There is Nothing Central Planners Cannot Do …
As Robert Murphy pointed out last week, yet another example of 'mission creep' at the Fed has recently surfaced. As readers are probably aware, the Fed is one of the bureaucracies that are constantly rewarded for failure. In fact, it is a general rule of thumb that the greater the failure, the greater the subsequent expansion of power that is granted to the bureaucracy concerned. Examples for this principle of statism abound – see e.g. the vast expansion of the budget and power of the national security bureaucracy after it failed so abjectly to avert the 9/11 attack.
It is similar with the Fed, the regulatory powers of which have been expanded greatly right after it presided over the biggest financial crash since 1929-1930. However, for some people this doesn't go far enough. The Fed should not only manipulate interest rates and the money supply and act as a kind of fox guarding the financial hen-house. As Bob Murphy relates, it is now argued that the Fed under Ms. Yellen's leadership should add credit dirigisme designed to 'save the planet' to its menu:
“I have referred to Ben Bernanke as the “FDR of central banking.” What I mean is that Bernanke not only instituted horrible economic policies, but he used the financial crisis to fundamentally transform the way Americans (and Earthlings more generally) view the role of the Federal Reserve. A recent Huffington Post article on Janet Yellen illustrates my case beautifully. The bio describes the writer, Mike Sandler, as a “climate change professional” (among other things). That should warm us up for his recommendations for incoming Fed chair Janet Yellen:
“On January 6, Janet Yellen will likely be confirmed as the next Chair of the Federal Reserve System. Her to-do list will be full of things like the interest rate, the bank bailouts, the unemployment rate, and in general, running the economy. Climate change would be an unexpected addition to that list, but the Fed Chair is in an important and rarely recognized position to to take action on the climate crisis.”
Sandler lists several ways that Yellen can tackle the “climate crisis,” but I don’t want to overwhelm you. Let’s look at just one of his suggestions:
“She can make a carbon cap a part of the Fed’s operations by tracking and requiring carbon reductions in the footprint of loans originated by Fed member banks. This could take the form of a declining number of annual allowances to banks that provide loans to the energy and oil industry. By connecting economic activity to greenhouse gas emissions, the Federal Reserve could create levers to allow for additional economic growth in low-carbon activities, while reining in high-carbon industries.”
Does everyone see the significance of this statement? Sandler wants the Fed chief to oversee commercial bank loans in order to micromanage specific industries. We have moved well beyond the idea of a Fed that promotes economic growth while trying to minimize the volatility of price inflation. Now we have “climate change professionals” telling the Fed chief to crack down on banks that make loans to industries that the writer thinks are emitting too much carbon dioxide. Finally, just to make sure that we throw out marginal cost/benefit analysis and view the issue in emotional terms, here is how Sandler ends his HuffPo piece:
“Janet Yellen will have unique powers over economic policy, and she can use her new powers to save the planet. To do so, she will need to add one more item to her 2014 to-do list.”
Here is a link to the HuffPo article Bob Murphy refers to. There we learn that Mike Sandler is a 'political economist, climate change expert and sustainability advocate'. The term 'sustainability' has become a catch-all term used by central planners and would-be central planners (i.e., their self-appointed advisors of Sandler's ilk) in their crusade to suppress economic development and economic freedom.
The Authoritarian Character of the 'Planet Savers'
One thing Bob Murphy has not particularly stressed in his post on Sandler's piece deserves some further attention. Sandler specifically points to the non-democratic character of the Federal Reserve as putting it into an ideal position to shove his plans down our collective throats with no-one being able to do anything about it. 'Resistance would be futile' in other words. He writes:
“In the silos of the Federal Government, domestic efforts to address climate change are typically led by an alphabet soup of environmental agencies including the EPA, DOE, CEQ and others, but not the Federal Reserve (aka "The Fed"). Although President Obama has stated his intention to implement his climate action plan without Congressional approval, there are limits to presidential authority. He cannot institute an economy-wide price on carbon, and he cannot circumvent Congress' power over the budget.
Meanwhile, a major unrecognized power sits in another corner of the policy apparatus. While the Federal Reserve plays an important role in regulating the country's banks, setting the interest rate that banks pay, and determining the level of money supply, it also has the unique ability to reorient the interaction between the economy and environmental degradation by controlling the power and process of money creation.
In our debt-based monetary system, money enters the economy when banks make loans. Those loans must be repaid with interest, leading to an economy-wide growth imperative accompanied by the "side effect" of global warming. A more sustainable approach would be a steady state economy, where people can achieve a comfortable standard of living without jeopardizing the planet's life-support systems.”
