Saturday, 29 December 2018

The Carbon Lie, part two

The crucial role of international trade in global warming

I’m going to do some speculating. The reason the rate of embodied, trade-based carbon emissions discussed in part one is so significant is that overall CO2 emissions are intimately connected – not to the degree of economic growth per se – but to the amount of international trade.

Foreign direct investment – and thus global trade – mushroomed from the 1990s onwards as globalisation took root. Manufacturing companies upped and left the deindustrializing West and relocated to countries like China*.The products they made had to be transported back to consumers in rich countries via container ships and aeroplanes and therefore emissions shot up. Between 2000 and 2008 the emissions’ growth rate reached 3.4%.

Everything came to a juddering halt in 2008 with the global financial crisis. But the respite was short-lived – in 2010 emissions’ growth returned with a vengeance, hitting 5.9%.

Then something strange happened. Global economic growth continued, albeit at a historically subdued level, but carbon emissions did not follow suit. They were, in fact, flat for three straight years (2014-2016). For the first time ever emissions were not rising in tandem with GDP growth. This prompted notions that the world had reached peak emissions and that CO2 pollution was finally “decoupling from economic activity”.

However, such hopes were dashed almost as soon as they were raised. In 2017, carbon emissions started growing again, reaching a historic high.

These developments become a lot less puzzling when global trade, as opposed bare economic growth levels, is brought into the picture. According to the United Nations Conference on Trade and Development (UNCTAD) Status of World Trade 2017 report, world trade grew at less than 2 per cent a year from 2011-14, declined by 10 per cent in 2015 – during which time the profitability of global shipping companies sank like a stone – and dropped by a further 3 per cent in 2016. However, reports UNCTAD, the “dismal performance” of world trade over the previous eight years came to an end during 2017.  

After an unpromising beginning at the start of the year, “Trade growth”, notes the report, “picked up substantially in the second and third quarters of 2017”. In the fourth quarter, trade was expected to achieve growth rates 10% higher than those of 2016. Trade was anticipated to outperform GDP growth in 2017 (4 percent points compared with 3.6), something it had done consistently since the middle of the 19th century, except for the period 2011-2016, when coincidentally carbon emissions remained flat or fell. Importantly, noted UNCTAD, trade growth was widespread across both developed and emerging economies.

Hence, the years in which global CO2 emissions did not rise were concurrent with declining world trade, and the return to rising emissions synchronous with the revival of world trade. I don’t think that’s a coincidence.

It is true that global economic growth has increased as well, but to nothing like the same degree. According to the International Monetary Fund it was 3.1% in 2015, 3.2% in 2016, 3.6% in 2017 and projected to reach 3.7% in 2018: an incremental rise but nothing spectacular. If trade growth – as anticipated – has continued into 2018, it is a sure fire bet that carbon emissions will have increased as well.

Why does international trade cause emissions? Through a combination of the pollution caused in the manufacture of goods or extraction of raw materials and in transporting them often thousands of miles to end user markets.

The Establishment in denial

But this connection between global trade and global warming is anathema to both liberal and conservative commentators. Donald Trump, for example, is roundly lambasted for stoking a trade war with China by introducing tariffs on commodities like steel. Such restraints on trade and protectionism are seen as dangerous and potentially leading, as they have done in the past, to actual physical conflict. These worries are warranted – protectionism and tariff imposition preceded the massive conflagrations of the First and Second World Wars, although it should also be pointed out that most countries, including the US in the 19th century, industrialised precisely because they protected their domestic enterprises.

However, we also know that the way the world economy is currently configured – a configuration in which unfettered trade between nations is considered sacrosanct – will cause drought, mass poverty, the inundation of coastal areas, a refugee crisis to dwarf anything we have so far experienced and, very likely, physical conflict in just over 20 years.

