Original Link: http://www.lab.org.uk/index.php?option=com_content&view=article&id=1205:world-social-forum-day-of-action&catid=65:news&Itemid=39

By Francis McDonagh, for LAB

For the first time a Brazilian company has been awarded the title 'Worst Company in the World'. The title this year went to the Brazilian multinational mining company Vale. This Public Eye award has been given annually since 2000 by the Swiss NGOs Declaration of Berne and Greenpeace Switzerland on the basis of votes on the internet, and is announced to coincide with the annual Davos World Economic Forum. This year the award was also announced at the World Social Forum thematic meeting in Porto Alegre, Brazil.

Vale was nominated by a Brazilian NGO, Justice on the Tracks (Justiça nos Trilhos) in association with the International Network of People Affected by Vale.

The coordinator of Justice on the Tracks, Fr Dário Bossi, said that his group works with 6,500 families living along the railway line the company uses to transport its ore. 'There are communities in which 59% of the population constantly suffer from fevers as a result of respiratory problems.' Fr Bossi also said that the Vale's train, 'the biggest in the world, with 400 trucks, daily transports iron ore worth US$ 29 million and so can't stop. It hits an average of one person per month, as well as livestock, because of the lack of protection.' Fr Bossi also claims that Vale's Capão Xavier iron ore mine in Minas Gerais threatens the water supply of the state capital, Belo Horizonte. Friends of the Earth Brazil say that the steelworks vale is building in Sepetiba in Rio de Janeiro state will increase the state's greenhouse gas emissions by 76%.

The international operations of Vale cited by the critics are in Mozambique, Peru, Indonesia, New Caledonia and Argentina. In Mozambique Vale's coal mining operations in Moma and Moatize in the North and Central regions are said to have displaced 760 families between November 2009 and April 2010. Other displacements are said to be planned.

In Canada, Vale's subsidiary Vale-Inco's attempts to reduce wages and conditions led in 2009/10 to some of the country's longest strikes, 12 months in Sudbury and Port Colborne, in Ontário, e 18 months in Voisey's Bay, in the province of Newfoundland and Labrador, involving more than 3,000 workers. In Canada Vale has also been the subject of prosecution and a civil suit for environmental damage.

In the last days of voting Vale narrowly overtook the Japanese company Tepco, responsible for the nuclear plants at the centre of the disaster in Fukushima. Among the main reasons for the company's 'victory' is its decision in 2010 to take a 9% stake in the company building the controversial Belo Monte dam. Vale, previously a Brazilian state-owned company, was privatised during the presidency of Fernando Henrique Cardoso.

For full details of the Public Eye summary of vale's operations, see http://www.publiceye.ch/en/vote/vale/

The so-called zero draft with the title “The Future We Want” that is the declaration of the Heads of States and Governments is certainly not for the prosperity of the people. Governments do not seem to be willing to address the various crises, created by the failure of capitalist system resulting in increased poverty and food crisis, the climate crisis, the resource crisis, the financial and economic crisis and the crisis of global governance. Rather they want to pursue the green economy in the context of sustainable development and poverty eradication, which is a deceptive notion to legitimise profit making, using nature as the basic
resource.

The zero draft’s core elements keep hold on the existing economic model. The current economic models pursued in the name of efficiency and economic growth, but in fact driven by profit and greed, have resulted in unprecedented levels of poverty, exploitation of natural, resources, inequality and food insecurity, which disproportionately affect women. The draft widely ignores social justice, human rights and eco-justice but opts to grow and to expand the existing economic model, greening it and transforming all ecosystem services to commodities and market products.

We, the undersigned NGO/CSOs coming from Asia, Africa, Latin America and Europe and fighting for equity and environmental justice in our societies and among nations, share a common analysis of the zero draft. The points that are the main causes for our concern are as follows:

· Green Economy, which is the core concern of the zero draft, keeps hold of the existing exploitative model of economic growth. It fails to take into account that even the greenest economy imaginable at some point will clash with the natural resources the earth provides us with.

· The Green Economy as outlined in the zero draft seems to be nothing more than the greening of the existing economic structures. Thus social inequalities, pertinent injustice and inequity, the power of few on the powerless many are left untouched.

· The concepts of human rights and eco-justice seem to be unknown among governments. Thus, core issues of the debate referring to sustainability and sustainable societies are not reflected in the zero draft.

· Sustainable Development Goals in the framework of a Green Economy, as proposed in the zero draft, are not a useful tool. Embedded in the Green Economy concept as pointed out in the zero draft, they can neither serve as an anchor nor as a goal for a path to sustainable societies.

· The concept of Green Economy is blind with regard to imbalances of the World Trade regime. According to the zero draft, trade liberalisation is one of the keys to sustainable development. This ignores the need for policy space that governments can make use of for regulating the national economy towards sustainable development. It also ignores that the model of trade liberalisation pushed for by developed countries in
the World Trade Organisation and in bilateral agreements is part of the roots for poverty, ecological damages, and severe injustice.

· Concerning food security and agriculture the zero draft fails to address the major tasks set by the food, financial and environmental crisis. The model of sustainable intensification is just greening the current way of agricultural production which has dramatically failed to feed the worlds hungry, to stop the loss of biodiversity, climate change, land degradation and desertification in the last 20 years.

· According to the zero draft, business has to be seen as a main engine on the road to sustainability. This mirrors the tremendous influence business has gained on political leaders and decision makers. At the same time it ignores the countless ecological and social damages multinationals are responsible for in the last twenty years. It also ignores various models of alternative economies that have been practised for years.

Economic growth can no longer be the primary goal that anything else has to serve. If Rio+20 shall be a success, it will have to subordinate private economic interest based on profit and greed to human rights, social and ecological justice and a life in dignity for all. Ownership and control of natural resources and means of productions should remain embedded in communities for their livelihood sustainance. For this equity as well as integrity of nature has to be at the core of the Rio+20 Conference.

We urge governments, in the further discussions and negotiations to revise the draft declaration. The world and especially the many poor and marginalized people earn and have the right to a political commitment of their governments that is more in accordance to their needs and concerns than the present zero draft. Governments must show their commitment to the democratic rights of people and thereby come up with a people-centred declaration.

