The Economics of Climate Change

“…Bread in California, because it will become relatively scarcer as a result of regulation, will increase in price. So will other commodities. As costs for fuel rise, the cost of transporting other goods to market also rises, leading to price increases for everyday items like milk and eggs at the grocery store or winter coats for kids — who, global warming or not, will still have to bundle up against the winter chill in such northern cities as Chicago, Duluth, and Fargo. To the millions of American families living on $15 per hour or less, such cost increases are devastating. And, with higher prices come job losses for some, like the 1,300 workers in California who will lose their jobs with Interstate Bakeries. For those living at the margin, even in “wealthy” America, socialist tinkering in the economy has real, and dire, consequences..”

By Dennis Behreandt
As posted at The John Birch Society

Incredibly, the Nobel Peace Price for 2007 has been awarded jointly to Al Gore and the UN’s Intergovernmental Panel on Climate Change (IPCC). The award was made to this unlikely pair “for their efforts to build up and disseminate greater knowledge about man-made climate change, and to lay the foundations for the measures that are needed to counteract such change.”

The choice of Gore and the IPCC raised eyebrows among more than a few. “People are asking the obvious: How has Gore’s alarmism on global warming aided world ‘peace’?” queried columnist L. Brent Bozell of the Media Research Center. The answer, perhaps, is that the award was given because of the increasing insistence by some, including certain retired military officers and assorted international bureaucrats, that global warming could lead to wars over scarce resources made yet more scarce by climate change. In a 35-page report released in April by the CNA Corp., a national security think tank in Virginia, nearly a dozen retired admirals and generals warned:

Climate change acts as a threat multiplier for instability in some of the most volatile regions of the world. Projected climate change will seriously exacerbate already marginal living standards in many Asian, African, and Middle Eastern nations, causing widespread political instability and the likelihood of failed states.

“The chaos that results” from failed states, they warn, “can be an incubator of civil strife, genocide, and the growth of terrorism.” Similar concerns have been voiced by retired Marine General Anthony Zinni, who warned: “We will pay to reduce greenhouse gas emissions today … or we’ll pay the price later in military terms.” Those sentiments were echoed by bureaucrats at this summer’s G8 summit in Heilingendamm, Germany, who warned in a communiqué: “Global warming caused largely by human activities is accelerating [and it] will seriously damage our common natural environment and severely weaken [the] global economy, with implications for international security.”

These concerns, though, are unfounded. Beyond the disputed science* behind the standard global-warming theory, the underlying assumption behind the Nobel Peace Prize this year — that climate change will lead to resource shortages and then to warfare, terrorism and strife — is radically off-base. While shortages often do lead to strife, war, carnage, and mayhem, it is not climate change that leads to shortages. Invariably it is government intervention in and regulation of the economy that leads, first to shortages, then to wars, famines, and genocides. Insofar as environmentalists and radical progressives want government to intervene in the market to control greenhouse gas emissions, it is their proposals themselves that, if enacted, will deindustrialize the developed nations and threaten the peace, stability, and prosperity of the world.

Free Markets or Famine

From the perspective of the modern industrial world, where food is abundant, varied, and fresh, where drinking water is clean, and where public health and sanitation have radically reduced disease, it is difficult to envision the world as it was prior to the industrial and agricultural revolutions. But that foul world of the past, where the vast majority of people lived under constantly repressive feudal rule, is only a history book away. Accounts of rampant famine and disease caused by thorough economic regulation can be found in almost any time period prior to the 19th century.

Jean La Bruyere-Champier served as physician to King Henri II of France in the 16th century. In addition, Champier was very interested in food, going so far as to author a very extensive and obscure encyclopedia of food and drink.

Temporarily dredging up Champier from the depths of Renaissance obscurity, in 1967 Harvard-trained economist V. Orval Watts noted that the antique Frenchman had “made a revealing comment on crows.” In his book, Watts pointed out, Champier “said that crows are not good eating because they live largely on human flesh.”

While macabre, it points to the unfortunate reality that prior to the 19th century famine and death on an incredible scale were a constant of the human condition. And that, by and large, was because a thorough feudal despotism was the normal political arrangement throughout Europe. Sixteenth-century Russia was a case in point. The growth of the Muscovite state during that century was predicated on the growth of a repressive feudal system in Russia.

“To expand and to defend its growing territory, the Muscovite state relied on service people, that is, on men who fought its battles and also performed the administrative and other work for the government,” wrote historian Nicolas V. Riasanovsky in his History of Russia. “The service people — eventually known as the service gentry, or simply gentry — were supported by their estates. In this manner, the pomestie, an estate granted for service, became basic to the Muscovite social order.”

The creation of the service gentry and their estates was of great and terrible consequence to the vast majority of the population, who were peasants. These, like peasants everywhere, were tied to the lands on which they toiled. As estates were parceled out to the service gentry, so were the peasants. The result was tyranny and misery, and eventually, famine. “Gentry landlords, themselves straining to perform burdensome state obligations, squeezed what they could from the peasants,” Riasanovsky wrote. Many peasants tried to flee. Famine ravaged the population in the years 1601-1603.

