Business Climate or Real Climate. Which is more important for Rhode Island’s future economy?
Research from ProsperityForRI.com Research Director Greg Gerritt October 2019
ProsperityForRI.com is a research project focused on what it will take to create a widespread prosperity in Rhode Island. All of the papers it has produced are available in the pages section of the blog ProsperityForRI.com http://prosperityforri.com Under various names ProsperityForRI.com has been studying the RI economy and actively participating in the public debate on economic development for more than 20 years, with a focus on the ecology/economy interface, justice, climate, and economic democracy. The perspective it brings to the discussion and understanding of the RI economy do not simply come from economics or politics, but include ecology, anthropology, biodiversity, forests, and the work of international institutions. Its slogan is the following: “You cannot heal ecosystems without ending poverty, you cannot end poverty without healing ecosystems”.
ProsperityforRI.com and its founder Greg Gerritt have had a hand in the creation of two industries in Rhode Island, Green Infrastructure and Compost. Both of these growing industries are critical if RI is to heal its ecosystems and communities and to create long term sustainable prosperity. ProsperityForRI.com also spent much time fighting bad projects like the Pawsox moving to downtown Providence on our dime, the Quonset container port that would have opened into the Great Recession, cost us $1 billion, and contributed to deforestation and genocide throughout southern Asia, and the fracked gas power plant proposed for Burrillville, which would have been a tremendously costly white elephant/stranded asset, spewing climate destroying emissions until we were able shut it down long before it wore out. Recently the Fane Tower has been symbolic of the skewed nature of economic development in Rhode Island.
Unlike most analysts of the Rhode Island economy, the health of the forest and the security of those who live in it is critical to the analysis ProsperityForRI.com brings to the table. Too many forget how important the forest is to community health and how important wood and wood products are to modern civilization and the building of cities. http://www.bbc.com/future/story/20190911-what-would-happen-if-all-the-worlds-trees-disappeared In a few places forests are returning and growing, but in all too many places the forest continues to disappear.
“Much of the deforestation has happened in recent years. Since the onset of the industrial era, forests have declined by 32%. “
The people who live in forests that disappear end up dead or in shanty towns at the edge of burgeoning cities to start their three generation march into the global middle class trap if they make it through the dirty water, the fascist gangs, the racist right wing overlords, lack of democracy, ecological collapse, and the rolling climate catastrophe. The people in Rhode Island face many of the same obstacles, though most of us do not face them quite so immediately as the forest people. The rich and powerful and the corporations and politicians they own tell us to stay the course, even double down on the neo-liberal model of low taxes, little regulation, drill baby drill, and running over communities, as they believe that will provide the biggest economic growth, and nothing else is important, except maybe the rich and powerful holding on to power. How is that working out for your neighborhood or state of mind?
The format of this paper is a mosaic of written comments by ProsperityForRI.com Research Director Greg Gerritt, links to back up nearly everything stated in the paper, and snippets from the writings of others that offer further commentary that reinforce the themes of the report so that it becomes quite clear that ProsperityForRI.com is not the only organization critiquing current economic development policy from the perspective offered here. We are just the only organization directly engaged in the discussion in Rhode Island. I do not provide attribution for things I have witnessed with my own eyes, and there is just a bit of snark directed at the rich and powerful who are doing much to adversely affect Rhode islanders.
One note on reading the report. If something does not immediately follow a link and have quotation marks around it, it was written by Greg Gerritt. There are many quotes, all in some way attributed and linked. Often the author of this report injects a sentence or two within a section of quotes. Those sections will not be in quotation marks, but may be followed by a resumption of the quote, properly delineated.
If Rhode Island is to have a prosperous future, should we pay more attention to the real climate or the business climate?
Greg Gerritt Director of Research ProsperityForRI.com Providence RI
Rhode Island, the USA, all the countries of the world, are at an economic crossroad. Global per capita income continues to go up while the resource base that supports that economy, and the climate that supports all life, deteriorate rapidly, and inequality grows. https://www.biologicaldiversity.org/programs/biodiversity/elements_of_biodiversity/extinction_crisis/index.html?gclid=EAIaIQobChMI6faDjLCm5AIVysDICh1evQnkEAAYASAAEgK-EvD_BwE
Having a great economy, one that provides prosperity throughout the community, is one of the major goals of modern governance. https://iowaculture.gov/history/education/educator-resources/primary-source-sets/great-depression-and-herbert-hoover/chicken Every candidate promises prosperity and has ideas on how to achieve it. Most of the ideas we hear in the public debate come from the neo-liberal school of economics, http://evonomics.com/look-behind-neoliberal-economist-youll-discover-rich-economic-theories-serve-big-business/ https://www.theguardian.com/books/2016/apr/15/neoliberalism-ideology-problem-george-monbiot a free market view of economics, which promises a bountiful ever growing economy based on maximum freedom for commerce, but delivers most benefits to the pockets of the wealthy few, with a tiny trickle running down the legs of the rest of us. The policy agenda offered up to fuel the growth of the Gross Domestic Product is one we have heard repeated for years: low taxes, little regulation, unfettered corporate power, low wages, few social services, private healthcare, climate denial and wars for oil. This model used to include free trade, but that seems to have fallen out of favor with the Trumpist camp of the oligarchy, though the results of the trade wars might make free traders popular again.
As much as neo liberal economics claims to be a science, mostly it was deliberately developed by members of the Mont Pelerin Society https://www.montpelerin.org/statement-of-aims/ as a way to help the old white power structure roll back civil rights, democracy, clean air, environmental justice and anything they could label socialist like parks, health care for everyone, and good public schools. This attempt by the old guard to hold onto power plays out today under very different conditions from when neo liberalism was being developed, and if it did not model the reality of the world very well when developed, it is even more off key today. In the 1950’s the echoes of ecological collapse were much quieter, the tropics had much more forest, and in the west democracy seemed on firmer footings, so an economist might have seen years of growth benefitting everyone as long as they kept the blinders on. Today the natural resource base that supports us all is collapsing,https://medium.com/@thugznkisses/theres-more-to-the-ecological-crisis-than-global-warming-2de8a66de4d the role of the environment, justice, and equality in creating prosperity has been recognized in many quarters,
and the need to protect the environment as part of a push to stop climate change grows ever more urgent. No wonder the neoliberals and the racists think democracy is too messy a process if the wealth of the 1% and the power of whiteness is to be protected.
You can read about the neo liberal conspiracy in many places and the roles of James M Buchanan of University of Virgina and George Mason University and Chamber of Commerce leader Lewis Powell https://www.huffpost.com/entry/the-rightwing-legacy-of-j_b_11521804 who later became a Supreme Court Justice and consistently ruled for the rights of the oligarchs against everyone else for many years.
We have been told that There Is No Alternative to neoliberal policies. Margaret Thatcher and Ronald Reagan https://www.worldeconomicsassociation.org/newsletterarticles/adaptive-systems/
brought that slogan into the public lexicon, but as soon as the saying arose, the resistance slogan of Another World is Possible became an even more powerful meme. Many books and articles have been written on what a green and just economy would look like and how it might evolve from the current mess we are in. People and communities have been implementing green and just practices for years, but there has been limited implementation of a green and just economy at scale. The lack of implementation mostly derives from the fact that in pretend democracies around the world the moneyed interests control the flow of information, the voting apparatus is riggable, and the politicians are almost all on the take or already a part of the oligarchy. Therefore no modern state has ever tried to do the right thing and simultaneously heal ecosystems and end poverty while implementing economic democracy. Or rather every time a nation has attempted to run its economy for its people and not the corporations/oil industry/military industrial complex, the United States and its allies have put on diplomatic and economic sanctions, staged a coup or invaded, and generally worked to squash any political movement willing to take on neoliberalism and the bankers. Chile, Congo, Cuba, Guatemala, Iran, and Occupy Wall St are all good examples of American intervention on behalf of the corporations and oligarchy. China and Russia, while disavowing neo-liberalism, clearly practice keeping the power in the hands of the oligarchy, and are also quite willing to use violence to prevent democracy and an economy working for communities. Both countries have harmed many communities while raising living standards. The priorities of all of these oligarchical systems is for the economy to work for the benefit of who the oligarchs want it to http://www.ipsnews.net/2019/07/privatization-increases-corruption/ while hoping to provide just enough bread and circus to prevent open rebellion.
Because the oligarchs of all stripes have enforced neoliberalism and other oligarch based economic systems with guns and show trials, (hello people of Hong Kong, hello pipeline resisters) internally and internationally, there is no valid way to compare the economic results of efforts to heal our communities with business as usual. There is no actually existing people’s economy in any nation state, though many communities that are/were not organized as nation states have had economies geared to the needs of the community. Still, let us examine just how well neoliberalism has delivered for our communities, and whether or not following the prescription actually improves economic performance, particularly in a time of ecological collapse and climate catastrophe. After exploring neoliberalism, business climates, economic growth, the effect of environmental regulation on the economy, economic development and community prosperity in Rhode Island, and the economic consequences of climate catastrophe, a discussion of whether or not a green and just economy could provide a better result will ensue.
Does neoliberalism deliver the goods to anyone other than the 1%?
With the youth of the world in rebellion over climate and the lousy economy, to get the global middle class to go along with an economic model that is leaving more and more members of the global middle class behind and the Earth in tatters is not easy. At a minimum the model needs to prove it can actually deliver prosperity. Right now all that seems to work is the public relations machine, as the economy continues to be broken into fewer and fewer pieces. ( I know, it is hard to break things into fewer pieces but the global corporations are shrinking in number, gobbling each other up, and growing larger as inequality grows) We know this because business climate reports, the marching orders for the politicians as to how to manipulate government to benefit the rich, have been produced for years, specifically by right wing think tanks, often associated with Koch money, and the states in the USA have been ranked repeatedly. To see if the model works we should look for two things. The economic results in the states that have adopted the model more fully and the statistical match between rankings of states and their GDP growth rates over an extended period of time. In addition, there should be an exploration of the result of environmental, health, and safety regulations on economic performance to see if matches the model. I have searched high and low for a study that seriously points to a statistically valid correlation between rankings and growth rates. Searched on google, read the newspaper daily, asked the media for their sources, asked professors who spoke about the business climate in public hearings for their sources. If the correlation is correct, if having a good Business Climate actually improves economic performance it would be in the headlines on a regular basis. You can be sure if there was a correlation between rankings and growth rates the Heritage Foundation would be sending press releases. So would 10 other think tanks. So would every state governor, city council, mayor, and Speaker of the House in America as they ask for tax cuts for the rich and giveaways to the rich to create jobs in the neighborhood. So tell me, when was the last time you actually saw that headline?
When you read the paper or listen to any RI politicians, it is quite obvious that the business climate model of neoliberalism has been taken to heart by many RI politicians. They insist that low taxes are critical and then neglect services and infrastructure while supporting pet projects for their friends with all sorts of subsidies. Then the politicians insist it is the bad business climate that is killing the Rhode Island economy. Over the rest of this paper, we shall tease that thought apart into constituent pieces to come up with a better way to explain RI economic performance, and offer suggestions for improving the economy based more closely on what is actually going on instead of the rational man models that the neoliberals have flooded us with. https://doi.org/10.3390/su11164374
I cannot remember where I found this next quote, but it comes with references built in and it seems like a good place to start the discussion of whether the neoliberal prescription actually delivers any results, and the quote is relevant to current trends in Rhode Island.
“The White House says the tax cuts will create a jump in economic growth that will generate enough new revenue to wipe out any increase in the budget deficit. This is supply-side nonsense. The Congressional Research Service reviewed tax cuts since 1945 and found no evidence they generate economic growth. Ronald Reagan and George W. Bush both cut taxes, and both ended their presidencies with huge budget deficits. Bill Clinton raised taxes, and the economy created more jobs than it did under Bush or Reagan. “
For several years in the aftermath of the Great Recession every dollar the US saw in GDP growth ended up in the pockets of the 1%, the actual assets of the 50% of families at the bottom of the economy are not only a smaller as a percentage of the total assets in the country, but actually shrank while the assets of the wealthiest 1% swelled massively. Given that it should be no surprise that inequality these days is the highest it has been since the Great Depression, and that when the economy was most evenly allocated the rising tide lifted most boats not just the yachts.
“Since 1989 1% have gotten $21 trillion richer, bottom 50% are poorer. …,,,,, $900 billion poorer.”
“It can be argued that economics, as now mostly practiced, is largely self-reinforcing rather than self-correcting as neoliberal vested interests dig in.”
“Most jobs created since the recession have been low-paying
Three-quarters of U.S. jobs created since the 2008-’09 financial crash pay less than a middle-class income, according to an Axios analysis of U.S. Labor Department data.
What’s going on: On Friday, the Bureau of Labor Statistics reported that the economy continued a 94-month jobs growth streak. It added 201,000 jobs, and the fastest wage growth since June 2009.
- Since the crash, about 75% of new jobs have paid less than $50,000 a year,
Professions that were once the backbone of the middle class have been vanishing, and similar professions have not been bubbling up to take their place, report the WP’s Andrew Van Dam and Heather Long. “
“ WASHINGTON) —The Census Bureau also said in an annual report Tuesday that household income rose last year at its slowest pace in four years and finally matched its previous peak set in 1999. Median household income rose 0.9% in 2018 to an inflation-adjusted $63,179, from $62,626 in 2017.
The data suggest that the economic expansion, now the longest on record at more than 10 years, is still struggling to provide widespread benefits to the U.S. population”
I think it is pretty clear who it delivers for and who it does not as almost all the economic advisers to the political class are practicing neoliberals.
The failure of American politicians to speak the truth about the economy is why we now have President Trump. Workers have been getting screwed for years, essentially since the Chamber of Commerce decided in 1973 that it was going to stop the continuation of the New Deal and environmental progress. Neither the Republican Party nor the Democratic Party have been willing to take on an economic system rigged for the rich. And when the party that claims to be for the people offers the same non solutions as the party of the demagogues, people in dire straits vote for the strong man. Until the Democratic Party starts to speak the truth about the economy, it will take the Republicans offering up fruit cakes for the Democrats to win until the demographic transitions coming down the road kick in. And we might be under water by then.
This study by the St Louis Federal Reserve Bank points out that the entirety of the mainstream has imbibed the neoliberal Kool Aid, but it does not seem to have a positive effect on the economy anywhere.
