The Economics of Climate Change
Shifting away from an emphasis on global economic growth toward local economies provides a means to increase meaningful employment, shrink the gap between rich and poor, and tackle climate change.
The Economics of Climate Change
By Helena Norberg-Hodge /

I assume, like any thinking person has to be, that you are alarmed by runaway climate change. But what to do about it? Do you have a sneaking suspicion that changing your light bulbs and insulating your water heater won’t really make enough of a difference?

My observation from working for more than three decades in about a dozen countries, is that a growing number of people have become paralyzed by a fragmented analysis of both the cause of global warming and its cure.

In the last 30 years, our world has undergone a quiet transfer of power and wealth into the hands of virtually invisible banks and corporations. In the process, corporate influence — in the media, in academia, even in most scientific research — has obscured the impacts of our changing systems of production and marketing. In the era of globalization, giant multinationals have shifted production to low-wage countries, where there are relatively few controls on emissions. They have then transported everything — from our food to our shoes to our building materials — back and forth across the globe, contributing to a geometric escalation in the carbon footprint of virtually every consumer product.

At the same time, corporations have gained greater freedom to promote rampant consumerism around the world. There is ever more built-in obsolescence, packaging and waste, while young children are systematically targeted and manipulated into developing an appetite for consumer products.

But when we hear about global warming as presented by Al Gore and others, these reasons for the dramatic increase in energy consumption and CO2 emissions are largely ignored. Instead, the discussion focuses on the isolated consumer and what they can do to reduce their individual contribution to climate change. There is no mention of the need to look at our systems of production, marketing, and consumption. No mention of the trade treaties that deregulated global businesses and banks, while over-regulating local and national businesses. No mention of the way that our taxes have subsidized global trade and global infrastructures, enabling the giants to outprice smaller, local businesses.

The first step to limit climate change, then, is to halt the further deregulation of corporations and banks through treaties currently being negotiated, like the TransPacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP). Like other trade treaties, these agreements seek to accelerate global trade by ‘harmonizing’ regulations at the lowest possible level. But the new treaties go even further: they emphasize “investor-state dispute settlement” (ISDS) clauses that give corporations the right to sue governments if environmental or health rules might limit corporate profits. For example, when the Canadian province of Quebec enacted a ban on certain uses of lawn pesticides containing 2,4-D, ISDS rules in NAFTA allowed Dow AgroSciences to sue for their lost profits. Similarly, tobacco giant Philip Morris sued Uruguay for having increased the size of the warning labels on cigarette packaging.

While most people are repelled by these and other corporate strong-arm tactics, revulsion is often tempered by the mistaken assumption that laws protecting health, the environment, and worker safety are “drags” on the economy that ultimately cost jobs. But for decades now, global growth has meant jobless growth: the relaxation of environmental and health standards has helped corporations achieve record profits, but unemployment, underemployment, and a massive shift in wealth from the bottom to the top have only worsened.

Shifting away from an emphasis on global economic growth toward rebuilding smaller-scale, more localized economies not only provides a means to increase meaningful employment, to shrink the gap between rich and poor, and to tackle climate change, it also has the potential to strengthen community and improve people’s quality of life. And this goes for both North and South.

This is another area where corporate influence continues to divide the environmental and social justice movements, and stands in the way of uniting around meaningful change. The assumption has been that countries of the South need globalized development and trade to lift themselves out of poverty. It is also argued that they should have the right to increase their carbon emissions as they industrialize.

At first glance it makes sense that they should, based both on equity and the notion that rich countries have no right to make demands of the so-called poor countries: “We in the North have benefited from ‘development,’ how can we deny the South the right to follow in our footsteps?”

This argument suffers from two key flaws. First, people in the South simply cannot replicate the development path taken by the North: not only has our “development” already used up too much of the planet’s resources — including its ability to absorb CO2 emissions — but the South has no colonies to supply it with cheap resources and labor, no “Third World” to exploit. Second, arguing for equity ignores the fact that development and globalization do not benefit the majority; they have instead been responsible for a dramatic increase in poverty, while primarily benefiting a small wealthy elite. There is an emerging middle class in places like China and India, but they are generally trapped in a rat race of 80-hour workweeks and increasing debt.

In this sense, “telling the people of the South what to do” is precisely what Northern institutions have been doing for decades by imposing export-oriented, fossil fuel-based development on them. Government aid, direct foreign investment, and the policies of the WTO, the IMF and the World Bank are foisting ever larger-scale infrastructures on the South — mega-dams, fossil fuel and nuclear power plants, superhighways and shipping terminals. Meanwhile, TNCs are bombarding people all over the South with advertising images promoting an urban, consumer lifestyle. If addressing climate change requires limits on Southern greenhouse gas emissions, this is not telling the people of the South what to do: it is telling TNCs and the global elite that they cannot continue to transform societies for their own short-term interest.

It makes sense for the West to immediately reduce its consumption of fossil fuels and other natural resources. It also makes sense for the global North to bear the financial burden of reducing CO2 emissions. However, it does not make sense to argue — in the name of equity and justice — that the South should have the right to continue increasing its CO2 emissions. To a great extent, those emissions are our dirty laundry. They are the waste caused by using the most fertile lands of Africa to grow the vegetables that fill the aisles of European supermarkets. They are the smoke billowing from the factories of China that produce an endless stream of plastic trinkets for our manufactured consumer wants. They are the pollution created by sweatshops churning out goods that we could perfectly well produce for ourselves.

Whether in North or South, a shift away from the corporate-led global economy toward strong local economies provides the basis for greater security, prosperity, a healthier environment, and a more stable climate.


Helena Norberg-Hodge is the director of Local Futures – International Society for Ecology and Culture, producer and co-director of the award-winning film, The Economics of Happiness, and author of Ancient Futures: Learning from Ladakh. She lectures around the world on issues of sustainability, economics, and culture and was the recipient of the 2012 Goi Peace Prize for contributing to “the revitalization of cultural and biological diversity, and the strengthening of local communities and economies worldwide.”

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The Economics of Climate Change