Carbon Politics Down Under

The final word in my short recent series on the developments in carbon policy in Australia should be given to Clive Spash , who was there on the inside and, as an academic economist of the social-ecological position, in a strong position to analyse the policy outcomes from a planetary perspective.

Spash has produced a paper describing how Julia Gillard was able to depose the previous Prime Minister Kevin Rudd, also of the Labour Party, because of the unpopularity of his carbon emissions trading scheme. The powerful mining sector lobbied strongly against this and the opposition thus generated, most on the basis of untrue claims about the effect on ordinary Australians, allowed Gillard to successfully challenge Rudd and create a new government with support of Green and independent MPs.

Spash describes how the political compromise involved a temporary carbon tax for three years, to be followed up by an ETS very similar to that which had been proposed by Rudd and at considerable political cost:

'That cost extends to allowing major emitters to make guaranteed windfall profits from pollution permits. The emission trading scheme suffers numerous problems, but the issues raised show taxes can also be watered down and made ineffectual through concessions. Taxpayers will get no assets from the billions of dollars to be spent buying-off the coal generators or other polluters. The scheme hopes to stimulate private investors to create an additional 12 percent in renewable electricity generation by 2020.'

Spash sets a much more stringent target of a wholesale shift to 100% renewable energy within a decade, the only proposal he considers 'serious' given the urgent nature of the issue of climate change. His working paper explores the difficulties of implementing meaningful greenhouse gas taxes in Australia.
. Tweet

Unified Continent not Single Currency

The first time that I was in the uncomfortable position of agreeing with Conservatives was some ten years ago when, on behalf of the Green Party, I joined the national campaign against Britain joining the Euro. The pro-finance and little Englander Tories felt the need for a bit of breadth and so invited Euro-sceptic former foreign minister David Owen, a couple of anti-European Labour MPs and a representative from the Green Party to join them.

Around the same time I published a chapter in a book called Implications of the Euro: A Critical Perspective from the Left. In my chapter I discussed the ways that a single currency would force the pace of political change in a way that the institutions could not follow and would alienate the peoples of the countries involved. This, and the growing tensions between nations that would be created, could threaten the future of the European project as a whole. The self-interest of finance could overwhelm the common interest of peace.

This morning I believe we have seen these predictions come to pass. This is why I believe that David Cameron was right not to join the treaty although, just like the Tories on the anti-Euro committee a decade ago, we could not be further apart in terms of the economic route Britain should follow. Cameron's interest is almost entirely to protect the City and to avoid its spivs and speculators from being forced to consider the social consequences of their actions. However, some in his party are articulating concerns about democracy that I still believe have merit.

It is tempting to believe that the European institutions might impose acceptable standards on the City, just as they have forced us to improve our environmental standards and reduced exploitation at work. But the problem every time has been that we have not had the power to make these decisions democratically. We do not elect people with sufficient power to make decisions at the European level and so these decisions have no more political authority than the current unelected prime ministers of Italy and Greece.

The democratic deficit is more threatening to the aims of the EU than the collapse of the euro. For many years the single market and then the single currency were ambitions driven by business to serve its interests. They have utterly distorted the institutions of Europe and have alienated many of the people of Europe from this organisation that was designed to protect their peace and prosperity. How else can we interpret the huge votes in many of Europe's most loyal members for parties of the nationalist right?

Although the details of the new treaty are as yet unclear we do know that it will involve allowing unelected European officials to set levels of spending and rates of taxation in countries over which they have no democratic mandate. The Euro always constrained monetary policy and therefore reduced the room for manoeuvre in terms of fiscal policy. But as the fiscal straitjacket is imposed, and austerity follows, it is Europe and the other nations that make up the continent that will be blamed by the citizens of the countries who suffer.
. Tweet

Divided We Fall

It is rather ironic that the main question the media has drawn from the latest publication of Social Attitudes in Britain is whether we are more Thatcherite now than we were in the days of Thatcher. If we were we would certainly not have these data to mull over, since Thatcher was notoriously opposed to social research and abandoned the most valuable tool for the social researcher: the National Child Development Survey, as well as virtually eliminating sociology from our universities.