AS-PTA – Agricultura Familiar e Agroecologia, Brazil

Church Development Service (EED), Germany

Community Technology Development Trust (CTDT), Zimbabwe

Ecumenical Association for Sustainable Agriculture and Rural Development (ECASARD),Ghana

Ecumenical Justice Network (EJN), South Africa

Federação de Órgãos para Assistência Social e Educacional (FASE), Brazil

Fundação Luterana de Diaconia (FLD), Brazil

Gender Empowerment and Development (GeED), Cameroon

Instituto Brasileiro de Análises Sociais e Econômicas (IBASE), Brazil

Instituto de Estudos Socioeconômicos (INESC), Brazil

Policy Research for Development Alternatives (UBINIG), Bangladesh

Third World Network, Malaysia

The zero draft of the outcome document for the 2012 UN Conference on Sustainable Development (Rio+20) is clearly an attempt by the Secretariat to produce a document that can be widely accepted in time for adoption in June, with the hope that its generality will not give rise to difficult intergovernmental negotiations. The desire of the UN and some governments, including Brazil as host country, to attract heads of States and Governments to attend the Conference is a driving factor and the draft is premised upon the Rio+20 conference being at a Summit level as seen in para. 1. The actual time allocated for negotiations of the document is very limited, compared to the 1992 Rio Summit and the 2002 World Summit on Sustainable Development that produced the Johannesburg Plan of Implementation. Thus what is presented in the zero draft looks like a compromise text that tries to please everyone with something of concern to them.

The main outcomes of the internationally agreed sustainable development agenda under the UN auspices are reaffirmed throughout the document but the implementation aspect of the zero draft is weak. This is disappointing since the failure of implementation is clearly evidenced by the multiple crises facing the world as we head towards Rio+20. The outcome of the 2009 UN conference on the impacts of the financial and economic crisis on development is surprisingly absent from the zero draft.

In view of the positions and proposals submitted and articulated by the groupings of countries in the preparatory process so far, the overall thrust of the zero draft favours an outcome along the lines of the Green Economy Roadmap of the European Union  (with some caveats regarding what the GE should not be in para. 31) and the Sustainable Development Goals proposal of Colombia/Guatemala (paras. 105-110).

An important outcome of the Conference will be the shaping of the International Framework for Sustainable Development over the next few years and the zero draft captures the options that have emerged in the preparatory process.

In line with the current state of discourse, para. 111 in the sub-section on “Accelerating and measuring progress” recognizes “the limitations of GDP as a measure of well-being” and agrees “to further develop and strengthen indicators complementing GDP that integrate economic, social and environmental dimensions in a balanced manner.”

It does not go the distance by replacing GDP with new metrics for sustainability and societal progress but can build on several tracks of valuable work such as the report of the Stiglitz-Sen-Fitoussi Commission, the Gross National Happiness Index of Bhutan and the current revision of the System of Environmental-Economic Accounts (SEEA) coordinated by the Statistics Division of the UN Secretariat.

However, the more fundamental question is what are the indicators supposed to measure?

The zero draft proposes the launching of a process to devise by 2015, a set of Sustainable Development Goals (para. 105) that will be part of the post-2015 UN Development Agenda (para. 108). It asks the UN Secretary-General to propose indicators to measure, and specific target to evaluate, progress towards those Goals with 2030 as a possible deadline (para. 109).

The 1992 Rio Summit mandated further work on the definition of indicators of sustainable development which would be the basis both for defining the concept and establishing common international goals. Two decades later, more progress has to be achieved. Links have to be established to the human rights framework which sets clear goals, for instance on the rights to food, to health, and to education. Therefore, the debate should not be about these goals, as they have already been agreed upon, but about the “when” and the “maximum available resources” (including those of international cooperation) to ensure their progressive realization.

The priority areas identified in para.107 are environment-heavy and do not adequately address the human rights aspects and the socio-economic sustainability aspects. Unless these are addressed simultaneously and in a balanced way we risk derailing the comprehensive sustainable development agenda without any compensatory gains.

Furthermore, if the Sustainable Development Goals are envisaged to be part of the post-2015 UN Development Agenda, there appears to be still a lack of integration of the 3 dimensions. And if the Sustainable Development Goals are indeed to be comprehensive then the systemic economic issues need to be addressed and the social and economic dimensions need better balance.

At the same time there is a significant section in the zero draft (paras. 25 to 43) on the green economy in the context of sustainable development and poverty eradication with its own road map (more below). How will this interface with the Sustainable Development Goals and post-2015 UN Development Agenda in terms of the balance, reform and integration of the 3 pillars?

The overall “Framework for Action” (paras. 22-24) in section I on “Renewing political commitment for sustainable development” is worrisome. It effectively dilutes and opens the door to a reshaping of the fundamental basis for international cooperation – most developed countries are already backtracking from the commitments that they have undertaken in UN action plans and legally binding agreements (treaties) related to sustainable development. There is already express rejection by many of these countries (in particular the US) of their historical responsibility for environmental damage and the principle of common but differentiated responsibilities in the shift to sustainable development as seen in the climate negotiations. Many developing countries and civil society are very concerned that the Rio+20 Conference will mark the rewriting even reversal of the Rio Principles and the agreed international framework on sustainable development. Paras. 22 to 24 appears to confirm those concerns.

[22. We commit to improving governance and capacity at all levels - global, regional,

national and local – to promote integrated decision making, to fill the implementation gap

and promote coherence across institutions.

23. We commit ourselves to reinvigorating the global partnership for sustainable

development. We recognize that States must work together cooperatively and join with all

stakeholders to address the common sustainable development challenges we face.

24. We call for a global policy framework requiring all listed and large private companies to consider sustainability issues and to integrate sustainability information within the reporting cycle.]

The zero draft calls for “bold and decisive action on the objective and themes of the Conference” and states that taken together, the actions of all States “should fill the implementation gaps and achieve greater integration of the three pillars of sustainable development” (para. 5).

However, the text in section II on “Renewing political commitment for sustainable development”, the objective of the Conference, is too general and the document is weak on implementation.

While the title in section II A reads: “Reaffirming the Rio principles and past action plans” the text in paras. 6-9 does not explicitly do so. Para. 7 talks about reaffirming commitment “to advance progress in implementation of the Rio Declaration on Environment and Development” (emphasis added) and para. 9 merely “recognizes” the need “to reinforce sustainable development globally in accordance with the principle of common but differentiated responsibilities and the principle of the sovereign right of states over their natural resources”. The Group of 77 and China and many civil society organisations have asked for reaffirmation of the Rio principles because one of the key principles, common but differentiated responsibilities (CBDR), is under increasing attack by most developed countries. CBDR is the basis for the equitable sharing of the efforts to shift from sustainable to sustainable development – developed countries accordingly committed in the 1990s in a series of UN action plans and multilateral environmental treaties to take the lead in changing their consumption and production patterns, and to provide new and additional finance, technology and capacity building.

