Johann Hari
Columnist for the London Independent
Posted: November 25, 2010 09:57 PM
Why are the world's governments bothering? Why are they jetting to Cancun next week to discuss what to do now about global warming? The vogue has passed. The fad has faded. Global warming is yesterday's apocalypse. Didn't somebody leak an email that showed it was all made up? Doesn't it sometimes snow in the winter? Didn't Al Gore get fat, or molest a masseur, or something?
Alas, the biosphere doesn't read Vogue. Nobody thought to tell it that global warming is so 2007. All it knows is three facts. 2010 is globally the hottest year since records began. 2010 is the year humanity's emissions of planet-warming gases reached its highest level ever. And exactly as the climate scientists predicted, we are seeing a rapid increase in catastrophic weather events, from the choking of Moscow by gigantic unprecedented forest fires to the drowning of one quarter of Pakistan.
Before the Great Crash of 2008, the people who warned about the injection of huge destabilizing risk into our financial system seemed like arcane, anal bores. Now we all sit in the rubble and wish we had listened. The great ecological crash will be worse, because nature doesn't do bailouts.
That's what Cancun should be about -- surveying the startling scientific evidence, and developing an urgent plan to change course. The Antarctic -- which locks of 90 percent of the world's ice -- has now seen eight of its ice shelves fully or partially collapse. The world's most distinguished climate scientists, after recordings like this, say we will face a three to six feet rise in sea level this century. That means the drowning of London, Bangkok, Venice, Cairo and Shanghai, and entire countries like Bangladesh and the Maldives.
And that's just one effect of the way we are altering the chemical composition of the atmosphere. Perhaps the most startling news story of the year passed almost unnoticed. Plant plankton are tiny creatures that live in the oceans and carry out a job you and I depend on to stay alive. They produce half the world's oxygen, and suck up planet-warming carbon dioxide. Yet this year, one of the world's most distinguished scientific journals, Nature, revealed that 40 percent of them have been killed by the warming of the oceans since 1950. Professor Boris Worm, who co-authored the study, said in shock: "I've been trying to think of a biological change that's bigger than this and I can't think of one." That has been the result of less than one degree of warming. Now we are on course for at least three degrees this century. What will happen?
The scientific debate is not between deniers and those who can prove that releasing massive amounts of warming gases will make the world warmer. Every major scientific academy in the world, and all the peer-reviewed literature, says global warming denialism is a pseudo-science, on a par with Intelligent Design, homeopathy, or the claim that HIV doesn't cause AIDS. One email from one lousy scientist among tens of thousands doesn't dent that. No: the debate is between the scientists who say the damage we are doing is a disaster, and the scientists who say it is catastrophe.
Yet the world's governments are gathering in Cancun with no momentum and very little pressure from their own populations to stop the ecological vandalism. The Copenhagen conference last year collapsed after the most powerful people in the world turned up to flush their own scientists' advice down a very clean Danish toilet. These leaders are sometimes described as "doing nothing about global warming." No doubt that form of words will fill the reporting from Cancun too. But it's false. They're not "doing nothing" -- they are allowing their countries' emissions of climate-trashing gases to massively increase. That's not failure to act. It's deciding to act in an incredibly destructive way.
The collapse of Copenhagen has not shocked people into action; it has numbed them into passivity. Last year, we were talking -- in theory, at least -- about the legally binding cap on the world's carbon emissions, because the world's scientists say this is the only thing that can preserve the climate that has created and sustained human civilization. What are we talking about this year? What's on the table at Cancun, other than sand?
Almost nothing. They will talk about how to help the world's poor "adapt" to the fact we are drying out much of their land and drowning the rest. But everybody is backing off from one of the few concrete agreements at Copenhagen: to give the worst-affected countries $100 billion from 2020. Privately, they say this isn't the time -- they can come back for it, presumably, when they are on rafts. Oh, and they will talk about how to preserve the rainforests. But a Greenpeace report has just revealed that the last big deal to save the rainforests -- with Indonesia -- was a scam. The country is in fact planning to demolish most of its rainforest to plant commercial crops, and claim it had been "saved."
