A Reflection by Our Think Tank of Young Economists

Every episode of the online dialogues between visionary economists, organized as part of the Consultation, starts off with a personal reflection by one of the members of the Consultation’s Think Tank of Young Economists. This is the reflection of Elisa Terragno Bogliaccini at the start of the dialogue ‘How Can Markets Be Reconciled with Ecology?‘ (2 November).

It must not be news for anyone in this (virtual) room that we are facing a severe crisis on all fronts. With the corona virus hitting 44 million worldwide cases this week, the Arctic ice caps not yet refreezing in November, and unemployment rates soaring worldwide. And what is worse, the top 1% of the world’s population owning more than half of the world’s wealth.

Me, personally, I can’t seem to stop thinking about what economist Ernst Friedrich Schumacher famously said back in the 70s:

The real problems of our planet are not economic or technical, they are philosophical. The philosophy of unbridled materialism is being challenged by events.”

In other words, our insatiable longing for consumption, and our fixation with the material world is slapping us in the face, showing us their consequences in the form of unavoidable health, economic and environmental disasters.

For me, and for many others in my generation, the disconnect between humans and our surroundings is becoming ever more clear. I have an economics degree… I have lived human disconnect… 😉

Short-termism

Mark Maslin, a professor of climatology, already warned us in 2014: “climate change challenges the very way we organise our society” …and he was absolutely correct. Our self-serving short-termism is a clear obstacle in achieving meaningful climate action, and it is precisely there where our analysis must begin. In the last decades, rather than societal value creation and contribution to the real economy, shareholder value maximisation has dominated decision-making at companies; driving executive compensation up to 940% since the late 1970s.

A similar short-termism is observed in the extraction of resources across our earth; a clear example being leftist governments in Latin America resorting to resource extraction for alleviating social pressures…which is well intentioned, but it’s short-termism nonetheless. Here in the global North: despite the signing of several agreements, restless activist efforts and government promises, millionaire financial contracts for petrol extraction have been signed as recently as last year.

The power dynamics inherent in the linkages between the private sector and the financial system pose a key problem for ecological safety: financial interests make the world go round, and if these interests are focused on the wrong investments, our green deals and green recovery plans have nothing to offer in counter.

So, what is there to do about this?

The green growth paradigm

One famous approach is that which the European Commission proposed last December, the ‘European Green Deal’. And this Green Deal proposes something called the Just Transition Mechanism, in order to compensate for the unequal starting position of different countries across the EU. Such a mechanism, as both speakers may know already, consists of one fund and two loan facilities, amounting up to 150 billion euro… which is basically a 0,9% of last year’s EU GDP.

But the question remains… how will this money be allocated? It seems that so far it will follow the usual path of the green growth paradigm… finance a couple of sustainable infrastructure projects here and there… but what solutions does it offer to counter the structural power imbalances between and within countries?

Last week doing some research into this mechanism, I found out that the term ‘Just Transition’ was coined by the International Trade Union Confederation, which was embracing the idea of participatory processes to ensure a bottom-up approach to the energy transition. In my opinion, this is very much lacking in the European Green Deal Just Transition Mechanism.

Another approach is the very popular Sustainable Development Goals of the United Nations. And don’t get me wrong, they do represent a great commitment of countries across the globe, and they do specifically talk about ‘reaching those furthest behind’. However, it also seems to me that their lack of specificity beats its own purpose, namely ensuring that those at the very bottom contribute to create solutions that work for them.

My question is then to you both, Professor Steinberger and Dr. Pettifor, what can be done to tackle these very difficult issues? And what role can markets play in this, if any?

Read More

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The Case for the Green New Deal (2019)

Rethinking the Economics of Land and Housing

The Production of Money; How to Break the Power of Bankers (2017)

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