El $uper$

The Dollar Joins the Currency Wars

 

 

NEW YORK – In a world of weak domestic demand in many advanced economies and emerging markets, policymakers have been tempted to boost economic growth and employment by going for export led-growth. This requires a weak currency and conventional and unconventional monetary policies to bring about the required depreciation.

Since the beginning of the year, more than 20 central banks around the world have eased monetary policy, following the lead of the European Central Bank and the Bank of Japan. In the eurozone, countries on the periphery needed currency weakness to reduce their external deficits and jump-start growth. But the euro weakness triggered by quantitative easing has further boosted Germany’s current-account surplus, which was already‎ a whopping 8% of GDP last year. With external surpluses also rising in other countries of the eurozone core, the monetary union’s overall imbalance is large and growing.

In Japan, quantitative easing was the first “arrow” of “Abenomics,” Prime Minister Shinzo Abe’s reform program. Its launch has sharply weakened the yen and is now leading to rising trade surpluses.

The upward pressure on the US dollar from the embrace of quantitative easing by the ECB and the BOJ has been sharp. The dollar has also strengthened against the currencies of advanced-country commodity exporters, like Australia and Canada, and those of many emerging markets. For these countries, falling oil and commodity prices have triggered currency depreciations that are helping to shield growth and jobs from the effects of lower exports.

The dollar has also risen relative to currencies of emerging markets with economic and financial fragilities: twin fiscal and current-account deficits, rising inflation and slowing growth, large stocks of domestic and foreign debt, and political instability. Even China briefly allowed its currency to weaken against the dollar last year, and slowing output growth may tempt the government to let the renminbi weaken even more. Meanwhile, the trade surplus is rising again, in part because China is dumping its excess supply of goods – such as steel – in global markets.

Until recently, US policymakers were not overly concerned about the dollar’s strength, because America’s growth prospects were stronger than in Europe and Japan. Indeed, at the beginning of the year, there was hope that US domestic demand would be strong enough this year to support GDP growth of close to 3%, despite the stronger dollar. Lower oil prices and job creation, it was thought, would boost disposable income and consumption. Capital spending (outside the energy sector) and residential investment would strengthen as growth accelerated.

But things look different today, and US officials’ exchange-rate jitters are becoming increasingly pronounced. The dollar appreciated much faster than anyone expected; and, as data for the first quarter of 2015 suggest, the impact on net exports, inflation, and growth has been larger and more rapid than that implied by policymakers’ statistical models. Moreover, strong domestic demand has failed to materialize; consumption growth was weak in the first quarter, and capital spending and residential investment were even weaker.

As a result, the US has effectively joined the "currency war" to prevent further dollar appreciation. Fed officials have started to speak explicitly about the dollar as a factor that affects net exports, inflation, and growth.‎ And the US authorities have become increasingly critical of Germany and the eurozone for adopting policies that weaken the euro while avoiding those – for example, temporary fiscal stimulus and faster wage growth – that boost domestic demand.

Moreover, verbal intervention will be followed by policy action, because slower growth and low inflation – partly triggered by a strong dollar – will induce the Fed to exit zero policy rates later and more slowly than expected. That will reverse some of the dollar’s recent gains and shield growth and inflation from downside risks.

Currency frictions can lead eventually to trade frictions, and currency wars can lead to trade wars. And that could spell trouble for the US as it tries to conclude the mega-regional Trans-Pacific Partnership. Uncertainty about whether the Obama administration can marshal enough votes in Congress to ratify the TPP has now been compounded by proposed legislation that would impose 'tariff duties' on countries that engage in “currency manipulation.” If such a link between trade and currency policy were forced into the TPP, the Asian participants would refuse to join.

The world would be better off if most governments pursued policies that boosted growth through domestic demand, rather than beggar-thy-neighbor export measures. But that would require them to rely less on monetary policy and more on appropriate fiscal policies (such as higher spending on productive infrastructure). Even income policies that lift wages, and hence labor income and consumption, are a better source of domestic growth than currency depreciations (which depress real wages).

