G2 On Leadership
Carbon and climate change: Why are we behind?
Now that even China has put a price on carbon emissions, the U.S. is the only major economy yet to take action on global warming. Why does this issue seem to defy political leadership? Who, in your opinion, is MOST responsible for the leadership failure — President Obama and Senate leaders for not forcing a deal? Republicans unwilling to consider anything that might raise energy prices? Coal and oil state Democrats? Republican moderates who bowed to conservative pressure?
KLMNO
Angel Cabrera is president of the Thunderbird School of Global Management and senior adviser to the United Nations Global Compact on academic affairs. He blogs at
Global Leaders Can Be Made. The United States suffers from a severe case of
what my Thunderbird colleague Gregory Unruh termed years ago “carbon lock-in.” Carbon lock-in refers to the self-perpetuating inertia created by interlocking institutional forces and cultural norms that inhibit efforts to develop alternative energy systems. In other words, we’re stuck with carbon-producing fossil fuels because any alternative would create an immediate loss to many actors, private and public: from energy companies to automobile manufacturers, transportation operators, regulators and even consumers, who have developed a fossil-fuel dependent lifestyle. The pain of any tax on carbon would be certain, personal and immediate, while the benefits of a shift toward alternative energies would be long-term, uncertain and shared. This market and policy failure is more severe in the U.S. than elsewhere because the stakes here are higher. The answer to “Who is most responsible?” cannot be other than “all of the above.” Unlocking the U.S. economy from carbon
won’t be easy. According to Unruh, “social change often precedes institutional change in democratic societies” because of the inherent difficulties in transforming institutions (let alone interdependent, mutually supporting institutional systems). Change can likely be only initiated by a broad social movement. If so, the best thing political leaders can do is to facilitate the emergence of such movement through education and awareness campaigns and by trying to be more precise about the tangible costs of not doing anything.
Pablo Eisenberg, a senior fellow at the Georgetown Public Policy Institute, served for 23 years as executive director of the Center for Community
Change. The blame for not enacting a climate change bill has to be shared by several parties. First the president has not demonstrated any leadership or courage on the matter. Nor has the leadership in the Senate or among Democrats. Finally, the Republicans — beholden to energy companies, business and outmoded ideology— have opposed any reasonable policies to tackle the carbon, air quality and energy problems that currently face this country. Also the public has not lighted the fires required for reform or to hold our politicians accountable. A total lack of responsibility and courage have led our politicians into a state of paralysis.
Deborah Ancona is the Seley Distinguished Professor of Management at the MIT Sloan School of Management and the faculty director of the MIT Leadership Center.
There is no simple answer here; it is not easy to parcel out responsibility as if one were cutting up a pie wanting to serve the right-sized piece to each culprit. Perhaps a better solution is not to wait for the hero leader who will go out on a limb and somehow lead us to the promised land. Perhaps another way to go is for all of us to wait until the midterm elections are over and the political stakes a bit lower, then get members of both parties off together away from the glare of the television lights. Let them do some old-fashioned horse trading, or energy negotiating, with a commitment to move forward. Let them show the American people how much other countries pay for gas and how others are leaving us behind in the race for solar, wind and nuclear power. Let them take a stand together to work on this issue along with regulation, the economy and immigration. Unfortunately, collaborative leaders are almost as rare as hero leaders and almost as likely to get sacrificed while the rest of us point fingers and continue to clamor for improvement with no sacrifice.
JEFF HAYNES/GETTY IMAGES
President Obama gives a speech at Ford’s assembly plant in Chicago last Thursday, but the U.S. still hasn’t tackled climate change.
Excerpts from On Leadership, a Web feature exploring vision and motivation, by Steven Pearlstein and Raju Narisetti. To see videos and read the entire panel’s comments, go to
www.washingtonpost.com/leadership.
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SUNDAY, AUGUST 8, 2010
Yash Gupta is professor and dean of the Johns Hopkins Carey Business School.
Winston Churchill famously said that
Americans will always do the right thing, after they’ve exhausted all the alternatives. We’ll eventually do the right thing by taking smart, forceful steps toward curbing our emissions of carbon. But certainly our nation has been slow to meet this issue head-on, and the blame can be laid on the lack of political leadership at both ends of Pennsylvania Avenue. Meanwhile, look at the Chinese. They’ve long been regarded as one of the leading polluters in the world, but now they’re creating a booming industry around the development of anti-pollution technology. They’re even attracting some of the brightest engineers from the U.S. to work in China on these innovations. It’s hard to imagine our political leaders promoting such technology when they have trouble even agreeing that global warming is a problem. We all recognize t hat this is a difficult issue for our politicians to tackle, but that’s what true leadership is about, articulating the urgency of the problem at hand and forging the will to produce a solution, even if it means one’s popularity takes a hit.
on
washingtonpost.com This week’s business chats
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TUESDAY How to Deal, Lily Garcia, 11 a.m. THURSDAY Color of Money columnist Michele Singletary, noon. FRIDAY Cars columnist Warren Brown, 11 a.m.
