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The Economist this week published a cover story called “The World’s Lungs,” about the transition to a forest-preserving rather than forest converting world (http://www.economist.com/node/17093495). The article mentions REDD, but reduces it to “pay(ing) people in developing countries to leave trees standing.” That’s not inaccurate, but it misses the critical point about how the payment occurs: As part of regional and global markets for GreenHouse Gas (GHG) emission reductions. The Kyoto Protocol had begun to institute global cap-and-trade markets, with various instruments representing various kinds and locations of emissions reductions. Kyoto hadn’t yet embraced deforestation abatement, but other regional systems (such as Europe’s) began to allow such off-sets into their own markets. In the wake of the disappointing Copenhagen convention, which had been hoped to advance what Kyoto had started, it is beginning to look like the world will be progressing in the form of regional and national GHG emissions abatement markets, linking together through such things as developing country REDD off-sets.
I am one of those rare birds who is a big fan of carbon markets, not because they are in all or most cases currently the best approach, but because they offer the best long-term promise to give us one more powerful tool with which to tackle a variety of public goods and public bads, across national boundaries. As strange as it may sound now, and as technically challenging as it would be, we could conceivably, in the somewhat distant future, create violence abatement markets, and human rights violations abatement markets, and goodwill credit markets…, whatever we can imagine as public goods and bads that we want to promote or discourage (see Political Market Instruments).
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Colin Powell spoke out on immigration reform recently (http://www.denverpost.com/nationworld/ci_16119612). He said what every reasonable person knows: That we have to provide a road to legal status for the roughly 12 million who are here illegally, and that we have to recognize that fairly massive immigration is still part of the life-blood of this country.
As Powell recognizes, leaving intact an underground undocumented population that constitutes over three percent of the entire population is simply untenable. Identifying, detaining, and removing a significant portion of that population is prohibitively costly, inhumane, and destructive to our own economy. The only reasonable course of action, by any measure, is to provide a path to some kind of legal status, and to make it more attractive than remaining undocumented.
Also, as Powell realizes, those millions of undocumented immigrants are fully integrated into our economy, into our culture, and into our society. Simply removing them, even aside from the incredible inhumanity involved, would send shock waves through all three. It would undermine our economic vitality, disrupt our social systems and networks, and impoverish our culture.
Virtually everyone agrees that some kind of immigration reform is necessary. The argument is over what form it should take.
A few quick facts to keep in mind:
1) The United States has historically exploited the permeability of our southern border, and the relative poverty south of it, to create a membrane through which cheap disposable labor can pass (sometimes assertively imported) when it is convenient for us, and can be blocked and removed when it is inconvenient for us.
2) The true economic impact of illegal immigration is far more complex, and far less large, than the xenophobes contend. Most analyses conclude that there is either pretty much a net nation-wide economic wash, or a small net nation-wide economic gain due to illegal immigration, though the distribution of costs and benefits does lead to real strains on local social services. Illegal immigrants pay far more taxes, and are far more obstructed from collecting the benefits funded for by those taxes, than some people realize. Most importantly, they are paying into social security to support current retirees, but are not accruing social security benefits upon which they can draw.
3) Human beings have always migrated away from poverty and toward opportunity, and always will. Any responsible parent would place greater weight on their children’s future than on the prohibition to cross a line drawn in the sand by historical (and opportunistic) military conflicts. To villify people for doing so is simply reprehensible.
4) The more factors of production can flow freely, which includes how open borders are, the more global wealth is produced, and, in this case, the less inequitably it is distributed.
5) We rely on massive immigration demographically, with a burgeoning retired population and a shrinking working-age population supporting them. Immigrants come to work, redressing that imbalance.
Here’s my analysis:
From a global economic efficiency and distributional justice point-of-view, the ideal is the free flow of people and goods across borders. From a global leadership and fairness in distributing the burden point-of-view, the US should be in the lead on moving the world in the direction of that ideal.
