Fri, Jun 30, 2023 page9

• The New World Economy: US politics and the Paris finance summit

  • By Jeffrey D. Sachs
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  Barbadian Prime Minister Mia Mottley and French President Emmanuel Macron invited world leaders to Paris on Thursday and Friday last week to develop a new global pact to finance the fight against poverty and human-induced climate change.

  All kudos for the ambition, yet few dollars were put on the table. To an important extent, the continuing global failure to finance the fight against poverty and climate change reflects the failings of US politics, as the US remains at the center of the global financial system.

  To understand US politics, it is important to start with the history of the British Empire. As Britain became an imperial power, and then the world’s leading power of the 19th century, British philosophy changed to justify its emerging empire.

  

  Illustration: Mountain People

  British philosophers championed a powerful state: Thomas Hobbes’ Leviathan; the protection of private wealth over redistribution: John Locke’s right to “life, liberty and property;” markets over government: Adam Smith’s “invisible hand;” and the futility of aiding the poor: Thomas Robert Malthus’ law of population.

  When humanitarian crises arose in the British Empire, such as the Irish famine in the 1840s and the famines in India later in the century, Britain rejected providing food aid and left millions of its subjects to starve, even though food supplies were available to save them. The inaction was in line with a laissez-faire philosophy that viewed poverty as inevitable, and help for the poor as morally unnecessary and practically futile.

  Britain’s elites had no interest in helping the poor subjects of the empire — or Britain’s poor at home. They wanted low taxes and a powerful navy to defend their overseas investments and profits.

  The US learned its statecraft at the knee of Britain, the mother country of the US colonies. The US’ founding fathers molded the new country’s political institutions and foreign policies according to British principles, albeit inventing the role of president instead of monarch. The US overtook Britain in global power in the course of World War II.

  The lead author of the US constitution, James Madison, was an enthusiast of Locke. He was born into slave-owning wealth and was interested in protecting wealth from the masses. Madison feared a system of democracy in which people participate in politics directly, and championed representative government, in which people elect representatives who supposedly represent their interests. Madison feared local government, as it was too close to people and too likely to favor wealth redistribution. He therefore championed a federal government in a capital far away.

  Madison’s strategy worked. The US federal government is largely insulated from public opinion. The public majority opposes wars, supports affordable healthcare for all and champions higher taxes on the rich. The US Congress routinely delivers wars, over-priced private healthcare and tax cuts for the rich.

  The US calls itself a democracy, but it is a plutocracy — the Economist Intelligence Unit categorizes the US a “flawed democracy.”

  Rich and corporate lobbies finance the political campaigns, and in return, the government delivers low taxes for the rich, freedom to pollute and war. Private health companies dominate healthcare. Wall Street runs the financial system. Big oil runs the energy system, and the military-industrial lobby runs the foreign policy.

  This brings us to the global climate crisis. The most powerful nation in the world has a domestic energy policy in the hands of big oil. It has a foreign policy that aims to preserve US hegemony through wars, and it has a Congress designed to protect the rich from people’s demands, whether to fight poverty or to fight climate change.

  The US leaders who attended the Paris Summit for a New Global Financing Pact — US Special Presidential Envoy for Climate John Kerry and US Secretary of the Treasury Janet Yellen — have outstanding ethics and long-standing commitments to fighting poverty and climate change. Yet they cannot deliver actual US policy. The US Congress and its plutocracy stand in the way.

  The leaders at the summit recognized the urgent need to expand official development financing from the multilateral development banks (MDB) — the World Bank, the African Development Bank, the Asian Development Bank and others.

  However, to expand their lending by the amounts needed, MDBs require more paid-in capital from the US, Europe and other major economies. Yet the US Congress opposes investing more capital in MDBs, and its opposition is blocking global action.

  The US Congress opposes increasing capital for three reasons: First, it would cost the US money, and rich campaign funders are not interested. Second, it would accelerate the global transition away from fossil fuels, and the US’ big oil lobby wants to delay, not accelerate, the transition. Third, it would hand more policy influence to global institutions in which China participates, yet the US’ military-industrial complex wants to fight China, not collaborate with it.

  While developing countries need hundreds of billions of US dollars in additional MDB lending each year, backed by additional MDB capital, the US and Europe are instead pressing the banks to lend slightly more with their existing capital.

  The MDBs could squeeze out another US$20 billion in loans each year with their current capital, but it is a fraction of what is needed.

  The exasperation of the developing world was on full display in Paris. Brazilian President Luiz Inacio Lula da Silva and some African presidents said that there are too many summits and too few dollars. Chinese Premier Li Qiang (李強) spoke quietly and courteously, pledging that China would do its part alongside the developing countries.

  Solutions can finally be found when the rest of the world moves forward despite the US dragging its feet. Instead of allowing the US to block more capital for the MDBs, the rest of the world should move forward with or without the US. Even US plutocrats would realize that it is better to pay the modest price of fighting poverty and climate change than to face a world that rejects their greed and belligerency.

  Jeffrey D. Sachs, a professor and director of the Center for Sustainable Development at Columbia University, is president of the UN Sustainable Development Solutions Network. The views expressed in this column are his own.
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