In Hamburg this week, thousands are preparing to launch protests against the exploitation of labor, the degredation of the environment and the extremes of capitalism. To solve the world’s problems, a radically new approach is necessary.
There are injustices that have become so familiar that few are even bothered by them anymore. A brief reminder: Every 10 seconds, a child dies of starvation somewhere in the world, despite there being enough food on the planet to feed between 10 and 12 billion people — and the global population is just 7.5 billion. Almost 800 million people in the world live in extreme poverty, despite there being more money in the world than ever before. Fully 81 percent of the energy produced in the world is the product of burning fossil fuels, even though this practice warms the climate and alternatives such as wind and solar are available.
When G-20 leaders gather in Hamburg later this week, they will have an opportunity to at least mitigate some of the most blatant contradictions facing our world. After all, they are largely responsible for the existence of such contradictions in the first place.
The G-20 nations represent two-thirds of the global population, just over three-quarters of its economic output and four-fifths of its greenhouse gas emissions — and they are the prime target of anti-globalization activists. “The G-20 are part of the problem, not the solution,” says Werner Rätz, co-founder of the German chapter of the network Attac, which is critical of globalization. It is that conviction that has driven Rätz to coordinate protests planned for Hamburg this week. He has plenty of experience doing so.
Rätz, 65, has a white beard, shoulder-length hair and is a longtime veteran of the leftist scene. He was once active in the conservative Christian Democratic Union (CDU) party, before moving on to the Greens and then the Left Party. But he ultimately realized that party politics wasn’t really his thing. Instead, Rätz prefers the extra-parliamentary opposition. In summer 1982, he registered a peace demonstration in Bonn in parallel with a NATO summit. An estimated 450,000 people showed up, but it only got 16 seconds on the nightly news. “It’s hard to imagine such a thing today,” he says.
Thirty-five years later, he doesn’t need to worry much about media attention. He’s more concerned about the Hamburg government, a coalition pairing the center-left Social Democrats (SPD) and the Greens. Hamburg Mayor Olaf Scholz wants to prevent demonstrators from camping out in city parks, which is something for which Rätz has no understanding at all. He knows Scholz from when the mayor was an official with the SPD’s youth wing — and now he is rubbing shoulders with the big-wigs against whom Rätz is mobilizing.
‘The Global System Is in Trouble’
Indeed, police on Sunday evening cleared out a protest camp in a park on the Entenwerder Peninsula just southeast of the Hamburg city center. Protesters had thought they would be allowed to set up tents and spend the night there, but a court ruled against the camp on Sunday evening and police immediately stepped in to prevent the pitching of tents there, deploying pepper spray and arresting one person. On Tuesday, the city-state’s interior minister, Andy Grote, once again emphasized that the police will be following a zero-tolerance strategy when it comes to allowing demonstrators to spend the night in the protest camps.
Rätz, for his part, is convinced that he is on the right side of the barricades. “The global system is in trouble everywhere,” he says. “It’s an opportunity for the alternative movement.”
Globalization critics have been receiving an unexpected amount of support in recent months. Last September, 170,000 people demonstrated across Germany against the free trade agreements TTIP and CETA, with the United States and Canada respectively. Now, the masses of critics are heading for Hamburg to stand in the way of world leaders. A broad alliance is behind the protest movement: church groups, environmental organizations, trade unions, refugee councils and peace movements. They are united in their belief in the good of humanity and in the malignance of the system.
They all believe that free trade and the market economy do not produce prosperity for all and merely make the rich richer. They are convinced that the intertwined global economy, digital advance and untamed financial markets only serve a small elite and that the masses become the losers. The majority, they believe, are excluded from prosperity.
According to 2016 calculations made by the aid organization Oxfam, just eight men control a fortune worth $426 billion, with Microsoft founder Bill Gates, textile magnate Amancio Ortega (who owns clothing retailer Zara) and investor Warren Buffet at the top of the list. Together, those eight men possess more wealth than the poorest half of the global population. The few profit handsomely while the vast majority lose a little: It is this state of affairs that galvanizes critics far beyond the leftist political spectrum.
Nothing Is Perfect
Two weeks ago, German Chancellor Angela Merkel surprised participants at a meeting of non-governmental organizations in Hamburg called the Civil20 Summit, or C-20 for short. During a panel discussion at the summit, Merkel conceded that economic policy should not focus “simply on growth,” but also on “sustainable, inclusive growth.” She said that market freedoms were beneficial, but added: “Nothing about globalization is perfect.”
