The Price of Civilization_ Reawakening American Virtue and Prosperity - Jeffrey D. Sachs [42]
There is one overarching solution to the race to the bottom: international cooperation. All countries are suffering from the decline in corporate tax rates and the downward pressures on financial, environmental, and other regulatory standards. By banding together to set minimum international norms, such as a common approach to eliminating tax havens and a common standard of financial and environmental regulation, all countries can gain. Of course, with their overweening power, corporate lobbies routinely short-circuit such attempts at global cooperation by successfully playing off one government against another.
The Depletion of Natural Resources
The new globalization poses one more enormous problem: the depletion of vital primary commodities such as freshwater and fossil fuels, and long-term damage to the earth’s ecosystems under the tremendous stresses of worldwide economic development. For a long time, economists ignored the problems of finite natural resources and fragile ecosystems. This is no longer possible. The world economy is pressing hard against various environmental limits, and there is still much more economic growth—and therefore environmental destruction and depletion—in the development pipeline. The explosive growth of production in China, India, and other emerging economies is already pushing world prices of food and feed grains, coal, oil, and countless other primary commodities sky-high, indicating an era of much greater scarcity and resource depletion. The surge in primary commodity prices in recent years, including fuels (oil, gas, and coal), minerals (copper, aluminum, iron ore, and others), and cereal grains (wheat, maize, rice, and others), is shown in Figure 6.4. The commodity price indexes are divided by the U.S. GDP price deflator to obtain inflation-adjusted indexes for each commodity group. It was only the steep economic downturn in 2009 that brought commodity prices down from their 2008 peaks.
The scarcity problems may be even more serious in areas where market prices are not available to warn us of impending environmental crises. This is the case of climate change, deforestation, loss of biodiversity, land erosion, and many kinds of large-scale pollution. In all those cases, unprecedented environmental destruction is under way and getting worse, but without market signals in place to guide us back to sustainable technologies and business practices.
Figure 6.4: Primary Commodity Prices (Inflation-Adjusted), 1992–2010
Source: Data from International Monetary Fund World Economic Outlook, 2011.
The issue of environmental sustainability is a huge one that could take us too far afield here. I earlier tried to provide an overview of the interconnected and complex challenges in my book Common Wealth. In the current context, though, I would like to emphasize that America’s sustained prosperity will require solutions to the rapidly encroaching resource pressures.
There are two main obstacles to a sustainable trajectory. First, the scientific and technological know-how to deploy more sustainable technologies (such as massive supplies of low-carbon energy from solar power) still needs large-scale research and development. Second, we need to overcome the power of corporate lobbies in order to impose regulations and market incentives that will steer markets toward sustainable solutions. So far, the corporate lobbies of the polluting industries have blocked such measures.
Free-market economists, once again including Hayek and Friedman, have recognized the need for public action to protect the natural environment. And Americans have consistently agreed, expressing strong environmental sentiments on a wide range of environmental challenges.14 Yet this basic truth has not yet found political expression in the United States because of the power of Big Oil and Big Coal. In chapter 10, I’ll suggest some