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April 29, 2010

An Economic and Political Perspective

Henry S. Cole, Ph.D.
The 40th anniversary of Earth Day happened last week. I participated in the first Earth Day as a young professor and environmental activist back in1970. We had high hopes. People were jumping on the eco-wagon like there was no tomorrow. Well here we are tomorrow, four decades later. And we’ve had a busy Earth Month.
President Obama announced his plans to open up more coastal waters to the oil industry, in a stroke of bad timing for the President’s policy, one of BP’s big oil rigs exploded and sunk the    Gulf of Mexico (on Earth Day). The resulting oil slick expanded rapidly week and threatens estuaries and fish and shrimp industries in four states. See ABC TV video.
According to the Wall Street Journal, the rig had no remote shut-off switch used in other oil-producing nations  U.S. regulators don’t require them.
On Thursday, the head of the Coast Guard’s efforts, Mary Landry said that the situation is deteriorating and the spill may wind up being one of the worst in history.
The good news. After nine long years, the Interior Department finally approved a 130-turbine wind farm off the coast of Cape Cod providing a real boost to the U.S. offshore wind industry. See NY Times coverage; The U.S. has lots of offshore wind.
But there are other news in the making that may ultimately have a more important impact on the future of the environment. Consider the Senate the revelations emerging from the Senate subcommittee hearing on the impact of Goldman Sachs on the financial system and the broader economy. Thanks to financial experts like Simon Johnson (See Johnson and Kwak’s best-selling 13 Bankers and their Blog, Baseline Scenario) and this week’s Senate hearing (See the video), we can see how the reckless speculation and avarice of the Wall Street investment banks contributed the financial meltdown of 2008 and the worst recession since the Great Depression.
According to a recent CNN Report: the Bailout Tracker our federal government has already spent 3 trillion dollars and committed 11 trillion dollars to bailout the “too-big-to-fails” (TBTFs). Now the Mega-banks are again making billions while the 15 million Americans are unemployed and millions have lost their homes.
The Wall Street fiasco is an outgrowth of the deregulation that started under President Reagan and continues to flourish. Environmental regulation and enforcement was especially hard hit under Reagan and George W. Bush.

Hopefully Congress will enact legislation strong enough to rein in the TBTFs that profit by betting against the rest of us. However, ultimately, the real solution is for Congress to ensure that no corporation is powerful enough to wreck havoc on our economy or on the environment.

The juxtaposition of these stories points to a monumental fork in the road – not just a choice between renewables and fossil fuels, but a deeper choice about the way that decisions are made and for whose benefit. It’s about whether mega-corporations or “We the People” will mold the future.

If permitted, large energy corporations will not only “drill, baby, drill,” but will attempt to squeeze oil from shales and tar sands regardless of the environmental consequences. Big Energy also wants a free hand to reopen uranium mines to fuel a new generation of nuclear power plants with big government subsidies regardless of the environmental and financial risks. Note that the President’s energy plan includes tens of billions of dollars in loan guarantees to entice reluctant banks to invest in nuclear power.

The CEO of one of these companies is likely to use the following strategy (1) use political power to regulatory concessions; (2) get big government subsidies (3) make big profits but saddle the tax paying public with the risks (4) suggest that your firm may leave town if you don’t get what you want. The latter is especially scary to a governor in an economically depressed state with high unemployment. So he or she instructs the head of the state environmental department and the Senator to go easy on the guy with the big smoke stack. Somehow the threat of losing another 500 jobs seems a bit more compelling than a few more cancers or a melting glacier on a far off mountain.

Finally, one should ask what if the trillions used for bailouts had been invested directly in the small, local businesses and community-oriented banks. What if we invested to help state and local governments solve their budget crises?  Imagine if even a small part of the $$$ were invested to boost wind and solar industries and to restore damaged ecosystems. Then we might just be able to celebrate fully on the 50th Anniversary of Earth Day.

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