Given the vehement rejection by the United States of any reference to equity and CBDR in the climate negotiations in Durban last December on the “Durban Platform” for “a protocol or other international instrument or an agreed outcome with legal force” the zero draft appears to seek to provide compromise language from the beginning. Therefore CBDR as an operating principle for international cooperation to achieve sustainable development is weakened in several parts. For example, para. 14 “acknowledge the particular responsibility in nurturing sustainable development and consumption and production patterns” when the agreed commitment is that developed countries take the lead. And on finance, the notion of “triangular cooperation” is effectively prioritized in para. 115 though the usual exhortation on developed countries’ aid commitments is repeated in para. 112.

Para. 44 on strengthening and reform of the institutional framework for sustainable development uses the term “keeping in mind the Rio Principles, in particular CBDR” (emphasis added).

Stronger language is seen in para. 25 of section III on Green Economy in the context of sustainable development and poverty eradication – that this “should be based on the Rio principles, in particular the principle of common but differentiated responsibilities, and should be people-centred and inclusive, providing opportunities and benefits for all citizens and all countries.”

The title of section II B is promising: “Assessing the progress to date and the remaining gaps in the implementation of the outcomes of the major summits on sustainable development and addressing new and emerging challenges (Integration, Implementation, Coherence)”.

However, while para.13 acknowledges that “Sustainable development remains a distant goal and there remain major barriers and systemic gaps in the implementation of internationally agreed commitments” the assessment in section II B is highly inadequate. The strongest statement is in para. 11 but that is still too general. For example, income and social inequality within many countries (in the developed countries of the OECD and developing countries that experienced rapid economic growth in the past 2 decades) has worsened dramatically since 1992 but the word “inequality” does not appear at all in the draft and there is only a general call to “strive for societies that are inclusive and equitable” in para. 2 in the Preamble/Stage Setting section.

[Para. 11 reads: “We acknowledge, however, that there have also been setbacks because of multiple interrelated crises – financial, economic and volatile energy and food prices. Food insecurity, interrelated crises – financial, economic and volatile energy and food prices. Food insecurity, climate change and biodiversity loss have adversely a affected development gains. New scientific evidence points to the gravity of the threats we face. New and emerging challenges include the further intensification of earlier problems calling for more urgent responses. We are deeply concerned that around 1.4 billion people still live in extreme poverty and one sixth of the world’s population is undernourished, pandemics and epidemics are omnipresent threats. Unsustainable development has increased the stress on the earth's limited natural resources and on the carrying capacity of ecosystems. Our planet supports seven billion people expected to reach nine billion by 2050”.]

Section II B and the rest of the zero draft does not directly deal with the structural flaws and instabilities of the current international economic system (finance and trade) that are major obstacles to achieving sustainability. The outcome of the 2009 UN conference on the impacts of the financial and economic crisis on development is not even included in section II A that reaffirms past action plans.

Section III on “Green Economy in the context of sustainable development and poverty eradication” attempts to capture the unresolved debate on the topic that has dominated the Rio+20 preparatory process so far. Para. 31 is designed to allay the repeated concerns of developing countries but this section essentially promotes the European Union’s proposal and roadmap.

The zero draft suffers from the same lack of common understanding of a “green economy” that is characteristic of the inter-governmental debate so far. Para. 26 views “a green economy as a means to achieve sustainable development, which must remain our overarching goal” (emphasis added). Para. 27 states that “green economy is not intended as a rigid set of rules but rather as a decision-making framework to foster integrated consideration of the three pillars of sustainable development in all relevant domains of public and private decision-making.” Then para. 30 states that “a transition to a green economy will require structural adjustments which may involve additional costs to their economies” while para. 30 refers to “transformation to a green economy” and para.32 acknowledge that “countries are still in the early stages of building green economies” with para. 42 setting out the types of support needed “to make significant progress towards building green economies” (emphases added). All these imply that green economy is a goal and this is reinforced by the detailed actions proposed in section III. As discussed above, it is unclear how the detailed proposals in this section interface with the Sustainable Development Goals proposals. Given the uncertain and possibly far-reaching implications of these proposals any follow-up if agreed to must be driven by Member States through the General Assembly and not be left to the Secretary-General as proposed in paras. 33 and 43.

A clearer set of principles of green economy in the context of SD and poverty eradication is needed and the list of what it is not should be more comprehensive along the lines of the submission of developing countries.

Section IV on International framework for sustainable development reflects the various proposals of Member States. The option that will generate most debate will be the establishment of “a UN specialized agency for the environment with

universal membership of its Governing Council, based on UNEP”.

Many developing countries and NGOs are concerned that a new environmental organization that is sectoral in nature would not serve the goal of sustainable development that requires integration of the 3 dimensions. Given the current state of play in international relations and the possibility of “green protectionism” aimed to protect economic interests, an environmental organization at the global level could be “misused” to selectively enforce obligations to the detriment especially of developing countries.

At the same time the approach taken by UNEP on capitalizing natural resources and incentivising the private sector to operate within the limits of the environment and depleting resources has raised doubts and debate because the use of financial instruments that are problematic has been proposed – this was evident in the UNEP exposition of the green economy. There are also concerns over the trend to apply market approaches to biodiversity and ecosystem services that may lead to commodification of nature and violation of the rights of indigenous peoples and local communities to land and resources. Therefore, the zero draft option of a new environmental agency based on UNEP creates problems.

The EU supports a new global environmental organization, as do some developing countries. The US does not support any new international institution.

The upgrading of the existing Commission on Sustainable Development (CSD) to a high level Council on Sustainable Development is gaining support from a number of Members States and many civil society organisations. The zero draft proposes a process for consideration of this upgrading, where the President of the General Assembly is mandated to “conduct open, transparent and inclusive negotiations, with the aim of establishing the mandate, modalities, functions, size, composition, membership, w working methods and procedures of the Council” (para. 49 alt ter).