I’m both a global humanist and a realist: I recognize the ideals we should be striving for, and the current realities that force us to compromise our efforts. One of the realities of the world is that people are locally and immediately biased: costs and benefits closer to home and closer to the present are weighted much more heavily than costs and benefits farther from home and farther in the future.
I’m less sympathetic to the reactions of people who resent (though are only marginally burdened by) the unstoppable flow of people from poverty and destitution toward opportunity than I am cognizant of its inevitability. For that reason, more than any other, we need federal laws that are enforceable, and that are a reasonable compromise between who and what we should be, and who and what we are.
The history of immigration law in America is a lot uglier than a lot of people realize, more often racist than not, and still somewhat brutal in the fierce protection of what’s ours, even against the most innocent and vulnerable victims of a cruel world. It’s hard to admire that, when the vast majority in America are walking around with i-phones, and pay cable subscriptions, and live comfortably and eat well. And here’s one of my objections to some in my own party: the branch of American labor that does not recognize any international responsibility beyond protecting our own wealth against foreign intrusion is as odious to me as any aspect of right-wing ideology.
Furthermore, we are capable of restructuring our priorities, and investing in our future, in ways which will provide native-born Americans with better opportunities to fill higher-paying, more information-intensive positions in our national (and the global) economy, leaving those eager souls from beyond our borders with the opportunity to fill the lower-paying, unskilled positions that Americans no longer want. This is, to a limited extent, the nature of illegal immigration today; in reality, the demand for low-paid foreign labor exists because Americans want, and can usually find, better opportunities (and the demand for highly paid, highly skilled foreign labor exists because we are failing to educate our own children to be able to satisfy it). But to the extent that there still is some competition for jobs between those born here or here legally, at the bottom of our economic ladder, and those who are newly arriving illegally, a greater commitment on our part to robust and effective public education, and provision of affordable, varied higher educational opportunities, will mitigate this problem, by moving those already here up the economic ladder, and leaving the rungs at the bottom to those newly arriving.
Even so, the use of immigrant labor to depress wages and to displace higher paid American labor still exists. Despite our relative wealth and comfort, the pressures and anxieties of an uncertain economy, of an uncertain future, of family responsibilities and assumptions about what we will be able to give to our children, all make our protectionist reflexes understandable, if neither ideal nor admirable. I’m not unsympathetic to the worker whose livelihood is made less secure by the competition of desparately poor people elsewhere, nor to the folks in border states and communities whose local resources are strained by undocumented waves of humanity pouring in.
But I’m a human being first, and an American second. The problems and stresses of Americans are nothing compared to the problems and stresses of those against whom we are protecting ourselves. And our mythologies and rationalizations with which we reassure ourselves that that is just and right do not in any way actually make it just and right. Furthermore, our own long-term interests are best served by including massive immigration in the equation, and creating a context in which those who enter fill positions that those who are here no longer need to settle for.
So that’s the nature of the challenge, as I see it. How do we negotiate all of those imperatives, all of those needs, all of those legitimate concerns? I don’t know. But the first step is to achieve a higher degree of honesty about the nature of the world in which we live, and the nature of the role we play, and could play, in it.
The Denver Post published an AP story about Obama’s appointment of Elizabeth Warren, “an aggressive consumer advocate and Wall Street adversary,” as de facto head of the new Bureau of Consumer Financial Protection (http://www.denverpost.com/business/ci_16106784). This appointment is significant for two reasons: 1) It marks a continuation of the process of concentration of power in the White House to avoid increasingly difficult and lengthy senate confirmation processes associated with appointing regulatory agency directors, and 2) it is an expression of the Democratic Party’s wise commitment to preserve and continue to develop the sophisticated regulatory architecture necessary to manage the modern market economy.
David Brooks commented on the first aspect on The News Hour last night (http://www.pbs.org/newshour/bb/business/july-dec10/shieldsbrooks_09-17.html). According to Brooks, this is a trend that has been growing over the course of the last five administrations. For good and for ill, there has been a gradual concentration of political power in the executive over the course of American history. The rise of the administrative state since the New Deal had led to some limited dispersion of that power (since Congress created each administrative agencies and confirmed the director appointed by the President), but, if Brooks’ assessment is correct, even that small moderating influence on presidential power has been eroded by the executive reaction to contentious confirmation hearings (not only by removing Congressional oversight, but also by shifting the power from semi-autonomous agency secretaries to, in this case, a “special assistant to the president”).
