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misreportedandmisremembered

Bringing context and perspective to the chaos

Mind the Gap

Introductory-level economics is based on the principle that perfect competition is theoretically possible – this means that all buyers and suppliers are equally well-informed, that all firms holds equal degrees of market power, and that entry and exit of the market can occur at any time without barriers. In the real world, this concept is laughable – any competitive industry consists of firms of varying sizes (the exceptions being oligopolies or monopolies) with varying degrees of market power. There are also external actors looking to ease or impose pressure, primarily by reducing the monetary burden placed upon suppliers or consumers to make specific products more appealing to purchase or produce. These are known as subsidies, often offered by the state, that provide direct support to incentivize certain behaviours.

The theory of economics is that markets, within a free market system, will self-regulate as supply adjusts to changes in demand and vice versa. The provision of subsidies is one of the more minor ways of distorting this “balance” (a more extreme version being currency manipulation or any other action taken in a planned economy), as the reality of free-market systems is that they are riddled with power structures that reduce the buying power of consumers, especially in larger global markets. Often, subsidies and support on the supply side are directed towards essential but non-competitive sectors (agriculture) or industries in their infancy (clean technology). By artificially lowering the cost of production and adoption, governments have the ability to encourage or reduce the cost of certain behaviours, which often include essential services like providing education, lowering the cost of health insurance, or providing rebates on installing solar panels.

But here a snag arises – subsidies are funded through taxpayer dollars, meaning that the effectiveness of programs must be judged against the potential ROI of investment into a venture with a lower opportunity cost. This is part of the fundamental divide between fiscal hawks and doves – ensuring the finite resource of taxpayer funding is not wasted in areas where greater utility could be generated elsewhere (a true conservative often believes the greatest utility of a dollar is to be had in the hands in the consumer). The line between direct and indirect subsidies is often that the government can either provide support directly and recoup a percentage of their investment, or can provide funding indirectly and see no fiscal return, hoping that this method is indirectly funded by increases in support-related GDP or employment growth in targeted sectors. So, government subsidies play an essential role in ironing out the gaps left by the free market – right?

To simplify a technical explanation, a subsidy to a firm acts as revenue, which mimics increased demand for a product. It allows the producer to reduce their costs of production per unit and sell on the market at a reduced price, passing savings onto consumers. Governments often claim to operate with a mandate of only providing support to industries with a societal benefit – but the vague nature of this definition makes it easily exploitable for political opportunists. Deciding where subsidies are allocated can be the result of careful policy-decisions or “pork barrel spending”, an American term coined to describe government spending in a specific congressional representative’s district. Subsidies can be provided either to sectors – oil & gas, telecoms, utilities and the financial sector received 56% of total US government support from 2008 to 2010 – or to individual companies, which include struggling companies such as Alphabet/Google and Walt Disney, with the former receiving over $630M USD since the year 2010.

But the aid provided to organization does trickle down to employees and consumers – the USDA offers rebates on insurance for farms to make it more affordable, supporting domestic industries that may otherwise get outcompeted on the world stage. And until recently, the same theory was used to lower premiums for out-of-pocket costs for health insurance on low or middle income households in the United States. These examples of how providing support to industries impacts employment and lowers costs for consumers illustrate just how complex these discussions can be – even Alphabet/Google, beneficiary of potentially unneeded support, has used it to grow into the world’s 2nd most valuable firm, become a cutting-edge innovator and employ over 72,000 people.

Theoretically, in the case of successful organizations or industries, subsidies can be removed once they are established enough to no longer require support to be successful. But once a subsidy exists, removing it is a tricky process. In theory, industries are supported until they are capable of being competitive in a free-market. But the transitional effect of removing subsidies can see the costs of certain goods actually increased above market value, since firms would have remained profitable without the need to implement the same efficiencies as competitors. Additionally, continued support of an industry can result in lower mobility amongst the labour force, as workers become dependent on subsidies in highly specialized industries and can lack the education needed to find another job when those subsidies are removed. This can create a whole new set of policy problems, where the marginal benefit experienced by many is offset by the severe cost to a smaller few. Saudi Arabia’s recent struggles also illustrate how easy reversing this progress can be – the Crown Prince Muhammad bin Nayef eliminated a layer of government support before reinstating it only months later once he realized it was not politically favourable to attempt to break down the deep state.

So the provision of government subsidies, a monetary tool used to level an unequal playing field, is subject to political whim, is difficult to eliminate without regressive ripple effects, and can result in taxpayers directly funding discounted land taxes for conglomerates. But that does not mean mistakes cannot be rectified – ensuring support can justify a societally favourable return (often generated in non-monetary terms) and can be readily eliminated when the time is right is key. Take Nigeria: a dip in oil prices saw the government remove the national fuel subsidy and increase the price of oil by almost 60% overnight. While previous such attempts has resulted in protests, results this time were more measured, with the majority of Nigerians accepted that higher costs were necessary to relieve the fuel shortages that had arisen. The lesson? Waiting until wasteful subsidies cripple the economy appears to be the only way to remove them without pissing everyone off.

Moving South for the Winter

Gardening is one of the few hobbies in which sitting back and patiently watching plants grow constitutes as an activity. Effective gardeners know that the best gardens require the most planning – focusing on a specific design means early plantings, seasonal alignment of florals and a rich tapestry of species to truly see an anthropogenic ecosystem flourish. But in chaotic conditions, where digging rodents and dry weather wreaks havoc on predictability, growth can be more difficult to manage. But effective planning can help flora mitigate or adapt to even some of the harshest conditions.

As with flowers, so to with businesses – the fostering of a friendly business climate is one of the core tenants of economic liberalization, and policy planning must involve the balancing and execution of multiple regulatory actions to create a climate that removes hurdles from starting businesses, encourages investment and promotes infrastructure growth to support new ventures. But, as with gardens, a difficulty emerges in fostering a business-friendly economic climate in developing nations due to higher than average levels of systemic corruption and poverty, laughably-poor infrastructure and a lack of governmental stability. The World Bank’s Ease of Doing Business Rankings outline 10 criteria by which economic climates can be benchmarked against or measured from, with only Malaysia placing in the top 30 rankings internationally to represent developing economies (it landed in 23rd place, bolstered by existing protection to minority investors and strong energy infrastructure transmission capacity).

The ten factors by which nations are measured include themes of dealing with governments (ease of starting a business, dealing with construction permits, registering permits and paying taxes), attractiveness for investment (trading across borders and access to credit lines) and legal protections from chicanery (protection for minority investors, ability to enforce contracts and regular capacity to resolve insolvency). Issues of access to electricity and basic services are also measured, as an ability to tap into existing infrastructure greatly reduces needed capital investments for new ventures. As expected, 20 of the top 30 most attractive climates could be found in the OECD, a club of mostly rich countries. The first countries from both Africa and South America to appear respectively were Rwanda in 56th place and Mexico in 47th place respectively.

These two continental regions, often viewed as hubs for resource extraction and neo-mercantilist foreign investment, have an odd double standard that makes them more difficult to evaluate – the rankings index is based not off of polled data from firms, but from evaluations of governmental policies. And strict rules in weak states, which are found more prevalently in the Global South, mean the way business operates in theory and practice can differ drastically. Well-connected firms and organizations in countries with low rankings have seen speed in getting permits and real tax rates similar to firms in more attractive economic bastions (In one state, policies outline a 177 day process for construction permits that local firms say can take as little as 30 days) – leading to the question, to what degree does corruption factor into the unattractiveness of economic climates in the developing world?

Nations with higher rankings within the index are consistently found to have lower rates of graft and bribery than those who placed lower – partially a result of stable and functional bureaucratic infrastructure. Transparency International’s annually published Corruption Perceptions Index provides a similar benchmark to the Ease of Doing Business Rankings, save it examines endemic corruption in a given country’s public sector. In the 2016 index, African and South American countries did not fair well, though the issue of corruption was much discussed in the public sphere. Corruption scandals have plagued governments in the Sub-Saharan African region, with democratic elections seeing graft pushed to the forefront of campaigns in the DRC, Ghana and South Africa. Administrative anti-corruption efforts in Nigeria and Kenya have had little progress, with voters universally expressing frustration and dissatisfaction at the lack of progress made. A common practice of politicians in the region is to run on a platform of “anti-corruption” – laudable, but ultimately meaningless if change never materializes.

South America saw corruption bear a similar volume of headlines through the year, with an average state score of 44/100 (anything less than 50 signifies no effective action is being taken to address graft). The Panama Papers, Brazil’s Lava Jato scandal, and a widespread leadership crisis, either in lack of capacity to tackle systemic issues or in repeated visible attempts to amass personal power beyond their legislative mandate, made news consistently throughout the region, with voters crying out for judicial action against lawmakers. But untangling systemic corruption takes time, and while much has been made of efforts, unravelling complex webs has proven to be an act of much posturing and little progress. A universal suggestion in both regions is the increased strengthening of institutions that hold governments accountable and provide a more equitable playing field for citizens.

Therein lies the answer: increased corruption with a system creates an uneven playing field, where entrenched and well-connected incumbents see their performance continuously rise, and competition from smaller firms is oppressed. Regions with poor business climates see competition as a more fluid concept, with larger firms being offered 30 day permits and less-well connected newcomers being forced to play by established rules, or worse, face extended periods as penalties for avoiding bribery and obeying the law.

Hope exists – placing corruption under the spotlight does ensure the issue is discussed, and government promises to address it can have significance. President Temer’s support of an independent investigation in Brazil has lent credence to it’s findings, and two SSA countries held democratic elections that were ruled as exemplary by third party observers (disappointingly, out of 53 nations, this constitutes progress). But lawmakers must crack down on corruption to eliminate internal barriers to growth and policy implementation that too often see developing nations get in their own way when attempting to attract foreign investment. You can’t expect to grow flowers out of a garden that you keep stomping on – and it takes time and patience in waiting for a garden to bloom.

