Globalization

In a Newsweek Op-Ed yesterday, Fareed Zakaria rails against current American climate and energy policy (or lack thereof) in the context of this week’s G-8 in Hokkaido, Japan.

Whether it's Barack Obama or John McCain who enters the White House in January, the new president could well find his approval ratings sliding fast. The increasingly grim economic news is likely to overshadow all else. Britain's prime minister, Gordon Brown, is already experiencing this reality. While most of the British media would argue (vigorously) that Brown's low poll ratings relate to his charisma, or lack thereof, he is also clearly suffering the political effects of economic malaise.

Like the United States, Britain is going through a credit crunch, a financial crisis and a housing collapse all at the same time. Brown, however, argues that the central problem is skyrocketing food and fuel prices—"that's what hurts the average family most," he said in a conversation last Tuesday. Brown said he hoped that the Group of Eight countries would take them on at its summit in Hokkaido, Japan, this week. "The great challenge for the G-8 is, can we coordinate policies to prevent crises. In the 1980s, we had currency coordination. But with finance globalized, that's not the challenge of the present," he said. "The new problem, worldwide, is energy. We need to coordinate our energy policies."

Brown argues that even in the short- and medium-term, the G-8 countries could do something. "The market assumes that demand will always increase, and in a circumstance of constrained supply, that means prices rise. But we can send a signal that demand is going to moderate, that we are serious about efficiency and alternative energy sources. But it would have to be a clear signal sent by all the major consuming countries."

Last month, Britain laid out plans to generate 35 percent of its electricity needs from renewables by 2020—up from 5 percent now. The country is already the world's largest generator of wind power (with mostly off-shore turbines) and plans to generate 60 times current levels in 12 years. It has also cleared regulations to increase nuclear energy. "You cannot get to a new energy mix without a substantial rise in nuclear power," Brown said.

The contrast with Washington is blinding. George Bush still has not made a serious speech, announced a serious plan or presented Congress with a serious set of laws to move the country toward new energy sources. With oil prices at their highest levels since the discovery of oil (even in inflation-adjusted dollars), and with their rise threatening to push the country and the world toward 1970s-style stagflation—he hasn't brought himself do it. And while we stand pat, the rest of the world is moving. In a recent ranking of countries for environmental performance, jointly produced by Yale and Columbia universities, the United States came in 39th, well behind every other advanced industrial country. (Germany ranked 13, Britain 14 and Japan 21.)

Washington's inaction also stands in contrast to intense activity in the private sector, fascinatingly described in Fred Krupp and Miriam Horn's new book, "Earth: The Sequel." Krupp heads the Environmental Defense Fund, but this is not a gloomy global warming tirade. It's an optimistic account of the progress being made by American industry in renewable energy. The authors explore every new technology, from solar to wind to geothermal, and introduce the men and women who are inventing the future.

But they would be the first to point out that, even though American research labs are rising to the challenge, government action remains vital. The idea that government should "stay out" is meaningless. It is in knee-deep already; energy is a highly regulated industry. In fact, it's notable that we have low productivity and runaway inflation in two crucial areas these days—food and fuel. Both have been nationalized, protected or subsidized by governments around the world for decades. A host of regulatory and legal barriers make renewable and small-scale energy production less attractive, profitable and manageable than it could be. But Krupp and Horn focus on the central policy change that the United States needs to make—enacting a cap on carbon. America is the only developed country that does not put a price on carbon.

Imagine if President Bush were to announce at the G-8 summit that the United States would institute a cap on emissions. We would instantly have the world's largest carbon market and it would, instantly, change the price of clean energy. It would unleash a tsunami of economic activity in renewables that could, over time, give American productivity the next big boost it needs. It would, of course, also quickly send a signal to the market about future demand for oil, which would in turn affect the price.

But somehow I don't think that's what Bush is going to say in Hokkaido this week.

Zakaria is right to suggest that America do what much of the rest of the world seems to know we must: restore American leadership globally by comprehensively tackling climate change and reforming energy policy. He also knows that by doing so, we will address demand for fossil fuels, and fundamentally alter the current energy and economic paradigms. Solutions to the energy and climate dilemmas are not, as some argue, mutually exclusive. Rather, creating a prosperous 21st century depends on understanding that they can be one in the same. The private sector has figured this out, and is making a lot of money while doing so. Let’s see if the government can’t get the picture too.

