Surviving Climate Change: Producing Less and Enjoying it More

Panel 7: Reversing Wealth Inequality between People and Countries
Sunday, June 29, 10:15 am — noon

Ben West, a member of the Community Arts and Media Project in St. Louis, has a background in electrical engineering. He has been working with community development and social justice groups for the last five years.

To most people the Internet is an ethereal presence, rapidly flickering words and images that fade from memory sooner than they fade from the screen. Many people don’t realize the Internet is the fastest-growing heavy industry in this country, and that this exponential growth is more driven by marketing zeal than by true demand. For example, in 2006 American datacenters consumed more power than of all the country’s TV sets. The convergence of open, collaborative media enabled by the Internet is already changing our social fabric rapidly, yet these changes should be ones we chose, and not ones chosen for us. Just as we vehemently demand sane fuel sources along with social and environmental responsibility from the automobile industry, so should we demand more responsible energy policies from the Internet industry. Just as General Motors was criticized for marketing the profoundly fuel-inefficient Hummer to the wealthy and vain, so should Google be criticized for placing a secretive, 30 acre, energy- and cooling-intensive datacenter on the Columbia River in remote Oregon.

Fredric Raines was staff economist for Council of Economic Advisers under Presidents Kennedy and Johnson. Four time visiting Fellow/Lecturer in economics at Warwick University, England, his published studies examine trade unions, labor productivity, and defense spending and economic growth.

Income and wealth inequality has increased dramatically over the past quarter of a century in the US. Plausible reasons for this reversal are left to the discussion. The issue I wish to address is the prospective course of income inequality in an era of declining measured consumption and output.

First, it needs to be noted that an economy characterized by “free market” capitalism will, in the absence of countervailing government policy, experience increasing income inequality. The reason is that financial assets of upper income households are disproportionately greater than those of lower income households (the rich have a much higher savings rate than the poor). Asset income compounds existing wage income inequality, producing successively higher levels of wealth inequality.

Given the key role of asset income (capital gains, dividends, interest, rent), in driving inequality, inequality can be gauged by the trend in labor income as a proportion of total output (the residual being capital income). While the share of total output that should go to labor is debatable, it is unambiguous that a steadily falling labor share has severe negative welfare consequences. A well known result in economics holds that if total labor compensation per hour increases at the same rate as labor productivity (output per hour), the shares of labor and capital in total output remain constant. However, if labor compensation rises less rapidly than labor productivity, labor’s share of total output declines. To compute this decline for the post war US economy, I use data for the nonfarm business sector of GDP. Labor’s share, estimated to be 70% in 1959, falls to 64% by 1980, then plummets to 51% by 2007.

The question now becomes how does an economy undergoing declining production of GDP engineer an upward trend in labor’s share? If labor’s share is rising, corporate profits will be falling. Government policy can assist this inequality reversal, but the pie to be redistributed in the private sector is shrinking.

Putting aside expanded government programs, a more exciting and ultimately necessary avenue lies in the newly emerging development sector of the economy. This sector could consist of private worker run enterprises addressing the needs of a greening economy, sustainable communities and alternative energy. Such enterprises would offer workers the potential of better wages but also asset accumulation, the key to arresting inequality tendencies in capitalism. But these new development enterprises would need access to capital and technology, and might find themselves in competition with existing large corporations.

I see this scenario as consistent not with an economy where output is shrinking, but one in which output, appropriately measured, is expanding. The trick will be to create a development sector that is as efficient and productive as the current private sector. But I favor this approach because it retains, in a new world, two key elements of our culture: the competitive drive to succeed and the goal of a better life.

Carmelo Ruiz-Marrero is a Puerto Rican author and educator with over 15 years experience. His research and education work covers human rights, peace activism and environmental issues with a focus on agriculture, hunger, biotechnology, globalization, global warming and biofuels.

We are witnessing not one but three interrelated crises that are feeding each other:

1. Global warming;
2. Oil prices ("peak oil"); and,
3. The food crisis (peak food?)

Agriculture is perhaps the main thread connecting these crises. For example, conventional agriculture is petro-dependent. Chemical inputs like fertilizer and pesticides are based on petroleum, farm machinery uses fuel, and on top of that our extremely centralized food system typically transports food over a thousand miles from farm to plate, which means a massive expenditure of fossil fuel for trucks, trains and ships.

On the other hand, conventional agriculture exacerbates global warming, as the Stern Report shows. Fertilizer is agriculture's main contribution to climate change, and deforestation to make way for monocultures is also a major cause. Add to this the massive transportation infrastructure needed for long distance transport of agricultural commodities — ports, waterways, airports and highways, whose construction often causes the destruction of delicate ecosystems, like estuaries and wetlands.

Civil society organizations like Via Campesina have presented some very concrete proposals to fight both world hunger and global warming. These proposals are based around small farms, organic production and locally based consumption. Reducing the number of food miles is one of the single most important steps we can take both individually and collectively to counter global warming and the other two related crises.

Lori Reed is Director of the International Affairs program, which works to end the debt crisis for the world’s most impoverished countries. The AFSC is working to insure passage of the Jubilee Act, which calls for immediate debt cancellation without harmful conditions.