The Clean Power Plan’s Day in Court

Elizabeth A. Stanton

In one week, the D.C. Circuit of the U.S. Court of Appeals will begin hearing oral arguments regarding the Clean Power Plan—that’s the Environmental Protection Agency’s rule limiting carbon emissions from existing power plants that the Supreme Court put on hold in February. In staying the rule, the Supreme Court flagged concerns that EPA had failed to take the rule’s economic impacts into account. The 27 states challenging the rule have focused their arguments instead on its legal niceties claiming that the federal government is overstepping its authority.

Of the 27 states suing the EPA, 21 have already achieved their 2024 emission reduction targets and 18 have enacted policies that put them on track to reach their 2030 targets. Reuters quotes EPA Administrator Gina McCarthy as saying, “We are seeing reductions earlier than we ever expected. It’s a great sign that the market has already shifted and people are invested in the newer technologies, even while we are in litigation.” Economics are driving large-scale adoption of wind and solar generation around the country at the same time that low natural gas prices mean less reliance on coal-fired generators.

Carbon emission are falling and will continue to fall in the electric sector—without help from federal climate regulation. But in the absence of a strong national climate policy these reductions will not cut emissions quickly enough for the United States to play its essential role in keeping global warming below 2 degrees Celsius. It is no exaggeration to say that the decisions made by the D.C. Circuit and U.S. Supreme Court will set a precedent for federal regulation of carbon pollution that will have long lasting impacts felt around the world.

The quality of public debate sparked by the Clean Power Plan’s day in court will benefit from a grounding in facts not just about climate change and the U.S. role in changing the composition of our global atmosphere, but also in the legal issues at the core of the challenge to and stay of the rule. Here’s some recommended reading to that end:

·        A helpful blog piece from the Institute for Policy Integrity explaining the challenge in the context of U.S. law and history

·        A brief history lesson from the Law360 website describing the U.S. legal decisions that paved the way for the Clean Power Plan

Cross-posted at the author’s blog,

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September 22, 2016 | Posted in: Uncategorized | Comments Closed

The End of U.S.-Led Economic Globalisation?

Jayati Ghosh

There is much angst in the Northern financial media about how the era of globalisation led actively by the United States may well be coming to an end. This is said to be exemplified in the changed political attitudes to mega regional trade deals like the Trans Pacific Partnership Agreement (TPP) that was signed (but has not yet been ratified) by the US and 11 other countries in Latin America, Asia and Oceania; and the Trans-Atlantic Trade and Investment Partnership Agreement (TTIP) still being negotiated by the US and the European Union.

President Obama has been a fervent supporter of both these deals, with the explicit aim of enhancing and securing US power. “We have to make sure America writes the rules of the global economy. We should do it today while our economy is in the position of global strength. …We’ve got to harness it on our terms. If we don’t write the rules for trade around the world – guess what? China will!”, he famously said in a speech to workers in a Nike factory in Oregon, USA in May 2015. But even though he has made the case for the TPP plainly enough, his only chance of pushing even the TPP through is in the “lame duck” session of Congress just before the November Presidential election in the US.

However, the changing political currents in the US are making that ever more unlikely. Hardly anyone who is a candidate in the coming elections, whether for the Presidency, the Senate or the House of Representatives, is willing to stick their necks out to back the deal.

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September 21, 2016 | Posted in: Uncategorized | Comments Closed

The New Extreme Reality of Floods

Sunita Narain

Bihar chief minister, Nitish Kumar, whose state is submerged under water reportedly told the prime minister that he wants to cry. We should add our tears to his. This year’s floods not only have the imprint of our gross and near criminal mismanagement, but also mark the beginning of the world risked because of climate change. This should worry us. In fact, scare us. We need to realise that we do not have the luxury of delayed action and petty party politics. In this climate-risked world, where we are hit by a double whammy, we need to ensure that not only do we get development right, but we also need to do this at a scale and speed we have never done before.

The 2016 floods are huge in its scale—virtually all parts of the country have been hit by devastation. And remember, it is not just about some water that enters homes. Floods claim lives, destroy property and crops. In this way, all the years of developmental efforts are lost in one stroke. It is also clear that we worry about floods only when it affects the urban population. Even during the deadly 2013 Uttarakhand floods, the tragedy reached our television screens only because of the large numbers of people who died or were trapped in the swirling waters. Floods do not, otherwise, get serious media coverage. We do not know how bad the situation is or how it is getting worse. Floods then have become part of the cycle of boredom; they will come every year. So, what is new?

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The Wrong Side of a Long, Long History of Resource Extraction

Elizabeth A. Stanton

Elizabeth A. Stanton, PhD, is an independent consultant with more than 15 years of professional experience as an environmental economist, and has authored more than 80 reports, policy studies, white papers, journal articles, and book chapters on topics related to energy, the economy, and the environment.