“Figures 2A and 2B plot the relationships between political leaning and state and local government revenues and expenditures. The results exhibit no discernible patterns, in contrast with the traditionally held perception. The correlation coefficients between state and local government revenues and expenditures to state-level GDP ratios and the average election results are 0.02 and 0.04, respectively.2 That is, we find little evidence that state and local government revenues and expenditures as a share of state-level GDP correlate with the political leaning of each state. Therefore, in this sense, political leaning might not play a dominant role in state and local government finances. “
An economy built for few is why so many people feel left behind, which is why the left and the right are both demanding change, why Populism, is so prevalent. No one trusts the current leadership to deliver, so humans tend to drift towards strongmen to protect them, even if it never works. The strongmen move towards oligarchy even faster. The economic system is failing more and more of us as it drifts into inequality, oligarchy, and its associated destruction of the forest and the climate. It is making people obsolete and reducing employment without leading to new employment opportunities for those being left out. Capitalism’s creative destruction seems to no longer lead to creative construction. Just more for the few and less for the many in older industrial countries. Lower income countries are still making some progress, but only a favored few are growing fast enough to catch up to the industrial west. Meanwhile the rust belt fruitlessly looks for lifelines that will speed up growth instead of an economy that will improve the quality of life. Brexit anyone?
So when do we get to an economy that actually improves life in our communities without leading to unaffordable housing, education, and healthcare? ProsperityForRI.com will offer up a bit of a plan once the full context is explored, but first let us look at one of the tools the rich use to keep us in line.
Business climate is one of the tools the rich use to steal from the rest of us and the planet.
Funded by several of the same rich folks who fund the further development of the political power of neo-liberalism, the pet think tanks came up with something called the business climate https://www.upcounsel.com/business-climate-definition
It is probably a methodological error to accept business climate rankings as valid indicators of anything, for among the many errors the reports make the reports often mix results into their formulas rather than sticking to independent variables. http://www.goodjobsfirst.org/sites/default/files/docs/pdf/gradingplaces.pdf And it is another methodological error to equate neoliberalism and the underpinnings of business climate rankings, but it is entirely reasonable to view neoliberalism and business climate rankings as closely aligned since the people and organizations touting neoliberalism and the people and organizations offering business climate rankings are very closely aligned and often the same, with the same funders. So while it is an error to accept the conjunction, I gladly make it.
Since in Rhode Island the chattering class’s main preoccupation is to take aim at Rhode Island’s “lousy” business climate and promise that if it was fixed all would be well, it is important for us to know what neoliberal economics actually delivers and whether following what the business climate rankers prescribe actually delivers faster economic growth, because that is the criteria they claim to stand on. It should also be pointed out that many of the leaders touting the business climate are among the leaders denying climate change or offering non solutions and kicking the can down the road even if they say they see it as a immediate danger. And folks denying climate change or offering us the go slow recipe are clearly more than willing to play fast and loose with the truth even if it means millions die unnecessarily.
There are many different business climate rankings. http://www.businessdictionary.com/definition/business-climate.html They measure different things, and provide different results, but they generally rank communities/states/nations on tax rates, regulatory frameworks, red tape, ease of access for business to the power structure, corruption, access to capital, the strength of unions, and the ability of the community to influence decisions about big time projects, essentially prescribing what are thought to be the best practices of the ideology of neo-liberalism. In Rhode Island every time one of the rankings comes out the mainstream media, the corporations and their shills, and the politicians in the neoliberal colonizing force insist it is the factors contributing to RI’s very low ranking that explain why the economy is not growing rapidly. It would be nice if they would show their evidence that the low ranking is the reason for our slow growth compared to other places. It will be demonstrated in a later section that there are much more important reasons that RI is a relatively slow growth place, and the things they prescribe are essentially irrelevant or cause more damage, often by facilitating ways for the rich to steal more. I also find it interesting that high marks are given to states with weak unions and in which the democratic process for public discussions about development is weak. Tell us again why democracy is bad, how having to get the real support of the people for big projects is unfair, and how good wages harm the community. Then remember every time the people have had to stop politicians from creating white elephants and disasters in pursuit of business. In Rhode Island we have the shining example of 38 Studios as the fight the people were shut out of that went really south really fast with our money, but we can also remember fights about nuclear power plants, the Quonset Container port, a Pawsox stadium in downtown Providence, and most recently a fracked gas power plant proposed for Burrillville in which the people stopped a big development supported by the entire establishment that would have turned into a climate and financial albatross around our collective necks while lining the pockets of the rich.
The Tax Foundation ranking https://taxfoundation.org/publications/state-business-tax-climate-index/ is one of the more well-known rankings of US states and one often used by the conservative business media to demand communities change their policies so they can get faster GDP growth, so the 1% can skim 99% of it.
One might think that with all the puffery about taxation rates and the supposed need for states to compete for the low tax status that local and state tax rates would be a huge burden on small businesses. But as the quote below points out, it aint necessarily so.
“The amount businesses pay in state and local taxes is far less than what they typically imply. Two studies estimate that businesses’ state and local taxes account for less than 2 percent of the total costs of doing business, on average, nationally.22 Other costs, such as wages and benefits, are far more substantial, so it makes sense that the impact of reducing a specific business’s tax burden has only modest effects on location decisions.23”
Here is some more from Nobel Prize winning economist Joseph Stiglitz
“Still another piece of evidence supporting the importance of rent-seeking in explaining the increase in inequality is provided by those studies that have shown that increases in taxes at the very top do not result in decreases in growth rates. If these incomes were a result of their efforts, we might have expected those at the top to respond by working less hard, with adverse effects on GDP.
It should be noted that the existence of these adverse effects of inequality on growth is itself evidence against an explanation of today’s high level of inequality based on marginal productivity theory. For the basic premise of marginal productivity is that those at the top are simply receiving just deserts for their efforts, and that the rest of society benefits from their activities. If that were so, we should expect to see higher growth associated with higher incomes at the top. In fact, we see just the opposite”
So why does the Tax Foundation scream about taxes other than to line the pockets of its funders since they have such little effect on businesses and cutting them helps economies so little?
Is there a correlation?
We are repeatedly told that following business climate/neoliberal prescription should bring an increase in the growth rate, and we are told it is absolutely essential to follow the formula if Rhode Island, or any other place, is to have rapid economic growth. Based on this premise one should conclude that having a high ranking ought to correlate with a having a relatively rapid growth rate for the industrial west. Does it? That begs the questions as to whether or not GDP is a useful indicator, and whether or not it is possible to grow economies significantly in the industrial nations at the present time. I will come back to the issue of whether or not the economy can actually grow much in RI, but lets start with the business climate and its affect on growth rates.
At the end of the 2019 rankings the Tax Foundation included discussion about how the rankings of each state changed based on whether taxes went up or down, and prominently trumpets that tax rates matter to growth rates, but left off the key piece. Did the growth rates in states moving up in the rankings go up compared to the national average? Did the growth rates of states moving down in the rankings go down compared to the national average? You can be sure that if the overall data matched the hypothesis that a highly ranked business climate is key to faster growth they would have trumpeted it. But nary a peep.
I have also asked the Providence Business News, the Providence Journal, Mike Stenhouse of the RI Center for Freedom and Prosperity, and economics professor Dr. Edward Mazze of URI after he testified at a hearing on the Fane Tower about the importance of the business climate, for their data demonstrating that a good business climate correlates highly with rapid growth. I have also prodded my readers to look for the data and references that demonstrate that good business climates increase growth rates. Very little evidence has been produced to back up the neoliberal and business climate enthusiasts claims. The Providence Journal refuses to answer the question and Dr Mazze said its complicated when he was offered evidence that no such link exists. Mike Stenhouse of the RI Center said to my face on State of the State it did not matter if it was actually true, common sense insists it must be true, so it is okay to lie and create public policy based on lies. Occasionally you find a report that says if you squint hard some of the indexes do show some correlations. But the evidence is weak.
The most important early study in the explorations of the efficacy of following the neoliberal prescriptions laid out for us by the pundits, politicians, and think tanks is the study ordered by Kansas Inc, at the time the economic development agency of the State of Kansas.
http://www.kansasinc.org/pubs/working/Business%20Climate%20Indexes.pdf (original link does not work, see explanation below) https://business.ku.edu/sites/business.ku.edu/files/images/general/Research/Business%20Climate%20Indexes.pdf (this is the one that works)
Business Climate Indexes: Which Work, Which Don’t, and What Can They Say About the Kansas Economy? June 2005
George Bittlingmayer, Ph.D. Wagnon Professor of Finance University of Kansas School of Business
Liesl Eathington Industry Specialist Office of Social and Economic Trend Analysis Iowa State University
Arthur P. Hall, Ph.D. Executive Director Center for Applied Economics University of Kansas School of Business
Peter F. Orazem, Ph.D. Koch Visiting Professor of Business Economics University of Kansas School of Business
Prepared for: Kansas Inc
“Table 4 reveals several facts about business climate indexes:
None of the business climate indexes can explain a large proportion of the variation in growth across counties. The best performing business climate indexes explained at most 5% of the variation in relative growth at the borders, suggesting that most of the variation in economic performance is due to factors not captured by state-level business climate measures. This would seem to suggest that business climate is unimportant in driving relative growth among the states. We conclude that the majority of the variation in growth is due to local business factors that are not reflected in the indexes .
The paper has to be accessed from the University of Kansas website rather than the Kansas Inc website because Kansas Inc had to be reorganized after Kansas tried the neoliberal experiment that their own research said would not do what it was advertised to do, and the whole Kansas economy tanked. Kansas Inc’s website disappeared. Oklahoma tried the same screwy approach. The quick and dirty version about the Kansas and Oklahoma examples is that both states had Republican legislatures and elected Tea Party Republican governors who bought into the neoliberal/business climate model whole heartedly. The governors convinced the legislature( it was not hard) to cut taxes dramatically. It was expected that the great boom in growth from cutting taxes would more than make up the revenue, but the economies of the two states tanked. The disaster was widespread. Schools closing, maintenance disrupted, economic chaos, and a shrinking economy despite both Kansas and Oklahoma being part of the fossil fuel energy boom. Here are two articles.
What to learn from the Kansas crash after cutting taxes
“Last week, the editorial board at the Kansas City Star warned Trump not to repeat the same mistakes that Kansas did. It was strikingly different from the op-ed written by the economists who helped craft both plans:
We do not oppose tax reform. Paying federal taxes is too complicated and too distorted by tax breaks for special interests. Taxes at all levels should be simple, low, broad and fair. But the president isn’t just proposing tax reform. He also wants a trickle-down tax cut for the wealthy. Kansans know how this story ends.”
Oklahoma: more of the same
“OKLAHOMA CITY (AP) — When the GOP took full control of Oklahoma government after the 2010 election, lawmakers set out to make it a model of Republican principles, with lower taxes, lighter regulation and a raft of business-friendly reforms.
Conservatives passed all of it, setting in motion a grand experiment. Now it’s time for another big election, but instead of campaigning on eight years of achievements, Republicans are confronting chaos and crisis. Agency budgets that were cut during the Great Recession have been slashed even deeper. Rural hospitals are closing, and teachers are considering a statewide strike over low wages.
“I’m not scared to say it, because I love Oklahoma, and we are dying,” said Republican state Rep. Leslie Osborn. “I truly believe the situation is dire.”
Oklahoma’s woes offer the ultimate cautionary tale for other states considering trickle-down economic reforms. The outlook is so grim that some Republicans are willing to consider the ultimate heresy: raising taxes to fund education and health care, an idea that was once the exclusive province of Democrats.”
And one looking at this topic more generally
As stated earlier, despite repeated efforts it is very hard to find actual evidence that corroborates that having a good business climate/following the prescriptions of the Koch brothers/neoliberal economists increases the GDP growth rate. But somehow the idea that a good business climate and neoliberal policies are essential continues to rule the political roost. I think it is a case of rich folks hiring professional liars to defend the privileges of class and their license to steal. And the economics professionals putting on blinders and saying yes to the oligarchs.
Here are a few more articles on the lack of efficacy of the business climate as a predictor of growth rates.
Economic Growth Defies Tax Foundation Ranking
Sven Larsen Oct 26 2017
“There is no macroeconomic data to show that a “good” business-tax index score is associated with a strong state economy. On the contrary, a review of state GDP data indicates that the opposite might actually be true. Contrary to conventional wisdom, the relationship between taxes and economic growth is not very straightforward”
By JOHN HOOD
January 6, 2016 10:48 P
“ No serious person would suggest that state fiscal and regulatory policies are the most important factors affecting state economies, or even that they are large enough to swamp other factors when seeking to explain state-by-state differences in economic performance. Natural resources, geography, climate, and international trading patterns are clearly important.”
“As recent research by Oxford University economists has shown, all economic prosperity rests on natural foundations. Simply put, without clean air, safe water and a well-functioning environment, there can be no material wealth. And even the business big cheeses at the Davos World Economic Forum now argue that policy-makers’ obsession with GDP has damaged our planet and our societies.
Traditional economics has forgotten that our economies should have a purpose: they should deliver greater well-being, increasing prosperity, improved security and comfort, without imperiling the things that make life worth living. If all government decisions are made on purely financial terms, then ultimately those decisions will benefit finance and capital at the expense of people and nature. As New Zealand treasury secretary Gabriel Makhlouf puts it, “The traditional view of economics is more of a caricature than reality.”
Expecting the business climate to outweigh factors like natural resources, ports, soils, education, health, the climate catastrophe and the state of democracy and peace is pure propaganda. Perpetuated by the wealthy to maintain their power and control. Clearly the only thing our legislators seem to listen to when it comes to protecting the public are the voices of those with the most to gain from pollution and the destruction of wetlands. Recent studies have demonstrated that the public’s voice on regulatory issues in front of the legislature is very severely outweighed by the corporate lobbyists carrying campaign checks, https://mises.org/wire/no-matter-how-you-vote-politicians-dont-represent-you and that the public policy coming out of legislatures and executive branches is not capable of coping with the disasters we face.
I think the conclusion must be that the ideas of the neoliberals, when translated into public policy in the real world, have almost no positive effect, and may be doing real harm in that the policies we end up with lead to neglect of public infrastructure, poor schools, more pollution, more public health crises, greater inequality, less democracy, more degraded communities, ecological ruin, and devastating climate change.
Economics and economic development as practiced and taught in the USA and Rhode Island is a system based on models and neoliberalism, with very little real world data intervening. The criticisms of the model are finally going mainstream. This sidebar includes a few snippets and links on the topic.
I just saw this very new paper and if you wish you can ignore most of the other references in this sidebar, this one says it all and in devastating fashion, but I left the others in because it would be good for everyone to see that these discussions have been going on for some time and the politicians really have no excuses for being so far behind the curve.