The sum of all trade balances in the world is equal to zero, which means that not all countries can be net exporters – and that currency wars end up being zero-sum games. That is why America’s entry into the fray was only a matter of time. 

Nouriel Roubini

MAY 1, 2015

Y el 7 de Mayo... Reino Unido

Britain’s Silent Election

LONDON – Other people’s elections are usually baffling and boring, which is certainly true of the United Kingdom’s coming vote on May 7; indeed, many Britons share the sentiment. The longest election campaign in UK history has been strikingly short of focus. Nonetheless, the campaign contains three important pointers for other Western democracies.

The first pointer is that Bill Clinton’s famous campaign slogan from 1992 – “It’s the economy, stupid” – is itself stupid, or at least insufficient. If it was the economy that would decide Britain’s election, Prime Minister David Cameron would be leading a much more confident campaign.

For the past 18 months or so, the UK has had Europe’s fastest-growing economy, and at times has even outpaced the United States. The unemployment rate, now 5.6%, has fallen to less than half that of the eurozone.

But favorable economic indicators have made little difference to the standing of Cameron’s Conservatives in opinion polls, and have done nothing to save their coalition partner, the centrist Liberal Democrats, from a severe slump. Too many voters, it seems, still do not feel better off, and for good reason: average incomes have barely begun to rise, following seven painful years.

So the right slogan in this campaign might be, “It’s the living standards, stupid.” Or, more accurately (though more cumbersomely): “It’s the perception of future living standards, stupid, and the perception of fairness surrounding those prospects.” Either way, the point is straightforward: statistical recovery is not enough.

This seems to be why, although it has only a small lead of 2-4 percentage points in the polls, the center-left Labour Party has had the best of the campaign. Labour’s leader, Ed Miliband, was widely derided last year as weak, unconvincing, and unlikeable; but, perhaps benefiting from low expectations, he has looked steadily more credible and statesmanlike as the campaign has gone on.

The second pointer is that foreign affairs, though rarely a major factor in any country’s national elections, can contribute to a general sense of unease about political leadership. It had been widely assumed that the UK’s continued membership in the European Union would be a leading campaign issue, given the rise of the UK Independence Party and Cameron’s pledge that, if re-elected, he would hold a referendum on the question by 2017.

Indeed, Cameron’s promise is arguably the most consequential issue at stake in the British election: if he remains Prime Minister, there will be a referendum; if Miliband takes over, there will not be. Britain’s strategic future rests on this choice.

Yet there has been near-silence on this choice. Both UKIP and its charismatic leader, Nigel Farage, have slipped in opinion polls and have struggled to get attention. More important, Cameron has said almost nothing about either Europe or immigration; and, though Miliband’s clearly stated pro-EU stance has endeared his candidacy to many business leaders, he, too, has played down the issue.

Perhaps this reflects my own bias, but I suspect that this evasiveness on the part of Britain’s main political parties has weakened support for them, by diminishing their status as valid representatives of the country. Voters may not list Europe or foreign affairs among the main issues that concern them. But the daily news about migrants dying in the Mediterranean, the war in Ukraine, Greece’s possible default, the turmoil in Syria, Iraq, Yemen, Libya, and Gaza, Iran’s nuclear program, and more heighten voters’ awareness that their country needs to be defended robustly, by a government with a coherent foreign policy.

And yet Britain’s defense forces are weaker than at any time since the 1930s. The general perception is that Britain’s voice in international affairs is less influential than at any time since then, too. Whatever voters think Britain’s foreign and defense policy should be, they believe their country should have one.

The final pointer of the UK election may partly reflect the vacuum in national leadership that such silence epitomizes. Whatever the result of the election, the most striking phenomenon will be the rise of regionalism, most notably a surge in support for the pro-independence Scottish National Party (SNP).

