Monday, 9 June 2014

Inequality and carbon emissions

I recently watched this short clip of an interview with Christine Lagarde of the IMF on the BBC News website, and it has been in my thoughts ever since.

Surprisingly, as the IMF are champions for austerity measures, which inevitably squeeze the poorest members of the population the most, Christine Lagarde is making a point about inequality.

"...Inequality is rising and, to the extent that inequality is not particularly supportive of sustainable growth, it's an issue...."

'Sustainable' and 'Growth' really should not be used in the same sentence, because as George Monbiot recently pointed out in his post The Impossibility of Growth, growth cannot just continue indefinitely. I believe she means 'Continuous Growth', which is a very far cry from anything remotely sustainable..... but I digress.

"....Over the last 30 years, inequality has risen significantly. For instance the top 1% has increased its share of wealth in 24 out of 26 advanced economies. And if you take some of the Oxfam numbers for instance, the numbers are quite striking actually. If you take the 85 wealthiest people in the World, they can all fit in a double-decker bus right, well they have more amongst themselves than half the population of the World, the poorest half of course, but that is 3.5 billion people...."

There is so much about this that is sooooooooo wrong. Where do I even start?

Just for a moment put aside the fact that Christine Lagarde is listening to and taking note of reports from Oxfam, which seems quite a positive development. And forget the ridiculous notion of anyone with that much wealth stepping foot on a common London bus. Let's just stick to the key message, that 85 people have as much wealth as 3.5 billion people.

3.5 billion people is a lot to comprehend. It is more than the total population of Europe, Africa and the Americas put together. That is a lot of people. Many of them have very little, over 1 billion are barely subsisting on $1 a day.

Hans Rosling used a wealth chart shown above in the documentary Don't Panic - The Facts About Population which I have discussed previously here. The 7 people depicted along the bottom of the chart represent the 7 billion people in the world and above it shows the distribution of the wealth. More than 1 billion on the left of the chart are below the extreme poverty line, barely able to feed themselves or afford shoes. The 1 billion on the right can afford cars and even to travel by aeroplane and earn an average $100 a day.

Chances are if you are reading this then you are in the right hand side of the graph. $100 dollars a day is around £60 at the current exchange rate. To put that in perspective, the minimum wage for over 21's in the UK is £6.31 an hour, so for an 8 hour day that would be £50. For those that are unemployed and depending on income support the minimum they would receive is £56.80 a week, which is just £11 a day or $18 a day (calculated with a 5 day working week for comparison).

£11 will buy very little in the UK and would not be enough to afford to run a car, probably not even a moped, but certainly a basic bike. In the UK we have a safety net intended to mean that everyone can feed themselves, but as this minimum has not been rising enough to match inflation over the years there have been reports of hungry children in schools and people having to choose between eating or keeping warm. The government has combatted this with winter fuel payments to help cover heating costs, free insulation and boilers for those on benefits, and is now introducing free school meals for all children under 8. And of course we have free healthcare for everyone.

Hans Roslings graph needs to be extended on the right hand side if we want to show where the richest 85 people would be. Past the $1,000 mark which signifies the top 1% in the US, and on past $10,000 and $100,000 a day mark. We still haven't reached the 1,645 billionaires in the World (according to Forbes magazine) let alone the top 85, who are around the $1,000,000 a day mark. Bill Gates, currently the Worlds richest man again, earns an estimated £8.8 million or $14.8 million a day, so is past the $10,000,000 mark! Now we can see what Christine Lagarde means about inequality.

Why can't we afford to provide a safety net to cover the basic human needs for the people in the rest of the world? It doesn't look like there isn't enough wealth, just that we don't like sharing it fairly. Maybe we need a Greed Tax? What do you think?

In Switzerland they took a vote recently on whether to limit the pay of the top executives to no more than 12 times that of the lowest paid worker in their company. This is a very clever idea, because it would stop wages at the top getting out of control without first increasing the wages at the bottom. Unfortunately, this did not get enough votes to be approved. If minimum wage in the UK is £50 a day, then the maximum earnings of the highest paid individual in the company could not exceed £600 a day on this system, without having to increase wages at the bottom. £600 a day is a bit more than the Prime Minister currently earns, but on the scale above it doesn't seem a lot does it?

Equality is really important for a healthy society and I would thoroughly recommend reading The Spirit Level by Richard Wilkinson and Kate Pickett as an eye-opening introduction to the effects of inequality.

For me there is another reason why understanding the disparity of wealth is important. When we look at reducing carbon emissions or fossil fuel consumption which side of Hans Rosling's graph should we be focusing on? The poorest billion who only use as much wood as they can collect themselves, or the richest billion who can afford large houses filled with 'stuff', and travel long distances for pleasure?

The more money we have available to spend on consumer goods, fast cars, flights abroad and large houses, the more fossil fuels we use and carbon emissions we create. I found this Wikipedia list showing the global difference between vehicle ownership and it indicates how different the oil consumption will be. The US has 797 motor vehicles per 1,000 people and the UK has 519. Whereas China only has 183 motor vehicles per thousand people, India 41 and Bangladesh just 3 (2010).

I am a supporter of carbon rationing for this reason. Rationing carbon would mean that everyone gets a share or a quota of 'carbon emissions' or energy each year, in the form of a plastic credit card. Every time you fill up your car with fuel, pay your energy bills or buy goods from a store, you swipe your carbon card too and are using up your carbon quota. If it was important for you to fly half way round the World to visit family, then you would either have to reduce your carbon emissions in other areas or buy quotas from someone who hasn't used theirs.

This won't stop the rich from travelling, as they could invest in a fleet of electric vehicles running on renewable energy or just buy more quotas. But buying more quotas acts as a tax on energy consumption, above a certain level. It focuses attention on reducing energy consumption, and helps people see their actual consumption levels in perspective. The quotas would have to start off at a fair amount and then reduce each year in order to reach reduction targets.

There would be grumbles at first, especially among the more affluent, but this is a very fair system and potentially could provide an extra income stream for those who are frugal with their energy consumption. The scheme promoted in the UK is called "Tradable Energy Quotas" and was endorsed by David and Ed Milliband when they were Secretary of State for the Environment. There is no hope of TEQs re-emerging under the current government, but maybe after the next election they will be back on the agenda.