It would seem, in other words, that criticisms of globalization have got through to the establishment. The political center has become concerned about how the world is currently developing. When Pope Francis — to the degree one can view him as belonging to this center — writes in his “Laudato Si” encyclical on the environment and human ecology that the earth “groans in travail,” it sounds like one of the fundamental criticisms that environmentalists have been levelling at capitalism for years. Meanwhile, Dennis Snower, president of the Kiel Institute for the World Economy, once a hotbed of market liberalism, is now addressing the question as to whether societal cohesion is eroding. “Social developments are no longer proceeding hand-in-hand with economic advances,” he fears.
There is also plenty of anti-globalization coming from the right, though the focus is a different one. The authoritarian-minded populists aren’t seeking to increase the fairness of global trade, they reject it entirely. They want to protect domestic economies from foreign competition and have nothing but disdain for multinational corporations. It is a position that is attractive to many — to those who see themselves as globalization’s losers.
It almost looks as though the left has begun attracting support from the wrong side — as though an odd alliance is developing between right-wing nationalists and leftist TTIP opponents. But is it? Attac rejects the idea out of hand, insisting that they aren’t protectionists. They merely want to see more equitability.
Others, though, aren’t so sure. Thomas Ebermann, one of the co-founders of Germany’s Green Party, warned not long ago in the magazine konkret that some from the leftist camp are in favor of a return to European nation-statism and “lexit,” a leftist withdrawal from the euro. Ebermann sees such positions as “the core crystallization of a far-right development.”
Many perspectives have been shifting in recent months, including views on globalization. The U.S. — once hailed as the “leader of the free world” — is pursuing strict isolationism. China is presenting itself as a champion of the new international division of labor, a term which refers to the shifting sites of worldwide production as a consequence of globalization. And both forces are fighting for influence in Europe. The new divide is no longer between the political right and left, but between those who are in favor of open societies and those who would prefer to seal themselves off from global developments.
This week in Hamburg, visions for how countries should deal with globalization and its consequences are now colliding with one another: how to deal with poverty; how to protect the environment; and how to tame the excesses of the financial industry. They are questions that should concern everyone with a sense of moral responsibility: politicians, business leaders and normal citizens. And sometimes they do in fact reflect on them.
In quiet moments, lawmakers consider whether the law currently up for a vote will, in fact, serve the population at large — rather than just his or her own re-election campaign. Every executive surely reflects on whether their responsibility to their employees is of greater importance than their own wealth. And consumers likewise wonder occasionally if they really need all the things they buy — or whether consuming less might be a better way to go.
If we answer such questions honestly, we are gripped by a bad conscience, for a moment at least — before suppression once again takes hold. It is something of a paradox: Everyone knows in principle what is right, but we don’t always act on that knowledge.
It is this paradox that the new critics of globalization are targeting. They are demanding that politicians, business leaders and the rest of us take a close look at our actions. And to then examine what the consequences are — and ask ourselves: How radically must things change for the problems facing our world to be solved?
The diagnosis arrived at by Munich-based sociologist Stephan Lessenich is radical indeed. He says that people in the North are living at the expense of people in the South, having simply outsourced the dirty and polluting elements of production. On our behalf, “resources are being exploited, toxic substances released, refuse stored, swaths of land devastated, communities destroyed and people killed,” he says. “Our abundance is robbing others of the foundations for survival.”
Lessenich, a slender man in his 50s, studies social inequality. The academic took over the Sociology Department at the University of Munich from Ulrich Beck, the doyen of German sociology, after he died unexpectedly two-and-a-half years ago. Both were interested in the fault lines dividing global society in the age of capitalism, but Lessenich is more uncompromising.
Germany’s economic success, he says, depends on the exploitation of people and the environment in other parts of the world. “We aren’t living beyond our means,” Lessenich says. “We are living beyond the means of others.” The professor declines to support his diagnosis of an “externalization society” with empirical environmental data. His proof is more anecdotally based.
Take coffee capsules, for example: In 2016, Germans used around 5,000 tons of them. Making such capsules requires aluminum, the production of which not only requires huge amounts of energy, but also bauxite — and large swaths of rain forest in Brazil are clear-cut to make way for bauxite mines. “We have specialized in winning and damned others to losing,” Lessenich says.
