Reform the tax laws to make the super-rich pay

Barbados Prime Minister at COP26. 

Pic courtesy: Reuters

Among all the heads of the state that made headlines at the ongoing COP26 negotiations in Glasgow, the chances are you wouldn’t have been told what the Prime Minister of Barbados, Mia Mottley, said in her eight minute address. The mainline media didn’t talk of it, and what she said was uncomfortable for the big business as well as for the global leadership to even acknowledge. Each line of her powerful address brought out the bitter truth that the world tries so hard to push under the carpet.

Mia Mottley talked of quantitative easing, an instrument of monetary policy that has remained outside the purview of TV discussions, and in fact is not even deliberated much in the economic classrooms. As an economic expression it means buying bonds to lower the interest rates on savings and loans but in simple terms it means printing surplus money. She talked of $25 trillion of surplus money printed by Central banks of the wealthy countries in the past 13 years: “Had we used those $25 trillion to purchase bonds to finance the energy transition, of how we eat, of how we move around in transport, we would have today reached that 1.5 degree limit that is so vital to us,” she stated.

As I had explained in one of my earlier articles (The Tribune, May 22, 2021) $ 9 trillion of surplus money that the Central banks had printed in 2020 alone had actually gone into the pockets of the rich via the financial markets. While the wealth of the super-rich increased by a whopping $5 trillion to $13 trillion during the pandemic, imagine how gigantic the $25 trillion quantitative easing booster dose must have been for the soaring wealth of the ultra-rich. Nevertheless, if the surplus money was instead routed to provide for the global climate finance requirement of $100 billion a year that the Paris Agreement had promised for, the world would have been a much safer place to live. As the Barbados Prime Minister had worked out, quantitative easing could have been easily utilised to create a $500 billion fund, which would hardly be 2 per cent of the surplus money printed. 

In fact, if I were to add another $100 billion that is required to fight extreme global poverty, a fraction of the surplus money that is printed, could have been more than sufficient to make the world move towards a utopian stage where poverty becomes history, where no one sleeps hungry, and where the world gets over the nightmare of an impending climate catastrophe. The massive amounts of quantitative easing drives growth, economists would say but what is not told is whose growth. Why the same instruments cannot be suitably transformed to ensure that quantitative easing works for the people and the planet? That’s a question that economic thought leaders as well as G-7 leadership has conveniently ducked.   

Not only quantitative easing, the rich are routinely provided with economic stimulus, bailouts and tax cuts besides other incentives. In US, effective corporate income tax has come down from 50 per cent in 1950 to 13 per cent in 2020. In India, corporate tax has been lowered from 30 per cent to 22 per cent, and the demand is to bring it still further down. Not investing the amount saved in creating employment, these tax cuts have often helped companies to buy back shares. In last five years, Indian companies have gone in for stock buyback to the tune of Rs 2-lakh crore. 

The rich don’t become ultra-rich because they did something extraordinary but it is simply because macro-economic policies are so designed to help transfer wealth to them. So much so that in America, top 1 per cent holds 15 times more wealth than the bottom 50 per cent. In India, the top 1 per cent holds four-times more wealth than the bottom 70 per cent. Despite this generosity, the top 1 per cent globally has safely hidden an estimated $7.6 trillion in tax havens. 

At a time when 55 corporations in the US haven’t paid any tax, US President Joe Biden has publicly accepted the implicit bias in the tax regime. In a tweet last week, he wrote: “Those at the top have gotten a free ride – at the expense of the middle class – for far too long. My Build Back Better Framework will make the super-wealthy and big corporations pay their fair share, and then invest that money in the middle class.” The Build Back Better Programme is the $3.5 trillion package that he recently unveiled to reduce poverty, expand healthcare and address the crisis emanating from climate aberrations.  

Considering that at a time when wealth inequality is increasing, and corporate tax is being systematically lowered, what Joe Biden says makes terrific economic sense. It is well known that billionaires wealth increased by a whopping 70 per cent during the pandemic. To give you an idea, the wealth of America’s billionaires increased by $ 2.1 trillion in the first 19 months of the pandemic, of which Tesla CEO Elon Musk’s wealth surpassed $ 209 billion, and former co-founder of Amazon Jeff Bezos is now worth $192 billion. But they didn’t pay their share of taxes. As per ProPublica, an investigative website, Musk didn’t pay any tax in 2018 and Bezos didn’t pay in 2007 and 2011. Reports also show that the top 400 richest in the US paid a lower tax than an average American worker. 

