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Climate Change Trumps Terrorism as Threat to National Security

by Brent Blackwelder

Climate destabilization eclipses all other security threats to human civilization except for a major nuclear war. But the current global economy gives no signals to investors and consumers about the profound implications of climate destabilization on water cycles, agriculture, and humanity’s ability to grow food for seven billion people.

The latest weather disaster, the monster Hurricane Sandy, demonstrated that changing environmental conditions pose a huge threat to U.S. security and stability. In the aftermath of the storm, thousands of people in New York and New Jersey face grim conditions, with $50 billion in damages, over 20,000 homeless, and some dying of hypothermia.

The American public, however, has been conditioned to think of national security in terms of terrorist threats. The Washington Post’s veteran Pentagon reporter Greg Jaffe makes the case that the world has never been safer, if security is to be measured by acts of human sabotage and terrorism. Jaffe asserts that according to “most relevant statistics, the United States — and the world — have never been safer… global terrorism has barely touched most Americans in the decade since Sept. 11, 2001.”

Jaffe appropriately criticizes presidential candidates and other politicians for exaggerating the national security threat from terrorism because they want to “cast themselves as potential saviors in an increasingly dangerous world.” During this time, he notes, more U.S. citizens have been crushed to death by furniture and televisions falling on them than have been killed in terrorist attacks (Washington Post 11/4/12).

Despite the way politicians are talking about national security, the reality is that over the past twenty years, national security has become more closely tied to environmental factors such as energy, water, food, and climate disruption. President Clinton’s State Department made the formal acknowledgment that deteriorating environmental conditions can cause conflicts and constitute threats to stability.

Hurricane Sandy comes ashore.

Rampaging global weather disasters pose serious challenges to governments around the world. According to Swiss Re, the world’s largest reinsurance company, twenty to forty percent of losses from disasters are uninsured. The company says economic losses from climate-related disasters are substantial and rising. One news release states, “Over the last 40 years global insured losses from climate-related disasters have jumped from an annual USD 5 billion to approximately USD 60 billion.” Another news release says that “without further investments in adaptation, climate risks could cost nations up to 19% of their GDP by 2030, with developing countries the most vulnerable.”

To address the root causes we must move from our current global system of cheater economics and casino economics to a true-cost economy. In a true-cost sustainable economy, the climate-disrupting effects of coal and oil would be factored into their prices, and prices would rise beyond most people’s idea of affordability. Ironically, the current method for calculating national economic well-being (GDP), counts the billions spent on fixing storm damages as a plus.

In the presidential debates Romney and Obama competed to see who could be more supportive of oil and gas and who would accelerate the movement of tar sands oil from Canada the fastest. It was as if they were saying, “Let’s see who can generate the most greenhouse gases the fastest and create even more gigantic storms and weather disruptions.”

The extraction of tar sands oil is devastating the homes of native people in Canada and creating a wasteland scene reminiscent of Dante’s Inferno. Utilization of such a filthy fuel on the scale now being advocated means “game over for the climate,” according to NASA climate scientist James Hansen.

At least the victorious President Obama stressed that he wanted more renewable energy, whereas Romney opposed wind power, belittled concerns about climate destabilization, and joked about rising sea levels. Now is the time to demand that Obama fulfills the clean-energy promise he made in his first term. Along the way, we might even alleviate some threats to national security that are already on our shores.

The Higgs Boson and the Steady State Economy

By Brent Blackwelder

What does the Higgs boson have to do with the establishment of a sustainable economy? The discovery of this subatomic particle required a Herculean effort, involving billions of dollars, over 1,000 physicists, and thousands of craftsmen to construct and operate an almost incomprehensibly complex machine — the Large Hadron Collider. The same kind of diligent, prodigious effort is needed to construct and operate a new economic system for all nations of the world.

Physicist Lawrence Krauss, author of A Universe from Nothing, described the effort on the Higgs boson in ebullient terms:

…a triumph of technical and computational wizardry of unprecedented magnitude…

…cathedrals and colliders are both works of incomparable grandeur that celebrate the beauty of being alive…

…the discovery will change our view of ourselves and our place in the universe. Surely that is the hallmark of great music, great literature, great art… and great science.