Kubiszewski, I. , et al (2019). Overcoming the Myths of Mainstream Economics to Enable a New Wellbeing Economy. Sustainability. https://doi.org/10.3390/su11164374
Kubiszewski is a well known and prolific ecological economist working with some of the giants of the field like Robert Constanza. The paper discusses economics ignoring reality and the inability of economists to solve real world problems. And notes that despite the lack of efficacy the belief system of the misguided economists is taught everywhere, mostly because it upholds the power of the oligarchy. A few quotes
“Disproof of mainstream economic assumptions has come from both within and outside the discipline
of economics. Examples are: (1) increased efficiency does not necessarily lead to decreasing use of
resources (e.g., Jevons paradox), (2) increasing income and wealth does not necessarily lead to higher
levels of wellbeing after a certain threshold is passed (e.g., Easterlin paradox), (3) perpetual economic
growth is neither desirable nor viable (e.g., The Limits to Growth), and (4) in a globalized economy
wealth does not flow from rich to poor nations (or neighborhoods) (greg’s comment) (e.g., Lucas paradox) (Figure 1). When real world data and phenomena contradict what is expected by theory we refer to paradoxes; when desirable
outcomes cannot be achieved using policy based on economic theory we refer to delusions. There are
many facts, figures, and situations that demonstrate that the world view of mainstream economics is
There is growing evidence that economic inequality is not only detrimental to human wellbeing
but is also not efficient even from the traditional economic perspective [11–13]. Economic inequality
is currently extreme and getting worse, with 48% of global wealth distributed to the richest 1% of
the world’s population, 87% to the richest 10%, and 1% to the poorest 50% [14–18] (please refer to
World Inequality Lab  for more recent figures on income and wealth inequality). At the same time,
increasing wealth is not automatically solving inequality problems .
Nobel Prize winning economist Paul Krugman has provided an excellent summary of these disagreements, stating that “the economics profession went astray because economists : : : clung to a vision of capitalism as a perfect or nearly
perfect system, (and) this romanticized and sanitized vision of the economy led (them) to ignore all the
things that can go wrong.” He thus argues that “(Economists) will have to acknowledge the importance
of irrational and often unpredictable behavior, face up to the often idiosyncratic imperfections of markets”.
Read this next paragraph from Kubiszewski
“It is interesting that while the discipline of economics encompasses fundamental disagreement
within the academy, mainstream economics is still the most revered approach to economics for advising
policy makers. This is in contrast to an academic discipline such as climatology, which enjoys almost
unanimous agreement on fundamental theory within its discipline, yet its practitioners are ignored
and disparaged even though they have a much better track record in matters of predictions and
fundamental theoretical explanations. It is time for policy makers to give more attention to economic
schools and approaches that embrace the messy world of data, empirical reality, uncertainty, and
irrational human behavior [1,2,99–103].”
Here is the rest of the links and snippets.
Of Ecosystems and Economies: Re-connecting economics with reality 213
Clive L. Spash and Tone Smith
“It can be argued that economics, as now mostly practised, is largely self-reinforcing rather than self-correcting as neoliberal vested interests dig in.
Davos 2019: the yawning gap between rhetoric and reality
“Nor will there be while economics is underpinned by the notion that more is always better, that the overriding goal of policy should be to maximise growth, and that interference in a system where power is skewed towards the rich and powerful should be kept to a minimum. The depressing conclusion from a dinner held in Davos to discuss new thinking in economics is that – with one or two notable exceptions – there has been very little new thinking in economics. A decade after the biggest crisis in living memory and with the clock ticking away on climate change, it’s business as usual.
The conclusions from this should be obvious. Economics in its traditional sense is useless when it comes to addressing the urgent problems that need to be solved. Other disciplines, such as psychology, can actually be more helpful than models based on supposedly rational consumers maximising their utility. And unless we rethink our economic model and retrain our brains, we can see it and we can shout it from mountain tops in Switzerland. But it won’t be sorted.”
End of sidebar
Economic Growth and why it happens or not
The way to get data on economic growth in the USA is to look up the Bureau of Economic Analysis https://www.bea.gov . BEA is the federal agency tasked with studying economic growth, and sends out quarterly and yearly reports reporting how fast the economy is growing and the sectors of the economy leading the growth, nationally and by state, as well as additional data. After reviewing the reports I think the data on RI and the country give complete lie to any thoughts that the business climate has anything to do with anything except making it easier for the rich to steal.
Is Growth dead?
Ever since the Limits to Growth came out in 1972 https://www.clubofrome.org/report/the-limits-to-growth/ it has been a topic of discussion as to whether on our finite planet the economy can grow forever. Is it secular stagnation that will stop the growth? Climate change? A loss of forests and other wild resources? Or will the dematerialization we are constantly told is coming allow 10 Billion people to create ever more economic value without burning down the house? The jury is still out on dematerialization, though evidence that we can grow the economy while it dematerializes is rather weak, especially if what passes for growth fuels greater inequality.
But the jury is not out on the idea that most of what we get today is uneconomic growth, growth that harms communities and the planet. https://www.humansandnature.org/economy-gus-speth
“For ecological economists like Lawn, increasing the size of high-GDP economies is now producing uneconomic growth rather than economic growth, because these economies are past their optimum size, as measured by a marginal cost-benefit analysis.
So our politicians, their advisers, the economics profession, lobby groups, the media – in fact, society as a whole – is trapped in a mass delusion that is buttressed every day by things like bandwagon effects and cognitive biases, even while Earth’s life-support systems face collapse.
In the hey day of the postwar boom, when the economy was much smaller and climate weirding and deforestation had not become as urgent as they are today, the USA sometimes achieved economic growth rates of 4% or 5% a year. Now we get 2.2 to 2.4% most years. The global average is about 3% with China and India leading big economies at 6 and 7% growth per year and Europe averaging about 2%. Africa is currently seeing relatively strong growth of about 3.5% a year, though it varies tremendously from country to country based on local conditions, but in any case all of the African economies are starting from a very low base. It is of course much easier for small economies to have large percentage increases each year than large economies.
More and more writers are offering up essays and articles about both the end of growth, and the need to end growth due to ecological collapse. This is one of my favorites.
Is U.S. Economic Growth Over? Faltering Innovation Confronts the Six Headwinds
NBER Working Paper No. 18315
Issued in August 2012
Gordon makes the case that the rapid economic growth between 1870 and 1970 was the result of unique economic circumstances and a plethora of earth changing inventions like the telephone, electric power, cars, airplanes and the like that massively shifted people from country to the city and helped boost productivity while dramatically boosting employment. The computer revolution according to Gordon is having less of an effect and not increasing employment in places that are already among the wealthier on the planet.
I offer up a quote on growth that comes from some rather reputable CAPITALIST consultants. McKinsey and Co.
Africa: A continent of opportunity for pharma and patients
Africa may be the only pharmaceutical market where genuinely high growth is still achievable. Here’s what’s driving that strength and how companies should react.
June 2015 | byTania Holt, Mehdi Lahrichi, and Jorge Santos da Silva
“In a world of slowing and stagnating markets, Africa represents perhaps the last geographic frontier where genuinely high growth is still achievable. Early movers can take these four steps to pursue competitive advantage:
Here is what I wrote about the article several years ago. A bit RI centric and sort of out of order for this paper, but this is where the McKinsey article fits. And not very different from how I would say it today.
“What McKinsey is saying, that rapid growth anywhere except in the very poorest and rapidly urbanizing places is likely to be a short term resource boom followed by a bust. Combined with the slowdown of growth in China, the steady state economy in most of western Europe, the collapse of ecosystems everywhere, and the growing inequality in which the anemic growth the neoliberals tout all ends up in the hands of 1% of the population, one has to conclude that Rhode Island is very unlikely to ever achieve high growth rates again. No matter what tax policy and give aways to the rich the legislature comes up with. And the effort to achieve rapid growth is likely to do significant harm by damaging ecosystems and increasing inequality.
Since RI is not going to achieve high growth rates again, what we face in the public policy realm are choices as to which policies are likely to create the most widespread prosperity in the low to zero growth environment we find ourselves in. Unfortunately the policy makers in Rhode Island insist that they can get a high growth rate here if we just follow their prescription. Of course they have been failing for the last 50 years with this prescription. And unfortunately, policies to achieve growth that do not fit the actual situation we find ourselves in accelerate inequality and ecological collapse. Thereby making things worse. The political leadership get their marching orders along with the campaign cash they use to get reelected from global corporations and the real estate industry.”
A school of economics focused on the development of steady state economies so as to not overdraw the Earth’s resources is becoming more mainstream. Ecological economics points out that if we over draw the resource base, things will crash.
This very recent article makes the case in slightly different fashion
“It’s an absurdly odd world and it signals two things,” said investment banker Daniel Alpert, managing partner at Westwood Capital. “There’s an obvious, persistent and continuous glut of underutilized capital and there’s no place in the advanced world for that capital to be invested without excess risk.”
“Economic growth is slowing around the world, in part driven by President Trump’s trade war. But there’s a growing debate over whether the global economy is only softening or coming in for a hard landing.”
“This is the ultimate indicator that something is fundamentally wrong with the world economy,” said Adam Posen, president of the Peterson Institute for International Economics. “The escalation of the trade war is making it worse.”
We have this glut of capital with nothing to invest it in that provides good yields that actually benefit communities. Have had this problem for years. We get hoarding, we get real estate speculation, and we get investments in destroying ecosystems for short term gains, but in the western world there is nothing to invest in that generates jobs or growth the way previous generations of investments did, nor anything that lifts all boats, the growth only lifts the yachts. So the rich hoard their money, leave properties vacant, demand subsidies to build luxury apartments while thousands sleep on the streets, and demand tax cuts while corporations buy back their stock to raise the price of their shares instead of investing money in productive activities. https://www.cnbc.com/2019/07/29/buybacks-companies-increasingly-using-debt-to-repurchase-stocks.html
And this on where the modern technology is taking us
“Economists don’t disagree about jobs vanishing, they argue over whether these will be replaced by new jobs. Economic history tells us they will. The automobile may have wiped out blacksmiths, but it created new jobs in car manufacturing and highway construction. Freed labor resources, history tells us, always find a replacement outlet and the digital economy will not be different.
I am not convinced.”
Maybe what we really need to do is give up the obsession with growth and focus on community prosperity, from the bottom up since when lower income people do well, everyone does.
And to emphasize the point that we are in resource collapse, that growing based on using more resources faster is an iffy proposition in the 21st century, and that we might even need to shrink the economy, More links.
“The biophysical evidence — that is, reality — shows that material consumption and waste production are still increasing with population and GDP growth. Meanwhile, carbon dioxide is accumulating at accelerating record rates in the atmosphere and the years 2014, 2015 and 2016 sequentially shared the distinction of being the warmest years in the instrumental record.”
What really determines growth rates
Whether or not we believe growth is desirable, at least for anyone other than people living in very low income countries who do not have enough to eat and need for the economy in their neighborhoods to expand so that everyone can be fed and housed, we still need to know why and how the economies of communities, states, and nations grow. And we need to start to incorporate into our brains that what we are currently getting in the industrial nations is uneconomic growth radically skewed to the wealthiest while everyone else gets poorer.
The things that seem most important if a community or state is to see rapid economic growth are: a boom in natural resource exploitation, rapid immigration from rural areas to cities, and being a huge city with large financial, high tech/biomedical and media industries. Just about every place on the planet with high growth rates meets at least some of these criteria.
A lot of my understanding of this started with the work of Immanuel Wallerstein and was elucidated in his World System Theory.
Wallerstein explores the roots of global capitalism since the middle ages. I especially want to note Wallerstein’s understanding of the role of forests in the growth of cities, and how necessary it seems to be to steal forests to achieve high growth rates. China does not have enough forests to exploit to fuel its growth, and would appear to be an exception to this rule except for the fact that China has, by a variety of nefarious methods, stolen the forests of Vietnam, Cambodia, Laos, Papua New Guinea, and Indonesia to fuel its 30 year boom. https://news.mongabay.com/2007/06/chinese-demand-drives-global-deforestation/ And build cities.
Much of China’s growth was the direct result of moving low income farmers into manufacturing cities that were built at the direction of the government. https://fas.org/sgp/crs/row/RL33534.pdf Now the growth is slowing as half the farmers have moved to the cities, manufacturing heads up the technology ladder, and employment for the masses becomes harder to engineer. And forests are getting harder to steal as they disappear and resistance by the remaining forest people is supported globally. Brazil has been in a recession for a while and Trumpist President Bolsanaro has decided that destroying the Amazon forests faster will help boost the economy.
In the long term, it is bullshit, though Bolsanaro probably will line his pockets with the bribes of his cronies as they practice genocide and steal land from the people who live in the forest. And destroy the climate of the whole planet.
Deforestation causes huge financial losses.
“The findings showed that while gains by agriculture are US$32 to 53 billion per year, the environmental damage caused by tropical deforestation during this period amounts to future annual losses of US$107 to 135 billion per year. Despite the study showing large differences between the costs and benefits globally, the team found that as a whole, tropical deforestation generates large economic losses.”
Unfortunately those involved in most economic development planning seem to think of forests as infinite or never consider them at all. I recently read an article in an economic development blog that waxed rosy about the future of forest industries. Here is the link and my comments on the article.
“I find it rather interesting that one could look at long term trends in the forest based industries and never once mention the health of the forest, the amount of wood currently available, or climate change. Nor the loss of biodiversity and the recent trends to make sure that the indigenous hold on to the land to protect the climate and biodiversity. “
Here is the positives on why we want forests to thrive while recognizing the threats.
That is why we need to ensure tropical forests are worth more standing than when they are cut down for grazing livestock, growing crops or harvesting timber,” David Festa, senior vice president for ecosystems with the Environmental Defense Fund, said in a statement.
The sentiment echoes a remark from noted biologist E.O. Wilson during an interviewwith the BBC: “Destroying rainforest for economic gain is like burning a Renaissance painting to cook a meal.”
“No one understands the value of forests better than indigenous and local communities,” she said. “As experts, often guided by hundreds of years of knowledge, we are uniquely suited to manage, protect and restore the world’s forests.”
Research has shown that forests managed by indigenous communities have lower deforestation rates and release less CO2 than those managed by governments, and the new IPCC report recognizes for the first time the role these peoples could play in addressing climate change.
“Finally, the world’s top scientists recognize what we have always known,” a group of community and indigenous organizations from 42 countries said in their response to the report released on Aug. 8.
But critical to nurturing that beneficial relationship is acknowledging indigenous land rights around the world. The statement’s authors point out that these communities customarily take care of more than half the world’s surface. But governments only recognize their ownership of about a tenth of global land. Furthermore, the signatories to the response argue, these groups must be involved in decision-making processes about what happens to the land they hold — what’s known as free, prior and informed consent, or FPIC.
But standing up for the right to have a say over what happens to a piece of land is often contentious and dangerous. On July 30, Global Witness released a report documenting the deaths of 164 “land and environmental defenders” in 2018 — an average of more than three a week.
Another study, published Aug. 5 in the journal Nature Sustainability, found that more than one-third of killings between 2014 and 2017 over natural resources involved either agriculture or mining interests.