This brings me back to the question that Mia Mottley had raised. After all, adequate public finance and investment is required to secure the future economic and social-well being of people. Decades of corporate tax avoidance, austerity and economic liberalisation have brought the world to a stage where it is awash with money, but the tragedy is that much of it is locked in corporate safe vaults. The bigger challenge therefore is how to reform the tax regime to make the super-rich pay, and redesign economic policies that work for people and the planet. #

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G-20 leaders hold the key for an ever-lasting solution to the climate crisis

Pic courtesy: abc7chicago.com 

The inconvenient truth is before us. Despite all the global talks on climate change since the early 1990s, the latest report of the World Meteorological Organisation (WMO), the UN weather agency, has come as a dampener. Greenhouse gas emissions have hit a record high in 2020, not giving any indication of the world being able to meet the promise of keeping temperature rise below the target of 2.0 degrees expected to be achieved by the mid of the century.

“We are way off track,” the WMO Secretary-General Petteri Taalas said, adding “We need to revisit our industrial, energy and transport systems and whole way of life.” The United Nations Environment Programme (UNEP) meanwhile has warned that the world is on a track to see a temperature rise of 2.7 degrees by the end of this century if it is business as usual. This startling breaking-news comes a few days before the two-week deliberations of the 26^th Conference of Parties to the UN Framework Convention on Climate Change (or COP26) are scheduled to begin at Glasgow on Sunday, October 31. The climate negotiators are expected to not only grapple for the next two weeks, huddling together to sound alarm, setting national determined contributions (NDC), and wanting higher climate finance obligations to be legally enforced.

A day earlier, on Oct 30, leaders of G-20 countries will be meeting at Rome for a two day conclave, and again the focus, besides patting themselves for the Covid-19 response, is expected to revert to climate change. More so knowing the ambition their respected countries are expected to exhibit at the COP 26, and the media built up looking for a more meaningful breakthrough than what has been achieved so far. With G-20 countries responsible for 80 per cent of the global emissions, their role and commitment on carbon neutrality or net-zero remains critical to keep the temperature rise in check. That is why Britain’s Alok Sharma, the COP26 President, was forced to remark: “The response of G-20 will quite simply be make, or break.”

Aptly titled ‘People, Planet, and Prosperity’ the G-20 leaders’ Summit is happening at a time when the latest report of the Inter-governmental Panel on Climate Change (IPCC), while issuing a ‘code red for humanity’ warning, summed up the reasons for the climatic upheavals, by categorically stating: “It is unequivocal that human influence has warmed the atmosphere, oceans and land.” Extreme weather conditions, including frequent cyclones, floods, drought and increasing human casualties highlights the extent of climate crisis. In 2020, WMO estimates climate disasters to have caused a loss of $ 238 billion in China, $ 87 billion in India and $ 85 billion for Japan. More recently, untimely heavy rains and resulting landslides and floods in the first fortnight of October have killed nearly 250 people in Uttarakhand, parts of Uttar Pradesh, Kerala in India, and in adjoining regions of Nepal.

Simply put, the climate catastrophe that the world is staring ahead is the outcome of the consumption-driven economic growth model that the world is following. Increasing economic growth requires higher use of energy, which leads to higher emissions. The higher the greenhouse gas emissions, the higher is the GDP. So the correlation that a higher GDP has with increasing climate shocks is clear. Radically reforming the economic growth design is something that is beyond the capacity of the climate negotiators, who can at best work out a timeline for climate finance to be delivered, and also set a target for emission-reduction trajectory.

Beyond this, it will be the role of international leadership to acknowledge that any meaningful outcome will come from decoupling growth from a devastating ecological footprint that economic growth leaves behind. After all, the way the global economic growth model has been cast, a high growth trajectory eventually results in resource depletion. For the political leaders, a higher GDP is the ultimate development indicator showcasing the performance of their government. The resulting environment havoc it leaves behind is a cost that people have to live with and silently suffer. The debate around climate change at least has been able to bring out the huge cost people pay by way of resulting destruction. To move away from the economic growth design, towards an economic system that does not lead to a climate catastrophe, calls for a transformative change in economic thinking, which will require the global leadership to demonstrate courage in guiding and leading the world towards a safe and healthy future.