If there is to be the establishment of a new global environmental organization as part of the UN system, the mandate and principles should be on the basis of sustainability, the 1992 Rio Principles, Agenda 21, the Johannesburg Plan of Implementation etc. Moreover, the process should be handled inter-governmentally, via the General Assembly or the office of the President of the General Assembly as proposed for the Sustainable Development Council in para. 49 alt ter.

Member States can condition their support for the specialized agency on the following: that the new agency is not based on UNEP as the other 2 pillars are needed too; the Sustainable Development Council is a necessary component to ensure that all 3 pillars are intact and integrated; the terms of reference and mandate have to be negotiated by Member States via intergovernmental process of the General Assembly and not be left to the Secretary-General or UNEP; the right to development should remain a strong emphasis; the environment pillar should be supported by finance, capacity building and transfer of technology; social and economic pillars should not be left out and the new organisation should not be at the expense of losing the CSD (hence the need to upgrade the CSD to the Sustainable Development Council as a package).

Paras. 112-117 on finance focuses on official development assistance, South-South cooperation (and accordingly triangular cooperation) and private sector investment but is silent on the flawed financial system that creates global instabilities and that continues to result in net South-North flows of resources through various pathways.

The issue of aid effectiveness and the references in para. 114 relate to the OECD-led process and are not the outcomes of a UN process. In the last meeting at the end of 2011 that adopted the Busan Partnership for Effective Development Cooperation, China and India were participants (joining the process at a late stage) and after intense negotiations a paragraph was included as follows: "The principles, commitments and actions agreed in the outcome document in Busan shall be the reference for South-South partners on a voluntary basis." This came after considerable debate on the issue of South-South cooperation and other issues. Rwanda on behalf of the African countries inserted a footnote rejecting some paragraphs on tied aid.

In light of this, it would be unwise for the Rio+20 outcome document to endorse or legtimise this aid effectiveness process and its outcomes without the matter being addressed by the full UN membership.

[114. We call for increased aid effectiveness, taking into account the Paris Declaration, the Accra Action Agenda and the Busan Partnership for Effective Development Cooperation, in ensuring that aid is effective, accountable and responsive to the needs and priorities of developing countries. There is a need for greater coherence at both the international and national levels, including effective oversight of resources to ensure that developing countries have steady and predictable access to adequate financing, including by the private sector, to promote sustainable development.]

The section on trade (paras. 124-127) is familiar general language that does not reflect the lessons learnt from the past 20 years of inappropriate trade liberalization and emerging new forms of protectionism.

The private sector especially transnational corporations has been instrumental in unduely influencing domestic policies and laws as well as global norm setting, but the zero draft looks to the private sector as a key player in achieving sustainable development, and specifically talks about leadership by the private sector in para.19. This is particularly ironical given the scandals involving corporate influence in the past 30 years that led to deregulation of the financial sector and the persistent challenge by transnational corporations of various environmental and social policies laws necessary to achieve sustainable development – the most recent is the legal challenge by Philip Morris (tobacco giant) of the tobacco control laws of Uruguay and Australia.

Para. 116 in section V on the Framework for action and follow-up (Means of implementation) has general language about public policy creating a “regulatory framework conducive to long-term investment and socially and environmentally responsible behaviour by business and industry” with the main thrust of the para. reaffirming “the key role of the private sector in promoting sustainable development”.

This runs counter to increasing public calls in many countries across the world for the State to take on more responsibility in safeguarding public and long terms interests of society to achieve sustainability. The Occupy Wall Street movement that is spreading all over testifies to this emerging public demand.

Para. 24 calls for “a global policy framework requiring all listed and large private

companies to consider sustainability issues and to integrate sustainability information within the reporting cycle” – it is not clear what this means in operational terms, but it is clear that the endorsement and promotion of public-private partnerships based on voluntarism that was encapsulated in the 2002 Johannesburg Plan of Implementation and touted in the UN system since then have not yielded the kind or scale of actions needed for a paradigm shift to sustainable development as envisaged in Agenda 21. In almost every sector, the most powerful and influential of the private sector continue to put profit over sustainability in each of the 3 pillars.

The tendency to group the behaviour and actions of all actors together without differentiating the types of responsibilities, obligations and commitments can result in dilution of official State commitments. The failure to distinguish the actions expected of the private sector from the contributions and efforts of civil society organisations, communities and indigenous peoples further weakens corporate accountability.

Thus para. 128 in which the Conference is to “welcome the voluntary commitments made at Rio+20 and invite the Secretary-General to compile them in a registry/compendium that will serve as an accountability framework” can create an illusion of action and divert from unmet promises and commitments of developed countries. What “accountability framework” is envisaged is not clear when the commitments are voluntary.

(It is understood that the four days of dialogue roundtables before the Conference where Nobel Laureates, leaders of NGOs/indigenous peoples/communities, corporate leaders, Hollywood personalities and heads of States will be invited to participate will generate “voluntary commitments” referred to in para.128.)

The section on Science and Technology (paras. 118-120) is silent on technology assessment, an issue that is gaining growing public concern in light of the debates around nuclear power (especially since the Fukushima incident), genetically modified organisms, geo-engineering etc. The reaffirmation, in para. 118, of commitments on S&T made in the Rio Declaration 1992, Agenda 21 and other major UN conferences and summits covers technology assessment capacities but this generality does not pave the way for concrete action on technology assessment.

Throughout out the document the UN Secretary-General is given a prominent role in the future discussions and mandated to develop key normative aspects of the development agenda and institutional follow-up (paras. 34, 43, 106, 109, 111). There needs to be a distinction made on follow-up actions that should appropriately be led by UN Member States via the General Assembly, including from the possible Sustainable Development Council. (The Council is an option in the section on Institutional Framework for Sustainable Development para. 49 alt, reflecting growing support from Members States on upgrading the existing Commission on Sustainable Development). For example, if a green economy roadmap is accepted, the process and modalities must be intergovernmental, i.e. via the General Assembly, or under the Sustainable Development Council if this is established, or the President of the General Assembly (see para. 49 alt ter re: the Sustainable Development Council establishment).

For more information please contact:

Chee Yoke Ling (yokeling@twnetwork.org)

[1] This comment does not cover the sectoral priorities in the zero draft.

It would be good to check the data, before providing a full reply to the doomsday scenario. First when we look at the decomposition of the sources of growth in China, it becomes clear that since the beginning of the last boom in the periphery the external sector has not been the driving force in China, since imports, particularly of commodities, have grown very fast. Investment and consumption are, on the contrary, the main sources of Chinese growth. So on that one the pessimists’ are correct; growth in China is driven by domestic markets forces (by the way, that makes the complaint that China is not making enough to solve the so-called global imbalances a bit peculiar, to say the least).

