Trump Does Not Create Good Profit

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Donald Trump loves to tout his experience in the private sector and his campaign suggests that it will allow him to work miracles for the US economy. His supporters are impressed by the massive profits he reports. However, there are important distinctions to be made among types of profit. On the one hand, there are high returns on capital investments by any means necessary. On the other hand there is what Charles Koch refers to, in a book by the same name, as good profit. This distinction may mean that Trump lands closer to Hillary on economic matters than he would like you believe.

Perhaps the biggest accomplishment on Trump’s resume is the transformation of the bankrupt Commodore Hotel into a new business called the Grand Hyatt. But how did Trump manage such a feat? It helped that he received a little bit of favoritism from then-mayor Abraham Beame. It also didn’t hurt that he was able to exploit New York’s urban development system to leave taxpayers with hundreds of millions of dollars in expenses. What Trump certainly did not do was create superior value for customers, utilize efficient innovations, or conduct himself with integrity.

What’s more, Donald doesn’t fall far from the tree. Donald’s father, Fred Trump, scored his biggest development contracts thanks to government subsidies. Leaning on government institutions like the Federal Housing Administration allowed Trump to pass his risk on to taxpayers. Once again, great personal profits but not good profit.

Trump’s style isn’t a breathe of fresh air. It stinks of the same-old Washington kleptocracy. Consider the similarities between the deals that made the Trump family rich and the 2011 Solyndra scandal. Solyndra received over $500 million thanks to Obama’s administration for a start-up solar company. It was a risky allocation of taxpayer money and when the company failed, it was the taxpayers who got burned.

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Our economy does not need more of the same. We need someone who believes that society can be made better by mutual benefit, not government picked winners and losers. We need to believe that, by working together, we can all be winners. When Americans go to the voting booth this time, they need to elect a candidate who doesn’t represent the oligarchy. No such candidate will come from either of the major parties. If there is to be any meaningful change in the US economic climate, it will have to come from a third party.

Thankfully, we have a libertarian candidate in the running. As the 29th Governor of New Mexico, Gary Johnson got government out of the way by utilizing his veto power in an unprecedented way. Within his first six months in office, Johnson blocked over 200 new pieces of legislation. The results speak for themselves. The unemployment rate declined throughout most of Johnson’s eight years in office. When he left, official unemployment was about one percentage point lower than when he took office and about on par with the national average. However, if you ask Johnson he’ll tell you that he didn’t create a single job while in office. That’s because he understands that people working together for mutual benefit create jobs, not government.

Gary Johnson

 

For more on this, check out these sources:

Libertarian Candidate Gary Johnson: Corporate America’s Best Bet for President?

Johnson – Weld 2016

Trump and the Artifice of the Deal

Good Profit

Good Profit (Uncommon Knowledge Interview)

The Tort Solution to Transboundary Air Pollution

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Since the middle of the 20th century, states have been successfully negotiating bi-lateral treaties to address problems that result from the emission of airborne pollutants. These deals typically take place between states that are direct neighbors or else are located in close proximity to one another. The types of pollutants they address are ones that have direct adverse impacts on nature, infrastructure, or human health. Unfortunately, some pollutants have a less direct impact and are therefore cannot effectively be addressed bi-laterally. These pollutants are referred to as greenhouse gasses and scientists warn that their accumulation in the atmosphere will have long term adverse effects on a global level. Because these gasses are largely a bi-product of profitable industry, they have a clear positive function that incentivizes their emission. In addition, because the predicted consequences will be distributed globally, only a fraction of their negative function is an immediate concern to the industries that emit them. This results in a Tragedy of the Commons obstacle which multilateral approaches have so far failed to overcome. However, it is not for a lack of efforts. For decades, world leaders have been meeting, sharing information, and asserting their commitment to solving this problem. It might be time to recognize that this approach is not working. Precious time has already been lost and scientists are predicting major consequences before the end of this century if drastic steps are not taken. As an alternative to the failed multilateral approach, I believe that the United States should explore the possibility of a unilateral solution. The problems of transboundary air pollution boil down to a lack of accountability for polluters, the solution to which is tort justice. By leveraging its unique position as a global super-power, the United States may be in a position to do for the environment what no-one else can; enforce tort justice.

In the 1930s, the United Sates government formally complained to the government of Canada about the emission of sulfur dioxide which was causing destructive acid rain in Washington State. On April 15, 1935, the two governments reached an agreement at the Convention of Ottawa. The agreement included a payment of $350,000 to be made in compensation for “damages in respect of the wrong done the United States in violation of sovereignty”[1]. This decision is important because it reflects an understanding of cross-boundary effects of pollution as a violation of sovereignty and because it addresses the violation as a matter of tort. Tort being a wrongful act against some entity which leads to liability for those responsible.

The incentives for polluters to continue with business as usual are clear. By buying and burning fossil fuels, they are able to reap massive profits. One example of this is the Pacific Gas & Electric company which is the largest in the United States and reported a $1.4 billion net profit in 2014[2]. PG&E is actually among the industry leaders in moving towards renewable sources of energy but even by their own estimates they will still be 60% dependent on fossil fuels by 2021[3]. The result is that PG&E, along with the rest of the United States energy producers, contribute over 12% of the world’s annual greenhouse gas emissions. Globally, 72% of greenhouse gas emissions come from the lucrative energy industry[4].

