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James Galbraith:
This has been, very largely, a conference about the possibilities, the ways, and the means of an alternative strategic direction, the reasons why we need such a direction, the ways of achieving it, some of the obstacles, some of the costs, some of the problems associated with that.
What we thought we would do for this final session was to discuss the problem of the strategic goals, the objectives that economic policy ought to be focused on once, to some degree, we’ve succeeded in establishing the importance of that alternative strategic direction. First of all I should say I’m going to, for the purposes of this panel, exercise the prerogative of the chair in an unusual way by not actually speaking, and thereby freeing up a little bit more time for the three excellent panelists that we have, and also more time for discussion. And I think the model of having three speakers and adequate discussion time has served us very well in the last couple of days.
So that said, we have three panelists who are going to speak to different aspects of the problem of, if you like, strategic goals. Warren Mosler, who I believe plans to speak to the problem of achieving and maintaining full employment; Eban Goodstein, who plans to speak to the problem of the management and control of the challenge of climate change, a subject on which he is, I think, one of the pioneering economists of our time; and Marcellus Andrews, who is also very much concerned with climate change, and plans to speak to the problem broadly of the management of risk, and particularly in the context of the example of the fate of the city of New Orleans after Hurricane Katrina.
So that’s where we are, that’s what we’ll try to do. I’ll give you 15 minutes apiece, and I’ll start with Warren.
“Full Employment”
by Warren Mosler:
Thank you, Jamie.
What I’ve done is try to condense about a two-hour outline of the monetary system into a twelve-minute powerpoint presentation that’s applicable here. I’m going to say two things from previous [sic] in terms of trade. I think one of the reasons I’m here is I point out certain fundamentals that often get overlooked, creating a lot of damage in the world. One of them is, exports are a cost and imports are a benefit. I’ll have to repeat that for Jeff here. I’m saying, Jeff, that in terms of trade, exports are a cost and imports are a benefit. Now it’s a fundamental from the first week of macroeconomics. In economics, it’s better to receive than to give.
And yet it’s been measured completely backwards. Japan’s winning because they have a big trade surplus, and we’re losing. If MacArthur had gone into Japan after World War II and said, All right, you lost the war, you’re going to send us two million cars a year or we’re going to come back with nuclear weapons—you can’t do that to those poor people. It’s an outrage.
Meanwhile, for the last 60 years, they’re sending us two million cars a year and we’re sending them nothing, and we’re sending trade negotiators to try and stop it, right? I remember wondering why we’re sending Mickey [?]. This is madness.
Now, I can understand how a politician can get this backwards, who has got exporters breathing down his neck. I can understand how they would favor one group over another at the expense of the macroeconomy. But I have yet to see, in 40 years of occasionally reading the newspapers, one letter from one serious economist talking about that.
The other thing is comparative advantage. Now I don’t know if any of you know Jan Kregel. He brings me to a conference somewhere, he uses me kind of as a hatchet man or something. They’re talking about free trade and comparative advantage—it was some international U.N. thing—and I said, well, you know, comparative advantage in the neoclassical model assumes full employment. Everything clears. That’s why it’s comparative advantage. It’s not whoever has the lowest dollar price for labor has the comparative advantage; that’s not what it’s about. And if you don’t have full employment, all you get is an international race to the bottom, which exactly describes what’s happened.
Now this is not any advanced theory or anything. This is just standard neoclassical—That whole thing’s left out. So with no further ado, I’m going to get onto this powerpoint, which I’ll call “Fighting for Jobs,” just trying to be clever here, “War on Unemployment.”
What is the apparent cost of the Iraq War to the voters of the United States? Well, there’s been no rationing. It started off with a tax cut. The economy improved by all public measures. Unemployment dropped. The stock market’s boomed, housing prices have gone up, we’ve gotten free prescription drugs. Personal income and profits are up. It doesn’t look to the person voting, he’s not feeling any kind of a cost. I mean he hears numbers of eleventy seven trillion dollars here and there, but in the meantime his taxes are cut and he’s got a job, and his kid graduated school, and he’s working on Wall Street. There’s a message. This message is embedded, it’s implied in: War is good for the economy. War got us out of the Great Depression.
Economies are at risk when war ends. What are we going to do after the Korean War? We had the Eisenhower recession. After World War II, we better have this Marshall Plan. There’s the risk. The risk is when the wars are over. The post-Viet Nam War. There’s no domestic destruction with these foreign wars. Nobody sees anything, nobody hears anything. Soldiers are well-paid volunteers now. And the last point is it’s better to fight there than here.
And so they’ve got all these things supporting the notion of why now they’re—There’s all the due remorse about what’s happening and everything else, but the fact is, a) we keep getting into these things over and over again; and b) we’re putting every economic incentive to support it.
Now there’s plenty of moral reasons not to support it, and I’m not saying they’re not more important; but this is about economists here and what we’re doing, and our part, and we’ve set up a set of institutional structures that’s putting economic incentives for war for the population that’s voting for it.
War does have real costs obviously--we all know this—the lives lost, the continuing care things we’ve heard about, and the wasted real resources, which is staggering.
Before I talk about this, let’s look at the European economy with 8 percent unemployment, and the U.S. economy with 4 percent—I’ll just use round numbers. Now the War in Iraq, just in terms of GDP, is costing us one percent. And we’ve got Europe—So even if you add that back in as a total waste of GDP, Europe is wasting four times more on unemployment, lost output, than we are by throwing away actual output in Iraq. So the way things are in the world, and it goes unreported of course, is that the losses due to unemployment are way higher than what we’re doing in Iraq. Again, not trying to justify at all what we’re doing in Iraq. I can’t even read the newspapers about it or turn the TV on.
Why does the economy improve during wartime? Because during at peacetime we don’t run it at full employment. It’s really that simple. We maintain excess capacity during peacetime. We’re afraid of full employment during peacetime. The Fed wants to keep some slack so they don’t have to raise interest rates. We have [NAYRU?] issues. We have all these things that keep us at less than full capacity. So when you’re running at 80 percent capacity utilization, and then a war gets you up to 82 or 83, everything’s good. When you’re running at 5 or 6 percent unemployment, and war gets you down to 4, it can get you down to 4.
With full employment policy, the real costs of war become explicit. The military will have to pay high enough salaries to take workers from civilian jobs, not just give unemployed who can’t find anything, desperate people, disadvantaged people, an opportunity to eat. Conscription may be necessary when people have jobs that pay, decent jobs somewhere else before the war starts.
Domestic consumption will fall if we’re at full employment to begin with because then any resources that go the military are taking away resources from domestic consumption. And investment, I could put that as well. Military purchases of arms and munitions will drive up prices and cause shortages. Well why don’t they do that now? Because we have excess capacity now. If we’re using our capacity, it’s going to drive these things up. The Fed will respond to elevated inflation with higher interest rates. I just threw that in. It’s a little bit superfluous, but it’s just one of—This list can go on forever. Again, this is about a twelve-minute abstract from two hours about how the monetary system works.
How do we sustain full employment during peacetime? It is painfully simple. We only have to do one thing. Government offers a job to anyone willing and able to work at a fixed wage. That’s it. Done.
I’d say that fixed wage should be disruptive so it’s not—Now I’ve got two papers here. One’s called “Full Employment and Price Stability,” and that was published, I think, in ’96, that goes into more detail on this, if anybody’s interested in more detail. But that would be $8, $9, $10 an hour, this wage. And that wage automatically becomes the minimum in this society. You don’t even need minimum wage legislation. But there’s nothing else that has to change. Simply do that, and then there is a productive job for anybody who wants one, and other things happen.