It is a rather black-and-white view and Lessenich admits that, as an academic, such an uncompromising approach makes him uncomfortable as well. But he wants to make a point that everyone can understand, he says, which is why he adopts such a polemic tone.
By doing so, however, he opens himself up to attack. It is possible, after all, to see the world in a completely different light — as a more hopeful place with significant opportunity. Despite, or even because of, globalization.
According to the World Bank, extreme poverty — defined as an income of less than $1.90 per day — has dropped significantly in recent decades. In 1990, 34.8 percent of the global population, fully 1.84 billion people, lived in extreme poverty. By 2013, that number had plunged to 766 million for a share of 10.7 percent of the world’s population.
China, in particular, has seen vast improvement, a function of the country having become an important part of the global economy. A quarter-century ago, 756 million people in China lived in extreme poverty, more than half of the country. Today, the number is just 25 million people, a mere 2 percent of the Chinese population. Meanwhile, industrial wages in China stand at the equivalent of $3.60 per hour, not much lower than the $4.50 earned by workers in Portugal. In many regions of the world, with the notable exception of Central Africa, the battle against poverty and hunger has been producing measurable and observable improvements.
There are also surprising success stories when it comes to the environment. China, the world’s largest emitter of CO2, has significantly cut back on the construction of new coal-fired power plants and India also recently put a halt to several projects. The goal of limiting global warming to no more than 2 degrees Celsius might be unrealistic, but Nicholas Stern, the former chief economist at the World Bank, nonetheless sees a number of things that give him hope.
Ten years ago, Stern wrote a widely read report that focused global attention on the potential consequences of global warming. Since then, he says, a lot of progress has been made. Solar has become an energy source that can now compete with fossil fuels and the automobile industry is making significant investments in electric and alternative-fuel vehicles. Stern says he never would have expected such a thing.
Furthermore, many companies have now identified sustainability as a goal, both for ethical reasons and, primarily, to protect their bottom lines. They are interested in attracting prosperous customers, many of whom want to buy products that are produced and traded fairly. Sustainability bolsters their image.
An Age-Old Contradiction
It used to be that fair trade was a niche for the Birkenstock-wearing crowd, but today, discount supermarkets offer organic eggs and fair trade chocolate as if it were the most normal thing in the world. These days, German supermarket chains like Lidl, Aldi and Edeka sell more organic products than all organic supermarkets put together. And they have also begun selling more locally produced products.
A new awareness is even growing in parts of the financial industry. Banks, insurance companies and investment firms are examining their portfolios and some are divesting themselves of companies that earn their money with oil, natural gas and coal. Here, too, the primary motivation is economic in nature: Investors are concerned that the “carbon bubble” could burst — that fossil fuel-based industries might have to undertake significant write-downs because the global demand for oil, natural gas and coal is sinking. The influence of investors in the so-called “divestment movement” is significant: Together, they manage assets worth $5 trillion.
Companies, governments, consumers: Changes in behavior can be found everywhere — but sociologist Lessenich isn’t particularly impressed. He considers concepts such as green capitalism and intelligent growth to be little more than “terms of collective self-deception,” he says. They don’t, he says, offer a way out of the fundamental dilemma: The realization of unsustainable behavior on the one hand, and the practice of simply continuing on as before on the other.
It is the age-old contradiction between dispositional ethics and the ethics of responsibility within which everyone is trapped: the companies that produce never-ending sustainability reports, yet — when push comes to shove — ultimately shoot for growth and high profits; governments that have made progress in the battle against poverty but which are too weak or divided to improve equality; and consumers who buy water from the initiative Viva con Agua, which helps finance aid projects, but then drink it out of plastic cups. People, in short, who think and talk about environmental responsibility, but who then act differently when it comes to consumption — at the expense of workers in Burmese textile factories, for example.
Winnie Byanyima knows such women. From Uganda, Byanyima has led a life that makes the rest of us look boring by comparison. She was born in 1959, when her country was still a protectorate of the British Empire. The daughter of a teacher, she grew up under the tyranny of President Idi Amin before fleeing to England and training as an aeronautical engineer. She then returned to Uganda and joined the rebels, spending time in the bush. Later, she became Uganda’s ambassador to France.
Today, she is the first African to lead Oxfam, an international confederation of development organizations with representation around the world. Two weeks ago, she shared the stage at the C-20 summit with Angela Merkel and reported about the daily lives of women in Burma.
