Category: EGD

Clarissa writes*

April 20th marked a historic day in Spain’s history, as tens of thousands mobilised against the detrimental impacts of overtourism in Canary Islands (Canarias in Spanish). Immortalised under the name “20A” and the motto “Canarias has a limit”, the people have demanded change. Adding to the pressure, 14 hunger striking activists met with the Congress of Deputies in Madrid to voice to concerns (Público, 2024). These protests have inspired similar movements in other regions, notably Málaga, where tourism-led growth has gone too far (Laghrissi, 2024). The Canarian political elite, however, has rejected the protestors’ demands.

The Canary Islands are extremely dependent on tourism. The islands’ 2.2 million inhabitants received 13.9 million visitors in 2023 (Rodger & Kemp, 2024). Tourism makes up 35% of the region’s GDP, making its residents extremely vulnerable to shocks in the sector (Jones, 2024).

The residents of Canary Islands are bearing the costs of mass tourism – 34% of the population is at risk of poverty or social exclusion (Shaw, 2024). Housing prices are skyrocketing, forcing a young generation (many working minimum wage jobs in tourism) to postpone their financial independence or migrate. Gabriel González, councillor of the leftist party Podemos, says “we are not living off tourism; tourism is living off us” (Rodger & Kemp, 2024).

Environmental degradation is also an immense source of concern, for several tourism mega-projects have been found to be built illegally on protected areas. These buildings’ unfinished frames serve as a reminder of corruption and broken neighborhoods (Vargas, 2022).

Protestors plastered their demands to the regional parliament on thousands of posters (Efe, 2024). The first is an eco-tax on tourists entering protected areas to pay for nature conservation, agriculture, and infrastructure rehabilitation. The second — an emergency tourism moratorium — would freeze new permits for touristic rentals until stronger regulations were adopted. The third would limit foreign investment in real estate, as allowed by Article 349 of the Treaty of Rome.

The Canarian Parliament has rejected these three demands

Bottom Line: The people of the Canaries demand changes, but their political representatives are defending an unsustainable status quo that favors corruption and touristic multinationals. Nonetheless, the people are united in pressing for their concerns.

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* Please help my Real Donut Economics** students by commenting on unclear analysis, alternative perspectives, better data sources, or maybe just saying something nice 🙂

** Why “Real”? In short, because (a) Raworth’s claims to being a “21st century economist” denies that all of her ideas were presented by others in the 20th century and (b) she presents no viable mechanisms (besides “be nice”) for achieving equality and sustainability. My students are more realistic. In long? Read this.

Alexandra writes*

High-income capitalist welfare states provide social security to their citizens in the form of basic goods and services. However, they are faced with a challenge: To what extent are they able to provide (social) welfare in the face of the climate crisis? I propose a post-growth welfare system —  which assumes a non-growing economy — that can deliver on these two goals (Walker et al., 2021).

Historically the welfare state developed after the industrial revolution, when many previously existing institutions of social security were eroded and replaced by the state (Esping-Andersen,1988). Following World War II the welfare state was consolidated and social provision expanded in line with the Keynesian prediction of higher public spending stimulating the economy (Walker et al., 2021). After the financial crisis in the 1970s however, public spending came to be regarded as an inefficient inhibitor of private investment and thus economic growth (Quadagno, 1987).

Setting aside that controversy, we now need to consider environmental sustainability, which means decarbonising both the private and public sectors. How should this happen?

First, Gough (2017) suggests redefining “wellbeing” (aka, welfare or Wohlfahrt) to include social, economic, and environmental dimensions, each with their own measure.

Next, some scholars argue that the transition to a post-growth economy means that the public sector should shrink, which leaves fewer resources for the public sector to deal with social disruptions and environmental crisis (Bailey, 2015).

Finally, Walker et al. pose five questions to post-growth welfare systems:

1. Where will a post-growth State get its revenues?
2. How can the State pay for increased welfare needs?
3. How can the State’s institutions break their dependencies on growth?
4. How should the State manage increasingly scarce resources?
5. How can political barriers to a welfare state transformation be overcome?

Bottom Line: The welfare state needs to be critically examined and re-developed to cope with post-growth economies, ecological limits and evolving social needs.

