Category Archives: EARTH WATCH

The Greatest Balancing Act

Nature and the global economy
By David Attenborough and Christine Lagarde – In nature, everything is connected. This is equally true of a healthy environment and a healthy economy. We cannot hope to sustain life without taking care of nature. And we need healthy economies to lift people out of poverty and achieve the United Nations Sustainable Development Goals.

In our current model these goals sometimes seem to collide, and our economic pursuits encroach too closely on nature. But nature—a stable climate, reliable freshwater, forests, and other natural resources—is what makes industry possible. It is not one or the other. We cannot have long-term human development without a steady climate and a healthy natural world.

The bottom line is that when we damage the natural world, we damage ourselves. The impact of our growing economic footprint threatens our own future directly. By some estimates, more than 50 percent of the world’s population is now urbanized, increasing the likelihood of people losing touch with nature.

With the projected rise in ocean levels and increase in the average temperature of the planet, large swaths of land, even whole countries, will become uninhabitable, triggering mass climate-induced migration. Never has it been more important to understand how the natural world works and what we must do to preserve it.

A necessary first step is to recognize that waste is the enemy. Wasting food, energy, or materials flies in the face of sustainability. Producing plastics fated to end up as litter is a waste, especially when these plastics pollute our oceans. If we could live by the simple injunction to “do no harm,” both individually and as businesses and economies, we could all make a difference. Overconsumption and unsustainable production have put the planet in peril.

Since the natural and economic worlds are linked, similar principles apply to both.

In the financial world, for example, we would not eat into capital to the point of depletion because that would bring about financial ruin. Yet in the natural world, we have done this repeatedly with fish stocks and forests, among many other resources—in some cases to the point of decimation. We must treat the natural world as we would the economic world—protecting natural capital so that it can continue to provide benefits well into the future. more>

There is No Economics without Politics

Every economic model is built on political assumptions
By Anat Admati – There is absolutely no way to understand events before, during, and since the financial crisis of 2007-2009 while ignoring the powerful political forces that have shaped them. Yet, remarkably, much of the economics and finance literature about financial crises focuses on studying unspecified “shocks” to a system that it largely accepts as inevitable while ignoring critical governance frictions and failures. Removing blind spots would offer economists and other academics rich opportunities to leverage their expertise to benefit society.

The history of financial economics is revealing in this regard. By the second half of the 20th century, when modern finance emerged as part of economics, the holistic approach of early thinkers such as Adam Smith—which combined economics, moral philosophy, and politics—was long gone. Narrow social-science disciplines replaced the holistic approach by the end of the 19th century. In the 20th century, economists sought to make economics formal, precise, and elegant, similar to Newton’s 17th-century physics.

The focus in much of economics, particularly in finance, is on markets. Even when economists postulate a “social planner” and discuss policy, they rarely consider how this social planner gets to know what is needed or the process by which policy decisions are made and implemented. Collective action and politics are messy. Neat and elegant models are more fun and easier to market to editors and colleagues.

Lobbyists, who engage in “marketing” ideas to policymakers and to the public, are actually influential. They know how to work the system and can dismiss, take out of context, misquote, misuse, or promote research as needed. If policymakers or the public are unable or unwilling to evaluate the claims people make, lobbyists and others can create confusion and promote misleading narratives if it benefits them. In the real political economy, good ideas and worthy research can fail to gain traction while bad ideas and flawed research can succeed and have an impact.

Having observed governance and policy failures in banking, I realized that the focus on shareholder-manager conflicts is far too narrow and often misses the most important problems. We must also worry about the governance of the institutions that create and enforce the rules for all. How power structures and information asymmetries play out within and between institutions in the private and public sectors is critical. more>

The Adaptive Age

No institution or individual can stand on the sidelines in the fight against climate change
By Kristalina Georgieva – When I think of the incredible challenges we must confront in the face of a changing climate, my mind focuses on young people. Eventually, they will be the ones either to enjoy the fruits or bear the burdens resulting from actions taken today.

Our efforts to reduce greenhouse gas emissions through various mitigation measures—phasing out fossil fuels, increasing energy efficiency, adopting renewable energy sources, improving land use and agricultural practices—continue to move forward, but the pace is too slow. We have to scale up and accelerate the transition to a low-carbon economy. At the same time, we must recognize that climate change is already happening and affecting the lives of millions of people. There are more frequent and more severe weather-related events—more droughts, more floods, more heat waves, more storms.

Ready or not, we are entering an age of adaptation. And we need to be smart about it. Adaptation is not a defeat, but rather a defense against what is already happening. The right investments will deliver a “triple dividend” by averting future losses, spurring economic gains through innovation, and delivering social and environmental benefits to everyone, but particularly to those currently affected and most at risk. Updated building codes can ensure infrastructure and buildings are better able to withstand extreme events. Making agriculture more climate resilient means investing more money in research and development, which in turn opens the door to innovation, growth, and healthier communities.

