Globalization and its Risks

Preface

This book began with a series of lectures I gave in 1999 at the Brookhaven

National Laboratories in Long Island, New York, the Pegram Lectures.1 I was asked explain the origin of global environmental problems and propose solutions: a tall order and I thank the organizers and the participants for their probing questions and suggestions, and their passion for the topic. Some of the material in this book goes back much longer, originating in the Model of the Fundacion Bariloche, a computerized model of the world economy was the first to be created within a developing nation. Bariloche is a beautiful town of mountains and lakes located in Patagonia, the South of , my country of birth. In creating the and the of the Bariloche Model, I introduced the concept of Basic Needs as a foundation for economic development. I worked closely with Latin American scientists led by the late geologist and friend

Amilcar Herrera and several physicists and friends including the Jorge Sabato and Carlos

Mallman. Basic Needs offered a new perspective on developing nations’ economic development, focusing on ways to overcome dire poverty while averting resource depletion. At the time, the global modeling literature was dominated by the Limits to

Growth Model developed at MIT. Specifically, Basic Needs was a response to the Limits to Growth attempt to measure economic progress solely by Gross Domestic Product, and its claims that developing nations could only succeed by depleting the planet’s resources.

In the Bariloche model, we proved that by concentrating on Basic Needs we could achieve economic progress in the developing world while averting the depletion of the

1 The Pegram Lectures www.chichilnisky.com

1 earth’s resources. In that sense, the Bariloche Model was truly the first study on global sustainable development.

Somewhat unexpectedly, the concept of Basic Needs spread rapidly from the first publication in the mid 1970’s of our book Catastrophe or New Society by the

International Development Research Council (IDRC) of Ottawa Canada. The book was translated into 8 other languages and read around the world, and I published several academic articles introducing and developing the concept of Basic Needs while teaching at .2 The concept of Basic Needs was taken up by several United

Nations agencies and the , including the UN Department of Social and

Economic Affairs (ECOSOC), the United Nations Institute for Training and Research’s

Project on the Future, led by M. Phillippe De Seynes, and the United Nations

International Labor Organization (ILO) in Geneva that performed a number of country studies led by Mike Hopkins on the feasibility of Basic Needs policies. The Basic Needs approach to economic development was eventually voted by 153 nations at the 1992

Earth Summit of Rio de Janeiro Brazil, as the cornerstone of efforts to define Sustainable

Economic Development.3 The influence of Basic Needs was also felt across academia, for example, in ’s work on entitlements that is consonant with the idea of satisfaction of basic needs as a primary end of development policies, and the late Harvard philosopher John Rawls book Theory of Justice, who argues that the welfare of those who are worst off is an ethical priority.

2 Chichilnisky, G: “Economic Development and Efficiency Criteria in the Satisfaction of Basic Needs”. Applied Mathematical Modelling 1977, and “Development Patterns and the International Order” Journal of International Affairs, 1977, www.chichilnisky.com. 3 See G. Chichilnisky, G. Heal and S. Vercelli: Dynamics and , Kluwer, www.chichilnisky.com.

2 In 2000 the United Nations introduced its Millennium Goals that focus on monitoring effectively the satisfaction of Basic Needs. The of the United

Nations4 is another manifestation of the close connection between global resources and the satisfaction of Basic Needs. In creating the carbon within the Kyoto Protocol,

I aimed at providing a global market mechanism that can correct the missing values in standard GDP measures and uncover the true costs of global resources, while helping overcome the global divide between rich and poor nations. The connection between the carbon market and Basic Needs is at the heart of this book and is developed throughout its chapters.

While attracting worldwide attention, the concept off Basic Needs remained more of a hope than a reality, a goal to be pursued but never attained. The increasing importance of markets in the world economy led me to think that the only way we would be able to achieve the satisfaction of Basic Needs was by using markets for this purpose.

My idea was to create new global market mechanisms that while achieving profits could at the same time address environmental concerns and the wealth differentials between nations. Through many publications and speeches, I started in the early 1990’s to develop the idea of creating new global financial mechanisms that could achieve the two seemingly opposite goals.5 The idea became a reality in 1997. The Kyoto Protocol is the first international agreement that is fundamentally based on the creation of a new global market mechanism, the carbon market, where the nations of the world the rights to use a global , the planet’s atmosphere. Representatives from 160 signatory

4 On December 10 1997, representatives from 160 signatory nations of the UN Framework Convention on agreed in the Kyoto Protocol to reduce global emissions by 5.2% by 2012. 5 Among others a key note presentation to the Annual Meetings of the World Bank in December 1995, Chichilnisky, G. “The Greening of the Bretton Woods” Financial Times, January 6, 1996, Chichilnisky, G. Development and Global Finance, UNESCO and UNDP, New York, Discussion Paper Series No 10, published in New York April 1997.

3 nations of the UN Framework Convention on Climate Change agreed in the Kyoto

Protocol to reduce global emissions by 5.2% by 2012.6 In helping create the United

Nations Kyoto Protocol’s carbon market and its Clean Development Mechanism, I helped put in place a new global market mechanisms that was self-funded, requiring no donations by any nation, and that could achieve simultaneously the two purposes mentioned above. The Kyoto Protocol’s carbon market is a new global market mechanism that can resolve major global environmental problems of our times, while helping to promote the welfare of countries that have fallen behind in economic development.

The idea of a carbon market is straightforward. It is based on limits on nations’ emissions. On a given year, a nation that is above its limits can buy rights to emit from another nation that is below its limits – while the total world emissions remain within the agreed ceilings. This penalizes the bad guys and rewards the good guys, without any tax authority needed as an intermediary. The carbon market creates a ‘ signal’ that encourages clean technology innovation.

By deliberate design and for historical reasons, the Kyoto Protocol puts no limits on poor nations’ emissions and they preferentially benefit from the use of the planet’s atmosphere. Furthermore, through the Clean De