Thanks to abundant coverage by social media, the nation watched this week as activists protesting the construction of a pipeline to transport oil through the Dakotas, Iowa and Illinois put their own safety at risk to protect a Native American cultural site. A Pinkterton-esque goon squad used pepper spray and attack dogs to clear the site for unscheduled excavation, resulting in injuries, hospitalizations, and an outraged public.

Energy Transfer Crude Oil Company—the developer of the Dakota Access or Bakken Oil Pipeline—asserts a public need for the 1,172-mile pipeline and promises jobs, tax revenues, and a boost to the economies of the affected states. Advocates arguing against this pipeline’s construction have found these claims to be unfounded. Energy Transfer bases its statement that the Dakota Access Pipeline is necessary on the business opportunity to get more Bakken oil to market sooner, and not on any public need that would be served by a greater flow of oil from the Dakotas to Illinois. The company’s claim that farmers need the pipeline to open up space to ship grain on trains that currently transport oil was soundly debunked by expert witnesses and even by Iowa’s Utility Board in issuing its approval of the project. There is no reason to believe either that Midwest grain shipments will be curtailed in the future or that building the pipeline would reduce any rail shipping constraints should they arise.

And while the private benefits of building the Dakota Access Pipeline are clear, any benefit to the public is harder to discern.

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September 13, 2016 | Posted in: Uncategorized | Comments Closed

What We’re Writing/What We’re Reading

What We’re Writing

Fei Yuan and Kevin P. Gallagher, Repositioning Chinese Development Finance in Latin America: Opportunities for Green Finance.

Jomo Kwame Sundaram, Poverty Cut by Growth Despite Policy Failure.

What We’re Reading

Prabhat Patnaik, Globalization and the World’s Working People.

220+ Law and Economics Professors Urge Congress to Reject the TPP and Other Prospective Deals that Include Investor-State Dispute Settlement (ISDS).

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The Mediatic-Parliamentary Coup in Brazil

Matias Vernengo

President Dilma Rousseff was finally toppled down today. Yes, it’s a coup, different in nature to the previous ones (last in Brazil was in 1964), but with the same consequences. I have discussed the nature of the process here, here, here, and here (this last more on the economy, from last year) before. It is a coup that has received discrete support from the US government, by the way, as much as the elected neoliberal government of Macri in Argentina (Obama visited the latter, a government that basically tries to vindicate the last and genocidal dictatorship in Argentina).

A good summary of the mess is available here. Important things to remember: she is NOT implicated in corruption (contrary to Fernando Collor that was impeached in 1992, so that was NOT a coup), and even if one has qualms about the fiscal transfers (“pedaladas”) that are the formal cause for the impeachment (and one shouldn’t really, since these are not crimes of responsibility, or crimes at all), it’s not even clear that she violated the rules by which she was overthrown. Note that the worse that can actually be said, and it was repeated ad nauseam by the opposition, is that she lied during the campaign. And she did. She promised a government against bankers and for the people, with expansion of social expenditures, and did a u-turn, and delivered the neoliberal policies that the opposition was requesting.

What comes next is more of the same neoliberal policies that are spreading throughout the continent, support for free trade, privatization, including cuts to social security, lower real wages, fiscal adjustment, and more unemployment. The economic collapse of the last year and half is far from over.

Originally published at Naked Keynesianism.

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Is Fiscal Policy for Prosperity Back in Place of Austerity?

Philip Arestis and Malcolm Sawyer

Fiscal policy has not been taken seriously by policymakers since the Great Financial Crisis (GFC) of 2007-2008, with some exceptions over the period 2009-2010, notably after the G20 meeting in London (April 2009). The GFC prompted significant government and central bank interventions, both to restore confidence in the financial system and to contain the impact of the crisis on the real economy. Monetary and fiscal policy responses became very accommodative in many countries. Central banks responded by flooding the financial markets with liquidity, while fiscal authorities attempted to deal with the decline in the solvency of the banking sector. Those policies before 2010 had helped to avoid a complete collapse of the financial system and the real economy after the emergence of the GFC. Subsequently “unorthodox” monetary policies have been implemented, which have not been successful in terms of producing and maintaining healthy growth in the economy. Fiscal policy has increasingly been concerned with “balancing the budget” and “expansionary austerity” rather than being genuinely expansionary.

There are several reasons for such a change in terms of fiscal austerity going out of fashion. An important one being the failure of the austerity policies to bring about significant recovery despite the claims made for “expansionary fiscal consolidation.”

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Poverty, Vulnerability and Social Protection

Jomo Kwame Sundaram

According to the World Bank, the MDG target of halving the share of the poor was achieved by 2008, well in advance of 2015, the target year. However, increased unemployment and lower incomes in recent times remind us that poverty is not an unchanging attribute of a shrinking group, but rather, a condition that billions of vulnerable persons risk experiencing.

Despite the various shortcomings of money measures of poverty, they nevertheless reflect the extent of vulnerability. For example, the estimated number of poor globally in 2012 more than doubles from 902 million to 2.1 billion when one raises the poverty line by 63% from $1.90/day to $3.10/day per person, suggesting that a very large number of those not deemed poor by the World Bank are very vulnerable to external economic shocks or changes in personal circumstances, such as income losses or food price increases.

