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Editorial

Pave the way to the green economy

by Hans Dembowski
Installing a wind farm in southern India

Installing a wind farm in southern India

The G7, the group of the biggest western-style economies, is not leading the world. Its sovereign debt dramas are a drag on the global economy. North America and Western Europe seem eager to copy Japan’s decades of stagnation. While western diplomats and scholars worry about China’s growing influence, their political leaders are doing little to prove that democracy is preferable to authoritarianism.

In terms of prosperity, of course, the G7 still beat China. An underlying reason is that complex modern societies cannot be run by top-down order. Even China is not a command economy anymore. In the long run, freedom and markets go hand in hand. In the short run, however, dysfunctional politics in democratic nations can make authoritarianism look plausible to leaders in developing countries. This is especially likely when lambasting the US and the EU serves personal leanings to grab power and refuse to share it.

The budget-cutting frenzy that has gripped America and Europe is depressing. The right-wing maniacs that have taken control of the Republican Party in the USA do not seem to care about financial markets at all, while the West’s remaining policymakers seem to have little else on their minds. Doesn’t anyone understand that budget policy in itself cannot stem the crisis of confidence that is hobbling the advanced economies? This crisis is not just about national budget deficits, but just as much about an utter lack of direction.

Humankind faces several huge challenges. Climate change and dwindling resources are probably the most important ones – but the G7 is not rising to them. Balanced budgets will never compensate for a world climate tipped out of balance. No fiscal arithmetic can re-engineer the global economy in a climate-compatible way. But unless that happens, humanity’s problems and crises will only multiply. The hunger tragedy in Somalia and its neighbouring countries is but yet another omen. Scholars have been saying for decades that extreme weather is the first consequence of climate change. Eastern Africa’s multi-year drought fits into this picture. Obviously, torn and fragile countries are the most vulnerable since violence saps their resili­ence. No, the depressing news of famine was no surprise. Anyone who took interest knew something like this was going to happen sooner or later.

The global community needs to invest massively in new infrastructure and new technologies. Credible programmes geared to that goal would boost investor confidence in a way that austerity cannot. Let’s not forget that the advanced economies are not suffering from a lack of capital, but from a lack of promising investment opportunities. Gearing public policy towards bringing about climate-compatible modernisation would help to restart the stuttering global economy.

The world needs something like a global Green New Deal. The G7 must lead. Its members are historically the greatest contributors to climate change, and their consumption patterns are being copied by emerging markets. And no, it does not make sense for Europeans to wring their hands over right-wing Republican rascals who claim to be American patriots but are recklessly undermining their president’s standing in the world. The EU has a history of aspiring to be the USA’s global co-leader. It’s high time it started leading. Europe must make generous proposals to restart the stalled climate talks and lead the way to a global green economy.