Category: Economics

Matters of money

Media attention to the case for divestment

I was heartened yesterday to see the CBC publishing an article about one of the scholars behind the case for divestment which was made successfully at Cambridge: Academic from Saskatoon plays key role in Cambridge University divesting from fossil fuels.

The report they link — Divestment: Advantages and Disadvantages for the University of Cambridge by Ellen Quigley, Emily Bugden, and Anthony Odgers — is particularly notable for its inclusion of a broad range of scholarly work on divestment from a range of fields.

British Columbia’s 2020 election

I’m not celebrating NDP premier John Horgan’s successful gamble on an election to secure a majority government. For one thing, I think minority governments which sometimes seek support from the Greens are likely to enact more responsible climate change policies. For another, I have been consistently frustrated by the NDP’s inconsistent and inadequate positions on climate change.

Both federally and provincially I think it would be desirable for the left-wing parties (Liberals, NDP, and Greens) to adopt a Pact for Humanity in which they pledge to at least keep in place their predecessors’ climate change mitigation policies. That would help give some certainty to industries, municipalities, and individuals who are deciding whether to invest in fossil fuel infrastructure or alternatives. Of course, there would still be uncertainty from possible future Conservative governments which will roll everything back, but it’s better than having the left remain split on what approach to take and left-wing parties competing with each other about whether to support industry at the expense of the environment, keep tightening carbon restrictions in line with the best scientific and economic advice, or keep jumping unproductively between one approach to GHG regulation and another.

Related:

Is plastic recycled?

There’s a story doing the rounds about how plastic recycling has always been a scam. Consumers started to get concerned about the ecological consequences of throwing plastic away and — despite knowing it was infeasible and uneconomical to actually recycle — they slapped little logos on everything implying that they can and will be recycled, thus alleviating the consumer concern without doing anything about the problem.

NPR’s Planet Money did a show on whether recycling is worthwhile at all.

In particular, people argue that recycling as a solution suits the corporate agenda by shifting responsibility from the firms creating the problem to individuals, regardless of whether they are at all positioned to make things better. This can be equated to the ‘carbon footprint’ idea and the approach to climate change mitigation based on individual action, helping the fossil fuel industry avoid regulation and responsibility.

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Morneau’s deficit comments

If finance minister Bill Morneau believes that Canada’s budget deficit “the challenge of our lifetime” he’s either tragically ill-informed, delusional, or disabled by finance-industry-insider blinders. Russia and Argentina, among others, show how states can default on their external debts and suffer relatively little consequence, as investors race back in within years. Even the worst economic outcomes, like interwar hyperinflation in Germany, are nothing compared to what catastrophic climate change would involve — and that’s where we’re on track to end up if the world just keeps doing what it is doing now.

The quote shows how deeply our highest-level leaders are failing to understand what climate change will mean for humanity and life on Earth if we don’t begin a dramatic program of cutting fossil fuel production and use. When you’re facing the plausible risk of extinction as a civilization or a species, having leaders who think a line on a spreadsheet is the greatest challenge is demonstrative of actively harmful leadership and underscores the degree to which existing politicians and institutions are incapable of accepting the most severe consequences of their choices.

Today’s China is not the future we should want

China’s strategy with the Hong Kong ‘security’ law seems intended to send a global message: critics of China will be increasingly punished as the state’s global influence grows.

This is disturbing in many ways, for the welfare of people in China, the region, and around the world. The degree of authoritarian control that technology has granted over citizens’ lives is disturbing in itself, and could permanently inhibit reform or political progress. While it tries to present itself as organized and competent in comparison to chaotic democracies, there is also reason to believe that China is replicating the dysfunctional and corrupt politics of the Soviet Union, with officials at every level incentivized to conceal and misrepresent what is really happening to protect themselves and advance their personal interests. Ethnic and religious nationalism, in India as well as China, are also deeply frightening and drivers of abhorrent humanitarian abuses.

Given the expected trajectory of relative power in global politics — with North America, Europe, and Japan all in relative decline — perhaps the best that can be hoped for is a peaceful revolution within China to remove the Communist Party, potentially along the lines of the establishment of the Sixth Republic in South Korea after 1987.

China hasn’t grown richer out of the brilliance or wisdom of the communist party, but out of that party’s abandonment of communist ideology for a synthesis between export-driven industries making use of inexpensive labour and an unaccountable state willing to smash anyone who gets in the way of the big plans. The idea that there’s an appealing “China model” that other states should consider in the face of American decline is just wrong. It’s a police state rising through cynical diplomatic manipulation and a central role in the global consumerist manufacturing system, not a model for the future that any free people should embrace. Indeed, it is a model we should resist, even when the Chinese government cultivates fear over what the personal costs of doing so will be.

The Soviet Union’s pre-Chernobyl nuclear safety record

In the 1950s, when the RBMK design was developed and approved, Soviet industry had not yet mastered the technology necessary to manufacture steel pressure vessels capacious enough to surround such large reactor cores. For that reason, among others, scientists engineers, and managers in the Soviet nuclear-power industry had pretended for years that a loss-of-coolant accident was unlikely to the point of impossibility in an RBMK. They knew better. The industry had been plagued with disasters and near-disasters since its earliest days. All of them had been covered up, treated as state secrets; information about them was denied not only to the Soviet public but even to the industry’s managers and operators. Engineering is based on experience, including operating experience; treating design flaws and accidents as state secrets meant that every other similar nuclear-power station remained vulnerable and unprepared.