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* Please help my Real Donut Economics** students by commenting on unclear analysis, alternative perspectives, better data sources, or maybe just saying something nice 🙂

** Why “Real”? In short, because (a) Raworth’s claims to being a “21st century economist” denies that all of her ideas were presented by others in the 20th century and (b) she presents no viable mechanisms (besides “be nice”) for achieving equality and sustainability. My students are more realistic. In long? Read this.

Alice writes*

Sweden’s Million Program (MP) aimed to address 1960’s housing shortages, but it worsened socio-economic segregation. MP areas are now associated with high crime rates, low socio-economic status, and educational disparities. This post explains the origins of the MP, its current troubles, and suggestions for reform.

In the 1960’s, there was a looming housing shortage in large cities in Sweden, particularly in the two biggest cities: Stockholm and Gothenburg. In Stockholm, over 100,000 people were queuing for public rental housing (Länsstyrelsen, 2004). The Social Democratic government was criticized for the lack of housing and as a response, the party adopted a motion to build “one million homes in ten years”, starting in 1965 (Allmännyttan, n.d.).

MP homes were primarily three-story buildings, but also small villas and high-rise buildings in the suburbs. These buildings were designed in accordance with functionalist architecture, a style that had previously been criticized by Stockholm’s mayor for compromising the city’s aesthetic values (Lindhagen, 1930). Merely two years after the reform was adopted, the housing shortage turned into a surplus, and those with fixed incomes saw tax advantages in buying a home instead of renting (Boverket, 2007). The monotonous architecture and sterile environment of MP neighborhoods repelled citizens who could afford to move elsewhere, leaving low-income, socially disadvantaged residents behind. Socio-economic segregation increased.

In 2015, as a response to a surge in organized criminal activity in the suburbs of Stockholm and Gothenburg, the police mapped particularly vulnerable areas with high crime rates and low socio-economic status. In 2022, eighteen out of nineteen of these areas were MP neighborhoods (GP, 2024). The negative reputation of MP areas means that middle-class citizens do not want to move there, creating a self-fulfilling prophecy of high unemployment and low education levels (SvD, 2018).

The future of the MP areas is highly debated. Some suggest that areas should be torn down and rebuilt to conform with modern social planning (SVT, 2022). Others suggest that the municipalities should invest in replacing concrete with more green areas (SvD, 2019). No matter what choices are made, there is an urgent need to renovate 400 000 MP housing units at a cost of SEK 300-500 billion (EUR 30-50 billion) (SVT, 2019).

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* Please help my Real Donut Economics** students by commenting on unclear analysis, alternative perspectives, better data sources, or maybe just saying something nice 🙂

** Why “Real”? In short, because (a) Raworth’s claims to being a “21st century economist” denies that all of her ideas were presented by others in the 20th century and (b) she presents no viable mechanisms (besides “be nice”) for achieving equality and sustainability. My students are more realistic. In long? Read this.

Kuba writes*

High-speed 2 (HS2), the UK’s cross-national railway plan, has already earned its place as one of the greatest failures of infrastructure planning in modern history. Proposed in 2009, it was meant to connect London with Birmingham and the North of England through high-speed rail. It was originally meant to cost £37.5bn. However, by 2020 the estimated cost had ballooned to around £110bn according to both independent and government assessments.

A key defence of the project was that it would reduce regional inequality by connecting the richest and poorest regions in the country. The project was meant to help other regional development schemes such as the ‘Northern Powerhouse’. However, by 2023 the Prime Minister decided to cancel the parts of the route in northern England, thereby making the project irrelevant in terms of regional development. Cost-benefit analysis equally deemed it no longer cost-effective. Building a faster connection between London and Birmingham simply could not be seen as a part of an effective ‘levelling up’ programme to help left-behind parts of the nation. Its inability to provide any benefit beyond the two largest cities and its incredible cost of £300mn per km of track deservedly gave it the recognition of being a ‘pointless’ project.

The failure of this project derives from mismatches in rights and political power between those directly affected by the railway’s construction and those who were meant to benefit in the North. The 2017 Act that specified how HS2 Limited (the public company tasked with carrying out the project) could make land acquisitions gave communities near the proposed line a great deal of legal power.