Nor was Russia the only place where life was nasty, brutish, and short. “Starvation,” economist V. Orval Watts pointed out, “remained an important factor in the death rate throughout most of Europe until the nineteenth century.” According to Watts, that was because the despotic feudal system throttled economic activity and led to massive shortages.

“We may better understand the reasons for the barbarous living conditions … in Europe if we keep in mind that the feudal manors, or baronies, were much like the forced labor camps and collective farms of Communist Russia,” Watts wrote. Thus, he concluded, “starvation was the more common in feudal times because the widespread plundering and restriction of commerce and finance forced the people of each manor to depend on what they could produce for themselves or on what their lord and his henchmen might seize by raids.” Because most people, being peasants, were largely prevented from traveling and trading, supplies were always highly localized and very limited, and starvation was always near.

The deadly consequences of government regulation of and interference in the economy did not disappear with the beginning of modernity. Throughout the 20th century, the ugly results of such meddling have been on display repeatedly wherever despotic governments have tried to control and manipulate a nation’s economic behavior.

The classic case is the Soviet Union. In that communist backwater, all economic matters, including industrial and agricultural organization and production, were micromanaged by a centralized planning agency. As a result, market allocation of goods, services, and resources based on supply and demand was replaced with the fundamentally inefficient whim of the government bureaucrat. As always, the results were endemic shortages and devastating famines. “The historical failures of socialism are indeed enormous,” wrote George Mason University economist Bryan Caplan in 2002. “Five million starved to death during Lenin’s short tenure as Soviet dictator. Seven million starved to death during Stalin’s terror-famine.”

Those who survived were only marginally better off than the dead. “In the name of the proletariat, socialism revived both slavery and serfdom on a massive scale,” Caplan noted. “Millions were sent to slave labor camps to toil in inhuman conditions. Far larger numbers were tied to their collective farms for life, locked in place by internal passport systems. The abuses most familiar to the Western world — like the Berlin Wall — were the media-friendly side of socialism. The lines and shortages endemic under Brezhnev and Gorbachev were the system at its best.”

Global-warming Socialism

What does this have to do with global warming? Despite the demonstrably deleterious effects of socialistic government interference in economic matters, this is precisely the solution offered as the means to combat global warming by environmentalists, progressives, socialists, and everyone else from George Bush on over to the extreme left side of the political spectrum. Bill McKibben, scholar in residence at Middlebury College and the author of The End of Nature and Deep Economy: The Wealth of Communities and the Durable Future, summed up this manner of thinking nicely in a recent review of books on the subject in the New York Review of Books.

“Carbon monoxide — carbon with one oxygen atom — killed you when you breathed it in,” wrote McKibben of a pollutant that once frightened environmentalists but has now become passé. “If you put a filter on the back of your car, it disappears from the exhaust stream. There’s no filter for carbon dioxide; it’s the inevitable result of the combustion of fossil fuel. To deal with it, you need to deal with the dependence on fossil fuel, which means dealing with the economy as a whole, which means dealing with how we live.”

If the Al Gores of the world have their way, it will be government that will deal with how we live. The usual authority referenced with regard to solutions to the supposed carbon crisis of global warming is the UN’s Intergovernmental Panel on Climate Change. In its “Summary for Policymakers,” for Working Group III’s contribution to the IPCC’s Fourth Assessment, the panel describes several regulatory mechanisms governments can impose on economies in order to limit the output of greenhouse gas emissions. The policy mechanisms the IPCC recommends governments use include increasing taxes and surcharges, imposing restrictive “regulations and standards” to reduce industrial emissions of carbon dioxide outright, and mandating “tradable permits” to “establish a carbon price” — essentially making producers pay a penalty fee for emissions.

The IPCC has sketched out a number of scenarios marked by increasingly aggressive use of such policy levers to combat global warming. The bureaucrats and would-be administrators of the proposed schemes for economic regulation never talk about the human cost of their plans. At the most aggressive levels proposed by the IPCC, the costs will be so staggering that even many middle-class and low-income Americans will suffer in the face of overwhelming financial challenges as a result of the economic damage resulting from curbs on industrial activity.

“For the United States, the most aggressive scenario in the new UN Intergovernmental Panel on Climate Change mitigation report — holding greenhouse gases in the atmosphere to under 500 parts per million, up from the current 380 parts per million — could cost a whopping $240 billion a year, or 2 percent of the nation’s income, said Robert Mendelsohn, a climate change economist at Yale University,” the Chicago Tribune reported in May. To put that into perspective, according to the Tribune, the average yearly cost of the war in Iraq has been $100 billion per year.

