Progressive Policies for Economic Development

Economic Diversification and Social Inclusion after Climate Change

Alfredo Saad-Filho

• Publisher: Routledge
• Year: 2021
• ISBN:
  9781000415339
• Edition: 1
• Topic: Economia
• Subtopic: Macroeconomia

Despite the unprecedented gravity of the challenges posed by global warming, most political systems have not given them the required priority. The oil industry has resisted, and many countries have taken only token measures to reduce emissions and mitigate the worst effects. In this context, this book examines the progressive options available to today's developing countries as they face the limitations of neoliberalism and the existential challenge of global warming.

Examining the cases of both low-income fossil fuel-dependent economies and large middle-income economies, this book argues that for all developing economies the best way forward includes 'green' macroeconomic policies articulated with progressive industrial and social policies, thus allowing these countries to achieve economic diversification, build alternative drivers of growth, and deliver improvements in the distribution of income, wealth and power. There is urgent need for this progressive policy agenda - grounded on heterodox economics, committed to social integration and the reduction of multiple inequalities - to improve the economic outcomes for these countries, improve the lives of citizens and meet global climate targets. The book argues that capitalism challenges the possibility of free and dignified existence while climate change challenges the possibility of life itself, and that these challenges must be confronted together. Since neoliberal capitalism will not adopt the necessary policies to reduce carbon emissions rapidly, it must be overthrown – not only for ethical or logical reasons, or to shift to better arrangements for the functioning of society, but in order to preserve the conditions for life itself.

This agenda for progressive economic development is essential reading for anyone interested in heterodox economics, development studies, international politics, international relations and sustainable business.

1 Capitalism and the climate

DOI: 10.4324/9781003103035-2

Neoliberalism, as the current form, phase, or stage of capitalist production, is intrinsically exploitative of people and nature, and it is incompatible with the stability of the climate. Its logic of expanded accumulation driven by individual profit-making has led to rising CO2e emissions, the destruction of environments, and the elimination of countless species, and it has fatally destabilised the rhythms of nature. This chapter reviews the systemic roots of the changes in the Earth’s climate and the drivers of the environmental damage caused by global capitalism. It also examines their political implications through, for example, the shocking inaction of even the most “sensible” democratic governments, given the magnitude of the unfolding disaster. Finally, the chapter outlines the case for curtailing rapidly the extraction of fossil fuels.

Capital accumulation, extraction, poverty

Capitalist production and the accumulation of capital rely on the employment of labor and the productive consumption of processed inputs and natural resources: minerals, agricultural products, and, especially, energy. There is no need to stress that the consumption of fossil fuels releases CO2 and other gases in such volumes that they are influencing the Earth’s climate and triggering global warming. This has been known for decades, and these processes have been examined in multiple ways—for example, through the ecological implications of economic growth; the consequences of climate change for humans and other animals; the chemical, physical, geological and other processes involved; and the ethical and intergenerational costs and benefits of fossil fuels.¹ These debates invariably point to increasingly alarming scenarios. For example:

The eventual response to doubling pre-industrial atmospheric CO2 likely would be a nearly ice-free planet, preceded by a period of chaotic change with continually changing shorelines … Humanity’s task of moderating human-caused global climate change is urgent. Ocean and ice-sheet inertias provide a buffer delaying full response by centuries, but there is a danger that human-made forcings could drive the climate system beyond tipping points such that change proceeds out of our control.

(Hansen et al. 2008, p. 164)

In the meantime, large numbers of people already suffer from poverty and deprivation, which will become harder to address with climate change:

Climate change threatens all countries, with developing countries the most vulnerable. Estimates are that they would bear some 75 to 80 percent of the costs of damages caused by the changing climate. Even 2°C warming above preindustrial temperatures—the minimum the world is likely to experience—could result in permanent reductions in GDP of 4 to 5 percent for Africa and South Asia. Most developing countries lack sufficient financial and technical capacities to manage increasing climate risk. They also depend more directly on climate-sensitive natural resources for income and wellbeing. And most are in tropical and subtropical regions already subject to highly variable climate … Economic growth alone is unlikely to be fast or equitable enough to counter threats from climate change, particularly if it remains carbon intensive and accelerates global warming.

(WDR 2010, p. xx)

Extraction, exploitation, exhaustion

Emissions of greenhouse gases change the climate in ways that are diffuse, gradual, cumulative, and global (Granados 2018). These relationships severely constrain the options available to limit climate change and mitigate its impact:

The climate system exhibits substantial inertia … CO2 remains in the atmosphere for decades to centuries, so a decline in emissions takes time to affect concentrations. Temperatures lag concentrations: temperatures will continue increasing for a few centuries after concentrations have stabilized. And sea levels lag temperature reductions: the thermal expansion of the ocean from an increase in temperature will last 1,000 years or more while the sea-level rise from melting ice could last several millennia.

(WDR 2010, pp. 10–11)

The consequences are startling:

The dynamics of the climate system … limit[s] how much future mitigation can be substituted for efforts today. For example, stabilizing the climate near 2°C (around 450 ppm of CO2e) would require global emissions to begin declining immediately by about 1.5 percent a year. A five-year delay would have to be offset by faster emission declines … [A] ten-year delay in mitigation would most likely make it impossible to keep warming from exceeding 2°C … Inertia is also a factor in research and development (R&D) and in the deployment of new technologies. New energy sources have historically taken about 50 years to reach half their potential. Substantial investments in R&D are needed now to ensure that new technologies are available and rapidly penetrating the marketplace in the near future. Innovation is also needed in transport, building, water management, urban design, and many other sectors that affect climate change and are in turn affected by climate change.

