Friday, April 03, 2009

G20 and the environment II: Monbiot's return

Sadly I am too busy to comment at length on the G20-environment debate so I will let George take over.

On a purely "G20 save the world" note am I the only economist who believes the latest moves will do little to help? The way I see it is that the trillion dollars just allows those countries addicted to gambling to keep on gambling. Low interest rates encourage households to gamble on riskier investments instead of saving.

Capitalism is about capital - the lack of incentive to save means individuals taking even more risk.

After a party this size of the one the global economy has had over the last ten years the hangover was always going to be bad. The current solution may stop the very worst of it but may well mean that the hangover goes on for longer.

Still, there are some good idea and the tax haven solution is one of them but these are long term solutions to stop this happening again. There is no danger of that for a while.

Over to George on the environment who is as always spot on. A great piece on the current farce over bank bailouts.

Once we are well and truly past the planet's tipping point there can be no "planet bailout" however much money we throw at it assuming we return to our path of unstustainable growth.

G20 forgets the environment [Guardian]

Here is the text of the G20 communique, in compressed form.

"We, the Leaders of the Group of Twenty, will use every cent we don't possess to rescue corporate capitalism from its contradictions and set the world economy back onto the path of unsustainable growth. We have already spent trillions of dollars of your money on bailing out the banks, so that they can be returned to their proper functions of fleecing the poor and wrecking the Earth's living systems. Now we're going to spend another $1.1 trillion. As an exemplary punishment for their long record of promoting crises, we will give the IMF and the World Bank even more of your money. These actions constitute the greatest mobilisation of resources to support global financial flows in modern times.

Oh - and we nearly forgot. We must do something about the environment. We don't have any definite plans as yet, but we'll think of something in due course."

The G20's strategy for solving the financial and economic crisis, in other words, is detailed, innovative, fully costed and of vast scale and ambition. Its plans for solving the environmental crisis are brief, vague and uncosted. The environmental clauses - which contradict almost everything that goes before - have been tacked onto the end of the communique as an afterthought. No new money has been set aside. No new ideas are proposed; just the usual wishful thinking: let's call the whole package green and hope for the best.

So much for the pledge, expressed in different forms by most of the governments present at the talks, to put the environment at the heart of decision-making. Though the economy is merely a measure of our engagement with the environment; though, as most of the leaders acknowledge, continued prosperity is impossible without sustainability, the communique shows that the environment still comes last. No expense is spared in saving the banks. Every expense is spared in saving the biosphere.

This suggests to me that our leaders have learnt nothing from the financial crisis. It was caused by allowing powerful agents (the banks) to exploit a common resource (the global economy) without proper control or regulation. Governments deployed a form of magical thinking: that the boom would go on forever, that a bunch of predatory psychopaths would regulate themselves, that profits, dividends and share prices could grow indefinitely even though they bore no relation to actual value.

They treat the environmental crisis the same way. Climate breakdown, peak oil and resource depletion will all dwarf the current financial crisis, in both financial and humanitarian terms. But, just as they did with the banks, the G20 leaders appear to have decided to deal with these problems only when they have to - in other words, when it's too late. They persuade themselves that getting the economy back to where it was - infinite growth on a finite planet - can somehow be reconciled with the pledge "to address the threat of irreversible climate change".

Next time this magical thinking fails, there'll be no chance of a bail-out.


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