Ramifications: War costs become obvious. The fixed wage becomes the minimum wage. And this part here: This new employed labor buffer stock replaces the current unemployed labor buffer stock and acts as a better price anchor. It’s a far superior price anchor.
don’t know if you’re familiar with the [JEFAS?] program in Argentina. That was pulled off of my paper by Daniel Cozar, who’s at the Labor Ministry down there. What they did--back in 2001 maybe? I can’t even remember. When did Argentina blow up? 2002—is they offered a job to any head-of-household willing and able to work, and they wound up with two million people. And they paid very little—100 pesos a month, or something like that. But what happened is 750,000 of those people were hired by the private sector in the next couple of years. Those people, I will tell you, would not have been hired by the private sector. The private sector doesn’t hire unemployed. The private sector hires people who are already working for the most part, and that’s one of the problems of an unemployed buffer stock […?] unemployment. It doesn’t work as a buffer stock. A buffer stock has to be fluid. People have to be able to move back and forth. Once you’re already working, whether it’s in a kitchen, a daycare center, or a public infrastructure project, and then somebody’s looking for help, they’re way far more likely to hire you than they would to go roam the streets for an unemployed person. It just doesn’t work. And so as a price anchor, it’s better. You get more price stability using this employed buffer stock than with our current system of unemployment. And so it enhances price stability; it’s not an inflationary. And any buffer stock policy is a price stabilizing policy; it’s not an inflation policy.
Real output increases and useful output increases, because you’ve got more people working, you’ve got people going into the private sector, and a lot of non-useful output goes away. You don’t need as many police, you don’t need as many people counseling families, you don’t need as many people chasing kids when things go bad because of unemployment. So real and useful output increases.
Labor flexibility is tremendously improved. People can move back and forth to this labor buffer stock, and many of the disruptions—I just mentioned a few—of employment vanish.
And the last part—a little more technical, but I go into it—the market sets the federal budget deficit. That is critical. The budget deficit has to be equal to the savings desire or else you have a true imbalance in the economy, either inflationary or deflationary. By letting the market do it, it keeps it always at the desired savings level—not necessarily the same day, but over a period of months and years certainly. And so what happens is the government, when the market, let’s call it, wants more deficit spending, this is evidenced by more people’s—things are tight—this is evidenced by more people showing up for work in this labor buffer stock. And as they get hired away, the budget deficit goes down, because the government’s not paying them, and it becomes a very powerful counter-cyclical force, much more powerful than the unemployed buffer stock, and much more effective. And it’s actually a market-based solution to the correct size of the budget deficit.
Negatives: None. It’s been 10 years, I haven’t heard a legitimate negative to it. Every once in a while you hear, Well, it would be better if you had a three-tiered system with three different— I’m not saying you can’t make it better, maybe, but there are certainly no negatives.
Why hasn’t been this done? Innocent frauds in the financial markets. Everybody familiar with that term? Now we got a little bit of Galbraith in here with innocent frauds, we’ve got a little bit of Levy in here with an emphasis on employment because of the real costs of unemployment. Federal deficits risk solvency. Of course not. Japan’s had the highest deficit in the history of the world—7 percent of GDP annually, 150 percent of GDP, downgraded to below Botswana—and for 10 years, three-month treasury bills are going through a .0001 percent, and 10-year notes are .65. Now if there was any solvency issue, those things would be on the moon. When you have a floating exchange rate, there’s no solvency issue. I can go into more detail, but I’m going to leave it there for now.
But governments with floating exchange rates don’t bounce checks. When they pay you, they just change the number in your bank account; you can watch it on your screen. It doesn’t come from anywhere. If you go bowling and you knock five pins down, and you score goes from 20 to 25, where do those points come from? You think bowling alleys should have a 300,000-point reserve in case there’s a big turnout? It’s absurd. Federal deficits take away savings. No. They add to savings. And in my interview with the chairman—I do a mock interview with the Federal Reserve chairman, and it’s the congressional questioning. Isn’t it true, Chairman—I forget his name--, that last year’s budget deficit of 250 billion dollars added exactly 250 billion dollars to the financial assets, the net financial assets, the savings of the non-government sectors in aggregate, and not 249, and not 251; or these two people I brought from the Congressional Budget Office would have to stay late and find their arithmetic mistake. The national accounts balance. And he has to say, Well, yes. For 20 years we’ve heard deficits take away from savings. They don’t. They add to savings.
Levy Institute. Wynn Godley’s whole model is based on the fact that if you put $20 in your checking account, the balance goes up by $20. It doesn’t go down. Government deficits add to savings.
Federal deficits elevate interest rates. Yeah, just like Japan. Excuse me? There’s a paper that thick a few years ago about how a one percent increase in the deficit—you saw that, Jeff, right?—would increase interest rates or something. It’s just total nonsense. The Federal Reserve votes on the interest rate. They can vote on whatever they want. Yes, they have a reaction function. If they see a high deficit, they can raise rates, they can lower rates; but that’s a reaction function, that’s a very different thing.
Federal deficits burden our children. I even heard that here. Yes, oh sure, in the year 2030, when our children build 20 million cars, they’re going to have to send them back to 2007 to pay off the debt. What? There is no inter-generational transfer of real resources. That’s total nonsense. Whoever’s alive gets to eat, consume, whatever they produce that year. There’s no transfer of real debt across time. Yeah, the deficit might say this year, if you guys don’t do anything, here’s who’s going to drive the cars, and here’s who’s going to be digging the coal, and if you don’t like it, you’ve got the entire government structure to change that—the tax structure, spending, everything. There’s no burden to our children. We’re borrowing from foreigners to fund our spending habit. Total nonsense. There isn’t even any such thing as foreign capital.
I was just practicing this 15 minutes ago so I’m going to be able to say this real quickly: But I got to buy a Toyota, and what do I do? I got to Citibank and I borrow $20,000. The loan creates a deposit. We’re not fixed exchange rate loan-able funds world; this is floating exchange rate, non-convertible currency. The loan creates a deposit. It’s a [T] account. That deposit becomes the property of Toyota. The car becomes the property of me. Citibank has a loan to me. Now, there’s no imbalance. I’d rather have the car than the money. That’s why I bought it. Toyota would rather have the money than the car. That’s why they sold it. This is all voluntary stuff. And Citibank wants loans. That’s why they’re there. We walk away—I drive away, everybody’s happy. What’s happened? Where’s the foreign capital? There isn’t any such thing. Domestic credit created foreign savings. The whole 700-billion deficit is domestic credit creating foreign savings, and the foreign savings desire is satisfied because, via the export of product to the U.S. That’s why they’re doing it. If they didn’t want to save their money, they wouldn’t do it. That’s what drives it. We couldn’t export anything unless somebody wanted to save that money. Now 700 billion, is there an imbalance? No. It’s voluntary. Is 700 billion a lot? Well, the rest of the world GDP is 30-something trillion. That’s 2 percent of the rest of the world GDP. Does it make sense that the rest of the world would want to save 2 percent of their income in U.S. dollar financial assets? I don’t know. The world’s a pretty secure place. Maybe that’s a lot. Maybe they want to save 3 percent. I don’t know. They’ll figure it out, and that’s what our trade deficit is going to be. A) It’s an innocent fraud. We’re not dependent on foreign capital for anything. They’re dependent on our domestic credit to be able to accumulate these assets. Totally backwards.
And I have a whole list of these. These are just of few because I’m down to like one minute.
The cost of less than full employment: What are the costs of unemployment? Less output, public and/or private, family deterioration, neglected children, and last probably but not least, war. And it’s not that it’s causing a war, but what we don’t need is, one, there’s a powerful economic incentive for war. We’ve got enough problems containing it as is. Thank you.
Winslow Wheeler:
Did you ever give them that information on Capitol Hill?
WM:
Not Capitol Hill, but I was in Colorado one night at midnight after a long party giving it to New Gingrich for about an hour. He was on top of it. It was pretty interesting. […?] But yeah, I’ve been through half a dozen or more senators, treasury secretaries.