Women there, she said, work more than 14 hours a day, but earn no more than $4 for their toils. That may be above the international poverty line, but it isn’t even close to enough to feed a family, she explained, adding that the women have no social net whatsoever and are immediately fired if they become pregnant.
She then turned to the chancellor and said: “These women are making the clothes you and I wear.” Merkel listened intently and nodded. The audience also applauded Byanyima’s comments, perhaps feeling caught out themselves.
Most Germans, after all, don’t much care where their shirts, their shoes or their chocolate bars come from. Hardly anyone thinks much about the conditions under which such products are produced. It is only thanks to NGOs like Oxfam or the Südwind Institute in Bonn that we have learned more about where the things we buy come from.
But it doesn’t help much. In 2014, German consumers spent around 1.5 trillion euros on consumer products, but just 50 billion euros of that total was spent on environmentally friendly products, according to the German Environment Agency — a share of just 3 percent. Even the oh-so- environmentally correct Germans enjoy a lifestyle that exceeds the natural limits of our planet. If everyone on earth were to consume as much as a single citizen of Germany, 2.6 planets would be necessary to meet their needs.
Buying More than Necessary
We humans are planting more crops than the depleted soil can bear. We are using wood faster than it can grow in our forests. We are producing more greenhouse gases than our atmosphere is able to absorb. And we buy more shoes than a single person needs: Germans buy an average of five pairs per year; in the U.S. it is eight.
Industry produces more products than their customers need, but that only works because consumers have become used to buying more than necessary. German mail order magnate Michael Otto has been celebrated for his pledge to use only sustainably produced cotton in clothes produced under its house brand and licensed brands by 2020. It is a move that demands respect. But does it go far enough?
His business model, after all, depends on selling as many clothes as possible. And it works because Germans today buy 11 times as many articles of clothing per year as they did just 30 years ago — a total of 6 billion items of clothing per year. Often, shoes, T-shirts or pants end up in the garbage or a clothes collection bin after just one year, even though most of it is in perfect condition and could still be worn. Not a few clothing items end up unworn in the wardrobe after purchase. Clothes are simply too cheap for people to truly value them. And the smallest portion of the purchase price ends up in the hands of the Burmese women who sew them.
The situation described by Oxfam head Byanyima reflects a fundamental problem with the international division of labor. Retailers such as Primark and Zara rake in the vast majority of the profits while the people who actually make the products get very little. The chancellor, who otherwise is happy to represent the interests of German retailers, took the side of the people on the other end of the production chain while on the C-20 stage two weeks ago. The profits, she said, are often only gathered at the very end of the production chain and not at the beginning.
Such disparities aren’t unique to the textile industry. In the Ivory Coast, the world’s largest exporter of cocoa beans, farmers often only earn half a dollar per day for their work. Using machetes, they chop the pods from the branches and open them up to remove the beans. It is estimated that more than 1 million children work on cocoa plantations in the country, and many of them don’t go to school as a result. A rule of thumb holds that the lower cocoa prices fall, the more likely it is that children will be used as a cheap labor force. Currently, cocoa prices are near a 10-year low.
The situation is similarly appalling in the shoe industry. A chromium solution is often used during the leather tanning process, which results both in environmental pollution and health problems among workers, such as rashes and difficulty breathing. The shoes are often sewn by workers in their own homes. It takes about one hour to produce a single pair, with around 360 steps necessary from cutting out the leather to the final stitch.
In Indonesia, it is primarily women who stitch shoes together and according to Südwind, they receive the equivalent of 22 euro cents per pair they produce. If their employer finds a quality problem, the women are often fined and the money comes directly out of their wages.
None of this is a secret; consumers just have to make the effort to inform themselves. And it isn’t even that difficult: Seals such as Fairtrade, Gots or Gepa guarantee clean production or fair trade. But whether the higher prices drive people away or they just can’t be bothered, only a minority of consumers actually seek out sustainably produced products.
‘This Is Too Important To Be Left to 20 People’
It’s even harder for corporations to make the world a better and fairer place. Publicly traded companies submit themselves to the rules of a financial capitalism, whose standards have spun out of control. Just four technology companies on the stock markets — Facebook, Apple, Amazon and Google — have a combined market capitalization of just under $2.4 trillion, a sum that exceeds India’s gross domestic product. Central banks are flooding the markets with money and those profiting from the development are building up wealth of almost unimaginable magnitude — while the connection to the real economy is eroding.
