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Nobel Laureate Joseph Stiglitz counters those who suggest that we should put off dealing with climate change issues due to our escalating global economic problems by suggesting that climate change may actually be our biggest and most urgent economic problem. In his latest essay, The Post-Crisis Crises, he also warns that the suppression of consumer demand due to excess concentration of wealth is a much bigger problem than budget deficits are, and that the austerity cuts proposed by misguided deficit hawks will make our economic problems worse not better.

Stiglitz starts by noting that rising global temperatures will require substantial reductions in carbon emissions which will require investments that will stimulate our economy:  


Some suggest that, given the economic slowdown, we should put global warming on the backburner. On the contrary, retrofitting the global economy for climate change would help to restore aggregate demand and growth.

Stiglitz thinks some of the causes of the Great Depression were challenges that arose from moving from a rural, agrarian economy to an urban, manufacturing based economy, that we did not have an adequate government to help deal with. Now that we need to move from a manufacturing based economy to one more based in services, we would be wise to learn this lesson and more strategically, and proactively develop a plan for creating and developing new and small firms which will be better at helping us adapt our way forward to a future economy where we will need new ideas and different economic structure than we have now.

Stiglitz sees government playing a vital role in this transition.

 

Moreover, making the transition requires investments in human capital that individuals often cannot afford. Among the services that people want are health and education, two sectors in which government naturally plays an important role (owing to inherent market imperfections in these sectors and concerns about equity).

Finally, there is a worldwide crisis in inequality. The problem is not only that the top income groups are getting a larger share of the economic pie, but also that those in the middle are not sharing in economic growth, while in many countries poverty is increasing. In the US, equality of opportunity has been exposed as a myth.

Stiglitz warns that "(a)n economic and political system that does not deliver for most citizens is one that is not sustainable in the long run." And, free markets, on their own, can not solve any of these problems.

Although, Stiglitz does not come out and say it, my inference is that he is suggesting we risk another global depression if we do not overcome the resistance to having innovations in governments lead the way across these next major economic and environmental transitions.  

The market will not, on its own, solve any of these problems. Global warming is a quintessential “public goods” problem. To make the structural transitions that the world needs, we need governments to take a more active role – at a time when demands for cutbacks are increasing in Europe and the US.

As we struggle with today’s crises, we should be asking whether we are responding in ways that exacerbate our long-term problems. The path marked out by the deficit hawks and austerity advocates both weakens the economy today and undermines future prospects. The irony is that, with insufficient aggregate demand the major source of global weakness today, there is an alternative: invest in our future, in ways that help us to address simultaneously the problems of global warming, global inequality and poverty, and the necessity of structural change.

Yes, exactly!

As troubling and urgent as many of our economic and environmental problems are, they also present us with opportunities to be running our economy at much higher levels of employment to cope with and overcome these problems. Instead of shutting our economies down, with these austerity bombs that idle up to, or more than 15% of the population who could be working, we should be investing in converting our economies to sustainable and clean energy production such as solar, wind, and other renewables that do not emit carbon.

And, we should be more aggressively using our tax policy to address the over concentration of wealth, and budget inadequacy by raising taxes on the most wealthly, and closing corporate loopholes not cutting essential social programs such as Medicare and Medicaid which are already underfunded.

Even Rush Limbaugh was ranting yesterday, that while taxes were raised the "income wealthy," those who are "asset wealthy" were untouched. Although, it wasn't Limbaugh's intention, he argued well that dividends, capital gains, and estate taxes need to be reexamined so they can make their fairer and wiser contribution to not just our deficit problem, but more fundamental and corrosive problems of excess concentration of wealth that is crippling global consumer demand and leading to a stagnation that free markets are unable to correct on their own. Even the wealthy, and most certainly corporations will be better of with thriving global economies.  

In the spirit of a footnote, Alexis Kleinman offers a list of facts supporting the view that global warming is our biggest economic challenge:

Climate change is projected to cost the average U.S. household $1,250 per year by 2020, $1,800 per year by 2040 and $2,750 per year by 2080.

Climate change will likely cost the U.S. economy $3.8 billion per year by 2020, $6.5 billion per year by 2040 and $12.9 billion by 2080.

The U.S. economy may be held back by 2% of GDP over the next 20 years because of climate change.

Failure to act on climate change already costs the world economy 1.2 trillion dollars in lost prosperity each year, according to one study.

There are many other useful facts you should check out, including statistics on the staggering and increasing costs of weather related economic damage. Climate change is already a leading cause of death causing 5 million be year now, and expected to continue to increase as global atmospheric conditions deteriorate.

While these statistics and challenges are tragically sad, Joseph Stiglitz has such a brilliant big picture view combined with a powerful straight-forward easy to read vision of a way forward that I find his essays encouraging and inspiring.    

Originally posted to And Now for Something Completely Different on Tue Jan 08, 2013 at 04:25 PM PST.

Also republished by Keynesian Kossacks, EcoJustice, Progressive Policy Zone, DK GreenRoots, Climate Hawks, and Climate Change SOS.

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Comment Preferences

  •  Worth leveraging & sharing Stiglitz ... (5+ / 0-)

    Honestly, there wasn't anything in it that was 'news' -- however, Stiglitz is a name to share / pass around.

