Environmental morality in the present

The burden must fall upon those best able to prevent climate change

Look away from the history of greenhouse gas emissions and just think about the present state of play. However you cut the pie, present emissions are anything but equal. There are, of course, different ways of thinking about inequality and what to do about it. Some argue that fairness demands that a finite and precious resource be distributed equally, and in the case of climate change, you can have the planet’s carbon sinks in mind. We end up with the same conclusions now as we did when reflecting on the history of emissions in the last post. We end up with the view that the developed world has a responsibility to reduce its emissions, probably drastically and quickly, given the great differences in present emission rates.

The point can be strengthened by thinking not just about emissions entitlements, but also about the varying capacities of rich and poor nations. Not all emissions have the same moral standing. Some emissions have more or different value, even if the quantity of emissions is just the same. The emissions resulting from an African farmer’s efforts to feed his family are not on a par with the emissions resulting from an American dermatologist’s efforts to get to Vegas for the weekend. There is a difference between subsistence emissions and luxury emissions, even if pinning it down takes some doing. There is a sense then, that the West has more room for reduction, more luxury emissions. Suppose that 60% of the emissions of the US Virgin Islands are luxury emissions and all of Rwanda’s emissions are subsistence emissions. It’s clear, just given these facts about present emissions, who has room to reduce and who doesn’t. Arguing the point is as good as saying that some Rwandans should die so that some Virgin Islanders can keep their DVD players on stand by.

The developed world is also better placed to make reductions in other senses. Think just about the United States, the world’s only Superpower. It has the brains and the know how, the infrastructure, the money, the technology – the list could go on – to do something meaningful about climate change. The fact that it has done so little in this connection can jar a bit.

You would have some explaining to do if you walked past a drowning baby and did nothing to save it. You would have a lot more explaining to do if you were a fit lifeguard. The greater your ability to do what’s right, the greater the onus on you to do what’s right. It is a very short step from this thought to the conclusion that the developed world is making an enormous moral mistake when it comes to action on climate change.

James Garvey has a PhD in philosophy from University College London and is Secretary of the Royal Institute of Philosophy. He is author of some books and articles, most recently, The Ethics of Climate Change (Continuum 2008)
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Let's turn RBS into a bank for the public interest

A tarnished symbol of global finance could be remade as a network of local banks. 

The Royal Bank of Scotland has now been losing money for nine consecutive years. Today’s announcement of a further £7bn yearly loss at the publicly-owned bank is just the latest evidence that RBS is essentially unsellable. The difference this time is that the Government seems finally to have accepted that fact.

Up until now, the government had been reluctant to intervene in the running of the business, instead insisting that it will be sold back to the private sector when the time is right. But these losses come just a week after the government announced that it is abandoning plans to sell Williams & Glynn – an RBS subsidiary which has over 300 branches and £22bn of customer deposits.

After a series of expensive delays and a lack of buyer interest, the government now plans to retain Williams & Glynn within the RBS group and instead attempt to boost competition in the business lending market by granting smaller "challenger banks" access to RBS’s branch infrastructure. It also plans to provide funding to encourage small businesses to switch their accounts away from RBS.

As a major public asset, RBS should be used to help achieve wider objectives. Improving how the banking sector serves small businesses should be the top priority, and it is good to see the government start to move in this direction. But to make the most of RBS, they should be going much further.

The public stake in RBS gives us a unique opportunity to create new banking institutions that will genuinely put the interests of the UK’s small businesses first. The New Economics Foundation has proposed turning RBS into a network of local banks with a public interest mandate to serve their local area, lend to small businesses and provide universal access to banking services. If the government is serious about rebalancing the economy and meeting the needs of those who feel left behind, this is the path they should take with RBS.

Small and medium sized enterprises are the lifeblood of the UK economy, and they depend on banking services to fund investment and provide a safe place to store money. For centuries a healthy relationship between businesses and banks has been a cornerstone of UK prosperity.

However, in recent decades this relationship has broken down. Small businesses have repeatedly fallen victim to exploitative practice by the big banks, including the the mis-selling of loans and instances of deliberate asset stripping. Affected business owners have not only lost their livelihoods due to the stress of their treatment at the hands of these banks, but have also experienced family break-ups and deteriorating physical and mental health. Others have been made homeless or bankrupt.

Meanwhile, many businesses struggle to get access to the finance they need to grow and expand. Small firms have always had trouble accessing finance, but in recent decades this problem has intensified as the UK banking sector has come to be dominated by a handful of large, universal, shareholder-owned banks.

Without a focus on specific geographical areas or social objectives, these banks choose to lend to the most profitable activities, and lending to local businesses tends to be less profitable than other activities such as mortgage lending and lending to other financial institutions.

The result is that since the mid-1980s the share of lending going to non-financial businesses has been falling rapidly. Today, lending to small and medium sized businesses accounts for just 4 per cent of bank lending.

Of the relatively small amount of business lending that does occur in the UK, most is heavily concentrated in London and surrounding areas. The UK’s homogenous and highly concentrated banking sector is therefore hampering economic development, starving communities of investment and making regional imbalances worse.

The government’s plans to encourage business customers to switch away from RBS to another bank will not do much to solve this problem. With the market dominated by a small number of large shareholder-owned banks who all behave in similar ways (and who have been hit by repeated scandals), businesses do not have any real choice.

If the government were to go further and turn RBS into a network of local banks, it would be a vital first step in regenerating disenfranchised communities, rebalancing the UK’s economy and staving off any economic downturn that may be on the horizon. Evidence shows that geographically limited stakeholder banks direct a much greater proportion of their capital towards lending in the real economy. By only investing in their local area, these banks help create and retain wealth regionally rather than making existing geographic imbalances worce.

Big, deep challenges require big, deep solutions. It’s time for the government to make banking work for small businesses once again.

Laurie Macfarlane is an economist at the New Economics Foundation