It’s not that things were much better in the past. The economy has been driven by the shareholder value mindset for three decades. What’s new today is that the financial sector essentially points CEOs in what direction their companies must go. Economists refer to the phenomenon as the financialization of the economy. “Our biggest and brightest companies have started to act like banks,” American columnist Rana Foroohar recently wrote.
Today, airlines often earn more money through hedging on oil prices than they do selling seats to passengers. And companies buy back their own shares rather than invest their money. Between 2004 and 2014, American firms used over half of their profits to do so, spending close to $7 trillion in stock buyback programs. Meanwhile, financial institutions move the prices of corn or wheat through commodities speculation, leading to a situation in which prices are no longer determined by the quantity of the harvest. Indeed, prices are no longer determined by supply and demand.
Companies are getting further and further away from their original reason for going into business: providing good products that people like, earning decent money and paying their employees well. A hundred years ago, German engineering giant Siemens was building housing settlements for its employees, an idea that seems unfathomable today, despite housing shortages. These days, the main focus of companies is the effort to deliver a larger profit than that of the previous year.
People serve companies, but actually it should be the other way around, argues Christian Felber, who sometimes does handstands when he gives speeches. What Felber is trying to show is that the way we conduct business has been turned on its head. On this particular morning in Berlin, the moderator says time is short, so Felber skips this part of his show. Felber is sitting on a panel at the T-20 summit — T for Thinktank. Like the C-20, it’s also a preparatory meeting — and one that is attended by some pretty high-level people, including Nobel laureates, CEOs and German government ministers. Sitting between them is Felber, with his strawberry blond beard, rolled-up shirt sleeves and green backpack on his shoulder. Even without doing his signature handstand, he stands out from all the others in their suits. So, too, do his ideas.
Ideas from the 13th Century
Felber, born in 1972 in Vienna, is one of the co-founders of the Austrian chapter of Attac. He’s also one of the new stars of the alternative scene and gets invited to events so frequently that he could probably make daily appearances, but he tries to limit himself to 100 a year. Felber’s fundamental thesis is captivating — he’s calling for a new economic order that he calls the economy for the common good, one that serves to help people live better lives rather than just increase profits.
Felber himself admits that there’s nothing new about his thesis and that many of the ideas can be found in the work of the 13th century philosopher Thomas Von Aquin. Felber says he just updated those notions to fit with the times. In an economy for the common good, it isn’t the financial result that is placed at the center of all economies, but rather five central values: fairness, human dignity, solidarity, democracy and sustainability. Felber and his fellow campaigners are also developing a common good balance sheet that can be used to measure whether systemic changes have been successful.
In it, they try, for example, to review how a company treats its suppliers or employees, whether it’s business practices are climate-neutral, whether it discloses money it gives to lobbyists and if it is a company that promotes women. A few companies have already allowed their common good aptitude to be tested, including German outdoor sports equipment-maker Vaude and even one financial institution, Munich’s Sparda bank.
The bank has made the decision to ensure that no part of its employees’ salaries is performance based nor does it pay commissions on business acquired. The bank wants to ensure that money doesn’t get in the way of providing clients with reputable service and advice. The shift in values at the company goes so deep internally that the bank has removed Nestlé water coolers from its office and offers its employees fair trade coffee. The company’s tea towels are produced in factories that employee blind or otherwise disabled workers.
A broad spectrum of organizations are adhering to such common good ideas, including Protestant church organizations and activists with the environmentalist group Greenpeace. Around 200 companies have already been reviewed to determine their common good balance sheets. Felber says he even presented his system to Germany’s postal service, Deutsche Post, although the resonance was limited.
At the T-20 panel in Berlin, Felber sat across from Deutsche Post CEO Frank Appel. The executive waxed philosophical about the questions facing mankind, the importance of love, meaning and hope, but also about Deutsche Post’s responsibility to society. “We have done a lot,” he said, adding that Post could provide an example for other companies. At that point, the panel moderator asked him why Deutsche Post had decided against the economy of common good concept?
The ‘Golden Straightjacket’
Appel admitted that he couldn’t recall the exact reasons. He said many alternative models exist, but they lack the kinds of standards used in classical accounting. If a global standard were established, the executive assured, Deutsche Post would also be open to participation. Felber smiled. It was exactly the kind of answer he had expected.