However, while many pundits and politicos are most concerned about the distribution of power, I am most concerned with the efficacy of its use. As long as enough separationof powers exists to prevent any slide into dictatorship (and it does, despite the perennial overheated rhetoric on the Right), the distribution remains an issue of the means to our ends, and the salient question becomes whether the power thus exercised accomplishes goals which serve the public interest. Since neither our individual liberties are in any actual danger as a result of the concentration of power in the White House, nor, for the most part, is the functionality of distributed competences, the question really is whether increased regulatory oversight of financial markets serves the public interest.
And the answer is: Yes. The combination of the complexity of the modern market economy and the consequences of “information asymmetries” creates an indispensable need for an increasingly sophisticated regulatory architecture. The reason for this is that in information-intensive market sectors, where some minority of market actors are close to information that is remote and inaccessible to the majority of market actors, that minority of market actors will tend to manipulate markets to their advantage and to the public’s disadvantage, often with disastrous results. Examples of this abound, including the recent financial sector collapse, the Enron-fabricated California energy crisis of 2000-2001, and even Bernie Maddoff-like ponzi schemes (which exist in abundance). The challenge, indeed, is creating and running regulatory agencies capable of keeping up with those who are closest to the action.
This is not to say that there are not defects and downsides associated with the administrative state. Certainly, it is possible for market regulations to fail a cost-benefit analysis, and impose burdens on business more onerous than the benefits warrant, costing jobs and stifling wealth production. Agency rule-making processes, however, are highly attuned to this consideration, and make necessary assessments that offend less pragmatic sensibilities, such as placing price tags on the value of human life (since regulations that consider individual human lives infinitely valuable would inevitably lead to the complete shut-down of the economy).
The bigger problem is the phenomenon known as “agency capture,” in which regulatory agencies become “captured” by the industries they are supposed to regulate, and make rules that serve the industry’s rather than the public’s interests. This happens both as a result of political ideology and allegiances (mostly conservative presidents sympathetic and beholden to particular industry interests appointing agencies heads who represent and advocate for those interests), and organic processes (finding individuals competent to regulate information-intensive industries generally requires recruiting from the pool of people who have worked within those industries, and thus have friendships and loyalties tied to those industries).
But the challenge of effectively regulating our complex modern market economy does not counsel a retreat from the attempt to do so; rather, it counsels renewed vigor and assertiveness in the attempt to do so. The creation of this absolutely essential, and long overdue, new regulatory agency is a step in the right direction.
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The German economy seems to have forgotten that there’s a global recession (http://www.economist.com/blogs/freeexchange/2010/08/europes_economies). By supplying the increasing consumer and industrial demand in fast-emerging large economies like China, India, and Brazil, the German economy grew at an annual rate of almost nine percent in the last quarter, the most robust growth since reunification 2o years ago. Unemployment in Germany is lower than it was before the recession hit. And German economic success is fueling increased demand at home, sending a positive ripple throughout the world economy.
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2008 Nobel Prize Winning Economist and New York Times Columnist Paul Krugman calls out Mitch McConnel for attempting to use political extortion to preserve fiscally irresponsible tax breaks for the super-wealthy (Even conservative Alan Greenspan has said that Congress should let the Bush tax breaks for the super-wealthy sunset, and not renew them), describes how how the Bush administration got them passed in 2001 by bundling them with smaller tax breaks for the middle class and circumventing fiscally responsible senate rules requiring off-sets for the tax breaks in reduced spending, and argues persuasively that it is in both the Democrat’s political interests and the nation’s economic interests to take a tough stand against Republicans trying to continue this national debt-inflating redistribution of wealth to the wealthiest Americans: http://www.nytimes.com/2010/09/17/opinion/17krugman.html?_r=1&src=twt&twt=NytimesKrugman.