Note also, in the graph above, that with the collapse of external demand during the 2007-09 crisis, investment, which corresponds to about 40% of GDP (in the US for comparison is closer to 15%), of which about half is public and good chunk goes to housing, increased to make up the difference.

It is worth noticing that the rise of China as a great trade power, which brought about better economic opportunities for peripheral countries in Africa and Latin America, since its entry in the World Trade Organization (WTO) in December of 2001, has taken place hand in hand with a significant real appreciation of its currency. While the real exchange rate deflated by the Consumer Price Index barely moves (and fits the complaints that China has not done enough to appreciate its currency and solve the global imbalances), the one deflated by Unit Labor Costs (ULC) has appreciated about 100% since the Asian Crisis of 1997.

Further, as the 3rd graph (below) shows it seems that ULC changes have fundamentally followed the variations of real wages. In other words, the expansion of real wages, which has been one of the pillars of consumption growth, a central component of output growth as we saw in the first graph, has undermined the external competitiveness of China, as it should be expected.

Public investment and domestic consumption, the driving forces of the expansion, are built on a foundation of insignificant foreign borrowing (foreign obligations as a share of reserves are tiny, since international reserves stand at around US$ 3 trillion) and a sustained increase in workers remuneration (for a chart of real wage growth going back to the 1980s go here). In that sense, a fundamental difference of the Chinese boom with respect to other bubble based booms, is that the housing boom was not central to allow the expansion of consumption and there is no imaginable balance of payments problem ahead.

Further, China is going through a long transition from a rural society to an urban industrial one, which would imply that hundreds of millions of people moving to cities in the next couple of decades. Given the size and importance of public investment for the Chinese economy it would surprising if there is no public involvement in the expansion of public housing projects to say the least.

But lets assume that the pessimists are correct and that housing prices collapse in China. Critics suggest that local governments, which are heavily dependent on land sales, and banks, that issued record numbers of home mortgages, will be the first to be hurt by a collapse of the housing market. The government will be forced to rescue banks, and, again like in the US, this would take precedence over growth and employment creation. Yet, I find this scenario very unlikely.

Note that in China and the US the debt is all denominated in domestic currency and, as a result, it is a political decision to rescue banks and creditors, or promote growth and favor debtors. While the expansions in the US have been weak (not just this one, but for 30 years now; see here), and the economic policies have been pro-creditors (Wall Street if you prefer) and anti-labor, the long Chinese boom has not been so. Growth (and direct repression of dissent, one might note) has been the way to sort out social conflicts in China. Nothing indicates that would change in 2012.

The zero draft outcome document – the official document to be negotiated by United Nations Member States in the lead up to the UN Conference on Sustainable Development (Rio+20) – has been released. Although the text will be extensively negotiated in the coming months and will most likely be modified, the zero draft in its current stage reaffirms Member States commitment to work together for a prosperous, secure and sustainable future for both people and the planet, including by eradicating hunger, want, and all forms of poverty; by committing to make progress on already internationally agreed development goals, including the Millennium Development Goals (MDGs); and by enhancing cooperation.

More specifically, the zero draft invites Member States to reaffirm the Rio Principles and related action plans, and to reinforce globally collective and national efforts – while recognizing the principle of common but differentiated responsibilities, as well as the sovereign rights of States over their natural resources. In a very general manner, it assesses progress to date and the remaining gaps in the implementation of the outcomes of the major summits on sustainable development. On a positive note, it underscores the need for Member States to recognize that broad public participation in decision-making and major group engagement are fundamental prerequisites for the achievement of sustainable development. As such, the zero draft includes language highlighting Member States’ commitment to improve governance at all levels and to reinvigorate a global partnership for sustainable development.

For the theme “Green Economy in the context of sustainable development and poverty eradication,” the zero draft defines the green economy as a means to achieve sustainable development. It is “not intended as a rigid set of rules but rather as a decision-making framework to foster integrated consideration of the three pillars of sustainable development in all relevant domains of public and private decision-making,” the draft underscores. The draft further explains that a green economy should not be a threat to any country, and therefore should not create new trade barriers, impose new aid and finance conditionalities; widen technology gaps or exacerbate technological dependence; nor restrict a country’s policy space. The draft outcome document proposes the creation of an international knowledge-sharing platform to facilitate countries’ design and implementation of green economic policies. The latter, however, should remain tailored to countries’ specific needs and preferences. The document further acknowledges that new, additional and scaled up sources of financing need to be provided to developing countries to help them build their green economies.

In terms of the “institutional framework for sustainable development,” the zero draft invites Member States to strengthen, reform, and better integrate the three pillars of sustainable development. It also includes a section that would strengthen the Commission on Sustainable Development or transform it into a Sustainable Development Council that would serve as the authoritative, high-level body for consideration of matters relating to the integration of the three pillars of sustainable development. Similarly, it proposes to strengthen UNEP in its current form or to transform it into a UN specialized agency for the environment with a revised and strengthened mandate. The zero draft further invites Member States to consider the establishment of an Ombudsperson or High Commissioner for Future Generations.

The zero draft also proposes language on a number of sectoral and cross-sectoral priority areas as well as to the linkages among different sectors. More specifically, this includes language on food security, water, energy, cities, green jobs/social inclusion, oceans and seas, natural disasters, climate change, forests and biodiversity, land degradation and desertification, mountains, chemicals and waste, sustainable consumption and production, education, and gender equality.

To access the zero draft outcome document, click here.

The way forward

The first set of discussions on the zero draft outcome document are planned for 25-27 January 2012 at UN Headquarters in New York. These discussions will include both a general discussion on the whole document, as well as informal-informal negotiations on the first two sections of the document.

Some background information

The zero draft is based on a Compilation Document, which was the result of an extensive and inclusive consultation process which invited all UN Member States, UN system organizations, and other relevant stakeholders to provide inputs and contributions to the Secretariat by the 1 November 2011 deadline. The majority of the contributions received came from civil society (Major Groups).

A more detailed analysis of the zero draft outcome document, explaining how it relates and responds to proposals made by civil society, will follow soon on the NGLS Rio+20 website.

The blog is designed to contribute to a more open and worldwide dialogue about these global issues and reunites a network of specialists on the subject of the three crises. The goal is to develop debates and analyses about the current worldwide issues and present possible collaborative solutions.