No one can predict whether the SNP might end up in the paradoxical position of joining a coalition with Labour to govern a country that it was campaigning to leave in last September’s independence referendum. But the SNP’s likely electoral gain is too large to be explained by secessionist sentiment alone. The party appears to be attracting many people who voted against independence but who want more regional autonomy and a stronger voice for Scotland in the Westminster Parliament.

The absence of a broader “feel good” factor from economic recovery, resentment of economic inequality, mistrust of national political leaders, and greater faith in localism: these are the main features of Britain’s election campaign. Whether or not they make Miliband the next prime minister (in a coalition with the Liberal Democrats, the SNP, or both), they are likely to characterize elections elsewhere as well in the years ahead. 

Bill Emmott, a former editor-in-chief of The Economist .

MAY 1, 2015

Alemania, una explicación (en familia)

Crisis de liderazgo en VW

Ferdinand Piëch, víctima de su propio maquiavelismo

 

Hace una semana, el consejo de vigilancia del Grupo VW aceptó la dimisión del que hasta entonces había sido su presidente, el mítico ingeniero e industrial Ferdinand Piëch. Su decisión no fue voluntaria. En el aeropuerto de Braunschweig, antes de iniciarse la reunión del Consejo, fue abordado por varios de sus miembros que le ofrecieron la salida honrosa de la dimisión.

El terremoto que se lo ha tragado lo había provocado él mismo 10 días antes al pretender despedir a Martin Winterkorn, el actual presidente ejecutivo del consorcio y artífice de su actual desarrollo hasta convertirse en el segundo fabricante mundial.

Por una vez no calculó bien sus apoyos. En especial los de la representación sindical, que tiene 10 de los 20 votos del consejo y que siempre le había respaldado. Pero que, esta vez, se pusieron del lado de Winterkorn. Aunque ahora lo quisiera sustituir por Matthias Muller, presidente de la marca Porsche, Winterkorn había sido considerado siempre como un hombre de Piëch, que lo propuso como presidente ejecutivo cuando se marchó Bernd Pischetsrieder.

Éste último, cuando era presidente de BMW, se había ganado el respeto de Piëch al conseguir que le cediera la marca Rolls Royce, por la que ambas empresas competían. Lo atrajo a VW nombrándole presidente de Seat y después hizo que le sucediera como presidente ejecutivo cuando él, en 2002, pasó a presidir el Consejo de Vigilancia.

La irrupción de Gerhard Schroeder

Pero el socialdemócrata Gerhard Schroeder, primer ministro de Baja Sajonia (que tiene dos puestos en el Consejo), fue elegido canciller de Alemania, y le sucedió el democrata-cristiano Christian Wulff, cuya relación con Piëch no era buena. De acuerdo con él,  

Pischetsrieder intentó un golpe de mano, pero los sindicatos se opusieron y el promotor del intento tuvo que salir del grupo al fin de su contrato, dejando el puesto a Winterkorn.

Nieto del mítico Ferdinand Porsche, el creador del Escarabajo, demostró desde el comienzo de su carrera profesional en Porsche, la empresa familiar, ser un brillante ingeniero. Diseñó coches de competición que dominaron el Campeonato del Mundo de Resistencia. Pasó a Audi, que había sido adquirida por el Grupo VW, en la que creó modelos que le dieron un carácter premium como el Audi 100 y el Audi Quattro. Estos logros le llevaron, primero a la presidencia de Audi, y después, cuando se jubiló Carl Hahn, a la presidencia ejecutiva del Grupo VW.

Este ascenso le llegó en 1993, en un momento difícil. La caída del muro de Berlín había abierto los mercados del Este de Europa pero la inestabilidad que se creó afectó a muchas economías, entre ellas, la española. Su antecesor había apostado por España, invirtiendo en Seat, que se convirtió en el origen de todos males para Piëch que, en 2001, en la presentación de una nueva generación del modelo Polo en Wolfsburg, declaró «si de mí hubiera dependido, jamás hubiéramos comprado Seat». Su apuesta fue por la marca checa Skoda que cuando fue adquirida producía la mitad de la española y que ahora la triplica.