Why on Earth does anyone vote for Republicans anymore? Because the right’s economic disinformation campaign has successfully disguised their economic hypocricy and incompetence in the eyes of many. It’s time to relegate to the dust heap of history these worhshippers at the alter of feathering the nests of the wealthy at the expense of the middle class and of future generations, and continue to reinstate reasonable government by responsible and committed public servants.
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Press release from Governor Ritter’s office: http://www.colorado.gov/cs/Satellite?c=Page&childpagename=GovRitter%2FGOVRLayout&cid=1251580722546&pagename=GOVRWrapper.
Congratulations to Lockheed Martin of Denver and United Launch Alliance of Littleton (both bordering on my state house district, on opposite sides) for being awarded two of four NASA contracts awarded nationally, highlighting one of Colorado’s most vibrant and inovative economic sectors. We need to preserve the policies that have made Colorado so attractive for economically vital enterprises such as these two, which include attention to infrastructure, to quality of life, and to vibrant cultural and educational facilities.
A marine bacteria that very robustly pumps carbon out of the atmosphere and into a permanent oceanic carbon sink. From The Economist: http://www.economist.com/node/16990766.
To sumarize, when marine life dies, some of the carbon in the remains dissolves into the ocean, 95% of which can’t be metabolized (called “refractory”). Since it can’t be metabolized, it can’t be turned back into carbon dioxide released into the atmosphere, making it an actually and potentially enormous carbon sink that has been largely overlooked by marine biologists until recently. The quantity of carbon stored in these refractory molecules is about equal to the amount of carbon stored in the atmosphere.
It had previously been discovered that a certain kind of bacteria (abbreviated AAPB) produces these refractory molecules when it metabolizes certain common nutrients, but on a far more robust scale than previously realized. (The main source of food for these bacteria is phytoplankton, which plays a crucial role in the marine food chain and itself is affected in complex ways by global warming).
Until now, the only known way to stimulate carbon absorption into the sea was to seed the sea with iron in order to stimulate the growth of planktonic algae. However, the introduction of iron has some serious negative side effects. With the new discovery of this very robust carbon pump (the AAPB bacteria, which pumps carbon from the carbon cycle into an apparently premanent carbon-sink), new potential exists for organically pumping carbon out of the atmosphere and into the sea, which has a large capacity to absorb it with ecological damage. How this might be done, exactly, is not yet known.
This story is interesting in its own right, but what appeals to me most is that it highlights the complex systemic nature of the world in which we live, and the value of understanding it for working with those systems to find solutions that both serve our own particularly human interests, and simultaneously restore disrupted systems to a sustainable dynamic equilibrium.
Humanity faces a daunting challenge: Billions of people desperate to live even in what Americans would call an extremely modest level of comfort and security, and a global integrated system (comprised of biosphere, and the anthrosphere within it; the hydrosphere; the atmosphere; and the lithosphere) already strained by the relatively few who already do. For the wealthy and comfortable few to attempt to condemn the rest of global humanity to perpetual poverty in the name of environmental sensitivity is completely untenable for both humanitarian and pragmatic reasons (you want more violence and instabililty? Try that strategy).
Our paltry attempts to solve our environmental problems with what are truly systemically superficial strategies are not going to rise to this challenge. We are going to need to effectively redesign our economic and technological systems to become more integrated with the ecological and natural systems within which they are ensconsed, and upon which they depend.
Economically, it means “internalizing the externalities,” incorporating into the prices of our goods and services the environmental costs that are currently not incorporated. Technologically, it is going to mean integrating an increasingly sophisticated knowledge of the systems which comprise our world into the technologies which interact with those systems. Together, economically and technologically, it will mean constructing closed systems, in which the waste produced is the in-put in another process, and in which imbalances are addressed by tweaking the human and natural systems through which we operate in ways which restore and maintain the balance that had been disrupted.
First, of course, we need to overcome that faction of humanity more to the indefinate continuation of immediate, on-going, destructive, unsustainable, self-indulgent greed and mutual indifference. Once again, though the challenges we face together are daunting enough, it is the armies of Organized Ignorance among us who ensure our inability to confront and surmount them.
