The "yellow vests" protest in France against fuel tax increases intended to combat climate change shows that people care about the unequal impacts of policies—actual and perceived.
Globalization and economic policies such as deregulation, free capital flows, and austerity, are perceived to have increased inequality. Policies to mitigate climate change and its consequences, such as disasters and damages, also pose a challenge to equity and fairness for national economies. How does inequality affect growth, and how can we design policies to foster globalization and tackle climate change in a way that is inclusive and sustainable?
This was the question addressed on February 7th as part of SCEPA's Economics of Climate Change Speaker Series, as academics, researchers, and policy analysts came together to discuss policies that balance economic growth with equality and climate change mitigation.
The evening began with a discussion of the relationship between inequality and economic growth, as IMF authors Jonathan Ostry and Prakash Loungani presented the findings of their new book Confronting Inequality: How Societies Can Choose Inclusive Growth. Ostry argued that inequality is bad for growth, and that countries are free to, and should, choose policies that can foster both equality and growth. You can view his presentation here. Loungani, whose presentation you can find here, linked their work to one of the biggest challenges for equity in modern economies: climate change. Climate disasters reinforce existing disadvantages as the poor are both the most exposed and the most vulnerable. In turn, they become less prepared for the next disaster, perpetuating a downward cycle.
Harvard Economist Dani Rodrik doubled down on the notion that inequality is not our destiny, contrary to stories of the inevitable trade-off between equity and efficiency and the cost of redistribution. Countries are free to, and should, choose globalization and trade policies that empower labor and civil society interests instead of financial institutions and the elite, he said. Rodrik argued that, as with globalization, technological change does not have to be the enemy of low-wage workers. Instead, we are capable of ensuring that new technology can lift up low-skilled workers by helping them do the jobs of more skilled workers.
Finally, New School for Social Research Alum and World Bank Consultant Erin Hayde asked, how can we design successful climate policy? She examined real-world examples, highlighting the success of carefully designed carbon pricing and targeted compensation in Iran and British Columbia. You can view her presentation here.
A brief discussion and Q+A period followed the formal remarks, with questions addressing a shift in economic thinking, including "Do you accept that there has to be a fundamental rethinking of our (economic) premises very broadly?;" "Is there going to be consensus in the economic field about the necessity to reduce inequality?;" and, "Will economists have difficulty finding political means to advance what they know is true?"
The event was hosted by SCEPA's Economics of Climate Change project, headed by economist Willi Semmler and generously supported by the Fritz Thyssen Foundation. We thank Parsons Dean Joel Towers for joining us and making opening remarks.