Sus jugadas maestras

Sí logró conquistar al ingeniero español José Ignacio López de Arriortúa, el hombre que revolucionó los sistemas de suministros y producción en la industria, que siguen vigentes 20 años más tarde. Superlópez, como se le llamaba, era vicepresidente de compras y suministros de General Motors (GM) en Detroit y saltó al Grupo VW casi sin avisar. GM le acusó de haberse llevado información sensible y López de Arriortúa tuvo que dejar VW.

Su penúltimo combate fue contra Wendelin Wiedeking, el presidente ejecutivo de Porsche, la marca de la que él, junto a los demás miembros de las familias Porsche y Piëch, son máximos accionistas. Wiedeking, con el visto bueno de Wolfgang Porsche, primo de Ferdinand Piëch y presidente de consejo de vigilancia de Porsche, logró adquirir hasta el 51% del Grupo VW.

La operación no gustó, ni a Piëch, ni a los sindicatos, que reaccionaron. Wiedeking dio entonces un paso en falso, endeudando a Porsche para adquirir derechos de compra de acciones hasta el 70% que, según las leyes europeas, le daría el control del consorcio.

Pero Piëch utilizó la deuda contraída para imponer a sus familiares que su primo despidiera a Wiedeking y que Porsche pasara a ser una de las marcas del grupo cuyo 50,73% controlarían as familias Porsche-Piëch. Aunque la operación no fue mala para él, Wolfgang Porsche se ha resarcido ahora al apoyar Winterkorn en contra de su primo.

CNMV. People wanted to know whether board members were actually doing their jobs or just filling seats and collecting a nice fee.

La primavera Accionista Continúa

24 de abril 2015

 

LONDRES - Es temporada anual asamblea general - la época del año en algunas de las mayores compañías del mundo se reúnen para informar a los accionistas y tienen una apariencia de una conversación con ellos. Para el próximo par de meses, una sucesión de empresas hablará sobre lo que influyó en su rendimiento respecto al año anterior, lo que están planeando para el futuro, y las decisiones que sus juntas directivas han hecho.

Hubo un momento en que estas reuniones se llevaron a cabo sin mucha fanfarria, mayormente desapercibida por el público. Eso no ha sido así durante un par de años. Una desigualdad empeoramiento economía y la ampliación han impulsado a más gente a participar más activamente y tomar un interés en las actividades de las empresas y quienes los ejecutan. Y, con ese cambio, la atención se ha ampliado desde los directores ejecutivos y equipos ejecutivos a los que antes existían en un cuadro negro: los miembros del directorio de las empresas.

En 2012, los accionistas y los otros empezaron brilla una luz brillante en los tablones, cuestionando sus decisiones y actividades, y las de los miembros individuales, y así nació la primavera Accionista . Las personas se cansaron de consejeros sin oído que operan en habitaciones insonorizadas , aparentemente ignorando la realidad económica y el estado de ánimo del público. Querían confrontar a aquellos que deciden sobre los ejecutivos de compensación a menudo llamativos o aprobar las decisiones de las empresas para llevar a cabo sofisticada ingeniería fiscal. La gente quería saber si los miembros del consejo estaban haciendo realidad sus puestos de trabajo o simplemente llenar los asientos y se percibe una cuota agradable.
 

Las empresas y los directorios de las empresas Muchos esperaban que este mayor interés pasaría rápidamente; en cambio, ha madurado. El descontento ha seguido aumentando, y los inversores, empleados, políticos y miembros del público ahora quieren saber no sólo acerca de la compensación ejecutiva, sino también acerca de la frecuencia discrepancia asombrosa entre lo que ganan al personal de más altos y salarios más bajos de las empresas. Ellos quieren saber acerca de los salarios dignos y contratos de cero horas. Ellos quieren saber lo que están haciendo las empresas para abordar el cambio climático, ya sean miembros responsables de la comunidad, la forma en que se comportan en las zonas de conflicto, y mucho más.