As climate change, energy prices, and the impact of the “Third Oil Shock” on the American and global economies continue to make front page news every day and change the way we live, NDN’s Green Project is excited to announce a series of events and thought-provoking papers examining these critical issues over the next month.

Building on previous work in the green space, including a forum in New York City entitled, Understanding the Cleantech Investment Opportunity, and talks by energy expert Amory Lovins and electric car innovator Shai Agassi, NDN’s upcoming Green Project will be offering some thoughts on intellectual underpinnings for building the post-carbon economy.

We kick off this important and timely series on Wednesday, July 9, on Capitol Hill with U.S. Sen. Jeff Bingaman (NM), Chairman of the U.S. Senate Committee on Energy and Natural Resources and one of our nation's foremost leaders on energy, who has chosen NDN to host his next address on climate change. This event will start at 8 a.m. in 325 Russell Senate Office Building. Click here to RSVP.

NDN will also be releasing an important new paper by NDN Green Project Director Michael Moynihan entitled, Solar Power: The Case for Action. In this paper, Moynihan places solar energy in the context of major changes needed to our energy policies, including how to reinvent our national economy to cope with high energy prices and increase our technological competitiveness in a post-carbon future.

On Wednesday, July 16, Dr. Robert J. Shapiro, Chairman of the NDN Globalization Initiative, will host a lunch for the NDN community on his new paper, Addressing Climate Change without Impairing the U.S. Economy: The Economics and Environmental Science of Combining a Carbon-Based Tax and Tax Relief, which details a strategy for implementing a carbon tax and using 90 percent of the revenue to cut the payroll tax. The lunch will be held at 12:30 p.m. at NDN: 729 15th St. NW, 1st floor. For more information or to RSVP, contact Kevin VanderMolen at kvandermolen@ndn.org or 202-384-1216.

On Saturday, July 19, in Austin, Texas, Michael Moynihan will join NDN President Simon Rosenberg and Andrei Cherny at Netroots Nation in speaking on A New Era of Possibility—Looking at America's Role in the World after the Bush Presidency.

Finally, NDN has an event in the works to examine the impact of high energy prices on such important elements of the economy as the auto industry, transportation, aviation, the exurbs and, indeed, the American Way of Life. Please stay posted for more details.

Do not miss these events that together will help develop our understanding of the impact of climate change and energy policy on our nation. To read NDN’s latest thinking on these issues, check out the Green Project blog.

Peter Beinart, from a nifty op-ed in the Washington Post:

In "The Best and the Brightest," David Halberstam chronicles Lyndon Johnson's absolute terror of appearing soft on Communism. Having seen fellow Democrats destroyed in the early 1950s because they tolerated a Communist victory in China, Johnson swore that he would not let the story replay itself in Vietnam, and thus pushed America into war. The awful irony, Halberstam argues, is that Johnson's fears were unfounded. The mid-1960s were not the early 1950s. The Red Scare was over. But because it lived on in Johnson's mind, he could not grasp the realities of a new day.

In this way, 2008 is a lot like 1964. On foreign policy, many Democrats live in terror of being called soft, of provoking the kind of conservative assault that has damaged so many of their presidential nominees since Vietnam. But that fear reflects memories of the past, not the realities of today. When Democrats worry about the backlash that awaits Barack Obama if he defends civil liberties, or endorses withdrawal from Iraq, or proposes unconditional negotiations with Iran, they are seeing ghosts. Fundamentally, the politics of foreign policy have changed.

On Thursday, the Washington Post published a very thoughtful op-ed, Global Action to Save Global Growth, by Secretary of the United Nations Ban Ki-moon. For those trying to define the narrative, the agenda, the language and better understand the challenges of the era after Bush, this well-crafted piece offers a glimpse into what will be a very different era of global politics and economics:

HOKKAIDO, Japan -- Global growth is the leitmotif of our era. The great economic expansion, now in its fifth decade, has raised living standards worldwide and lifted billions out of poverty.