With this partnership, all new posts on the Triple Crisis Blog will be available in Portuguese at the Inesc Blog. Also, the original English content is going to be a part of the Inesc English website.

One more year, Durban 2011, adds even a bigger failure to the one already accumulated since Copenhagen where, analyzed from the current perspective, it makes clear that more than a battle against the climatic crisis was lost.

The Kyoto Protocol, entering into force late (in 2005) and in extremis (strategic interstate exchanges forced the Ratification of Russia), now, one year before its first period of compromises finishes - the very close 2012 end -, it has been frozen, if not completely murdered. The only multilateral instrument proposed that had as a goal a quantified mitigation of the emissions (absolutely insufficient, why not to say), will stop having goals and any objectives and will hibernate (maybe, sorry for the irony, in order to not contribute anymore to the global warming of the planetary tensions' sum).

In state a supposed new Durban Platform will begin the elaboration of... it is better if we read literally the text, because it is not to be missed:

2. Also decides to launch a process to develop a protocol, another legal instrument or a legal outcome under the Convention applicable to all Parties, through a subsidiary body under the Convention hereby established and to be known as the Ad Hoc Working Group on the Durban Platform for Enhanced Action;

To which the article 4 of the same document is added:

4. Decides that the Ad Hoc Working Group on the Durban Platform for Enhanced Action shall complete its work as early as possible but no later than 2015 in order to Adopt this protocol, legal instrument or a legal outcome at the twenty-first session of the Conference of the parties and for it to come into effect and be Implemented from 2020!

Which leads us, inevitably, to total and absolute desperation.

Why? What the background of all these can be? What are the interpretations and main conclusions that we can obtain from it?

It is clear, legally, the Kyoto Protocol, taking in consideration the international treaties law cannot easily disappear, but replaced for another one. It cannot disappear, so they froze it without any consideration: it has been extended without any new objective, goal or mission, etc. And even some states are cheek enough to get out of it, explicitly, in order to avoid the low "penalty" that would obtain, now, by not achieving its reduction goals. Result: outrageous!

And frozen until when?, so until 2015, year that taking the article 4, just literally cited, from the Durban Platform a new one will be approved; because the calculations are a fact: the 21st COP (Conference of the Parties of the United Nations Framework Convention on Climate Change) will take place in 2015 (no more no less, and taking in consideration the previous experiences, it can be much more, isn't it?).

And is it for sure that the result will be another treaty? The final negotiation, even represented as another business show, leads to a drawn up of article 2, also previously cited, from what we can obtain any strange thing (another legal instrument or one legal outcome) in which case the existence of similarities with a serious and rigorous international treaty would be only a "coincidence".

But wait for it!: According to the article 4 from this Durban Platform, whatever that ends up being obtained in 2015 or in..., it will not enter into force before 2020.

Then, if in order to ensure, according to the IPCC, that the average surface temperature in the earth would not increase more than 2 ◦ C more, it would have to and it has to be reduced, at least, by the developed countries, a reduction of from 20% to 40% of the emissions of 1990; so now nothing will be reduced, except of what a conscious and decent state would reduce by its own convictions.

The 2 o 4 ◦ C more, are serves; and the fact that our grandsons will live in a planet very different of the current one is now for sure!

And taking all these in consideration what should be done, what should be set out, what should be mobilize from the world citizens with historical conscience (past and above all future) of humanity?

So bringing to the world a Worldwide Climate Democratic Governance System (and most important, supranational) that once analyzed the crisis based on the IPCC reports, and taking in consideration the different state situations and the Rio principles accepted by everybody in theory, takes, as a new Supranational Democratic Climate Authority, the mandatory decisions of mitigation and monitoring that each state of the world, depending of their levels of responsibility and capacities, should start achieving already, as soon as possible.

Apart of the climate crisis we would be finally facing the main current problem of multilateralism: its inability of taking decision. Legitimate and even reasonable interests, analyzed from each country's perspective, are nowadays incompatible with the humanity interests as a whole that lives and would like to keep living in the earth planet that we know.

Shouldn't we take advantage of the celebration of Rio +20 in order to begin all this?


*Senior Lecturer in BarcelonaTech (Universidad Politècnica de Catalunya). President of the "project association World Democratic Governance, WDGpa": "Catalan aplicating Organization to the World Federalist Movement WFM"

As the G20 takes its November meetings into the belly of the eurozone crisis, its food security agenda drifts toward irrelevance. Or worse. Early promises to address commodity speculation and market volatility have given way to tepid recommendations from G20 agricultural ministers in June and last month’s underwhelming communiqué from its Washington meeting on development, with its one snappy paragraph on food security issues. Now that finance ministers on their gilded steeds have turned and fled from the dragons of commodity speculation, the G20 is unlikely to slay any of the monsters threatening global food security – biofuels expansion, land grabs, speculation, price volatility, low public investment.

Fortunately, new research keeps coming, and it should inform the debate. The latest is from a group of researchers at New England Complex Systems Institute (NECSI). As their name would indicate, these are modelers, and their paper, “The Food Crises: A quantitative model of food prices including speculators and ethanol conversion,” offers evidence that the underlying cause of rising food prices over the last decade is primarily the US corn ethanol program, while the cause of the two recent price spikes is speculation.

The model results pretty much speak for themselves. The authors – Lagi, Bar-Yam, Bertrand, and Bar-Yam – sought a model that could explain recent food price movements, and they found one. In the process, they disprove notions that rising prices were caused by weather, rising demand in China and India, and other fundamentals of supply and demand. Minor effects, says their modeling, compared to conversion of US corn to ethanol, which explains the vast majority of food price increases (not just corn) due to fundamentals. They then add to this relatively smooth upward pressure on prices their model of commodity market speculation based on observed trends, herd investing, lags in market corrections, and transmission from futures to spot markets. Notably, they fit their model not to futures price movements but to food prices themselves.

The authors explain the influence of volatile futures markets on spot prices by taking the novel step of talking to granaries about their price-setting practices. According to the authors, traders report setting spot prices using futures prices as references. Ghosh, Heintz and Pollin, in a new paper, explain these connections in more detail: “If the expectation is that prices will increase in the future, suppliers will only be willing to sell on the spot market at a higher price than they would in the absence of such expectations. This is because traders in the physical commodity could always hold onto their stocks and sell them at some point in the future.”