Of the world’s poor, three-quarters live in rural areas where agricultural wage workers suffer the highest incidence of poverty, largely because of low productivity, seasonal unemployment and low wages paid by most rural employers. Vulnerability and economic insecurity have increased in recent decades with rising insecure, casual and precarious jobs involving part-time employment, self-employment, fixed-term work, temporary work, on-call work and home-working – often mainly involving women.

Such trends have grown with labour market liberalization, globalization, and declining union power. To make matters worse, macroeconomic policies in recent decades have focused on low inflation, rather than full employment, while limited social protection has exacerbated economic insecurity and vulnerability.

Additionally, lower economic growth rates, following the global financial crisis, would push 46 million more people into extreme poverty than expected before the crisis. This figure was later revised to 64 million, implying over 200 million people fell into extreme poverty due to food-fuel price hikes and the global financial crisis.

While some of these figures were subsequently revised downward, they suggest widespread vulnerability and economic insecurity, due to the inability of governments to respond with adequate counter-cyclical policies and in the absence of comprehensive universal social protection measures. During the East Asian financial crisis of 1997-1998, the official poverty rate in Indonesia shot up from 11% to 37% in just one year following the massive depreciation of the Indonesian rupiah.

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Robert Pollin on “Green Growth”

Robert Pollin is professor of economics at the University of Massachusetts Amherst and co-director of the Political Economy Research Institute (PERI).

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Overcharged: The High Cost of High Finance

Gerald Epstein and Juan Antonio Montecino

Gerald Epstein is a professor of economics and Co-Director of the Political Economy Research Institute (PERI) at the University of Massachusetts Amherst. Juan Antonio Montecino is a doctoral student in economics at the University of Massachusetts Amherst. This is an excerpt from a report Epstein and Montecino wrote for the Roosevelt Institute. The full report is available here.

A healthy financial system is one that channels finance to productive investment, helps families save for and finance big expenses such as higher education and retirement, provides products such as insurance to help reduce risk, creates sufficient amounts of useful liquidity, runs an efficient payments mechanism, and generates financial innovations to do all these useful things more cheaply and effectively. All of these functions are crucial to a stable and productive market economy. But after decades of deregulation, the current U.S. financial system has evolved into a highly speculative system that has failed rather spectacularly at performing these critical tasks.

What has this flawed financial system cost the U.S. economy? How much have American families, taxpayers, and businesses been “overcharged” as a result of these questionable financial activities? In this report, we estimate these costs by analyzing three components: (1) rents, or excess profits; (2) misallocation costs, or the price of diverting resources away from more productive activities; and (3) crisis costs, meaning the cost of the 2008 financial crisis. Adding these together, we estimate that the financial system will impose an excess cost of as much as $22.7 trillion between 1990 and 2023, making finance in its current form a net drag on the American economy.

First, we estimate the rents obtained by the financial sector. Through a variety of mechanisms including anticompetitive practices, the marketing of excessively complex and risky products, government subsidies such as financial bailouts, and even fraudulent activities, bankers receive excess pay and profits for the services they provide to customers. By overcharging for products and services, financial firms grab a bigger slice of the economic pie at the expense of their customers and taxpayers. We estimate that the total cost of financial rents amounted to $3.6 trillion–$4.2 trillion between 1990 and 2005.

Second are misallocation costs. Speculative finance does not just grab a bigger slice of the pie; its structure and activities are often destructive, meaning it also shrinks the size of the economic pie by reducing growth. This is most obvious in the case of the financial crisis, but speculative finance harms the economy on a daily basis. It does this by growing too large, utilizing too many skilled and productive workers, imposing short-term orientations on businesses, and starving some businesses and households of needed credit. We estimate that the cost of misallocating human and financial resources amounted to $2.6 trillion–$3.9 trillion between 1990 and 2005.

Adding rent and misallocation costs, we show that, even without taking into account the financial crisis, the financial system cost between $6.3 trillion and $8.2 trillion more than the benefits it provided during the period 1990–2005.

On top of this is the massive cost of the financial crisis itself, which most analysts agree was largely associated with the practices of speculative finance. If we add conservative Federal Reserve estimates of the cost of the crisis in terms of lost output ($6.5 trillion–$14.5 trillion), it brings the total amount of “overcharging” to somewhere between $12.9 trillion and $22.7 trillion. This amount represents between $40,000 and $70,000 for every man, woman, and child in the U.S., or between $105,000 and $184,000 for the typical American family. Without this loss, the typical American household would have doubled its wealth at retirement.

These excess costs of finance can be reduced and the financial sector can once again play a more productive role in society. To accomplish this, we need three complementary approaches: improved financial regulation, building on what Dodd-Frank has already accomplished; a restructuring of the financial system to better serve the needs of our communities, small businesses, households, and public entities; and public financial alternatives, such as cooperative banks and specialized public financial institutions , to level the playing field.

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