Yet today, many wonder how long it can last. The reason: Plenty comes at an increasingly high price. We see it daily in the rising cost of fuel, food and commodities. Consumers in developed countries fear the return of "stagflation" -- inflation coupled with slowing growth or outright recession -- while the world's poorest no longer can afford to eat.

Meanwhile, climate change and environmental degradation threaten the future of our planet. Growing populations and rising wealth place unprecedented stress on the earth's resources. Malthus is back in vogue. Everything seems suddenly in short supply: energy, clean air and fresh water, all that nourishes us and supports our modern ways of life.

As the leaders of the Group of Eight gather here, we know that these issues affect us all: north and south, large nations and small, rich and poor. And we know we must find ways to extend the benefits of the global boom to those who have been left behind, the so-called "bottom billion." In dealing with problems of such dimension and complexity, there is only one possible approach: to see them for what they are -- as parts of a whole requiring a comprehensive solution.

A big part of that solution should be a "global supply-side response," as some economists put it, grounded in sustainable development -- nations, international financial organizations, the United Nations and its various agencies working together as one.

Begin with the global food crisis. It has many causes, among them a failure to give agricultural development the importance it deserves. What's needed, in effect, is a "green revolution" of the sort that once transformed Southeast Asia, this time with a focus on small farmers in Africa. With the right mix of programs, there is no reason productivity cannot be doubled within a relatively short span, easing scarcity worldwide. We've seen it happen in Malawi, which with international assistance has shifted within a few years from being a country plagued by famine to one that exports food.

In Hokkaido, I will call on G-8 nations to triple official assistance for agricultural research and development over the next three to five years. We must act immediately to get seeds, fertilizers and other agricultural "inputs" to farmers in vulnerable countries in time for the coming harvests. We must encourage nations to eliminate the export restrictions that many placed on foodstuffs this spring, as well as the more long-standing subsidies that many developed nations provide their farmers. Such artificial barriers distort trade patterns and drive up prices, deepening the immediate crisis and jeopardizing global growth.

With climate change, as well, sustainable development figures large in the solution. Most experts agree that we are nearing the end of cheap energy. Alternative technologies are among our best hopes for cleaner, affordable power. Here, too, a new "green revolution" is underway. The United Nations Environment Program has found that $148 billion in new funding went into sustainable energy last year, up 60 percent from 2006 and accounting for 23 percent of new power-generating capacity.

Our job, as national and international leaders, is to help guide and accelerate this nascent economic transformation. We need to change social behavior and consumption patterns throughout the developed world. And we must help developing countries "green" their economies by spreading climate-friendly technologies as broadly as possible.

We can take a big step forward in Hokkaido. Mindful of our responsibilities to the poorest nations most vulnerable to climate change, we must fully fund the global Adaptation Fund and make it operational. Looking forward to the December climate change summit in Poznan -- and to Copenhagen in 2009 -- we must push ahead with negotiations for a comprehensive agreement limiting greenhouse gases. Above all, we need to inject a sense of urgency and real leadership into this quest. It is not enough to set goals for 2050, far down the road. We need a middle-term timeline to 2020 if we are serious about promoting change now.

Lastly, Hokkaido will test our commitment to the Millennium Development Goals. For Africa alone, donors have pledged $62 billion a year by 2010. Those in need have faces: mothers who die needlessly in childbirth, infants stunted through life because they do not receive adequate nutrition during their first two years. We promised to help. Now is the time to do so.

Never in recent memory has the global economy been under such stress. More than ever, this is the moment to prove that we can cooperate globally to deliver results: in meeting the needs of the hungry and the poor, in promoting sustainable energy technologies for all, in saving the world from climate change -- and in keeping the global economy growing.

These are the ties that bind us. We must act, in Hokkaido and beyond -- not merely because it is the right thing to do but also because it is in the enlightened self-interest of all of us.

