Abstract: To save the planet while allowing most people to become richer, new technologies have to be invented and made mandatory. The EU has played that game, but the USA has obstinately kept on sticking to its old addiction of mindless waste and deliberate consumption. This created imbalances in the US economy leading to the credit crisis, the collapse of the US dollar, a probable recession, poverty, bad health care, and, some will say, invading another country for oil… Besides, interfering destructively with all good-natured attempts at modifying for the best the sorry trajectory of the world’s ecology. To domesticate the reticent Americans, taxes on the European model should work miracles, as they did in Europe. That is part of what change really means. Not just words.
The esteemed Paul Krugman (Princeton, NYT) compared the percentage of GDP of diverse sectors of the economy in 2007 versus the average over the period 1980-2000. He found that “the main thing at this point is high consumption is offset by a high trade deficit”. (http://krugman.blogs.nytimes.com/2008/02/16/defining-the-macroeconomic-problem).
In other words, the USA wastes too much, lives above its means from the charity of foreigners, and does not export enough. Countries that have got in this predicament did not end up well. It happened to many in the 20C, Argentina being a spectacular example. It could be argued that this combination of waste and dependence upon foreigners is part of what happened to the Roman empire.
Krugman then wondered what to do. We present here a necessary part of the solution. It is not very original. There are many countries in Europe, and a few are large, and they have encountered similar problems in the past, and they hit on that same basic solution, which is a mix of Added Value Tax (AVT, a French invention), which strikes down exaggerated consumption, and high taxes on energy (another French invention which has been imitated all over Europe).
US citizens may feel an existential void if threatened with a dearth of stuff, so one should be careful, lest they have a fit, like the spoiled children they are proud to be. But they may consent to make the US economy more efficient, and more able to export. By doing this, a useful change for the better, their psychological condition should improve, and they should open their minds to another way to experience life more compatible with the survival of the biosphere.
In 2004, the USA emitted per capita 20.4 ton of carbon dioxide per year, and France 6.2 (yes, less than three times less!). Since then the difference has got worse, France reducing its emissions, according to the Kyoto Treaty, while the US has enjoyed a rampage of waste. Meanwhile, to ensure future supplies of ever more CO2, the USA chose to invade the country with the largest oil reserves (except maybe for Saudi Arabia). Whereas the most controversial French energy activities have been to build two nuclear reactors of the new third generation (one in Finland), and to push with the European Union for ever stricter carbon emission restrictions, worldwide. France having the world’s best health care system, and armed forces in combat in even more countries than the USA, and an industrial variety as large as the USA, EFFICIENCY PAYS (with the sort of lifestyle US citizens love).
Thus, clearly, its present system having turned into a dismal failure, the USA should follow the European way and capitalize on its know how and great universities to invent and develop futuristic energy procurement and conservation systems, instead of dispatching storm troopers to fetch oil.
But this is easier wished than done. The entire US economy has been manipulated for generations to serve powerful corporations such as car manufacturers rather than public transportation, with giant metastatic suburbia, and car drivers, or frequent fliers, taking subsidies for their birth rights, screaming loudly when a penny goes to railroads. All too much of the US economic activity is directed to plane companies and car companies. So great have been these subsidies that these sectors became addicted to them, fat, lazy, numbed out.
Just two examples. In the fifties, General Motors bought the San Francisco Bay Bridge, tore down the railroad that occupied one of the decks, to replace it by a freeway going the other way, and, thus, mission accomplished, sold it back to government. Ever since the San Francisco Bay transportation has been a big traffic jam, as intended. Now for airlines: after 9-11, the US government gave billions to US airlines, whereas the EU allowed no subsidies to its airlines, which were left to mind their business more efficiently. Consequence: Air France and Lufthansa are now by far the largest airlines in the world, many smaller European carriers are even more profitable, all operating efficient new planes. Meanwhile Europe is building thousands of miles of ultra efficient very high speeds train lines (so fast they could cross the USA itself in half a day).
Hence to develop new, more efficient energy sources and usage in the USA, ASAP, one will have to manipulate a full arsenal of government guided activities, removing some, adding others. And not just words. One will have to use tax incentives as carrots, while using a carbon tax and an energy tax as sticks: greed and fear, that’s how to do it. The enormous taxes on energy in Europe, give both an incentive to be ever more efficient, and a safety reserve if an energy supply catastrophe strikes energy taxes are huge not only in the UK, a net energy exporter, but even in Norway, one of the world’s largest energy exporters).
The history of man is the history of energy usage, and especially of Western civilization. By 1,000 CE, Western Europe had the highest energy usage per capita in the world. This energy opulence allowed to free man from slavery (to lords and nature).
But now energy is getting tight, and there is a huge amount of waste (as said above, the USA is three times more wasteful than France, per head). This has to stop: there is no justice in having the USA with 4% of the world population, using 25% of the energy, a lot of it taken from abroad, and most of it polluting the entire planet. The way out is not to economically shrink, but to technologically grow, as the EU is already doing (in 2008, Germany, although as north as Canada, was the number one solar energy nation!).
Of course the economic switch to greater efficiency through higher technology has to pay for itself (otherwise it would not be self propelled). First one has to be conscious of the enormous subsidies old industries profit from (it’s not just from distribution of money, but of laws; e.g., ethanol from corn is mandated, although it’s an ecological horror, while less ecologically incorrect ethanol from sugar cane is barred by tax barriers), Those subsidies are protected by armies of paid lobbyists (nearly half a million of them in the USA alone). By removing those subsidies for an unsustainable past, one makes it so much easier to pay for the future.