New York Times columnist Thomas Friedman once invented the image of the “golden straightjacket” to describe the situation governments and executives find themselves in. They are trapped in a system of global competition, borderless free trade and the ruthless grabbing for profits. It was then-British Prime Minister Margaret Thatcher who first tailored that jacket at the beginning of the 1980s, when she placed the United Kingdom on a strict liberal economic course. Even today, nobody seems to have truly been able to escape it — assuming any of them actually even want to get out in the first place.
In 2005, a CEO of a company on Germany’s blue chip DAX stock index earned 42 times that of a normal employee. In 2014, it had risen to a factor of 57 times a normal salary. Post CEO Appel earned a total of 9.9 million euros last year, compared to around 34,000 euros for a postal carrier. This means that Appel gets more on a single workday than a postal carrier gets over an entire year. And now he wants to talk about love, meaning and hope?
Globally, the income disparities have reached their highest levels in 50 years, according to the Organization for Economic Cooperation and Development. The places with the greatest social inequality are not to be found in the United States, Asia or Europe or even in New York, Shanghai or London, as one might expect. Almost all are in Africa.
Four countries in Africa are home to the greatest social disparity. In Angola, around 40 percent of the populace lives under the poverty level, but its capital city Luanda has been determined to be the world’s most expensive city for expats. Well-paid foreign professionals, mostly working in the oil industry, have driven up prices.
In Africa, the economic conflict lines are to some extent two-dimensional. The gap between the industrialized nations is widening, but at the same time, the chasms within African countries are also growing dramatically. But what’s causing this? “First and foremost, Africa’s elites themselves,” says Oxfam coordinator Byanyima. “The governments need to create economies that help many and not just a few.”
Africa is globalization’s perpetual loser and it has been since colonial times. The international community has spent entire generations ignoring the suffering in sub-Saharan Africa and it took the escalation of the refugee crisis two years ago before people once again became politically aware of the continent’s fate — at least that’s the case for many Europeans.
But now, suddenly, Africa is gaining importance in another area: It’s demographic development will almost certainly have an impact far beyond the continent. By 2050, Africa is expected be home to more than one-quarter of the global population. It is predicted that the population will double to 2.5 billion, with half of that figure under the age of 25. The German government has placed issues pertaining to Africa at the center of its G-20 presidency.
The German Finance Ministry has christened its new initiative the Compact with Africa. Initially, the plan is for the program to include five pilot countries — Ivory Coast, Morocco, Rwanda, Senegal and Tunisia — with each receiving 300 million euros in additional aid money from Germany. The aim of the pact is to attract private investment to Africa. But Oxfam International Executive Director Byanyima is critical of the initiative. “I’m sorry,” she says, “but it’s going in the wrong direction.”
As an adolescent, Byanyima experienced in Uganda firsthand what despotic rule is like. People could be detained by the military at any time, an experience that has shaped her political understanding. Byanyima believes the government should play a central role in combating poverty — in the form of a predictable, policy-oriented state that supports small businesses at the local level. Byanyima warns that private investors pursue ulterior motives — namely their own interests. “They play with the countries,” she says.
She recalls how Rwanda’s former finance minister once told her how a company CEO had flown to the capital city of Kigali in a private jet to negotiate his tax rate. The man then climbed back into his jet and flew to Uganda, where he planned to do the same thing. The problem with that kind of behavior is that African governments will lose billions if they allow themselves to engage in a downward competition to offer the lowest corporate tax rates. This has already resulted in Kenya losing $1 billion a year in tax revenues — twice the amount the country spends annually on health care. Poor countries suffer disproportionately from tax avoidance schemes because they often have few revenue streams other than trade in raw materials.
These countries lack the ability to conduct good governance — the ability to take assertive government action through reliable institutions or maintain the principles of rule of law — regulations that protect property and prosecute corruption. Markets alone can’t eliminate poverty; often they exacerbate it. To do so, you need an active state that sets the ground rules and creates a better balance between society’s winners and losers.
THE WAY OUT
That’s the good news. There are ways of making the world a fairer place while at the same time protecting the environment. For that to happen, though, the people, the business community and the politicians need to be honest with themselves. They need to do more than just say the right thing — they must to have the trust in themselves necessary to take decisive action. They need to muster the courage and resolve for radical change. Implementation begins on a small scale at the municipal administrative level.
This year, the city of Portland, Oregon, wants to impose a 10-percent surcharge on the corporate tax if a CEO earns more than 100 times more than a normal worker. If that level exceeds 250 times the salary of average normal employees, an additional levy of 25 percent would be charged. The regulation is a response to the fact that within a period of just five years, the average annual salary of the 200 highest-paid CEOs in the U.S. has doubled and now stands at $19.3 million.
