Paris Climate Deal: It’s the Economy, Stupid!

Eiffel TowerUnder normal circumstances, few people should care about the Paris climate deal. This kind of stuff is mostly just technocratic. There is a problem and they are just working out how to solve it. Indeed, 20 years ago, it would have been just that. But when one of the major political parties in the most powerful country on earth refuses to acknowledge that the problem is real, things are different. Then, getting anything done at all is a big deal. And that’s why this agreement is a big deal.

What’s different about this agreement is that it is not legally binding. But the question is: does that really matter? Brad Plumer wrote a really interesting article that provides a brief history of the failure of previous climate deals, Past Climate Treaties Failed. So the Paris Deal Will Try Something Radically Different. But the real takeaway here was this, “No treaty is truly binding.” That’s right. Countries mostly abide by their treaties because they want to be part of the civilized world. Even at that level, humans are still social. But more than that, there is the economic issue.

The only upside for continuing on as we have been is that it allows installed interests to continue to make money. The economies that are going to be strong in the future are the ones that embrace green energy today.

I’m all too aware of the conservative response to this. We have already heard people claiming that this will just allow Russia (which has set insignificant goals) to get ahead of us. But I think this is a total misunderstanding of the way that economics works. Listening to the Republican debates, I’ve been really annoyed hearing about how doing something about climate change will hurt our economy. This is taken as a given. But it is actually rather the opposite that ought to be given. We aren’t going to grow our economy in the long-term by making it ever more dependent on the new energy technology of a century and a half ago.

What we are getting from the Republicans — and what we always get from them — is not an argument for economic growth. It is an argument for the status quo. They care about securing the profits of those who are already rich. Look at who is the biggest funder of the Republican Party: the Koch brothers. Their wealth comes from oil. They don’t see clean energy as a way to help our shared economy; they see it as a threat to their short term profits. And the Republicans rush to defend their interests, using the specious argument that they are looking out for all of us.

So Russia looks like it is going to do what Russia has traditionally done: look backwards. As it is, the Russian economy is highly dependent upon selling oil. So this makes some sense. But it is shortsighted. I think that’s especially true because we have been going through a period of revolution regarding green energy. I fully expect countries like Costa Rica (which put forward an ambitious program) to look back in ten or twenty years and see that they have not only been able to do a lot more, but that their economy is much better as a result.

We really have two choices here. We can look backward and continue to harm the earth. This will lead to more economic stagnation. Or we can look forward and mitigate the damage we are doing. This will lead to a more vibrant economy. That’s it. This really is what it’s all about. The only upside for continuing on as we have been is that it allows installed interests to continue to make money. The economies that are going to be strong in the future are the ones that embrace green energy today. And I think that alone will cause this climate deal to be a success.

It Does Make You Wonder About the Fed

Tim DuyOver at Mark Thoma’s indispensable Economist’s View is a sub-blog by Tim Duy, Fed Watch. Generally, it is too technical for me. But the other day, I was really struck by an article, Makes You Wonder What The Fed Is Thinking. Of course, I always wonder what the Fed is thinking. But when someone like Duy says that, it makes me take note.

He started by noting that one of the reasons that the Federal Reserve is set to raise interest rates is because it believes that the inflation rate will “approach” its 2% target in 2016. Now before we get to Duy’s point, think about that for a moment. According to the Fed, it is supposed to target 2%. Now it’s looking like the Fed is saying that really the 2% target is a ceiling. They are not willing to let it get above that point. If that’s the case, I wish the Fed could tell us so that we could fire them all and restructure the organization. As it is, the Fed doesn’t seem to be much concerned with employment, which is the other thing that it is supposed to do.

“The trouble is they have made the same prediction for the past four years.” —Josh Zumbrun

But as Josh Zumbrun noted in The Wall Street Journal, while the Fed may think that inflation will “approach” 2% next year, “The trouble is they have made the same prediction for the past four years.” It seems that in Fedlandia, we are always and forever on the verge of inflation. The Fed isn’t any better than the Ron Pauls of the world who tell us we must buy gold because hyperinflation is coming. The Fed types scoff that such idiocy. But they don’t seem to be able to learn from their own failed predictions.