(WDR 2010, pp. 10–11)²

In other words, time is not on our side. Current environmental challenges are closely related to four sources of stress in the global economy.

First, and at the most general level, there is an irresolvable contradiction between the boundless search for individual profits under neoliberal capitalism, through extraction, production, exchange, speculation, and plunder, and the social consequences of the activities generating those profits, especially those flowing from the limited capacity of the Earth to sustain a stable climate. This is not simply a “technical” matter of absorptive capacity or carbon budgets. The underlying problem is that profitability requires the consumption of natural resources, but nature can never be fully commodified. The atmosphere, rivers, oceans, seasons, and the metabolic processes that produce what, for humans, appear as the “natural conditions of production,” either have not (yet) been appropriated by capital, or cannot be claimed as property in any meaningful sense. The consequence is that they cannot be traded for profit in stable markets, and will always tend to be overexploited. By the same token, the boundary between “sustainable” and “unsustainable” plunder will always remain fuzzy, and nature will always tend to be used as a free sink for carbon and other wastes generated by the production of commodities for profitable sale.

Even when governments ascribe property rights over nature, or set arbitrary (“shadow” or any other) prices to natural processes, or impose specific taxes, charges, or subsidies, or create markets where property titles over resources and the environment can be traded, those institutions will affect economic outcomes only imperfectly and insufficiently from the point of view of the efforts needed to address climate change (Heynen et al. 2007; Siebert 2020). The difficulty is not merely that national governments are not “strong enough” to impose the “right” prices, taxes, charges, and subsidies in order to curtail extraction or shift demand enough to avoid environmental collapse; it is not even the (closely related) laxity of the existing international treaties. The trouble is that the necessary outcomes cannot be achieved by market processes. The inevitable consequences follow; for example, “the coal-fired power plants proposed around the world over the next 25 years are so numerous that their lifetime CO2 emissions would equal those of all coal-burning activities since the beginning of the industrial era” (WDR 2010, p. 11).

Second, there is a disjunction between the longstanding awareness of the environmental limits to growth and the evident inability of governments and intergovernmental organizations to do much to address climate change. More than a quarter-century since the United Nations Framework Convention on Climate Change (UNFCCC) came into force, little has been tried and even less has been achieved;³ all signs point to catastrophic climate change within a couple of generations, with consequences likely to last for millennia. For an illustration of the limitations of current approaches, take the example of oil-export-dependent Norway, one of the wealthiest countries on Earth:

Norway’s emissions trajectory with proposed and prospective new oil and gas fields is not in line with the rate of global emissions reduction needed to achieve the Paris goals … [I]f Norway continues to permit exploration and development of new fields, it will both push the world into dangerous levels of climate change and risk billions of dollars of investment and thousands of jobs, forcing on itself (and others) a rapid transition at huge economic and social cost. Since carbon budgets are finite, Norway is set to take an undue share of limited global carbon budgets, thereby depriving poor countries of an opportunity to develop.

(McKinnon et al. 2017, p. 2)

For similar reasons, CO2 emissions from oil, gas, and coal have risen almost relentlessly, from 20,516 megatons in 1990 to 33,513 megatons in 2018, declining temporarily only after the GFC (and, later, the COVID-19 pandemic).⁴ Perversely, the share of the dirtiest fuel, coal, rose steadily between 1999 and 2014.⁵

The emissions of a small number of AEs have declined in recent years,⁶ but these outcomes, especially in the United States and the United Kingdom, are largely due to deindustrialization and the relocation of “their” manufacturing output (and emissions) to the Global South. It would be misleading for the AEs to claim credit for these CO2 reductions, because they are by definition transfers that do not reflect improvements in technologies, do not challenge current living standards, and do nothing to address the climate disaster. Alarmingly, even if the CO2 reductions in the best-performing countries (Cuba, Denmark, Spain, and Sweden) were replicated everywhere, the world would still not achieve the targets set in the Paris agreement (Anderson et al. 2020; Granados 2018; Muttitt 2018). Take the example of Denmark:

Denmark is a leader in technological innovation and wind power. A large fraction of the total energy consumed in that country is now produced by zero-emissions renewable sources. However … the CO2 emissions implied by what is consumed in Denmark have not declined. Total energy consumption in Denmark in kilowatt-hours (kWh) slightly decreased from 228 billion kWh in 1990 to 210 billion kWh in 2014, while total production of renewable energy more than quadrupled from 13.3 to 54.5 billion kWh. But emissions of CO2 implied by total consumption in Denmark were 58 megatons in 1990, 55 megatons in 2014, and 54 megatons in 2015.

(Granados 2018, p. 25)

Boyce comments on the lack of sufficient progress curbing carbon emissions, stating that:

The 1997 Kyoto Protocol sought to cap the carbon dioxide emissions of industrialized countries at roughly 94% of their 1990 levels—a modest target … In March 2001 the U.S. administration of President George W. Bush rejected this accord … because it would impose costs on the U.S. economy while not setting emissions ceilings for developing countries.

(Boyce 2004, p. 19)

Years later, President Donald Trump would take the United States out of the Paris agreement, stating that:

The Paris accord would have been shutting down American producers with excessive regulatory restrictions like you would not believe, while allowing foreign producers to pollute with impunity … What we won’t do is punish the American people while enriching foreign polluters … I’m proud to say it—it’s called America First.⁷

These quotes neatly encapsulate the predicament of climate policy since the early 1990s: growing consensus in scientific circles, grudging recognition i...