The Act did not provide the standardised compensation system common in many other European countries when making land acquisitions for building infrastructure. As a result, councils petitioned constantly for aesthetic design changes and greater compensation, with local Conservative MPs more than happy to demand more concessions. One particularly brazen example is that of the government paying £7mn for a new golf club  to complete a small land acquisition. Many councils have delayed construction by using the 2017 Act to force HS2 Limited to seek local approval for parts of the construction process. Buckinghamshire Council delayed work by nine months simply by challenging HS2 Limited’s right to bring in construction vehicles. The institutional design of the project has allowed excessive rent-seeking, i.e., expensive, mostly aesthetic, design concessions that significantly increased costs.

The constant political and legal risks the project has faced due to the disproportionate legal and political power of small, wealthy communities along the route bestowed upon the project an ‘uncertainty premium’. This uncertainty premium has been recently further justified by the cancellation of the Northern part of the route. This has meant that the train factories based in the North of England supplying HS2 are likely to close — removing a key goal of regional development.

Millions in the north of England will not benefit because of the disproportionate power given to southern wealthy communities. Whilst these communities enjoy their huge concessions, cities in the North must face their wasted investment on a project that never came to be.

Bottom Line: Legal powers given to southern, rural, wealthy communities  enabled rent-seeking that undermined HS2 at the expense of the North of England.

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* Please help my Real Donut Economics** students by commenting on unclear analysis, alternative perspectives, better data sources, or maybe just saying something nice 🙂

** Why “Real”? In short, because (a) Raworth’s claims to being a “21st century economist” denies that all of her ideas were presented by others in the 20th century and (b) she presents no viable mechanisms (besides “be nice”) for achieving equality and sustainability. My students are more realistic. In long? Read this.

Anna writes*

Environmental degradation has occurred because of the tension between growth and sustainability, where renewable resources were exploited at a rate higher than they be can restored, and nonrenewable resources were used without regard to their stocks (Weiskopf et al., 2020). Further, climate change-intensified natural disasters are predicted to lead to up to $12.5 trillion in economic losses by 2050 (WEF, 2024). To limit further degradation and minimize the economic impacts of climate change, better techniques to protect the environment are needed.

“Rights of Nature” (RoN) is a proposed solution to these problems where either ‘naturehood’ or ‘personhood’ is given to natural entities so that degradation can be directly legally argued as injury (Ogboru, 2024). RoN has the potential to make legislation less anthropocentric and place humans within an ecological system. On the other hand, its lack of clarity may result in it becoming another failed attempt to protect the environment. The primary question regarding RoN is whether it is effective in limiting environmental degradation and pollution.

Ecuador was the first country to enshrine the RoN (Kauffman & Martin, 2017). In 2008 after pressure from indigenous and environmental groups, the constitution was amended based on principles of the Buen Vivir lifestyle (Kauffman & Martin, 2017; Ogboru, 2024). Interestingly, Ecuador’s economy is based on extractivism which directly contrasts the goal of protecting nature’s resources (Kauffman & Martin, 2021). Thus we can investigate cases in Ecuador to determine if and how RoN can protect the environment.

Early implementation was delayed and insufficient, for example the case of the Vilacambra River, where a road development project dumped debris into the river, which caused flooding. The court ruled in favor of the river, setting stipulations that the company needed to conduct an environmental impact assessment, create and conduct a remediation plan, and set up a monitoring compliance mechanism. Although the ruling was in favor of the plaintiffs, none of the mandates were followed, resulting in a secondary claim to the constitutional court in 2012. However, this ruling was stalled for six years, and the government complied with the environmental impact assessment during that time (Ogboru, 2024).

In a 2021 case, the Ministry of Mining granted a license to exploit Los Cedros, a mega-diverse forest. The Constitutional Court blocked the license, citing RoN as a legal mandate. The court’s ruling is an example of using the precautionary principle to prevent irreversible harm. The court also ordered  that public servants be trained to defend RoN. This case was seen as a significant step in normalizing the use of RoN in in court (Ogboru, 2024).

Initial attempts to implement RoN were flawed because plaintiffs had to sue and judgements were not enforced. Jurisprudence is now strengthening, and 10 out of 13 cases relying on RoN have succeeded (Kauffman & Martin, 2017).

Bottom Line: Rights of Nature can protect the environment — once precedents are set.