Karl Rove -- who was George W. Bush's chief spin-doctor -- boasted this year: "Climate is gone." He meant it is off the political agenda, but in time, this statement will be more true and more cursed than he realizes.
It's in this context that a new, deeply pessimistic framework for understanding the earth's ecology -- and our place in it -- has emerged. Many of us know, in outline, the warm, fuzzy Gaia hypothesis, first outlined by James Lovelock. It claims that the Planet Earth functions, in effect, as a single living organism called Gaia. It regulates its own temperature and chemistry to create a comfortable steady state that can sustain life. So coral reefs produced cloud-seeding chemicals which then protect them from ultraviolet radiation. Rainforests transpire water vapour so generate their own rainfall. This process expands outwards. Life protects life.
Now there is a radically different theory that is gaining adherents, ominously named the Medea hypothesis. The paleontologist Professor Peter Ward is an expert in the great extinctions that have happened in the earth's past, and he believes there is a common thread between them. With the exception of the meteor strike that happened 65 million years ago, every extinction was caused by living creatures becoming incredibly successful -- and then destroying their own habitats. So, for example, 2.3 billion years ago, plant life spread incredibly rapidly, and as it went it inhaled huge amounts of heat-trapping carbon dioxide from the atmosphere. This then caused a rapid plunge in temperature that froze the planet and triggered a mass extinction.
Ward believes nature isn't a nurturing mother like Gaia. No: it is Medea, the figure from Greek mythology who murdered her own children. In this theory, life doesn't preserve itself. It serially destroys itself. It is a looping doomsday machine. This theory adds a postscript to Darwin's theory of the survival of the fittest. There is survival of the fittest, until the fittest trash their own habitat, and do not survive at all.
But the plants 2.3 billion years ago weren't smart enough to figure out what they were doing. We are. We can see that if we release enough warming gases we will trigger an irreversible change in the climate and make our own survival much harder. Ward argues that it is not inevitable we will destroy ourselves - because human beings are the first and only species that can consciously develop a Gaian approach. Just as Richard Dawkins famously said we are the first species to be able to rebel against our selfish genes and choose to be kind, we are the first species that can rebel against the Medean rhythm of life. We can choose to preserve the habitat on which we depend. We can choose life.
Yet at Cancun, the real question will be carefully ignored by delegates keen to preserve big business as usual. Long after our own little stories are forgotten, the choice we make now will still be visible -- in the composition of the atmosphere, the swelling of the seas, and the crack and creak of the great Antarctic ice. Do we want to be Gaia, or Medea?
Johann Hari is a writer for the Independent.
Saturday, November 27, 2010
Monday, November 22, 2010
Government's role in a free-market economy
By Vijay K. Mathur
Saturday, November 20, 2010 - 11:18pm
Among many people, politicians and media pundits, there seems to be confusion about the operation of free markets. Sometimes the word capitalism is used to propagate the notion of free markets. However the word capitalism came into use almost one hundred years after the publication of The Wealth of Nations in 1776 by Adam Smith, the most ardent supporter of free markets. Capitalism should not be confused with the system of free markets. Like markets, capitalism is evolutionary, however it encompasses not only economic organization but also political and social organization.
According to Adam Smith, self-interest (not selfishness), property rights and division of labor are three important interrelated pillars of economic growth. Property rights, if clearly defined and enforced, ensure that people are free to transact their goods and services at positive prices. Self-interest of sellers to make profits and of buyers to obtain products they prefer at the lowest prices brings sellers and buyers together in a market transaction. Self-interest in competitive markets maximizes economic welfare of the society. If free and competitive markets work, they efficiently allocate products among consumers according to their preferences, allocate inputs among producers, and enable producers to obtain the maximum output with given amounts of inputs. Division of labor facilitates scale economies to bring down costs.
However, there are circumstances when markets do not perform their function efficiently. Economists refer those states of the markets as market failure, a point missed by many who blindly promote virtues of free markets.