The Europeans have found a strategy to make planet-saving and riches-spreading new technology more profitable quicker. The EU imposes new standards onto itself, and then the world, to fight the greenhouse effect. Thus it forces itself to develop new technologies (for example carbon emission which are above 300 mg per kilometer in the USA, have been lowered by law in EU to 185 and now 135). Then the EU sells its newly fanged wares (That only more advanced European technology can develop first). It’s good for European jobs, and good for the world. Strenuous EU emission standards for cars have been adopted by China, making it illegal to buy inefficient US cars (!).
This European way is not new. It is one of the greatest European superiority strategies of all time: USE ETHICAL PROGRESS TO FORCE TECHNOLOGICAL PROGRESS, ALLOWING ECONOMIC SUPERIORITY. In other words a process which starts with better manners, ends with a chicken in every pot.
That BETTER ECONOMY FROM BETTER ETHICS TRICK was clearly used by the Franks when they outlawed slavery around 660 CE (they understood its importance at the time: from the German point of view, ethics and economy were tied up by family farming, and they looked down on Roman fascism and its giant agribusinesses). The abolition of slavery forced Europe to chose the high technology route that the Roman empire had given up on.
Now the entire planet has found useful to integrate more and more of the ideas that allowed Europe to take off during the last 15 centuries. Democracy is just one of those ideas, and, clearly, it was preceded by strength and technology (the Franks destroyed the Arabo-Berbero-Syrian armies in a series of battles and wars in 8C Francia, accompanying economic lift, and requiring new, very heavy taxation to pay for the high tech armies of the Franks).
China and India, among others, have understood this, and their success has not escaped notice. The most successful developing countries opt for developing new high tech. For instance, South Africa is inventing “pebble bed” nuclear plants, a completely new technology designed specifically for exports all over the developing world (they are super safe, and never stop). India, having little uranium but lots of thorium, is developing a uranium-thorium breeding scheme which is entirely appropriate to its precarious energetic circumstances.
Sweden has been using a carbon tax for more than a decade, and it’s just a matter of time before the entire EU follows suit. To limit senseless addiction to consuming and reduce fraud, the Europeans use the mighty AVT. The USA has no choice, but to follow what has worked well in dozens of advanced industrial nations.
But, all too often, per the nature of the USA as a big island, and a long settled habit to compare itself to various derelict dictatorships (instead of comparing itself to what’s comparable to itself, the most advanced democracies), Americans often find hard to learn from the outside (something a future president Obama should be able to remedy).
Presented with these solutions, Krugman evoked Saint Augustine to justify doing nothing for now (“Make me without sin, oh Lord, but not yet”). Well, that was a very telling example. Saint Augustine was one of the worst anti-intellectuals and anti-Judaists of all times, in truth one of the greatest criminals against mankind, and this statement of his reflects how he could live with himself so well. His hypocrisy allowed him to do so, conveniently blinding him, and made him the scourge he became for civilization. The hardest in a new task is often just to get started, to make the first step.
The massive energy and consumption taxes the USA needs could be, and would have to be, staggered very progressively. They will allow to reduce taxes in some other areas (say on capital, and the poor, as the EU has done).
The bubble economics, its hedge fund managers, and the tail of the financial sector wagging the entire economy, a sorry mess (engineered by Rubin, Clinton, Greenspan and Bush) weakened the USA. Only taxes reflecting the new (for the US) philosophy of reducing waste and changing the future towards efficiency will allow the USA to join the world, reduce the imbalances, and develop in a sustainable way. It’s a necessity, because the rest of the world cannot be expected to work hard and sacrifice, while the Americans are having an orgy, and burn the house down. A related point is that, as justice spreads and six billion people from the developing world get to enjoy some of the amenities Americans take for granted, grave ecological damage to the entire planet will only be mitigated by using technologies that, at this point, are still in the domain of science fiction.
In conclusion: reducing US consumption and carbon emission, while boosting US exports and efficiency, and providing more jobs and security, can be viewed as one problem which will need a change in the US tax system. Against waste, towards a more economic future. That is part of what change means, or it will be more of the same. Americans are getting intoxicated on the idea of change, but change means changing their own behavior, ultimately a change in the law of what is proper and what is not, and the easiest such change is in the tax law.
P/S: So far, to reduce the lending crisis, which came from too much lending, the US president and congress have decided to make it easier to lend some more. So let’s not overestimate the capacity of US decision makers to understand the universe. In a related show of selfishness, the US (through the IMF and the World Bank), forced South East Asian countries, which were experiencing a bout of over-investment (thus diminishing returns, leading to a confidence crisis), especially in real estate (thus comparable to the present US crisis), to rise interest rates sky high. That was supposed to invite foreign investors to come back, and stop the collapse of the currencies. Instead it collapsed the South East Asian economies. Following once again Saint Augustine (id est, I will not do as I preach, but just the opposite, the fundamental saying of priests, and one of the reasons why religion is so big in the USA), the USA, although now in a very similar crisis, is acting according to the exact opposite strategy, namely collapsing interest rates. As we try to explain above, this very short term alleviation of symptoms will not change much. Ultimately, US citizens have to relate to the world in a different way, because the transactions they have among themselves have impacts on third parties (this is the set up for pigovian taxes (after Arthur Pigou, 1877-1959, a Frenchman); theory has proven such taxes more efficient than regulation or markets (the carbon emission trading has turned silly)).