 

The Freedom to Smile

Landlocked within the awesome beauty of the Himalayas, the Kingdom of Bhutan has seen the title of the Last Great Kingdom bestowed upon it due to it’s natural beauty and long standing independence. Despite their ruler bearing the formal title of Druk Gyalpo, or the Dragon King, Bhutan’s primary noteworthy attribute is the pioneering of an alternative philosophy to GDP known as Gross National Happiness, or GNH, which was monarchically mentioned in the early 1970s and constitutionally enshrined in 2008. The initiative has since been symbolically adopted by both Thailand and Dubai through the creation of government departments focused upon spreading happiness throughout their respective nations.

The idea of measuring happiness as an alternative to economic growth has never truly gained mainstream clout in the developed world, having long preferred measures of economic prosperity and individual freedom to measurements of an emotional state. Chinese New Year celebrations regularly feature songs wishing happiness and prosperity and the “American Dream”, a state of financial stability in which one can support a family and own property, has been widely adopted by consumers for years as a method of garnering personal satisfaction. Ultimately, the happiness derived from financial success can be afforded to the increased number of opportunities presented to an individual once they have enough surplus capital to consider spending on non-essentials. Therein, a rich individual’s true wealth lies in greater freedom, perceived or otherwise, over their fellow citizens or peers.

But does freedom, both from financial worry and autocratic rule, truly result in individuals evaluating their lives as “better”? The question of personal satisfaction with wealth is perhaps better directed at a professional – but when comparing data between the UN Human Development Index and happiness levels within individual nations, trends emerge. But the simple act of collecting this information is fraught with misdirection, given the subjective nature of happiness as an emotional state. Variables include an individual’s capacity to adapt to conditions, the relative economic status of an individual’s particular peer group and the issue of experience vs memory – an individual’s feelings regarding the likelihood of being a victim of criminal activity are typically much higher than crime figures report is likely, thereby impacting a sense of personal safety and happiness therein.

A report released by the UNDP Human Development Office in 2015 sought to answer this exact question, while attempting to find empirical links between levels of development and life satisfaction. In short, it did – overall levels of development across the globe were generally found to go hand in hand with evaluations of quality of life (QOL). Individual links that were found to yield the strongest correlation between QOL and development included higher rates of job satisfaction, stable governance structures and lower levels of inequality.

A difficulty in interpreting the results of the report emerges in the subjective nature of belief versus results. Take the example of freedom of choice – the freedom to choose is of fundamental importance, being a primary measure of a democratic state and one of the strongest factors linking development levels of nations to the happiness of individuals. But a sense of freedom of choice, such as the Yes referendum on the executive powers of President Erdogan on the Turkish people in April of 2017, can often lead to a group objectively lessening their freedom while maintaining a subjective sense of empowerment. The capacity of an individual to convert their freedom into wellbeing can be subverted, thereby creating a situation where subjective wellbeing can come at the detriment of wellbeing for all – a conceptually difficult but incredibly perilous situation when occurring on the national or international stage.

Bhutan, the last great Himalayan Kingdom, leads South Asian nations in ease of doing business, economic freedom and peace while continuing to measure overall success by human happiness – but to the national government, the state of happiness has been dissected into a series of quantifiable metrics including overall health, quality of education and living standards, similar to measuring levels of development across the globe. While Bhutan remains regarded as a least developed country by the UN, it is certainly nice to know that they appear to be on the right track.

References

Hall, J. & Helliwell, J. F.. Happiness and human development. UNDP Human Development Report Office. Retrieved from: http://hdr.undp.org/sites/default/files/happiness_and_hd.pdf

 

The Cost of Fear

Few words strike more fear into the hearts of communities across the globe than the phrase “terror attack”. Mass harm caused by individuals suffering from mental illness or brainwashed by extreme ideologies paints a dark image of destruction and chaos. Terrorism is terrifyingly effective – the political and cultural fallout from communities that experience this devastation can be shattering. Attacks on children can destroy families, attacks on landmarks can cripple countries, and the indiscriminate violence often sees the lives of innocent civilians as the primary targets. While the term itself originated in the late 18th century in a turbulent France, it’s use is well documented in eras both before and after the French Revolution.

It is worth noting that being a terrorist is simply defined as doing harm to others to fulfill a political, ideological or religious objective. Qualifying as a terrorist does not require an affiliation with an extremist organization or a set nationality. Lone wolf terrorism has re-emerged in recent years as a more popular form, with individuals often claiming affiliation to specific organizations or ideologies, but little to no evidence being found to tie them directly.

Depending where you live, the risks of terrorism affecting your daily life, either by disrupting the flow of resources, destroying infrastructure or directly harming a loved one, vary drastically based on geographic proximity to active combatants. In the last decade, the highest number of terror attacks and fatalities from attacks have been seen in the Middle East region, with Iraq topping the list and Afghanistan, Pakistan and Yemen all following within the top seven. Countries like Nigeria have seen devastation enacted both in the form of direct attacks on communities and the capturing of oil fields in the Northern regions, ensuring that lives are lost and the national economy is crippled as a result of military action.

But the impacts of terrorism are now felt well beyond the borders of one nation. IS has been accused of waging ‘cultural war’ with the launch of propaganda and recruitment campaigns that know no boundaries. Russia and China’s daring misinformation campaigns have blurred the lines between subjective opinion and historical fact regarding both the Ukraine and the Nine Dash line. As citizens of all nationalities leave their respective nations to fight for extremists, homegrown terrorists attack cultural and educational institutions and entire nations are destabilized while being consumed by warring factions, the question remains: how do we stop them?