So having survived the Thatcherite axe the social researchers, though privatised, are still funded to tell us that we care less about each other than we used to and that we have utterly lost faith in our public institutions. While we did hear on the BBC about the fall in support for a government role in redistributing wealth we did not hear about the decline in trust for that institution itself: from 72% to 49%. The politicisation of the BBC has destroyed its role as a public-service broadcaster. The only public institution to have gained trust is the National Health Service. There are no data about the extent to which people's faith in statistics has been undermined by the privatisation of those who seek the data: NatCen (a company limited by guarantee) would have no interest in such a question and its results would not reach a high market value.

This sort of data is, as the Spanish say of history, a field in which all can make hay. I would be interested to see some socio-economic breakdown of the responses to the questions about welfare. It seems that those most vulnerable, including many dependent on benefits themselves, are some of the most vociferous in criticising the dependency culture. This represents another example of the cognitive dissonance that is a necessary skill to survive in late-capitalist Britain.

The media emphasis was on the declining levels of support for redistribution, which was matched by a growing sense of injustice about the unequal way in which hard work is rewarded. This chimes with the findings of another report released this week, by the OECD. Called Divided we Stand it rang alarm bells about the negative social consequences of rising rates of inequality withing societies. Hardly the message one might have expected from the club of the world's richest nations and a traditional cheer-leader for globalisation.

Angel Gurría, OECD secretary-general, is quoted as saying that 'the social contract is unravelling', and this seems to be reflected in the responses to the Social Attitudes Survey as well. The interesting question is why the OECD should suddenly have become interested in the social impact of growing inequality. The real struggle is between the greedy and thoughtless elites and those who realise that capitalism has always relied on the consent of the masses and that without a social contract that consent cannot be guaranteed.
. Tweet

Poor Standard of Credit Rating

The delight about the rapprochement between Merkel and Sarkozy was short-lived, being undermined almost immediately by a threat from the credit-rating agency Standard and Poors. How are we to interpret these events?

The estrangement in the Franco-German affair was the result of Merkel taking a hard line on monetary policy and refusing to sanction the direct creation of money by the European Central Bank to ease the debt problems of the 16 other Euro members. Apparently yesterday she relented on this, allowing a relaxation of monetary policy in return for a new treaty imposing debt restraint on the Eurozone members.

In response to this a downgrading of the quality of the debt of most Eurozone countries might seem reasonable. But why Germany, which is clearly capable of paying its debts? It appears that this may be more an act of revenge for Merkel's previous insistence that bond-holders must bear some of the cost of their risky investment decisions. The Greek hair-cut was the last stand of a politician who would not accept that the innocent would bear all the pain. Germany will now be punished for the losses this brought to financiers, its own national debt now attracting higher interest rates than the state of its economy demands.

More fundamentally we might question why the US and UK, who are far more debt-ridden and whose economies are struggling much more than that of Germany, are not being threatened in the same way by the markets. The huge money-printing operations of both the Fed and the Bank of England makes investment in these countries far more risky, as does their lack of real production and their low rates of growth, and yet they are not the target of the credit raters. The conclusion is clear: the credit-rating agencies are rating finance-friendly policies, not the strength of national economies and the debt they issue.

More fundamentally the explicit evidence of economic policy being negotiated between politicians and rating agencies makes more urgent the need for politicians to have the courage to articulate an alternative and to co-operate to reclaim the democratic power to determine the direction of their own economies. We need to find a way through this present crisis that is compatible with democracy, not just compatible with the wishes of market investors. If alternative views are not articulated then we will be heading for a political rupture rather than the evolution to a more stable and equitable economic model that our happiness and well-being requires.
. Tweet

Creating New Economists

I had a very interesting experience over the weekend while attending university open days. I was enquiring from a young woman encouraging people to take economics how pluralist her course was. She really seemed unable to understand my question. She responded that they taught 'normal' economics. I asked her if this meant neoclassical or whether they also had space for classical or Marxist varieties. She was simply unable to answer.