In the coming month, NDN will be attempting to address some of the themes raised in this piece. This week we will host a major new speech by U.S. Sen. Jeff Bingaman on the future of the climate change debate in the United States; our new Green Project will release a new paper on the Solar Tax Credit and the need to invest in renewable energy sources; NDN Globalization Initiative Chairman Rob Shapiro will host a lunch looking at a new paper he's released that makes a compelling argument for how and why we can enact a carbon tax; we will host a discussion with Hon. Carolina Barco, Colombian Ambassador to the United States, who will discuss the state of our hemispheric relations and how we can best meet our common challenges; we will release a new paper that looks at the centrality of mobile devices in helping struggling nations grow; we will release a video interview with U.S. Rep. Adam Smith, author of the Global Poverty Act, a far-sighted piece of legislation that will position America to lead the world in meeting the Millennium Development Goals cited above; we will conduct an event on how high energy prices will affect America, a nation built on the assumption of low-cost energy; and of course, we will be banging away each day here on our blog and with the media.

To us at NDN, these are hard times, struggling times for our nation. But also a time of possibility, a time in which we can imagine once again doing big and important things, and leading America and the world with grace, confidence and success into the very different global political terrain of the 21st century.

NDN’s Green Project is pleased to announce that one of the U.S. Senate’s most well-regarded leaders, U.S. Sen. Jeff Bingaman (NM), Chairman of the Energy and Natural Resources Committee, is scheduled on Wednesday, July 9, to deliver a major policy address on climate change to the NDN community.

As Chairman of the Energy and Natural Resources Committee, Sen. Bingaman has been a strong voice for addressing our nation's energy challenges through reducing America’s reliance on fossil fuels, cutting greenhouse gas emissions and increasing investment in innovation and technology necessary to build a clean energy future.

Chairman Bingaman's speech is scheduled for 8 a.m. in Room 325 of the Russell Senate Office Building, in Washington, DC.

Sen. Bingaman has been a long-time friend of NDN and has supported the missions and goals of NDN throughout the years.

NDN’s Green Project is a program of the Globalization Initiative that seeks to develop the legislative and regulatory framework to address climate change, enhance energy security, and accelerate the development of green technologies to promote economic growth.

NDN’s Green Project Hosts Senate Energy and Natural Resources Chairman Jeff Bingaman for Major Policy Address
325 Russell Senate Office Building
Wednesday, July 9
8 a.m.
Click here to RSVP

On Monday at the National Press Club, I attended an event put together by the U.S. Climate Task Force, which is chaired by Dr. Robert J. Shapiro, also Chair of NDN’s Globalization Initiative. At this event, Dr. Shapiro released his paper entitled, Addressing Climate Change without Impairing the U.S. Economy: The Economics and Environmental Science of Combining a Carbon-Based Tax and Tax Relief, which details a strategy for implementing a carbon tax and using 90 percent of the revenue to cut the payroll tax. (The remaining 10 percent would be used to fund research, development, and deployment of clean technology). The end effect would be to combat climate change while limiting the economic burden and increasing the political salability of such a solution to climate change.

The proposal is fascinating, and the event, which featured a panel of climate change experts, was equally so. The take-away from the event was that putting a price on carbon is obviously crucial to combating climate change, and that returning the money collected by a carbon-pricing scheme through a reduction in the payroll tax is an innovative and progressive idea. Internationally, it is crucial for the U.S. to lead in the effort to combat climate change, especially because any agreement will need to bring the developing world on board. China’s carbon emissions have already surpassed America’s, and will only continue to grow. Tackling the prevalent use of coal and providing consumers with alternative forms of energy, in large part through increased investment in research, development, and deployment of low-carbon sources, must also be central to confronting climate change.

Climate Wire (subscription req’d), had this to say about Dr. Shapiro’s proposal:

As energy prices climb higher, even the most environmentally minded politicians have shied away from the tax, deeming it to be too much of a political landmine.

The tax would start out at $14 per ton in 2010 and rise to $50 per ton in 2030. Most of the revenue generated -- projected to be about $4 trillion over 20 years -- would cycle back into the economy, primarily through a cut in the payroll tax.

"We are reducing one tax and applying a second tax. The reason is, we want to encourage one kind of behavior and discourage another kind of behavior," explained Robert Shapiro, chairman of the U.S. Climate Task Force and a co-author of the new report. "This is not the imposition of a tax -- this is a tax shift."