The fixation on international trade as beneficial and leading to peace, not war, among nations is immensely hard to dislodge. It is, as this article points out, the most venerable of the “numerous ideological shibboleths” of the liberal-capitalist order, which can be traced back to the notion of the 19th century economist David Ricardo that free trade allows countries to exploit their ‘comparative advantage’. Unimpeded trade between nations, said Ricardo, would maximise benefit to consumers and allow for the most efficient use of domestic natural resources.

In time, the notion that countries that trade with each other were unlikely to go to war was added to the carapace justifying unfettered trade. Not only does international trade benefit the consumer but is also forges links of mutual self-interest between nations. Hence, UNCTAD’s synonym for world trade – “economic interdependence”.

In our era, the significance of trade has grown beyond its relevance to the consumer. A lot of trade is now intra-industry. International supply chains allow corporations to shift production or assembling to where it is cheapest (a process known as ‘global labour arbitrage’), while more intricate, technical processes take place in developed countries. The most famous examples are Apple’s iPhone, iPads and iPods. Their components are manufactured in multiple countries – including the US, China, South Korea, Japan, Germany, Switzerland and the Netherlands – but assembled in just one, China. The threads of international trade involved in constructing Apple’s products, and then transporting them to the consumer, are immense.

The transformation that isn’t

But still – in spite of the acknowledged gravity of the situation – proposed solutions to climate change eschew structural change in favour of financial incentives and technological transformation, demonstrating, if nothing else, the stubbornness of the liberal-capitalist faith in international trade.

The IPCC paints a picture of the calamities that will ensue if CO2 emissions are not drastically reduced by 2040 but places its hopes in widespread carbon pricing – charging producers for the amount of CO2 they emit. This is despite the fact that carbon pricing has been introduced by many countries but global emissions have continued to rise.

We need an economic transformation, says the IPCC, for which there is “no documented historical precedent”. But in terms of how to achieve this radical change the well documented precedent of neoliberalism reigns supreme.

The International Maritime Organisation has agreed a non-binding commitment to reduce shipping emissions by 50% by 2050. But the way to achieve this is purely technological. Projections that global trade is to increase dramatically over the coming decades are accepted without question. Rather it is proposed that the currently 50,000-strong global shipping fleet rapidly adopt zero-carbon technology, such as batteries, renewable fuels derived from hydrogen and bioenergy.

Such a transformation is regarded as quite possible with “the correct level of investment”.  Studiously ignored is the fact that investment – the financing of new equipment or machinery – has steadily fallen in advanced capitalist countries, including in export giants like Germany, over the past four decades (see Chart 5.2, p 143). Contemporary, financialised capitalism specialises in extracting profit but not in long-term technological transformation.

Introducing tariffs and stoking trade wars is not the way to achieve the necessary slashing of carbon emissions. Even if it did succeed in reducing emissions – which is far from certain – the consequences are perilous. Notwithstanding the rampant racism involved, rising international tensions might well lead to war.

The rational reduction of global trade

Nonetheless, if climate change is to be mitigated significantly, which must be the aim of any rational political movement, the shibboleth of uninhibited world trade must be tackled. As Naomi Klein says in This Changes Everything, long-haul, energy intensive transport has to be rationed – “reserved for those cases where goods cannot be produced locally or where local production is more carbon-intensive”.

So it falls on the Left to steer a delicate course – reducing world trade in such a way that does not provoke xenophobia and international conflict, economic or physical. This, to be frank, is not an easy task. Jeremy Corbyn’s ‘Build it in Britain’ campaign and assertion that a future Labour government would try to ensure that “we build things here that for too long have been built abroad” was a step in the right direction. But, inevitably, insourcing – the reversal of outsourcing to the other side of the world – is going to have to happen on a large scale.