The IMF is stepping up its efforts to deal with climate risk. Our mission is to help our members build stronger economies and improve people’s lives through sound monetary, fiscal, and structural policies. more>

Europe Wants ‘Strategic Autonomy,’ but That’s Much Easier Said Than Done

By Stewart M. Patrick – Strategic autonomy has obvious appeal to Europeans at a time of fraying trans-Atlantic bonds and deepening great-power competition. Aspiring to self-reliance is one thing, however. Achieving it will require much more from the European Union. The heterogeneous bloc will have to develop a coherent strategic culture and come to some agreement on a shared assessment of threats—and on how the EU should pursue its interests and promote its values internationally.

Europeans must also reassure the United States that any new EU military capabilities will complement rather than undermine NATO.

Europe’s strategic reappraisal is largely, though not entirely, a function of President Donald Trump. While his predecessors in Washington often pressed the Europeans to ramp up defense spending, Trump has upended the trans-Atlantic alliance in several ways. He has depicted it as obsolete, questioned America’s commitments to NATO’s mutual defense as outlined in Article 5 of the North Atlantic Treaty, and taken precipitous actions without consulting allies in Europe—such as his recent unilateral withdrawal of U.S. troops from northeastern Syria. Confronting such uncertainty, Europeans naturally want to hedge their bets. One way to do so is by developing autonomous military capabilities that permit them to act outside NATO, including with a post-Brexit United Kingdom.

Washington’s own identification of China as America’s primary economic, technological and strategic adversary reinforces these instincts. Few Europeans share such a zero-sum assessment, seeking instead to pursue what Beijing terms “win-win” relations. While Americans seem bent on a new Cold War with China, Europeans must confront a more immediate military and political threat: an aggressive Russia under Vladimir Putin, right on their doorstep.

Beyond defense matters, Trump’s disruption of U.S. foreign policy has persuaded a growing number of Europeans that they need to pursue strategic autonomy across the board. America’s abdication of global leadership has thrust the EU into an unaccustomed role—that of chief defender of the rules-based, liberal international order. As Trump has embraced unilateralism and protectionism, cozied up to dictators and ignored climate change, the EU has become the primary champion of collective security, multilateralism, human rights and the preservation of the global commons. more>

Nature’s Solution to Climate Change

A strategy to protect whales can limit greenhouse gases and global warming
By Ralph Chami, Thomas Cosimano, Connel Fullenkamp, and Sena Oztosun – When it comes to saving the planet, one whale is worth thousands of trees.

Scientific research now indicates more clearly than ever that our carbon footprint—the release of carbon dioxide (CO2) into the atmosphere where it contributes to global warming through the so-called greenhouse effect—now threatens our ecosystems and our way of life. But efforts to mitigate climate change face two significant challenges. The first is to find effective ways to reduce the amount of CO2 in the atmosphere or its impact on average global temperature. The second is to raise sufficient funds to put these technologies into practice.

Many proposed solutions to global warming, such as capturing carbon directly from the air and burying it deep in the earth, are complex, untested, and expensive. What if there were a low-tech solution to this problem that not only is effective and economical, but also has a successful funding model?

An example of such an opportunity comes from a surprisingly simple and essentially “no-tech” strategy to capture more carbon from the atmosphere: increase global whale populations. Marine biologists have recently discovered that whales—especially the great whales—play a significant role in capturing carbon from the atmosphere (Roman and others 2014).

The carbon capture potential of whales is truly startling. Whales accumulate carbon in their bodies during their long lives. When they die, they sink to the bottom of the ocean; each great whale sequesters 33 tons of CO2 on average, taking that carbon out of the atmosphere for centuries. A tree, meanwhile, absorbs only up to 48 pounds of CO2 a year.

Protecting whales could add significantly to carbon capture because the current population of the largest great whales is only a small fraction of what it once was. Sadly, after decades of industrialized whaling, biologists estimate that overall whale populations are now to less than one fourth what they once were. Some species, like the blue whales, have been reduced to only 3 percent of their previous abundance. Thus, the benefits from whales’ ecosystem services to us and to our survival are much less than they could be.

But this is only the beginning of the story. more>

The planet is burning

By Stephen J Pyne – From the Arctic to the Amazon, from California to Gran Canaria, from Borneo to India to Angola to Australia – the fires seem everywhere. Their smoke obscures subcontinents by day; their lights dapple continents at night, like a Milky Way of flame-stars. Rather than catalogue what is burning, one might more aptly ask: what isn’t? Where flames are not visible, the lights of cities and of gas flares are: combustion via the transubstantiation of coal and oil into electricity. To many observers, they appear as the pilot flames of an advancing apocalypse. Even Greenland is burning.