Here is NDN’s press release endorsing Dr. Shapiro’s paper:

NDN ENDORSES SHAPIRO PAPER ON CARBON
TAX/PAYROLL TAX TRADEOFF

The U.S. Climate Task Force yesterday released an important paper in the debate over how to address climate change and global warming entitled, Addressing Climate Change without Impairing the U.S. Economy:The Economics and Environmental Science of Combining a Carbon-Based Tax and Tax Relief.

Authored by Dr. Robert Shapiro, former Under Secretary of Commerce for Economic Affairs in the second Clinton Administration and Chairman of NDN’s Globalization Initiative, and economists Dr. Nam Pham and Dr. Arun Malik, the paper represents a valuable addition to the literature on potential policy solutions to the problem of carbon emissions.

NDN strongly endorses the report’s bold recommendation to put a price on carbon and supports the report's central idea that a well-crafted carbon tax, combined with a reduction in the payroll tax, has the potential to staunch the release of greenhouse gases without harming the economy and will promote job creation. In endorsing this carbon tax proposal, NDN remains committed to the effort to develop comprehensive climate change legislation that accomplishes the goal of reducing carbon emissions through a tax on carbon, a cap and trade system, a cap and dividend system, or some combination of the above.

A number of countries and localities have adopted a carbon tax to help stem greenhouse gas emissions. Such a tax, however, can increase costs to energy or industrial consumers and potentially impose a drag on economic growth. Using computer simulations that employ the U.S. Department of Energy’s energy consumption and pricing model, Dr. Shapiro’s paper makes the important point that how this tax revenue is recycled through the economy is critical to the effect of the tax on the American people.

Using carbon tax revenue to reduce the payroll tax helps to mitigate the impact on the economy by increasing disposable incomes of working families and reducing what is, in effect, currently a disincentive to employment. While the payroll tax has historically played a critical role in funding Social Security, it is levied as a tax on wages. So, reducing the tax and any future increases likely required to accommodate an aging workforce helps to promote employment. And by tying the payroll tax deduction to the revenue to be gained from putting a price on carbon, Dr. Shapiro’s proposal offers a way to limit carbon emissions without lowering economic growth.

“The idea of balancing a carbon tax with a reduction in the payroll tax is appealing because it has the potential to put a price on carbon without lowering economic growth,” said NDN Green Project Director Michael Moynihan.

Moynihan added that NDN will continue to work with the U.S. Congress, the presidential campaigns, the U.S. Climate Task Force, the clean technology community, the environmental community, industry and other interested stakeholders in meeting the important challenge of climate change.

As reported by Reuters, the European Union agreed yesterday to end sanctions against Cuba, although it will insist the Communist island improves its human rights record. EU External Relations Commissioner Benita Ferrero-Waldner told reporters, "Cuban sanctions will be lifted," after foreign ministers of the 27-nation bloc clinched agreement at a summit dinner in Brussles. Ferrero-Waldner added, "Of course there is clear language on human rights, on the detention of prisoners and there will have to be a review also."

According to EU sources, the decision - taken despite U.S. calls for the world to "remain tough" on Havana - will be reviewed after one year. Spain reportedly led the push for a softening in policy towards Cuba, meeting some resistance from the bloc's ex-communist members and the Swedish Foreign Minister, Carl Bildt. The sanctions had already been suspended in 2005, and unlike the U.S. embargo, the sanctions did not prevent trade and investment. Regardless, this is a major policy change, and lifting the sanctions is at odds with the current U.S policy towards Cuba.

Despite the current hard-line approach to Cuba in the U.S., could the EU's decision foreshadow what might become U.S. policy under a new president? Reuters reported that a draft it obtained of the EU agreement calls on Cuban authorities to: improve human rights, including unconditional release of political prisoners, ratification U.N. rights conventions, and giving humanitarian organizations access to Cuban jails. This sounds very similar to what Sen. Barack Obama said just a few weeks ago as he delivered a major speech on Latin American Foreign Policy before the Cuban American National Foundation (CANF): "My policy toward Cuba will begin with justice for Cuba's political prisoners, the rights of free speech, a free press and freedom of assembly; and it must lead to elections that are free and fair."