“Global Warming Solutions for America ”
by Eban Goodstein:
Onto global warming. I am directing a national educational initiative on global warming called Focus the Nation: Global Warming Solutions for America. It’s a national teach-in. It’s going to be held next January 31, 2008. The idea is on that day we’ll be coordinating over a thousand colleges, universities, high schools, middle schools [in a] simultaneous one-day educational symposia on the topic of global warming solutions for America. It will be involving tens of thousands of educators, millions of students. It’s about education. It’s also about civic engagement, so that the vision would be, for example, here at Bard College and everywhere that the teams who are organizing these focus initiative events would be inviting politicians, U.S. senators, congresspeople, mayors, city councilors, state representatives, to come to campus and engage with young people in a dialogue about their future. We’ll also be sponsoring a national vote on global warming policy options, so here at Bard and everywhere else around the country students will be sitting out in front of the dining hall on that day and the week leading up to it with a ballot with 20 things that the U.S. could be doing about global warming. And there will be a national vote so that evening people will go to the website and there will be a campus-endorsed agenda for national action.
I’m going to circulate a signup sheet about this project. If you’d like to learn more about it, you’ll get a bi-monthly email from us. And I would urge you all to take a look at our website and take this opportunity to engage as educators on this issue. This is a very critical issue.
Q:
What is the date?
EG:
January 31st, 2008. It’s a Thursday. It’s right after the South Carolina and Florida primaries, and it’s the week before the super-duper national primary.
We’ve been hearing a lot about global security issues, policy questions. We heard the other night that if we screw things up in Iraq, we might face the consequences for decades.
We stand at a unique moment in human history in the sense that the decisions that we’re going to make as a nation over the next couple of years will have profound impact. And those decisions are really about whether or not we’re going to control global warming pollutants, and also whether or not we’re going to invest tens of billions of dollars a year in clean energy technology solutions. Those decisions are going to have profound impacts, not only for the next couple of decades, for our lives and the lives of our children, but in fact for every human being who will ever walk the face of the planet from now until the end of time.
Unchecked global warming will kill more people and drive more animals, plants, creatures into extinction than has any other industrial pollutant in human history. And yet, taking the first steps to stop global warming--and that involves stabilizing emissions this decade and beginning to invest the kind of money that our kids are going to need in the clean energy technology solutions that will allow us to unhook from fossil fuels— The obstacles to taking those two steps are not economic or technical; they’re fundamentally a lack of political will.
Now that’s changing, it’s changing rapidly. President Bush this morning announced a diversionary tactic, I think, to keep people away from focusing on real solutions; but nevertheless, hypocrisy is the first step perhaps to real progress. But we are very much in a race against time, and that’s what I want to talk a little bit about in terms of what is the security challenge that global warming brings to us.
This is the picture that’s brought us all here today. It shows the world heating up about a degree and a little bit Fahrenheit over the last 100 years, and 2005, 1998 were the hottest years on record. So far, 2007 looks to be on track to be the hottest year on record, record-breaking. At this point there is no doubt in the scientific community that much of the warming that we’ve observed in the last century is due to human-induced pollution. Now we used to call this the greenhouse effect, but we have a much better name for it now: the carbon blanket. It’s a much better metaphor for understanding the problem. Basically for the last 100 years we’ve been burning gas in our cars, coal in our power plants, emitting carbon dioxide. C02 is a heat-trapping gas. We’ve been pumping billions and billions and billions of tons of carbon dioxide into the atmosphere. It is trapping the heat. It is warming the planet.
Now, how hot is it going to get? Well, over the next century the official forecast is a warming of really between three and four degrees Fahrenheit at the low end, and 10½ degrees Fahrenheit at the hot end, within out children’s lifetimes. To put those numbers in perspective, during the last Ice Age, a period of time during which this particular part of the world was covered by hundreds of meters of ice, the world was only nine degrees Fahrenheit colder than it is right now. So we are talking about the very real possibility of a swing in global temperatures of Ice Age magnitude within my daughters’ lifetimes.
Now, at the low end those impacts will be very serious for hundreds of millions of people around the planet. It will drive maybe 20 percent of the creatures on the planet into extinction. But it will be a manageable situation. Our kids will and must get through that. The policy challenge that we face over the next few years as Americans— Because as Americans we’re only 4 percent of the world’s population, but we emit about 23 percent of the world’s global warming pollutants. But more fundamentally we have the capability to make the technology investments that could solve this problem, so as Americans we bear a special responsibility. The challenge that we face is to hold that warming to the low end and avoid what are potentially truly catastrophic outcomes.
This is the one picture I want to show you to give you a sense of the magnitude of the changes that we are facing over the next 100 years. This is the global climate record going back 400,000 years. So that’s the present; that’s 400,000 years ago. What you’re seeing is the Earth sliding into and out of Ice Ages. It’s about a 100,000-year cycle. Average temperature during the last Ice Age is about 4½ degrees C., about 9 degrees Fahrenheit colder than it is right now. This is the last 10,000 years. That’s the Holocene. This is the period of time during which human civilization developed. So there’s domestication of animals, there’s animal husbandry, and right there is the iPod. Humans have been the beneficiary of not only a remarkably warm period in climate history, but a remarkably stable period in climate history. So if we look at the climate system, we know that we are dealing fundamentally with a system that is inherently unstable; and that suggests that there are very powerful positive feedback loops that reside within that system, and we are in danger of triggering many of those positive feedback systems that we know about, and probably some that we don’t understand.
So again, to put the number in perspective, this is the environment in which humans have, human civilization has developed, has evolved. It’s an environment of climate stability, and that is the environment in which all of human security and peace arrangements have been negotiated. We are headed to here, this century, under the most positive scenarios possible. We are headed to here under some very plausible and likely scenarios. So we have left the era of climate stability. We’ve left the Holocene. We’re entering what many people are now calling the Anthropocene, the period of human-induced climate instability, and that is fundamentally the security challenge that global warming poses.
Direct impacts: We have talked about water supply issues. This is my home town of Portland, Oregon. This is Mt. Hood. You can see it from downtown Portland. This is Mt. Hood with a normal snow pack. This is Mt. Hood with a 50 percent snow pack. And this is the future that global warming is dialing up for my kids. By mid-century there will be on average a 50 percent reduction in the snow pack in the Cascades. By the end of the century, it will largely be gone in early summer. That doesn’t just mean bad skiing. That’s our summer water supply. There are billions of acre feet of water trapped in those mountains and the Rocky Mountains as well. It’s not going to be there for my kids. And they won’t have that water for hydroelectricity, for agriculture, irrigation, fish, recreation. It’s not going to be there for them.
Now we had that summer in 2001. It was unusually warm and dry, and this is the kind of headline that we saw in Oregon. In Oregon. We are not Southern California, and these water shortages almost induced social conflict. There were almost riots in southern Oregon over the water shortages that were induced.
Now here in New York, Oregon, we’re a rich country, we’ll figure out how to adapt to three- and four- and five-degree Fahrenheit warming scenarios. But this is the Rimac River in Lima, Peru. It feeds six million people. It could be well be running dry six months of the year in a couple of decades because it’s fed by snow melt from the Andes, places in the Andes which are rapidly disappearing. And so, as we’ll hear, it is poor people in the developing world and the developed world who are already beginning to feel and will be the first victims of the rather dramatic changes in resources that global warming’s going to create for the planet.
We talked a bit about Darfur. To what extent is climate change a factor? Well, this is British Home Secretary John Reed: “Environmental changes makes the emergence of violent conflict more rather than less likely. The blunt truth is that the lack of water in agricultural land is a significant contributing factor to the tragic conflict we see unfolding in Darfur. We should see this as a warning sign.” Lake Chad has virtually disappeared over the last few decades, and that has driven, that is in many ways at the root of the conflict between the agricultural folks in Southern Sudan and the nomadic peoples there.
So obviously it’s not the only cause of the problem, but certainly it’s lurking in the background.