The answer is twofold: Commitment to combatting terrorism must result in swift and surgical action to cut malignant ideologies from the Earth. Cancerous extremism, allowed to prosper, only breeds further terror. But addressing the root causes of not why individuals commit terrible crimes, rather the systemic problems that drove them to identify with extremism, is a key to preventing the growth of the next generation of terrorists.

Regarding military action, the battle is increasingly fought beyond the frontier. Coordination by organizations with potential recruits is conducted virtually, often via established social media and messaging platforms. Intelligence services require controlled (overseen by a judicial framework) access to this data in order to make the strategic, on-the-ground decisions that have a direct cost of human life. Committing ground and air forces is essential in the fight, but the purchase of equipment should be matched with investment into cyber security to better track potential extremists and infiltrate online communities. A renewed focus on investment into intelligence infrastructure, while politically problematic, is required to deal with the current generation of extremists who are armed with access and reach, previously unknown weapons in the fanatic’s arsenal.

Focusing on eradication of current groups is important, but addressing the root causes behind why an individual identifies with any group seeking to actively incite violence as a means to an end is arguably equally important. Groups urge lone wolves to carry out attacks when they themselves are too weak, or lack a presence, in a set area. Attacks by individuals claiming affiliation to organizations are not necessarily evidence of a foothold being secured, but confusingly can be indications of the exact opposite. Strengthening the relationships between law enforcement, community members and individuals who feel isolated is fundamental in the struggle to preventing the spread of extremist ideology. This can take the form of building support within communities by actively conducting equity and outreach efforts to marginalized or minority groups (past success stories include outreach campaigns by law enforcement officers to Muslim communities). Fostering a culture of greater resilience amongst communities is equally crucial. The fact remains that the public’s fear of terrorism, specifically conducted by jihadist extremists, remains high despite the extremely low statistical probability of this happening and harming any one person. Highlighting that positive relationships between ethnic communities are necessary for public safety is the first step in moving towards a world that reduces attacks instead of displacing them.

There are also economic factors that push individuals, specifically young men, into extremists ideologies as well. Young men across the globe who have historically enjoyed positions of privilege now face a downward spiral of economic uncertainty. The sons of shop owners, manufacturers and bureaucrats see a world where their wives are their economic equals and where once-solid career prospects no longer offer stability. The underlying resentment that has slowly bubbled has manifested as frustration at a world that emasculates them at every turn (often by not providing employment opportunities, not providing prospects for marriage, delaying an ability to be financially or residentially independent from their families). As the Western world claimed to have ushered in an era of success for all, the individual remains, feeling left behind, angry and ignored – therefore vulnerable and susceptible to being swayed by arguments of fighting “righteously for a cause greater than themselves”.

But the difficulty remains that no terrorist attack happens in a vacuum. Completed to further a religious or political aim, terrorists have a knack for selecting targets with a degree of emotional significance, be they mainstays of a city skyline or murdered children whose faces are then seared into our memories. Attacks yield emotional responses – often disproportional in an objective cost-benefit analysis of damage wrought. And because they hit us at home, at the very core of our lives by attacking symbols of the principles we hold most dear, we view a vow to eradicate entire ideologies as proportional, despite the unrealistic claim that an idea or a frustration can be bombed out of existence.

Any terrorist attack hitting the Western world strikes two core areas: the safety of citizens and the liberal values that underpin our societies. Holding onto those values, of free speech, tolerance and respect for all, is fundamental in combatting terrorism, as is ensuring that a world is created where the risk of falling victim to the siren song of fanaticism is lessened. A better, safer world is within reach – we must ensure that we do not destroy the one we have in our quest to reach it.

The Power of a Buck

In theory, the creation of currency facilitated exchange between two individuals and provided a tangible store of value for any person wanting a transaction, but offering a service instead of a direct good. As the worlds of early societies shrank, groups and cultures with differentiated economies began to seek formal relationships, a new problem arose – what was one unit of currency A worth when held up against one unit of currency B? Foreign exchange rates play a much more prominent role in currency denominations today than when gold used to be exchanged for grain. But prominence has come hand in hand with complexity. Not the least of which is that now the currencies underpinning financial products themselves offer direct indications of the health of both the product being sold and the nations whose in whose currency these products are underpinned.

In this, it becomes apparent that certain currencies have greater value per unit than others – the primary example being the American dollar, the global standard for trade. The US dollar has risen to prominence because, amongst other reasons, it is the primary currency used in commodities markets, such as gold and petroleum, and the growth of the American economy since the Second World War has ensured that the dollar poses a secure base for transactions given it’s historical stability and widespread usage. These factors have contributed to the American dollar becoming the unofficial global reserve currency and the official currency adopted in developing nations across the globe.