But there are clear non-capitalist consequences that should be embraced. The ultimate source of profit can be endlessly debated but, in essence, profit is a mark-up over costs. Hence, enormous profits are made from the trading of oil and gas (oil has to be extracted, transported and refined; all occasions for the insertion of profit). However, renewable energy embodies a completely different logic. It does not have to be transported and is freely available. Beyond the high costs of infrastructure development, the price of transmitting the resultant energy to consumers and enterprises, is minimal. There is no reason at all why the production and transmission of renewable energy should be privately owned or a source of profit.

Likewise, the technological future of production, for example 3D Printing, is not for goods to be transported thousands of miles to end markets but to be produced locally. If global trade is to be radically curtailed in the coming years – as it has to be – such a development will likely go with the grain of economic development, not be in conflict with it.

*This process, by the way, wasn’t exclusive to Anglo-European countries. South Korea, a major industrialised country by the 1980s, also shifted production to China and, as a result, trade between the two increased by 1431% between 1995 and 2015.

Friday, 14 December 2018

The Carbon Lie, part one

Officially, the United Kingdom has been stunningly successful in reducing its carbon footprint. Despite green-lighting fracking and the expansion of Heathrow, Britain’s CO2 emissions have fallen by 38% since 1990 and are now as low as they were when Oscar Wilde’s The Picture of Dorian Gray was published in 1890.

However, this is a lie. Not in the sense the UK government is fiddling the figures, though many claim that emissions from major infrastructure projects are deliberately miscounted, but because the UK has only achieved this reduction in emissions because it has outsourced them to other countries.

Britain has gone through rampant and conscious deindustrialisation over the last three decades. When Margaret Thatcher came to power in 1979, manufacturing made up 30% of the economy and employed 6.8 million people. By 2010, at the end of the last Labour government, it had shrunk to 11 per cent of GNP and had a workforce of just 2.5 million.

However, people have not learned to live on fresh air. Many of the products that were once made in Britain are now imported. This increases CO2 emissions in two ways – one because the manufactured products and commodities may be made or extracted under worse environmental conditions than might have been the case domestically (though still often under the aegis of western-based multinationals) and two because they have to be transported thousands of miles across oceans, usually by container ship, to their end markets.

Embodied emissions between China and the UK, for example, increased by 333% between 1995 and 2015. The kind of products traded in this manner includes both industrial goods – steel and cement for example – but also consumer items such as toys, trainers, clothes and office equipment.

Thus, while the UK’s territorial carbon emissions have been slashed, primarily because of domestic deindustrialisation, the overall carbon footprint that the UK is responsible for, which includes so-called embodied or traded emissions, has not. According to a report on the ‘Carbon Loophole’ from August 2018:

The UK’s territorial CO2 emissions have been declining for decades, and it has been one of the few countries able to report a decline in absolute emissions. However, considering the embodied carbon in imports, this apparent success is partly reversed. The total carbon footprint, inclusive of embodied CO2 in imports, has slightly increased since 1990.

Clearly, the UK is not alone, though its rate of deindustrialisation, and thus reliance on trade, is extreme. In the US, for example, embodied carbon imports grew rapidly from the 1990s onwards but declined following the 2008 financial crisis and have plateaued since then. The EU and Japan paint a similar picture. Thus, while the advanced capitalist countries officially claim they are mitigating climate change, they are in fact doing the opposite. As the report says:

Remarkably, in all cases, changes in emissions embodied in imports are comparable to or larger than changes in domestic emissions. Thus, under a consumer responsibility principle, developed countries have not recorded a decrease from 1990 levels, but rather an increase.

This deception arises from the fact that when countries report their greenhouse gas emissions they do so on the basis of their territorial emissions only. The emissions generated in the production of goods for trade go towards the territorial emissions of the country they are produced in (say China or India). And the emissions generated by transporting the products to developed country markets are not counted at all. This is an unfortunate oversight considering that emissions from shipping are predicted to double or even triple by 2050 (see executive summary).