Globally water shortage from snow pack loss--that is not just an issue for the Western Americas or Africa. There are several hundred million people in the world who depend upon snow pack, many of them in India and China, for their water supplies. Increased floods and droughts, extinction of many species in ecosystems—There was a study done in Nature a few years ago. Up to one-third of the terrestrial species on the planet are at risk of being locked into extinction paths by 2050 solely as a function of habitat destruction from global warming under a business-as-usual scenario. One-third of the creatures on the planet.
Spread of pests and disease and more heat-related illnesses and deaths, more intense hurricanes and typhoons, which we’ll hear about. And those are just what we would expect just from a gradual warming of the planet.
There’s some good stuff: longer growing seasons, fewer cold-related deaths, more good golf days for folks who live in cold climates, longer falls and springs.
But then there’s the positive feedback loops that I was discussing, the tipping points. And there’s at least four of these, and there’s more. But one is the possibility that ocean acidification—As we continue to pump tons of carbon dioxide into the atmosphere, the oceans have been absorbing a lot of that C02, and we have actually acidified the entire ocean. The pH of the ocean has dropped noticeably over the last 100 years. If it continues to do that, it could begin to dissolve the shells of the little creatures that live at the base of the ocean food chains, which would have devastating impacts on marine ecosystems all the way up.
As the Amazon begins to warm up and dry out, it could burn down, flip to a savannah environment. That would release tens of billions of tons of carbon dioxide in the atmosphere. It would add a couple of degrees of warming on top of the warming that we’re already going to get.
Methane release from the tundra—a similar phenomenon. We’re beginning to see significant amounts of methane, a very potent global warming gas, being released.
And then finally the one that really has the scientific community concerned right now: the possibility that we might perhaps very soon cross some emissions threshold that would lock in a temperature increase that would lead to the collapse of the West Antarctic and Greenland ice sheets. If that was to happen, it would raise global sea levels by 35-40 feet. It would create tens if not hundreds of millions of environmental refugees. It wouldn’t happen overnight. It would take somewhere from 200 to 1000 years for that process to be completed; but once we cross that threshold, it can’t be stopped. This is being driven largely-- We’ve learned from ice science and ice dynamics over the last couple of decades is that these continental ice sheets collapse rather quickly, and the process is driven by melt water on the surface of the continents. When large lakes begin to form on the surface of this ice, it drills down through the ice, lubricates the base of the glaciers, allows them to move rapidly into the sea.
This is the increase in the surface area of Greenland on which these lakes have been forming just over the last 30 years. They didn’t exist 30 years ago. And just two weeks ago—you can’t see it—but NASA released some rather frightening pictures of Antarctica that showed California-sized lakes forming briefly in the summer of 2005, the first time they’ve ever been seen on that continent.
All this data led James Hanson last year to say this: How far can it go? The last time the world was three degrees warmer than today—that’s Centigrade, so six degrees Fahrenheit, which is what we expect later this century—sea levels were 25 meters higher, 75 feet higher. That’s what we know from the Paleo record.
How long have we got? We have to stabilize emissions of carbon dioxide within a decade here in the United States, or else temperatures will warm by more than two degrees Fahrenheit. They will warm by more than that. That will warmer than it’s been for half a million years, and many things could become unstoppable. These tipping points—we don’t have much time left. That was the top U.S. government climate scientist speaking last year. So now we have about eight-and-a-half years to accomplish this task.
How do we do it? And this is supposed to be the good news part of the talk, but it looks pretty daunting. So to stabilize the climate at about three to four degrees Fahrenheit warming, rich countries of the world would have to meet the Kyoto targets then by the end of the century, reduce emissions on the order of 90 percent. Developing countries collectively would get to keep on polluting till about 2050, but then they too would have to make steep cuts on the order of 50 percent reductions.
Now this looks impossible, but I would urge you to think about what the main emission source was from the transportation sector a hundred years ago: Horse poop. They actually managed to reduce emissions of horse poop by well over 90 percent over the last hundred years. So we just have to make that kind of a transition. We know where we need to go. Clean electricity sources—wind, biofuels, geothermal, solar. Once you have that clean electricity, then you can use it to run your vehicles, or you can run them on biofuels.
So there’s a very rich potential menu of technological opportunities out there that would allow us to make that transition. The problem of course is that they are currently too expensive.
Now many people refer to my parents’ generation as the greatest generation. But in fact—I don’t know if there’s any 20-year-olds in this audience, are there?—you guys are the greatest generation. You are the greatest generation, because look what we have to do in this decade. We have to stabilize emissions of global warming pollutants as the Europeans have done. But when you’re my age, when you’re 47, you have to cut emissions on the order of 20 percent decade if you want to make the world a safe inhabitable place for your kids when they’re in college. So you will be the greatest generation.
Now here’s what we have to do for you, and here’s what you have to push us to do: We have to stabilize emissions this decade. By 2015, in the United States, we have to be flat. That’s what we have to do. But more than that, we have to invest tens of billions of dollars annually in the clean energy technology solutions that will allow you to fundamentally transform the world economy. So that in the years 2030 to 2040, your job is going to be to rewire the entire world with clean energy technologies, create millions and millions and millions of jobs, good jobs, not digging up holes and filling them in again, and lay the foundation for a truly just and sustainable and prosperous future. This is imminently doable. There are really no economic or technical challenges to achieving this goal. It’s affordable, on the order of tens of billions of dollars of expenditure annually.
But what we are really lacking at this point is a) a sense of urgency. Americans don’t understand this. They get increasingly that global warming is bad and that we should do something about it, but it’s very hard to grasp the magnitude of the irreversibility here. If we do not act aggressively in the next two or three years, this window will shut. We will not be able to hold warming to three to four degrees Fahrenheit, and we will be looking at five to six degrees Fahrenheit. And as we look at five to six degrees Fahrenheit, the probability that we will cross one of these positive feedback tipping points increases. And so it may be impossible to hold warming to five or six degrees Fahrenheit, because you will trigger one of these mechanisms that will drive the temperature even higher, which will trigger further mechanisms that will drive the temperature even higher.
We have a very good story here. It’s a wind power story. So if you look at 1980, I’m in college. There was no such thing as commercial wind power. U.S. government concerned about energy security at that time invested a couple of hundred million dollars in clean energy technology alternatives, California doubled the ante. It wasn’t a very smart policy, but it was an effective policy. By the mid-1990s, California was the world leader in installed wind energy technology. Now we’re out at about 80,000 megawatts installed worldwide. And if you’ve got access to transmission and a good site, wind power is now the cheapest electricity generating source in the world next to efficiency, and it’s the second fastest growing electricity generating source in the world after solar power.
What do we learn from this? It takes 20 to 25 years for this process to be completed, to drive these technologies to a maturity level where they compete and spread rapidly. We learned a lesson about not engaging in Kyoto, about not embracing this clean energy future, so the industry has now migrated abroad as our subsidies dried up, and so the Danes and the Germans are now the world leader in wind energy technology. And we learned that lesson again from the Japanese. Early 1990s, they saw this clean energy future coming, they understood how global warming was going to drive markets, they invested heavily in hybrid technology, and now they own that technology and they own the jobs that come with it. Ford Motor Company announced that they were going to cede the number two automakers’ slot in this country to Toyota.
And finally, I guess we learned if we’re going to solve this problem—so we go back to this slide here and we think about how are we going to get through this?—we have got to invest lots of money right now in a whole suite of technologies, because we don’t which one is going to work. But a number on the order of tens of billions of dollars will enable the technologies of the 2030s and the 2040s that will allow today’s young people to really see this transition through and really fundamentally stabilize the climate and solve this challenge.