“No one knows the conflicts playing out among food, fuel and forests better than indigenous peoples and local communities,” Tauli-Corpuz said. “We’re often in the cross-hairs of conflicts over land, especially forests.”
When Rhode Island was in discussion about whether to build a container port at Quonset 17 years ago I brought up the connection between the exports from southern and eastern Asia that would be carried in the ships that would dock at Quonset and the deforestation and genocide that accompanied it. It drove the RIEDC crazy that anyone would connect the dots in Indonesia and bring that to the policy discussion in Rhode Island, another example of the tunnel vision of the economic development community in Rhode Island. They seem to know how to add, but seem to have forgotten how to subtract.
Does Rhode Island fit any of the models?
Let us look at economic growth data from the BEA. Rather than make a chart of RI data, I want you to look at the BEA reports linked here on your own to see how Rhode Island matches up with national data and explanations of growth by the BEA. This first article also contains a chart of quarterly growth the last 5 years.
This is the most recent quarter for which data was available as this research was being done, quarters mean very little, but in this case the RI growth rate was 2.2% and the national average was 3.1% pretty close to 70% of the national average, the same as it has run for years.
From 2014 to 2018 RI averaged 71.4% of the national average, with a range of 60 to 75%. RI is always at the bottom of the business climate rankings, and yet despite any policy gyrations, including some rather large tax cuts, we track at 70% of the national growth rate. It is not the business climate that is driving growth it is what is going on around us. US average for last few years has fluctuated from 2.2 to 2.4% except for last year when it was 2.9 after the short lived goose of the tax cuts for millionaires. That is already fading away, and when the trade wars are thrown in, looks like we may be heading for a recession. Which modern economic theory cannot account for in their models.
Ponder this. If RI is such a bad place for business, with a business climate ranking between 45 and 50 in many rankings, why do we have a per capita income right in the middle of the pack and a growth rate that is close to that of other old industrial states in the East, and consistently has GDP growth (about 1.7% ) at about 70% of the national average? Kind of tells me that we would be better served accepting that old industrial economies in small places that do not have big natural resource sectors grow slowly and that we are slowly approaching a steady state economy rather than forcing Rhode Island through gyrations to appease the rich who want more to line their pockets as healthcare becomes unaffordable, housing becomes unaffordable, inequality becomes intolerable, the infrastructure decays, and the climate deteriorates. Lower taxes never fixed the infrastructure or the schools, but that is what the politicians are trying to sell.
Here is one quote from the 2018 final and 2018 fourth quarter report that I think makes the case pretty well that it is not business climates that determine growth rates, it is natural resources and history.
- “Mining increased 38.0 percent nationally and contributed to growth in 49 states. In addition to Texas, this industry was the leading contributor to the increase in real GDP in Wyoming, Oklahoma, Alaska, and New Mexico–the second through fifth fastest growing states. “
If you look at the BEA maps it is crystal clear that states with large natural resource sectors grow faster than states with small natural resource sectors except when they hit a resource bust, and states in the West grow faster than states in the East. We in the East have fewer unexploited resources and are less blatant about depleting natural capital and calling it profit. It is very instructive to look at the data for North Dakota in the BEA charts. North Dakota always ranks in the top 10 of business climate rankings. Some years it has tremendous growth, as fast as any place on the planet, other years it crashes. When the fracking boom went bust one year so did North Dakota. No business climate in the world is going to overcome that. Nor enhance it.
Now think about Wallerstein again and his suggestions for the factors that lead to periods of rapid growth. Natural resource exploitation/depletion, rapid movement of low income farmers to the city so they can work in low wage manufacturing and be replaced on the farms by machines, and being a global megacity with a few high end specialties and lots of high end services. Finance is one leader, entertainment another, medicine/biotech a third, and information technology sort of stiches it together.
Could it be any clearer that growth rates are determined by your economic history and resources and not your business climate? What you see when you compare business climate rankings, per capita income, and growth rates is a complete hodgepodge. Business climate rankings for rapidly growing states and for the slowest laggards are all over the map with some high ranking states having very slow growing economies some years. Per capita incomes match very little except historical trends. Examples: Mississippi has the lowest per capita income, a business climate ranking of 31, and one of the worst performing economies in the country. Connecticut has a business climate ranking of 47 and is usually 2nd or 3rd in per capita income. RI has a low ranking (44) is 24th in per capita income (right in the middle) and ranks with its old industrial peers for growth rates.
One more point. The national growth rate is significantly buoyed by extractive industries in select locales. The growth rates are almost always lead by resource extraction states as noted above. If we removed the extraction industries from the growth charts and called it the depletion of natural capital that it is, growth would be significantly lower, sort of close to where RI is, though we might still be below the national average due to old and somewhat inefficient infrastructure. But no one would be pointing out how far below the national average we are, because the national average would be much lower, while Rhode Island’s growth rate would be relatively unchanged. What is blamed on politics should rather be looked at as a historical and geographic fate and the ecological collapse due to over expectations of growth in the 21st Century.
A Rhode Island Example
West of Elmwood Avenue in Providence is a factory district. Old brick mills that once housed all manner of industry. A few businesses remain, including a few building sized factories, but many of the buildings have been turned into elderly apartments, condos, and schools. I am totally used to factories lining rivers in New England, with water power powering mills right up to the late 1800’s. But this industrial area is not on the river. In fact it is the oldest large accumulation of mills I have ever seen that is not on a river. The area was developed around 1890, which gives us some clues. It is the first generation of mills that could be built off the river powered by fossil fuels and electricity.
I am not 100% sure what it looked like before the 1890’s, maybe it was farms, but the key to the location is that it was laid out before the automobile was the key way to transport goods. The district has a rail line abutting its southern end (Huntington Ave). And it is absolutely flat from the rail line going north up the main thorough fare of the factory district (Bucklin St), which was necessary for moving heavy loads by horse drawn wagon to and from the railroad.
The Rhode Island economy started its period of decline around 1920, and it is telling that the 1890’s factory buildings were reaching the end of their up to dateness for modern production just as the automobile and trucks gave much greater mobility to businesses with large machinery. When the next generation of factories were built they were no longer built on transit lines, no longer within walking distance of workers homes, no longer multistory. They were now being built anywhere there was cheap labor, cheap land, electricity. and a road. Rhode Island, a perfect place for industry in the 19th Century with the close proximity of ports, immigrants, and water power, no longer fit the economic development model and started to fade. The racist Dawson act of 1924 restricting immigration from Southern Europe did not help either. The collapse of downtown business districts took until after WWII and the development of car oriented suburbia but was essentially complete by the 1970’s as well.
But even well before 1920 Rhode Island was always obsessing about creating the right climate for business. But it never mattered. When RI looked like what a prosperous place should look like, with ports, rail, immigrants coming off the boats, and water power, we received our bountiful share of investment. When the economy passed us by, no tax cuts or weak regulations by a business friendly legislature has ever brought us back to the top tier.
We do not fit the model for rapid growth, and the more we learn about what happens when you try to force communities to fit the neo-liberal model, the more we see how what the rich demand makes life in our community much more difficult for many of our residents.
Regulations and the Economy
Another key factor in Business Climate Rankings is the regulatory environment. Now I will admit that a place can be so corrupt and full of red tape that it can tank its own economy. Zimbabwe under President for Life Mugabe was such a place. But those places are extreme examples, far beyond what happens in Rhode Island. There is no evidence that a reasonably managed regulatory system, even one with strong protections for the environment, public health, and workers, hurts the economy. Most people who start a successful business are used to red tape and it ends up as a minimalist impediment. And most business owners want to live in a nice place with little pollution, good parks and schools, well maintained infrastructure, clean beaches. I cannot find the link but the Rhode Island Foundation did a study and found that the regulatory environment in Rhode Island was barely a consideration for business people. Wetland regulations are always a bug a boo for real estate developers because people like to live near the water and developers seem to not care about those living downstream who get pollution and floods when wetland regulations are ignored or suppressed.
Quick example. Automobile industry claimed the cost of installing seatbelts would mean that fewer people would buy cars. They claimed fuel efficiency standards, safety equipment, cleaner engines, and all other manner of things enacted to make cars cleaner and safer would ruin the business. The reality is that the only thing ruining the car business is car companies.
People keep studying the topic and the evidence is pretty clear that protecting the environment, public health, and workers has not harmed economies, and that frequently the innovation for cleaner business practices and technologies has been an economic boon. That we are told the opposite is a strong indictment of the corruption inherent in systems run by the rich for their own benefit.
Rather than bore you with more of my take on this , here are some links and excerpts to make the case
http://web.mit.edu/polisci/mpepp/Reports/eepup.PDF This paper by Steven Meyer is one of the earlier reports on this topic.
The complaint that regulations cost the overall economy money has been shown to be untrue, http://grist.org/energy-policy/2011-03-02-gains-from-clean-air-act/ but is a big part of today’s policy agenda.
Private profit overwhelming public good based on the myth of deregulation boosting the economy. And they want it cheap.
“Finally, when looking at the total effect of environmental regulations on the economy, the effect is overwhelmingly positive. According to the Office of Management and Budget, cost-benefit calculations for all major regulations between 2005 and 2014 showed economic benefits that dramatically exceeded costs, every single year.
• The benefits of environmental regulations have exceeded costs by a ratio of more than 10:1
• All told, major regulations provide net economic benefits to the U.S. of over $500 billion per year.
Another early analysis ranked the U.S. states according to the strength of their environmental policies in the 1970s, and evaluated subsequent economic performance in the 1980s. The author found that states with stronger environmental policies saw faster growth in gross state product, in total non-farm employment, in construction employment, and in overall labor productivity. Among other things, the author noted that “growth in gross state product among the strong environmental states was more than twice that of environmentally weak states. When comparing the 1980s to the 1970s, economic growth accelerated in states with strong environmental policies, but slowed in states with weak environmental policies. “
“But no where was the effect greater than with EPA regulations themselves. Over the last decade, they imposed as much as $45 billion in costs on the economy, but they also drove as much as $640 billion in benefits:
The OMB found that a decade’s worth of major federal rules had produced annual benefits to the U.S. economy of between $193 billion and $800 billion and impose aggregate costs of $57 billion to $84 billion.“These ranges are reported in 2001 dollars and reflect the uncertain benefits and costs of each rule,” the report noted.
The San Francisco Federal Reserve even ran an analysis of regulations more broadly, and found that in states where businesses expressed more concern about regulations over time, employment actually went up slightly.
Surveys of small businesses routinely fail to find compelling evidence that firms view taxes and regulations as a major impediment to hiring, an EPA-mandated clean-up of the Chesapeake BAY is anticipated to create 35 times as many jobs as the proposed construction of the Keystone XL pipeline, and jobs in the coal industry actually increased by 10 percent after the EPA cracked down on mountaintop-removal mining in 2009.”
“The economic benefits of various sections of the Clean Air Act ranged from 4 to 1 to 40 to 1 greater than the costs of compliance for the Acid Rain sections of the law. http://www.smallbusinessmajority.org/pdf/Benefits_of_CAA_100410.pdf
“1. The Clean Air Act has proven to be a very good investment. Studies show that the economic benefits of the Act have far exceeded the costs of controlling air pollution emissions. According to the Office of Management and Budget, the total economic benefits of the Clean Air Act are estimated at more than four to eight times the costs of compliance.
2. The CAA has fostered a long period of economic growth and development by protecting public health and the environment. In the last two decades, emissions of the most common air pollutants have declined by 41 percent, while Gross Domestic Product (GDP) has increased by more than 64 percent.
3. The CAA has spurred important technological innovations, such as catalytic converters, that have helped fuel job growth in the U.S. economy. The environmental technology industry— spurred by environmental regulations and particularly the Clean Air Act—led to the creation of 1.3 million total jobs between 1977 and 1991.”
Dirty Air Kills 30,000 Americans Every Year, New Study Says
“A new study estimates that fine particle pollution kills more than 30,000 Americans each year from lung and heart disease, and that more stringent air pollution regulations could save tens of thousands of deaths annually.
If airplane crashes killed as many people, “it would be on the front page of the paper and people would be marching in the streets trying to fix it,” said Dr. Brian Christman, a spokesman for the American Lung Association and vice chair of the department of medicine at Vanderbilt University’s School of Medicine in Nashville, Tenn. Read article in WebMD.”
When we do the cost benefit analysis on things like the Clean Water Act or the Clean Air Act, the benefits are strong even if we do not take into account all of the avoided medical costs that dirty air and water would burden us with. If we take health into account the economic benefits are so overwhelming that the resistance to a cleaner environment must be viewed as an extremely cruel joke.
This applies to all of the ways we try to keep water clean. Maybe it is cheaper to dump sewage in the river instead of treating it, but the public health improvements over the years more than pay for themselves in community health and access to resources. http://www.usnews.com/opinion/economic-intelligence/2015/06/08/epa-clean-water-rules-benefits-outweigh-its-costs In fact the death rate in cities were always higher than the birth rates until the introduction of sewer systems. The regulations that protect wetlands are one of the biggest targets of the right wing in America. But these days we are finding that Green Infrastructure to manage stormwater pollution provides benefits to our communities far beyond just cleaning the water as greening communities to manage stormwater reduces heat island effects and provides green space in communities. https://www.epa.gov/green-infrastructure/economic-benefits-green-infrastructure-case-study-lancaster-pa
Key points and take aways
The criteria for rapid economic growth are mineral booms, massive immigration off the farm to low wage manufacturing jobs, and being a global megacity with giant corporations in a very few favored industries. Deforestation/the murder of the people of the forest is often a key component as wood is critical for the building of cities, and the wood and the people need to be removed so the mines can be dug. Even in the modern world rapid economic growth is still very closely linked with faster exploitation of natural resources. The supposed ability of modern economies to grow with a circular economy or through an economy delinked from using more stuff from the natural world has not been proven.
The fastest growth rates are seen in places experiencing mineral booms. Which clearly are not sustainable, or even likely to be productive for more than a decade or two. Boom towns do go bust.
Old industrial small and medium sized places will have growth rates below the global average of 3%, and in the United States below the average of 2.4%. The global rate is buoyed up by mineral booms and the rapid growth in China and India. The US rate is buoyed up by the fracking boom. Based on this, that Rhode Island has averaged 1.7% growth the last few years is actually pretty good, even though we are constantly told it is too little.
There is no evidence that lowering taxes, weakening environmental and safety regulations, or following any of the rest of the prescription offered by mainstream neo-liberal economists and their business climate acolytes increases the growth rate. History and resources rule.
No matter how hard we try it is unlikely that anything the politicians and developers do to increase the GDP growth rate in Rhode Island will speed up growth enough to notice, and that by lowering the quality of life, undermining democracy, and creating greater inequality, they are likely to do a great deal of harm to our communities and even the economy they claim to be helping.
