Category Archives: Globalisation

Budgeting for Climate Change

The aim of the UN climate change conference in Paris is to achieve a legally binding and universal agreement to reduce greenhouse gas emissions, so as to limit the global temperature increase to a maximum of 2°C above pre-industrial levels. Only then could this generation lay any claim to having fulfilled its responsibility to bequeath a sustainable planet earth.

Climate summits are notorious for agreeing targets and then not keeping to them. It is not clear how Paris will be any different. There are huge problems in the way of a committed agreement that could produce an effective and lasting solution. Not the least of which is the fact there will be 196 nations attending, all with different histories, cultures, economies and futures.

An example of these ‘local’ difficulties is the Philippines plan to build 23 new coal-fired power stations in response to growing electricity demand, all too frequent power blackouts and the fall in coal prices. They might, with some justification, argue that if developed nations want the Philippines to invest in renewable alternatives, they should contribute the additional cost.

These practical difficulties caused by the differences between different nations are only part of the story. A bigger problem was identified by MacKay in a Comment in the science weekly, Nature. Agreement would require an ‘upward spiral of ambition’ and the ‘science of co-operation’ in order to ‘harness self-interest by aligning it with the common good’. That head-on collision between the maximisation of self-interest and the protection and development of the common good, is the most fundamental of all the myriad of problems in ensuring the sustainability of life on earth. Solve that and the other difficulties could almost certainly be resolved. But achieving MacKay’s alignment will be difficult. It is not immediately clear how maximising self-interest can be aligned with the common good.
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Fighting Corporate Abuse: Beyond Predatory Capitalism

People are angry about corporate abuses: tax avoidance, asset stripping, fat cat salaries and bonuses and much else. Corporate capitalism has lost its moral compass and its social values. It has plunged the world into recession and austerity and contributed to growing social inequality. The prevailing focus on shareholder value has placed short term profit ahead of constructive investment. The current structures of corporate law and practice are clearly in need of radical reform.

And yet the underlying principles of corporate law – providing for external investment in enterprises which combine the labour of workers to produce goods and services – are not inherently wrong. They have worked over the years to increase prosperity and living standards in many countries. What is needed is a realistic and pragmatic programme to eliminate abuses and promote fairer and more productive alternative corporate structures.
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Lessons for Advanced Economies from 2012

Advanced economies everywhere seem to be led by politicians who are media competent but practically inexperienced. They seem not to have learned anything from the experiences of the past year, only yearning for a return to business as usual. But there are vital lessons and changes need to be made.

Recession: The much talked of double-dip morphed into talk of triple-dip and the lost decade, and, eventually in 2012, to the previously unthinkable notion that GDP growth might be a thing of the past for advanced economies. Systems thinkers warned of the classic systems life cycle characteristics which accompany permanent change from one phase (eg maturity) to the next (eg decline): for the first several time periods, the idea of permanent change is never accepted – ‘it’s a blip’, ‘a double dip’ – until the permanency of change is absolutely undeniable. By which time most opportunities for improvement have been lost. This scenario seems ever more probable, given the increasingly apparent limitations on earth’s capacities and the ever increasing demands placed upon it.
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The Real Costs of Globalisation

Globalisation reduces the cost of goods and services as their production migrates to the lowest cost parts of the world. The lower prices are a benefit for everyone and the low cost parts of the world, which are only now beginning to industrialise, gain tremendously in terms of economic growth and employment. So globalisation is a good thing, But there are some downsides. Jobs disappear in the advanced economies as production moves to the developing world. Up to now, the advanced economies have grown, bar a few booms and busts, more or less continuously, for the past 250 years in UK’s case. But the migration of jobs now seems likely in the advanced economies to be permanent and to be bringing the growth phase of their economic development to an end.

Permanent changes like this are difficult to forecast, and even appear difficult to recognise when they have happened. The initial response is to identify the change as a blip. Commentators today are identifying this quarter’s UK GDP data as indicating the end to the ‘double dip recession’. If miniscule GDP growth is recorded two quarters on the trot, commentators will surely be referring to ‘green shoots’. But it is equally likely that the slightly encouraging data this quarter is a blip and from now on, the lack of economic growth will be the steady state in advanced economies, which might more aptly be described as post-industrial.
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Anglo-American Post-Industrial Waste

The idea of the life cycle is widely applicable, from products and industries to something as simple as a lighted candle, or even something as complex as a whole economy. It depicts four distinct stages: start up, growth, maturity and decline. The early stages are slow with typically many false starts, but once a particular approach is established, growth takes off. For example, the factory system in 18th century England. During this growth phase innovation dominates, with new technologies applied to produce genuinely new products with more features and better performance. In due course, generally accepted standards of performance emerge as growth slows into maturity. During this critical transition to maturity there will be a radical reassessment of growth projections and fierce competition will force the weakest to withdraw.

During the ensuing, relatively stable mature phase, the emphasis of innovation tends to move from product to process, where innovations are largely aimed at reducing costs and improving efficiency. That phase comes to an end when either a completely new technology takes over or some other structural change eliminates the existing; maybe something like globalisation. Again the reduction in future expectations will cause intensified competition and force out marginal units.
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