Here, an ironic turn emerges – the stability of the dollar, and therein dollar-denominated debts, is both a blessing and a curse. A ‘strong’ dollar (a comparative measure indicating when the US dollar has risen to historically high levels relative to other currencies) has numerous ripple effects within surrounding economies. A risk emerges when examining companies with reserves or debt denominated in foreign currencies – a strong dollar acts as a trend amplifier that is strongly felt within capital reserves, causing markets to flee to the dollar when faced with the prospects of a bearish market. This stampede and ensuing dollar binge only exacerbates the existing problem and sees greater amplification of markets fleeing towards ‘stability’ (debt often denominated in either American dollars or Japanese Yen, another notoriously stable currency).

A strong dollar is typically met with raises in interest rates from the Federal Reserve, therein increasing the cost of borrowing the dollar and (hopefully) acting as a stabilizing force within the market to reduce the dollar binge. But an ascendant greenback also stunts inflation, thereby making foreign goods cheaper for any individual or entity holding the dollar. This means that while markets adjust to interest rate hikes, consumer behaviour and buying patterns can continue to act as a short-term counter-measure to the efforts of central bankers. An additional impact is being felt on foreign shores – sharp falls in currencies force central banks to either raise interest rates in an effort to prevent depreciation and avoid the worst of ongoing deflation. Alternatively, a strong dollar can force economies to lower interest rates to historic lows in an effort to attract investment and spur domestic spending when individual currencies become ‘weaker’ and the decrease in the real value of savings hits the portfolios of consumers. This puts the Federal Reserve in an awkward position – raising interest rates risks undercutting global economic growth, thereby seeing downturns in economies currently struggling who lack the traditional fiscal and monetary mechanisms to mitigate adverse impacts. But keeping interest rates low fails to address the issues currently simmering that threaten to cripple growth across the globe.

Why does this matter? The number of currencies that move in line with the greenback encompass 60% of the world’s total GDP. The volume of dollar denominated bonds held in developing markets amounts to over $3T and each time the dollar rises, so does the cost of servicing those debts. A strengthening dollar could see a spiral emerge of capital outflows, now going towards paying debts instead of domestic investment, and the resulting fall in asset prices could lead to an economic downturn similar to that experienced by Brazil during the last 5 years. Presidential promises to lower corporate tax rates expressly aimed at American companies in order to facilitate the repatriation of earnings onto American soil would see rocket fuel added to the rise of the greenback, and protectionist measures would directly impact American consumers as the cost of imported goods increased and export growth continued to decline.

Despite all the talk of trade deficits throughout the 2016 presidential campaign, the reality remains that the United States can entirely afford to operate at a continuous trade deficit due to the high demand for debt instruments denominated in American currency that generates capital inflows capable to subsidizing a deficit. But that does not mean a deep structural issue does not exist – The strength of the American dollar poses a threat to all, from domestic consumers and foreign governments. As the worlds buffers for mitigating financial downturns shrink, the likelihood of the next recession being felt more severely by consumers increases – and whichever one of currency A or B you use, you can take that to the bank.

A Subjectively Better World

The inequality fostered in modern markets is well documented and has been denoted and analyzed ad nauseam by experts and students alike. Despite the existing flaws, the general principle has been that capitalism, adopted across the world to create global trade routes and financial systems, provides a greater overall benefit for more than engaging in protectionist tendencies that look inward to solve problems. Look no further than Brexit, which in it’s current form is estimated to cost £66bn annually and slash the GDP of the UK by 9.5% over the next 15 years. But voters clearly indicated a willingness to sacrifice national economic growth for increased sovereignty in policy and trade decisions, and to opt for economic measures that prioritize UK organizations over international competitors for funds (a row over deciding to fund the NHS over paying to access the EU market in the Brexit campaign was a primary example of this nationalist focus).

Voters have, throughout the world, categorically demonstrated a desire to act against the grander self-interest of nations – but not necessarily of themselves. Physical and financial insecurity have combined with an increasing sense of marginalization and resulted in two outcomes: a loss of faith in experts who deal in amalgamations and predictive modelling (and thereby are seen as not understanding the plight of the single family), and a desire to sacrifice growth and future prosperity to live in a more equitable state. An essay penned in Foreign Policy Magazine by Anand Menon and Camilla MacDonald recently outlined that in the case of Brexit, equity referred to the prioritization of co-nationals and tackling wealth inequality in Britain, as well as reducing household debt levels and stabilizing regional housing markets. Border security was also of chief concern, with the physical safety of individuals and families in urban areas seen as an existential-level threat.

This focus upon the strength of community and identity are values shared by another movement – the modern environmental movement. Although distinctions can be clearly drawn about individual policy decisions, both movements are guided by the notion that a better world is not a more prosperous one for the masses, but rather a more equitable one for the individual. Both movements illustrate that low unemployment figures and raucously raising interest rates provides little respite or impact for individuals facing growing health care and housing costs. Both movements speak of having had “enough” – one to a perceived or existing repression, the other to the consumption of a finite resource base – and demand collective action from the masses to instigate change.

Leaders of the environmental movement often call for “the end of growth” – a principle that the current system (of infinite growth using finite resources) exists to enrich the elites of today at the cost of the masses, that this cost directly impacts the future livelihood and security of individuals, and that communities must use their voice to protect their best interests in a system that benefits from their silence. But how heavily do the ideas underpinning the theory that growth is at it’s end align with those underpinning modern populism?