The recent Intergovernmental Panel on Climate Change (IPCC) report that caused a sweeping gnashing of teeth for almost 48 hours stated that unless greenhouse gas pollution was reduced by 45% by 2040 and by 100% by 2050, coastlines would be inundated by rising seas and droughts and food shortages would become rampant. The IPCC said there was “no documented historical precedent” for the economic transformation that is required. Tragically, such an economic metamorphosis is even more difficult if the nature of the problem is misunderstood in the first place – if we are labouring under the misconceptions of, in Naomi Klein’s words, “a vastly distorted picture of the drivers of global emissions”.

What lies at the root of these misconceptions is an obdurate belief in the beneficence of global trade. International trade, in the dominant liberal-capitalist mind-set, is seen as both the wellspring of wealth and prosperity and a guardian against the dark forces that will be unleashed if it is impaired.

Unfortunately, the Left, too, seems woefully under-prepared for the scale of the transformation that is called for.

Which will be the subject of Part Two of this post.

Friday, 23 November 2018

The Coming UK General Election

Despite what you may have been led to believe by, strangely, a combination of John McDonnell and the mainstream media, a general election in the UK is not highly unlikely. It is, in fact, very possible.

Under the Fixed Term Parliament Act of 2011, an early election is granted if two-thirds of the House of Commons vote for it. This is what happened in 2017. But that is not the only way. As the Wikipedia entry on the Fixed Term Parliament Act explains:

Section 2 of the Act also provides for two ways in which a general election can be held before the end of this five-year period:
  • If the House of Commons, with the support of two thirds of its total membership (including vacant seats), resolves "That there shall be an early parliamentary general election".

It’s important to differentiate between the aim of the Tory right for a no confidence vote in Theresa May as Tory leader – which would mean she would no longer be Prime Minister but the government would remain in place – and a no confidence vote in the House of Commons which would mean the government falling. In 1990 John Major replaced Margaret Thatcher as Prime Minister after enough Tory MPs didn’t support her, but the government itself just carried on.

Should May’s deal not be supported by the House of Commons, which looks probable, Labour will table a motion of no confidence. This is – lest we forget – a minority government so even if all Tory MPs vote in support it would still lose – theoretically, assuming all opposition MPs vote against. Everything depends on what the DUP does* or whether the odd Lib Dem or Labour MP can be prised away. It’s possible it would stagger over the line. But if May does lose the no confidence vote and no alternative government can be formed in two weeks, a general election is mandatory.

If the right of the Tory party was that cynical – which it is – it would vote against May’s deal, then support the government in the no-confidence vote, hoping it scrapes home. And then replace May in an internal party coup á la Thatcher and Major. With this government unable to negotiate a new deal, it would probably try and extend the transition period, which is not the same as Article 50, for as long as possible. But there would be no election.

However, any opportunity for the Labour party to force a General Election should be taken. We desperately need a radical change of direction on multiple fronts. This is a country where 1 in 200 people are homeless (and that is almost certainly an underestimate). The assumption would be that the EU will agree to extend Article 50 because a new government with an actual mandate (unlike with the current government or anything that can be conjured from existing Parliamentary arithmetic) constitutes an exceptional circumstance.

There is one other slight possibility. That is the May government, which has utterly ruled out a second referendum, changes its mind if it loses the vote on its ‘deal’ in the Commons and calls a referendum. The question would undoubtedly be the May deal or Remain. The government would secretly hope to lose (Remain would win). And there would be no election – the government would continue just as the Conservatives did in 2016 after the original referendum, as if the last few years were just a bad dream. But the possibility of enormous civil unrest is real given that many millions of people would not want either option.

We need an election.

* The DUP has a 'confidence and supply' agreement with the Conservatives. It's widely assumed that they would support Theresa May under any circumstances because the thought of a Corbyn-led Labour government is intolerable. But DUP leader Arlene Foster has said May's Brexit deal is more of threat than a Corbyn government. So whether the DUP would support May in a no-confidence vote is definitely an open question.