Amid such extraordinary hype, it’s worth asking what we have to show for finding the so-called God particle? Will this momentous discovery help solve any crucial economic, social, environmental, or political problems besetting societies today and even threatening the livability of the planet? Will we possess the “key to the universe” and still wreck the planet we depend on?

If we can build the LHC, there’s hope for the SSE.

The most urgent task for humanity is the focus of the Center for the Advancement of the Steady State Economy: a transformation of the existing world economy. Today’s global economy rewards the depletion of natural resources, promotes overuse of fossil fuels, drives huge numbers of species to extinction, and turns a blind eye on the destruction of the very ecosystems that make life possible.

The transformation required in this emergency situation was described by economist Kenneth Boulding roughly half a century ago — the same period when physicists were formulating hypotheses about mystery particles. The essential change, Boulding said, was a move from “cowboy economics” (the unsustainable economics of continuous growth and resource overexploitation) to “spaceship economics” (the sustainable economics of the steady state).

Scientists specializing in ecosystem health warn that Earth is like a patient in the emergency room needing CPR — conservation, preservation, and restoration. The latest climate science reveals alarming physical changes to the planet — changes that are even more disturbing than the warnings issued in the big 2007 report of the Intergovernmental Panel on Climate Change (IPCC). Here are a few such changes:

  • The oceans are warming 50% faster than predicted;
  • Greenhouse gas emissions are tracking the worst-case scenario;
  • Oceans are acidifying at the fastest rate in 300 million years;
  • Sea levels are projected to be over 3 times as high, and the melting of the Greenland Ice Sheet would raise ocean levels 20 feet;
  • The earth is on track for an average warming of 7 degrees centigrade by 2100 — enough to produce massive agricultural failures.

We need a Herculean effort on both economic and ecological fronts to deal with climate destabilization. How many ecological economists are at work on a redesign of the global economy? What about the paucity of scientists who study the variety of life and the functioning of ecosystems? We do not know if there are 10 million species on Earth or 50 million.

In contrast, consider the stupendous volume of data being gathered by the supercollider. Dr. Krauss reports that this collider generates more data every second than the information in all the world’s libraries. The physicists got the billions they needed, but only a little progress has been made in developing spaceship economics. In fact, mainstream economics is reinforcing both the cowboy and casino thinking that is gripping most economies on Earth.

Physicists did not face a slick disinformation campaign funded by oil companies. Surely the job of rescuing our planet from an untimely demise should rank high in the funding priorities. Lester Brown estimates that $200 billion a year — less than a fifth of the world’s defense department budgets — is needed to shift to a clean-energy economy and do the CPR that planet Earth desperately needs.

Two “Robin Hood” Taxes for the Price of One

Linking Climate Justice to Tax Justice

Co-authored by James S. Henry, economist, lawyer, and author of The Blood Bankers (Basic Books, 2005) and Dr. Brent Blackwelder, president emeritus of Friends of the Earth

The subject of taxes certainly isn’t the most riveting topic for cocktail party conversations. Most people don’t like thinking about the labyrinthine tax code or filling out convoluted forms. They certainly don’t enjoy paying taxes. But we believe that the time has come to reframe the debate on taxes and build up some popular passion and energy for a few basic adjustments to the tax code. With these simple, easy-to-implement changes, it turns out that we could move the economy in a direction that works much better for people and the planet, including a more stable climate.

We badly need to recapture the public discussion and debate on tax codes from the technical specialists and special interests, as well as the diehard anti-government reactionaries. The tax system is so critical to the functioning of any nation that as concerned citizens, it is essential for us to insist on making values like justice, fairness, and shared responsibility central to any political debate on this issue.

By framing all discussions of taxation with the jaundiced view that “politicians just want to raise your taxes,” critics have actually ended up promoting a tax system that rewards pollution and disproportionately exempts the wealthy from paying their fair share. Since more careful discussions of tax policy have become taboo, governments have ended up being deprived of revenues that are essential to provide services. Thus, the anti-government forces have created a vicious, self-perpetuating cycle: their programs to curtail revenues have often crippled government programs, helping, in turn, to reinforce the notion that government can’t get anything done.