There are three foundational ideas behind why growth is unsustainable in the current climate: depletion of finite resources, environmental degradation and increasing levels of debt. In each of these three, parallels can be drawn – the notion of depleting a finite volume of resources is similar to that of sovereignty. Both rely upon messaging that current levels of growth and migration are unsustainable and, if continued, will directly result in negative impacts. Both paint grim scenes of carnage, with droughts and crime abound. And both foster a deep anti-elitist sentiment – one directed at large corporations emphasizing profitability over the health of citizens, the other at governments for letting in potentially dangerous individuals in favour of cheap labour.

The idea of a degrading environment is similar to the concept of the real cost of economic progress. Every politician or business leader touting innovation and growth is viewed as the enemy, given that they typically do not outline the tangible cost of prosperity: disruption and degradation. The costs are the jobs of individuals who no longer possess the skills deemed valuable by the market, the natural environments whose value cannot be directly calculated and are thus paved over. Often touted as the primary objective, growth too often sees externalities and hardship fall not upon spreadsheets, but on families and homes. As for increasing levels of debt, no direct parallel is needed. Crushing household and national debt is a tangible impact felt by everyone, whether it be money borrowed to make car payments or natural systems destroyed whose absence will be noted – but not within the next fiscal year.

Occasionally, politicians manage to embody both sides – left-leaning populists in the vein of American presidential candidate Bernie Sanders and Dutch politician Jesse Klaver often speak to rising inequality and a need to create a “better” world. And in there, a possibility exists that rising populism may actually signify a shift in modern societies towards more thoughtful growth and consumption wherein individuals are prioritized. If growth can be designed to be more inclusive overall, it stands to reason that less of it would be required to foster the same net results. Then maybe, at long last, someone can finally give some money to the NHS.

 

Storming about the Climate

Nowhere is the divide between members of the scientific community and general public more apparent than in an individual’s interpretation of the difference between climate and weather – the lack of distinction between compiled data and anecdotal evidence has been known to anger many a scientist, and dramatic calls of apocalyptic consequence breed despair and snorts of derision amongst the general public. Governments across the globe recognize, seeing the direct consequences and risks  of sea-level rise to seaside populations centres and degrading air quality in urban areas, that action is required.

Yet it is difficult to effectively claim the societal response to a changing climate has been appropriate – politicization surrounding exactly which party is responsible for warming has clouded a debate surrounding action in the general community, highlighting the divide between leaders and the people they lead. The majority of blame for inaction tends to be dealt to “skeptics” – individuals who claim to believe that climate science has been unable to reach a definitive conclusion regarding the extent anthropogenic GHG emissions have lead to rises in global temperature. This is the reality of progress – the purpose of scientific inquiry is to create testable hypothesis that inform us of the realities of the physical world in which we inhabit. It is a human endeavour, meaning mistakes are common. Nevertheless, the role of discovery in our society is to inform decision-making and progress – not to provide evidence in an effort to disprove personal beliefs.

An equal danger exists in climate catastrophizing. Public figures have long positioned climate change as an omnipresent existential threat capable of creating a non-habitable world within a single generation in a well-meaning effort to spur action. But it has, in large part, has had the opposite effect – climate researchers and activists commonly suffer from PTSD and depression-like symptoms. Industry members bicker whether solutions like natural gas, which has lowered carbon emissions in the United States more than all renewable energy investments combined, should even be considered given their non-carbon neutrality. Individuals feel overwhelmed by the scale and scope of issues presented, and are therefore numbed into inaction – after all, what can one person do against an entire planet?

With skeptics touting falsehoods and catastrophists accepting nothing less than 100% mitigation, the most commonly sourced reports paint a more realistic picture. The Assessment Report, a gold standard created by the United Nations Intergovernmental Panel on Climate Change (IPCC) and released in 2014, estimates approximately 3-4 degrees Celsius of warming by 2100, with a corresponding seal-level rise of 0.6 metres.

The difficulty in effectively predicting the true impacts of climate change are that, beyond the understanding that increased levels of GHGs will result in greater heat being trapped in our atmosphere, scientists can only estimate. The rate of gas accumulation in the atmosphere, the corresponding warming that volume of gases will cause, the effect of that warming upon natural and man-made systems – each of these answers can only be estimated. These factors are predicted using Relative Concentration Pathways (RCPs), projection pathways which provide four separate estimates of increases in atmospheric radiative forcing over the next century (radiative forcing refers to the amount of sunlight absorbed by the atmosphere versus reflected into space; GHGs molecules reflect high volumes of heat onto the earth, thus increasing radiative forcing and make the world warmer).

Each pathway predicts a different level of human action taken to reduce total pollutants emitted over the next 100 years, with the most and least optimistic paths seeing a divide of impacts by a factor of almost 6. The most extreme of these factors, pointing to no action taken to reduce emissions, still sees only an 0.8 metre increase in sea level rise over the next century (slightly higher than predicted), with a corresponding 12 degree increase in temperature – but by 2300.