Tuesday, 20 November 2018

The Nazis and capitalism: the reign of the unorthodox

If the idea of the Nazis being socialists is crude propaganda that still leaves the question of how to correctly categorize them economically and politically. There is doubtless a brand of deterministic Marxism that will assert that between 1933 and 1945 capitalism had to take the genocidal and apocalyptic form it actually did in Germany in those years. But I don’t think that’s true. Economically, National Socialism was profoundly irrational – nihilistically dedicated to total war against enemies (the US and the Soviet Union) that it had no real chance of defeating. And it was even more manically dedicated towards the extermination of the European Jews. As is well known, deportations of Jewish people to the extermination camps took precedence over military necessities even in the time of looming defeat. If ‘capital’ was secretly in the saddle in the Third Reich years, it evidently had a death wish.

But at the same time, as remarked upon in part one, capital accumulation and profit-making were inserted into the very fibre of the Nazi economy. The death camps were privately insured, Zyklon B was supplied by a subsidiary of I.G. Farben and famous, brand-name firms ran slave labour factories in the vicinity of the death camps.

The only conclusion, I think, is that capitalism, given the chance, will happily operate under a variety of political cultures – and unapologetically assert its interests – but the nature of those cultures is not something exclusively determined by capitalists or their acolytes. As noted by David Schweickart in After Capitalism, there have been many different kinds of capitalism – Keynesian liberal, state developmental (as practiced by Japan and South Korea), third world “comprador capitalism”, our neoliberal version and, of course, the current Chinese model where the state retains a great deal of control through ‘state owned enterprises’ and rules out any complications resulting from multi-party elections. The original Marxist concept of a capitalist base determining the superstructure of culture is far too simplistic.

So the Nazis – and Hitler in particular – were quite aware of the existing power structure and the social role they had to play in order to get into power – eliminating organised labour and the Marxist threat. But they were not bound by economic orthodoxy – they needed to tap into and channel mass desires and discontents. This can be clearly seen in their rise to power.

Their increase in popularity was astoundingly rapid – the Nazis gained 2.6% of the vote in 1928 but by the summer of 1932 they were the largest party in the German Parliament, gaining close to a 38% vote share. Traditionally, this has been ascribed to the Great Depression and the mass unemployment it generated – nearly 18% of the workforce was without a job in 1932. But this is only a partial explanation.

The response of the German government to the depression was to institute crushing austerity. Under Heinrich Brüning of the Catholic Centre party, who was known as the “hunger Chancellor”, public spending was cut by 15% between 1930 and 1932. The largest falls in were in housing and healthcare spending and there were also significant reductions in unemployment benefit, payments to pensioners and support for the disabled and war veterans.

 Heinrich Brüning, the "Hunger Chancellor"

The Nazis campaigned on an anti-austerity platform, saying they wanted to preserve the social insurance system, demanding “generous expansion of support for the aged” and advocating building highways. Researchers who have analysed the NSDAP’s route to power found a strong correlation between austerity and both increased votes for the Nazis and people joining the party. Conversely, the socialist SPD – though outside government – passively supported austerity, and the Communists benefited mainly from increases in unemployment.

In power, the Nazis similarly went against the economic grain. They instituted massive state funded public work schemes in housing, land reclamation and highway construction (the famous autobahns).Tax reliefs were given to companies that created jobs and increased investment and unemployment was reduced from six million in 1932 to less than a million four years later. Of course, the main reason unemployment so successfully conquered and economic depression warded off was that the economy became wholeheartedly dedicated to rearmament and war (wehrwirtschaft or ‘war economy’ in Nazi parlance). War was not just a result of Nazi foreign policy; the entire economy was geared towards it happening.

Nazi economic policy – cutting taxes, spending money and instituting public works schemes – could in fact be described as Keynesian except that it was before Keynes. He most certainly existed at the time but his most important work – The General Theory of Employment, Interest and Money – wasn’t published until 1936. As economist Joan Robinson put it, “Hitler had already found how to cure unemployment before Keynes had finished explaining why it occurred”.

