Tag Archives: economics

A Tutor and its Pupil: An Overhaul of Market Economics

A comparison of two economic models to address Climate Change (from Bina and La Camera’s paper)

In the realm of market economics, though there are several schools of thought, one common denominator remains: the market should be optimized for sufficient gains and growth. As a former economics student, I recognize the importance of governments to balance the desire to sustain economic growth with that of other variables. From Brady Bonds to the market/controlled economy of China to carbon tax initiatives, different economic strategies have been deployed to deal with a host of problematic scenarios from developing countries embroiled in debt to a Communist country wanting to reap the benefits of market economics without succumbing completely to its free enterprise model to the ongoing and existential threat of Climate Change, which, taken to its most logical extreme, represents the most severe threat to our world (not that debt riddled countries and countries desiring to hold onto their customs aren’t important).

Such logic pervades Olivia Bina and Francesco La Camera’s research paper, “Promise and shortcomings of a green turn in recent policy response to the ‘double crisis,’’ which brings into question the efficacy of market economics as an economic system to address the ongoing environmental crisis and a framework to handle contemporary and future economic issues. Bina and La Camera consistently cite “Ecological economics,” drawing on the work of the subfield’s founder, Georgescu-Roegen, whose pioneering work demonstrated the limiting factor of a market economic world is  natural capital, for “Historically, the limiting factor that focused attention was that of manmade capital, but as humanity’s impact on resources and the biosphere move us closer to the so-called Anthropocene (Schellnhuber et al., 2005) and to growing scarcity of natural resources (MEA, 2005; Rockström et al., 2009), the limiting factor shifts to natural capital” (2311).    

The idea that growth is unsustainable and cannot be endless is central to ecological economics and with that, Bina and La Camera offer an alternative model to modern economies privy to both environmental and economic crises (during a ravaging pandemic, a global recession and unrelenting environmental catastrophes, this article feels far too familiar). In their model (see above), aptly labeled “An Alternative Turn,” “Distributive aspects” replaces “equality of opportunities” in the “mainstream economics perspective” of a system of economics centered around bettering both environmental and economic crises, “Eco-efficient Capitalism.” On this model, the researchers explicate that “justice becomes the expected outcome of a redistribution of wealth through the initial equality of opportunities and, at global level, the ‘trickle down’ effect, whilst sustainability is secured as a result of eco-efficient capitalism” (2314). In contrast, Bina and La Camera’s proposed model “requires that the environment be considered an ultimate means (i.e. not substitutable)” for it “envisages the ‘Ultimate End’ linked to a development that embraces the moral and ethical dimensions of the relationship between humanity and the environment” (2314). 

In essence, if there is not a significant recall of the market economics model, the current trajectory of the Climate Change crisis may result in a “Green” economy, but, as Bina and La Camera show, if the overarching goal of the model is to sustain economic growth, treating environmental sustainability as an added benefit of the model, the type of systemic overhaul needed to mitigate the damage of Climate Change won’t come from such a model.    

In the article, Bina and La Camera keep referencing “Robert Skidelsky’s (2009) observation that economics is the ‘tutor of governments,’” underlining the importance of alternative economic models mainly focused on fighting the Climate Change crisis. Skidelsky’s classification of the role of economics in government is on point and though this paper was published in 2011, a wealth of literature has since been published on economic modeling centered on Climate Change. If economics is indeed the tutor of governments, then we should continue to act as facilitators of education for the pupils that are our governments, bridging gaps between disparate fields and disciplines as we work to better the gap between our present and future.

The World Bank and Climate Justice: Impossible Bedfellows?

Bankers! From Walt Disney’s ‘Mary Poppins’

When my feeble brain tries to picture ‘The World Bank’ it comes up with some shadowy men in bowler hats, obscured by clouds of cigar smoke in the back room of a locked building. I realize this comic book image means that I don’t quite know who runs this mysterious sounding global organization and why, so dug into it after taking in their website and their various publications on climate changes, namely “Turn Down the Heat”. Here are three questions and answers:  

  1. Who are ‘The World Bank’ and what purpose do they serve?

Founded in 1944 to rebuild the devastation wreaked by World War II,  they have two stated aims for the global economy by 2030: to end extreme poverty and to foster growth in the incomes of the bottom 40% for every country. ‘The World Bank’ is now the largest development institute in the world and “works with country governments, the private sector, civil society organizations, regional development banks, think tanks, and other international  institutions on issues ranging from climate change, conflict, and food security to education, agriculture, finance, and trade.” Their business model is to provide low-interest loans, zero to low-interest credits, and grants to developing countries. They have their own historic capital, their profits, and they can also borrow capital from their wealthy member states. The CFO Bertrand Badré has this to say:  “Don’t forget that the World Bank is a bank, not a UN agency. In order to be sustainable, a bank has to make a profit and work with a credible budget.”  

  • Could you give us a more critical understanding of ‘The World Bank’?

Absolutely. Criticisms abound, particularly of the excessive neo-liberal policies adopted by the organization. As anyone with a loan knows all too well, it has to be paid back. And when you’re one of the worlds’ poorest countries, this means sacrificing money that could be spent on infrastructure or education or healthcare to repayments. A report from the Committee for the Abolition of Illegitimate Debt also points out that “…any debt relief remains conditional on the application of a wide range of neoliberal measures that negatively affect the living conditions of most of the people, violate human rights, and weaken the economies of the countries concerned by exposing them to international competition…” The organization is not a democratic one, with wealthy countries in the Global North making up its powerful majority. The U.S gets to dictate a lot, because it has a 16% share of the vote. David Malpass, the current president, is himself a failed banker and a Trump loyalist. And last but not least, an intervention from ‘The World Bank’ can often do more harm than good to the people it purports to help. That leads me to my final point.

  • What does the World Bank have to do with the climate crisis?

Honestly? A lot. This is their take.

“Climate change is a major risk to good development outcomes, and the Bank Group is committed to playing an important role in helping countries integrate climate action into their core development agendas.” From www.worldbank.org

However, while they are loaning and granting many billions of dollars to climate – forward initiatives globally, this focus on economic development over everything seems like a huge missed opportunity along the lines of what Bina and La Camera concluded in their analysis ‘Promise and Shortcomings of a Green Turn in recent policy responses to the Double Crisis’, namely that growth has become synonymous with modernity and success, while justice and well-being are way down the list. This goes for climate justice too: an economic approach is not enough, what is required is a paradigm shift. And as for the past, a wide-ranging investigation by the International Consortium of Investigative Journalists found huge problems with the bank’s projects. From 2004 to 2013 alone, they physically or economically displaced an estimated 3.4 million people, forcing them from their homes, taking their land or damaging their livelihoods. By financing dams in Brazil and coal-fired power plants in India, the bank damages and destroys the natural environment and the people living there, as well as racking up more carbon emitting and rapacious infrastructure that contributes to long-term climate chaos.