So what Sandler really likes about using the Fed is that it can do an end-run around Congress as its actions are essentially not really subject to democratic control. This authoritarian streak is actually a typical characteristic of many of the so-called 'environmentalists' and 'sustainability advocates'. As we have mentioned previously, we strongly suspect that the environmental movement has become host to many former Marxists who lost their sugar daddy when the Soviet system imploded. Their authoritarian mindset is nicely demonstrated in this advertising campaign filmed by British environmentalist campaigners (the 'No Pressure' movie by “10:10” – we mention this specifically because they were so embarrassed by this revealing movie that they are constantly trying to pull it from youtube, but it keeps reappearing).
We should also point out that the idea that more and more economic coercion will result in a “steady state economy, where people can achieve a comfortable standard of living without jeopardizing the planet's life-support systems” is meaningless economically illiterate balderdash. Sandler probably also thinks electricity just mysteriously appears from an outlet in the wall, and it doesn't matter what happens beyond that. Along similar lines, a few years ago an article at the Guardian asserted that a 'viable alternative to eco-fascism' would be to simply ban advertising (we will revisit the advertising question in another post). The article is quite interesting because it presents a few of the more prominent outspoken eco-fascists and their ideas/plans. Especially Finnish radical Linkola doesn't hold back with informing us about what it is really all about:
“One well-known example of the authoritarian turn in environmentalism is James Lovelock, the first scientist to discover the presence of ozone-depleting chlorofluorocarbons in the atmosphere. Earlier this year he told the Guardian that democracies are incapable of adequately addressing climate change. "I have a feeling," Lovelock said, "that climate change may be an issue as severe as a war. It may be necessary to put democracy on hold for a while." His words may be disturbing, but other ecologists have gone much further.
Take for example Pentti Linkola, a Finnish fisherman and ecological philosopher. Whereas Lovelock puts his faith in advanced technology, Linkola proposes a turn to fascistic primitivism. Their only point of agreement is on the need to suspend democracy. Linkola has built an environmentalist following by calling for an authoritarian, ecological regime that ruthlessly suppresses consumers. Largely unknown outside of Finland until the first English translation of his work was published last year, Linkola represents environmentalism pushed to its totalitarian extreme. "An ecocatastrophe is taking place on earth," he writes concluding several pages later that "discipline, prohibition, enforcement and oppression" are the only solution.
Linkola has a cunning ability to blend reasonable ecological precepts with shocking authoritarian solutions. His bold political programme includes ending the freedom to procreate, abolishing fossil fuels, revoking all international trade agreements, banning air traffic, demolishing the suburbs, and reforesting parking lots. As for those "most responsible for the present economic growth and competition", Linkola explains that they will be sent to the mountains for "re-education" in eco-gulags: "the sole glimmer of hope," he declares, "lies in a centralised government and the tireless control of citizens."
That's right, according to this luminary of the environmentalist movement, we need “re-education in eco-gulags” for those who serve consumers, and a “centralized government” exercising “tireless control of citizens”. Not only does this reveal a cynical and inhuman authoritarianism and anti-civilization bent, it also shows hopeless naïvete.
Consider the idea that centralized government would be a good steward of the environment. Never has more environmental damage been done than under the rule of centralized governments that had 'total control over their citizens'. After the former Eastern Bloc collapsed and the enormity of the environmental catastrophe that had occurred in these countries came to light, even the staunchest critics of the communist regimes were shocked. East Germany had the dubious honor of being host to the 'most polluted town on earth'. Even decades later, time bombs from the ecological nightmare in the Eastern Bloc continue to go off.
We don't want to give the impression that we think one should not care about the environment. There are certainly places on earth in need of improving their environment – such as for instance China. China suffers from outrageous pollution (especially in the large cities, see Indur Goklany's book on this topic).), but it is in fact ruled by an authoritarian centralized government. On the other hand, it is a historical fact that all countries that have adopted capitalist modes of production have not only experienced a vast growth in wealth, but following their development phase (which often weighs on the environment, because economic concerns are considered more important) have also seen a notable improvement in their environmental conditions. In fact, every single indicator of the quality of human life has been improved by capitalism, for all social strata. It does not matter what data one looks at, from life expectancy to literacy to access to amenities, it has all vastly improved for an unprecedented number of people, even though the market economy is severely hampered almost everywhere (see
The 'ecological catastrophe' that people like Linkola allege to exist is largely a figment of their imagination and one suspects merely provides the cover under which they act out their authoritarian impulses. The idea to harness the Fed for the purpose of implementing credit dirigisme to control carbon emissions, i.e., to fight the 'climate change' non-threat, similarly displays this authoritarian attitude.
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8 Responses to “The Fed Will Save the Planet”
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