So please check out our website: www.focusthenation.org, because I’ve heard many people here at this conference—I think there is a sort of very dramatic fatalism in this country about global warming. There’s an increasing recognition of the magnitude of the problem, but this real sense that we cannot do anything about it. And I think that’s just wrong. We have gridlock in Washington. We’ve had gridlock in Washington over problems—Our system is designed for gridlock. That’s the way it’s designed. And the only way you overcome gridlock in Washington is by the creation of a social movement. We did it with Abolition, women’s suffrage, labor rights, civil rights. It can be done. What we have to do now is do it very very rapidly. We have the internet and other tools at our disposal. Americans are increasingly engaged on this issue. The vision of Focus the Nation is to bring together that rising energy, that rising concern. This morning I was out running. I saw a sign at the Dairy Queen that said STOP LOCAL WARMING, with a little ice cream cone. So it’s definitely sinking into people’s consciousness. But what we need is, we need to create in 2008 a bi-partisan sense that politicians must embrace an ambitious clean energy agenda, so that that happens in 2009. That’s what we have to do. We just really have no other choice. Focus the Nation is an opportunity to bring together millions of Americans on the same day to engage in this conversation and really break through this fatalism dynamic and get people engaged as Americans at what Americans do well, which is to embrace technological challenges and figure out how to solve problems. Thank you …
“Global Warming, Hurricane Katrina and New Orleans”
by Marcellus Andrews:
[It seems the speaker periodically turns away from the mike, so sections of his talk are lost.]
Hmmm. I find myself in a quandary. We’ve had a talk about war and full employment, we’ve had an alternatively inspiring and terrifying talk about climate change. And I find myself, and particularly the reference to the social movement being driven by climate change awareness sets the stage for me to say a few things that may sound fatalistic.
By way of background: I left the academy a while ago and spent a little time at New America, and then I proceeded to go to the insurance industry. I left the academy because I wanted to learn a little bit about the world. And so six weeks after Hurricane Katrina destroyed my beloved New Orleans, there I was. The city drying out. Filth and shit and poison […?]. North Clayborne Street, the lower 9th Ward, where a year before I was playing with dirty, poor, but beautiful young black children, three of whom died there. Ringing in my ears are the denunciation of victims of storms and the inferior spawn of welfare culture that they just couldn’t [….?].
Get back to the insurance industry and I began to think about a number of things, climate change among them. Climate change and terrorists really, which is why I was hired. I’m a mathematician among other things, and these were the sorts of things I do. In the process of thinking this through, I’ve come back to the academy to think about the lessons of all these things, and I will use, for the next few minutes, I will use the death of black New Orleans as my example.
What I worry about is the security of vulnerable populations, right now in the context of climate change. You see, this movement, the social movement we call climate change, has two narratives, and I want to talk about those narratives for a second. In one narrative, why is New Orleans gone? And it is gone. Oh, there will be something to rise in its place, and Ray Nagin, bless his small mind, will run it. Such a friendly, dumb fellow.
One of the lessons, one of the narratives, one of the stories we tell is that, look, New Orleans is gone as a consequence of low tax, small government, low wage, model of development run by a brain-dead business class in the context of a kleptocratic politics. But that if we learn the lesson about why conservatism is a useless thing, why a business class needs to pay attention to the nature and structure of a regional economy, why kleptocracy is a bad idea, perhaps why racism can lull everybody to sleep – because why else would you not build the damn dykes when everybody at Louisiana State University is telling you you need to rebuild them. And if we do a few other things, then we will be able to invest in public capital, restructure the way in which we do business, we’ll be able to deal with the various kinds of challenges posed by climate risk.
You announced, sir, all the future problems that will befall us unless we do the thing that is right. This must be complemented by another analysis of all the problems that are going to come even if we do things right. I worry about those folks who are going to be put outside the circle of protection even if we take the positive lesson of New Orleans, which is, don’t do this solution again.
But there’s a second narrative. And it’s that second narrative I want to focus on. It’s the narrative I saw in the insurance industry, it’s a narrative that haunts me, it’s a narrative that I frankly will tell you is going to break […?]. In that narrative, we will shift, even if we fix things, even if our coastal cities are able to deal with rising sea levels, even if the cities of the Gulf Coast, […?] Gulf Coast make damn good investments in public capital and water management procedures, we’re going to shift the risk associated with the damage coming from climate change and perhaps other catastrophic risks, we’re going to shift those risks down the social hierarchy, given the way we have organized our economies.
This is true because we already refuse to share risk across class and color lines. We’ve already made that set of decisions. As we decide to repair our cities and figure out ways of dealing with the risks coming to us, our decision not to share simple risks, the equality risk, opportunity risk across class and color lines, it’s going to be reflected again in the way we refuse to share, to protect vulnerable populations.
Why do I say that? Well, I say that because in my time in the insurance industry and basic economics tells me that there is a certain economic logic to the abandonment of vulnerable people. Let me use as an example one state’s attempts to deal with emerging climate risks in a circumstance where the insurance industry is telling that state that you will either deal with climate risk in a sensible fashion or we won’t cover homeowner’s insurance. That’s the State of Florida. We all know that the State of Florida’s homeowner’s insurance rates are exploding. The market tells Florida that this is really really really a risky place in times of escalating climate risk, and that Florida, you’re going to have to adapt to higher risks, or else we’re not covering you. The State of Florida has decided to socialize homeowner’s risk. It’s remarkable.
Homeowners must of course buy insurance […?] but you have to buy insurance to cover your home. Insurance companies have made it clear that if prices don’t rise by a factor of four in the next few years, they can’t provide full coverage. The state continues to regulate homeowner’s insurance and has simply told the good people of the State of Florida that […?] those losses that the insurance won’t cover, subject to the famous [Flex-clusion?] we, the state, will cover. This risk-sharing arrangement, of course, has certain budget consequences. The people of the good State of Florida are terribly tax phobic. They don’t like to pay their bills. And climate risk, of course, is imposing very high costs on that good state, 84 percent of which is […?] coastline, so the population lives on the coast. So it has been pointed out to the good people of the State of Florida that in the event that you get a couple of Katrina-scale storms hitting the State of Florida, an event that according to the climate scientists I had the good fortune to come to know during my brief time in the insurance industry, is an event of probability 1. In the next 25 or so years, you’re going to end up with a couple of big bad nasty blows. The State of Florida is going to find itself with a magnificent hole in its budget where providing relief so the homeowners can rebuild their homes, so that the region can recover, is at war with funding schools, is at war with limitations on taxes.
Now since Florida, like most of the Gulf Coast, has pursued a low-wage, low-tax development model, in Florida’s case real estate driven—and Florida’s better than most—the budget hole that is likely to show up in the State of Florida is going to require Florida to make some hard choices. In my discussions with various people in the insurance industry and other industries in Florida, it became clear exactly what those choices would be. Floridians are not going to raise their taxes to anywhere near the degree necessary to put the socialization of homeowner’s insurance on an actuarial sound footing. They’re not going to do it. They would prefer to cut schools, state aid to schools, state aid to health care, state aid to poor people.
Now of course those poor folks are going to be the ones who are vulnerable. They don’t have houses. They live in trailer parks, by the sea in many cases. The strategy of inequality that we have pursued in this country for so very long made them vulnerable in the first place, and now the State of Florida’s socialization of homeowner’s risk and its consequent war between the protection of the property of the middle class majority and the needs of the vulnerable minority mean that the vulnerable minority is left out in the cold.
A second example, by way of New Delhi and Bangladesh: I had the good fortune of going to New Delhi to introduce my very young son to his aged Indian grandparents. My wife’s uncle is a former general in the Indian army. He’s taking care of his parents, he’s a dutiful son, a dutiful Sikh son; but he is still connected. [Delab?] and I got to talking about many things. And one of the things he brought up, since he knew my interest in matters of risk management, was the Indian military’s worries about climate change in Bangladesh. You see, as you know, as the sea water levels rise, millions of men and women in Bangladesh are going to drown. Or move. And of course, where are they going to move? Well, they’re going to do what everybody does. They’re going to do what the good people of Oklahoma did in the Dust Bowl. They’re going to go to a city. They’re going to go someplace where they can get a job. They’re going to go to Calcutta, because Dhaka will be under water.