Aquellos hacer las preguntas ya no se contentan con protestar afuera. Se están convirtiendo en cada vez más sofisticada sobre cómo ser escuchado, la compra de acciones, un paso adelante para el micrófono, y buscando miembros de la junta en el ojo, por lo que sus preguntas se convierten en parte de las actas oficiales. Y que están poniendo presión sobre los principales inversores de las empresas para mantener los miembros del consejo para tener en cuenta también.

Las preguntas formuladas y las declaraciones hechas a veces puede ser prolijo. Pero muchos de ellos son legítimos, y son un importante recordatorio a las juntas que deben servir a todo el ecosistema de la compañía - los inversores, empleados, clientes y la comunidad por igual. De hecho, estas reuniones abiertas son un recordatorio de que los miembros del consejo deben hacer las preguntas difíciles durante todo el año, en lugar de simplemente el caucho de sellado de propuestas de gestión o de ir a lo largo de llevarse bien.

Curiosamente, al igual que el movimiento para mantener juntas para dar cuenta se ha ganado una mayor tracción, algunas empresas han adoptado nuevas formas de convocar reuniones anuales de accionistas. Estas fueron una vez bastante encuentros serios. La alta dirección de las empresas caminaría inversionistas y miembros de la junta a través del paso de las formalidades informativas a paso, resultados actuales, responder preguntas, votar, y seguir adelante. Había té, café y galletas, pero nada extravagante.

En los últimos años, sin embargo, ha habido una tendencia hacia un ambiente más carnavalesco, con las empresas la incorporación de grandes nombres de artistas y convertir el evento en un pep rally de sentirse bien. El año pasado, la reunión anual de Wal-Mart ofreció Harry Connick, Jr., Robin Thicke y Pharrell Williams. En 2013, Elton John realizó.

Por el contrario, otras empresas han oscilado al extremo opuesto y abrazado reuniones totalmente virtuales. El consejo se reúne delante de una cámara para una transmisión en vivo a los accionistas, tiene preguntas presentadas con antelación y evita los manifestantes por completo. Este año, HP se unió a Sprint y Martha Stewart Living Omnimedia por este camino.

No es una virtud de tener una reunión con un componente virtual: las empresas son globales, y también lo son sus inversores, que pueden participar sin tener que subir a un avión. Pero un webcast de una reunión con una audiencia en vivo sería la combinación ideal. Y mientras que las empresas podrían argumentar que las reuniones totalmente virtuales ahorran dinero - que por supuesto es cierto - los inversores no necesitan Robin Thicke. Ellos se conforman con buenos números, análisis serio y una galleta seca.

Juntas y gerentes deben tomar estas reuniones en serio. Parte del trabajo se enfrenta a los que tienen algo en juego. Hosting circos o escondiéndose detrás de las cámaras no mantendrá preguntas difíciles de venir. Un asiento en la mesa de reuniones viene con la responsabilidad de ponerse de pie y hacer esta parte vital del trabajo - en persona y sin acompañamiento musical. 

Lucy P. Marcus , fundador y CEO de Marcus Venture Consulting, Ltd.

AIIB... el ocaso del BM y del FMI

The AIIB and Global Governance

APR 27, 2015

 

HONG KONG – Despite official American and Japanese opposition, 57 countries have opted to be among the founding members of the China-led Asian Infrastructure Investment Bank (AIIB). Regardless of what naysayers believe, this remarkable turn of events can only benefit global economic governance.

According to former US Treasury Secretary Larry Summers, the AIIB’s establishment “may be remembered as the moment the United States lost its role as the underwriter of the global economic system.” Asia Development Bank (ADB) President Takehiko Nakao, by contrast, does not believe that there will be a “major change to the world of development finance,” though he conceded that “there can be interpretations as to the symbolic meaning of this.”

Who is right will depend largely on the decisions that the AIIB’s top shareholders make regarding its operating structure. So far, the AIIB has not sought to amend the principle that the largest contributor to a multilateral organization gets the largest say in running it. Just as the US dominates the World Bank and Europe leads the International Monetary Fund, China will head the AIIB.

