Yasunizing the World

Joan Martinez Alier, Guest Blogger

In May 2013, the international press has become alive to the fact that
there is a lot of unburnable fossil fuels. “Unburnable” carbon has
become a buzz word in The Economist and in The New York Times. If the
oil, gas and coal reserves are burnt at present speed, there is no
chance whatever of limiting carbon dioxide concentration below 500 ppm.
A large part of such reserves must remain in the ground. The Grantham
Institute of the London School of Economics has produced a report that
proves that the policies advanced since 1997 by Oilwatch to leave oil in
the soil were right, and announces that the money value of fossil fuels
reserves will necessarily come down if something is effectively done
against climate change. The Economist (4 May 2013, “Unburnable Fuels”)
dismisses “technological fixes” such as carbon sequestration and
geo-engineering.

When Svante Arrhenius, a Swedish chemist and Nobel laureate, published
the first articles on climate change in 1896, the carbon dioxide
concentration in the atmosphere was 300 parts per million (ppm). It is
now reaching 400 ppm and rising 2 ppm per year. Arrhenius announced that
by burning coal found underground, industrialised countries were
releasing more and more carbon dioxide in the atmosphere and that this
would increase temperatures. He could not know that in the twentieth
century coal burning worldwide would increase seven-fold or that in
addition to coal burning would be added much more oil and natural gas;
in addition to the effects of deforestation.

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The Limits of Governing Budgetary Policies by Rules

Daniela Schwarzer

The European squabble over budgetary austerity reached a new peak a good week ago when a document drafted by leading representatives of the French Socialist Party, which reportedly had been seen by Elysée officials close to President Hollande, personally attacked German Chancellor Angela Merkel. Less mediatized, but more telling about the nature of the governance problems facing the euro area, are the statements made by Finance Minister Pierre Moscovici this weekend. After having obtained a two-year derogation for France to comply with the 3% deficit threshold of the euro area’s fiscal rules he said: “This is a turning point in the history of European integration since the euro exists. We have witnessed the end of a certain financial orthodoxy and the end of the dogma of austerity.”

Though the French government scaled down this triumphant tone subsequently, these words provoked some strong reactions in Germany. The reason for the Franco-German discord over budgetary policy are, first, competing policy preferences, deeply rooted in normative beliefs over “the right” way out of the current crisis. The German and the French economic mainstream diverge considerably over the question what should come first: The neo-classical paradigm dominant in Germany emphasizes the need for budget consolidation (expenditure cuts instead of tax increases), structural reforms and an adjustment of real price levels in order to then bring back demand, growth and employment thanks to enhanced competitiveness and increased trust among investors. The view dominant in France makes a case for more time to meet the European debt and deficit targets so that austerity does not crush domestic demand which is necessary to prevent a further deterioration of growth and employment and to enable structural reforms.

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Accounting for Ecological Capital

Edward B. Barbier

An important contribution of natural resource economics has been to treat the environment as a form of capital asset, or natural capital. But we should not restrict this concept just to those natural resources, such as minerals, fossil fuels, forests, agricultural land and fisheries, that supply the raw material and energy inputs to our economies.  Nor should we consider the capacity of the natural environment to assimilate waste and pollution the only valuable “service” that it performs.

Instead, natural capital is much broader, encompassing the whole range of goods and services that the environment provides. Many have long been considered beneficial to humans, such as nature-based recreation, eco-tourism, fishing and hunting, wildlife viewing, and enjoyment of nature’s beauty.  Natural capital should also comprise those ecosystems that through their natural functioning and habitats provide important goods and services to the economy.  Such ecological capital is a unique and important component of the entire natural endowment that supports, protects and is used by economic systems

However, there are several crucial features of ecosystems that distinguish them from other economic assets.

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The United States and the Latin American Left

Matias Vernengo

Economics is an essential part of foreign policy. One cannot think of the Cold War without the Marshall Plan that allowed reconstruction in Western Europe and containment of the Soviet Union in Western Europe. In Latin America one cannot dissociate the Cuban Revolution and the subsequent Alliance for Progress, which basically provided credit for allies in the region, pushed by Kennedy to contain Communism in the region. Geopolitics is, however, often ignored by economists, and political scientists tend to use only mainstream economics when discussing political economy issues.

In the case of US-Latin American affairs, the inability to understand the political elements of the economic process, and the incapacity to comprehend the deep causes of underdevelopment in the region explain, in part, the problematic relationship of the Obama administration with the left of center governments in the region. The Obama administration has compounded old mistakes and aggravated the mistrust from progressives in Latin America (for an early discussion of the topic go here; subscription required). John Kerry, the Secretary of the State, has referred recently to Latin America as the American “backyard,” and the Obama administration has not recognized the democratically elected government of Nicolás Maduro in Venezuela.

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Our misleading measure of income and wealth inequality: the standard Gini coefficient

Robert H. Wade

It is by now generally accepted that the sharp rise in income and wealth inequality in the US and much of Western Europe over the 1990s and 2000s was one of the bulldozer forces behind the rise in financial fragility.  And it has long been accepted that the Gini coefficient is the workhorse measure of inequality.  But it is not generally recognized that the coefficient is normally defined in a way which biases the measure in a downward direction, making inequality seem less large than another version of the coefficient would suggest.  By this alternative measure inequality is much higher than is generally thought. The standard measure is misleading us into thinking that economic growth is more “inclusive’ than it is.