But the fires we see are only part of our disturbed pyrogeography. Of perhaps equal magnitude is a parallel world of lost, missing and sublimated fires. The landscapes that should have fire and don’t. The marinating of the atmosphere by greenhouse gases. The sites where traditional flame has been replaced by combustion in machines. The Earth’s biota is disintegrating as much by tame fire’s absence as by feral fire’s outbreaks. The scene is not just about the bad burns that trash countrysides and crash into towns; it’s equally about the good fires that have vanished because they are suppressed or no longer lit. Looming over it all is a planetary warming from fossil-fuel combustion that acts as a performance enhancer on all aspects of fire on Earth.

So dire is the picture that some observers argue that the past is irrelevant. We are headed into a no-narrative, no-analogue future. So immense and unimaginable are the coming upheavals that the arc of inherited knowledge that joins us to the past has broken. There is no precedent for what we are about to experience, no means by which to triangulate from accumulated human wisdom into a future unlike anything we have known before. more>

The Unwanted Wars

Why the Middle East Is More Combustible Than Ever
By Robert Malley – The war that now looms largest is a war nobody apparently wants.

A conflict could break out in any one of a number of places for any one of a number of reasons. Consider the September 14 attack on Saudi oil facilities: it could theoretically have been perpetrated by the Houthis, a Yemeni rebel group, as part of their war with the kingdom; by Iran, as a response to debilitating U.S. sanctions; or by an Iranian-backed Shiite militia in Iraq.

If Washington decided to take military action against Tehran, this could in turn prompt Iranian retaliation against the United States’ Gulf allies, an attack by Hezbollah on Israel, or a Shiite militia operation against U.S. personnel in Iraq. Likewise, Israeli operations against Iranian allies anywhere in the Middle East could trigger a regionwide chain reaction. Because any development anywhere in the region can have ripple effects everywhere, narrowly containing a crisis is fast becoming an exercise in futility.

The Middle East has become the world’s most polarized region and, paradoxically, its most integrated. That combination—along with weak state structures, powerful nonstate actors, and multiple transitions occurring almost simultaneously—also makes the Middle East the world’s most volatile region. It further means that as long as its regional posture remains as it is, the United States will be just one poorly timed or dangerously aimed Houthi drone strike, or one particularly effective Israeli operation against a Shiite militia, away from its next costly regional entanglement.

Ultimately, the question is not chiefly whether the United States should disengage from the region. It is how it should choose to engage: diplomatically or militarily, by exacerbating divides or mitigating them, and by aligning itself fully with one side or seeking to achieve a sort of balance.

Economically, it ranks among the least integrated areas of the world; institutionally, the Arab League is less coherent than the European Union, less effective than the African Union, and more dysfunctional than the Organization of American States. Nor is there any regional entity to which Arab countries and the three most active non-Arab players (Iran, Israel, and Turkey) belong.

Yet in so many other ways, the Middle East functions as a unified space. Ideologies and movements spread across borders: in times past, Arabism and Nasserism; today, political Islam and jihadism. more>

What’s Elizabeth Warren’s wealth tax worth?

By Isabel V. Sawhill and Christopher Pulliam – On both sides of the Atlantic, economic inequality has rocketed up the political agenda and inspired a new wave of populism. Wealth inequality is high and rising in the UK and staggeringly so in the US. The top 1% of American households now have more wealth than the bottom 90%. In the UK, the top 10% holds over half the wealth. The richest 400 individuals in the US average a net worth of $7.2 billion.

How did we get to this point? As Thomas Piketty, in his book Capital, famously argued, a capitalist economy left to its own devices will tend to produce not just inequality but ever-rising inequality of wealth – and the income derived from wealth. The main reason is because the returns earned on assets such as stocks and bonds normally exceed the growth of wages.

Imagine an economy with one capitalist and one wage earner. If the annual rate of return to financial assets is, say, 3%, but wages are only growing by 2%, more and more income ends up in the hands of the capitalist. Wealth then begets more wealth as the capitalist, not needing to spend all of his added income, adds to his existing wealth and reaps ever-growing income from that wealth. Unless a war or other shock destroys his wealth (think depression or the devastation in Europe after the Second World War), or government decides to tax it away, we end up with the rise in wealth inequality that we are now seeing in many rich countries – the US in particular.

There is something deeply disturbing about Piketty’s work. If one takes his thesis seriously, it means that the inequality of wealth and its corollary, income inequality, along with their continued growth, is the new normal. They are baked into a capitalist economy.