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* Please help my Real Donut Economics** students by commenting on unclear analysis, alternative perspectives, better data sources, or maybe just saying something nice 🙂

** Why “Real”? In short, because (a) Raworth’s claims to being a “21st century economist” denies that all of her ideas were presented by others in the 20th century and (b) she presents no viable mechanisms (besides “be nice”) for achieving equality and sustainability. My students are more realistic. In long? Read this.

Cansin writes*

If you’re considering buying a house in Turkey, there’s one more thing you need to check before deciding: has your house benefited from construction amnesty? While it may seem reasonable to assume that a property with a deed adheres to safety standards, this may not always be the case. The construction amnesty law, also known as the zoning peace law, allows retroactive forgiveness of structures built without zoning permission in Turkey. Populists often use it as a tool to gain votes.

In the 1950s, spurred by economic growth and population increase, migration from villages to cities began in Turkey, leading to unplanned urbanization marked by the emergence of illegal housing in urban areas; before elections in the 1950s and ’60s, policies were implemented to legitimize these structures, facilitating public access to municipal services (Yılmaz, 2023). The law was officially published for the first time in 1984 under the government of Kenan Evren (Harrington, 2023). Construction amnesties became a recurring political tradition, with the last applied in 2018.

Why is the construction amnesty law so important? What’s the problem with irregular urbanization?

The construction amnesty law is particularly dangerous because Turkey is an earthquake-prone country. One of the most devastating earthquakes was the 1999 İzmit earthquake, with a magnitude of 7.4, affecting numerous cities and resulting in the loss of thousands of lives. After the earthquake, the AKP government, which came to power in 2002, passed construction amnesties seven times, usually shortly before elections (Yılmaz, 2023). Although AKP had seen the terrible results of previous government’s amnesties, it made the same mistake — which led to catastrophe.

On February 6, 2023, Turkey – Syria earthquakes occurred, resulting in the collapse of numerous buildings and the loss of thousands of lives in both countries. The earthquake attracted significant attention in national and international media — and thus questions about government-approved, but unsafe buildings. The Guardian wrote “experts warned that retrospectively licensing illegal buildings for a fee would have fatal consequences”.

What are the risks for the future? Another major earthquake is expected in Istanbul, Turkey’s most populous city, whose many unsafe buildings could contribute to disaster. Although efforts are being made to make risky buildings earthquake-resistant through urban renewal projects, it remains questionable whether this will be sufficient.

To avoid your home collapsing on you, don’t rely solely on the title deed. Check if your house has benefited from the construction amnesty.

Bottom line: Turkey’s construction amnesty law means that many may die when the next major earthquake levels unsafe buildings.

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* Please help my Real Donut Economics** students by commenting on unclear analysis, alternative perspectives, better data sources, or maybe just saying something nice 🙂

** Why “Real”? In short, because (a) Raworth’s claims to being a “21st century economist” denies that all of her ideas were presented by others in the 20th century and (b) she presents no viable mechanisms (besides “be nice”) for achieving equality and sustainability. My students are more realistic. In long? Read this.

Margot writes*

In Europe, most passenger cars run on diesel or gasoline, whose combustion pollutes the air and contributes to climate change.

One solution to address those “negative externalities” is to include them in the price of transportation fuel via consumption taxes. Higher prices should provide incentives for individuals to reduce their fuel consumption and modify their driving decisions.

Thus, fuel taxes have the potential to reduce carbon emissions. However, the French experience with fuel taxes sheds light on the limited environmental impacts fuel taxes can have. Indeed, in France, even if the fuel tax represented around 59% of diesel and 64% of unleaded petrol prices in 2018, it “consistently struggled to find its place as a catalyst for low-carbon transition” and has not yet significantly reduced French transport emissions.

Setting aside public resistance and socio-economic limitations, there are two main reasons why the structure of French fuel taxes provides limited environmental benefits.

The first reason comes from the use of the revenues from the fuel tax. Like many other European governments, the French government did not originally design diesel and gasoline taxes as an environmental tool to reduce emissions. Its first fuel taxes in the early 20th century intended to raise government revenues and finance regional projects which were not necessarily linked to climate action. Since then, the revenue goal has remained mostly the same. For instance, the government planned to use most of the additional revenues from the 2018 fuel tax increase to reduce the state’s budget deficit leaving a smaller share, only 21%, dedicated to environmental measures.