Market failure occurs due to many reasons. Let me discuss five of those reasons. First is monopoly power, where one or few producers and/or sellers gain control of the market. Monopolists restrict output and charge prices higher than the competitive market prices. That is the reason we have antitrust laws. The first major statute was The Sherman Act of 1890, enacted in response to the widespread growth of combinations or trusts in 1880s. Since the Sherman Act, other statutes have been enacted to deal with other anticompetitive behavior of businesses. Proper functioning of free competitive markets requires either to break-up monopolies, cease and desist monopolistic practices or regulate them. For example, in 1911 the Supreme Court broke up the Standard Oil Company into 33 geographically separate companies. Monopolies of electric and gas utilities are regulated to promote public interest.
The second reason for market failure is when producers do not fully bear total costs of products or are unable to capture all benefits of producing products. For example, oil and gas producers in Utah do not bear the full cost of health hazards their pollution imposes on population in the Uintah basin as well as in the Salt Lake valley. Many of the benefits of basic research and development and education pass on to others who do not pay the total price for inventions and knowledge production. Another example is when uninsured people seek health care in emergency clinics, thus causing higher premium costs to insured people. All such cases require government regulation or taxes or subsidies to improve efficiency of markets. A British economist A.C. Pigou, presented the earliest and most cogent discussion on market failure in 1920 in his book, The Economics of Welfare.
Third, market fails when there is a common property resource. Common property is nobody's property, hence the property is misused. For example, Great Lakes, Amazon Rainforest, Yellowstone National Park, national parks in Utah, Great Salt Lake are common property resources. Such resources cannot be privatized; the government has to intervene to preserve common property. The fourth reason is lack of information, misinformation or asymmetry of information. For example, the recent mortgage crisis was partly the result of asymmetry of information and/or misinformation to the participants, especially the borrowers. Health insurance also faces the problem of asymmetry of information. Therefore there is a need for regulations in such markets.
Finally, risk and/or uncertainty may be an impediment for free markets to provide products, which may be welfare-maximizing for the society in the future. For example, production of renewable energy and construction of transmission lines are very risky ventures at early stages of development, hence this sector will require government assistance to grow, just like railroads and system of canals did in the 19th century.
There are a host of other areas where free markets will not work efficiently and promote public welfare as envisioned by Adam Smith without some government intervention: for example, areas of product safety, workplace safety, airwaves allocation, oil and gas exploration. Therefore government intervention is essential for the working of free and competitive markets. I do recognize that government intervention in markets should be measured for efficient operation of markets. But indiscriminately diluting regulations, taxes, subsidies and user fees, which are essential parts of a vibrant free-market competitive economy, may result in undesirable consequences which no one would value.
Mathur is former chair of the economics department and professor emeritus of economics at Cleveland State University, Cleveland, Ohio. He resides in Ogden. His articles also appear in vijaykmathur.blogspot.com. He offers original blog posts for the Standard-Examiner at http://blogs.standard.net/economics-etc/.
http://www.standard.net/topics/opinion/2010/11/20/governments-role-free-market-economy
Saturday, November 20, 2010 - 11:18pm
Among many people, politicians and media pundits, there seems to be confusion about the operation of free markets. Sometimes the word capitalism is used to propagate the notion of free markets. However the word capitalism came into use almost one hundred years after the publication of The Wealth of Nations in 1776 by Adam Smith, the most ardent supporter of free markets. Capitalism should not be confused with the system of free markets. Like markets, capitalism is evolutionary, however it encompasses not only economic organization but also political and social organization.
According to Adam Smith, self-interest (not selfishness), property rights and division of labor are three important interrelated pillars of economic growth. Property rights, if clearly defined and enforced, ensure that people are free to transact their goods and services at positive prices. Self-interest of sellers to make profits and of buyers to obtain products they prefer at the lowest prices brings sellers and buyers together in a market transaction. Self-interest in competitive markets maximizes economic welfare of the society. If free and competitive markets work, they efficiently allocate products among consumers according to their preferences, allocate inputs among producers, and enable producers to obtain the maximum output with given amounts of inputs. Division of labor facilitates scale economies to bring down costs.