In any case, the NECSI model of speculative behavior fits the actual price data to a remarkable degree. They even explain the more recent run-up in food prices, which, unlike the 2007-8 spike, happened despite a rise in inventories generated by supply responses to the earlier spike. Their explanation: speculation, which kept prices above equilibrium and prevented the poor from buying up those inventories.

Their conclusions are quite clear: “Both causes of price increase, speculative investment and ethanol conversion, are promoted by recent regulatory changes – deregulation of the commodity markets, and policies promoting the conversion of corn to ethanol. Rapid action is needed to reduce the impacts of the price increases on global hunger.”

The underlying model certainly deserves closer scrutiny, but this is no marginal study by fringe researchers with an agenda. It was partly funded by the U.S. Army, which was apparently interested in understanding the causes of food price rises and their relationship to popular unrest in the Middle East and North Africa. The authors list their reviewers: Peter Timmer, Jeffrey Fuhrer, Richard Cooper, and Thomas Schelling.

Hopefully, the G20 is still listening. So too the U.N.’s High Level Task Force on the Global Food Security Crisis, which commissioned its own expert study (see posts here and here). The danger is that the U.N. will allow the G20 to set its agenda, in effect reducing the range of issues and policy responses on the table.

The mounting evidence implicates two key drivers of high prices and volatility, biofuels expansion and speculation.  A new study from IFPRI confirms this, as does UNCTAD’s Trade and Development Report 2011. As the NECSI researchers point out, both biofuels and speculation are influenced directly by regulations. That’s good news, because it’s harder to address some of the other drivers, such as the weather and the move to meat-based diets in emerging economies. By comparison, these are simple (if complex politically) and the U.S. government could go a long way to solving them unilaterally: end ethanol incentives and implement strong Dodd-Frank-mandated regulations on commodity speculation. Throw in a Financial Transactions Tax, which still has some supporters in the G20 and which new research shows would most impact high-frequency traders, and we could be making important progress on food security.

G20 – Are you listening?

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Inesc established a partnership with the Triple Crisis Blog - online space to discuss the outlook on global economic crises, environmental and development. The blog has been created to bring people in such an open discussion about global issues and brings together a network of experts dealing with issues related to the three crises. The intention is to develop discussion and analysis on the current global scenario and solutions can be developed collectively. Besides the population, Triple Blog intends to also impact the political sphere.

For some time now the focus of the discussion on the European crisis has been on Greece. Its wider dimensions, though recognised, were not emphasized. Among those dimensions was the real possibility of a banking crisis in Europe, since a haircut on bank loans to governments as part of the attempt at crisis resolution is unavoidable. Even if the banks are able to prevent that, an actual default failing resolution would hit them.

In the event of a European banking crisis, it cannot remain a regional problem given global financial integration. It would also affect emerging markets, whose growth is seen as crucial to bolstering the “multi-speed” global economy.

One of the consequences of financial globalization has been the increased presence of global banks in developing countries and an increase in their role as lenders in these countries. As of the end of the second quarter of 2011, banks in countries reporting to the Bank of International Settlements (BIS) had foreign claims of $27.3 trillion outstanding. Though a dominant share ($20.1 trillion) of these accumulated claims was in the developed countries, the developing country share ($5.1 trillion) was by no means meagre. What is particularly noteworthy is that the international banks involved are predominantly European. Around 70 per cent of the foreign claims of the global banking system are on account of European banks. Greater financial integration in Europe is one obvious reason. Of the $20.1 trillion claims on the developed countries, $12.3 trillion is in European developed countries, as compared with just $5.6 trillion in the US.

But another reason is that European banks faced with increased competition at home have been seeking out developing countries to expand business and sustain profitability. Close to 19 per cent of the exposure of banks abroad is in developing countries, and this is true of European banks as well. Given the greater role of European banks in total international funding and the importance of a few developing “emerging markets” as recipients of capital, this is of significance. The concentration of emerging market exposure of banks in one region increases the vulnerability of both these banks and their clients.

In the current context, the vulnerability of the developing countries, as demonstrated by the experience during the 2008-09 crisis, comes especially from one source. Having to cover losses at home, recapitalise themselves and improve the risk profile of their lending, European banks are likely to look to retrenching assets in their global operations. Emerging markets are bound to be affected by such moves.

The impact is likely to be greater because of a disconcerting feature of foreign bank claims in emerging markets. They seem to have been driven to a substantial degree by short-term supply side developments in the developed countries. Those developments have also significantly increased foreign claims in the Asia-Pacific, which is seen as buffering the global economy. Claims on developing countries in the region rose by $547 billion during the 2000-2006 period, when there occurred a supply side driven surge in capital flows across the globe. Even during the crisis period stretching from 2007 to the middle of 2009 foreign bank claims in the region increased by $290 billion. And when the post-crisis liquidity infusion made available cheap capital in large quantities to the banking system, the Asia-Pacific developing countries were the locations for an expansion of foreign bank claims to the tune of $596 billion in just two years. A capital surge of this kind, that provided additional grounds for the “decoupling” perspective, makes the region even more vulnerable to a capital outflow or a mere cutback in lending by foreign entities.

This vulnerability needs to be assessed in the context of the collateral damage that a banking crisis in Europe can result in. It would worsen the recession in Europe, which is an important destination for exports from emerging markets. The recession in Europe would in turn precipitate the double dip that can damage Asia’s foreign exchange earnings and growth even more. And finally, the European banking crisis could trigger a global crisis, not just in banking but in the financial sector generally, given the multiple institutions and instruments through which financial markets are interlinked today. If that occurs, what matters is the aggregate exposure of emerging markets to global capital: and that is indeed substantial. In sum, we have at hand a problem that should and does worry not just the G7, but the G20 and more.

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Inesc established a partnership with the Triple Crisis Blog - online space to discuss the outlook on global economic crises, environmental and development. The blog has been created to bring people in such an open discussion about global issues and brings together a network of experts dealing with issues related to the three crises. The intention is to develop discussion and analysis on the current global scenario and solutions can be developed collectively. Besides the population, Triple Blog intends to also impact the political sphere.

Last weekend, strange news circulated by the Sunday Times claimed that the Chinese government would be willing to inject money to rescue the euro.  The idea would be that China would buy large amounts of European sovereign debt, supposedly in exchange, even more bizarrely, for a greater commitment to fiscal austerity.  Basically, China wants to be the new International Monetary Fund (IMF). If this is true, it is exactly what China and the other developing countries in the G20 should NOT do!