This implies a larger global leadership role for China – which the world, including its traditional powers, should welcome. After all, global leadership is not just a matter of might; it also reflects the provision of global public goods.

When World War II ended, the US, aside from being the world’s leading military and economic power, was the largest provider of such goods, through the Marshall Plan, support for the United Nations, and contributions to the Bretton Woods institutions (the International Monetary Fund and the World Bank). But massive debts have lately undermined the ability of the US – not to mention Europe and Japan – to continue making such large contributions. Fortunately, China is willing and able to fill the gap.

In fact, China might have done so within the Bretton Woods institutions, were the distribution of voting rights within them not skewed so heavily toward the incumbents, who still enjoy veto power. For example, China has a 3.8% voting share in the IMF and World Bank, even though it accounts for more than 12% of world GDP. The United Kingdom and France – which are one-third the size of China – each have a 4.3% share. With the incumbents unwilling to bring China’s voting share in line with its economic might, China had little choice but to launch its own institution.

But the AIIB has its own objectives, which do not align precisely with those of, say, the World Bank. Specifically, the bank is a critical element of China’s “one belt, one road” strategy, which encompasses two initiatives: the overland Silk Road Economic Belt, connecting China to Europe, and the 21st Century Maritime Silk Road, linking China to Southeast Asia, the Middle East, and Europe. While the US “pivots” to the east, China is pirouetting west, applying the lessons of its development to its trading partners across Eurasia and beyond.

Perhaps the most important of these lessons is that connectivity is vital to economic growth. Over the last three decades, the construction of roads, railways, ports, airports, and telecommunications systems in China has fostered trade, attracted investment, and, by linking the country’s land-locked western and southern provinces to its more prosperous coastal areas, helped to reduce regional disparities.

China’s Silk Road initiative, which aims to boost prosperity among China’s trading partners largely through infrastructure investment, is a logical next step – one on which China is spending significantly. In addition to its initial contribution of up to $50 billion to the AIIB, China has committed $40 billion to its Silk Road Fund, $32 billion to the China Development Bank, and $30 billion to the Export-Import Bank of China.

According to estimates by HSBC, the “one belt, one road” initiative could end up costing as much as $232 billion – just under two-thirds of the World Bank’s balance sheet in 2014. The $100 billion AIIB will play a central role in this effort.

Given massive global demand for infrastructure finance – which, according to ADB estimates, will amount to $8 trillion in Asia alone over the next decade – the AIIB should not be considered a threat to the World Bank, the ADB, or other multilateral lenders. Nonetheless, it will compete with them, owing to its distinctive – and probably more efficient – approach to lending.

In fact, the AIIB’s operations will most likely resemble those of the World Bank in the 1960s, when engineers with hands-on development experience dominated the staff and could design lending conditions that worked for borrowers. In the late 1980s, the World Bank began to implement the Washington Consensus, pushing for economic and political liberalization, without sufficient regard for local political or economic realities. The result was conditional lending, with terms – created mostly by policy wonks – that many developing-country borrowers could not meet (at least not without hiring consultants to adjust their official reporting).

The acid test of the AIIB’s effectiveness will be its governance model. One failing of the Bretton Wood institutions is their full-time shareholder boards of directors, which tend to undermine effectiveness by micro-managing and often requesting conflicting lending conditions. The World Bank has wasted far too much time re-organizing itself under various presidents, without recognizing the fundamental problem with its own governance structure.

Even if the AIIB does not deliver as promised, its establishment is an important reminder that in a fast-changing world, economic governance cannot remain stagnant. If Western leaders really do believe in innovation, competition, and meritocracy, they should welcome the AIIB. 

Andrew Sheng, Distinguished Fellow of the Fung Global Institute.

Xiao Geng, Director of Research at the Fung Global Institute.

'The future of humanity will depend on mastering a balancing act'.