However, there are circumstances when markets do not perform their function efficiently. Economists refer those states of the markets as market failure, a point missed by many who blindly promote virtues of free markets.
Market failure occurs due to many reasons. Let me discuss five of those reasons. First is monopoly power, where one or few producers and/or sellers gain control of the market. Monopolists restrict output and charge prices higher than the competitive market prices. That is the reason we have antitrust laws. The first major statute was The Sherman Act of 1890, enacted in response to the widespread growth of combinations or trusts in 1880s. Since the Sherman Act, other statutes have been enacted to deal with other anticompetitive behavior of businesses. Proper functioning of free competitive markets requires either to break-up monopolies, cease and desist monopolistic practices or regulate them. For example, in 1911 the Supreme Court broke up the Standard Oil Company into 33 geographically separate companies. Monopolies of electric and gas utilities are regulated to promote public interest.
The second reason for market failure is when producers do not fully bear total costs of products or are unable to capture all benefits of producing products. For example, oil and gas producers in Utah do not bear the full cost of health hazards their pollution imposes on population in the Uintah basin as well as in the Salt Lake valley. Many of the benefits of basic research and development and education pass on to others who do not pay the total price for inventions and knowledge production. Another example is when uninsured people seek health care in emergency clinics, thus causing higher premium costs to insured people. All such cases require government regulation or taxes or subsidies to improve efficiency of markets. A British economist A.C. Pigou, presented the earliest and most cogent discussion on market failure in 1920 in his book, The Economics of Welfare.
Third, market fails when there is a common property resource. Common property is nobody's property, hence the property is misused. For example, Great Lakes, Amazon Rainforest, Yellowstone National Park, national parks in Utah, Great Salt Lake are common property resources. Such resources cannot be privatized; the government has to intervene to preserve common property. The fourth reason is lack of information, misinformation or asymmetry of information. For example, the recent mortgage crisis was partly the result of asymmetry of information and/or misinformation to the participants, especially the borrowers. Health insurance also faces the problem of asymmetry of information. Therefore there is a need for regulations in such markets.
Finally, risk and/or uncertainty may be an impediment for free markets to provide products, which may be welfare-maximizing for the society in the future. For example, production of renewable energy and construction of transmission lines are very risky ventures at early stages of development, hence this sector will require government assistance to grow, just like railroads and system of canals did in the 19th century.
There are a host of other areas where free markets will not work efficiently and promote public welfare as envisioned by Adam Smith without some government intervention: for example, areas of product safety, workplace safety, airwaves allocation, oil and gas exploration. Therefore government intervention is essential for the working of free and competitive markets. I do recognize that government intervention in markets should be measured for efficient operation of markets. But indiscriminately diluting regulations, taxes, subsidies and user fees, which are essential parts of a vibrant free-market competitive economy, may result in undesirable consequences which no one would value.
Mathur is former chair of the economics department and professor emeritus of economics at Cleveland State University, Cleveland, Ohio. He resides in Ogden. His articles also appear in vijaykmathur.blogspot.com. He offers original blog posts for the Standard-Examiner at http://blogs.standard.net/economics-etc/.
http://www.standard.net/topics/opinion/2010/11/20/governments-role-free-market-economy
Wednesday, November 10, 2010
India set to be first country to publish 'natural wealth' accounts
by Juliette Jowit
guardian.co.uk, Wednesday 20 October 2010 07.00 BST
India is today expected to become the first country in the world to commit to publishing a new set of accounts which track the nation's plants, animals, water and other "natural wealth" as well as financial measurements such as GDP.
The announcement is due to be made at a meeting of world governments in Japan to try to halt global destruction of biodiversity, and it is hoped that such a move by a major developing economy will prompt other countries to join the initiative.
Work on agreeing common measures, such as the value of ecosystems and their "services" for humans – from relaxation to clean air and fertile soils – will be co-ordinated by the World Bank, which hopes it can sign up 10-12 nations and publish the results by 2015 at the latest.
The move fulfils one of the key demands of a major report also being published today at the Japan meeting, a UN study of The Economics of Ecosystems and Biodiversity (TEEB) .
