Globalization and its Risks Preface This is a moment of transformation and change on all fronts, which includes a metamorphosis of who we are. The human species has faced transformational unions before. Indeed, the cells that record the history of human beings—the mitochondria which form what is known as the energy engine-- reveal in our background the previous coming together of at least two other species, a phenomenon that helped shape what constitutes our current selves. Yet the union on the horizon is more radical than those previous and heralds a vastly different world; it is revolutionary because it involves the synthesis of humans and technology, a change that is almost here with respect to intelligent phones, and that is based on the use and transformation of energy and natural resources at the planetary level to produce electricity and telecommunication. It is no secret that humans now dominate Planet Earth; nor that we have altered and continue to alter the atmosphere, bodies of water, and the complex web of species that makes up life on Earth. We have entered a new geological period, the Anthropocene, whose beginnings will be cited in the evolution of rock formations that will be studied for thousands of years to come; written in the very Earth will be the confirmation that human beings are, without doubt, the most powerful geological force on the planet. Yet the transformation we observe is not, finally, based on some sort of geological shift. The transformation of the planet in process is an economic revolution at its core and it is the history of economic behavior that reveals the process of how we have changed the planet, our lives, ourselves. Nothing makes sense unless we understand that, behind everything, are the fundamental decisions involving how humans have chosen to use and to share natural resources, along with how we have fed and organized ourselves. After human hunters and gatherers organized for survival in larger groups, communities developed and the basis of economies began to take shape. Later, the agricultural revolution transformed the way human groups fed themselves around the world. The development of nations, governments, and economic structures evolved after the industrial revolution, a massive shift that eventually spread across the globe and started the crisis of climate change that we observe today. These developments took place without plan. Now, the fundamental decisions that will shape our futures must be scrutinized and, I believe, revised, rethought, reimagined, if we are to survive. The economic principles—no longer applicable, productive, or even safe-- that underlie our personal, social, and national lives must be reexamined if we are to have a role in the future evolution of the planet, human life, and nations. Existence is at stake. Climate change may wipe our species from the face of the earth if we do not think, act, re-design. But the transformation of economics and the earth itself does not have to mean the end; it can presage and foster a new, more positive, equitable, and healthy beginning, the start of a redistribution that erases poverty, inequality, and suffering around the world. We have the opportunity to reinvent our future. In the pages of this book and in the ideas it introduces, I will offer the reader a glimpse at the coming economic revolution and, not only the dangers of trying to sustain our current path, but also the opportunities that are opening in front of our own eyes and yet are hidden to most people. The possibilities inherent in positive change are revealed in what, to some, may seem a secret code, but it is more accurately a set of discernable signals that, once exposed, become overwhelmingly clear and almost obvious. If we do not follow their guidance and facilitate new, broader understanding, we will perpetuate the reality of our own destruction; it is that simple. Because of the crisis in our global environment, humankind, already the survivor of a history of radical evolution, faces -- immediately-- the most fundamental and dramatic, perhaps devastating, moment of change yet seen on this planet. We have seen bacteria come to control their environment, creating oxygen-based life forms and oceans and, in the process, relegating old forms of life to small pockets in the oceans that live off the energy emitted by sea vents. About 60 million years ago, we saw the mighty dinosaurs succumb to a dramatic episode of climate change; those that survived eventually became birds. Now we are seeing a mutation of the species not dissimilar to the evolution of these creatures. Now we are seeing the human species repeat the process. This is the moment in the history of the planet when action is not suggested, but demanded. The current transformation is unique in that it involves the transformation of the human mind and our species as well as the planet as a whole. It comes at a time when globalization—the force behind climate change-- poses threats to our ability to use clean air, water, and the foods that are the basis of human survival. While the international market has been seriously implicated in the transformation and the destruction of our physical life systems, this book announces a brave shift beyond today’s capitalism, a new way of economic thinking for the future, for survival, and for better, richer, healthier, and more creative lives. It is, I am convinced, our best hope, given the current threats to our planet, which grow more immediate with every passing hour. Time is short. We are close to a point of no return. The remedies I suggest, fundamentally economic, will be felt in every area of life and offer, I believe, our best hope for survival. What is proposed here can be done; what is proposed here must be done. I invite the reader to join a sober search for solutions and to imagine and help create a new world in which humans live in harmony with each other and with the world’s resources, enhancing rather than destroying human happiness, innovation and realization, along with the respect and embracing of the unique and complex web of species that makes life on Earth. This book began in 1999, with a series of lectures I gave at the Brookhaven National Laboratories in Long Island, New York, the Pegram Lectures.1 There 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 dates back much longer, to 1974, originating in the Model of the Fundacion Bariloche, a computerized model of the world economy that 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 Argentina, my country of birth. In creating the economics and the mathematics 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 sociologist Fernando Enrique Cardoso who later on became the president of Brazil, and the physicists 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 the ensuing suggestion 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 earth’s resources. In that sense, the Bariloche Model was truly the first study on global sustainable development. The concept of Basic Needs was taken up by several United Nations agencies and the World Bank, including the U.N. Department of Social and Economic Affairs (ECOSOC) along with the United Nations Institute for Training and Research’s Project on the Future, led by M. Phillippe De Seynes. The United Nations International Labor Organization (ILO) in Geneva 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.2 The influence of Basic Needs was also felt across academia, for example, in the distinguished work of Nobel Laureate economist Amartya Sen’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. In 2000 the United Nations introduced its Millennium Goals that focus on monitoring effectively the satisfaction of Basic Needs. The Kyoto Protocol of the United Nations3 is another manifestation of the close connection between global resources and the satisfaction of Basic Needs. In creating a model for the carbon market 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.