Planetary Boundaries and Human Prosperity

APR 28, 2015

STOCKHOLM – The future of humanity will depend on mastering a balancing act. The challenge will be to provide for the needs of more than ten billion people while safeguarding our planetary life-support systems. Recent scientific insights have made us better equipped than ever to strike that balance. Doing so will be our generation’s great task.

Ending poverty has become a realistic goal for the first time in human history. We have the ability to ensure that every person on the planet has the food, water, shelter, education, health care, and energy needed to lead a life of dignity and opportunity. But we will be able to do so only if we simultaneously protect the earth’s critical systems: its climate, ozone layer, soils, biodiversity, fresh water, oceans, forests, and air. And those systems are under unprecedented pressure.

For the last 10,000 years, the earth’s climate has been remarkably stable. Global temperatures rose and fell by no more than one degree Celsius (compared with swings of more than eight degrees Celsius during the last ice age), and resilient ecosystems met humanity’s needs. This period – known as the Holocene – provided the stability that enabled human civilization to rise and thrive. It is the only state of the planet of which we know that can sustain prosperous lives for ten billion people.

But humans have now become the single largest driver of ecosystem change on earth, marking the start of a new geological age that some call the Anthropocene. Scientists argue over the exact starting point of this epoch, but it can be dated to somewhere around 1945, when modern industry and agriculture began to expand briskly. In the future, geologists will see telltale markers like radioactive carbon – debris from nuclear blasts – and plastic waste scattered across the planet’s surface and embedded in rock.

More recently, human activity has undergone what is being called the Great Acceleration: the rapid intensification of resource consumption and ecological degradation. We risk disrupting the earth’s critical systems, and with them modern civilization itself.

The planet’s response to our pressures is likely to be unpredictable. Indeed, the surprises have already begun. As we overdraw on our planet’s accounts, it is starting to levy penalties on the global economy, in the form of extreme weather events, accelerated melting of ice sheets, rapid biodiversity loss, and the vast bleaching of coral reefs.

We face an urgent need to define a safety zone that prevents us from pushing our planet out of the unusually benevolent Holocene state. The Planetary Boundaries framework, which a group of scientists, including one of us (Johan), first published in 2009, does just that. It draws on the best science to identify the key planetary processes regulating the earth’s ability to sustain Holocene-like conditions. For each of those processes, it proposes a boundary – a quantitative ceiling – beyond which we risk inducing abrupt changes that could push our planet into a state that is more hostile to humanity. 

These nine boundaries include climate change, ozone depletion, ocean acidification, interference in the global nitrogen and phosphorus cycles, land-use change, global freshwater use, biosphere integrity, air pollution, and novel entities (such as organic pollutants, radioactive materials, nanomaterials, and micro-plastics). Worryingly, our most recent update in January, which confirms the nine boundaries and improves their quantifications further, indicates that humanity has already transgressed four: climate change, nitrogen and phosphorus use, biodiversity loss, and land-use change.

Our challenge is to bring the earth’s systems back within the safety zone, while simultaneously ensuring that every person has the resources he or she needs to lead a happy and fulfilling life. Between these planetary and social boundaries lies humanity’s safe and just operating space: the limits we must respect if we are to create a world that is ecologically resilient and free of poverty.

Meeting these goals will require a far more equitable distribution of the planet’s resources and far greater efficiency in how we use them. If we are to ensure that our planet remains one on which all of humanity can thrive, we will have to pursue a new paradigm of prosperity. 

Johan Rockström is Professor in Global Sustainability.

Kate Raworth is Senior Visiting Research Associate at Oxford University’s Environmental Change Institute, Senior Associate of the Cambridge Institute for Sustainability Leadership, and a member of the Club of Rome.

UCRANIA, Alarma nuclear en el XXIX aniversario de Chernobyl

Ukraine’s Other Chernobyls

APR 29, 2015

KYIV – In 1983, the Soviet Union inaugurated two nuclear reactors in what is now Ukraine. One of them, unit four at Chernobyl, experienced an explosion and fire three years later that released large quantities of radioactive particles into the atmosphere – a catastrophic accident whose effects are still being felt far beyond Ukraine’s borders. The other reactor, unit one at the South Ukraine Nuclear Power Station, remains in operation, though all indications suggest that it should be retired.

