Climate, Democracy, and Other People’s Money

Climate, Democracy, and Other People’s Money

Britain’s Prime Minister Boris Johnson, France’s President Emmanuel Macron, and United Nations Secretary-General Antonio Guterres at the UN Climate Change Conference (COP26) in Glasgow, Scotland, Britain, November 1, 2021. (Christopher Furlong/Pool via Reuters)

The week of November 1: COP-26, corporatism, inflation, and much, much, more.

Reconciling the climate warriors’ agenda with either free markets or basic democratic accountability is not — how to put this — straightforward. Those attending the COP-26 conference now under way in Scotland are not trying that hard to conceal this unpleasant reality. Of course, so far as the d-word is concerned, current circumstances mean that such an exercise would be even more difficult than usual. As the Wall Street Journal’s Joseph Sternberg observed:

Bad results for Democrats in Virginia, and almost in New Jersey, suggest Mr. Biden’s party is losing its claim to represent the moderate swing voters who put him in office a year ago. So, when he signs on a dotted line at COP26 or anywhere else, the first question any foreign leader should ask is: Whose full faith and credit, exactly, stands behind this commitment?

This should embarrass the global-summit gang because it’s the same story everywhere else. Consider the Group of Seven, one of the older of the world’s many overlapping associations of nations. Its summer meeting in the U.K. paved the way for the policy breakthroughs of recent months, from a major new global corporate-tax deal to some of the green innovations to emerge from COP26. And of the leaders at the G-7’s table, only Britain’s Boris Johnson and French President Emmanuel Macron enjoyed any sort of clear-cut electoral mandate for anything, let alone for anything on the agenda at the summit.

That last caveat is worth talking about. It is true that reaching “net zero” greenhouse-gas emissions by 2050 was included in the Conservatives’ 2019 election manifesto (net zero had already been waved into law by a nonchalant House of Commons earlier in the same year), but that election was not “about” the pursuit of net zero in any material sense. That was not only because no major party was opposed to this project but also because none of them had spelled out what it would cost. To be fair, that would have been hard: They hadn’t made a serious effort to find out. Net zero was just a pretty promise made by a feckless Conservative Party and cheered on by even truer believers on the left, its excruciatingly painful consequences safely over the political horizon. The ugly implications of that promise are now beginning to come into view, and, one way or another, that’s going to matter.

As for Macron, having already seen, with the rise of the gilets jaunes, the political trouble that higher energy costs can cause, it is no coincidence that (as mentioned in a recent Capital Letter) he is in the process of reversing an earlier planned (partial) retreat from nuclear energy (France is heavily reliant on its nukes) and is pressing for nuclear to be treated as a green-energy source for the purposes of the EU’s “taxonomy for sustainable activities.” (Click here for an explanation if you can face it.)

But back to Sternberg:

As for the other world leaders making these decisions, Canadian Prime Minister Justin Trudeau and German Chancellor Angela Merkel both lead minority governments (without and with a coalition partner). Or rather Ms. Merkel used to lead such a government. By the time she showed up in Glasgow for COP26 she didn’t represent anyone, having long ago announced she’d retire after the September elections in which her party’s proportion of the vote hit a postwar low.

Japan is on to its second of two prime ministers this year, only the more recent of whom won an election. Italian Prime Minister Mario Draghi hasn’t been elected by anyone, having come to power via obscure machinations among a kaleidoscopic array of parties in Rome. The European Union gets a seat at the G-7 table, too, and its democratic deficit—which in Europe is code for “crisis of legitimacy”—is longstanding, notorious and possibly unfixable.

These are the people negotiating global regulatory deals?

Matters grow worse once one expands the circle to include the leaders of the Group of 20 large economies, whose summit immediately preceded COP26, or the attendees of the climate summit itself. The heads-of-state-and-government lineup at these things is an undemocratic rogues’ gallery. China’s Xi Jinping (when he troubles to show up; he didn’t attend COP26) and Saudi Arabia’s royal family enjoy the legal authority to represent their countries at such events. But they lack the democratic legitimacy to do so—and they know it. This is exactly why they dare not test their subjects’ patience with environmental commitments that might jeopardize economic growth.

The democratic deficit among the governments that participate in these summits offers a big clue to why the meetings invariably frustrate the ambitions of activists like Greta Thunberg or Greenpeace or Prince Charles.