What Duy highlighted is the asymmetric nature of the Fed interest rate increases. If the economy starts to heat up, causing inflation — the Fed can just raise interest rates as high and for as long as necessary. But if economy goes into recession, the Fed can only lower interest rates to zero. So if they raise interest rates too soon, there is little the Fed can do to fight the resulting recession. There are other asymmetries in all of this. And they all point in the same direction. So why raise rates now?

Duy mentioned the “financial stability” argument. According to this argument, low interest rates will “encourage excessive risk-taking.” Really?! Because I remember the Fed watching the tech bubble and the housing bubble inflate over years without doing anything about it. I think this argument is just more apologetics. The situation is this: the Fed wants to raise interest rates; but there is no real reason to raise interest rates; so the Fed goes looking for reasons to justify things it wants to do regardless.

I’m sorry to be constantly harping on the Federal Reserve. But it really is ridiculously important. The truth is that with the current philosophy of the Fed, the working class will never get ahead. As soon as the economy is starting to do well enough that workers can share in productivity growth, the Fed puts on the brakes. This is not good. In general, the Fed has not been a major tool of the power elite. But it looks more and more like that. And imagine what it would be doing if it had been filled with people by Donald Trump or Ted Cruz? It’s too frightening to contemplate.

Morning Music: Barney Miller Theme

Barney MillerWhen it comes to television themes, I most like Barney Miller. It was written by two veterans of television: Jack Elliott and Allyn Ferguson. Like most of these, the music is simple. In this case: very simple. It’s basically just a vamp on a single (dominant-7) chord with that unrelenting four bar bass line. The whole line is then transposed up and then back down. After the instruments come in, the bass gets pretty funky, improvising around and beyond that line. There is also a bridge, of course.

It is also the case that the show Barney Miller is great. I always find it interesting to go back and watch shows that I liked when I was much younger. Often, they really don’t hold up that well. But Barney Miller is as good as anything on television now. It isn’t just that the humor still works. The show has a remarkable amount of humanity — both regarding the officers and the criminals. I’m sure I could get a thousand words out of discussing how it has a more advanced understanding of crime than most political pundits.

Anyway, here is the song in its three minute version:

Anniversary Post: Adolf Eichmann’s Sentence

Adolf EichmannOn this day in 1961, Adolf Eichmann was sentenced to death. It’s remarkable to think that he was only 39 years old at the end of World War II. And then you look at him in prison in his mid-50s and it isn’t hard to see why people picked up on Hannah Arendt’s concept, “The banality of evil.” This wasn’t what she was getting at, but I know we all have the same reaction when we see a war criminal long after the fact, “That average looking old man did it?!”

But based upon Arendt’s reporting, I would say that Eichmann was a totally typical authoritarian. So when he gave the explanation that he was simply following orders, he was being honest. Obviously, it is wrong to follow orders when the orders are wrong. But the issue that our civilization has never wrestled with is that all of our governments depend upon people following orders. Every aspect of the official state is designed to get people to follow orders without thinking.

All you really need to do is look at the way that our government responded to Chelsea Manning and Edward Snowden. I don’t believe for a minute that the government really cares about the secrets that were revealed. The overblown outrage that we see is to send a message: it doesn’t matter what you do because you think it is right, the government will hunt you down and destroy you. Do you really think that the US government would have forced another country’s airplane down to search for Robert Lewis Dear, if he were on the run? Of course it wouldn’t. No one needs a lesson about murder, but they do about never crossing the government.

I do think there was something banal about Eichmann. He was doing what almost all authoritarians would do in his place. And in America, I would say that about 25% of us are authoritarians. But the real problem is that the government seems to think things would be better if we all were.