The second reason for the limited environmental benefits of French fuel taxes is that they contain many exemptions and reductions which mimic fossil fuel subsidies. Since the 2000s, carbon taxes (including fuel taxes) in France have exempted fossil fuel-intensive sectors such as agriculture and the road, air and maritime transport. In 2018, exemptions and reductions of energy-related taxes amounted to €13.6 billion. This forgone tax revenue acts as a fossil fuel subsidy because it reduces their fuel costs. The result is unchanged consumption and high transport emissions.

Bottom line: French fuel taxes have had limited environmental benefits because the government spends most of the revenues raised on non-environmental measures and because it exempts polluting industry sectors from the tax.

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* Please help my Real Donut Economics** students by commenting on unclear analysis, alternative perspectives, better data sources, or maybe just saying something nice 🙂

** Why “Real”? In short, because (a) Raworth’s claims to being a “21st century economist” denies that all of her ideas were presented by others in the 20th century and (b) she presents no viable mechanisms (besides “be nice”) for achieving equality and sustainability. My students are more realistic. In long? Read this.

Kiara writes*

While some argue that “sustainable development” is an oxymoron, Tokyo is trying to deliver. In March 2021, the governor of Tokyo, Koike Yuriko, announced a set of projects aligned with the UN’s SDG goals.

The Tokyo Bay eSG project strives to build within an ESG (environment, sustainability, governance) framework. This project will create a new city that combines “convenience” and “nature” on reclaimed land, currently used for garbage processing (Tokyo Metropolitan Government, 2021).

Residents are relieved that Tokyo’s government is finally focusing on the health of the Tokyo Bay. The last 100 years have given rise to various environmental concerns such as decreasing biodiversity and water pollution. To overcome such issues, the eSG project intends to generate no waste and no emissions by relying solely on hydrogen energy.

The most ambiguous aspect of this project is its implementation of completely new technologies, digital transformation and innovations by domestic and international startups. Trash-collecting robots, for example, will help create a “swimmable Tokyo Bay.”

While some are excited about the futuristic technology, marine environment researcher, Okada Tomonari, emphasizes that a sustainable city does not end with the creation of new wetlands, or cleaning robots (Giseburt, 2023). The battle to save Tokyo Bay while improving residents’  lives needs constant attention, learning and monitoring social and environmental impacts. It is too early to dismiss long-run dangers facing Japan.

This project must succeed if Japan will meet UN goals, restore hope in sustainable development, and reverse Japan’s stagnation, inequality, and climate crises. If it does, then I will be able to swim in Tokyo Bay by 2100!

Bottom Line: Tokyo’s Metropolitan Government says the eSG Project can solve environmental concerns while delivering growth, but its reliance on technology may put those goals beyond reach.

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* Please help my Real Donut Economics** students by commenting on unclear analysis, alternative perspectives, better data sources, or maybe just saying something nice 🙂

** Why “Real”? In short, because (a) Raworth’s claims to being a “21st century economist” denies that all of her ideas were presented by others in the 20th century and (b) she presents no viable mechanisms (besides “be nice”) for achieving equality and sustainability. My students are more realistic. In long? Read this.

Max writes*

Singapore’s economic position, something relatively unimaginable one hundred years ago, results from a mixture of successful policies and critical junctures. Unlike some resource-rich states such as Saudi Arabia or Australia, “Singapore does not have leading natural resources,” which means it needs to innovate differently, “developing the service industry, trade, and tourism to boost its economy.” (Asean, 2023).

Consider Singapore’s trade liberalization, which can be described as “duty reductions in export markets but also for the removal of non-tariff barriers and behind-the-border bottlenecks” (Seshadri, 2023). After independence in 1965, Singapore pursued growth through “free trade and export promotion” (Bercuson, 1995).

For Singapore, trade liberalization meant more than just removing trade barriers; it meant committing to becoming a global leader in trade. By 1981, “ninety-six percent of all imports enter free of duty or other restrictions. There are no import quotas, variable import levies, minimum import prices, tariff quotas, or import surveillance, and the maximum ad valorem tariff rate is 5 percent” (Bercuson, 1995). This policy stimulated the Port of Singapore, creating stable employment and high revenues.

