The Economics of Climate Change

The Story of Stuff got me thinking more about the economy. Anyone who knows me is probably boggling, because I’m not someone you’d call a financial whiz kid; give me rocket science any day.

My friend Stef Maruch commented:
The entire premise of capitalism is based on ever-increasing levels of production and spending. It’s a Ponzi scheme.Companies with kazillions of customers, like eBay, are considered to be “weak” if they don’t add MORE kazillions of customers.  Now, increasing production and spending don’t have to involve using up more physical resources…as the people making money on Second Life can attest…but generally they do.

TimesOnline reported (13 Dec ’07):
European leaders and environmental campaigners reacted angrily yesterday after the United States rejected guidelines for reducing greenhouse gas emissions intended to check global warming….

The negotiations were given urgency by the publication last month of a report by the Inter-governmental Panel on Climate Change (IPCC), which gave warning of irreversible catastrophe caused by global warming if greenhouse emissions are not rapidly reduced….

(The IPCC) concluded that it was possible to limit average temperature rises to 2.4C by the middle of the century, but only if carbon emissions peak by 2015 and then start to decline. It calculated that, in order to achieve this, industrialised countries should reduce their greenhouse emissions by between 25 and 40 per cent compared with 1990 levels by 2020 – this is the figure which the EU wishes to see in this week’s document.

All of this has got me thinking about the economy. I can see a couple of different senarios:

1) “Global warming” is a bunch of hogwash; sure we might warm a couple of degrees, but this talk of the dire effects of global warming is irresponsibly alarmist. Though it is too bad about the polar bears.

2) There will be an amazing scientific answer to the problem which will pull our nuts from the fire, and we will be able to engineer our environment to suit our needs.

3) Global warming will happen gradually, with most of the effects being felt in the poles and tropics. We’ll have a different world, but we’ll be able to adapt.

4) “The Shit Will Hit The Fan

Most people believe #3. So I started thinking — what if senario three is what will really happen?

First, the third world would be the first to suffer from the effects of global warming. There will be changes in climate that will effect the food and water supply, as well as increased severe weather events. The scientific community is pretty straight-forward about this prediction.

Much of the world’s manufacturing takes place in the third world. As the third world infrastructure degrades and its populations suffer from lack of food, shelter and heath services, their economies will most likely crash. I think that there will be bottlenecks in manufacturing and costs will increase dramatically.

Secondly, as we see the world change, I think that there will be more and more focus on consuming less. This is already happening, though nowhere near to what it needs to be to decrease emissions to the level that is needed to avert senario four.

What both of these things point to is a slow down in the economy. Since the US is already heading into a rather significant recession, I wonder if it will have the resiliency to avoid a serious economic crash.

Statistics show that “American consumers owed a grand total of $1.9773 trillion in October 2003, according to the latest statistics on consumer credit from the Federal Reserve. That’s about $18,654 per household, a figure that doesnt include mortgage debt. The number is up more than 41% from the $1.3999 trillion consumers owed in 1998.” (MSN Money)

An economic slow down means that more and more people will be out of work — we might be able to feed and shelter ourselves, but we won’t be able to pay our outstanding debts.  This will greatly aggravate the depression, throwing more and more businesses into failure. 

People who have spent their lives saving for their retirement will lose everything.  And this will hit us at the height of the elderly baby-boomer population.

We are spending like there is no tomorrow. We are using up our world like there is no tomorrow. 


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