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July 16, 2024

US Politics and the Paris Finance Summit

Author : *Jeffrey D. Sachs | Editor : Anty | July 18, 2023 at 04:43 AM

Barbados Prime Minister Mia Mottley and French President Emmanuel Macron invited world leaders to Paris on June 22-23 to reach 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, since the US, at least for the moment, remains at the center of the global financial system.

To understand US politics, we should 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 Britain’s emerging empire. 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 (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.

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

The United States learned its statecraft at the knee of Britain, the mother country of the American colonies. America’s 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 ardent enthusiast of Locke. He was born into slave-owning wealth and was interested in protecting wealth from the masses. Madison feared direct democracy, in which the people participate in politics directly, and championed representative government, in which the people elect representatives who supposedly represent their interests. Madison feared local government because it was too close to the people and too likely to favor wealth redistribution. Madison therefore championed a federal government in a far-off capital.

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 Congress routinely delivers wars, over-priced private healthcare, and tax cuts for the rich.

The US calls itself a democracy but is in fact a plutocracy. (The Economist Intelligence Unit categorizes the US a “flawed democracy”). The 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 still 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 the demands of the masses, whether to fight poverty or to fight climate change.

The US leaders who attended the Paris Summit, John Kerry (U.S. Special Presidential Envoy for Climate) and Janet Yellen (U.S. Treasury Secretary) are individuals of outstanding ethics and deep and long-standing commitments to fighting poverty and climate change. Yet they cannot deliver actual US policy. Congress and the US plutocracy stand in the way.

The leaders at the Paris Summit recognized the urgent need for a massive expansion of official development financing from the Multilateral Development Banks (MDBs), meaning the World Bank, the African Development Bank, the Asian Development Bank, and others. Yet to expand their lending by the amounts needed, the MDBs will require more paid-in capital from the US, Europe, and other major economies. Yet the US Congress opposes investing more capital in the MDBs, and the US opposition is (so far) blocking global action.

The Congress opposes more capital for three reasons. First, it would cost the US a little bit of money, and rich campaign funders aren’t interested. Second, it would accelerate the global transition from fossil fuels, and America’s 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 military-industrial complex wants to fight China, not collaborate with it.

Thus, while developing countries need hundreds of billions of dollars in additional MDB lending each year, backed by additional MDB capital, the US and Europe are instead pressing the MDBs to lend slightly more with their existing capital. The MDBs might possibly squeeze out another $20 billion in loans each year with their current capital, a tiny fraction of what’s needed.

The exasperation of the developing world was on full display in Paris. Brazil’s President Lula da Silva and several African presidents made clear that there are too many summits and too few dollars. China’s Premier Li Qiang spoke quietly and courteously, pledging that China will do its part alongside the developing countries.

Solutions will finally come when the rest of the world moves forward despite US foot-dragging. 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 the US plutocrats will realize that it’s better to pay the modest price of fighting poverty and climate change than to face a world that rejects their greed and belligerency.


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- Source : *Jeffrey D. Sachs

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