The issue of government revenues has come to the fore as developing nations have tried to grapple with climate destabilization. Quite reasonably, they’ve been asking for assistance from the wealthy nations that, over the long haul, have undeniably been the biggest contributors to the problem, to help them pay the costs of adaptation.

The huge Copenhagen climate summit in December failed to achieve breakthrough results to reduce greenhouse gas emissions, but it did result in a pledge by the U.S. Secretary of State, Hillary Clinton, for $100 billion per year in climate adjustment assistance to poor countries by 2020. The actual amount required may turn out to be even larger, but if we start early and build up a reserve fund, we can be prepared – much like insurance. And the good news is, there is a way to obtain such large sums even in today’s difficult economic climate, while simultaneously helping to clean up and stabilize the global financial system.

The tragic earthquake in Haiti, although not caused by climate destabilization, graphically illustrates the sheer magnitude of physical and monetary magnitude of relief and adaptation measures that scientists predict may well be needed by poor nations as the earth’s climate is disrupted.

Our revenue plan involves two very modest, complementary transnational “climate change surcharges” on groups that not only could readily pay them, but also richly deserve to pay them: major banks and their superrich, often tax-dodging global corporate and individual clients.

The first component is a variation on the well-known “Tobin tax” on foreign currency transactions, originally suggested by Keynes in the 1930s. The version of the Tobin tax that we are proposing would be even less intrusive. It would only apply to wholesale foreign exchange transactions, not to retail customers. Nor would it really be an international tax, imposed on countries by some faceless OECD bureaucracy. Each country signatory would agree to introduce legislation to adopt its own national version of a “model” tax. Each country’s own tax authorities would be responsible for collection and enforcement. Given the astonishing $4 trillion per day of such transactions, a tax of less than a dime per $1,000 of transactions would yield at least $50 billion per year. A similar low marginal tax rate on all international financial transactions, including stocks, bonds, options, and derivatives, could readily collect at least twice that amount.

The second new revenue stream that we propose is an “anonymous wealth” tax. This involves levying a modest 0.5% annual “climate aid” withholding tax on the estimated $15 to $22 trillion of liquid private financial assets — bank deposits, money-market funds, mutual funds, public securities, and precious metals — that we and other analysts have estimated now sit offshore, almost entirely untaxed, in anonymous accounts, trusts, and foundations. This tax could raise at least $25 billion to $50 billion per year.

Furthermore, the administration of all these “private banking” assets is heavily concentrated in the hands of a comparative handful of leading First World banks, including all of the key players in the wholesale currency market, as well as the leading players in the recent financial crisis, and the largest recipients of “too big to fail” assistance.

This means that the anonymous wealth tax and the transactions tax complement each other neatly. The first one addresses the huge stock of undisclosed offshore wealth and income that has fallen through the cracks, while the other addresses the ongoing speculative activity that has been fueled by the accumulation of all this restless, internationally mobile private capital. From an administrative standpoint, major international banks, the “systems operators” for this highly problematic global financial industry, are perfectly positioned to help clean up its “bads.” In that sense, we can view these two modest taxes as “financial pollution” taxes, which will help to compensate the rest of us for bearing the costs and the risks of easy tax avoidance and excessive speculation.

In sum, we believe that these two modest tax proposals constitute a bold new potential solution to the problem of paying for climate adaptation, and a way of linking “climate justice” to “tax justice.” They not only are administratively and politically feasible, but most important, they also happen to be the right things to do on ethical grounds.

Administrative feasibility. This year the G20 and the IMF have already had very serious discussions of several variations on the Tobin tax, and just this week the European Parliament passed a resolution supporting it. Nevertheless, for reasons that are unclear, the U.S. Treasury Department and White House economists have been resisting. Apparently the economists are concerned about “market efficiency,” while the Treasury is still concerned about Wall Street.

These concerns are overblown. Of course all taxes interfere with perfect markets to some extent, but no one except radical anarchists are proposing that we all return to the mythological Eden of a tax-free world. This is especially true in a world with highly imperfect markets, where facts of life like imperfect information, excess financial speculation, financial crimes, ineffective law enforcement, and pollution often justify tax policies that offset these market imperfections.