Like Sen. John McCain, Sen. Obama would maintain an embargo on Cuba, but only as "leverage to present the regime with a clear choice: if you take significant steps toward democracy, beginning with the freeing of all political prisoners, we will take steps to begin normalizing relations." Sen. Obama sees "principled diplomacy" as the way to bring about real change in Cuba. In his speech, Sen. Obama criticized what he called the eight years of "the Bush record in Latin America," i.e., having been, "negligent toward our friends, ineffective with our adversaries, disinterested in the challenges that matter in peoples' lives, and incapable of advancing our interests in the [American] region...The United States is so alienated from the rest of the Americas that this stale vision has gone unchallenged....The situation has changed in the Americas, but we've failed to change with it. Instead of engaging the people of the region, we've acted as if we can still dictate terms unilaterally....the future security and prosperity of the United States is fundamentally tied to the future of the Americas. If we don't turn away from the policies of the past, then we won't be able to shape the future."

Sen. Obama's idea of a "new alliance of the Americas," at the center of that major speech, has been greeted with favor by Cuban-Americans from all political camps. It seems they agree with Sen. Obama's position that American politicians go "to Miami every four years, they talk tough, they go back to Washington, and nothing changes in Cuba....the parade of politicians who make the same empty promises year after year, decade after decade."

Barack Obama's proposal for change with Latin America favors discussion with "friend and foe alike," in order to be a "leader and not a bystander." Under his proposal, Sen. Obama would:

1) Reinstate a Special Envoy for the Americas in the White House.

2) Expand the Foreign Service, and open more consulates in the neglected regions of the Americas; expand the Peace Corps, and ask more young Americans to go abroad to "deepen the trust and the ties among our people."

3) With respect to Cuba, he would allow unlimited family travel and remittances to the island.

4) He would maintain the embargo, but also work with the Cuban regime to examine normalizing relations if it takes significant steps toward democracy, beginning with the freeing of all political prisoners.

5) Increase international aid, investment promotion, and economic development in Latin America.

6) Develop democracy through negotiations, "Put forward a vision of democracy that goes beyond the ballot box. We should increase our support for strong legislatures, independent judiciaries, free press, vibrant civil society, honest police forces, religious freedom, and the rule of law. That is how we can support democracy that is strong and sustainable not just on an election day, but in the day to day lives of the people of the Americas."

It's important to note that Sen. Obama delivered this ground-breaking speech and revolutionary proposals in front of the CANF - the group previously known for being one of the most hard-line on Cuba policy, rejecting anything other than the overthrow of Castro as acceptable policy. But the CANF applauded. Soon after that speech, the founder of Women in White, Miriam Leiva, and her recently freed dissident husband, Oscar Chepe, also wrote an open letter to Barack Obama; they applauded his offer to allow Cuban Americans to freely visit relatives here.

They also wrote that a more creative policy could help the transition towards democracy. It seems that times are-a-changing, and everyone recognizes that the status quo has not been effective for anyone. Sen.Obama and these groups are picking up on what NDN advocated before it was popular, before this change in public perception had occurred. NDN has been a pioneer on the issue of policy with Cuba; in 2006 NDN conducted an important poll with Bendixen and Associates. The poll showed that 72% of Cuban-Americans in South Florida were actually open to consideration of creative means of engaging the people of Cuba and its government to accelerate democratization. The poll also showed that support for the trade embargo, restrictions on travel and restrictions on remittances all dropped ten percentage points over one year.

From the NYTimes:

Two former managers of hedge funds at Bear Stearns were arrested and charged with securities fraud on Thursday, a year after the collapse of the funds signaled the onset of a credit crunch that shows little sign of abating.

The indictments, which were detailed this afternoon by federal prosecutors in Brooklyn, are the first to be brought against senior Wall Street executives linked to a tight credit market that has rattled global markets, led to more than $350 billion in write-offs, cost numerous executives their jobs and culminated in the demise of Bear Stearns.

The two funds had names as abstruse as the complex subprime securities in their portfolios - High Grade Structured Credit Strategies Fund, and its riskier sister offering, the High Grade Structured Credit Strategies Enhanced Leverage Fund.

