Bad policy will make climate change worse

By James McCusker

The apocalyptic flavor of President Barack Obama’s Arctic speech bears an uneasy resemblance to the work of Thomas Malthus written over 200 years ago. Each outlines a model of how things are going to work out in our world.

In the president’s model the disastrous events are the work of climate change, formerly known as global warming, of which greenhouse gasses are the cause. In the Malthus model, similar events are also traced back to a single cause: population growth.

Unlike the apocalyptic writings of the Old and New Testament, which were descriptive, both the president’s and Malthus’ efforts are proscriptive — aimed at altering our behavior, our public policies, or both. In Malthus’ writings the goal was to gain support for ending well-meaning but counterproductive public policies and private charities which interfered with the natural constraints on human reproduction. The goal of the president’s speech is to gain support for federal control of the industries and behavior patterns attached to greenhouse gas sources in order to slow down the rate of climate change.

The apocalyptic outcomes predicted by Obama and Malthus are not mutually exclusive. Is it possible, for example, that the economic model of the Industrial Revolution, which served the populations of England, Europe, and the U.S. so well, is not sustainable for the planet as a whole? Is this model, along with the public and private aid programs, serving to inflate populations beyond the capacity of our economies to support them?

Malthus’ economic theory was essentially an equilibrium model, describing long-term forces and tendencies. This was the focus of economics for a considerable time. Over the years since 1798, when his “Essay on The Principle of Population” was first published, though, economists gradually lost interest in equilibrium models and began focusing on economic growth instead. It is no accident that economic growth was, and is, seen as the most effective way to stave off the Malthusian outcome of mass starvation and the same “waves of migrants” referred to in President Obama’s speech.

Europe is now trying to get itself together to address the waves of migration that are, literally, washing up on its shores. Germany, while not the principal initial landing point, is taking the lead in accepting substantial numbers of these migrants as residents. Whether its economy can absorb this surge in labor force-age migrants without substantial economic and politically punishing costs remains to be seen. Thus far countries like France, Italy, and Germany itself have had employment problems generally, and especially with their immigrant populations. And there should be little doubt that our record-setting level of immigration had a hand in the stagnation of working class wages.

Obama and Malthus may share a vision of a few outcomes, but their economic models producing these outcomes are very different. Embedded in Malthus’ theory, for example, is a disparagement of the logic behind redistribution as a lasting cure for economic misery. Moreover, in his view redistribution was not only illogical but ineffective, since the poor, upon receiving the added money, would quickly produce enough offspring to absorb the bounty and restore widespread poverty.

Obama has a vastly different perspective on our economy. In his model, income can be redistributed, either through taxation policies or labor force unionization, without affecting economic performance. This is not illogical, but its credibility requires more research and analysis than it has thus far received.

A single enterprise, for example, might be positioned well enough to absorb a labor cost increase without reducing employment and, in some cases, without lowering the firm’s management performance, or even its profitability and access to capital. Individual situations like this, though, do not support the assumption that the economy can simply create higher wages without affecting anything else in the economy — or, specifically, without reducing the overall unemployment level.

Although climate change is a global issue, a regulatory approach to remedy it will come down to the impact on firms and individuals — profits, wages, and jobs — and its final economic impact is difficult to predict. The results could be technology-based adaptation, plant closures, export of operations and jobs overseas, or other impacts not yet foreseen. And in the end, even assuming international cooperation, for the program to work it has to have an effect on climate change, something that is far from definite.

We have a responsibility to future generations to do what we can to ensure that the climate change story doesn’t have an apocalyptic ending. That responsibility is not well served, though, by impoverishing our economy through ill-considered policy decisions. That would render us unable to help anyone at all. These decisions will not be easy, but economists can and should help us make them.

James McCusker is a Bothell economist, educator and consultant. He also writes a column for the monthly Herald Business Journal.

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