This is the problem the discipline faces: really nice, well-motivated people who have no conception that there might be other ways of thinking about economics than in terms of supply and demand curves and the marginal analysis. To address this problem the Association of Heterodox Economics is running training in alternative methods for economics, beginning with a course of training for researchers.

The postgraduate workshop on research methods will take place at London Metropolitan University on 10th and 11th February next year. It is funded so places are available free for students. Workshop topics will include:

· Reorienting economics to match method with social material

· Open system methodology in Economics

· Grounded theory in Economics

· Mixing quantitative and qualitative data

· Qualitative data analysis

To book a place you need to contact Andrew Mearman: Andrew.Mearman@uwe.ac.uk.
. Tweet

Carbon Floored

However many cheers we decide to cheer in response to Australia's introduction of a carbon tax , it is an encouraging sign that a country dominated by mining and energy interests and one of the highest carbon polluters is introducing an unpopular policy. What about the UK? Should we be arguing for a carbon tax here? Interestingly, it appears that this discussion is already underway, although in strong contrast to the situation in Australia, it is happening between the government and business, with little or no public debate at all. It is also happening without any mention of the word tax, and yet it is hard to find any other interpretation of the consultation document about a 'carbon price floor' published this March.

The first graphic illustrates the need for such a 'price floor'. It shows the price at which carbon was trading (bear with me on this nonsense) during the first phase of the EU's carbon trading scheme. The collapse in the price in 2007 resulted from the over-issue of a permits as a result of industry lobbying. There were more permits than companies needing to emit CO2, hence no scarcity, hence no price and the market failed.

The second graphic illustrates the government's proposal to use the Climate Change Levy to create a predictable upward trend in the 'price' of carbon to give a clear signal to industries reliant on fossil fuels that they had better increase their efficiency and/or shift their source of energy. This is a purely indicative graphic, with no suggested price, although later the document suggests 'Three illustrative carbon price scenarios for the UK power sector: £20, £30 and £40/tCO2 in 2020 rising to £70/tCO2 in 2030.'

This is one of the major problems with carbon pricing as a solution to climate change: we have no idea what the price should be. Real solutions to the problem of excessive emissions begin with a scientifically determined cap, and then find some way of sharing out the emissions the cap implies. Trading leaves the field wide open for industrial emitters to lobby to increase the number of permits available, and hence fix the market price. We can see from the first graphic that the current carbon price in the EU system appears to be stabilising at around €15 per tonne. As one of my students recently pointed out, given that our individual carbon quotas are around one tonne per year, and our actual emissions are 2.5 times that, he could easily afford to pollute to his heart's content, even on a student income.
. Tweet

Enclosure 3.0

The role of McKinsey, the US-based management consultants, in spreading the new gospel of corporate capitalism around the world has been widely noted. A new report now makes clear how the creation of the concept of 'ecosystem services' was always, as some of us have long believed, a step towards the commodification and sale of life itself. In spite of the clear evidence that globalisation has resulted in rising rates of inequality and ecological destruction, the report, called Resource Revolution, argues that what the world needs is more capitalism, not less.

Green economists have long been arguing that the two centuries of focus on labour and capital and the sidelining of land has been a mistake. McKinsey have now caught up, concluding that:

'In the 20th century, governments and businesses didn’t have to worry about resource productivity; they could focus on capital and labor. Over the next 20 years, resources must be at the heart of public policy and business strategy.'

The report provides a range of scarey statistics about rising population and increasing demand for resources, but then reassures readers that these offer tremendous opportunities. Unsurprisingly given its source, the opportunities are for businesses to take control of global assets and then organise their distribution. This is justified by the claim that the McKinsey model can offer the necessary increase in resource productivity.

Although couched in 21st century language, this is precisely the same argument made by the 18th-century improvers, who provided the intellectual justification for the theft of land during the Enclosures. Then, as now, the role of politicians was limited to freeing up the market ('unwinding subsidies'), making capital available, guaranteeing property rights. Oh yes, and providing safety-nets for those 'very poor people' who may lose out to deal with change. Perhaps we could ask McKinsey to hold a public meeting to discuss their findings - I'd like to suggest we book the Speenhamland Village Hall.
. Tweet