By Lukas Fiala
Looking out the window of my hotel room in New York City this week, I couldn’t help but feel a certain apocalyptic reckoning. Due to raging wildfires in Canada, the city that’s home to the world’s most important financial center was covered in thick clouds of smoke. The red-colored sky certainly reminded me of the sci-fi blockbuster Interstellar in which Matthew McConaughey travels through deep space to save humanity living on a barren planet plagued by dust storms and the disastrous effects of climate change.
While current events on the East Coast serve as a painful reminder that the consequences of global warming are real and dangerous, they also highlight the massive inequality between developed and developing economies in dealing with the ensuing consequences. Indeed, amidst all the attention paid to New Yorkers shuffling around wearing masks, we mustn’t forget that fallout of climate transition is a daily reality for billions of people across Africa, Asia, and beyond.
According to the UN Intergovernmental Panel on Climate Change (IPCC), ‘approximately 3.3 to 3.6 billion people live in contexts that are highly vulnerable to climate change.’ From droughts in the Lake Chad region to the effects of foreign direct investment on maritime ecosystems in Southeast Asia, the consequences of unchecked globalization, accumulation, and consumption are unraveling before our eyes.
More than anything, these examples point to the disproportionate burden that the most powerful stakeholders must take on to prevent further escalation. Globalization has not only connected us economically but also given the few the power to affect the lives of the many. A bill currently considered in New York – which would cap repayments to U.S.-based private creditors at the same level as sovereign lenders – is a case in point. With over half of the global privately-held sovereign debt falling under New York jurisdiction, the bill could affect numerous communities across the developing world by speeding up loan renegotiations and thereby freeing up debtor governments’ fiscal capacity.
The bill will likely face opposition from the financial sector who might argue that debt distress is often a consequence of domestic economic mismanagement. Yet, while collective action failures are certainly a factor in bringing about debt crises, it is worth remembering that the effects of austerity following outsized debt repayments affect vulnerable groups the hardest. Political and economic elites – however corrupt they may be – will in many cases live on with impunity.
Kenya’s debt servicing costs, for instance, represent close to 60% of projected state revenue, eating up Nairobi’s fiscal capacity to protect vulnerable groups in Kenya from the whims of climate change and environmental degradation.
In thinking about how to find common ground on these epoch-defining issues, I often remember what development economist Jeffrey Sachs once told a small group of students a few years ago during a fireside chat. If in doubt about what to do, ‘just be nice’.
In the absence of moving human civilization to outer space Interstellar-style, mitigating the effects of climate change requires swift and real action by both the West and China to protect those most at risk. Pointing fingers to evade our responsibilities won’t get us there, but being nice might just be enough to get us started.