The final version of theKlimaforum09People's Declaration emerged at the very end of the Copenhagen Summit on Climate Change in December 2009, also known asCOP 15 after the Conference of Parties that had signed the UN Framework Conventionon Climate Change at the Rio Earth Summit in June 1992. During theSummit’s tumultuous second week whenmany of the leaders of the 192 nations had arrived and the negotiations had almost completely failed except for the emergence of the weak Copenhagen Accord, the People’s Declaration was a remarkable achievement by several thousands of civil society organizations (CSOs).
There are many areas of agreement of the Declaration with the Tierra Fee & Dividend system. Most notable are its views on the need and urgency of transitions to sustainable societies and of system change, its demand of recognizing the historical fact of ecological indebtedness and its associated obligation for compensation, its views on the refutation of the cap-and-trade system and its market orientation and technology centeredness, its views on TNCs and the need for their regulation and, last but not least, its views on the need to de-globalize by focusingmore on local communities using the principle of subsidiarity according to which economic and social decisions are to be made on the lowest possible levels of social organization.
However, there are main and minor differences between the Declaration and the TFD system. The main difference is that the TFD system adds an institutional innovation to the Declaration by its establishment of a carbon-based monetary architecture with its international reserve currency of the Tierra and its de-carbonization monetary standard that form the basis of debit and credit carbon accounts in the nations’ balance of payments. This addition would strengthen the financing for mitigation and adaptation measures. It would integrate the presently proposed funding under the COP and the funding for the MDGs and other UN programs for sustainable development. Thus, it would institutionally tackle the funding for restoring both the global financial and ecological imbalances that have to be considered together.
Though the Declaration applies the subsidiarity principle in its efforts to de-globalize the presently TNC dominated corporate globalization process, the TFD system places the development of sustainable communities within the concept of bioregionalism and frugal trade, thus enhancing the Declaration’s conception of sustainable local communities. This enhancement is also effected by the TFD system’s planning framework of contextual sustainability and its adoption of the Earth Charter which, to my great surprise, was not even mentioned in the 7 page Declaration.
While the Declaration’s main strategy is to build a movement of the worldwide citizen movements to push for the Great Transition to sustainability, the TFD system presents the proposal of the UN Commission on Monetary Transformation and the Climate Crisis, as a practical step to bring the UN climate process forward.
Paul Krugman in today’s New York Times argues that the real story of the euromess lies “not the profligacy of politicians, but in the arrogance of elites” because these policy elites “pushed Europe into adopting a single currency well before the continent was ready for such an experiment.” Indeed, it was a bold experiment given that these policy elites were fully aware according to David Marsh in his 2009 The Euro. The Politics of the New Global Currency that they were choosing between a monetary union without a political union or the safer way of a monetary union as part of a political union. Like in all crises, weaknesses of systems are shown up and to be dealt with.
My focus here is to make a couple of observations about the euro experiment for the implementation of the Tierra Fee & Dividend system.
First, the Tierra Fee & Dividend system does not start out with a vehicle currency for a region, let alone the world. It starts out as an international reserve currency in its phase 1. Thus, nations can conduct their economic and fiscal policies without being LEGALLY constrained by the Tierra Treaty.
Second, by agreeing to the Tierra as a reserve currency nations learn to work together, so that greater political union will come possible in their efforts to have the Tierra become a vehicle currency. The 16 euro-zone nations will have profited in several ways by engaging in a monetary union without having a strong legally binding political union. They are now in a difficult patch, but their way out of this difficult patch is, as Krugman states, not a breakup which is “very nearly unthinkable, as a sheer matter of practicality.”
Thirdly, the euro-zone nations and their 11 non-euro-zone EU member states will engage in the next couple of years in muddling through their high unemployment, deflation and other monetary, financial, fiscal economic and commercial problems while at the same time dealing with the demands of the climate crisis. They will probably come to the realization that 1. they cannot solve their regional problems without solving them in their international context; 2. that the international monetary, financial, economic and commercial systems have to overhauled in fundamental ways to deal with both the economic and climate crises, to mention only the two most important and pressing ones.
Fourthly, once that realization sets in and is being taking seriously they and the rest of the international community will be ready to consider the Tierra Fee & Dividend system and agree to establish the UN Commission on Monetary Transformation and the Climate Crisis as a major channel of investigation and negotiation that also would include the results of thetwo ad hoc working groups (AWG-LCA and AWG-KP) of the UNFCCC and the main demands in the Copenhagen conference’s Klima-Forum’s People's Declaration.
In his meeting with Senate Democrats yesterday several questions dealt with China’s currency policies. These questions and Mr. Obama’s answers show that an important cause of these policies and of the currency dispute is not being recognized.
China’s currency, the RMB, may be undervalued between 25-40% and this may look as currency manipulation by the US. For China its currency serves to make its exports expand and provide income for its national coffers. This export driven development model will be adjusted in due time, placing more emphasis on local consumption. As part of that policy change, the global financial imbalances will also be reduced.
The reason that this adjustment has not yet happened and that the dispute will continue for an unforeseeable time is that its fundamental cause is not recognized. It is the international monetary non-system with its floating exchange rates and a global reserve system that is based upon a national currency. As long as the US dollar continues to function as the main reserve currency, the international monetary system will be not only unsustainable and inequitable, and, therefore, unstable. Progressing to a non-national reserve currency as proposed by the UN Stiglitz Commission in June 2009 would constitute the beginning of real negotiations between the US and China. One is not to forget that China herself a few days before the London Summit of the G20 proposed the need for a “supranational currency”.
Once both nations and the G20 recognize the need for reforming the international monetary system by working towards a new global reserve system, this new system will also contribute to reducing the global financial imbalances that cause so much volatility and increased transaction costs in international trade.