The question in any real world situation is always whether the revenue generated is worth the price of any extra inefficiencies. We believe that in the case of our two specific proposals, the revenue gains dwarfs the inefficiency, if any. For example, in the case of the .005% levy on all wholesale and interbank foreign currency transactions among major currencies and cross-currency derivatives, such a tax could be implemented at very low cost, with limited opportunities for evasion. The wholesale foreign exchange market is already completely electronic, and highly concentrated. Indeed, in 2009, for example, more than 60 percent of all trading was handled by just five global banks — Deutsche Bank, UBS, Citigroup, RBS, and Barclays. This growing market generated over $4 trillion of transactions per day, more than twice the volume in 2004.

Similarly, in the case of the withholding tax on anonymous offshore wealth, the top 50 private banks in the world have more than $8 trillion in private financial assets under management, and another $4 to $5 trillion in assets under custody. Indeed, the top 10 alone account for nearly half of this amount. So long as the taxes were implemented uniformly across anonymous customers, it would be simple for these institutions to levy .5% annual withholding taxes on these assets.

Political feasibility. In principle, the revenue plan proposed here should be by far the most politically pain-free way of fulfilling Secretary Clinton’s Copenhagen climate aid pledge. It concentrates the costs on a very tiny, privileged group that is supremely able to afford them — the world’s wealthiest 10 million people on a planet with 6.8 billion humans.

From this angle, this proposal should attract widespread support from religious congregations and other nongovernmental organizations that are concerned about equity and global development. It should also attract support from national tax authorities, law enforcement agencies, and homeland security agencies that continue to see a large share of proceeds from international tax evasion and the underground economy slip through the cracks, despite their best efforts. Of course it should also attract support from environmental groups, and from public officials who are concerned about finding ways to pay for essential government activities without going deeper into debt.

Finally, this proposal could gain traction from the public outrage over the lingering effects of the financial crisis and the taxpayer bailouts that have been received by wealthy financial institutions that were “too big to fail.”

Moral justification. The moral foundation of this proposal is the idea of combining “global climate justice” with “global tax justice.” Global climate justice reflects the polluter pays principle — the judgment that it is fundamentally fair for rich countries to pay for most of the costs of adapting to climate change, since they have been overwhelmingly responsible for greenhouse gas emissions in the first place.

The concept of “global tax justice” reflects the judgment that it is fundamentally fair for the financially wealthiest citizens and corporations in both poor and rich countries alike to pay at least some taxes on their worldwide incomes and/or wealth to support their home countries.

One key source of the trillions in private funds that we propose to tax is underreported capital flight — money that is secreted offshore and invested abroad beyond the reach of domestic tax authorities. A second major source is under-taxed corporate profits and royalties that have been parked offshore in tax havens by way of rigged transfer pricing schemes. A recent report by the charity Christian Aid estimated the annual cost of these transfer pricing schemes to developing countries, in terms of lost tax revenues, at $160 billion per year. A third source is the myriad illicit activities that constitute the global underground economy — corruption, fraud, insider trading, drug trafficking, “blood diamonds,” and innumerable other big-ticket, for-profit crimes.

The ownership of the trillions in untaxed financial wealth is incredibly concentrated. At least 30 percent of all private financial wealth, and nearly half of all offshore wealth, is owned by world’s richest 91,000 people — just 0.001% of the world’s population. The next 51 percent is owned by at most 10 million people, comprising only 0.15% of the world’s population. About a third of all this offshore wealth has been accumulated from developing countries, including many of the largest “debtors.” And almost all of it has managed to avoid any income or estate taxes, both in the countries where it has been invested and the countries where it originated.

Tax policies are at their best when they provide the right incentives, secure funding for needed public goods and services, place the burden of payment on the right parties, and make progress toward a more equitable society. The proposed “Robin Hood” taxes on anonymous wealth and foreign exchange transactions meet all these criteria, and they are easy to administer. They are precisely the kind of progressive tax changes that we should all be happy to discuss, even at a cocktail party.