The report was commissioned by the G8+5 major nations in 2007 in the hope of repeating the success of Lord Stern's report on climate change in persuading governments of the strong economic case to take action on saving the natural world.
The environment secretary, Caroline Spelman, welcomed the report: "TEEB can have the same impact for biodiversity as Stern had for climate change and will be a useful tool to help reduce the loss of species and habitats ... economically, we have to take action to reduce the loss of our natural environment before the cost becomes too high."
Pavan Sukhdev, economist and the TEEB study leader said: "Natural capital is a massive asset class, and developing nations' biggest asset."For it to be missing from the balance sheet of the nation, or for failures not to be counted, does not make sense."
After India and the other countries that join it in the first ecosystem accounts, Sukhdev said he hoped another 20-30 would adopt the system over the following three to five years.
"The rest: if they are not with it, people will get left behind," he added. "We'll never have all 192 countries, but does that matter? The idea is to establish the direction in which national accounting must go."
After the publication over the past two years of an interim report and specific documents about the economics and recommended actions by governments, businesses and citizens , Teeb will today publish its final "synthesis" report.
This will not contain a specific headline value for all the world's biodiversity, although earlier versions have quoted huge values for individual ecosystems such as forests, and Sukhdev today talks of "the multi-trillion dollar importance" of the natural world.
However it argues that there is plenty of evidence for national and local governments, businesses and individuals to radically review how they make decisions to take into account the damage or preservation of biodiversity.
"Teeb's approach can reset the economic compass," says Sukhdev. "Do nothing, and not only do we lose trillions of dollars' worth of current and future benefits to society, we also further impoverish the poor and put future generations at risk. The time for ignoring biodiversity and persisting with conventional thinking regarding wealth creation and development is over. We must get on to the path towards a green economy."
Among the report's recommendations are that countries and companies should publish accounts of their natural capital, and how much it has increased or decreased over the previous year, in parallel with traditional financial accounts. This should help address current accounting rules which, for example, measure the clean up of a pollution spill as an increase in economic activity (by the clean up companies), but take no account of the long-term damage done.
Such all-encompassing measures would be more likely to encourage other suggested changes, such as paying people to protect or restore ecosystems, refunding people who do not cut down forests or farmers who reduce chemical fertilisers and pesticides; and better certification schemes so that those who produce products and services, such as food and drink, in more environmentally friendly ways, can get recognition and charge higher prices to cover extra costs.
The report also calls for reform of subsidies for damaging industries, such as mining and intensive farming, and tougher fines for polluters to discourage the problem and pay for proper restoration.
In a written statement for the TEEB launch and his own country's announcement, India's minister for environment and forests, Jairam Ramesh, said: "Teeb aims to provide strong incentives for countries to ensure decisions are not solely based on short-term gains, but build foundations for sustainable and inclusive development."
Among the figures collected by the report team were an estimate that at present rates deforestation would cost the global economy US$2-4.5tr (£1.27-2.86tr) a year by the middle of this century; while the estimated market for certified agricultural products, such as organic, would be $210bn (£133bn) by 2020. Another quoted by TEEB, by Trucost in London, found the total environmental damage by the world's 3,000 biggest listed companies in 2008 added up to at least US$2.2tr (£1.40tr).
"TEEB has brought to the attention of the globe that nature's goods and services are equally if not far more central to the wealth of nations including the poor – a fact that will be increasingly the case on a planet of finite resources with a population set to rise to 9 billion people by 2050," said Achim Steiner, UN under-secretary general and executive director of the UN Environment Programme.
http://www.guardian.co.uk/environment/2010/oct/20/india-natural-wealth-accounts
guardian.co.uk, Wednesday 20 October 2010 07.00 BST
India is today expected to become the first country in the world to commit to publishing a new set of accounts which track the nation's plants, animals, water and other "natural wealth" as well as financial measurements such as GDP.
The announcement is due to be made at a meeting of world governments in Japan to try to halt global destruction of biodiversity, and it is hoped that such a move by a major developing economy will prompt other countries to join the initiative.
