No74 – 15 November 2012
Patterns, battles and conflicts, ongoing, escalating or to come, emerge as articles are read in clusters, as a system: e.g. US as top oil producer with Peak oil theorists disagreeing, the battle for the Arctic, Chinese Energy thinking and 6C increase in temperatures.
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No73 – 8 November 2012
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No72 – 1 November 2012
Some weak signals towards a change of paradigm, besides the usual tense hotspots and their aftermaths – which do contribute to the change of paradigm. Maybe an opening window of opportunity that might ease the escalation Israel-Iran… “maybe” because, there, signals are contradicting.
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Last weeks’ summary: In 2012 EVT, Everstate (the ideal-type corresponding to our very real countries created to foresee the future of governance and of the modern nation-state) knows a rising dissatisfaction of its population. Alarmed by the rising difficulties and widespread discontent, the governing authorities decide to do something when new elections start, which starts the second scenario, Panglossy. The new Everstatan government, dependent upon past thinking, decides that a return to economic efficiency through growth is the key to the crisis. Its first measure, to raise the minimum wage, fails to boost growth through consumption. The second, longer term, policy, which promotes green growth through infrastructure investment, starts with the preparation of the first high level conference of ISSIGE. Notably, funding through the emission of bonds, which should promote a lever effect by involvement of the private sector, is decided. The new international meeting group for the resilience of the financial system IRESFIS also convenes, but with no progress as the lenders’ nexus is as strong as ever.
(The reader can click on each picture to see a larger version in a new tab – a navigating map of posts is available to ease reading.)
Actually, the lenders’ nexus has even seen its position reinforced. The ISSIGE, by deciding to issue bonds, which go through the private banking system, and by hoping for leverage, has reinforced the dependency of the nation-states and its governing bodies upon the lenders’ nexus as well as upon any private actor with liquidity. The political weight that is put on the ISSIGE success, notably because it has been framed in terms of growth, which is crucial according to the past worldview, on the one hand, and, on the other, because of the global increasingly urgent need for investment, further strengthens the immediate power of the lenders’ nexus.
However, a large part of the investment deficit has been and is created by companies and lenders that have been seeing more (short-term) profit in not investing than in investing for years. This perception of the profits private companies and lenders could get – the return on investment – affects the perception of risks. It thus, most probably, contributes to lead private actors to ask the public (i.e. the nation-state) to bear the cost of all risks attached to green growth investment, from “where returns cannot be monetized or appropriated by the investor” to “risks that are more perceived than real, e.g. demonstration of a proven technology” (Global Green Growth Forum, March 2012, p.2). Actually, considering the overall investment deficit, it seems that it is not only green growth investments that are concerned.
Furthermore, all actors evolve within a paradigm that enounces that the private sector is best and knows best how to run everything and to provide for any goods and services. This favours the idea (even if it is never couched in such crude terms) that, if the private sector must contribute to invest, then it can do so only by obtaining the same high profit rates it could get by placing its cash surplus – the liquidity – elsewhere, i.e. notably in the bubbles of the financial market. It is thus up to nation-states to pay for the difference. Again, this leads to a blatant appropriation of public wealth and power.
Considering the existing public deficit, the private ownership of the related debts, the prevalent worldview and the various ideological and material stakes to keep it, there is, however, no other solution. To find another way would demand that at least one of the prevalent conditions change, so as to rebalance the negotiating power of actors (see, for a detailed explanation, “The powerful Everstatan elite under threat?” in Everstate, setting the stage (2) and 2012 EVT: Public Resources and Lenders).
Once the ISSIGE funding process is set up, the ISSIGE summit may take place. In a nutshell, the criteria the framework projects’ proposals will have to meet are as follows:
Arbutus menziesii immature fruit by Jina Lee GFDL or CC-BY-SA-3.0, via Wikimedia Commons
Once the framework projects are selected, then a usual legal bid system to compete for and be awarded public markets will be used. Legally, the system of the countries where the project will be implemented can be used indifferently. The delegates, once the summit ends, have six months to define framework projects proposals. Some of those proposals will then be chosen by the network of delegates and become the ISSIGE framework projects for the year. The network will make sure that each member country receives the same value in terms of funding of projects.
