Monday, May 09, 2011

Chomsky and doom and gloom

[CEOs of big corporations and the environmental crisis] ... "They know as well as you and I do that it’s very real and that the threats are very dire, and that they’re threatening the lives of their grandchildren. In fact, they’re threatening what they own, they own the world, and they’re threatening its survival. Which seems irrational, and it is, from a certain perspective. But from another perspective it’s highly rational. They’re acting within the structure of the institutions of which they are a part. They are functioning within something like market systems—not quite, but partially—market systems. To the extent that you participate in a market system, you disregard necessarily what economists call “externalities,” the effect of a transaction upon others. So, for example, if one of you sells me a car, we may try to make a good deal for ourselves, but we don’t take into account in that transaction the effect of the transaction on others. Of course, there is an effect. It may feel like a small effect, but if it multiplies over a lot of people, it’s a huge effect: pollution, congestion, wasting time in traffic jams, all sorts of things. Those you don’t take into account—necessarily. That’s part of the market system.... ....The financial crisis has a lot of roots, but the fundamental root of it has been known for a long time. It was talked about decades before the crisis. In fact, there have been repeated crises. This is just the worst of them. The fundamental reason, it just is rooted in market systems. If Goldman Sachs, say, makes a transaction, if they’re doing their job, if the managers are up to speed they are paying attention to what they get out of it and the institution or person at the other end of the transaction, say, a borrower, does the same thing. They don’t take into account what’s called systemic risk, that is, the chance that the transaction that they’re carrying out will contribute to crashing the whole system. They don’t take that into account. In fact, that’s a large part of what just happened. The systemic risk turned out to be huge, enough to crash the system, even though the original transactions are perfectly rational within the system.....It’s not because they’re bad people or anything. If they don’t do it—suppose some CEO says, “Okay, I’m going to take into account externalities”—then he’s out. He’s out and somebody else is in who will play by the rules. That’s the nature of the institution. You can be a perfectly nice guy in your personal life. You can sign up for the Sierra Club and give speeches about the environmental crisis or whatever, but in the role of corporate manager, you’re fixed. You have to try to maximize short-term profit and market share—in fact, that’s a legal requirement in Anglo-American corporate law—just because if you don’t do it, either your business will disappear because somebody else will outperform it in the short run, or you will just be out because you’re not doing your job and somebody else will be in. So there is an institutional irrationality. Within the institution the behavior is perfectly rational, but the institutions themselves are so totally irrational that they are designed to crash.... ...A financial crisis can be terrible. It can put many millions of people out of work, their lives destroyed. But there is a way out of it. The taxpayer can come in and rescue you. That’s exactly what happened. We saw it dramatically in the last couple of years. The financial system tanked. The government, namely, the taxpayer, came in and bailed them out. Let’s go to the environmental crisis. There’s nobody around to bail you out. The externalities in this case are the fate of the species. If that’s disregarded in the operations of the market system, there’s nobody around who is going to bail you out from that. So this is a lethal externality.... .... a typical story in the New York Times, it will tell you that there is a debate about global warming. If you look at the debate, on one side is maybe 98 percent of the relevant scientists in the world, on the other side are a couple of serious scientists who question it, a handful, and Jim Inhofe or some other senator. So it’s a debate. And the citizen has to kind of make a decision between these two sides. The Times had a comical front-page article maybe a couple months ago in which the headline said that meteorologists question global warming. It discussed a debate between meteorologists—the meteorologists are these pretty faces who read what somebody hands to them on television and says it’s going to rain tomorrow. That’s one side of the debate. The other side of the debate is practically every scientist who knows anything about it. Again, the citizen is supposed to decide. Do I trust these meteorologists? They tell me whether to wear a raincoat tomorrow. And what do I know about the scientists? They’re sitting in some laboratory somewhere with a computer model. So, yes, people are confused, and understandably. It’s interesting that these debates leave out almost entirely a third part of the debate, namely, a very substantial number of scientists, competent scientists, who think that the scientific consensus is much too optimistic. A group of scientists at MIT came out with a report about a year ago describing what they called the most comprehensive modeling of the climate that had ever been done. Their conclusion, which was unreported in public media as far as I know, was that the major scientific consensus of the international commission is just way off, it’s much too optimistic; and if you add other factors that they didn’t count properly, the conclusion is much more dire. Their own conclusion was that unless we terminate use of fossil fuels almost immediately, it’s finished. We’ll never be able to overcome the consequences. That’s not part of the debate..."

Taken from here

No comments: