Sometimes you have to look for inspiration elsewhere if you want to get out of a mess. Right now, Barbados would not be a bad place to start. Its Prime Minister, Mia Mottley, has successfully persuaded global leaders that it’s time to overhaul the archaic rules governing access to global finance.
Dubbed the ‘Bridgetown Initiative’, it would reverse the regulatory bias under which the poor have to pay more – sometimes 3 times more – than the rich for access to climate finance. The thinking behind the Initiative may originate from Barbados but it’s logic crosses all boundaries.
In Britain, austerity has come back with a vengeance. Everything the government does exacerbates the problem whilst pretending the opposite.
Worst of all, outdated economics is being allowed to turn climate realities upside down and send politicians in pursuit of nonsensical solutions.
The pursuit of poverty
Let’s be clear about today’s economic crisis. It isn’t the poor who have caused Britain’s inflation problems. Spiralling food and fuel prices are driven by external price increases not spiralling rises in basic UK pay. Today’s industrial disputes involve workers whose pay has failed to keep up with the cost of living. Those reliant on food banks to feed their families are the victims of this crisis, not its causes.
But listen to government Ministers or to the Bank of England and you are asked to believe the opposite.
Rising interest rates are oﬀered as the only answer to the wrong question.
Over the last year, UK pay settlements have seen the lowest paid (<£26,000 p.a.) getting increases of 4.7%, and middle income earners (on <£60,000) receiving 5.5% pay rises. Only those on >£180,000 have had pay increases approaching 8%. With inflation running at 8%, the Government’s obsession with pay settlements of less than 5% is merely a statement that the poor must become poorer.
The only spiralling pay increases are to be found in the private and financial sectors, justified by claims that these are necessary ‘to attract and retain talent’. No such logic apparently applies to retaining talent in the nursing, teaching or caring parts of the public domain.
As interest rate rises push increasing numbers towards the margins of poverty there is little mention of the ways in which banks have quietly pocketed increased profits by widening the margin between interest they charge on loans and the rates they pay to savers. Long gone is the memory of how the public bailed out the banks following their gambling fiasco of 2008.
The Bridgetown Initiative turns this on its head, requiring financial institutions to act as guarantors that give the poorest access to low cost finance for climate investment programmes. We have to internationalise the same logic.
Banking for the poor and the planet
There is nothing to prevent the government from setting a maximum ‘mark up’ (of say 2%) on the diﬀerence between interest rates on loans and deposits. It could also require banks to buy the same amount of government climate bonds as they pay out in dividends each year.
But banks aren’t the only part of the problem. The IMF has reported that the biggest driver of European inflation has been the increase in corporate profit-taking. Its Deputy Managing Director, Gita Gopinath, could hardly have been more blunt –
“All else equal, if inflation is to fall quickly, firms must allow their profit margins — which have shot up during the past two years — to decline”
Almost half of European inflation is accounted for in excess profits. Yet neither the British government nor the Governor of the Bank of England sees fit to even mention it..
You would hardly call the IMF a communist conspiracy but it’s analysis can’t even get into the ring of policy interventions the UK government is willing to consider.
And if pay-driven inflation is the problem then intervention should at least focus on where it is happening.
Management and Board bonuses could be restricted to payments made in the form of climate bonds. The use of such bonds could then be directed into meeting the UK’s legal duty to cut carbon emissions by 10% per year.
Where would this take us? The most
immediate way of cutting CO2 emissions is
insulating people’s homes. Investing in this would create a massive number of new jobs and dramatically cut home energy bills. And if Germany’s KfW Development bank can make climate finance available at 1% interest so too could the UK.
Better still, the government could make such bonds available at 0% interest to re-launch local authority social housing programmes. This would be the best answer to the over-heated, over-priced housing market Britain is currently stuck with.
The ayatollahs of avarice
No such debate is taking place in Britain because greed and ignorance now rule the parliamentary roost. One Nation Tories are purged from parliamentary seats. Their few remaining voices – like Lord Deben and his defence of Just Stop Oil protestors – must take sanctuary in the House of Lords. That is until the ayatollahs of avarice find a way of purging the Second Chamber too.
Until then, we are left with the paradox of old enemies becoming the new radicals in the politics of dissent. Lord Deben’s parting shot, as Chair of the Climate Change Committee, pulled no punches. The government is running on slogans and sound bites. None of the resources or programmes are in place to deliver a survivable climate future for our children. It was almost a ‘wake up or die’ challenge to the government. And it was no less a challenge to conventional economics.
Pragmatically, Labour seems to have chosen not to pick a head-to-head fight with corporate wealth and rampant profiteering. But it should at least use the Bridgetown Initiative to spell out where the money is being pocketed – to the detriment of both the poor and the planet – and to explore the better alternatives.
But this is where life gets a lot more complicated.
Empty plates and empty tables
Climate disruption is no longer something the West views through television screens and distant commentaries. It is becoming a lived experience for us all.
From uncontrollable fires in Canada and California, to unbearable heat and drought across Texas and the Mediterranean, and from hurricanes in the Caribbean to monsoons in Asia, ‘wild weather’ now massively disrupts the global food supply system.
In Britain, food price inflation has only just dropped below 20%. But even a 20% increase in everyone’s pay would not answer the problem of empty plates and empty tables. Sugar prices have gone up by 50%, largely because of hurricanes in the Caribbean and the torrential rains in Maharashtra which saw sugar cane production collapse.
Droughts in Spain and Italy had a devastating impact on olive harvests, leading to a shortfall in olive oil production and a subsequent 47% increase in olive oil prices. It was no kinder in the Po valley, where the production of risotto rice was decimated by drought. And those hoping that a shift into pasta was the answer will have found no comfort in the spiralling price of durum wheat following the drought that hit Canada, the world’s biggest producer.
This is the world we now live in. There is no magic wand to turn the clock back. Perversely, though, we can still make life better. What we have to grasp is that Bridgetown Initiative is not just about changing the archaic structure of the World Bank and the IMF in the interests of ‘over there’. It is about changing the ‘over here’ too.
Tomorrow’s economics today
Food security and water management are the central pillars of ‘tomorrow’s economics today’. International finance must underpin this, with more localised food systems becoming the order of the day. So too will a return to the seasonality of our diets; something our parents understood and we have forgotten. Except that the tradition lives on within the European ‘Slow Food’ movement and in the international sharing of knowledge that takes place within their annual ‘Terra Madre’ exchanges. Collaborative market structures will come to replace today’s suicidal race to the cliﬀ edge.
In doing so, farmers will have to re-learn how to farm without fossil fuel additions and without run-oﬀs that poison the water table. Subsidies must make it possible to plant fruit orchards rather than rip them up because produce can be found cheaper elsewhere. Ways of managing both drought and flood will become basic elements of our ride on the roller-coaster. Towns and cities will re-learn how to incorporate food growing within their boundaries. And, as citizens, we must all find roles in the cleaning up our own air and soils and streams. Do this well, and urgently, and a better life is still possible.
All it needs is leadership. And if Mia Mottley has come up with it we may find that a Bridge(town) Over Troubled Waters is exactly what we need.
30 June 2023