The Monetary Authority of Singapore’s management of the Singapore Dollar (SGD) created a currency that was stable against the currencies of Singapore’s trading partners, contributing to “noninflationary sustainable growth” (Bercuson, 1995). The SGD currently ranks as the sixth most stable currency worldwide.

Complementing Singapore’s trade liberalization and its strong currency, foreign and overseas investment created a powerful dynamic, with large volumes of foreign investments in the country and good returns on  overseas investments outside the country. In Singapore’s important textile market, more than 60% of output was produced by “wholly foreign-owned establishments” (Bercuson, 1995). The value of overseas investments increased from EUR 4.8 billion in 1981 to EUR 72 billion in 2023 (Bercuson, 1995; Temasek, 2023).

Whilst this growth of 6.6% per year (on average) adjusted for inflation might not seem “unbelievable,” Singapore’s steady growth in foreign direct investment, coupled with its well-managed inflation, exchange rate, and sustainable growth, reflects the nation’s impressive economic strategy. Additionally, Singapore’s diversified investment portfolio, built consistently since its inception, stands out for its ability to balance both local and foreign markets. This contrasts with Japan’s Government Pension Investment Fund, for example, which has faced periods of turmoil, experiencing four consecutive quarters of decreased value in 2023 alone.

Bottom Line: Singapore’s trade-liberalizing policies have brought strong economic benefits, both home and abroad.

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* Please help my Real Donut Economics** students by commenting on unclear analysis, alternative perspectives, better data sources, or maybe just saying something nice 🙂

** Why “Real”? In short, because (a) Raworth’s claims to being a “21st century economist” denies that all of her ideas were presented by others in the 20th century and (b) she presents no viable mechanisms (besides “be nice”) for achieving equality and sustainability. My students are more realistic. In long? Read this.

Pierre writes*

“Neglected. Expensive. Embarrassing.” Those three words are too often associated with American passenger rail services. Plagued by aging infrastructure and chronic underinvestment, passenger services seem to have a patent on inefficiency, inconsistency, and discouraging ridership.

Against this backdrop, it should come as no surprise that Amtrak (the American equivalent to the Dutch NS) has failed to turn a profit since its nationalization in 1971 (WBUR, 2020). This is the reality of a passenger rail system that fails to offer the speed, reliability, and convenience necessary to compete with other modes of transportation in the country.

Dismal levels of state and federal transportation funding has prompted an increased reliance on private sector partners to finance, construct, and ameliorate infrastructure.

Heralded as the first privately-owned and operated rail line built in the last decade, the Brightline Florida project seems promising. Inaugurated in late 2017, Brightline experienced a 67% ridership increase and a revenue jump of 174% in 2023 compared to the prior year, slightly reducing cars’ 99% share of long-distance travel in the state (Trains, 2024; Braun, 2024).

The Brightline business model focusses on transit orientated development (TOD) (Schorung, 2022). Investments into real estate developments complement its transportation offerings, enhances overall customer experience, and encourages the growth of walkable neighborhoods centered around transit hubs. It is too often the case in the United States that railway stations are located far from city centers and residential areas, which means, ironically, that stations need large parking areas for riders.

For Brightline, Miami, Fort Lauderdale, and West Palm Beach represent essential pillars for its property and real estate strategy. MiamiCentral station’s urbanization operation, for example, includes “the train terminal, which will house three rail services (Brightline, Metrorail, Metromover), a sizeable commercial center, two high-rise residential blocks and two 30-story office buildings — 2MiamiCentral and 3Miamicentral” (Schorung, 2022). As a whole, the initiative will create “around 93,000m2 of professional and commercial spaces, along with 1,300 new residential units” (Schorung, 2022).

Bottom Line: Brightline is not just diversifying its revenue sources, its TOD strategy is fosters sustainable urban growth, reduced social inequity, improved road safety, and increased city efficiency (ITDP, 2024).

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* Please help my Real Donut Economics** students by commenting on unclear analysis, alternative perspectives, better data sources, or maybe just saying something nice 🙂

** Why “Real”? In short, because (a) Raworth’s claims to being a “21st century economist” denies that all of her ideas were presented by others in the 20th century and (b) she presents no viable mechanisms (besides “be nice”) for achieving equality and sustainability. My students are more realistic. In long? Read this.