Well, the migration of many many many millions of people to Calcutta is a major worry for the Indian military. The Bengal states of Eastern India are primarily Muslim states. Yet in a society increasingly riven by religious struggle, where the dominant opposition party, the BJP, is making a subtle, or maybe not so subtle, steps towards Hindu fascism. The import of millions of very poor, unskilled Muslim men and women who are climate migrants is a terrifying prospect for the military. Delab spent a lot of time talking about how the military did not know what to do with the possibility of climate migrants and how government ministers in India are terribly worried that the process of [?] Indian economic growth, which has still left the vast majority of the Indian people untouched, must now somehow manage the incorporation of a very different people in the context of a divided society.
That got me thinking about the Gulf Coast. It got me thinking about the two analytical narratives in thinking about the climate change movement, and how this climate change social movement in the United States, by not thinking carefully about who will be protected and about the capacity of our organizations, the mix of public and private economic organization, to provide protection for the vulnerable, doesn’t deal very well with the prospect of climate migrants, potentially many many many many people of the wrong color, both black and increasingly brown by virtue of migration, the so-called immigration problem in the United States, who will be forced from place to place if the climate scientists are right about the likely consequence of global warming for near- and medium-term weather patterns along the Gulf Coast, or drought in the middle of the country.
To [fix ideas?], imagine that the Long Island Express, that powerful 1938 hurricane that cut a big swathe through what was then farmland on Long Island, imagine that it comes this year. Ask yourself this question: For people who have homeowner’s insurance on Long Island, City and State of New York, and the federal government will provide emergency services. Hopefully there will be minimum loss of life. Yet many many many many hundreds of thousands of people who have nothing will have no right to return to their lives, to their jobs, to the place in civilization they know. They will be like the climate migrants of New Orleans. They will have to go away. What will be the consequences of telling very poor people—or even not so very poor people—across the United States that in the new regime of climate change we’re going to fortify our cities, we’re going to take account of the impact of our actions on climate, we’re even going to try to mitigate and adapt to climate damages; but some of you are going to be left out in the cold, maybe by the way Florida finances the socialization of hurricane risk at the expense of poor folks, maybe the way New York would deal with the 1938 Long Island Express if it were to happen this year, by quietly bidding a portion of its poor farewell.
I come with this warning by way of a story: Six months after I was in New Orleans, I went to Tulsa to see the father of the children who had [died]. He’s a Christian man believes in God, and he believes in forgiveness [……?], a former soldier. A rare thing in America, a black man who believes in this place, who, shattered by the death of his children, shattered by the expulsion from the city he loves, despite his poverty, made clear to me that the worst part of the whole thing was that he had learned that he had no home. He could look for comfort from God to help him with the death of his babies. He could not understand the country that was never going to let him go back home.
Well I tried to be the economist, and I told him, Well, you know, you didn’t have anything, you didn’t have any insurance, you didn’t protect the thing you inherited from your mother and your grandmother and your great grandmother. Because you all need to remember now, in New Orleans there are a lot of black folks who own their houses, but their houses weren’t insured in part because folks are too poor to pay insurance, and you also need to know that they had the high ownership rate because, lord knows, white people didn’t rent to black people in New Orleans. So when those houses went away, and those houses weren’t insured, and there was [redlining?] in regard to insurance, and [redlining?] with regard to the banks for those who tried to borrow to fix their houses and maybe even borrow short-term credit to buy insurance, folks lost their homes.
I suggest that when we think about security, we think about the following fact: If we do not share risk up front, access to developmental resources from the time you’re born as a citizen of this country and for the time you’re expected to live an independent, meaningful life as a voter and an earner, that we will create class of potential climate migrants who will over time, when they come to be enlightened, they feel like Nate, they feel abandoned, that simply if you do not have a home, and that the ever-stronger, safer cities in the face of climate risks that are too expensive for them to afford left them without that home, and that the environmentally conscious, including Vice President Gore, who hasn’t given a whole lot of thought to this question, you will create an army of rage. Perhaps that’s not your worry. It is mine. Thank you.
JG:
Well, we have a good ten minutes.
Q:
Marcellus, I think that the point you made about the unequal distribution of environmental costs is a really important one, and I also think it relates to Eban’s point about positive feedback effects. As a gardener I know that there are positive feedback effects that I can interpret. And so I was wondering if you guys could maybe comment on the ways that we could make the exposure of humans to those positive feedback effects more equally distributed, so that people who have the power to act on them might also feel the personal incentive to act those signals from the Earth.
MA:
I guess I’ll take a stab at it. You ask a truly important question and one that preoccupies me now, and I’m at a loss to give you an answer. Here’s why:
Let’s take the 1938 Express hitting New York, which everybody, as I said, expects. Base storm hits New York, so what you gotta do is two different things. On the one hand, you gotta have emergency preparations to get people out, right? That will be done. On the other hand, you gotta over time fortify the city itself. That makes a city more expensive, because safe places are attractive places. So as you make the city safer, you make the city more expensive. Poor folks in the city, working folks in the city, can’t afford to stay in the city, which means they get priced out of the safe place. Now, we have to set up incentives therefore for people who can afford safety, can band together in safe places like an ever richer New York to provide protection for people who can’t afford to be part of the political economy in New York. Short of an ethic of solidarity, I don’t know how to do that, because at that point it really is not an incentive problem. It’s not a question of market [?]; it’s a question of something very different.
EG:
If you just pursue that in terms of movement building, which is what we need to do right now, I mean this is really one of those times where either we’re going to build a social movement that breaks through the gridlock in Washington and does what needs to be done, or we’re not. I think that is a time when people transcend their personal interests, and in this case will do it broadly in terms of an obligation to their children and grandchildren. Now that is a very abstract idea, but I think if you look at any of the social movements that mobilize huge armies of people, most of them were not directly impacted by the evils or inequities that were out there. Most people were engaged as citizens and moral agents. And I think with global warming, obviously poor people are going to suffer more, rich people will suffer some; but most of the suffering isn’t going to happen for 20, or 30, or 50, or 70 years. But so we have a unique, a truly unique situation here. But I think we can draw hope from the fact that people are motivated on occasion by a sense of obligation.
Q:
I just had two comments. One is that your story about the Indian general, we should also be aware that PACCOM and CENTCOM [Pacific Command and Central Command of the US military] are also worried about those exact same migrants, and that if you read the reports out of PACCOM or CENTCOM around the Indian Ocean, they’re very concerned, and one reason why we have the deployment of U.S. forces, and will continue to have the deployment forces in those areas. Because we’re going to come in on someone’s side when those migrants start moving, and I hate to think— So I just want to mention that.
I also want to mention, as a resident of New York City, and of Brooklyn in particular, which is particularly a, Brooklyn has historically been a black boroughs of New York. And I think that we have climate change issues, and we have real estate development issues, and right now there’s no political will to force real estate development to take into consideration climate change. So you need to mobilize the political will amongst middle class people, who are just as affected by real estate development in New York as poor people, and create the ethic of solidarity amongst the median and below people to see that real estate development and other things—There’s going to be no change until there’s a political will to say both economic development and climate change development has to impact upon real estate choices.
MA:
That’s a good point. Stay here for a second. Let’s have a little conversation about this. I think you’re absolutely right, but again, the economists […?] sees the following conundrum: They have political will, they have climate change become part of the process of a market-driven real estate mechanism through governmental supervision and regulation making Brooklyn better and safer. And I’m stuck. Because if you make Brooklyn better and safer, you make it really nice to live in Brooklyn, which means that poor folks and working folks of Brooklyn can’t live there. Okay. So in making Brooklyn better and safer from the perspective of climate risk, and we’ve also, when I worked in the insurance industry we talked about it with regard to the terror risk too. We’ve excluded the people who are the most vulnerable.