The summit is considered a success by the various member states. The very identification and presence of the delegates, on the one hand, having been able to agree upon and set up the process, on the other, are seen as the very first achievement of ISSIGE. A strong communication campaign is organised around this theme.
Yet, in terms of everyday life, for Everstate citizens, there is no improvement whatsoever, besides the efforts of the various administrations they witness. On the contrary, the situation appears to grow worse, slowly and inexorably. The administrative time, notably when it involves the coordination linked to multinational governance, seems to be increasingly disconnected from and ill-suited to a real world where problems follow their own dynamics.
Because of the transparency surrounding the process that allows for proper information, because citizens know that green investments are crucial, while being aware of the complexity of the task and finally because Everstatans hope for a direct improvement in their lives once the projects start, as has been promised, they bear with their rising hardship and fear.
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For real life discussions on green growth investment & financing, as well as on investment deficit:
3GF, Global Green Growth Forum, FINANCING Preparatory Strategy Meeting, 26-27 March 2012.
Caranci, Beata & Chris Jones, “Milking America’s Cash Cow: The Case For Stronger Investment Growth,” Special Report, TD Economics, May 25, 2012.
Climate Policy Initiative and the World Bank Group in collaboration with China Light & Power and the Organization for Economic Co-operation and Development, Inaugural Meeting of the San Giorgio Group: Expanding Green, Low-Emissions Finance, October 2011.
Euractiv.com, “‘Project bonds’ launched as an experiment,” 23 May 2012.
European Commission, Europe 2020 Project Bond Initiative, Investment needs, last updated 19/10/2011.
Hutton, Will Companies must stop hoarding cash and start investing instead, The Observer The Guardian, 19 February 2012.
Klein, Ezra, America’s capital investment deficit, Washington Post, December 31, 2010.
Pan European Networks, “‘Project bond’ plan approved by diplomats,” 22 May 2012.
World Economic Forum, Financing Green Growth in a Resource-constrained World Partnerships for Triggering Private Finance at Scale, 2012.
Zarroli, Jim, Companies Sit On Cash; Reluctant To Invest, Hire, August 17, 2011, NPR.
Zenghelis, Dimitri, “Restoring growth and confidence through green innovation,” E!Sharp, June 2012.
Last weeks’ summary: In 2012 EVT, Everstate (the ideal-type corresponding to our very real countries created to foresee the future of governance and of the modern nation-state) knows a rising dissatisfaction of its population. Alarmed by the rising difficulties and widespread discontent, the governing authorities decide to do something when new elections start, which starts the second scenario, Panglossy. Dependent upon programmes created to face efficiently past challenges, prisoners of entrenched political groupings, the major parties campaign to come back to the order ante. Meanwhile, the polarisation and rise of a new opposition that took place during the election is temporarily frozen by the last hope thus created. The new Everstatan government, dependent upon past thinking, decides that a return to economic efficiency through growth is the key to the crisis. Its first measure, to raise the minimum wage, fails to bring back the expected result, to boost growth through consumption and thus to restart the engine.
(The reader can click on each picture to see a larger version in a new tab – a navigating map of posts is available to ease reading.)
As the first measure fails to boost growth, then the income of Everstate remains in the pitiful state into which it was before the elections. It even continues degrading as pressures and related costs do not relent. Meanwhile, as the need for liquidity does not stop, power remains in the hand of the lenders’ nexus. Yet, the failure of the government is only about the first measure. Two longer term policies are meant to address those very problems that have contributed to derail the whole system: the pressures related to the increasing complexity of resources, including looming scarcity, relative and absolute, through ISSIGE, and the problem of liquidity through the new international meeting group for the resilience of the financial system (IRESFIS).
Those two policies show that, even if they are included under a label, “restoring economic growth,” that is still part of the outmoded worldview, some awareness of the real problems besetting Everstate has started to take place.
ISSIGE will convene its first high level meeting in Everstate’s capital, six months after the elections, to allow for the organisation, for the presentation of first recommendations and to make sure that it will be able to announce the amount of the overall fund. It is imperative that firm and consensually accepted recommendations follow from this conference, considering the urgency of the situation. Heads of governments of the various member-states will be present to show the high level commitment given to the project. Several hundreds delegates of all the countries involved will be present. They will constitute the ISSIGE network, backbone of the effort.
