Why we will miss the Millennium Development Goals

I’ve just finished reading the Millennium Development Goals Report for 2008. Basically it says that we aren’t going to make it, and that millions – billions – of people can look forward to hunger, ignorance and disease. Add to that the growing environmental and resources crises, you can add war to that too.

What has this to do with the topic of this blog, the environment? If we aren’t willing to help people in dire need now – even when we have expressly promised to help them and claimed (at the 2000 Millennium Summit) that they would ‘spare no effort’ to do so - how realistic is it to expect us to expend any significant effort on an environmental crisis whose really disastrous effects are mostly several decades away? Not great, I would say. Yet environmental action is at least as urgent as support for developing countries – many of the effects we can expect in future decades are the results of causes that are happening now. But of course we will do too little for far too long.

Why is this? I do not believe that it is because we are stupid or that the environmental case has not really been made. I have no idea how well individual members – or whole departments - of the government understand the problem. The fact that, say, the Foreign Office has ‘promote a low carbon, high growth, global economy’ as one of its four top-level policy goals, and the absence of many details about either climate or the environment generally in the FCO site as a whole strongly suggests that they have not really taken on board how great the change needed really is.

But as the sub-title of this blog – ‘About the environment, peak everything and capitalism’ – suggests, I suspect that it has a lot to do with the fact that the real problem – with understanding what the problem is, let alone solving it – resides at a far deeper level than navigating a particularly set of rapids. The fact is, we are probably on the wrong river, and the rapids ahead look like growing to Niagara-sized waterfalls.

The polluter doesn’t pay after all

Today the UK government begins its sale of 4 million carbon permits, equivalent to the right to release 4 million tons of carbon into the atmosphere. The sale is to electricity producers.

Despite the fact that this is a sale, not a giveaway, the permits are effectively free, because the public - you and me - have already paid for them.

Last year the power generators were given the permits for free - just to get them interested. (Apparently the alternative of being refused permission to sell electricity wasn't sufficient incentive to cough up.) But they passed on the 'cost' of these permits - i.e., the nominal price - to us consumers anyway. So even though they were free, electricity prices went up to reflect the cost of permits!

What does that mean? It means that this year the power generators have a large wad of cash - taken from us last year - with which to pay for permits. And they will of course pass this year's costs on to us too - which means that next year, they will again have a nice wad of cash - taken from us this year - with which to pay for permits. And so on, and on, forever.

In other words, unless the price of permits goes up radically or they need to buy a lot more, they will never pay for the pollution they cause. The polluter pays only for the marginal changes – it’s the polluted who pay the bulk of the costs.

Don't markets work well - especially if you control the market?

I am Jack the Ripper

Although my personal life is pretty dull, family mythology claims that I am related to some pretty exotic characters.

My father once told me that somewhere back there we are related to William Palmer – one of Britain’s more prolific murderers. He also told me that an uncle of his had once been chased through the streets of Whitechapel (where, by coincidence, I am writing these words) by a lynch mob eager to avenge the latest of Jack the Ripper’s crimes, which had taken place that just evening. It was foggy and my uncle, a craftsman, carried his tools in a Gladstone bag just like the one Jack was supposed to keep his tools in. He only escaped by running into a police station.

So was my great-uncle a suspicious character? I suppose so – hadn’t he been ‘linked’ to the unsolved Jack the Ripper murders? So was my father a suspect too – a ‘relative’ who might have led him into evil ways - suspicious? Am I too suspect – after all, I am a 'known associate' of my father’s?

Presumably so, if America’s Black Helix system is to be the judge. This is the very hush-hush database that currently being populated with up to 9000 new sets of DNA each year, taken from terrorist ‘suspects’.

Based on Guantanamo, the very word ‘suspect’ is suspect. Who says they are a suspect? Any old soldier who rounded them up and chucked them into the military paddy-wagon for ‘processing’ – and six years of imprisonment and abuse without charge? Who is suspect here – the ‘suspect’ or the soldier? Or the soldier's officers? Or the military command structure? Or the US government?

So the basis on which such suspects are ‘suspect’ is doubtful. But over and above that, what they are often suspected of is resisting a foreign invasion of their homeland. Which is not, as far as I can tell, a crime. Certainly not in the USA, where I doubt that many would resist the call to arms merely because the United Nations had said that invading them was OK or they didn't have a current set of dog-tags.

So many of these suspects are not really suspected of anything, and the thing of which they are not really suspected isn't actually a crime. But they are suspects anyway. We know - they are in a very hush-hush database. So they must be. No smoke without fire.

And so they will remain, dogged by this label for the rest of their days.

I can’t imagine how many things I must have done that would render me suspicious to the American authorities. Demonstrating against the war in Vietnam. Demonstrating against apartheid. Being rude about George Bush. Comparing Sarah Palin to a pitbull (hang on a minute...). This blog generally.

So someone gets a sample of my DNA and puts it into Black Helix. Thus am I branded for life. Just ask the right people and they will tell you, Oh no, he’s a bit ... suspect. Quite right too – wasn't there something about being connected to someone who was ‘linked’ with Jack the Ripper? Haven't I even ‘confessed’ to it - right here?

I'm all in favour of using databases to keep the world safe from terrorists. I just want them to pay some attention to the people who terrify me. Which right now doesn' t include anyone from Iraq or Afghanistan or any normal Americans. But it does include quite a few people from the US government.