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Another step forward for Colordo’s New Energy Economy? http://www.denverpost.com/business/ci_16086540
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In Sunday’s Denver Post, an editorial asked the title question “Political Theater or Poor Policy?” of President Obama’s proposed new transportation-sector stimulus spending (http://www.denverpost.com/opinion/ci_16036527). While admitting that Keynesian economists would answer that the proposed spending is too little rather than too much (implying that even Keynesians would have to oppose it on that basis), the author(s) sagely concluded that accruing more debt in order to invest in infrastructure and pump some capital into the economy is absolutely wrong. But there is no transparency of the reasoning behind this conclusion; we are left to assume that the wise editorial staff simply knows.
How, exactly, did the Denver post editorial staff arrive at a cost-benefit conclusion without having done any cost-benefit analysis? How, exactly, did the Denver Post editorial staff arrive at this economic conclusion without having done any economic analysis? This is what we don’t need more of, and particularly not from our information leaders.
It may be the case, or it may not, that taking on more debt now to invest in infrastructure and stimulate the economy costs more than it’s worth. It may be the case that it’s worth more than it costs. Professional economists are lined up on opposite sides of the issue, clustered around a much tighter and better informed battle-line than those whose wisdom is more arbitrary and less disciplined.
Wouldn’t it behoove us all if our last remaining major metropolitan newspaper in Denver were also among those clustered around the much tigher and better informed battle-line of economic literacy, rather than yodelling in the ideological echo chamber of arbitrary opinion?
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Henry Dubroff and John J. Huggins, in “From Great Recession to Great Reset” in today’s Perspective in The Denver Post (http://www.denverpost.com/opinion/ci_16039375), described the restructuring of the American economy that is occurring as a result of our recent financial sector meltdown. The authors view the loss of home ownership as a reliable investment whose growth in value can be depended on to finance future costs such as children’s college tuition and retirement, the decreased mobility due to a significant portion of homeowners owing more on their homes than they are worth, and the increased structural unemployment rate due to a long-term (or at least medium-term) downturn in new home and commercial construction, all conspire to create an enduring new economic context of slower GDP growth, increased savings, decreased spending-as-percentage-of-GDP, and decreased mobility.
Few would argue that some of these changes are not necessary and desirable in the long-run (e.g., increased savings and decreased reliance on consumer spending for economic vitality), and few would argue that increased structural unemployment is not undesirable (unless it was only the unemployment of people in a relatively smooth transition to new employment, which the authors argue is not likely to be the case in this scenario, in which the construction sector has around 25% unemployment, involving workers not easily positioned to retrain for the more robust communications technologies and health care jobs on the horizon). But what about decreased job-driven mobility and a slower growing GDP, two conditions that most economists would probably identify as undesirable? Are they really?
There are at least two silver-linings to those two interrelated clouds: 1) We need to transition into a more sustainable, eco-friendly, and, for both moral and pragmatic reasons, distributionally just global economy, which is going to have to place a higher value on ensuring that everyone has access to a modest means of sustenance than on the ability of some to achieve extraordinary heights of wealth and consumption; and 2) this country is in desperate need of a renewed sense of community, a renewed recognition that we are not just a collectiion of mutually irrelevant individuals, but are in fact a society of neighbors and fellow citizens, with a shared fate, shared challenges, and in a shared enterprise. The slower GDP growth in what is by far and away the most consumptive nation on Earth contributes to the former necessary global economic adjustment, while the decreased job-related mobility contributes to the latter necessary cultural adjustment in our own country.
The challenge we face is to transition into ever more sustainable and fair political economic systems, without compromising economic vitality to the point that we are only achieving a sustainable and fair condition of universal destitution. We need to create an economy robust enough to feed and shelter and educate and, in general, nourish the bodies, minds, and souls of the human population, but fair enough that it does not acomplish this for some by denying it to others, and sustainable enough that it does so in a symbiotic coexistance with rather than parasitic destruction of the natural context upon which our very existence depends.