Now perhaps they go to Nebraska. But of course there are serious climate risks in Nebraska with regard to rain, and hale, and windstorms, and stuff like this. And in fact it’s most interesting to me because I was thinking about what I was going to say today, one of the most vulnerable populations to climate risk are in fact a lot of working class white people who actually never get seen here in America, it’s really amazing. So I’m left wondering, well, all right, if we make Brooklyn safer in matters of climate risk perhaps, then we’ll have to also marry climate risk to some notion of equality—deep equality, equal right to survival, that’s one; but equal right to recovery, two. Okay.
My problem is we gave up on equality, including the American left gave on it. Well, if you’ve given up on equality, then I’m at a loss to see how the social movement we call the climate change movement becomes anything less than the protection of those not so much who have, but the protection of those who count, at least as registered by the market.
I know I sound angry and bitter, and I guess I am, because at that point the climate change movement does provide protection to those who count, and becomes a mechanism of the greenest and nicest form of exclusion. I don’t know. I’m stuck. If anybody—The Congress and [I] can’t see an answer to this.
Q:
I’d just like to add that I think that the thing, too, is that it’s equality in that the valuing of diverse populations is all contributing to what we understand as the vibrancy of Brooklyn. I’m just saying Brooklyn, I’m not saying anyplace else, but that the vibrancy of Brooklyn is not a monoculture of escaping white Manhattanites. So if you value the vibrancy of the culture of Brooklyn, then you don’t agree with the real estate development policies.
MA:
Yeah, but why can’t you just have lots of diversity in Brooklyn with all these different colored people, all of whom are rich.
Clark:
These were three inspirational talks. Thank you. On climate change: I don’t think the morally directed movement will be effective if the last 10 years and current activity is correct. But what I see as some reason for hope is the increasing competitive, economic competitiveness and profitability of renewable energy resources. This can go in a very bad direction, such as depriving the world of a considerable part of its food supply by turning it into automobile fuel. I think that’s a wrong direction. It needn’t be that way. We could remove the duties on Brazilian alcohol and get the same effect without reducing our food supply. And this does not require a moral choice in the United States because we have the opportunity through technological advances in solar and wind energy and tidal energy to make it economically competitive and use the profit motive to mobilize productive carbon reduction.
This is not the case, unfortunately, in India and China. And the Bangladeshi problem that has been posed—and it won’t be just Bangladeshi—given the availability of weapons of mass destruction to even poor groups of people, I see they’re not waiting to be drowned or disenfranchised; I see the possibility of a new world kind of rebellion of the poor armed with very significant weapons.
And in anticipation of that, I think it behooves to really accelerate the economic competitiveness of the renewable resources that will reduce the danger of climate change. I happen to know that we can do this, and we can do it now, but we can’t do it by simple moral appeals for the sake of our grandchildren. That hasn’t worked, and I don’t think it’s going to work to a significant degree. I think we have to concentrate on the economic incentives, which are becoming quite real.
Richard Kaufman:
Well, I too want to compliment the panelists for very excellent and clear presentations. I just want to raise a couple of questions, one with Warren Mosler about the government jobs. What will they be, or does it matter? And if it doesn’t matter, then welfare is just as good as work. But I assume you mean real jobs. So I just would like you to elaborate; but I think Jamie wants to wait to get these questions, and then you could answer them all.
Eban Goodstein, I wish you would consider using the term non-partisan, rather than bi-partisan. I think it’s really more realistic for some obvious reasons.
The other thing I wanted to just ask you about is Al Gore’s role and how you view it, whether you think it’s positive, whether his efforts are related to yours in any formal or informal way.
Michael Intriligator:
I want to use the blackboard, one picture. It cuts across Marcellus’s and Eban’s papers, involves both the hurricanes, Katrina and so forth, and global warming. This picture comes out of a conference I helped organize [……?]. And it’s illustrated in the following ways:
Suppose we have a river, and there’s a dam here on the river. And the dam could break and cause a flood, kill a lot of people. So the people went downriver, far away from the dam. They asked people, What do you think the chances are this dam is going to break and cause a big flood? And they found people felt that there was some chance that that could happen [that’s measured in chance?].
They came a little closer to the dam, and this thing rose and rose and rose and rose, as you’d expect. But eventually it fell to zero. When people were right under the dam, there’s a psychology of denial. It’s not going to happen. It can’t happen. […?] somebody else’s problems. They’re denying reality, they’re denying the reality of the tornado coming, the earthquake coming, the flood coming, global warming, hurricanes, or whatever else may be. That’s a major part of this problem, is I think the psychology of denial. This is what this illustrates, the psychology of denial.
JG:
Okay. Let me ask the panelists if they have a final word.
EG:
In terms of the movement, social movement, it’s being driven by a lot of dynamics. There’s obviously big businesses, like GE and Boeing and others, who see money to be made. And I agree completely the way through this is by significant, very large-scale investments in clean energy technologies. But the market won’t do it. Unless you have a policy framework in 2009 that does two things, one, caps global warming pollutants so that you drive up the price of dirty technologies, and also have government investment of significant quantities, tens of billions of dollars, you will not drive the technologies fast enough to enable today’s young people to do the work they need to do. And also, how do we get India and China on board, and Bangladesh? Essentially we have to drive those costs down so that those technologies are available at very low cost so that they will want to get rid of coal. I mean they’re killing their own people. They know it. They’ll be the first to install cheap solar cells. But they’re not there, and they won’t be there for 10 or 15 or 20 or 30 years, depending upon policy.
Q:
How do you know that?
EG:
Because we have study after study of technological development, how long it takes to commercialize new technologies.
In terms of Gore’s role, I think, God bless him, he’s played a very powerful educational role with the film. And we have no connection with him. We’re a non-partisan organization, so we really have no desire to hook up with his organization. I hope he runs for president. I think we have to role the dice here. If he wins, he will come into office with a mandate for this kind of policy. If he loses, he will drive the debate in the correct direction. And I think we need that. We have to be ambitious at this moment in time. There is just no point in being cautious.
Was that river the Nile, by the way? This is the issue. Gore said it in his movie: People have gone straight from denial to despair without stopping in between to think about determination. I think obviously there are still many people in denial. I think in spite of the most intensive scientific effort ever materialized, scientists have spent decades trying to come up with alternative explanations for why the planet is heating up so fast. We’ve known for over a century about the fundamental dynamics of carbon dioxide as a heat-trapping gas, and yet there are several people in this room that I’ve spoken with today that say, Oh, I don’t really know. Maybe not. So I don’t know whether that’s sort of a cynicism, or a skepticism, or what; but I think it’s probably denial. Because when you face up to this problem, it’s pretty daunting. I apologize, I need to leave now, but I thank you for your time.
Q:
[…?] doesn’t think it’s a problem.
MA:
I am struck by this. And […?] did say that. I listened to that as he said that yesterday, and it was really one of the most remarkable things I’d ever heard. Never had a man so deserved to lose his job. But, that’s me. [laughter] That might be true.
I was struck by this notion of denial, and I need to think about this. But here’s something—It’s not a question of denying global warming, but the not knowing what to do, with someone like my brother. A poor man helped as much as possible by myself. He’s got two daughters who might well get out of the trap of being black and poor in America. It’s not that Jeff doesn’t believe the scientists. It’s not that Jeff doesn’t believe that this marvelous technological republic can’t come up with all sorts of neat goodies. It’s that Jeff says to me, Cellus, why do you care about climate change? And I tell him why. He says, That makes sense. That’s a moral and ethical argument. That’s really good. But, but, but, somebody like me—I’m nobody, I’ve got nothin’, I don’t have power, I’m not important. I’m not going to get saved. Somebody like my daughters, maybe if they get to be like you, they get a big ole university degree, maybe they get saved. But they don’t get saved because they’re regular folks. They get saved because they got a university degree. And maybe not, man. So I’m not gonna think about it, he says. Because you’re all not going to help me and mine and come after me. They’ll help your son, Cellus, they’ll help your two sons, they’ll help them because they’re gonna be rich, you know? But they’re not gonna help us.