Except that Hitler didn’t cure anything. He had no interest in economics and outsourced economic policy to a banker called Dr Hjalmar Schacht, who had enthusiastically backed the NSDAP as they neared power but never actually joined the party. Among Schacht’s many departures from orthodox economics was a money printing scheme which created 12 billion marks out of thin air between 1935 and 1938. The money was used to pay armaments manufacturers and didn’t appear in the government’s budget. Any resemblance to quantitative easing is purely coincidental. But let’s just say it didn’t end well.

Why is this relevant, beyond historical debates about what National Socialism actually was? Well, over the past decade the Left has been confronted with an apparently ultra-orthodox and unyielding economic approach that demands cuts in public spending – austerity – to deal with an economic downturn. Past over-indulgence putatively makes this medicine thoroughly deserved – witness the UK general election campaigns in 2010 and 2015.

It has escaped attention that 21st century austerity is only half orthodox. It insisted on massive cuts to public spending – cuts that caused destitution and death – but responded to the threat of private sector bankruptcies with ultra-low interest rates, bail-outs and unconventional money creation schemes (quantitative easing again). Stern, unbending austerity for the public and endless indulgence for the ‘wealth creators’.

Austerity is now fraying at the edges – the Conservatives in the UK are trying to claim it’s over even though it plainly isn’t. However, this is only partly because it’s gone on so long without achieving its supposed aims – the deficit in the UK was meant to be erased by 2015, remember. It’s also because a new, ‘natavist’ Right has little patience with it. Donald Trump in the US is many things – misogynist, racist, serial liar, idiot – but he’s not a purveyor of austerity. This was former Greek finance minister, Yanis Varoufakis, talking about Trump in the Guardian newspaper in June:

The Trump administration is building up a substantial economic momentum domestically. First, he passed income and corporate tax cuts that the establishment Republicans could not have imagined even in their wildest dreams a few years ago. But this was not all. Behind the scenes, Trump astonished Nancy Pelosi, the Democrat’s leader in the House of Representatives, by approving every single social program that she asked of him. As a result, the federal government is running the largest budget deficit in America’s history when the rate of unemployment is less than 4%.

I’m old enough to remember when record, civilisation-endangering budget deficits were what the Left was bound to bring into being if it got anywhere near power. When way back in 2012 Niall Ferguson evinced that young people should “welcome austerity” and that “if young Americans knew what was good for them, they’d all be in the Tea Party”. But Trump’s record deficit has not put off enthusiastic former Tea Party members in the slightest. His “dedicated supporters”, says one article, “are many of the same folks who made the Tea Party the dominant force in American politics in 2010”. Ferguson meanwhile says Trump’s tax-cut fuelled, deficit building “is not something I can enthusiastically condone”. Maybe we should all join the Tea Party … oh wait.

But it’s not just Trump. The Italian government currently engaged in a face-off with the European Commission over its budget plans to introduce a €780 a month ‘basic income’ for unemployed Italians and to decrease the pension age is not of the Left. It is a coalition between the anti-establishment Five Star Movement and the far-right Lega. The government’s deputy Prime Minister is Matteo Salvini who has promised to deport 500,000 ‘illegal immigrants’ and been compared to Trump. But this is a government that insists it wants to “abolish poverty”.

I’m not suggesting there has been a Damascene conversion of the Right to anti-austerity. There are still many fiscally orthodox right-wingers around, such as the Austrian Freedom Party and Bolsonaro in Brazil. But as patience with never-ending austerity grows thinner and thinner, we can expect a much more flexible attitude towards it on the Right. And as the Nazis showed, there are clear historical precedents.

What means is that policies cannot be judged as being Left or Right merely in terms of whether they alleviate poverty and redistribute resources. To be classed as Left they also have to tilt the balance of power away from capital and the elite in favour organised labour and the citizenry. This is something the nationalist Right will never do.