In other words, the bull in the china shop – the race for a higher GDP -- is already on a rampage. Unless tamed, it has the capacity to not only to further plunder whatever remains of the planet’s natural resources, but to also heat it up to a point that will leave the planet literally burning. Aware of these hard realities, the G-20 leaders cannot go on seeking higher investments to boost production so as to achieve a higher GDP while at the same time call for stabilising global temperature rise. Even the highly anticipated climate finance delivery of $ 100 billion a year for the developing countries, beginning 2023, will not bring about any meaningful outcome unless the underlying intent is to drastically reduce the global material footprint. A new metric to measure planet's well-being is now required.  

For instance, we cannot go on clearing the Amazon forests on the one hand and at the same time call for technologies to help people mitigate climate change. We cannot go on pushing intensive farming systems across the globe and then at the same time talk of reducing emissions from agriculture. We cannot go on clearing large swaths of forests to accommodate the growing needs for mining and industry while making empty promises to conserve and protect the green lungs. At the same time we cannot go on redesigning economic policies that reduces savings and encourages people to spend more, thereby increasing consumption. Just a few illustrations, but I am sure readers will agree that all it requires is to reverse the economic thinking that has brought us to a tripping point.

That is why I have always maintained that an ever-lasting solution to the climate crisis lies in the hands of the G-20 leaders’. These leaders have to come out with their collective vision to save the planet, and demonstrate their willingness to take the bull by the horn. Getting over with their obsession with GDP is the first step. Measuring the social and environmental costs before taking up any economic activity, is the second. Invest more on human capital, and on conserving the nature at any cost. Not an easy task, I am aware but as Nelson Mandela had once said: “It always seems impossible until it’s done.”

Source: Race for higher GDP destroying mother Earth. Bizz Buzz. Oct 29, 2021. https://www.bizzbuzz.news/opinion/race-for-higher-gdp-destroying-mother-earth-1062654

 

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The hidden cost of producing cheap food

It is time to know the hidden cost of producing cheap food 

Pic courtesy Down to Earth

In a recent BBC Radio broadcast, Prince Charles said “How we produce food has a direct impact on the Earth's capacity to sustain us, which has a direct impact on human health and economic prosperity.” The clamour for producing cheap food, which is at the very foundation of the mad race towards an unfettered economic growth, is actually based on externalising the ‘hidden costs’ of modern industrial farming. 

The focus on producing surplus and cheap food threatens the very survival of the country’s smaller farms, Prince Charles said, adding if these small farms disappear, “it will rip the heart out of the British countryside.” The warning has been sounded at a time when Statista, a global business data platform, estimates the total number of employed and self-employed farmers in UK to have come down drastically to a mere 107,000 in 2020. 

In lot many ways, his warning finds reverberations in the iconic farmers’ movement being witnessed in India, wherein protesting farmers appear worried at the possibility of their farm lands being usurped by big agribusiness companies once the central farm laws are implemented. In addition, although 86 per cent of India’s farmlands are below 2 hectares, categorised as small and marginal, the advent of Green Revolution in the mid-1960s emphasising on the need to intensify production per unit of land, has come with a huge cost. Instead of making a long overdue correction, more of the same is now being pushed by facilitating the entry of big agribusiness companies. 

This reminds me of a plenary talk I delivered at the 2017 Organic World Congress titled ‘World Must Detoxify its Toxic Farmlands’ presenting a six-point charter for a more specific action-oriented programme at the local, national and international levels to reverse the ecological devastation that industrial farming has inflicted on the planet. Intensifying food production has not only inflicted a severe blow to environment by destroying the natural resources, including soil and water, and acerbating climate change in the process but the resulting unsustainable food systems that have been encouraged over the past few decades in the guise of building efficiency and competitiveness have also taken a heavy toll on human life. 

While the ‘hidden cost’ of producing cheap food has been talked about time and again, with some of the well-known experts and even some of the international committees, including the International Assessment of Agricultural Knowledge, Science and Technology for Development (IAASTD) in 2009 and more recently the 2021 report of The Economics of Biodiversity presented by economist Partha Dasgupta, warning that business as usual is not the road ahead, global leadership has simply ignored these concerns. It will therefore be interesting to see how the UN at its proposed Food Systems Summit (UNFSS) in Sept 2021 plans to come up with an effective and implementable road map for radically overhauling the way food is produced, processed, transported and consumed. 