I wonder sometimes when we talk about people’s denial of climate change if perhaps we’re a little too quick to laugh at ignorance and not understand the incredible complexity of fear, you know? The fear of being abandoned, the fear of being caught stupid, what it would mean to your entire view of the nature of this planet if you take this idea seriously.
Finally, about Al Gore: I actually hope he doesn’t run for president. I think to participate at this point in American politics is to participate in a stunning fraud, and that perhaps to establish a movement outside politics—The only precedent I can think for it is the Civil Rights Movement before it became a subdivision of the Democratic Party. But for Al Gore to move beyond politics and to demand that politics once again become the tool of a people looking to survive and thrive with a particular moral sense—that might make more sense to me, because the mechanisms of power in this country seem so lost in nonsense that the machine has to be redesigned before it can be up to the task.
WM:
Does anybody here actually know Al Gore? I had dinner with Al Gore about a few months before the election that he lost, and his question to me was, How are we going to spend the $5.6 trillion surplus? And I said, There isn’t going to be $5.6 trillion surplus. We’ve already had about a trillion, and that’s drained a trillion in financial assets out of the economy that supports the credit structure. The whole thing’s going to collapse. And at the decade, like any other decade, we’ll have a budget deficit equal to 3 or 4 percent of GDP. That’s going to be about $5 or 6 trillion. We’re going to have a $5.6 trillion deficit over the next 10 years, not a surplus.
And the only question is, How are we going to get into this deficit? Are we going to do it the way we normally do, through recession and increased transfer payments, or is somebody going to be proactive with a tax cut and a spending increase?
And he’s astute, he’s a pretty smart guy. And he went through the numbers. We had the paper out on the accounting and how it works. He goes, Yeah, you’re right. But I can’t say this kind of stuff. So I know how politics works and everything. And then he went and got up after dinner and gave his little talk about how fiscal responsibility or some nonsense, and he looked over, and he said, You know, this is hard after this last conversation I just had.
So I guess I have to conclude that he’s intellectually dishonest, just from that experience. So maybe that’s not fair. But this guy knew. He sat there, and he’s smart, and he knew. And he’s watched it happen, and he hasn’t said anything. And he’s watched his entire constituency get flushed down the drain because of his inaction—not that he should have proactive, but after it happened, he should at least acknowledge what happened. And so I sort of have to dismiss him--not dismiss the whole movement or anything else; but I know Al Gore’s intellectually dishonest.
I had a similar experience with Dick Gephardt. Six meetings, we went through a whole thing, and he just really understood it. He used to call me about what the Fed’s going to do, and, okay, the deficit’s here, and what’s—He saw—We’d call every turn correctly in the economy for four years. Never said a word about it, never did anything, got up to something else. I can go through some other names.
Q:
[……]
WM:
Well, look. I do this as a matter of conscience, okay. I look at what they’re doing and I try and guess what they’re going to do next in the marketplace, and I hate to see them the wrong thing. I like to see them do the right thing, I do everything I can, but if they don’t want to, fine, I’ll just take the mike. So I don’t have to do anything. But as a matter of conscience I feel, I can tell the guy, you’re making a mistake, this is going to happen; but if he wants to do it—Anyway.
That’s Al Gore. Now that has nothing to do with global warming per se; but that’s just the personality. And there’s a couple other personalities in there. If there was more time I’d go through about 10 of these guys.
But in terms of jobs, the question was—and I’ve got the paper there, “Full Employment and Price Stability.” You have to understand where the value of the currency comes from. It’s not expectations theory, although if you want to bet what the Fed’s going to do next, use expectations theory; but that’s not where value comes from.
The value of the cost of currency is, look, the government says to us there’s a tax out there of—how much is it now?--$2.5 trillion, and here’s what you gotta do to get the money to pay the tax. You go to any congressman, he says, We need to either tax or borrow to get the money to spend. That’s not what’s going on. What’s going on is we all need the government’s money to be able to pay the tax. You downstairs in the subway, and you watch the tokens going around, and you say, Oh, I know how it works. They collect the tokens, and then they can sell them. Oh no. They sell the tokens first, and then they collect them. It looks like the same thing.
Well, for this next 30 seconds, if you can get my paradigm, we need the government’s spending to get the money to pay the tax. And they tell us what we have to do to get it. Okay, we’ll give you $30,000 to serve in the Army. We’ll give you $5 billion for an aircraft carrier. We’ll give you $70,000 to be a judge here. Whatever. The government sets the terms of exchange for its currency when it’s spent. If the government just says, We’ll just give you the money for sitting around, you don’t have to do anything for it, it’s going to have no further value. That’s called hyper-inflation. And so they set the terms. They harder they make it to get, the more it’s worth.
So the difference between giving people money for doing nothing, if you did it at the margin, which we don’t with welfare— That’s why welfare has to be limited, that’s why basic income doesn’t work. It’s hyper-inflation. It might be morally correct, I’m not going to argue that; but it has no existence, operational existence; because if at the margin you don’t have to do anything to get the money to pay the taxes, the money has no value. And so the fact that with this program you have to at least sell your time, you have to show up for work to get paid, will give the currency at least that much value, a person’s time. So in that sense it’s a value-defining, price-stabilizing thing.
Now, the next question is what kind of work will people have to do? Well, you can say that for the rest of government too. There’s a lot of people who will say what we’re getting paid for in this room isn’t worth a whole lot. That’s up to us. Now there’s plenty of useful work. There’s just not enough funding. Everybody I know needs a personal assistant to help get everything done that they want to do, so if we give everybody enough funding for a personal assistant, you wouldn’t get one, because everybody wants one. It’s a fallacy [?] composition. And there’s always more work to be done than otherwise, than are available people, period, no matter where you are. And if you’re in any non-monetary society, that’s painfully obvious.
So the next thing specifically what would they do? So I’ll just point at suggestions, like I think the first thing you would do would say to all the government departments, look, you’ve got an unlimited budget for people, but I’m constraining the price you can pay to $8 an hour. So hire anybody you want to help out in your department—police department, welfare department, military—anybody you want—unless there’s someplace we don’t want more people—public works, hire after-school kids—anything you want for $8 an hour. That would take on lot. And beyond that, that could be extended to state and local governments. Anybody in the state and local government who wants to hire anybody for $8 an hour, the federal government will write the check.
When the government spends on a price constrained basis, it’s not inflationary. It’s when you try and spend and buy a certain quantity of things that you can cause inflation. I want you to go out and hire a million people. Somebody here said that I have to hire 967,000 people—she’s not here—for the census. Then you start paying [off that?] you cause inflation. If I say to you, You can hire anybody you want at $8 an hour, you’re not going to cause inflation. What you’re doing is stopping deflation. A buffer stock policy stops deflation. And then it prevents inflation because that stock gets released when demand pressure is built.
So I don’t know if that’s a sufficient answer or not. But again, there’s a lot more. And people have proposed all kinds of jobs, and I absolutely assure you that once it was started, there will be a whole lot more things to do than there are people to do it. That’s life.
JG:
Okay. On that note, I am tempted to wrap up the panel by suggesting that we create a department of climate planning and engineering, and that we use it as the administrative mechanism for a full-employment program at $8 an hour.
Q:
There’s a lot of people who claim to need a lot more help than the environmental area.
JG:
There’s a case to be made for this. But it will be made here this afternoon, because we have come to the end of our time, to the end of what I think you will all agree has been quite a remarkable two days.
I want to express my appreciation to absolutely everyone in the room for your contributions, which have been just rich and, as I said at the beginning and I said in the middle and I said at the end, disciplined, which I greatly appreciated. It made it possible for us to hear from everybody, and also to get a great deal of conversation in, and have time to talk around the edges, which is all very valuable.
This organization, Economists for Peace and Security, this is really a milestone meeting for us. It’s something we definitely want to do again, and the fact that you’ve made it into a success, I think, makes that just much easier than it would otherwise have been. So thank you very much, thanks to the panel.
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