Financial WMD

It is now six years since Warren Buffett wrote his famous description of derivatives as ‘financial weapons of mass destruction’ – a phrase that is now quoted left, right an centre. It comes from his summary of his company’s investment strategy:

We try to be alert to any sort of megacatastrophe risk, and that posture may make us unduly apprehensive about the burgeoning quantities of long-term derivatives contracts and the massive amount of uncollateralized receivables that are growing alongside. In our view, however, derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal (Berkshire Hathaway, Annual Report, 2002: 16).

By and large, this is all you ever read about Buffett famous words – a splendidly resonant phrase. But after a quarter of a century in serious research, I have found that there’s nothing quite like going back to the source. So if you read the report in full (come on, it’s only 78 pages, well written and strangely human for a business document – I rather like the author), you will find an astonishing critique of contemporary business practices, especially among the investment houses. Here are a few of his more striking words from 2002:

Despite three years of falling prices, which have significantly improved the attractiveness of common stocks, we still find very few that even mildly interest us. That dismal fact is testimony to the insanity of valuations reached during The Great Bubble. Unfortunately, the hangover may prove to be proportional to the binge… (pp.15-16)

Accountability and stewardship withered in the last decade, becoming qualities deemed of little importance by those caught up in the Great Bubble. As stock prices went up, the behavioral norms of managers went down. By the late ’90s, as a result, CEOs who traveled the high road did not encounter heavy traffic.

Most CEOs, it should be noted, are men and women you would be happy to have as trustees for your children’s assets or as next-door neighbors. Too many of these people, however, have in recent years behaved badly at the office, fudging numbers and drawing obscene pay for mediocre business achievements. These otherwise decent people simply followed the career path of Mae West: “I was Snow White but I drifted.”

In theory, corporate boards should have prevented this deterioration of conduct. I last wrote about the responsibilities of directors in the 1993 annual report… There, I said that “If able but greedy managers overreach and try to dip too deeply into the shareholders’ pockets, directors must slap their hands.” Since I wrote that, over-reaching has become common but few hands have been slapped. (p.16)

This is followed by a severe critique of allegedly ‘independent’ directors (p.18-20), of whom he declares that ‘their record has been absolutely pathetic’ (p.18), and an insistence that most investment managers perform at a mediocre level (a claim that research bears out fully) but over-paid. Perhaps most strikingly of all are Buffett’s business principle no.7 - ‘We will reject interesting opportunities rather than over-leverage our balance sheet’ (p.70). His preference for a fair price over a high one (p.72) and his attachment to ‘intrinsic value’ (p.73) are pretty striking too.

Unfortunately, having captured the effects exactly, Buffett get the causes quite wrong. He insists that the main cause of this is the difficulty of asking for a mediocre CEO to be fired when you are a member of the same little club, ‘the board’. In other words, the problem is essentially one of good manners.

Well, at least he isn’t going on about personal greed exclusively. Like greed and irresponsibility, weak governance and social constraints do indeed prevent decisive action from being taken. But if the present situation – not to mention to repeated mis-selling scandals – makes perfectly clear is that problem is actually systematic – and that the ‘system’ at fault is market capitalism itself.

Or rather, it is not market capitalism, because another thing these scandals and crises have made clear is that few contemporary ‘markets’ are any such thing. Rather, it is capitalism as such, which if not regulated and, where appropriate, directed and firmly controlled, simply demands the maximisation of profit by whatever means possible. It may help in such circumstances to have a lot of greedy people running the show – people how can be relied upon to maximise their own returns. But as the behaviour of the companies themselves has demonstrated time and time again, this is quite in line with the company board’s own goals.

Perhaps it is worth recalling another major scandal of recent years – the fall of Enron, Global Crossing, Worldcom and above all Arthur Andersen. Perhaps it is an urban myth, but I distinctly recall hearing that the most common response of many figures in the City to their tame Andersen partner was ‘Why didn’t you do that for us?’

This crisis is not about greed or poor internal governance. This is the normal operations of capitalism when it gets to decide its own rules. We would do extremely well not to forget this – and, if necessary, consider alternative arrangements.

Bye bye Sarah

Wonderful. Obama wins.

However, in the interests of political balance, I must admit that the high point for me was the most beautiful sight I have seen in many years - Sarah Palin choking back the tears. Bless.

Sadly, Alaska didn’t go Democratic (though I can’t help feeling that’s mostly because Palin's environmental policies pretty much decimated the polar bear vote), but you can’t have everything.

I feel quite sorry for Obama – a great guy to elect, and a truly crushing victory, but what a dreadful time to be elected. An economy in collapse and two wars with no politically acceptable way out of either. Iraq already in the hands of fundamentalist Shi'ites and Afghanistan completely unwinnable.

Not that Obama will be short of goodwill – after 8 years with Dubya, Obama could hardly be more welcome. I think most non-Americans would have welcomed a three-headed Martian. Or a bucket. Going by the vote, so would most Americans, if only the bucket went to church.

Yet to tell you the truth, I was quite looking forward to McCain winning. Nothing to do with the policies (puh-lease...), but I was rather attracted to the image of him dropping dead right after his inauguration and watching Ms Palin run the planet for four years.

I agree that total environmental collapse and global war is a high price to pay for four years of Sarah Palin accidentally satirising herself 24 hours a day, and there is something quite draining about the prospect of a president who makes Dubya look deep. But on the plus side, it would finally awaken Congress to the need for more terminal measures against pitbulls, no matter how pertly the lipstick was applied.