Environment: In defence of economic ideology
Global finance needs to believe in the progress it can drive to meet environmental challenges.
Many Euromoney readers were alive in more ideological times. They will remember the collapse of the socialist command economy model and the fall of the Berlin wall. They will also remember Margaret Thatcher’s aggressive application of liberal economic forces and Ronald Reagan’s belief in trickle down.
Those bruising, chaotic times gave political ideologies and the economic theories that flowed from them a bad name. They seemed extreme, antagonistic and created as many losers as winners. Applied in the extreme they also always contained some economic flaws that could be highlighted and used to discredit the broader aims.
Ideologies are, of course, extremely dangerous when they do not accommodate opposition and attempts to moderate excesses. But they also contain a belief in progress; that politics and economics can bring about change for the better.
Nowadays politics and economics are more about management and this, in the absence of a long-term ideological framework, necessarily means a short-term horizon.
This, too, can be destructive. In the absence of a driving ideology, politics becomes interest-based. A good example is Brazil. This month saw the owners of businesses (represented by, among others, the Sao Paulo business federation FIESP) trying to kill a bill that would eliminate the subsidies these companies enjoy by receiving below-market financing from state development bank BNDES.
No matter that Brazil has just reported its worst-ever primary deficit for July, which has left economists wondering whether the government will hit its target, which it has only just this month revised downwards. No matter that S&P explicitly linked a failure to pass this reform to a likely downgrade. No matter that it is not morally justifiable – why should large companies receive cheaper finance than the rest of the economy, especially when they generally have access to the international markets?
The problem with interest based politics and economics is that those interests always define themselves narrowly. It is why leaders choose cheap loans today over a healthy economic environment for the whole country tomorrow. It is why in Costa Rica the government has continually to impress upon the transport sector that the real cost of burning fossil fuels is higher than the market rate – once you have factored in the cost of climate change. And it is why the UK and the US have reached for morally bankrupt and economically-inefficient policies that seek to protect the interests of their communities – rather than seeking to trade and partner with others, which is in all of our interests.
The good news, if we choose to accept it, is that there is an ideology that is neatly waiting to be adopted that will define interests globally. Building environmentalism into the politics of democracy and the market economy could add long-term balance and a framework to a world that is otherwise appearing to fragment.
Recent events in Houston and the Caribbean have shown the cost of climate events. That is in no one’s interests.