The wacky state of economic development in Rhode Island.
Rhode Island was an economic powerhouse in the 19th Century. We had almost everything needed for economic growth. Water power right near ports, railroads, the latest technology and innovators to keep us up to speed, and a huge influx of low income immigrants off the farms of southern Europe and other places. Infrastructure built as we entered the 20th Century started to fray, literally and economically, by the 1920’s, but instead of being a place continuing to draw massive investment, the investments went elsewhere as the automobile and truck allowed much more choice in factory locations in most industries. It took a while for it to all unwind, helped along by the Great Depression, with some revival in supplying World War 2, and sort of coasting through the post war boom, but the 1970’s was the last hurrah of the old economy. Since then the basic goal of every level of government in Rhode Island has been to revitalize the economy. And if the politicians are to be believed, we have had 50 years of failure.
I believe the politicians completely misjudge the situation, and that the Rhode Island economy of the 21stCentury is performing pretty well in the context of our times. With no actual reason for optimism based on long term performance the political class and the business class think the GDP growth rate in Rhode Island ought to be about 3 to 3.5% a year. Excuse me, when the global growth rate is 3%, propped up by resource booms, China, and India, and the US growth rate averages about 2.3%, primarily on the back of global overheating, it is hallucinatory to think that Rhode Island is ever going to get much above 1.7% except for short periods when the national economy ignites briefly.
But the neoliberals among us, most of the inhabitants of the Statehouse, city halls, Chambers of Commerce, professors of economics and business, and the entire industry that has grown up around real estate, still insist that 3% is the goal, and that the plan is to use the neoliberal/business climate blueprint. I have also heard the argument that if we did not follow the neo- liberal model as much as is possible given our situation, that we would be in much worse shape. But given the actual effect of the prescription on growth rates, that has to be taken with a grain of salt.
Something I wrote a few years ago
Open for Business, the Business Climate, the actual climate, and economic development in RI. Greg Gerritt 7/8/16
“A simple way to tell that despite all the rhetoric and hot air, and all the stupid things the clowns on Smith Hill have done, the growth rate in Rhode Island continues to hover at about 60 to 75% of the national average year after year. This is EXACTLY what one would expect given the actual conditions in Rhode Island and our not participating in the fracking boom. The 1.8% growth rate we have experienced in RI is pretty close to the median in the US, Only half the states have rates above 1.8 the last few years even when the mean for growth in the US is hovering between 2.2 to 2.4%, So the politicians and the developers tell us, just go harder, double down on inequality, ecological destruction, and handouts to the rich. They keep telling us it will work, and it keeps not working.
Are the people responsible for economic development in Rhode Island incompetent? Are the politicians incapable of passing any business friendly legislation? Can the bureaucrats not implement the neoliberal blueprint, or is there something very wrong with the plan? Whatever the reason, the economic plans that are rolled out time and again have never delivered. Of course in Rhode Island we can easily believe that our political and bureaucratic leadership is that incompetent and corrupt, but I know many leaders in Rhode Island, and they are capable people. They are just missing the boat on how practical it is to try to get 3% growth each year in RI, and even more ill-informed about the damage trying does. But neo-liberalism is all that is taught and all that is acceptable in powerful company.
If you remember, a previous section discussed the neoliberal/business climate plan, how it was usually implemented, and the actual results it gives. The results are that places that have the right combination of factors to fit the modern economy grow rather swiftly no matter their business climate and that every other place grows much more slowly no matter what the tax rates or regulatory climate. So the gyrations of policy to appease the criminal rich and the real estate industries implemented by their pet politicians never bring rapid growth or a general prosperity, but do serve to line the pockets of the already wealthy and impoverish the rest of us more quickly.
Rhode Island”s political establishment and institutions should be called onto the carpet for how they funnel money for economic development to the wealthiest and neglect everyone else. I offer up two examples. We need a much better mass transit system and RIPTA has plans for it, though money is always an issue. Several years ago RIPTA was in one of its periodic financial crises, the direct result of trying to fund transit with a tax on gasoline. The state was threatening to cut RIPTA’s budget. At the same time the state was all in on lengthening the runways at TF Green airport a project that cost many millions and irked many of the airport’s neighbors. The bus riders put on a full court press, but the state ignored us. RIPTA was left to limp along, while the airport got the money since it is of “critical importance” that rich folks be able to get to Providence by air easily, while bus riders can be ignored since they are not rich.
Here we are a few years down the road. The airport has longer runways, but the number of fliers is down, and all the airlines that signed up to start flying to Providence have stopped doing so. (Guess that did not work out all so well) The flip side is that the Department of Transportation has latched onto some harebrain scheme from landlord and ex mayor Joe Paolino as part of his kick the poor out of Providence campaign to separate the transfer points so that it is harder for people to transfer from one bus line to another and to then build a tunnel under Washington Street for the pedestrians. And use all of the bond money the people of RI voted to go to improving the transit system to make it worse.
The second example is the Fane Tower. The I-195 commission is one of those typical RI quasi governmental agencies created by the legislature and executives to make it much harder for the public to influence development decisions. Designed to take power away from both local officials and the public, when the people fought back, the State Senate under the leadership of the Senate President, if you could call this leadership, voted to take local zoning power away from the City of Providence so that it was easier to fix the deal. The 195 commission tells us its job is to create the most and best possible economic development where the highway used to be. In other words it tells us it is creating our future. But no where does it tell builders that they need to build Carbon Net Zero buildings. This supposedly future oriented agency is still living in the past and seems oblivious to climate change and the need to rapidly decarbonize. The fact that they are starting to allow white elephants in places that are likely to be under water if the white elephants continue to pollute long before the life of the building should be over confirms their lack of vision. The 195 commission has primarily been a place where insiders go to get deals for industries that make life more difficult in the community. Or even worse, big subsidies for luxury apartments.
“And, of course, real estate development probably tends to greater extremes as a cycle within the greater economic cycle. Real estate booms and busts have come to characterize modern times, along with never-ending war and ecological carnage. The reason real estate rises and falls so dramatically is because it takes so much time to get these mega-projects permitted and to arrange the complex financing, and then built, then to market the units within. A project gets underway under one set of economic circumstances, and by the time it’s completed, things have changed. “
Commerce RI also has a lousy track record. So lousy that the Rhode Island Economic Development Corporation had to be rebranded as Commerce RI after a series of serious missteps. I am glad Commerce RI now has programs directly targeting minority entrepreneurs in low income neighborhoods, but the reality is that should be the ONLY programs they have. We do not need programs and funds to entice corporations to move. Those deals rarely benefit our communities. We do not need them advocating for a business friendly Rhode Island. The early portion of this report demonstrated exactly why that is bad public policy. Commerce RI should be using its clout for pro poor programs that increase livelihoods for those that the economy leaves behind, not those with the most resources. And it totally needs to get with it on climate change. Yes, they are helping the wind industry to gain a greater foothold, but they were not speaking out against big bucks spending on fossil fuels for powerplants and pipelines that will only contribute to more rapid climate disasters. And their support for the con men proposed megaport at Quonset that thankfully the people stopped would have contributed to deforestation and genocide in Indonesia. It will only be a useful agency when it loses the neoliberal leadership and orientation and truly embraces its mission to help low income Rhode Islanders and help us have an economy that is more equal and flowing towards a steady state and zero carbon.
Rhode Island needs to follow the practice of San Antonio.
“However, some local officials have begun resisting the temptation. For example, Mayor Sam Liccardo of San Jose, California, says that subsidies are “a bad deal for city taxpayers.”33 The administration of the nation’s tenth-largest city would rather focus on the workforce, citing a statistic that only 5 percent of job growth in Santa Clara County—which includes San Jose—comes from “move in” businesses.34 Similarly, in San Antonio, the nation’s seventh-largest city, the mayor and county judge wrote to Amazon declining to participate in its HQ2 search, saying, “blindly giving away the farm isn’t our style.”35
The academic literature tends to reinforce these mayors’ approaches. Incentives, while better targeted than broad tax cuts, are not particularly cost-effective, and research questions what, if any, impact incentive programs have on overall economic activity.36
Reality 3: Subsidies may result in diminished public services
Moreover, there also appears to be a connection between tax incentives and inequality. Out of a sample of the largest U.S. cities and counties, the magazine Governing found that the 100 places with the highest inequality, measured by the Gini index, had the highest median tax abatement per capita.65
The inequality is apparent in Sparks, Nevada. Following the arrival of Tesla’s battery factory in 2014, property values and rents have boomed, pushing many people whose fortunes fall outside of the margins of Tesla’s impact toward housing insecurity.
One model predicts that if a state gives away 1 percent of its personal income by cutting education spending, per capita income statewide would decrease 4.4 percent.73
Offering incentives deal by deal or passing legislation narrowly written for a single company in order to win a competition is bad tax policy. In one survey of economists, only 5 percent of respondents agreed that the country “as a whole benefits when cities or states compete with each other by giving tax incentives to firms to locate operations in their jurisdictions.”76 “
Despite the fact that the model does not serve the community very well, in addition to tax cuts for the wealthy and attacks on environmental enforcement, what we see is the power of the government continually getting behind very large projects that serve the needs of the few, and are often seriously opposed by a significant proportion of the populace. I was not in Rhode Island during efforts to stop the building of a nuclear power plant or a major oil terminal, I was elsewhere resisting similar proposals. But since the late 1990s I participated in efforts to stop a container port at Quonset that would have opened into the teeth of the Great Recession and cost us a cool billion, and the proposed downtown Providence baseball stadium to be built on our dime. Baseball has yet to be shown to really help the economies of downtowns, despite being an article of faith. And have you heard about the skyrocketing costs of the stadium Worcester is building? https://www.telegram.com/news/20180901/worcesters-polar-park-to-be-fourth-most-expensive-triple-a-field
Occasionally the legislature and the governor have managed to sneak a big project past us with little public scrutiny aided and abetted by the usual lack of transparency. 38 Studios comes to mind.
But what is most irritating is the everyday stuff they do. The industries they choose to support, the tools they use to do it and the results we get. I picked this example off the Slater Fund’s newsletter of Sept 5 2019
The Slater Fund is so excited that a company they helped fund has now been sold for the third time and this time the price was nearly a billion dollars. But it appears that the company is not in Rhode island any longer, none of the contacts on the press release listed a RI phone number. So what did we get for our money?
Or this one where we get public investment and private profit for products that none of us can afford to pay for any longer, but is a growth leader helping drive up the cost of healthcare.
The more I delve into it, the more and more obvious it becomes that economic development as practiced in Rhode Island is essentially real estate development in cahoots with the Med and Eds sectors of the economy. It is always a tax break to build this or that, an incentive to relocate a factory, or some other scam in the ever more devastating zero sum game of giving incentives that really do not do a whole lot, except fan the flames of gentrification and inequality as we the people subsidize the wealthiest among us. How could that not increase inequality? If real estate development is supposed to be the underpinnings of a strong economy, and is one of the primary underpinnings of the entire banking system, then how come the wealthiest among us, those owning the most stuff, need subsidies? Clearly there is something fundamentally wrong when buildings in downtown sit vacant, hardly anyone can afford housing, and the only way to get something built is with tax breaks worth millions for millionaires. For all the real estate game is touted as economic development it is clearly a broken model for communities even if developers make out like bandits. It also says the construction industry is broken as they can no longer build buildings that most people can afford to live in, and relying on a broken industry to generate prosperity is a very iffy proposition. https://qz.com/1705386/the-dfab-house-exhibit-opens-in-new-york-city/
“Firms looking to locate or relocate often overemphasize the impact that subsidies have on their decisions. They have good reason to do this since exaggerating the impact might encourage a state or local government to offer a more robust incentives package.
The reality is businesses place far more weight on other considerations. For example, in its request for proposal for HQ2, Amazon mentions incentives as part of “key preferences and decision drivers.” However, it also emphasizes real estate and siting availability; a talented workforce and education pipeline; sufficient infrastructure for workers commuting as well as for national and international travelers; and a community with a high quality of life”
“Governments competing for businesses by providing incentives is often a zero-sum game”
What the economic development leaders in RI need is a new plan, one based on creating employment in the lowest income neighborhoods, doing things that are necessary if the community is to be revitalized. Do not complete for runaway companies with subsidies. Maybe start with housing. Start with affordable nutritious food. Start with Green Energy. How about all 3 together? 10000 units of affordable rental units a year. All creating more clean energy than they use. Build that instead of anything else. Put them in cities and town centers with public transportation and large community gardens. Build up, not out. No more subsidies for moving from Massachusetts or Connecticut. No more sweetheart deals for fancy buildings downtown. No more subsidies for hotels. If we are to subsidize, what we need to subsidize is affordable housing for low income folks and the growth of small locally owned businesses in the lowest income parts of the community. No more Tax Stabilization agreements, no more sales tax rebates for building materials. Grow food. Practice prevention so people do not get sick, rather than spending money subsidizing the rich to cure them . It was going to cost $1 billion to build the Invenergy power plant. That same billion would go a long ways towards making the housing of every low income person in RI efficient and run on clean energy, and would save as much energy as Invenergy would have produced with no carbon emissions.
Can the healthcare industry save us?
First thing to know about the state of the American Health Care industry is that the US is #1 in expenditures per person while we are 37th in the delivery of health care, primarily because 30 million people have no insurance and millions more have insurance that leaves them very vulnerable to high deductibles and medical bankruptcy. https://www.commonwealthfund.org/press-release/2014/us-health-system-ranks-last-among-eleven-countries-measures-access-equity
I learned about the medical industrial complex when The Miriam Hospital ran over my neighborhood and the neighborhood association fought them for 2 years until we got steamrolled when no public officials were willing to take on the medical industrial complex. I studied why hospitals expand as part of trying to figure out how to stop it. At that time expenditures by hospitals were expanding about 11% a year. Hospitals were expanding, networks were expanding, the money grew. An obvious thing for all politicians to support, more health care. It is the same thing with medical research, around which we are redesigning the Knowledge District on the I-195 lands. This field is growing much more rapidly than the whole economy. Another obvious choice for state intervention under the misguided model. The only problem is that if expenditures in the medical fields are expanding much faster than wages everyone who intersects (i.e. gets sick or hurt) with the medical industrial complex get hit by higher bills, bills going up faster than their ability to pay. It appears that there are over 500.000 bankruptcies in the US each year that are primarily related to people being unable to pay a medical bill. https://www.thebalance.com/medical-bankruptcy-statistics-4154729 And our mish mash of an insurance system makes it that much more opaque, https://time.com/5673232/amercians-without-health-insurance-increases/ while the number of uninsured is creeping up again
Yes, I know miracle cures for cancer are great, and treatment for every ailment under the sun would be fabulous, I too am ready for the Star Trekkian device by which Bones scanned you and cured just about anything instantly. But for far too long the neoliberal approach to health has really been a day late and a dollar short in terms of increasing life expectancy and quality of life. The real improvements have come through water and sewer infrastructure for clean water, public health measures, and protecting people from toxic releases, not fancy expensive cures.