What would such costs mean to the average American? According to the Tribune: “Reducing greenhouse gases vigorously and quickly would probably push heating and electric bills for most Americans from 50 percent to 100 percent higher, said Jae Edmonds, a scientist and economist with the Joint Global Change Research Institute, based in Maryland. Gasoline would rise by about 50 cents to $1 a gallon, he said.”

Now, consider a working family in a northeastern state, perhaps living on $15 per hour and heating their home with fuel oil. The cost of purchasing fuel for the heating season this year for such a family, according to the U.S. Energy Information Agency, is expected to be $1,785. Even a 50 percent increase would add nearly $900 to this bill — money that the family would otherwise have spent on basics like food and clothing.

Even in America, there are disturbing signs that food might become scarce. In California, where substantial regulations on carbon emissions are already in place and where there are plenty of other government-imposed restrictions on economic activity, Interstate Bakeries, one of the largest producers of baked goods in America, including such well-known brands as Wonder and Roman Meal breads, is shutting down numerous operations because of “structural barriers” to profitability. The perverse business climate of California, distorted by regulation, is going to make it harder for people to buy bread!

Bread in California, because it will become relatively scarcer as a result of regulation, will increase in price. So will other commodities. As costs for fuel rise, the cost of transporting other goods to market also rises, leading to price increases for everyday items like milk and eggs at the grocery store or winter coats for kids — who, global warming or not, will still have to bundle up against the winter chill in such northern cities as Chicago, Duluth, and Fargo. To the millions of American families living on $15 per hour or less, such cost increases are devastating. And, with higher prices come job losses for some, like the 1,300 workers in California who will lose their jobs with Interstate Bakeries. For those living at the margin, even in “wealthy” America, socialist tinkering in the economy has real, and dire, consequences.

Catastrophic Impact

If the costs of climate change-induced economic manipulation are high in the United States, the potential consequences for the developing world would be devastating. Capping industrial carbon emissions would radically reduce industrial output, making goods and services desperately needed by the Third World more expensive and putting them out of the reach of millions who badly need access to the benefits of modern industrial free-market civilization.

George Reisman, professor emeritus of economics at Pepperdine University and author of the book Capitalism: A Treatise on Economics, put the potential decline in productivity resulting from regulation of carbon emissions into perspective in a recent essay for the Ludwig von Mises Institute. Asserting that “emissions caps mean impoverishment,” Professor Reisman wrote:

To gauge the consequences [of caps], simply imagine such caps having been imposed a generation or two ago. If that had happened, where would the power have come from to produce and operate all of the new and additional products we take for granted that have appeared over these years? Products such as color television sets and commercial jets, computers and cell phones, CDs and DVDs, lasers and MRIs, satellites and space ships? Indeed, the increase in population that has taken place over this period would have sharply reduced the standard of living, because the latter would have been forced to rest on the foundation of the much lower per capita man-made power of an earlier generation.

Now add to this the effects of successive reductions in the production of man-made power compelled by the imposition of progressively lower ceilings on greenhouse-gas emissions, ceilings as low as 75 or even 40 percent of today’s levels. (These ceilings have been advocated by Britain’s Stern Report and by the United Nations Intergovernmental Panel, respectively.) Inasmuch as these ceilings would be global ceilings, any increase in greenhouse-gas emissions taking place in countries such as China and India would be possible only at the expense of even further reductions in the United States, whose energy consumption is the envy of the world.

In another recent article, Reisman was a bit more pointed in his conclusions regarding the economic implication of substantial reductions in carbon emissions. The “clear implication” of government restrictions on emissions, and hence on economic activity, Reisman wrote, “is economic devastation. It is devastation in the production and use of energy and devastation in the production of everything that depends on energy.” The result, according to Dr. Reisman, could be billions of deaths.

Unnecessary Sacrifice

It is important to recall that the scale of economic damage that, potentially, could be unleashed by invasive regulation of industry in the name of fighting global warming is predicated on a theory of climate change that many highly credentialed scientists have called into question. “The best science offers little justification for … rapid cuts in carbon dioxide,” wrote Sallie Baliunas, an astrophysicist at the Harvard-Smithsonian Center for Astrophysics in a 2002 paper. “Furthermore, the economic consequences come with considerable human and environmental risk, at the cost of no significant climatic improvement in terms of avoided temperature rise by the middle of the twenty-first century.”

Still, with a Nobel Prize for Al Gore and the IPCC, with strong support for emissions controls from California Governor Arnold Schwarzenegger and increasingly from President George W. Bush, and with a new bill in the Senate that, according to the San Francisco Chronicle, “would cap greenhouse gases at the 2005 emission level starting in 2012 and gradually reduce them to 1990 levels” and more, the nation is on the path toward ever more invasive economic controls. Impoverished generations of the future might well look back and wonder why the present generation ignored the obvious and bleak lessons of economic history.

Posted in Corporate Fascism & Technocracy, Eco-Fascism & Radical Greening, Globalization, UN & Agenda 21.