But as Albert Einstein had once said we cannot solve problems by using the same kind of thinking we used when we created them. This is exactly what more than 300 civil society organisations, small scale producers, indigenous communities and individual scientists/experts are pointing to, and this is what the UNFSS has to be careful about. Launching a campaign for boycotting the so-called People’s Summit, they accuse UNFSS of “facilitating greater corporate concentration, fosters unsustainable globalized value chains, and promoting the influence of agribusiness on public institutions.” 

As I have often pointed out, this shouldn’t come as a surprise since the World Economic Forum too had in 2009 come up with a New Vision for Agriculture to be executed by 17 multinational agribusiness companies.  Finding corporate-led market-based solutions to a crisis that is actually the outcome of creating over the years an enabling environment for free markets is not what the world requires at this crucial juncture. Rethinking agriculture is the need of the times given that half the world’s land is used for agriculture, and as a consequence of pushing intensive farming systems it also happens to be the second biggest source of greenhouse gas emissions. 

Nevertheless, another timely report by Rockefeller Foundation -- ‘True Cost of Food: Measuring What Matters to Transform the US Food System’ -- that not only quantifies the cost of producing cheap food but goes much beyond providing a value tag to the ‘hidden costs’ should hopefully shake-up our blinkered economic thinking. Cheap food has always been considered essential to keep economic reforms viable. So far it has worked because economists and policy makers refused to measure its true cost. But the massive environmental disruptions, resulting human health costs and huge livelihood distortions resulting from producing cheap food are so large that it is no longer possible anymore to keep the shocking figures under the carpet.  

American consumers spent roughly $ 1.1 trillion in 2019 on food. The report says the food price tag however does not include the cost of healthcare from diet-related illnesses, the damage it does to environment, including soil, water and biodiversity, greenhouse gas emissions resulting in climate change, agrarian distress and much more. Adding up all these costs, “the true cost of the US food system is at least three times as big -- $ 3.2 trillion per year.” While this certainly is a conservative estimate, what the report helps bring out is to provide numbers to what was already known – the current food system that the world follows is badly broken. 

Globally too, the true cost of producing food is three times higher than what consumers pay. In India, where agriculture output is worth Rs 20.19 lakh crore and where farming as a profession is at the bottom of the economic ladder, studies are needed to quantify the true cost of producing food. Farming remains in distress because to provide cheap food the right price is denied to growers. Reversing this would require bold decisions based on a completely fresh thinking and approach. The same economic and scientific thinking that led to the crisis cannot be expected to provide any real-time solutions. #

The huge cost of producing cheap food. TheTribune. July 23, 2021. https://www.tribuneindia.com/news/comment/the-huge-cost-of-producing-cheap-food-286919?fbclid=IwAR0ZcddRadQrUGE5DyLVN9jfKfpMakMOFyt5PwKtvjzaUx-7CU1MgFB-AYw

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IPCC report on 'Climate Change and Land' -- Fails to provide policy guidelines

Painting by Michel Granger

At a time when half the country is recovering from a flood fury, especially in Kerala where massive landslides following incessant rains have taken a huge human toll; and much of the remaining half of the country is reeling under a continuing drought, the latest special report of the Intergovernmental Panel on Climate Change (IPCC) titled ‘Climate Change and Land’ couldn’t have come at a more appropriate time. The 1,300 page report, a summary of which was released last week, presents a lot of scary facts, which were being talked about, but perhaps needed an official endorsement.

Speaking to The Guardian, Dave Reay, a professor at the University of Edinburgh who was an expert reviewer for the IPCC report summed it up: “This is a perfect storm. Limited land, an expanding human population, and all wrapped in a suffocating blanket of climate emergency. Earth has never felt smaller, its natural ecosystems never under such direct threat.” Although integral to the discussions on climate change, the direct relationship land has with climate change had never been so loudly emphasised. It however restrains from making any policy recommendations and that in my thinking is its biggest drawback. To illustrate, if fossil fuel subsidies have grown to $ 400 billion in 2018, unless a phase out programme accompanied by adequate public sector investments in sustainable food production systems or land management etc is provided, it is futile to expect any meaningful contribution towards protecting the climate from going haywire.