When developers and the development industry are building biotech labs, it means we cannot afford health care as more money needs to enter this arena faster than it is entering in the rest of the economy or it would by definition not be a growth leader. Which means health care has to go up in price to pay for all the new people and labs. It makes for a crazy sick society, as amid such lucrative speculation every suitable corner on North Main St has a core of regulars asking for money from dawn to dusk. That seems to be our new economy.
The actual results, in our health care system as it actually exists, is that the poor continue to die, and in fact the last few years, with the opioid epidemic (another result of our crazy medical industrial complex driven by profit) the life expectancy of people in the USA actually went down, for the first time in essentially forever. https://www.aafp.org/news/health-of-the-public/20181210lifeexpectdrop.html But we can create miracle cures for the rich and for those who get lucky and go viral with their pleas for money on the internet.
What is sometimes really galling about this industrial methodology is that much of the basic research on health care is funded directly with tax payer dollars through things like the NIH and the CDC. The basic research upon which all the patents build. But despite none of this being possible without tax payer support, as soon as a drug or technology goes commercial the public never gets paid back, we just get higher prices.
Investing in high tech medicine does create jobs for PHDs and other with highly modern skill sets. This is followed by investments in real estate, restaurants, hotels. The flip side is that it makes health care much less affordable for many, and drives gentrification through our neighborhoods as a small contingent has money and can out bid everyone else for the limited housing available in Rhode Island that people can afford to live in. Most workers have the new low wage jobs, even in healthcare, and rents are going up faster than their wages. The result is much greater inequality and displacement and we see it every day.
The Education part of the formula is promote the growth of the colleges despite the fact that this too drives up the cost of college much faster than wages have risen, https://www.forbes.com/sites/camilomaldonado/2018/07/24/price-of-college-increasing-almost-8-times-faster-than-wages/#4f020c0b66c1 saddling a whole generation with debt that will be very hard to pay off as the economy slows. The idea is then for college researchers to spin off new businesses. It looks great, it attracts investment in a few specialized fields, it provides opportunities for people to build Knowledge District buildings for research and development, but the prosperity does not expand into most of the neighborhoods of the city.
The successes we see that help neighborhoods are often in the food industries. Food often helps neighborhoods even if it is low wage work. Sankofa creating opportunities in food businesses at their incubator. Community gardens in parks, cooperative grocery stores. While the high end foodie culture is the glitz downtown, spurred by all the JWU grads, it is what is going on in the neighborhoods that improves the quality of life.
2018 and 2019 have shown just how this whole scam works with the struggle to stop the Fane Tower. Despite the fact that the a 600 foot luxury apartment building violates all the zoning codes and the comprehensive plan the people of the city put together several years ago, that it would dominate the new park and bridge that have become incredibly popular in short time since the bridge opened, and that the people are nearly unanimous in their opposition, the city is offering up tax breaks, and Senator Ruggerio, to help out his employer, a construction union, pushed through a bill to over ride all city zoning in the area so that the construction unions could have more things to build. . There is something fundamentally wrong with economies that are designed around an industry that requires looting the public treasury so that fat cats can own more. And that can only produce buildings for the richest among us to live or work in. https://qz.com/1705386/the-dfab-house-exhibit-opens-in-new-york-city/ Clearly the Fane Tower will seed further displacement as people leave Fane to move through the rest of the city as their lives change and then outbid everyone else for housing.
It would be negligent of me to conclude this section without at least a mention of the attempt by Invenergy (with the support of the entire political leadership of the state ) to build the Clear River fracked gas power plant in Burrillville.
With Great Fanfare Governor Raimondo stood with the executives of Invenergy and announced her support for building a fracked gas power plant in Burrillville. The timing could not have been worse. Invenergy was taking the opportunity created by the upgrading of the gas pipeline that runs across much of southern New England and goes through Burrillville. While Invenergy saw opportunity, what pipeline building has done is start an upwelling of activism against the entire gas industry, from fracking to pipelines to powerplants that has spread across the country. People were already riled up, so as soon as the announcement that Invenergy was coming, the opposition started. I went to one of the first hearings at Burrillville High School. 600 people filled the room to tell the state that Invenergy was not welcome. I am not sure the executives of Invenergy ever recovered their footing. And other than construction unions and the fossil fuel lobbyists there was no support to be found anywhere in the room. At that hearing and all of the myriad that followed.
I know that when the announcement came, the environmental community opposed the plant, but many were unsure that we had a chance to stop it. I returned to my colleagues after the hearing and said, who knows, but the people of Burrillville are going to fight and fight hard, and we ought to join in. There were lots of reasons to oppose the plant, traffic, dust, noise, local pollution, a threat to the water supply, the destruction of one of the most biodiverse forest regions in southern New England, fracking, and maybe most of all climate change. And the people of Burrillville spoke on all of them.
My voice was mostly used to point out that that if we continue to build fossil fuel facilities of any kind; powerplants, pipelines, export facilities, that we had zero chance of avoiding climate catastrophe, and that we would hobble the economy with stranded assets, thereby preventing us from adequately investing in clean energy and efficiency. I also spent a bit of time discussing how economic development works a lot better if it is projects that the communities involved actually support.
As is typical of Rhode Island, to “streamline” the process the legislature had created the Energy Facility Siting Board, primarily to prevent towns and cities from stopping big projects that powerful folks wanted built. Until Invenergy came to town, the EFSB, composed of the head of the PUC, the Director of the RIDEM, and the head of the Division of Planning had turned down only one project in more than 30 years. The skids were greased, but the waves of people kept up the pressure, including at the legislature. Invenergy kept shooting itself in the foot by not submitting proper paperwork in timely fashion, and eventually the ISO-NE which manages the electric grid in New England, decided that the power was not needed as energy efficiency and clean energy along with the usual rate of economic growth, made the power Invenergy proposed to make irrelevant. By the time you are reading this, the final decision may have been presented (the EFSB did announce that they were not giving them a permit several months ago, but are still writing up the decision) and the time for appeal may have passed without an appeal closing the chapter.
The same small group of people who support build, build, build, and climate be damned, keep telling us we need more fracked gas no matter what. They want to build more infrastructure for gas all over the place, and continue to try to site dirty facilities in politically weak communities so as to avoid scrutiny. And when we stop them here and there, they work to convince the legislature and governor to freeze out public participation in the economic decision making despite the fact that every new facility built will be closed before it wears out because they will no longer be economically viable and the climate emergency will change the politics.
The construction unions do merit a bit of discussion in this exploration of the RI economy. While unions have been losing clout everywhere, including Rhode Island, as a bulwark of a conservative drifting Democratic Party the construction unions still have some political clout at the RI Statehouse. But construction unions seem to be squandering more and more of that clout as they insist that communities have to host the things they want to build even if the community thinks the idea is ridiculous and that the project would be bad for the community. The thuggish ways they try to enforce their view does not help their case at all.
The construction unions seem to have tied their fate to the most egregious destroyers of communities. They are willing to build anything, anywhere, and get angry at communities who do not want monstrosities. What they need is a new plan. They need to figure out how to build what communities want and actually need rather than relying on the billionaires to give them work building bad stuff. Put their pension funds and workers into new and innovative ways of building affordable housing, https://qz.com/1705386/the-dfab-house-exhibit-opens-in-new-york-city/ create divisions focused on rehabbing all inefficient buildings in the state, building the kind of infrastructure that helps us tame the carbon demons rather than letting them loose in the air. The construction unions could support getting enough money by taxing the rich so that we can rebuild our infrastructure for the 21st century and beyond. How about working on the retreat from the coast and the building of resilience in our communities. They should also support a carbon tax so that it is easier for all of us to afford the transition to clean energy. We do not need 600 foot tall luxury towers next to parks, subsidized baseball stadiums, or gas infrastructure. But well sited wind turbines, solar arrays in parking lots, stormwater management, clean mass transit, reforesting our pedestrian friendly cities, affordable housing that is fossil fuel free and making every old building in Rhode Island 100% fossil fuel free can provide a lot of work over the next 30 years.
We have now looked at neoliberalism, business climates, economic growth, the effect of environmental regulation on the economy, economic development and community prosperity in Rhode Island. Now let us look at the economic consequences of climate catastrophe, and then look at the RI economy and its future orientation.
In 1750, just before the use of fossil fuels became widespread, there were about 280 parts per million of Carbon Dioxide in the atmosphere. Right now there are about 412ppm CO2 in the atmosphere. Svante Arrenhius figured out in 1895 that burning fossil fuels increased the amount of CO2 in the atmosphere and that as it accumulated it would bounce ever more infrared radiation back to the Earth and heat up the planet. No one has ever refuted this basic science. https://skepticalscience.com/empirical-evidence-for-co2-enhanced-greenhouse-effect.htm The average temperature on Earth is 59 degrees Fahrenheit warmer than it would be if there was no carbon dioxide in the atmosphere. The result of increasing CO2 levels does not show up immediately. CO2 stays in the atmosphere a long time and keeps bouncing radiation back to Earth, so there is a cumulative affect that will work for a while even if we reduce CO2 emissions immediately. As of 2019 we have added .8 degrees Centigrade to the Earth’s average temperature since we have had accurate thermometers, with the rate of increase continuing to rise as the CO2 accumulates. Climate scientists tell us that anything more than a 2 degrees C rise in temperatures could have catastrophic effects, such as more Category 5 Hurricanes, massive fires, droughts, floods, famines, and rising seas. Actually they are no longer saying we shall see these disasters, we are already experiencing them.
Climate and the Economy
How soon will the people of the Bahamas recover from Hurricane Dorian? The rich will recover quickly while everyone else will struggle the way the folks in Houston have been slow to recover from Harvey, and the way many folks in New Orleans have yet to recover from Katrina.
It is not only from the immediate disasters enhanced by climate change that economic hell will enter our communities. For sure more frequent disasters, stronger storms, bigger fires, floods, and rising seas will continue to play havoc with local economies. But long term we are likely to see crop failures, water shortages, droughts, famines, migrations and wars as well as places where it is too hot to work outside for months at a time. Here is what I find in the media:
“Like many farmers in the area, Adams’s land runs along the Missouri River, the longest waterway in the U.S. The storms breached levees that were built decades ago to protect the areas along the banks. Much of the flood-prevention infrastructure was built 70 years ago, but over the last three decades, the region has seen about an 8% increase in precipitation.
Adams put it in personal terms. “When I was a kid,” he said, “an inch of rain, or an inch and a half of rain, was a big deal. Now it’s like we get four- or five-inch rains all the time, or six-inch rains, even. That was unheard of.”
“I’m not a climate change guy, as far as climate change, global warming, or any of that stuff,” Adams said. “But have I seen the weather change in, say, my 20-year farming career? Absolutely.”
In response to these troubling changes, some farmers in Nebraska are considering new solutions to keep their businesses afloat. One of those farmers, Graham Christensen, travels the country discussing a green farming initiative called regenerative farming”
The world will struggle to feed refugees, and many will die as they leave devastated communities. Racism will rise. Hatred and oppression will follow. No economy does well under those conditions. And rising temperatures directly harm economies as well. Beyond the disasters listed, how about things like melting roads, heatstroke for workers, hydroelectric electricity shortages, and more violence in cities.
And that is just the short term effects. Thinking long term, the climate catastrophe under the business as usual scenario is likely to do more damage to human communities and the economy than anything short of all out nuclear war. And given the right wing craziness overtaking the planet as the economy in many parts of the industrial world implodes for the working class, and the oligarchs calling justice and democracy evil interlopers, a nuclear war becomes much more possible under a regime of climate denial and catastrophe.
“Food production is dependent on nature for the resources it needs. However, it is singularly depleting the very same resources. It uses 70 per cent of the world’s water and 40 per cent of land, accounts for 25 per cent of greenhouse gas emission, and is the leading cause of deforestation and habitat loss. And we will need to produce even more to feed growing populations and meet people’s food preferences.”
The False Choice Between Economic Growth and Combatting Climate Change
If nations met their commitments under the Paris Agreement, the world would still see the average global temperature rise by two and a half to three degrees Celsius, which, according to Burke’s paper, would result in a fifteen-to-twenty-five-per-cent reduction in per capita output by 2100. “
“The Stern Report (Stern 2006), which remains the iconic statement on the costs of climate change, reached the following conclusion:
Using the results from formal economic models, the Review estimates that if we don’t act, the overall costs and risks of climate change will be equivalent to losing at least 5 percent of global GDP each year, now and forever. If a wider range of risks and impacts is taken into account, the estimates of damage could rise to 20 percent of GDP or more. In contrast, the costs of action—reducing greenhouse gas emissions to avoid the worst impacts of climate change—can be limited to about 1 percent of global GDP each year.”
Reading this last statement, one would think that any politician who wants to promise two chickens in every pot, or touts the great growth we are going to see under his plan, had better get righteous on the climate. But many seem to be going the other way in hopes of preserving the economy that works for them.
“By the close of the century, the United States could be more than 10 per cent poorer, thanks to the economic loss that climate change will impose.
The planet has already warmed by around 1°C in the last century, with ever more intense and frequent extremes of heat, drought and rainfall. The news that climate change could impose massive costs is not a surprise.
Researchers have been warning for decades that although the switch away from fossil fuels – along with other steps – will be costly, doing nothing will be even more expensive and, for many regions, ruinous.
Studies have warned that both Europe and the United States will pay a heavy price for failing to meet the Paris targets, and the poor in America will pay an even heavier price.”
“In the latest study, researchers from California, Washington DC, the UK and Taiwan started with data from 174 nations going back to 1960 to find a match between variations from normal temperatures and income levels. They then made computer simulations of what could happen under two scenarios.
They made the assumption that nations would adapt to change, but that such adaptations would take 30 years to complete. They then looked at 10 sectors of the US economy in particular, and found that across 48 states, every sector in every state suffered economically from at least one aspect of climate change.
They also found that the Paris Agreement of 2015 – which President Trump proposes to abandon – offers the best business sense. Were nations to contain global warming to the ideal of 1.5°C, both the US and Canada could expect their wealth to dwindle by no more than 2 per cent.”
“The economics of climate change stretch far beyond the impact on growing crops. Heavy rainfall prevents mountain access for mining and affects commodity prices. Cold snaps raise heating bills and high street spending drops. Heat waves cause transport networks to shut down. All these things add up,” Dr Mohaddes said.”
“The idea that rich, temperate nations are economically immune to climate change, or could even double or triple their wealth as a result, just seems implausible.”