Recall that the Gini coefficient is a number between zero and one that measures the degree of inequality in the distribution of income in a given society (named after an Italian statistician, Corrado Gini). The coefficient is zero for a society in which each member receives exactly the same income; it reaches its maximum value (bounded from above by 1.0) for a society in which one member receives all the income and the rest nothing.

As normally defined the Gini says that inequality remains constant—growth remains ‘inclusive’—if all individuals (or countries by average income) experience the same rate of growth, and rises only when upper incomes grow faster than lower incomes. So inequality remains constant if a two person (or two country) distribution x = (10, 40) becomes y = (20, 80). Yet the income gap has grown from 10 to 40.

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A Tax System for the 99%

Robin Broad and John Cavanagh

Paying taxes, as tens of millions of us in the United States do every April, evokes many emotions—from gratitude for government programs that feed the hungry to disgust over paying for fossil fuel subsidies and unjust wars. But among a growing number of people, it is also evoking anger over an unequal tax system that favors the 1 percent over the 99 percent.  More and more of us are saying that corporations, Wall Street, and the wealthy should pay their fair share.

The good news is that rising numbers of organizations and people are involved in struggles for a more just tax system.  Below we share the contours of three such campaigns, all of them winnable before the next U.S. president is elected.

Corporations: Daily newspaper headlines remind us that corporations are making record profits while their workers’ paychecks have been frozen for decades.  These same corporations complain that the corporate tax rate, pegged at a mere 35 percent, is one of the highest in the world.  And, corporations are lobbying furiously to cut that rate.

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A reversion to a Dickensian variety of capitalism

Jayati Ghosh

Since her death, many eulogies of Thatcher have spoken of her as a revolutionary. Thatcherism (along with the associated Reaganomics) is seen as a radical transformative agenda that changed the face of economy and society. But seen from the developing world decades later, much of this agenda appears familiar, in the form of structural adjustment policies that have been forced upon different countries at different times by international institutions.

Given the broad contemporaneity of these strategies, it is a moot point who “inspired” whom, or just how original those ideas were. But it is certainly true that they contributed to shaping policy dialogue in fundamental ways, and thereby left a continuing (if unfortunate) legacy. Consider just five significant elements of this legacy, most features of which are now found across the world and especially in developing countries:

First, and possibly the most well-known: the attack on organised labour and the resulting drastic reduction in workers’ bargaining power. This occurred not just through the instrument of unemployment (or fear of it) used to discipline workers, but through regulation and legal changes as well as changing institutions. This is now an almost universal feature, except in societies such as in Latin America where recent political changes have generated some reversal.

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Dealing with the TNC’s

Martin Khor

Leaders of several Latin American countries have set up a new coalition to coordinate actions to face the growing number of international legal suits being taken against governments by transnational companies.

A ministerial meeting of 12 countries held in Guayaquil, Ecuador, decided on several joint actions to counter the threat posed by these law suits, which have claimed millions or even billions of dollars from governments.

“No more should small countries face law suits from big companies by themselves,” said Ecuador’s Foreign Minister Ricardo Patino, at a media conference after the meeting which he chaired. “We have now decided to deal with the challenges posed by these transnational companies in a coordinated way.”

Seven of the countries, mostly represented by their Ministers of Foreign Affairs, Trade or Finance, adopted a declaration with an agreement to form a conference of states affected by transnational interests. They are Ecuador, Bolivia, Cuba, Nicaragua, Dominican Republic, St. Vincent and Grenadine and Venezuela.

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Dealing with the TNC's

Martin Khor

Leaders of several Latin American countries have set up a new coalition to coordinate actions to face the growing number of international legal suits being taken against governments by transnational companies.

A ministerial meeting of 12 countries held in Guayaquil, Ecuador, decided on several joint actions to counter the threat posed by these law suits, which have claimed millions or even billions of dollars from governments.

“No more should small countries face law suits from big companies by themselves,” said Ecuador’s Foreign Minister Ricardo Patino, at a media conference after the meeting which he chaired. “We have now decided to deal with the challenges posed by these transnational companies in a coordinated way.”

Seven of the countries, mostly represented by their Ministers of Foreign Affairs, Trade or Finance, adopted a declaration with an agreement to form a conference of states affected by transnational interests. They are Ecuador, Bolivia, Cuba, Nicaragua, Dominican Republic, St. Vincent and Grenadine and Venezuela.

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The US Food Aid Debate: Major Reform on the Horizon?

Jennifer Clapp

US policy makers, lobbyists and development organizations are in throes of debate over the Obama administration’s proposal to reform US food aid. The proposal, incorporated in the President’s 2014 budget, calls for a shift of some $1.4 billion of the food aid budget from Title II of the Food for Peace Act situated in the Farm Bill (and thus part of the US Department of Agriculture budget) to various development and emergency accounts controlled by USAID. It also would allow up to 45% of that shifted budget to be spent on foods purchased locally in developing countries.

For nearly 60 years, US food aid policy required that the aid be sourced from foods grown and packaged in the US. And it required that majority of that aid be transported on US flag ships. There was nothing particularly surprising about this policy: food aid originally served as a mechanism to dispose of surplus food. This was the case not just in the US, but also in a number of other donor countries that found themselves awash in excess food production in the 1950s and 60s.

As I outline in my recent book on the politics of food aid, food surpluses didn’t last, and a number of donors – the European Commission, Canada and Australia – untied their food aid at various points in the past 15 years. Untied food assistance allows the donor to provide funds to either purchase food closer to the source of hunger, a practice known as local and regional purchase, or to provide cash or vouchers to those in need so that they can purchase their own food on local markets.

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