The leadership in Beijing has also shown some imagination. Residents of the city are only able to obtain a license to purchase a car with a combustion engine through a lottery, with chances of winning minimal, at a level of under 5 percent. The calculation is that more people will buy electric cars in the smog-choked city.
Arrangements like that provide an example of how politicians can effect change at the local level. They illustrate a level of courage, imagination and also a bit of radicalness. But the issues addressed at the G-20 summit in Hamburg will be even bigger — it will be about the issues humanity faces and the world’s problems.
It will be about fair taxation, given that international agreements are necessary to standardize minimum tax rates, to eliminate tax havens and to prevent corporations from funneling their money to these havens in perfectly legal ways to avoid paying taxes, thus circumventing the contribution they should be making to the common good. It’s hoped that the so-called BEPS Project can be used to make life more difficult for the kind of tax avoidance schemes used by well-known tricksters like Amazon or Starbucks. But the treaty still needs to be ratified and it is not believed that it has support from the U.S. at this time.
Another priority is to prohibit the acquisition of raw materials of dubious origin. The U.S. used to be a leader in this push — at least until Donald Trump repealed the relevant passage from the Dodd-Frank Act this year. Until that move, publicly traded corporations had been required to disclose whether their products contained conflict minerals sourced from the Democratic Republic of Congo, including coltan, tin, gold and tungsten. Rebel groups finance their torture and rape through sales of the minerals. The European Union has a similar regulation in place, but it doesn’t cover cobalt — and over 50 percent of the world’s supply of cobalt comes from Congo.
Very clearly, another pressing issue at the summit will be climate protection — namely that of creating a price that is applied globally for the right to pollute the atmosphere with CO2. Europe’s own system of trading CO2 certificates hasn’t been successful, with a ton of emissions now costing only five euros, a sum far too low to actually have a significant deterrent effect. Economist Stern believes that figure will have to go up to at least $40 to $80 for it to have any effect.
A more consistent and effective way of protecting the climate would be to issue similar certificates to individuals. Climate researchers believe the acceptable figure would be 2 tons of CO2 emissions per person per year. That would force the U.S. to massively limit its emissions. Currently, the average American emits 16.1 tons of CO2 per year, compared to 9.5 tons emitted by the average German. Brazilians, on the other hand, are only slightly over that limit. At the G-8 summit 10 years ago in Heiligendamm, Germany, that system found a prominent advocate in Chancellor Merkel, who expressed her support for it at the time.
Those would be the perfect issues for the Hamburg summit. But it’s difficult to imagine they will be discussed seriously when democrats meet with autocrats this week and those seeking climate protection meet with leaders who doubt climate change even exists and when those supporting human rights meet with oppressors. Never before have expectations been so low for a summit. The evening before the summit, the Sherpas will meet until late in the night and hone every last sentence of the G-20 closing statement. This time, some are even questioning whether there will even be a closing statement. I have to admit, Columbia University economics professor Jeffrey Sachs recently told a panel, “I just become more and more nervous.”
Sachs is something of a popstar among global economists. During the early 1990s, he advised the new governments in Eastern Europe and later he devised a plan for eliminating poverty around the world. Now 62, he has gray hair, but he still exudes an almost Kennedy-like charisma. The speech he gave at the T-20 summit was a brilliant appeal — angry, almost despairing, but also passionate. “We are living in a quite dangerous world right now,” he said near the beginning of his speech. “Our institutions are not working, and our governments are not working, mine first and foremost.” The United States, he said, is “in a massive political crisis — the likes of which we have not seen, perhaps since the Civil War — and I do not think I am speaking hyperbolically.” The president, he said, is “incapable of this job,” and “behind him is a broken political system.”
Then Sachs turned to what he described as the other “prima donnas,” who are betraying the interests of their people by ignoring existential problems like species loss, the flooding of coastal areas and hunger in the world. How can we prevent, Sachs asked the audience, 5.9 million children under the age of five from dying this year? If questions like that aren’t addressed at the G-20 summit in Hamburg, he demanded, then where else can they be?
If the G-20 leaders won’t listen, he continued, then voters will “bring in the next ones, honestly, because this is too important to be left to 20 people. This is for 7.5 billion people and their children and their grandchildren.”