In response to some of our writings about the economic costs of global warming and the lack of coordinated mitigation, Thornton (Tip) Parker ([email protected]) wrote this commentary which we have agreed to share with readers. We thank Tip for permission. Some readers may find it controversial since it proposes ways to finance the mitigation that they reject. Anyway, here's Tip Parker’s reproduced letter below.
David,
Your August 31 letter “Idalia, Marine Heat Waves, & Financial/Economic Impacts Ahead” leads to a question: How can Americans learn enough about the basic workings of the economy to deal with what they are learning about global warming and climate change? Your discussion included:
“One permanent resident of Sanibel tells me that the recovery [from Ian] is about 20% so far. And, of course, there were budget cuts in the most recent Florida state budget. Those cuts included many millions pertaining to the “flood zones” and flood- or water- damage mitigation. All while the insurance situation in Florida worsens – and this Idalia outcome will only exacerbate the failing insurance policies of state government in Florida. More insurance companies will pull out of Florida. Many won’t write coverage here.
“The oceans and seas are getting hotter worldwide. The reason is global warming. The impact we see in fires and smoke and heat domes is even more accentuated where we don’t see it, in our oceans and seas. Will this Idalia be enough to precipitate a major policy change? I doubt it. Will heat dome emergency medical cases and excess deaths in the Southwest United States be enough? Not yet.
“My personal fear is that it will take large and repeated catastrophes with many dead and trillions in property destroyed before the wake-up call works and our political leaders either get thrown out of office or change from fighting political culture wars to addressing the common goal of America’s safety and need for climate change mitigation.”
These are important observations, but what can political leaders do, at the necessary scale? The problems are almost too massive to grasp and their tool kit seems insignificant. The situation seems hopeless and they are worried if not scared.
I think the main impediment to action is the belief that the country can’t afford to pay for what must be done because US dollars are scarce resources. But how can that be true? Although no dollars existed 240 years ago, the Federal Reserve reported that at the end on 2022, there were 21.4 trillion of them in the M2 money supply. Something must be wrong with the belief because scarce resources don’t grow like that.
A clue seems to be in what happens when the federal government runs budget deficits. Most people and their leaders believe the government is just like all others and must get dollars before it can spend them. They see it as a pass-through operation that takes dollars from the economy with taxes and security sales then recycles them back. But if the government were just a zero-sum game, its deficits would not add more dollars to the economy and could not be inflationary. We know, however, that deficit spending may be inflationary, so the government must create more dollars in the process. That point leads to other interesting facts that explain more about how the economy actually works.
Inflation is the most difficult aspect of the problem, but how well do we understand it? Climate change can have concurrent deflationary and inflationary effects on different regions and industries that adjusting interest rates and monetary policy can do nothing to relieve. For example, last year’s draughts here and Germany reduced crop yields and lowered the rivers used to move the crops to market. That reduced incomes for growers and shippers while driving up food prices in many places.
Various attempts have been made to project the losses that climate change will cause, but they cannot be reliable because there are too many interrelated factors that cannot be known. We may not even agree on what to treat as climate-related losses. But we must accept that huge losses are coming. In just this country, unless something is done, millions of people are destined to be impoverished as their homes become uninhabitable or too costly for them to afford. Your discussion of insurance company actions shows that market-based and state insurance pools are failing. The only fair and democratic approach that I can see is for the country to organize itself as a single, comprehensive climate change risk pool that is backed by the government’s ability to create dollars as they are needed.
Eventually, we must distinguish between what humans can change and what is beyond our power. The planet with its oceans and atmosphere set the limits on what humans can do. Governments and economies must operate within those limits. The approach of most of people has been to try to protect what seems to work for their comfort and benefit, while giving up as little as possible. That is just backwards. Markets and economies caused global warming that led to climate change and the process will not run in reverse. Mother Nature owns the house and we have to play by her rules.
The country urgently needs to examine how the basics of the economy actually works and how it must be modified to to deal with climate change. The examination must use cause and effect approaches like those that climate scientists have shown to work. As the British would say, the economy must be made “fit for purpose”.
I think the places to start the examination are: first, to learn how to create dollars that are the critical, leadership tools needed to do whatever we decide or are forced to do; and second, to learn how to control inflationary and deflationary effects that that today’s fiscal and monetary policies cannot control.
The immediate question is how can we get this revolutionary examination started quickly at in a way that can be credible?
Best wishes,
Thornton (Tip) Parker.
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