Americans have experienced de- flation firsthand. It’s a reason- able bet that many Americans would have difficulty defining deflation, and the majority would wonder why lower prices for everything should be consid- ered bad. No matter how obscure defla- tion may be, however, it is appar- ently the biggest threat to our country right now, according to some. Writing in the Nation, Wil- liam Greider warns of “a full- blown monetary deflation that would truly put the U.S. economy in ruin. In a general deflation, ev- erything falls — prices, output, wages, profits. Unchecked, this can lead to another Big D — the Depression Obama claims he has avoided.” James Bullard, presi- dent of the Federal Reserve of St. Louis, recently publicly ex- pressed his fear that “the U.S. economy may become enmeshed in a Japanese-style, deflationary outcome within the next several years.” Some major investors are not waiting to find out whether Bullard is right. The Wall Street Journal reported last week that such financial heavyweights as Pimco’s Bill Gross and major hedge funds are stocking up on securities that they think will perform best in a deflationary environment. Leave aside the question of
whether deflation is really about to descend on the land, and the fact that some economists be- lieve there may be such a thing as “benign deflation.” The biggest problem is that Western govern- ments and central banks are so obsessed with preventing infla- tion that they have no playbook for battling deflation. So strange politics have seeped in to fill this policy vacuum. For much of the modern Amer- ican era, inflation has been viewed as an evil demon to be ex- orcised, ideally before it even rears its head. This makes sense: Inflation robs people of their sav- ings, and the many Americans who have lived through periods of double-digit inflation know how miserable it is. But some- times a little bit of inflation is valuable. During the Great De- pression, government policies deliberately tried to create in- flation. Rising prices are a sign of rising output, something that would be welcome in the current slow-motion recovery. As econo- mist Casey Mulligan has argued, some inflation right now could have some salutary effects: “Spe- cifically, inflation would raise prices of homes, among other things. Higher housing prices would pull a number of mort-
Inflated worries over the direction of prices A
by James Ledbetter
s political bogeymen go, de- flation must be one of the strangest. Very few living
ASSOCIATED PRESS
During the Great Depression, when thousands lined up in New York and elsewhere for the chance at relief jobs, the federal government was eager to encourage inflation. WITH
WITH
nomic research demonstrates that except in wartime, there is effectively no relationship be- tween the size of government spending and the existence of in- flation). Infected by such myths, the
gages out from under water . . . and thereby reduce the number of foreclosures.” But don’t hold your breath waiting for America’s political leaders to preach the virtues of inflation. Indeed, for all the fret- ful talk about deflation, it is un- fortunately the fear of inflation that still haunts political and economic decision-makers. For decades, politicians and pundits on the right have told us that we need to balance the federal budg- et in order to keep inflation low; this remains a staple of libertari- an thinking (even though eco-
national debate remains focused on reducing deficits and debt; no matter what the diagnosis is, that’s always presented as the cure. The Obama administration may have added to unprecedent- ed levels of government debt (by mandating health-care coverage for millions of Americans, stimu- lus spending, continuing the wars in Iraq and Afghanistan), but rhetorically it is committed to restoring the surplus of the late ’90s. Secretary of State Hilla- ry Rodham Clinton has gone so far as to say that getting the na- tion’s debt and deficit under con-
trol is a national security issue, which is not an argument you’d associate with any Democratic administration of, say, the last 100 years. This posture may be politically
expedient in the age of the “tea party”; a July opinion poll found that two-thirds of the public op- poses the idea of a second stimu- lus. But that very opposition to government spending may cause the deflation that will be disas- trous for all. If government doesn’t juice demand with more spending, housing prices may fall, consumer demand may sag more, and full-on deflation may descend. Complain all you want about the inefficiency of govern- ment spending, but government is the only mechanism for the foreseeable future that is capable of jump-starting the broader
economy. Hedge-fund manager Alan Fournier told the Journal that a major reason he’s betting on deflation is the presumed in- ability of elected officials to spend more on stimulus. There’s an additional absurd-
ity here: The consensus of Gross and other mega-investors is that the best, most reliable returns in a deflationary climate are to be had by buying — have you guessed? — U.S. government debt. Over half of Gross’s Pimco Total Return fund, for example, now consists of U.S. Treasury bonds, up from less than 33 per- cent at the end of March, accord- ing to the Journal. The bet seems to be that if economic demand slumps and profits tank, Trea- sury bonds will lose less than just about everything else. So the market message gener-
ated by our current collective hate for government debt is: Eco- nomic growth will slow down, and private-sector demand for government debt will go up. —The Big Money
Ledbetter covers business and finance for Slate.
ROB PEGORARO Fast Forward
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