The report says that since the pre-industrial period (1850-1900) the global mean land surface temperature (till 2006-15) has almost doubled when compared with the global mean surface temperature, which is the average for land and ocean temperatures. While the land surface temperature has increased by 1.53 degree C, the rise in the mean land and ocean temperatures had hovered around 0.87 degree C. In other words, this report shows that to cap the rise in global temperatures to 1.5 degrees, the world will have to ensure that any further rise in the land surface temperature is kept under control. Further, global warming has already brought shift in climatic patterns in many parts of the world, including expansion of the arid climate zones and contraction of polar zones, and has also unleashed extreme weather fluctuations, inducing long dry spells, prolonged heat period, heavy floods, enhanced frequency of cyclones, permafrost thaw thereby resulting in massive land degradation, loss of biodiversity and posing a threat to global food security. The gloom that has descended following the rapidly changing climatic patterns has to be contained by rapidly evolving policy fixes.  

Recent studies have shown that ever since the time man started recording temperatures, July has been the hottest month. The Himalayas are losing more than one and a half foot of ice every year since the year 2000, and Swiss glaciers have lost more than 0.8 billion tonnes of snow and ice in the month of June. While the IPCC report says that cultivated soils are being lost at a rate 100 times faster than it is being formed (and 10-20 times in no till areas), a major study by ETC Group had earlier shown that nearly 75 billion tonnes of soil is lost every year to erosion, with damages costing Rs 400 billion a year. In another report, published in Scientific American, a UN official was quoted as saying that if the current rate of degradation continues, the world’s top soil would be gone in 60 years.

Global food production systems, and that includes, agriculture, forestry, livestock and other land uses account for 13 per cent carbon dioxide, 44 per cent methane and 82 per cent nitrous oxide emissions, accounting for a third of all greenhouse gas emissions. However this appears to be quite a scaled down estimate from another UN report on the Economics of Ecosystems and Biodiversity (TEEB) for Agriculture and Food released last year which pegged greenhouse gas emissions from the same activities to be somewhere between 49 to 57 per cent. Nevertheless, the challenge to reduce emissions without any negative fallout on food security remains paramount. It has socio-economic as well as political implications.

The IPCC report does suggest sustainable agricultural practices, increasing crop productivity, moving away from bio-energy programmes, and for shifting dietary preferences from meat based to plant based foods among measures that could make a significant dent on the greenhouse gas emissions. In addition, almost a quarter of the food produced, is either lost or wasted. Several studies earlier have pointed to the enormous damage resulting from food wastage and in turn the environmental footprint it leaves behind. If food wastage was a country, it would have ranked third in greenhouse gas emissions. At the same time, the food that goes waste in US for instance is good enough to meet the needs of sub-Saharan Africa.

Between 1961 and 2013, an additional 1per cent of world’s drylands had turned into drought. This however cannot be entirely blamed on climate change. In India, for instance, increasingly the drylands are getting into the drought zone because of a large number of water guzzling hybrid crops that are cultivated with impunity. Common sense tells us that drylands need crops which require less water. But it is just the opposite – crops that require more water are being grown in water scarce regions for several decades now. In Maharashtra, 76 per cent of the available irrigation is consumed by sugarcane alone, which occupies only 4 per cent of the cultivable area. The remaining 96 per cent of the crops that are cultivated are therefore faced with a terrible water stress which has little to do with global warming.

The IPCC report clearly mentions desertification, deforestation, industries, and urbanisation to exacerbate global warming. It also lists draining wetlands to be responsible for releasing carbon dioxide back into atmosphere. Kerala is particularly a victim of flawed policies that have drained wetlands, and by encouraging rampant quarrying in fragile areas of Western Ghats turned it vulnerable to landslides. In a quest for higher economic growth, natural resources are being ruthless devastated. 

I found the report to be very useful for academic purposes. Environmentalists will surely lap it up. But in the absence of any mandatory guidelines and policy directions that G-20 countries must be asked to adhere to more so at a time when the world is faced with a climate emergency, the IPCC simply let the opportunity go. #

IPCC report comes up short. The Tribune. Aug 21, 2019
https://www.tribuneindia.com/news/comment/ipcc-report-comes-up-short/820230.html?fbclid=IwAR0mPWda_EGCkdvlQIqiY0poYObXr8j2zggrpmOmwT7nnDhJwuqDdqE57X0

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