It would be good if the international and governmental financial institutions would get the point on climate and the future of the economy and stop funding white elephant fossil fuel plants but they are all talking a better game than they are practicing. I recently spoke at a rally asking people not to bank with Chase as they are funding many fossil fuel and deforestation projects.
“The insurance system is the economy’s shock absorber. Its role is to spread the impact of losses from those immediately affected to those with the wherewithal to bear the shock. In good times, the insurers earn handsome returns for accepting this risk. They cover their own liabilities by taking out reinsurance, further spreading the losses.
It is a highly effective system and enormous in scale. Property and casualty insurance (as distinct from life and health insurance) generates global premiums in excess of $1.5 trillion a year. The business is profitable so long as the risks remain within familiar limits and largely uncorrelated with each other. But that is precisely what climate change has called into question. As Carney put it in 2015, as a result of climate change, “the tail risks of today” will be “the catastrophic norms of the future.” Since the 1980s, the scale of weather-related insurance losses has risen fivefold to about $55 billion a year. Uninsured losses are twice as much again.
Research sponsored by Lloyd’s of London calculated that the 20-centimeter rise in sea level near Manhattan in the prior decades increased the insured losses inflicted by Hurricane Sandy in New York by 30 percent. The far more dramatic rises forecasted for the coming decades will do incalculably more damage.
Whereas “a [2 degrees Celsius] world might be insurable, a [4 degrees Celsius] world certainly would not be.” Without the ability to insure against catastrophic loss, the global credit system as we know it would simply cease to function.
Climate change is ,,, an environmental shift that will affect the very basis of human existence on the planet. It will likely create hundreds of millions of refugees. If that happens, the distribution of costs is unlikely to be decided mainly in the form of financial liability assigned by the courts. Rather, more direct and unpredictable forms of political action will come into play.”
Forests are a human rights, resource and climate issue
No one has ever figured out how to build cities and furnish houses with no wood. Paper is an essential of modern life. And new mines in the mountains mean the forest cover disappears there as well. Where civilization reigns, the forest is no more, meaning further forests need to disappear to keep feeding the expanding maw. And the people who live in them as well. The flip side is that the disappearance of forests makes all of our climate and weather related problems much worse. Destroying them adds CO2 to the atmosphere, and places with no shade are hotter and much more prone to flooding. And all evidence says that leaving the forest in the hands of the indigenous is the best way to keep the forest healthy. Nothing that was not said earlier in this paper, but a reminder is appropriate.
Deforestation causes huge financial losses.
The findings showed that while gains by agriculture are US$32 to 53 billion per year, the environmental damage caused by tropical deforestation during this period amounts to future annual losses of US$107 to 135 billion per year. Despite the study showing large differences between the costs and benefits globally, the team found that as a whole, tropical deforestation generates large economic losses.”
“the biophysical evidence — that is, reality — shows that material consumption and waste production are still increasing with population and GDP growth. Meanwhile, carbon dioxide is accumulating at accelerating record rates in the atmosphere and the years 2014, 2015 and 2016 sequentially shared the distinction of being the warmest years in the instrumental record.”
“The economies of all nations, the institutional, political, social and cultural fabric of every state, and the rights of all your people, and future generations, will be impacted” by climate change, she warned.
The UN rights chief also highlighted the impact climate change is having on insecurity around the world. She cited a UN estimate that 40% of civil wars over the past six decades have been linked to environmental degradation.
In the Sahel region of Africa for instance, degradation of arable land “is intensifying competition for already scarce resources”, she said. This in turn exacerbates ethnic tensions, and fuels violence and political instability, she added.”
“By 2030, the study estimates, 56 million people in the region will live in extreme poverty, but unless governments in Asia-Pacific take adequate measures to build up communities’ resilience to mitigate disaster risks, this number could more than double to 123 million.”
One might think that the people united could solve this problem, and I sure hope so. But the system is rigged against us. In a flawed democracy, one owned by the rich, the further skewing of the economic system towards the rich works to further skew the political system, giving us a vicious cycle and ever increasing damage at ever increasing speed. The one thing Donald Trump will be remembered for if civilization survives, is that he burned down the house.
While I have been a steady state economy advocate for years and am even more of an advocate for the slow shrinkage of the entire economy under the idea of use less and share more, it is good to see that many others are also replying to the over enthusiastic advocates for growth and those who believe that the climate catastrophe will not adversely affect the economy.
“Consider economists’ (and therefore society’s) near-universal obsession with continuous economic growth on a finite planet. A recent ringing example is Kaushik Basu’s glowing prediction that “in 50 years, the world economy is likely (though not guaranteed) to be thriving, with global GDP growing by as much as 20 per cent per year, and income and consumption doubling every four years or so.”
“Basu is the former chief economist of the World Bank, senior fellow at the Brookings Institution and professor of economics at Cornell University, so he is no flake in the economics department. But this does not prevent a display of alarming ignorance of both the power of exponential growth and the state of the ecosphere. Income and consumption doubling every four years? After just 20 years and five doublings, the economy would be larger by a factor of 32; in 50 years it will have multiplied more than 5000-fold! Basu must inhabit some infinite parallel universe.
Instead, a rational world would focus on devising institutions and policies for co-operative redistribution — ways to share the benefits of development more equitably. The goal should be to enhance the material well-being of developing countries and the poor and improve life-quality for all while simultaneously reducing both aggregate material consumption and world population.
Ensuring a socially just, economically secure and ecologically stable global environment requires: a) that rich nations consume less to free up the ecological space needed for justifiable consumption increases in poorer countries;
Fortunately, various studies suggest that planned de-growth toward a quasi steady state economy is technically possible, would benefit the poor and could be achieved while improving overall quality of life even in high-income countries.”
I offer this last link to show how dangerous our economic situation is even without the problems of climate change and ecological collapse that are coming down the pike (pun sort of intended) . This one also gives rise to much right wing populist rhetoric and violence as the workers in dying industries are told to blame the others for stealing their jobs rather than the plutocrats for vacumming the workers into obsolete industries.
By Tyler Durden
“Over the next three years, 120 million workers in the world’s 12 biggest economies may need to be retrained as a result of widespread adoption of artificial intelligence (AI) and automation in the workplace, according to a new IBM Institute for Business Value (IBV) study.
Only 41% of CEOs surveyed have the resources in place to close the skills gap brought on by new emerging technologies. That means 59% of the CEOs surveyed have no skills development strategies in place for their employees in the early 2020s.
One of our reports from June describes how automation, engineering, energy storage, artificial intelligence, and machine learning have the potential to reshape the world in the next decade, could result in at least 20 million job losses across the globe.
There is no doubt that the collision of AI and automation in the workplace will trigger economic disruption far more significant than what was seen during the agriculture revolution (1900 to 1940) when farmers retooled their skills to work in cities in industrial factories.”
I urge us all to use a bit of caution when approaching the topic of how bad will the economy get as the world warms. Human beings are smart and creative, and have often creatively figured out how to improve the situation. But we should also inject the note that while the general picture of what will happen on Earth due to anthropogenic warming is officially dire, as is all of the evidence on where the economy will go as the planet warms, the official reports of the IPCC are always behind the curve. Glaciers are melting faster than predicted, the arctic ice cap is melting faster than predicted, and the refugees are arriving every day. We also cannot predict at what point humans stop burning fossil fuels and deforesting the tropics and actually implement the transition at scale. We have reason to be hopeful (THANKS GRETA) and fearful at the same time.
The later we go all in on the transition, the more the damage will be. The sooner we go all in on transition, the less dislocation there is likely to be as the transition can go smoother, though we have 10 or 11 years at most to put ourselves truly on track and down the line to avoid the overwhelming disasters. Most of the mainstream predictions on the climate and economy do not take into account the other parts of ecosystem collapse we are experiencing, though some of the papers cited above are finally making the case for the add on damages that resource depletion and things like soil erosion will do as part and parcel of the climate catastrophe. It is going to be more expensive to obtain raw materials of any type. Forests are ever scarcer, soils more depleted, there are fewer fish in the sea, and the places being mined are harder and harder to work in, often for lower grade ores. Business as usual will also bring us greater inequality, which damages economies. It is really hard to see a prosperous future for most people under the conditions of neo liberalism and global overheating. An all in effort to stop climate catastrophe and rebuild our communities seems to be the only thing that will keep us healthy.
While some authors tell us stopping the climate catastrophe will unleash tremendous growth, I am skeptical because most of the authors suggesting that are not taking into account the entire range of ecological collapse and still believe that we can delink growth from the use of more stuff, but the delinking is really not happening, though growth of services sort of makes us think so. But I strongly believe that we can shrink the economy, slowly, gradually, and in keeping with a just transition by favoring earliest transitions for the various types of front line communities (those who mine for, drill, or process fossil fuels, and those who face the heavy pollution from processing and use) and favoring pro poor policies. A just climate smart economy, transitioning to a zero emission economy and society, is a pathway and opportunity to reduce inequality, create more sustainable economies, end poverty, and heal our communities and the ecosystems that support them. I have used the slogan “You cannot heal ecosystems without ending poverty, You cannot end poverty without healing ecosystems” as a symbolic way of making just this point for the last 15 years. We have to think holistically and keep our footprint within what the planet can stand or we cannot get out of the current mess. If we can reduce our footprint on the planet and grow the economy, so be it. I do not expect it beyond the short term grab currently going on by the oligarchs in which nearly all the growth is either natural resource depletion magically transformed into income or financial games that funnel nearly all of the new funny money into the pockets of the 1%.
Expecting the business climate to outweigh factors like natural resources, ports, soils, education, health, the climate catastrophe and the state of democracy and peace is pure propaganda. Perpetuated by the wealthy to maintain their power and control. Clearly the only thing our legislators seem to listen to when it comes to protecting the public are the voices of those with the most to gain from pollution and the destruction of wetlands. Recent studies have demonstrated that the public’s voice on regulatory issues in front of the legislature is very severely outweighed buy the corporate lobbyists carrying campaign checks.
Here are some links and snippets on resource depletion and its effects on the economy.
People as a whole use more and more stuff every year, and now approach 70 million tons removed from the planet each year, and the number is still rising rapidly as the industrial maw is bigger each year. Growth or no growth, a just, equitable, and ecological economy has never been offered to the people at scale. But the alternative, the continued destruction of the climate and the continued depletion of the resources and ecosystems we depend upon, seems a dead end and is already leaving many devastated communities.
Thinking about the poor
I know it is not realistic if viewed through a mainstream lens, but a successful pro poor economic agenda benefits the entire society. Unfortunately the climate catastrophe and the climate deniers strike the poor first and harder, giving us even greater incentive to do the right thing. Helping the poor become resilient will benefit the entire system, as when the poorest among us do well, good times roll for everyone.
“But most of the world’s developing nations, currently fighting a losing battle against rising poverty and hunger –and suffering from the devastating impact of climate change– are likely to miss the deadline for most of the 17 Sustainable Development Goals (SDGs), according to the latest report by Secretary-General Antonio Guterres.
Jens Martens, executive director of Global Policy Forum (New York/Bonn), told IPS that four years after the adoption of the 2030 Agenda, most governments are off-track to achieve the Sustainable Development Goals.
He said recent reports of the UN, including the Global Sustainable Development Report and the Spotlight Report 2019 show that in many areas there is no progress at all, and in some even regression.
“Destructive production and consumption patterns have further accelerated global warming, increased the number of extreme weather events, created plastic waste dumps even in the most isolated places of the planet, and dramatically increased the loss of biodiversity,” said Martens, who has coordinated the international Civil Society Reflection Group on the 2030 Agenda for Sustainable Development.
He pointed out that most governments have failed to turn the proclaimed transformational vision of the 2030 Agenda into policies that bring about real change.
“Even worse, national chauvinism and authoritarianism are on the rise in a growing number of countries, seriously undermining the social fabric, and the spirit and goals of the 2030 Agenda,” he noted.
And on the eve of a high-level summit meeting on SDGs on September 24-25, the UK based Overseas Development Institute (ODI) has released a new report predicting that at least 430 million people are expected to live in extreme poverty by 2030, – an increase of 7.5% on previous projections.
In a worrying sign that global efforts to reduce extreme poverty are failing, new ODI calculations find that, compared to figures released last year, an additional 30 million people will be living on less than $1.90 a day by the end of the next decade.
In the report titled Financing the end of extreme poverty: 2019 ODI, researchers say extreme poverty could be eradicated if governments in poor countries increased their tax revenues by a quarter and all donors met the UN 0.7 aid spending target.
Lead author Marcus Manuel, senior research associate at ODI, said: ‘We know that extreme poverty could be eliminated but this research shows that without major change hundreds of millions of people will remain living on less than $1.90 a day by 2030.
‘While economic growth will continue to help lift millions of people out of extreme poverty, many are being left behind. This does not have to be the case”.
The key challenge for countries and donors is whether they are willing to increase their financial effort and better target their spending in order to meet their commitment of ensuring nobody has to live in extreme poverty. Martens told IPS that the implementation of the 2030 Agenda is not just a matter of better policies. The current problems of growing inequalities and unsustainable production and consumption patterns are deeply connected with power hierarchies, institutions, culture and politics.
Hence, policy reform is necessary but not sufficient. “What we need are fundamental governance reforms at all levels, including at the United Nations,” he noted.”
Here is the very optimistic view of the African Development Bank, which is not all that optimistic,
“The AfDB is upbeat about Africa’s economic growth, which it has supported through various funding services availed to its 54 regional member countries.
In 2018, Africa recorded real GDP growth of 3.5 percent, the bank said in its 2018 annual report. This is a positive development for harnessing new investment on the continent. The bank said 17 African countries achieved real GDP growth higher than 5 percent in 2018, and 21 countries showed growth between 3 and 5 percent. Only five African countries recorded a recession in 2018, down from eight in the two previous years. Six of the world’s 10-fastest growing economies are African nations, which include Burkina Faso, Côte d’Ivoire, Ethiopia, Libya, Rwanda, and Senegal.
According to the bank, some non-resource-rich countries had high growth rates in 2018, including Côte d’Ivoire (7.4 percent), Rwanda (7.2 percent), and Senegal (7 percent), supported by agricultural production, consumer demand, and public investment.
Despite Africa’s GDP growing by an estimated 3.5 percent in 2018, the continent’s economic growth is threatened by domestic risks such as climate change, security and migration concerns, increasing vulnerability to debt distress in some countries, and uncertainties associated with elections and political transitions, the bank said, recommending significant private sector investment and external funding in regional infrastructure and financing.”
“I am optimistic about Africa’s future. I am confident in our capacity as a Bank to make a greater impact on the lives of millions of people across this beloved continent we have been called to serve,” Adesina said, adding that, “We need universal access to electricity. We must help make Africa self-sufficient in food. We must fully integrate the continent. We must industrialise the continent. And we must improve the quality of life for the people of Africa.””