Two activists, it should be said, who are none too fond of democracy. For all intents and purposes, Thunberg is just one of the latest in the seemingly endless parade of millenarian preachers who have bothered humanity for a long, long time, and such preachers don’t have much time for dissent. Under the circumstances, it’s no surprise that she has called for “system change not climate change,” a change that would not, I suspect, leave much of slow-coach democracy in place. The voters just cannot be relied upon to do the right thing in time or, indeed, ever. As for Britain’s ignorant, arrogant, and perpetually foolish crown prince, his environmentalism rests primarily on his dream of a pre-industrial world where ignorant, arrogant, and perpetually foolish crown princes actually counted for something.


The problem isn’t, as is so commonly claimed, a lack of “political will” on the part of world leaders. They demonstrate extraordinary willfulness by daring to show up at all when no one elected them to do so. The problem is a lack of political mandate.

Trying to bow to this reality while scrupulously avoiding a direct acknowledgment of it, COP26 delegates claimed to have found a workaround this week. They’ve ditched aspirations for bold political commitments from world leaders to curb carbon-dioxide emissions. Instead, they will foist major new green burdens onto private-sector investors, first and foremost banks and asset managers.

This is key, and it ties into the rise of stakeholder capitalism and ESG (a variant of “socially responsible” investing). As I’ve discussed on (numerous) occasions before, the interlinking of this unlovely duo is an expression of corporatism that uses the hijacking of private capital as a device to wield political power free from the constraints imposed by democratic control. Traditionally — and rightly — a company’s management owed a primary duty to the firm’s shareholders, shareholders who typically have mainly been interested in financial return. But the concept of shareholder primacy, an idea that has been condemned by Joe Biden as a “farce,” is rapidly being replaced by that of stakeholder capitalism, and not just at the urging from the left. Among its cheerleaders are America’s Business Roundtable and those who run “Davos.” Please keep in mind that the latter are also noisy propagandists for a drastic response to climate change.

Stakeholder capitalism is the notion that companies should be run for the benefit of various “stakeholders.” Away from the feel-good rhetoric that surrounds it, stakeholder capitalism’s key selling point to corporate managements (and they are buyers that count) is that it leaves them free to pursue a political agenda that rewards them financially, socially, and with either the reality or illusion (or, more typically, something in between) of the type of power that, in a democracy, is normally reserved for legislators. To take one rather relevant example: If as a society we want to squeeze fossil-fuel companies, that should be decided in Congress, not by democratically unaccountable banking executives, permitted by stakeholder ideology to turn down business that would benefit their shareholders in the name of an agenda set by, well, it’s not always easy to say.

But such executives are, increasingly often, backed by institutional shareholders, many of whom are adopting ESG, a subtler form of hijacking. As shareholders they have the right to say how their business is run. So far, so old school. What has changed is that some large shareholders no longer put quite the priority on return that shareholders typically used to do, a transformation enabled by a combination of convenient fact and convenient fiction. The fact is that they are managing other people’s money (your pension fund, perhaps). The fiction is that ESG-style investing (ESG involves at least partly weighing an actual or potential investment against certain environmental, social, and governance benchmarks) will not damage return, a claim at best only sustainable on a very short-term view, if even that. That the management of such institutional shareholders will benefit in ways akin to the management of the stakeholder-friendly companies in which they invest means that Sternberg’s suggestion that these “new green burdens” will be “foisted” on banks and asset managers will, in some cases, be misleading. For those in charge of these institutions, these “burdens” will often prove irresistibly rewarding. For those whose money they are responsible, not so much, but then they may well not be asked for their views.

Also in the Wall Street Journal, David Benoit details — to the extent that there are any details: in this world, vagueness is a feature, not a bug — the nature of these burdens:

Most of the world’s big banks, its major investors and insurers, and its financial regulators have for the first time signed up to a coordinated pledge that will incorporate carbon emissions into their most fundamental decisions.

The lenders and investors say they will help fund a shift that will reduce carbon emissions by businesses and spur the growth of industries that can help limit climate change. Regulators are putting in place new rules to oversee the shift.