    Thank you highlighting as I hadn't seen.

    Blogging regularly at Get Energy Smart NOW! for a sustainable energy future.

    by A Siegel on Tue Jan 08, 2013 at 05:37:46 PM PST

    •  Thanks. Yes, I didn't preface the title with (6+ / 0-)

      "breaking - Stiglitz thinks Americans economy policy is sub-optimal, because he has expressed the theory about unequal distribution of wealth before.  

      But, this is the first time I've heard him say global warming is our biggest economic problem.  Has he said this before?

      The means is the ends in the process of becoming. - Mahatma Gandhi

      by HoundDog on Tue Jan 08, 2013 at 05:44:37 PM PST

      [ Parent ]

      •  Was in the room (7+ / 0-)

        with him years ago where he showed a reasonably strong understanding / concern as part of a group conversation.  He was w/the 2007 IPCC.

        Stiglitz joined the Clinton Administration in 1993,[39] serving first as a member during 1993-1995, and then appointed Chairman of the Council of Economic Advisers on June 28, 1995, in which capacity he also served as a member of the cabinet. He became deeply involved in environmental issues, which included serving on the Intergovernmental Panel on Climate Change, and helping draft a new law for toxic wastes (which was never passed).
        His book Making Globalization Work had climate change as a major element of the discussion.
        Among the issues Stiglitz addresses in the book are the links between globalization and the pervasive poverty, inequality, financial instability, and indebtedness that plague many developing nations. He critiques the trade and capital market liberalization that were key components of the much-reviled “Washington Consensus” of the 1990s and points to the now-widespread agreement that these policies focused “too much on just an increase in GDP, not on other things that affect living standards.” Stiglitz argues that international financial policies also “focused too little on sustainability—on whether growth could be sustained economically, socially, politically, or environmentally.”

        Stiglitz’s attention to environmental issues is significant in light of the tendency of many mainstream economists to give them short shrift. “Making economic globalization work will be of little use if we cannot solve our global environmental problems,” he writes. In particular, Stiglitz highlights the inadequacy of the current international response to climate change, criticizing the U.S. failure to participate in the Kyoto Protocol while also noting the high hurdles to bringing both the United States and large developing country emitters of greenhouse gases into the treaty’s fold. In response to these limitations, he suggests an alternative climate framework that would be based on common carbon taxes among nations rather than on negotiated emissions targets.

        Etc ...

        Blogging regularly at Get Energy Smart NOW! for a sustainable energy future.

        by A Siegel on Tue Jan 08, 2013 at 06:02:15 PM PST

        [ Parent ]

      •  Not just Joe Stiglitz (0+ / 0-)

        The US military, the German military, and the UN have all released strategic papers calling the forced movement of entire national populations under pressure of climate change as the number one problem in the world.

  •  exactly why he needs to be Treasury Secretary/nt (2+ / 0-)
    Recommended by:
    radarlady, Roger Fox

    “If someone has a gun and is trying to kill you, it would be reasonable to shoot back with your own gun.” - Dalai Lama XIV (-9.50; -7.03)‽ Warning - some snark above‽

    by annieli on Tue Jan 08, 2013 at 06:45:57 PM PST

  •  Good post (3+ / 0-)

    It is a wonder to me how in this truly dangerous age we live in we are able only to produce Stieglitz, Krugman and a very few others as voices of reason.

    Alas, Stieglitz unfortunately hints at the future form of any fix of the climate problem, by hooking it up to unequal wealth accumulation.

    I suspect that no solution will be forthcoming until it directly benefits those who currently receive an unconscionable share of the worlds wealth, especially those who control the almost unconscionable wealth locked up fossil fuel reserves. Solar energy and energy efficiency will never be more that an outlier until the value of those reserves are realized.

    More that likely at a time most appropriate for the fossil fuel industry, a Manhattan Project  type of solution will be proposed. We will all go for it because we will by then be persuaded that nothing else is available to save us from inevitable doom, and they will not only have preserved and vastly increased their wealth, but would have secured the holy grail of private enterprise, the privatization of the air we all breathe.

  •  Put everyone to work (0+ / 0-)

    Building nuclear (hopefully many thorium-salt) plants and parts for them.

    Everyone else can work on decommissioning coal and LP plants

  •  Yes!! (0+ / 0-)

    Economy vs. environment is a false choice.

    I'll be posting a diary touching on this soon. Meanwhile thanks so much for alerting us to this! Stiglitz is the shiznit. Excellent.

    “Better the occasional faults of a government that lives in a spirit of charity than the consistent omissions of a government frozen in the ice of its own indifference.” -- FDR, 1936

    by SolarMom on Tue Jan 08, 2013 at 09:57:11 PM PST

  •  coincidentally (0+ / 0-)

    great to hear stiglitz reference limbaugh, the common republican's long-overlooked nobel level economist.

    and then yesterday, coincidentally, limbaugh spent most of the 15 min i listened repeating that climate change is a hoax and fraud.

    This is a list of 76 universities for Rush Limbaugh that endorse global warming denial, racism, sexism, and GOP lies by broadcasting sports on over 170 Limbaugh radio stations.

    by certainot on Wed Jan 09, 2013 at 07:04:52 AM PST

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