Of course, some financial capital gets invested in productive assets that help the economy grow. But productive investment and growth have slowed in recent decades, making it hard to argue that the rise in wealth at the top has benefited everyone. In the meantime, the accumulation of wealth in high-income households is one reason that income inequality is rising so sharply at the very top. While the richest 20% of US households, which benefit from a lot of human capital but not a lot of wealth, saw their market incomes rise by 96% between 1979 and 2016, the top 1% – which receives far more of their income from wealth – saw their incomes rise by a staggering 219%.

In short, growing wealth inequality spawns growing income inequality, so if we care about the latter, we cannot focus only on redistributing income. We need to tackle the accumulation of wealth as well.

What to do? Senator Elizabeth Warren, a serious contender for the US presidency, has proposed a wealth tax. more>

Hello From the Year 2050. We Avoided the Worst of Climate Change — But Everything Is Different

By Bill McKibben – Let’s imagine for a moment that we’ve reached the middle of the century. It’s 2050, and we have a moment to reflect—the climate fight remains the consuming battle of our age, but its most intense phase may be in our rearview mirror. And so we can look back to see how we might have managed to dramatically change our society and economy. We had no other choice.

There was a point after 2020 when we began to collectively realize a few basic things.

One, we weren’t getting out of this unscathed. Climate change, even in its early stages, had begun to hurt: watching a California city literally called Paradise turn into hell inside of two hours made it clear that all Americans were at risk. When you breathe wildfire smoke half the summer in your Silicon Valley fortress, or struggle to find insurance for your Florida beach house, doubt creeps in even for those who imagined they were immune.

Two, there were actually some solutions. By 2020, renewable energy was the cheapest way to generate electricity around the planet—in fact, the cheapest way there ever had been. The engineers had done their job, taking sun and wind from quirky backyard DIY projects to cutting-edge technology. Batteries had plummeted down the same cost curve as renewable energy, so the fact that the sun went down at night no longer mattered quite so much—you could store its rays to use later.

And the third realization? People began to understand that the biggest reason we weren’t making full, fast use of these new technologies was the political power of the fossil-fuel industry. Investigative journalists had exposed its three-decade campaign of denial and disinformation, and attorneys general and plaintiffs’ lawyers were beginning to pick them apart. And just in time. more>

The Dictators’ Last Stand

differencebetween.netWhy the New Autocrats Are Weaker Than They Look
By Yascha Mounk – It has been a good decade for dictatorship. The global influence of the world’s most powerful authoritarian countries, China and Russia, has grown rapidly.

For the first time since the late nineteenth century, the cumulative GDP of autocracies now equals or exceeds that of Western liberal democracies. Even ideologically, autocrats appear to be on the offensive: at the G-20 summit in June, for instance, President Vladimir Putin dropped his normal pretense that Russia is living up to liberal democratic standards, declaring instead that “modern liberalism” has become “obsolete.”

Conversely, it has been a terrible decade for democracy. According to Freedom House, the world is now in the 13th consecutive year of a global democratic recession. Democracies have collapsed or eroded in every region, from Burundi to Hungary, Thailand to Venezuela. Most troubling of all, democratic institutions have proved to be surprisingly brittle in countries where they once seemed stable and secure.

In 2014, I suggested in these pages that a rising tide of populist parties and candidates could inflict serious damage on democratic institutions. At the time, my argument was widely contested. The scholarly consensus held that demagogues would never win power in the long-established democracies of North America and western Europe. And even if they did, they would be constrained by those countries’ strong institutions and vibrant civil societies.

Today, that old consensus is dead. The ascent of Donald Trump in the United States, Matteo Salvini in Italy, and Jair Bolsonaro in Brazil has demonstrated that populists can indeed win power in some of the most affluent and long-established democracies in the world. And the rapid erosion of democracy in countries such as Hungary and Venezuela has shown that populists really can turn their countries into competitive authoritarian regimes or outright dictatorships. The controversial argument I made five years ago has become the conventional wisdom.

But this new consensus is now in danger of hardening into an equally misguided orthodoxy. Whereas scholars used to hope that it was only a matter of time until some of the world’s most powerful autocracies would be forced to democratize, they now concede too readily that these regimes have permanently solved the challenge of sustaining their legitimacy.

The new orthodoxy is especially misleading about the long-term future of governments that promise to return power to the people but instead erode democratic institutions. These populist dictatorships, in countries such as Hungary, Turkey, and Venezuela, share two important features: first, their rulers came to power by winning free and fair elections with an anti-elitist and anti-pluralist message. Second, these leaders subsequently used those victories to concentrate power in their own hands by weakening the independence of key institutions, such as the judiciary; curtailing the ability of opposition parties to organize; or undermining critical media outlets.

It is too early to conclude that the populist dictatorships that have arisen in many parts of the world in recent years will be able to sustain themselves in power forever. In the end, those who are subject to these oppressive regimes will likely grow determined to win back their freedom. more>