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Michel Bauwens's avatar

It's worth reading these comments from Pavan Sukhdev:

𝗧𝗿𝘂𝗺𝗽’𝘀 𝘁𝗮𝗿𝗶𝗳𝗳𝘀: 𝗮𝗻 𝗲𝗰𝗼𝗻𝗼𝗺𝗶𝗰 𝗮̲𝗻̲𝗱̲ 𝗲𝗻𝘃𝗶𝗿𝗼𝗻𝗺𝗲𝗻𝘁𝗮𝗹 𝗰𝗿𝗼𝘀𝘀𝗿𝗼𝗮𝗱𝘀

An unlikely environmentalist, President Trump appears to have important environmental policy goals hidden within his tariff war!

Firstly, a short-term environmental reprieve: tariff-induced GDP contraction will reduce emissions and pollution. As economist Raghuram Rajan noted (Bloomberg, last Friday) every 1% increase in tariffs drops GDP by ~0.1%. Modeling a retaliatory global trade war (with GDP-weighted-average tariffs increasing by ~16%) implies a 1.6% hit to GDP growth. Lower GDP also lowers GHG emissions and pollution. In 2020, a COVID- induced drop in global GDP (-3.3%) triggered a much sharper (5.4%) fall in CO2 emissions. This is because it’s not just about manufacturing GDP and emissions. Trade volumes are 58% of global GDP today. Reduce trade, and you reduce shipping and aviation emissions too.

Furthermore, if you cut GHG emissions, cleaner air follows. Our data at GIST Impact shows a strong correlation between corporate GHG emissions and air pollution, which kills 8 million people annually (WHO). So this is a welcome reprieve.

Secondly, a long-term environmental paradigm shift: tariff-induced localisation of value chains. The whiplash sell-off in equities last week was particularly acute for companies (eg: megatech 7) whose complex, finely-tuned, global value chains were designed to capture persistent international price arbitrages across labour and materials, taxes and subsidies, and brand wallets. It now appears these value chains were never designed to stand the test of time, let alone the vagaries of today’s ‘social-media-smoke-and-mirror’ politics.

As cross-border trade becomes riskier and more expensive, MNC’s will likely re-evaluate their sprawling global value chains and increase local components to reduce risks.

Third, Trump’s tariff war lifts the veil on a bigger problem: externalities. Trade wars are bad economics, but the pathetic state of today’s economics owes much more to unaccounted externalities than to trade wars. Oil and gas sector externalities (so-called ‘indirect subsidies’) surpass USD 6 trillion (IMF, 2024) annually, i.e. the size of the combined GDP of France and UK. This is doubly shocking, given that this sector walks away with USD 4 trillion in profits annually. Last week’s collapse in crude prices and energy valuations has reminded die-hard oil and gas investors of their stranded assets, and the fact that 𝘵𝘰𝘥𝘢𝘺’𝘴 𝘦𝘹𝘵𝘦𝘳𝘯𝘢𝘭𝘪𝘵𝘪𝘦𝘴 𝘢𝘳𝘦 𝘵𝘰𝘮𝘰𝘳𝘳𝘰𝘸’𝘴 𝘳𝘪𝘴𝘬𝘴 𝘢𝘯𝘥 𝘵𝘩𝘦 𝘥𝘢𝘺 𝘢𝘧𝘵𝘦𝘳’𝘴 𝘭𝘰𝘴𝘴𝘦𝘴.

𝗪𝗲’𝗿𝗲 𝘄𝗶𝘁𝗻𝗲𝘀𝘀𝗶𝗻𝗴 𝘆𝗲𝘁 𝗮𝗻𝗼𝘁𝗵𝗲𝗿 𝗰𝗼𝗹𝗹𝗶𝘀𝗶𝗼𝗻 𝗼𝗳 𝗲𝗰𝗼𝗻𝗼𝗺𝗶𝗰𝘀, 𝗽𝗼𝗹𝗶𝘁𝗶𝗰𝘀, 𝗮𝗻𝗱 𝘀𝘂𝘀𝘁𝗮𝗶𝗻𝗮𝗯𝗶𝗹𝗶𝘁𝘆. The question is: can we turn this particular disruption into redesign? As the Stanford economist Paul Romer said, “a crisis is a terrible thing to waste”.

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George Pór's avatar

Michel, this is a brilliant analysis, as usual from you.

The apex of the opportunities that you sketched won't be realized without conscious human intervention. What do you think, what can a commoner like me do to maximize his contribution to it? For some background, pls note that in 10 days, I will participate in the "A Movement of Movements for Bristol?" meeting the announcement of which says:

"Bristol is a city full of energy and vibrant alternative initiatives, but they don’t always connect well together. The idea of a ‘movement of movements’ suggests that organizing might to scale out and scale up if it is to be able to address the polycrisis that faces us, but for many organizers it is scale that is the problem. Ideas such as prefiguration, horizontalism, localism and so on tend to focus on the small and specific and to be suspicious of political parties, the state and established institutions. In this event we want to think about longer term strategic aims and wider social transformation. Is it possible to think about the Bristol city region ecosystem in ways that are more strategic and systemic? Can we co-ordinate our activities so that the many local and particular forms of activism can become a rising tide of change which is impossible to ignore?"

What would YOU say, if you were here, which would respond to the commoners' aspiration for greater transformative impact, aligned with your strategic vision?

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