Further, economists can now produce Integrated Assessment Models (IAMs), which attempt to convert the direct and indirect impacts of climate change into tangible costs. Such models can point to the conclusion that a 3-4 degree increase in global temperature will cost approximately 1-4% of global GDP in 2100, approximated at $20T USD in shared burden across the world (a cost, worth noting, that exceeds the entire GDP of the United States in 2016). Equally of note – this same model fails to see economic growth decrease by more than 0.05% over the next century in any single year, which is unlikely, as climate change impacts will occur gradually throughout the century and economic fluctuations are inevitable.

No economic model can effectively integrate non-tangible value, like community ties to land or the moral obligation of our species to preserve the planet – but nevertheless, the results of environmental and economic models point to the unveiling of real but manageable costs over the next century. Viewing the costs of climate change in grander context, applying appropriate time-scales to forecasting and segmenting models based on assumptions allow for the affirmation of the facts that climate change both exists and can be adapted to.

Humanity has an incredible capacity to overcome the challenges of our natural world – we have cured disease, fed the planet and created monuments to the greatest achievements of our species. There is no reason to believe we cannot adapt to a warmer world. But it does involve a transition in the way we view climate change – instead of mitigating future impacts, greater incentive should be given to adapting our current systems to inevitable transformations. The impacts of carbon already built up in Earth’s atmosphere will not be fully felt for the next 50 years, meaning irreversible damage has already been done. It is our responsibility to now ensure that we create a world well suited to our new reality.

Claims of positive feedback loops, resulting in cascading climate effects, remain unverifiable over the timeframes in which they are estimated. But in this apocalyptic vision of the future, investment into improved water management systems, more resilient and accessible energy infrastructure and public health practices will pay higher dividends still, as will spending on effective physical and digital infrastructure systems, and innovations not yet dreamed up by generations to come.

So have kids, because hey – someone is going to need to save the rest of us.

 

 

The Freedom to Speak

To speak freely is to express opinions and beliefs without censorship or restraint. This right is preserved in the United Nations Universal Declaration of Human Rights and is trumpeted in the laws of the majority of sovereign nations across the globe. However, distinctions are required: freedom of speech is not freedom to speak without opposition and it is not the freedom to speak without consequence. The right, which stands engraved in the laws of every sovereign Western state, protects one from physical harm or censorship for voicing their opinion – not from enduring the reactions their writing or speech provokes, in both relationship and professional settings.

This definition, while seemingly tedious, is necessary to establish a common base of understanding of what it means to have the write to speak freely. A line exists in the traditional discussion between a legal right and a cultural norm. It is in the realm of cultural norms that the debate emerges. The question is whether cultural censorship poses harm to reasoned civil discourse and debate. Giving a voice to the traditionally ignored has provided an exceptional benefit to society by adding voices to debate and creating a world that more equitably serves all of who live in it. But a second perspective, often an especially loud one, bemoans a loss of ability to speak with impunity on all subjects. This is often attributed to the creation of a new cultural norm of being overly politically correct.

To be politically correct means, in the literal sense, the use of language or measures to avoid offense or disadvantage to members of particular groups of society. But the term has morphed into a rallying cry of the political right and a point of contention for the political left in the Western world. The divide between students and faculty on university campuses in the West is stark: students believe they are standing in the fact of bigotry and hatred, refusing to indulge the musings of provocateurs and provide platforms to those who spread messages of division. Faculty and staff believe that this ideological isolationism is draining an entire generation of the ability to reasonably debate while creating an academic environment that does not encourage personal growth or evolution of thought.

One consistent theme woven throughout think pieces and news articles is a firm endorsement of an individual’s right to protest, another expression of freedom of speech that can be used to counter undesirable ideas. Non-violent protest has been and is used every day to amplify messages or spread an agenda, often in the face of authoritarian regimes to demand freedom or equality. Effective protest in essential to a democratic institution (hence the freedom to assembly) – but a line exists: if the freedom of an individual to speak encroaches upon the freedom of another to do the same, it itself may amount to censorship. Additionally, breaking any law during a protest still amounts to an illegal activity. If protest threatens harm, destroys property or creates an unsafe environment, it moves beyond the realm of freedom of speech and must be treated accordingly.

Any group or institution seeking to repress the freedom to speak is an illiberal one. The right to speak freely is fundamental to the rule of law. An unwillingness to debate certain ideas has created a culture wherein these ideas are rejected, but not refuted. This lack of public debate around certain subjects creates an atmosphere of tension whenever they arise and fails to appropriately deconstruct them to the degree where society at large can take informed positions. If the only discussion heard surrounding a social or cultural issue stems from a single ideological view, it is impossible to truly claim to understand all sides of any issue.

A second, more subtle, trend has emerged: a desire to label ideas and the individuals or groups who espouse them. When an idea is deemed to be hateful (racist/sexist/misogynistic/homophobic etc.), a tendency exists to label the individual voicing these ideas to be equally loathsome. This is dangerous. Conflating ideas with character is both isolating for those accused and often ignores the reality that hatred stems from ignorance, which can be cured. If we as a society continue to treat certain ideas as worthy of rejection of a person, three things will occur: these ideas will never be said out loud for fear of being rejected. Individuals will have a greater fear of being labelled as hateful than of holding biased views, for fear of being spurned. And individuals who hold these views will feel rejected from society at large.