And on Thursday, the two fund managers, Ralph R. Cioffi, 52, and Matthew Tannin, 46, who just 18 months ago reveled in their status as top hedge managers in a firm at the vanguard of the mortgage boom, surrendered to federal agents.

Like Enron several years ago and the insider trading scandals two decades earlier, the prosecution of the Bear Stearns executives is expected to become a test of the government's ability to make successful prosecutions of highly complex financial transactions.

Somehow this feels like the beginning of something rather than its end.

Thurs 430 Update - Apparently there is more, much much more, to come.

Mobile phones have made the headlines this year due their role in political organizing the world over, from the aftermath earthquake and environmental protests in China to political campaigns here in the United States. Now, what many have recognized as the true power of mobile technology is being realized in Africa. In Tuesday's Guardian, Richard Wray writes that "the dramatic spread of the handset is revolutionising the way money circulates."

For consumers in developed markets, using a mobile phone for banking services is a smart add-on to a bank's branch network. But to people in the developing world, the arrival of mobile banking - or m-banking - is potentially revolutionary.

If money is an economy's lifeblood, improving its circulation plays a critical role. Many Africans living in rural areas, for instance, rely on money sent home by members of their family who work in towns and cities. But getting that cash to a village that could be hundreds of miles away is a tricky business. In Kenya, for example, workers in urban areas hand wages over to bus drivers, who promise to stop off at the worker's home village en route to their destination.

Even those who do have a bank account - and they make up only a few per cent of Africa's 950 million population - are restricted in what they can do with their money because of the dearth of branches in rural areas.

But the dramatic growth in mobile phone use in Africa - phones now outnumber cash machines by several thousand to one - is paving the way for a new set of services that turn the humble handset into a banking tool with the potential to transform Africa's economy.

Services have sprung up that let people transfer cash by text message to other mobile phone users and give Africa's vast number of "unbanked" their first access to financial products. Instead of using a bank branch, these services rely on local retailers who already sell mobile top-up cards.

"We wanted to offer something that would work," explained Mung Ki Woo, who heads Orange's m-payments division. "Instead of giving people a plastic card, why not use something many people already have: a mobile phone? And instead of doing transactions at a bank branch, why not let people go to their local retailer to deposit and withdraw cash?"

The article goes on to discuss the proposed creation of m-banking systems that allow access by all users, regardless of cell phone carrier. It also discusses the expansion of this technology to microfinance, which would potentially allow these small loans that have changed the lives of millions for the better to be expanded to many times more people.

M-banking is truly revolutionary, and a broad-based implementation that allows mobile technology to substitute for visits to banks will have dramatic economic development impacts. The emergence of technology that enables bottom-up politics and banking may yet be the beginning of a new era of prosperity and engagement that will be felt globally.

The Front Page of yesterday’s Wall Street Journal features an excellent article by Guy Chazan entitled “Russia Outflanks EU’s Pipeline Bid.” The article describes Russia’s efforts to dominate European natural gas supply and politics by outmaneuvering American backed European attempts to build a pipeline to make them less reliant on Russian natural gas. The potential for heavy-handed petropolitics, exemplified by Russia’s 2006 shut-off of gas to Ukraine, has American policy makers concerned once more about Russia’s political influence in Europe.

During the Cold War, the balance of power was measured in nuclear warheads. Now a new kind of contest is playing out. The battlefield is Europe's energy market. The objective is pipeline proliferation. And Russia is winning.

Europe is witnessing a race between two mammoth pipeline projects that would bring natural gas to the Continent from the Caspian and beyond. One of the plans -- hatched in Europe, championed by Washington and named for a Verdi opera -- has been hobbled by bureaucracy. The other, backed by the Kremlin, is rolling ahead with a speed and success that has surprised and frustrated the West. The outcome could shape energy supplies, and political influence, in Europe for decades to come.

Europe is not the only place this dynamic is playing out. Chinese influence in oil-rich African nations has been much maligned due to a policy emphasis energy security, even at the expense of human rights. (Sudan is only one, albeit the most publicized, example of Chinese influence on the region.) This political turmoil, as well as high prices domestically, means that energy security has emerged as a hot topic in American media.