Unknown to the Soviet public and the world, at least thirteen serious power-reactor accidents had occurred in the Soviet Union before the one at Chernobyl. Between 1964 and 1979, for example, repeated fuel-assembly fires plagued Reactor Number One at the Beloyarsk nuclear-power plant east of the Urals near Novosibirsk. In 1975, the core of an RBMK reactor at the Leningrad plant partly melted down; cooling the core by flooding it with liquid nitrogen led to a discharge of radiation into the environment equivalent to about one-twentieth the amount that was released at Chernobyl in 1986. In 1982, a rupture of the central fuel assembly of Chernobyl Reactor Number One released radioactivity over the nearby bedroom community of Pripyat, now in 1986 once again exposed and at risk. In 1985, a steam relief valve burst during a shaky startup of Reactor Number One at the Balakavo nuclear-power plant, on the Volga River about 150 miles southwest of Samara, jetting 500-degree steam that scalded to death fourteen members of the start-up staff; despite the accident, the responsible official, Balakavo’s plant director, Viktor Bryukhanov, was promoted to supervise construction at Chernobyl and direct its operation.

Rhodes, Richard. Arsenals of Folly: The Making of the Nuclear Arms Race. Vintage Books, 2007. p. 6–7

Trudeau’s climate failure

In closing, a few words can be said about other aspects of the PCF [Pan-Canadian Framework on Clean Growth and Climate Change]. The complete ignoring of the 2020 target illustrates the power of the Canadian dynamic of policy failure set out in chapter 1. Disguising the lack of will and effort needed to achieve an international commitment by focusing on a new target, some years distant, was done in 1997, in 2010 and again in 2015. It provides the government in question with environmental legitimacy by allowing it to appear committed to policy action while avoiding the conflicts and costs the must be borne to actually achieve a target. Unless things change, there is a very real chance it will be done again in the years leading up to 2030, regardless of which government is in power. Because we are so willing to push action off into the future, we are able to avoid the regional conflict inherent to the allocation issue. The Justin Trudeau government’s focus on the easy challenge (which, as events turned out, has not been so easy) of ensuring carbon pricing throughout Canada when the big four emitting provinces already had pricing in place, rather than the much more difficult task of convincing those four to do more than they had already themselves decided on, is a continuation of the dynamic first seen with the easy challenge of the 1995 voluntary program. At that time, as discussed, a voluntary program was all that could realistically have been hoped for. In 2015, however, with very different public attitudes, foreign and domestic examples, and a majority government eager to act, the PCF was a missed opportunity. Taking advantage of that opportunity would have required facing the challenges that are the subject of this book, in particular vastly different western and eastern energy interests. That was not done because the Canadian dynamic of favouring peaceful relations over effective policy was exerting its usual force.

As of the spring of 2019, the Pan-Canadian Framework program, so completely a product of this dynamic that has brought only policy failure since 1990, was providing the worst of both worlds. It did not have the programs in place capable of meeting the stated goal, while a major element of the program, federal construction of a pipeline, will if implemented increase emissions. While providing no guarantees of achieving its goal, the PCF is causing considerable damage to national unity and the possibilities of constructive federal-provincial engagement. The outcome of the 2019 Alberta election made that situation even worse since by then a supposedly national program was opposed by half the provinces, representing more than half the population, and three-quarters of total emissions.

Macdonald, Douglas. Carbon Province, Hydro Province: The Challenge of Canadian Energy and Climate Federalism. University of Toronto Press, 2020. p. 232–3

Related:

Minsky on government-guaranteed employment

As recently as March 5th, The Economist published an article entitled: A recession is unlikely but not impossible

The April 18th issue reports: “On April 14th the IMF warned that the global recession would be the deepest for the best part of a century.”

I can’t find my note about it, but somewhere I recorded that a particular figure recommended that their staff read Hyman Minsky’s Stabilizing an Unstable Economy, which I have added to my non-thesis reading collection. It is somewhat difficult going as I am not especially well grounded in economic theory and terminology. Still, the central ideas seem accessible and somewhat surprising, especially the argument that governments should act as employers of last resort. Once I get through it, perhaps I will get the chance to ask Hugh Segal about how that approach compares with his preferred option of a universal basic income. Minsky argues:

Social justice rests on individual dignity and independence from both private and political power centers. Dignity and independence are best served by an economic order in which income is received either by right or through a fair exchange. Compensation for work performed should be the major source of income for all. Permanent dependence on expending systems of transfer payments that have not been earned is demeaning to the recipient and destructive of the social fabric. Social justice and individual liberty demand interventions to create an economy of opportunity in which everyone, except the severely handicapped, earns his or her way through the exchange of income for work. Full employment is a social as well as an economic good. (p. 10)

I can already see some of the appeal in government guaranteeing decent employment to anyone who requests it, since it would establish a floor for what private employers could demand in terms of working conditions. If nobody was forced to seek work through private job markets it would be helpful both in times of economic crisis when unemployment becomes extreme and at normal times, when the greater power of employers over employees may drive the latter to accept unacceptable working conditions or illegally low wages. Especially with the degree to which labour unions have become enfeebled, having the government offer acceptable alternative employment to anyone who wants it could play an important role in rebalancing power toward employees and avoiding labour exploitation.

Guelph divests

The Guelph University board of governors committed to divest from fossil fuels on Wednesday, after a sub-committee of their finance committee concluded that doing so was compatible with fiduciary duty and that a divested portfolio would have performed as well or better in the past. I was a guest on the board’s call, and it was remarkable to hear administrators making they key legal and financial arguments in favour of divestment. It shows how at least some administrators have internalized some of the central arguments of the divestment movement.

This follows divestment by Laval, Concordia, and UBC.