The prolonged operation of unit one and the country’s aging nuclear power plants probably would not have been possible without financial support from European taxpayers, delivered through the European Bank for Reconstruction and Development and the European Atomic Energy Community (Euratom) as part of a €600 million ($650 million) “safety upgrade” program. In defiance of both the Convention on Environmental Impact Assessment in a Transboundary Context (the Espoo convention) and the EBRD loan agreement, the program was undertaken in the absence of any consultation with Ukraine’s European neighbors.

Thanks to these efforts, the South Ukraine plant was granted a ten-year lifetime extension permit in 2013 by the State Nuclear Regulatory Inspectorate (SNRIU). But, according to a comprehensive study released last month by the National Ecological Centre of Ukraine (NECU), the assessment on which this decision was based was deeply flawed. In fact, the unit one reactor suffers dangerous vulnerabilities, with observed wear in some areas already exceeding tolerable levels by a factor of ten. Such vulnerabilities, the study warns, could result in a nuclear emergency, including a release of radioactive particles inside the unit – or even into the environment.

This is hardly an isolated case. Three of Ukraine’s nuclear power units are currently operating beyond their design lifetime, with nine others set to reach the end of their intended lifetime within the next five years. Most immediately, unit two in South Ukraine will reach that point in less than three weeks, meaning that the SNRIU must now decide whether to grant that unit a 20-year lifetime extension.

The SNRIU will make this critical decision without key information about the health and environmental risks that the reactor poses to Ukraine and its neighbors. Though this contravenes Ukraine’s responsibility, as a signatory to the Espoo convention, to carry out a cross-border environmental-impact assessment (not to mention missing the opportunity to consider potential alternatives to continuing the reactor’s operation), no such analysis is expected to take place.

Last month, campaign groups in neighboring countries wrote to their representatives at the EBRD, requesting that the bank suspend its support for revitalizing Ukraine’s nuclear power plants until a cross-border assessment is carried out. A similar letter, signed by CEE Bankwatch Network and 45 other environmental NGOs from across the region, had already been sent to the European Commission’s Directorate-General for the Environment and the European Union’s director at the EBRD.

But, even with such an analysis, Ukraine’s nuclear regulator would be in no position to guarantee the safe operation of aging nuclear units. Not only is its professional capacity dubious, as the NECU study highlighted; its independence has been dramatically curtailed by the government’s recent decision to reduce significantly regulatory obligations for businesses and state-owned companies (except with regard to taxation). As the EBRD acknowledged in February, the SNRIU is now prohibited from taking the lead in conducting safety inspections, which is in breach of the EBRD loan agreement conditionality.

This is to say nothing of the immediate threat posed by the ongoing military conflict with Russia-backed rebels in the Donbas region of eastern Ukraine. Beyond the obvious risks associated with instability, there is the fact that Ukraine depends on Russia not only for most of the fuel to run its aging reactors, but also for the treatment and storage of most of its spent fuel. In other words, Ukraine’s dependence on nuclear energy, which accounts for about half of its electricity generation, has increased its strategic vulnerability to Russia.

That alone should be enough to convince Ukraine’s government not to perpetuate their country’s reliance on this insecure and dangerous energy source. If it is not, the 29th anniversary of the Chernobyl disaster, commemorated this month, should serve as a stark reminder of how much damage a nuclear accident can cause.

Ukraine should take its reactors’ expiration dates as an opportunity to pursue a safer, more sustainable energy future. Given that this would also be in Europe’s interest, EU governments and citizens must do whatever it takes to support this effort. It is a long-term commitment, but one for which there may not be a lifetime extension. 

Iryna Holovko is a Ukraine campaigner at CEE Bankwatch Network and the National Ecological Centre of Ukraine.