Responding to Chazan’s article on the Wall Street Journal’s "Environmental Capital" blog, Keith Johnson argues that:

You can have energy security, you can give consumers a break, or you can do something for the environment. But aiming for all three at once—that is, what passes for energy policy in the U.S. and Europe—appears next to impossible.

Take the U.S. High oil prices have given legs to Big Oil’s demand for more access to federal lands and coastal areas—a bid for energy security–even while many in Congress are still opposed. But environmentalists figure high oil prices will spur alternative energy and help fight climate change. The Liberman-Warner climate bill foundered thanks in part to high energy prices right now. Meanwhile, the consumer gets whacked regardless—with higher gas prices, or higher electricity bills, or both.
…

As the scramble for energy heats up, it’s useful to remember that the rules of the game aren’t changing—the game itself is. Energy policy isn’t a cardigan moment or a Rose Garden speech—it’s become the currency of international influence. And the countries that ruthlessly focus on one pillar, rather than trying to juggle all three, are more likely to come out ahead.

Johnson is incorrect to argue that this is a new dynamic, however. Energy security has been the backbone of American politics in the Middle East since the Presidency of Franklin Roosevelt, and what has been called a “New Great Game” in Central Asia has been an ongoing chess match over oil and natural gas for decades. Johnson is correct that a ruthless pursuit of energy security is more likely to work than other approaches, but the solution to this energy security issue has little to do with climate or economic security. Rather, Europe needs to employ stronger policies and act in a more hard-nosed fashion against Russian advances, and doing so does not mean subverting goals of handling climate change. This is more a matter of having leadership that knows when the trade-off of playing hardball in favor of political security is well worth it.

Securing Energy and the Economy: Avoiding short-term policy traps

The fundamentally new elements of the energy paradigm are that these resources are no longer available on the cheap in the Western world, in large part due to the rise of the developing world, especially Asia, and the concern about climate change. Johnson seems to argue that pursuing energy and climate security while trying to keep energy costs low is impossible. In the short term, he is probably correct. In the longer term, he couldn’t be more wrong. And, in the short term, there are better ways to protect consumers.

The link between energy and economic security is easy to see. If countries do not pursue energy security, they become unable to feed their economies and maintain economic security – talk about a hit to consumers. In the short term though, pursuing lower energy prices can come at the expensive of both energy and climate security and results in silly ides, like a gas tax holiday or opening up off shore drilling.

Thomas Friedman, in yesterday’s New York Times, weighed in on the dire policy consequences of Egypt’s attempts to keep energy prices low:

From Shubra we drive into the desert toward Alexandria. The highway is full of cars. How can all these Egyptians afford to be driving, I wonder? Answer: The government will spend almost $11 billion this year to subsidize gasoline and cooking fuel; gas here is only about $1.30 a gallon. Sounds like a good deal for the poor — only the poor have no cars, and the fuel subsidies mean less money for mass transit.

Think about these numbers: This year Egypt will spend $6 billion on education and $3 billion on health care, far less than the subsidies for fuel. This is a terrible trap. The subsidies should have been phased out when food and fuel prices were lower. Now that they have soared, the pain of removing the subsidies would be politically suicidal. So education and health care get killed instead.

America is not currently in the trap Friedman describes, but with the wrong policies, could find itself moving in that direction. Incentives must be designed to stimulate infant technologies and decrease in amount over time as those technologies commercialize and scale, not the other way around.

Securing Energy and Climate: Building the 21st Century Economy

Climate and energy security are also not mutually exclusive. If all the West cared about was energy security, America could just build all the coal plants it wanted. We are, after all, the Saudi Arabia of coal. But that is fundamentally not in our climate or economic security interests.

What America needs is a policy that is focused on energy and climate security, indeed such a policy must see the two as interrelated, and must encourage the scaling of technologies capable of taking the place of fossil fuels. Building a 21st century post-carbon economy will not be simple and will not happen tomorrow, by this November, or by November of 2012, but failing to get on that path will ultimately prove the most difficult available option, as failure means economic surrender. Conventional sources of energy will remain important into the future, but the faster America is able to transition away from a hydrocarbon economy, the better our economic, energy, and climate security will be.