Each delegation prepares a draft determining the criteria for the framework projects they will have to propose in the years to come, the process according to which those framework projects will be selected and, finally, how those projects will be implemented, by whom, with which supervision, etc. Those drafts are, of course, widely shared, read, and amended among delegates over the six months preceding the conference. In this way, no surprise and no intractable dispute will occur during the conference. Considering the administrative work load those exchanges require, and considering the high level profile of the delegates, substantial emoluments are paid to those delegates who are not civil servants, while those civil servants who are now working full-time for ISSIGE within their mother administration are promoted to the rank of Director with corresponding salary increase.
In a wish to promote transparency and show Everstatan citizens the real and genuine efforts and progress of the new government, drafts, exchanges and discussions are precisely documented and uploaded on a dedicated ISSIGE website. Furthermore, a special platform opened to citizens is created, where Everstatans can give their input. This effort is quickly followed by other countries.
More difficult, ISSIGE must also find a way to fund the projects themselves, and decide upon a global amount. Considering the public deficit existing in most countries, the ISSIGE network, the governments and administrations behind them decide that the various members and the Regional Union will issue bonds to fund the projects, which should also, hopefully, promote private investment. The overall amount for the first year is set at EVC (Everstate Currency) 250 millions. ISSIGE hopes that a lever effect will apply and that the overall value of the projects thus funded will be much higher.*
This is a very small amount considering the global current needs existing in terms of investments. According to the Global Green Growth Forum using 2010 IEA estimates, “by 2050 US$ 1.2 billion additional annual investments just in energy supply and use are needed to avoid a temperature increase beyond 2°C.” Meanwhile, the economy needs in terms of investments “for transport, energy and information and communication technologies (ICT) infrastructure projects in Europe are estimated at €1.5 trillion for 2010-2020″ (Euractiv.com, 23 May 2012). According to the European Commission, “infrastructure investment needs” “are estimated to be of EUR 1.5 trillion to EUR 2 trillion to meet the policy goals of the Europe 2020 Strategy for smart, sustainable and inclusive growth.” However, this first ISSIGE funding is a start.
Meanwhile, the IRESFIS meets a couple of times, but each player camps on its position, and no progress is made. Those, which include Everstate’s government, who want more regulation, are immediately countered by most financial actors, who oppose it, as well as by some governments, who believe that more regulations will hamper financial transactions and thus diminish the power of their countries as financial centres.
As the income of the nation-state continues to be insufficient, the bargaining position of the lenders’ nexus is as strong as ever. It is even stronger because of the ISSIGE needs… to be continued.
———-
For real life discussions on green growth investment & financing, as well as on investment deficit:
3GF, Global Green Growth Forum, FINANCING Preparatory Strategy Meeting, 26-27 March 2012;
Caranci, Beata & Chris Jones, “Milking America’s Cash Cow: The Case For Stronger Investment Growth,” Special Report, TD Economics, May 25, 2012.
Climate Policy Initiative and the World Bank Group in collaboration with China Light & Power and the Organization for Economic Co-operation and Development, Inaugural Meeting of the San Giorgio Group: Expanding Green, Low-Emissions Finance, October 2011.
Euractiv.com, “‘Project bonds’ launched as an experiment,” 23 May 2012,
European Commission, Europe 2020 Project Bond Initiative, Investment needs, last updated 19/10/2011.
Hutton, Will Companies must stop hoarding cash and start investing instead, The Observer The Guardian, 19 February 2012.
Klein, Ezra, America’s capital investment deficit, Washington Post, December 31, 2010.
OECD, Infrastructure to 2030, Vol.2, 2007.
Pan European Networks, “‘Project bond’ plan approved by diplomats,” 22 May 2012;
World Economic Forum, Financing Green Growth in a Resource-constrained World Partnerships for Triggering Private Finance at Scale, 2012;
Zarroli, Jim, Companies Sit On Cash; Reluctant To Invest, Hire, August 17, 2011, NPR.
Zenghelis, Dimitri, “Restoring growth and confidence through green innovation,” E!Sharp, June 2012.