However, the International Institute of Monetary Transformation believes that these nations have to go one gigantic, i.e. transformational step further. If they base the new reformed global reserve system on a carbon monetary standard with its synthetic accounting unit of the Tierra the international community would integrate the enormous challenges of the climate crisis into the operation of its monetary, financial, economic and commercial systems. The acceptance of its Tierra Fee & Dividend system would institutionally deal the present ecological imbalances by having nations include in their balance of payments a carbon account that like their current and capital accounts have to be balanced. This modified balance of payments would become an institutional mechanism where the carbon debts in countries in the global North can be settled with the carbon credits of countries in the global South. Nobody can argue that there does not exist a global ecological imbalance, caused by the atmospheric occupation of the industrialized nations since the beginning of the industrial age. It is their recognition of this ecological indebtedness and the ensuing responsibility that is key to successful negotiations within the framework of the UN FCCC.
Returning to the currency dispute one can consider it to be a golden opportunity for the US and China to make progress in their pursuit of all the good intentions reflected in their joint statement of November 17, 2009. Once they, as a G2 partnership, manage to forge a programme of work for their part in reducing the global financial and ecological imbalances all the other international groups--G7, G8, G13, G20, G77 and finally G192—will be able to contribute according to their “respective capabilities” based upon their “common, differentiated responsibilities”.
Finally the Obama Administration is making clear where it stands in terms of financial reform by way of Paul Volcker’s OPED piece in Sunday’s New York Times. Hopefully, president Obama himself engage himself in this reform with far more gusto than the warmed-over reformist proposals from his Clinton and Bush holdovers. It was they—Summers, Geithner, Bernanke—who, in their deregulatory zeal, contributed to the near financial collapse in the US and abroad. It was they who, with diminished regulatory zeal but still sizable belief in market fundamentalism, engaged in bailout programs that, unfortunately, did not address the real causes of this major market failure.
There is, however, one important monetary issue that was not addressed in the Volcker article and that has hardly been featured in the Obama Administration’s post-crisis monetary/financial policies. The proper resolution of this monetary issue would resolve not only the vexing problem of global financial imbalances, but also free up hundreds of billions of financial resources, particularly in developing countries. In its transformational version, the resolution of the monetary issue of global reserves could become a most important element in coping with the climate crisis because it would create an institutional channel for funding climate mitigation and adaptation measures.
The reformist version of a new global reserve system is presented by Professor Joseph Stiglitz, who, as chair of the Commission of Experts of the President of the UN General Assembly on Reforms of the International Monetary and Financial System, recommended part of such system in June 2009. For many years he has been writing and speaking on the need of a reserve system that is not based upon a national currency such as the US dollar or the euro. In his latest book, Freefall. America, Free Markets, and the Sinking of the World Economy (pp231-4) he points to the need for the Obama Administration to include in its financial reform proposals the monetary renewal of having a new global reserve currency that is not nation based. By being willing to replace the US dollar as the main international reserve currency the Obama Administration would not only cause many benefits to flow to the US economy and society, but also to global economic system. It would free up the hundreds of billions of dollars that are presently being held, particularly by developing countries, to be used for their local economies. They could even invest some of them at interest rates that would be about 6x times higher than the 0.5% of their presently held T-bills.
The transformational version of this new global reserve system has the same benefits as the reformist version: it resolves the global imbalances, boosts global aggregate demand by providing greater purchasing power to developing countries and would place the US monetary, financial, economic and commercial system on a sound footing, thus improving those systems globally. However, it would take one gigantic step forward by basing the non-national international reserve currency not on an outdated gold standard, but on 21st century a carbon standard. This de-carbonization monetary standard is based upon an integrated set of 15 energy items using information from the recent publications of climatologist James Hansen and journalist Al Gore.It is part of the Tierra Fee & Dividend (TFD) system that stands in opposition to the cap-and-trade systems that Europe and, probably the US, have, unfortunately, adopted. The unit of account of this de-carbonization monetary standard is called the Tierra, Spanish for Earth. Annually, these Tierras would be allocated to each adult (and adolescent?) and become part of a nation’s carbon account in its balance of payments. While the resolution of global financial imbalances is an urgent and complex challenge, the resolution of the global carbon or ecological imbalances is similarly urgent and complex. Working towards the establishment of a Tierra Fee & Dividend system would set the global monetary, financial, economic and commercial systems on the right track in the urgent resolution of both types of global imbalances.
Note that initially these Tierras would be functioning as a reserve currency, but nations that are signatories to the Tierra International Clearing Union Treaty, can decide to have those Tierras function as a vehicle currency. This phase 2 of the TFD system would result in having the Tierra become a world currency that has organically and democratically emerged by the political will of nations, business and civil society in a joint search for equitable, sustainable, and, therefore stable international systems in finance, business and commerce.
The annual allocations of the Tierras have some resemblance to the emissions of SDRs by the IMF that the G20 have been considering. Mr. Soros, at the recent Copenhagen conference, suggested an allocation of $100 billion of SDRs to be allocated via the IMF’s quota system. Such allocation, if not translated into grants to developing nations, does not contribute to the resolution of either the global financial and ecological imbalances. The Tierra allocations on the other hand take place within a transformed international monetary system that would contribute to both types of global imbalances. Are Mr. Volcker and the Obama Administration able to take this gigantic, i.e. transformational step forward? Are they, together with Mr. Bernanke of the Federal Reserve, willingto confront the bailed out financial system and their Congressional lobbyists and to educate the US public and Congress about the opportunity of using a re-configured dollar as the pivot for a transformed international economic order?
THE INTERNATIONAL INSTITUTE OF MONETARY TRANSFORMATION