Work on agreeing common measures, such as the value of ecosystems and their "services" for humans – from relaxation to clean air and fertile soils – will be co-ordinated by the World Bank, which hopes it can sign up 10-12 nations and publish the results by 2015 at the latest.
The move fulfils one of the key demands of a major report also being published today at the Japan meeting, a UN study of The Economics of Ecosystems and Biodiversity (TEEB) .
The report was commissioned by the G8+5 major nations in 2007 in the hope of repeating the success of Lord Stern's report on climate change in persuading governments of the strong economic case to take action on saving the natural world.
The environment secretary, Caroline Spelman, welcomed the report: "TEEB can have the same impact for biodiversity as Stern had for climate change and will be a useful tool to help reduce the loss of species and habitats ... economically, we have to take action to reduce the loss of our natural environment before the cost becomes too high."
Pavan Sukhdev, economist and the TEEB study leader said: "Natural capital is a massive asset class, and developing nations' biggest asset."For it to be missing from the balance sheet of the nation, or for failures not to be counted, does not make sense."
After India and the other countries that join it in the first ecosystem accounts, Sukhdev said he hoped another 20-30 would adopt the system over the following three to five years.
"The rest: if they are not with it, people will get left behind," he added. "We'll never have all 192 countries, but does that matter? The idea is to establish the direction in which national accounting must go."
After the publication over the past two years of an interim report and specific documents about the economics and recommended actions by governments, businesses and citizens , Teeb will today publish its final "synthesis" report.
This will not contain a specific headline value for all the world's biodiversity, although earlier versions have quoted huge values for individual ecosystems such as forests, and Sukhdev today talks of "the multi-trillion dollar importance" of the natural world.
However it argues that there is plenty of evidence for national and local governments, businesses and individuals to radically review how they make decisions to take into account the damage or preservation of biodiversity.
"Teeb's approach can reset the economic compass," says Sukhdev. "Do nothing, and not only do we lose trillions of dollars' worth of current and future benefits to society, we also further impoverish the poor and put future generations at risk. The time for ignoring biodiversity and persisting with conventional thinking regarding wealth creation and development is over. We must get on to the path towards a green economy."
Among the report's recommendations are that countries and companies should publish accounts of their natural capital, and how much it has increased or decreased over the previous year, in parallel with traditional financial accounts. This should help address current accounting rules which, for example, measure the clean up of a pollution spill as an increase in economic activity (by the clean up companies), but take no account of the long-term damage done.
Such all-encompassing measures would be more likely to encourage other suggested changes, such as paying people to protect or restore ecosystems, refunding people who do not cut down forests or farmers who reduce chemical fertilisers and pesticides; and better certification schemes so that those who produce products and services, such as food and drink, in more environmentally friendly ways, can get recognition and charge higher prices to cover extra costs.
The report also calls for reform of subsidies for damaging industries, such as mining and intensive farming, and tougher fines for polluters to discourage the problem and pay for proper restoration.
In a written statement for the TEEB launch and his own country's announcement, India's minister for environment and forests, Jairam Ramesh, said: "Teeb aims to provide strong incentives for countries to ensure decisions are not solely based on short-term gains, but build foundations for sustainable and inclusive development."
Among the figures collected by the report team were an estimate that at present rates deforestation would cost the global economy US$2-4.5tr (£1.27-2.86tr) a year by the middle of this century; while the estimated market for certified agricultural products, such as organic, would be $210bn (£133bn) by 2020. Another quoted by TEEB, by Trucost in London, found the total environmental damage by the world's 3,000 biggest listed companies in 2008 added up to at least US$2.2tr (£1.40tr).
"TEEB has brought to the attention of the globe that nature's goods and services are equally if not far more central to the wealth of nations including the poor – a fact that will be increasingly the case on a planet of finite resources with a population set to rise to 9 billion people by 2050," said Achim Steiner, UN under-secretary general and executive director of the UN Environment Programme.
http://www.guardian.co.uk/environment/2010/oct/20/india-natural-wealth-accounts
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