The consequences of accumulating carbon in the atmosphere, scientists tell us, include drought, heat waves, rising sea levels, and rising global temperatures[5]. The cost of damage caused by these emissions is difficult to quantify but estimates range from $37 in damage per ton of carbon emitted to $220 per ton[6]. According to the understanding of justice demonstrated at the Convention of Ottawa; the cost of emissions should rightfully be borne by those responsible. For the energy industry in the United States, this translates to somewhere between $2-12 trillion annually.

The primary obstacle to this course of action is the reluctance of states to impose penalties on their own industries and thereby create a relative disadvantage for themselves. This obstacle was a key factor in the failure of a multilateral carbon reduction effort known as the Kyoto Protocol. The agreement was designed to require different levels of commitment from states based on their level of carbon emission in the year 1990. For states like Russia and Germany, which have reduced their carbon emissions level already, this meant little action would need to be taken. In addition, the agreement precluded the quickly developing states like China and India from the same restrictions[7]. Today, China produces a greater amount of carbon than the United States. For the United States to have agreed to these terms would have been a major competitive disadvantage, so the deal failed[8].

In 1972, the United Nations Conference on the Human Environment convened in Stockholm and agreed that protecting the environment was “the urgent desire of the peoples of the whole world and the duty of all governments.[9]” Despite this rhetorical solidarity, no solution to regulate the atmosphere could be agreed upon (much less implemented) in the subsequent 44 years. I believe, given another four decades, the same multilateral approach will continue to fail. It will fail because, without an authority to demand compliance, each actor is compelled to pursue its own individual interests at the expense of the global community. If that happens, the consequences could be tremendous. The answer, therefore, is an authority which will hold each actor accountable for its offenses.

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The concept of a global authority is not new. In the decades since the end of World War II, political scholars have credited the United States with providing an umbrella of security that enables the flourishing of democratic states, particularly in Europe and the Pacific[10]. This safe environment has been referred to as Pax Americana or the American Peace[11]. The idea is that, so long as states do not have existential worries, they can focus on productivity and cooperation.

Instead of framing the proposal of global accountability for the emission of transboundary air pollutants as something unprecedented, it should be understood as a consistent extension of the current order. America is currently committed to the defense of 69 states around the world[12]. The failure to fulfill those commitments should be recognized as negligence whether the aggression against U.S. partners be transboundary rockets, clouds of sulfur dioxide, or carbon induced flooding of coastal cities. Just as the United States conducted Operation Desert Storm in defense of Kuwait and the principle of national sovereignty[13], it should be willing to resort to military intervention to prevent aggression in the form of pollutant emissions.

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Image by James Dietz

 

Of course, military action is never the ideal solution. As the Smelter Trail case illustrated, damage caused by air pollution can be rectified by simple monetary reimbursement. In the event of sulfur dioxide pollution; that reimbursement should go towards hospital expenses, auto body repair, or forest restoration services as needed. When the atmosphere is over-loaded with CO2, the most practical remedy is re-absorption by vegetation. The Amazon alone may be able to provide a carbon scrubbing service of 100 million tons annually[14]. However, Direct Air Capture methods are also being pioneered by various tech groups[15]. Whatever the method of repairing the atmosphere, these services should be available on a global market in the form of offset-credits which carbon-emitters must purchase in order to be allowed to continue polluting.

 

 

[1] “Trail Smelter Case (United States, Canada).” Reports of International Arbital Awards. Volume III. PP 1905-1982. UN.org. Web. 28 June 2016.

[2] Lifsher, Marc. “PG&E Reports Strong Yearly Profit Despite Unfolding PUC Scandal.” Los Angeles Times, 10 Feb. 2015. Web. 29 June 2016.

[3] “Get the Facts.” PGE.com. Web. 29 June 2016.

[4] “8 Interactive Graphics Answer Top Climate Change Questions.” World Resources Institute. Web. 29 June 2016.

[5] “Global Climate Change: Effects.” NASA.gov. Web. 29 June 2016.

[6] Than, Ker. “Estimated Social Cost of Climate Change Not Accurate, Stanford Scientists Say.” Stanford News. 12 Jan. 2015. Web.

[7] “Problems with the Protocol.” Harvard Magazine. 01 Nov. 2002. Web.

[8] Coon, Charli E. “Why President Bush Is Right to Abandon the Kyoto Protocol.” The Heritage Foundation. 11 May 2001. Web.

[9] “United Nations Conference on the Human Environment.” (1972): 3. United Nations, 5-16 June 1972. Web.

[10] Lohman, Walter. “Honoring America’s Superpower Responsibilities.” The Heritage Foundation. 8 Apr. 2013. Web.

[11] Steel, Ronald. Pax Americana. New York: Viking, 1967. Print.

[12] Taylor, Adam. “Map: The U.S. Is Bound by Treaties to Defend a Quarter of Humanity.” The Washington Post, 30 May 2015. Web.

[13] “The Situaton Between Iraq and Kuwait.” UN.org. 2 Aug. 1990. Web.

[14] Ibarra, Nicholas. “Amazon Rainforest Scrubbing Half as Much Carbon as It Used To, New Study Shows.” SierraClub.org. 20 Mar. 2015. Web.

[15] “Air Capture.” Carbon Engineering. Web. 04 July 2016.