First, it must be understood that the European crisis is not a typical debt crisis, since the Greek debt (and the other peripheral countries’ debt) is denominated in euros, and the European Central Bank (ECB), an European institution, has the power to create euros, if the member countries deem it necessary.  In other words, they do NOT need yuans, dollars, yens, or pesos for that matter, as it would be the case in a foreign debt crisis. [For that point see the interview with Jamie Galbraith linked here].

This is a political crisis, caused by unwillingness of the ECB and the governments of France and Germany to buy more Greek debt, and avoid the contagion to other countries that might follow a default. By the way, the total Greek debt corresponds to about only 3% of Euro-17 area’s income. In plain English, not only is the debt domestic, it is also not that large.

However, the implications of a default could be far reaching and actually affect growth in developing countries. If Greece defaults, European banks, French and German as much as Greek ones, institutional investors and pension funds (mostly in Europe) would be directly hit. But also those institutions holding Credit Default Swaps, bought by agents to cover against the possibility of a Greek default, will suffer, and this would possible entangle investors in the UK and the United States. A Lehman moment may follow, and with that the breakdown of global finance and international trade as in September of 2008.

Thus, developing countries must demand that the ECB and/or the IMF buy more Greek debt, and follow the example of the Fed in the US, that is, pursue Quantitative Easing. That may not be sufficient to get the developed world out of the crisis (more fiscal stimulus is needed for that to happen), but at least it would reduce the chances of a global collapse.

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Inesc established a partnership with the Triple Crisis Blog - online space to discuss the outlook on global economic crises, environmental and development. The blog has been created to bring people in such an open discussion about global issues and brings together a network of experts dealing with issues related to the three crises. The intention is to develop discussion and analysis on the current global scenario and solutions can be developed collectively. Besides the population, Triple Blog intends to also impact the political sphere.

Another in a Triple Crisis and Real Climate Economics Blog series on the Durban Climate Change Conference.

In a previous post (Can’t Pay? Won’t Pay!) I posed the question: What do the worldwide debt crisis and global warming have in common?

They both represent economies drawing down assets faster than they can replenish them.

In the case of the debt crisis, economies are spending more wealth than they are accumulating.  In the case of global warming, we are using up nature’s capital and its vital services at an alarming rate.  Rather than adding to wealth – both financial and natural – economies are squandering it.  This problem has occurred throughout history, although the tendency to waste economic and natural wealth has accelerated in recent times.

Which leads me to the climate change talks in Durban, South Africa, and especially the efforts to establish a financial mechanism to reduce emissions from deforestation and forest degradation (REDD+) in developing countries.

Although expectations have been low for a successful outcome of the UN climate change talks in Durban, there has been cautious optimism about the potential for further agreements at Durban concerning REDD+.

The overall aim of REDD+ is to reduce global deforestation as a source of carbon emissions. Proponents hope that saving tropical forests will also conserve biodiversity and other important ecosystem services worldwide.  Thus, REDD+ has the potential to be the first truly global environmental payment scheme, and to overcome the chronic problem of inadequate forest conservation in developing countries.  It would also represent the first concerted global effort to reverse the decline in a major natural asset – tropical forests.

However, several concerns have arisen with respect to achieving these goals.  REDD+ is primarily focused on one global ecosystem service, the protection of forests for carbon sequestration.  Yet, even attaining this objective faces obstacles. Monitoring and verifying changes in deforestation rates in developing countries and their impacts on carbon emissions could increase substantially the transaction costs of implementing a REDD+ scheme on a global scale.  In addition, a carbon market for avoided deforestation may not necessarily be the best way of protecting forests that yield other global ecosystem services.  There is also concern over the high opportunity costs faced by many developing countries from losses in foregone agricultural and timber benefits.  These issues need to be resolved if there is to be a successful REDD+ financial mechanism implemented on a global scale. As a consequence, REDD+ projects currently face uncertainty over future demand for carbon credits, the feasibility of long-term donor financial assistance and the possibility of a short-lived REDD+ mechanism.

In addition, REDD+ is likely to rely on two sources of funding: through carbon market offsets, where polluters in rich countries purchase carbon credits from local communities and developing nations that maintain their forests, or through bilateral deals, such as the Norwegian government’s International Forests and Climate Initiative.  The talks at Durban have not changed this funding dynamic for REDD+, nor will any subsequent climate change negotiations in the near future.

However, both approaches have been criticized.  First, carbon trading is treated with suspicion, as it seen as a way for rich country polluters to shift the full costs of their carbon emissions to developing countries.  Second, bilateral REDD+ deals, such as those instigated by Norway, are criticized for transferring large sums of money to developing countries that simply perpetuate corruption, fraud and poor governance.

Both of these concerns are legitimate. But they are also symptomatic of a major “green paradox” concerning REDD+.  On the one hand, the major obstacle remains the funding challenge of implementing REDD+ on a sufficiently global scale to reduce worldwide tropical deforestation and its greenhouse gas contributions, yet any financial mechanism that is capable of generating such large-scale sums and transferring them to developing countries are considered “unacceptable” by REDD+ critics.

Certainly, without careful monitoring, enforceable safeguards, and strict controls and regulation, REDD+ may worsen deforestation, corruption and governance in developing countries.  In addition, we need to fund and protect forests that provide global ecosystem services other than carbon sequestration.  However, to combat the chronic under-valuing and under-funding of valuable global assets, such as tropical forests, we still need to create global markets that place a price on their beneficial ecosystem services as well as to find mechanisms for paying developing countries and local communities to maintain such assets.  By all means, reduce the scale of such markets and transfer mechanisms, if that helps in overcoming incentive, monitoring and enforcement problems.  But if we fail to create markets and transfers for ecosystem services, then we are perpetuating a world in which ecological scarcity is the norm.

Ultimately, this REDD+ and green paradox could undermine the overall goal: proving that the world economy is willing and able to invest in, rather than squander, a valuable natural asset such as global tropical forests.

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Inesc established a partnership with the Triple Crisis Blog - online space to discuss the outlook on global economic crises, environmental and development. The blog has been created to bring people in such an open discussion about global issues and brings together a network of experts dealing with issues related to the three crises. The intention is to develop discussion and analysis on the current global scenario and solutions can be developed collectively. Besides the population, Triple Blog intends to also impact the political sphere.