Creating environments that do not allow for open discussion has a sinister effect of discouraging people from asking hard questions for fear of being pushed away. Only when discussion can be open, only when ideas are debated in public can opinions be changed and society truly move forward. The alternative? We begin to associate more with ideologues who have a perceived freedom to speak openly. We conflate our desire to voice our views without fear of being rejected with having extreme views. And we fail to listen to those who we felt never listened to us.

“You are not entitled to your opinion. You are entitled to your informed opinion. No one is entitled to be ignorant.”

“I want you to be offended every single day. I want you to be deeply aggrieved and offended and upset, and then to learn to speak back. Because that is what we need from you.”

 

 

 

Greening the Grass

The basis of trade, an exchange of goods and services, has existed for millennia across almost all variants of modern humanity. Moving beyond a literal exchange of goods for food became necessary when economies grew in complexity and specialization to the degree where a medium of exchange with a commonly understood value was needed (likely around the same time someone took a job other than farming). Thus money was invented to fill an obvious need. As economies continued to grow in scope and money rose in popularity, the capacity to amass wealth and wield the power it provided saw the development of institutions and systems that would protect and manage the concept of value. Early banking systems focused on trading grains to merchants and farmers, a far cry from the current practice. Grain is still traded – but in futures contracts on commodities markets, where the price of goods is determined through a combination of automated trading and turbocharged bankers.

These improvements have lead to greater efficiency and an almost universal improvement in quality of life across the planet. Economic and financial systems have arisen and connected across the globe, resulting in the development of a world more interconnected than ever before. Closer union has proven a deterrence to war, an engine of opportunity and a driver of prosperity than has taken entire nations from the brink of collapse. Like any market, there are winners and losers – but none can attest that the world would not be a safer, more accessible place were it not the creation and integration of the global economy.

But market losers have faces and families. Too easily dismissed, we forget that the men and women residing in the nations facing recession and collapse do not share the same views of the system. For them, it is one that crushes freedom by conflating wealth and power, resulting in a loss of political and economic power to those being oppressed. For them, it is a system ruled by multinational corporations who destroy entire regions to enrich faceless shareholders. For them, it is a system that fosters inequality, pushing those who are no longer deemed valuable into a state of perpetual instability, where they cannot find employment or take advantage of any opportunity that may exist. For them, this is a system that disadvantages and oppresses, where bureaucrats and elites profit from their misery and they are left to starve.

Capitalism has winners and losers. But thought has gone into developing reform strategies to make the game more equitable. The popularization of Inclusive Economic Growth over the years proves this – defined by the OECD as “economic growth that creates opportunity for all segments of the population and distributes the dividends of increased prosperity, both in monetary and non-monetary terms, fairly across society”, it is both quantifiable and readily measured. Through a series of key performance indicators (KPI), economies can be benchmarked and compared.

Three key sections – growth and development, inclusion and intergenerational equity and sustainability – provide the framework for determining what it entails to be an inclusive economy. Through quantification and measurement of performance, the World Economic Forum has developed an  annual Inclusive Development Index that captures data from 109 nations around the globe and compares to averages of the last five years. Separated into developed and developing nations, the divide is distinct.

8 of the top 10 most inclusive nations in the world are European, with each Scandanavian state found in the top 6. Amongst developing nations, Lithuania was ranked highest, flanked by Azerbaijan and Hungary. Great Britain and the United States were ranked 21st and 24th respectively.

But does focusing on inclusive economic growth go beyond political speech and make a discernable impact on economic growth and poverty levels? Overall, GDP growth rates are above average amongst highly ranked nations, with a notable trend towards liberal economic policies showing more significant results. Some benefit strongly from wealth in key industries – oil and gas, banking, metal fabrication – whereas others benefit from government stability. A notable trend is that nations above are traditionally not viewed as active players in global affairs, and have relatively mono-ethnic domestic populations. Whether these factors play a substantial role is indeterminate, but it is likely not a coincidence.

In the case of the United States,  boosting the inclusivity of growth within the nation was one of the few issues both candidates agreed upon in the 2016 Presidential election. The most commonly cited statistic outlining wealth distribution within the nation’s borders is the percentage of overall wealth going to the top 1% of earners, but it does not paint a complete enough picture. By the mid 1980’s, income inequality saw a 5:1 ratio of real earnings from rich to poor. For the following 15 years, the incomes of poor households increased 0.06% annually before falling again in the early millennium. Throughout this time, rich incomes steadily increased year-on-year by 0.83% annually. Through these times, technological automation and globalization likely played a role, but do not paint the entire picture – both of these factors would have had uniform cross-border impacts and fail to explain why inequality grew at a faster rate in the United States than in both Great Britain and France over the same time period.

If inclusive growth is measured by ensuring inclusion in the workforce, developing solutions that are built to advantage individuals long-term and creating an environment that prioritizes opportunity for people of all ages, policies must be designed with people in mind. Easing the regulatory burden is important – but regulations exist to protect those who cannot otherwise protect themselves, or to create rules around use of common resources. And the ugly truth is that we may trade the grain today, but we are still responsible for ensuring that these is enough for everyone to go around tomorrow.

 

 

 

 

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