I have a few comments on this. Africa has never had a high penetration of land line telephones, but skipped that stage and went right to cell phones. I expect electricity generation in Africa to do the same thing. Locally owned and controlled solar and wind is how communities and households will power themselves. What we also see in African elites is a willingness to sacrifice the forest and the forest people to fill their government coffers and their private bank accounts. Much of Africa’s current growth is depletion masquerading as profit. There is at least more lip service about helping rural communities and small holders, and many great programs with clean energy and rebuilding soils and forests at their heart, but there is still way too much money going into fossil fuel facilities to make me think they will actually get where they want to go.
Somewhat Better news
On a hopeful note there are a multitude of initiatives all over the world trying to use less and share more at the local and regional level, and many of them are bearing fruit.
The next link and snippet is a case of people doing pretty well at reducing the harms, but being unwilling to discuss it publicly because the belief that it cannot be done means that it will cost them customers if they are open. Weird beyond belief these days with so many people aware of the need to reduce consumption and depletion.
“All these factors combine to create countless industries where pioneers are creating solutions to reduce environmental harm but are leaving other industry players and consumers in the dark. Evans says: “When we started our research 15 years ago, we believed the problem was that we didn’t have enough examples of sustainable industrial practices for others to follow.”
But he and others at the institute have now found that even with the examples they have been able to share, companies and consumers seem unable to accept that sustainability does not have to cost more to create an equally good product. Apparently, we simply cannot believe that a business can be equally or more profitable while reducing its environmental harm. This is despite an increase in evidence that actively investing in sustainable practices helps business thrive. An example is provided by the Dow Jones Sustainability Indices, a series of benchmarks assessing the sustainability of companies around the world. Research has repeatedly shown that those at the top end of the benchmark outperform those at the bottom.
Libby Peake, senior policy adviser at Green Alliance, an independent thinktank and charity that focuses on environmental leadership in industry and government, agrees. She says: “We know that the best manufacturers are improving their energy efficiency about five times faster than the average company. These leaders have vital lessons to share with the laggards, so it’s a sad state of affairs if they feel they cannot boast about their achievements. We need to see sustainable goods and services move to the mainstream instead of being hidden in the shadows.”
Green Alliance has shown that while people’s attitudes are overwhelmingly supportive of resource efficiency, 45% of people actively distrust big businesses.”
If you have read this paper to here, it should be obvious by now that Business As Usual is going to be bad for our communities and a climate crisis on top of that will be horrendous. Mitigating the Climate Disaster offers us a way out. Not necessarily leading to tremendous growth, but it is an opportunity to reduce inequality, create more sustainable economies, end poverty, and heal our communities, while transitioning to a zero emission economy and society.
In Rhode Island the current economic development process offers us special deals for billionaires, budget cuts for DEM every year, no real interest in rationalizing water use and protection, ever looser wetland protections and wages that do not keep up with inflation for 80% of the population. The oligarchs pretend it is economic development since in an economy geared to 10% of the population boosting the value of real estate is the road to riches and public office, especially since there is so little else to invest in profitably other than gambling and fossil fuel infrastructure, neither of which does us any good. Rhode Island combines real estate subsidies with big subsidies to the medical industrial complex, biotech, hospitals, etc . The result is as expected, hardly anyone can afford either health care or housing, but per capita income goes up since the 1% are accumulating wealth so quickly. As Piketty https://qz.com/1155448/thomas-piketty-says-the-us-is-setting-a-bad-example-on-inequality-for-the-world/ noted it is not just income, it is also assets, so as fewer people control more of the assets, it locks in further inequality, which ultimately undermines society and democracy. Hence the Orange Haired Bully in the Bully Pulpit. And an economic development strategy around real estate subsidies and overriding community approved zoning that is stuck on stupid if you are really looking for the widest possible prosperity. Ask the people being gentrified out of their neighborhood on the west side of town.
The recently circulated draft of the Providence Climate Justice report makes this same point
Providence Climate Justice report Draft July 2019
“Furthermore, Providence is experiencing a boom in development but the effects of these projects and improvements are not felt evenly across the city. These investments put upward pressure on the cost of living. Long-time residents of neighborhoods may enjoy a better quality of life, but may be pushed out if they are unable to keep up with higher costs of living, especially if these effects are not considered and mitigated early on.”
A Green New Deal?
If one were to attempt to create an economic plan that directly addressed the climate catastrophe, dramatically reduced poverty, created affordable housing and healthcare for all, you would probably come up with something resembling what is popularly called the Green New Deal. Or at least some versions of it. GND is based on healing ecosystems and creating justice. The Rhode Island Green New Deal should not promise an ever growing economy, but rather a prosperity that permeates the whole community and helps fossil fuel dependent and fossil fuel polluted communities move forward in a just transition.
To be successful we need a policy agenda that puts the climate catastrophe front and center in moving the economy forward and includes higher taxes on the rich, strong environmental regulation including strong protections for lower income and POC communities from pollution, a full scale build out of Green Energy, an immediate halt to building fossil fuel facilities along with a gradual phase out of fossil fuel facilities as renewable clean energy becomes more available, healthcare for all, higher wages, job training and placement for all who need it, much more local production and processing of food, more justice, a reduced military, and more democracy, especially in the area of how government resources are directed to improve the economy of our communities, sometimes referred to as economic democracy.
Some might disagree, but the precautionary principle,
the idea that an ounce of prevention is worth a pound of cure, needs to be a part of this strategy for pro poor development. Our healthcare strategy needs to shift into the same mode. Most disease can be prevented by reducing hazards( mostly by using strong precautionary environmental regulation) and making it much easier for people to practice healthy habits by ensuring that healthy foods and good parks are available in every community. This of course also leads us towards universal single payer health care, as it is impossible to control healthcare costs under the model of for profit high tech healthcare that now prevails.
The next snippet reinforces this point. Practicing prevention, in this case reining in greenhouse gases and preventing climate catastrophe in the Midwest by switching to clean renewables pays for itself in healthcare savings. In other words going all in on renewables not only prevents climate catastrophe, it saves us money and prevents lost work time.
For example, across 10 U.S. Rust Belt states policies known as renewable portfolio standards will require an average of 13% of electricity to be generated from renewable sources by 2030.
Building out that renewable infrastructure will cost $3.5 billion and yield $2.8 billion in savings from avoided climate change impacts, according to an analysis published August 12 in in Environmental Research Letters. But it will also result in $4.7 billion in health benefits from avoided medical bills and lost wages.
If Rust Belt states required 20% renewable power on average by 2030, this would yield $6.4 billion in climate benefits and $13.5 billion in health benefits, at a cost of just $5.8 billion.
If the states doubled their 2030 renewable power commitment to 26%, this would yield $9.5 billion in climate benefits and $20.0 billion in health benefits, with a price tag of $9.1 billion.
How could we not go along with such a plan instead of further building fossil fuel facilities and facilitating destroying the planet. Why would the rich and powerful ask us to stay stuck in the fossil fuel age unless they have their hands in the till? And we do know the fossil fuel barons fund a lot of politics and lobbying to keep their wells pumping and the pollution spewing.
What ProsperityForRI.com recommends
The next section is a very incomplete annotated list of recommendations for RI policy makers if they wish to see a greater prosperity in our communities. In no particular order other than related topics are often nearby.
Rhode Island policy leaders need to develop a more realistic understanding of what the conditions for economic growth actually are and understand how Rhode Island is likely to have a GDP growth rate below the global average and below the US average no matter what we do. Until we stop expecting to be something we are not, we shall continue to make mistakes.
Accept that the neoliberal plan does not work for our communities and that a program of low taxes on the rich, little protection for the public’s health and safety or the environment, and doubling down on fossil fuel use is not working very well for all but a few of Rhode Island’s residents and ought to be scrapped for something that reflects our reality better and will lead to a wider prosperity within the limits of the Earth.
Increase taxes on the rich and on corporations. It should be obvious after the first sections of this report that the arguments for low taxes hold no water. Higher taxes on the rich and corporations does not slow down the economy or drive out business. And governments not having the resources to do the work of the people creates a downward spiral for economies and communities.
Stop building any new fossil fuel infrastructure. Besides locking in future carbon emissions, it is likely that the facilities built in the 2020’s will not be allowed to continue in use until their predicted lifecycle ends. This will leave us with vast stranded costs on toxic sites. Between green energy and efficiency we do not need to expand the fossil fueled energy supply for the immediate future, and cannot afford to.
Start a vastly faster build out of green energy, but before much is built, let us conduct a truly representative public process so that the public can truly weigh in on what they would like to see and how they would like to site it.
Institute a carbon tax that is going to return most of the money to all consumers, including returning more than they pay to low income consumers, and the other part of the money being spent on infrastructure and efficiency in our communities.
Institute a more expansive view of economic democracy and let the public be much more involved in the decisions about what to spend the public’s money subsidizing. When the real estate and other elite driven industries hijack the public process, we see lots of wasted tax dollars, and tax dollars that create greater inequality.
Align state policies to focus on creating more off shore wind turbines and covering every appropriate parking lot and roof in the state with solar panels. The issues of siting off shore wind as related to the fishing industry seem like they are solvable. I am sure the devil is in the details, but nothing I have read says these issues cannot be solved with some good science and a holistic approach to communities and energy. The people who work the sea know climate change is wreaking havoc, the people who build the turbines know how important fish and fishing are. Keep talking but understand the urgency. The issues of siting large scale solar and on shore wind are similar. We should not be removing forest or paving farmlands for energy until every parking lot, brownfield, and roof that can be used effectively is in use. And by then our efficiency will have improved enough to reduce overall consumption.
Build out a storage system for electricity and modernize the grid.
Grow more food in Rhode Island using every available farming method congruent with healing the soil, sequestering carbon in farmland, and providing nutritious affordable foods in the neighborhoods that need it the most,. Community gardens, community farms, lawn to farm cooperatives, land trusts and innovative programs to get more young farmers started is critical to the economic future of Rhode Islanders, and the health of future generations. There should be a strong effort to convert lawns to gardens for food and pollinators, possibly employing neighborhood farmers to supply food to all the households from the farms on the lawn.
End the dumping of food or food scrap in the trash. Expand programs to move unused food to its next best use, beginning with feeding people. Hungry people are a drain on resources, while we throw away enough food to more than feed them. Food in landfills creates methane, a potent greenhouse gas. The EPA pyramid of uses for food that has not been eaten by the original purchaser should become official state policy, with resources put behind it. More local compost facilities are needed, as the less food scrap is hauled, the less its carbon footprint. Anaerobic digesters will play a role, probably working with the largest food scrap producers, but many small scale facilities will provide a base upon which other parts of the food system can be built. The state and cities and towns need to put resources into this. The regulations relevant to creating new smaller compost facilities have been updated and can be navigated.
Institute a policy that no luxury housing can be built in RI until every person has adequate housing. Then build 10000 units of low cost zero carbon housing every year for 5 years. One goal has to be to create enough housing for lower income Rhode Islanders that the price of real estate on the open market comes down due to abundant supply. All new housing should be sited within already built up districts with public utilities. Every building should be super efficient and generate energy. There should be gardens and parks accessible nearby. We may need to reinvent how buildings are built, but given the state of the ecosystem, as well as the economy, we probably should only build buildings from things that are in the waste stream instead of with virgin materials. A program to make sure that every existing building is made ready for the 21st century should have been started 20 years ago, so we better start one right away.
Upgrade resilience with green systems. Plant a lot more trees, especially in urban areas. Catch and clean stormwater before it reaches streams, rivers, and ponds. Use as much of the water as possible to create habitat for pollinators and amphibians, key links in all Rhode Island food and health chains, and disappearing under the industrial onslaught and through loss of wetlands. The wetland regulations should do much more to encourage the restoration of wetlands rather than allowing death by a thousand cuts.
Start to think of fossil fueled cars as dinosaurs about to meet their asteroid. Reduce the number of cars on the road, replace all cars with electric powered cars and hydrogen powered cars. Invest in mass transit that runs on electricity. All new buildings should be along rail and electric bus lines. Invest in infrastructure for pedestrians, bicycles, scooters that require no fossil fuels to transport people as well as for electrified bikes and scooters. Pedestrian deaths are rising, and the city of the future has to be more pedestrian oriented, so start now to improve conditions for non-motorized travelers. Deemphasize the use of planes. Replace most air traffic with high speed rail.
The economic development agencies like Commerce RI, the I-195 commission, planning boards, zoning boards and other such agencies, and the legislative bodies that fund this work with our tax dollars need to look at the facts of the rolling climate catastrophe and change their approaches to match the new reality. Every bit of development approved and built needs to be increasing our resilience and reducing our energy and materials consumption. They also need to stop financing the rich to build things that increase inequality, and incorporate the Sustainable Development Goals of the UN and its pro poor orientation into their work. As long as the development agencies are oriented to the needs of the rich we shall never achieve a prosperous society.
Orient economic development agencies towards the people who are already here. Do not waste time or resources trying to lure businesses across the lines. Invest in the people here, and more specifically nearly all the programs should be targeted towards businesses that can use the skills already in the neighborhood, and especially in low income neighborhoods and communities of color. If the governmental agencies are contributing to growing inequality, they are failing.
Begin retreating from the ocean and flood prone inland areas. Salvage all of the materials and infrastructure before the disasters so that more that can be reused. Institute no repair but rather relocate policies for all places subject to repeated damage. Move public infrastructure like water and sewer and electric systems. When moving, do not replace fossil fuel powered systems, allow them to pass into history.
When upgrading schools, make sure they becomes energy self sufficient and fossil fuel free. All schools should have solar panels, gardens, compost systems and green stormwater management as well as lots of recess and trees. Every school should have outdoor classrooms that are integrated into all subjects. STEAM education needs a greater focus on environmental, climate, and resilience literacy.
Rein in the growth of the medical industrial complex. If one insists on a medical research complex in the economy then we must institute single payer health care or else people will fall further and further behind the cost of healthcare, which causes huge amounts of damage to lives and communities as well as the economy. Single payer will make it possible to properly practice prevention rather than focusing on curing with expensive technologies after the fact. It is likely that instituting single payer healthcare for everyone would unleash many new businesses as too many people have to keep their day job just to keep their families insured.
A list like this could go on forever, but that is a good start. Our economy must be turned towards the elimination of fossil fuels, the elimination of waste, more equity in our communities, ending poverty, more justice, restoring ecosystems, and preparing the kids for what to do to on a hotter and more dangerous planet Earth. The growth of inequality and the climate disasters being baked into the current approach to developing the economy have to stop, and they have to stop now. If we stop climate change, if we become more just, our communities will thrive, but business as usual is going to be a disaster movie that ends rather badly.