The United Nations’ Glasgow Financial Alliance for Net Zero says financial groups with assets of $130 trillion have committed to its program to cut emissions. That is enough scale to generate $100 trillion through 2050 to fund investments needed for new technologies, and enough reach to impose pathways for corporations and financial institutions to restructure themselves, the group said.

The funding, unveiled Wednesday by U.N. Climate Envoy Mark Carney during the COP26 climate summit in Glasgow, can take the form of bank loans and investments by venture capitalists, private-equity firms, mutual funds, endowments and other big investors that buy stocks and bonds. These would all be used to shift funds toward investments that help lower carbon emissions, while still earning a profit.

In other words, this “shift” will be funded by other people’s money. I’ll leave you to decide whether such investments are likely to yield a good return, but the fact that some institutions reportedly took quite some persuading to enlist (despite the kudos and more that signing up would bring) is a bit of a hint.


Financial regulators, including the U.S. Federal Reserve, the Bank of England, plus the global accounting-standards organization have agreed to add their own oversight to the system through reviews and disclosure standards.

The justification, more often than not, for this “oversight” will be bound to include the contention that it will lead to a reduction in climate-related risk, an argument, once investment time horizons are taken into account, that is, almost regardless of where one stands on the #science of climate change, bogus. The returns to the rent-seekers — all those “consultants,” and not just them — harvesting the ecosystem created off the back of this #science will, however, not be.

Meanwhile, back to Benoit:

The Carney-led alliance, whose acronym is GFANZ, also elevated billionaire and former New York City mayor Michael Bloomberg to co-chair the group with Mr. Carney . . .

“Now, the key is to find the projects and where to deploy all that capital,” said Larry Fink, chief executive of Blackrock, who also spoke at the event.

After a century or so of central-planning fiascos, it is evident that capital is generally deployed most effectively when it is left to its own devices. Climate policy has already led to massive malinvestment. This latest initiative will make things worse still.

In that context, it wasn’t reassuring to read this (via Bloomberg Green):

Mark Carney, the former governor of the Bank of England and the co-chair of the Glasgow Financial Alliance for Net Zero, said there’s no reason investors pursuing low-carbon strategies should have to make do with lower returns.

“Certainly not on a risk-adjusted basis,” Carney said in an interview with Bloomberg Television.

Ah yes, that “risk” again. Comes in handy when there’s adjusting to do.

Mark Carney’s leadership role in GFANZ  is reason enough to look again at the review of his book, modestly entitled “Value(s): Building a Better World for All), which appeared in Canada’s Financial Post,” earlier this year. (Carney is a former governor both of the Bank of Canada and the Bank of England.)

In it, the reviewer (Peter Foster) notes that:

[Carney] claims that western society is morally rotten, and that it has been corrupted by capitalism, which has brought about a “climate emergency” that threatens life on earth. This, he claims, requires rigid controls on personal freedom, industry and corporate funding . . .

Carney draws inspiration from, among others, Marx, Engels and Lenin, but the agenda he promotes differs from Marxism in two key respects. First, the private sector is not to be expropriated but made a “partner” in reshaping the economy and society. Second, it does not make a promise to make the lives of ordinary people better, but worse. Carney’s Brave New World will be one of severely constrained choice, less flying, less meat, more inconvenience and more poverty: “Assets will be stranded, used gasoline powered cars will be unsaleable, inefficient properties will be unrentable,” he promises.

Please read the whole review. By the end of it, it is hard to avoid thinking that, if Carney were to get his way, the implications for both prosperity and democracy would be bleak. If GFANZ holds up, Carney will be a lot closer to getting his way.

The WSJ’s Benoit concludes his article as follows:

The promises represent a sharp turn in thinking at most global financial institutions. Six years ago, when world leaders gathered in Paris for a predecessor to Glasgow, financial institutions and banks weren’t a serious part of the conversation. The idea of an asset manager or a bank pledging to meet the Paris agreements wouldn’t come for several years, and wouldn’t become widespread until the last two.

At the start of 2020, the sum total of financial capital committed to hitting net-zero emissions was $5 trillion, compared with the $130 trillion this week.

Be careful with that second number, however. The writers of the Financial Times’ Lex column explain:

There are problems with that figure of $130tn. First, if it were an investment fund, as some observers wrongly assumed, it would be insanely large. The financial sector would be committing a sum six times larger than the annual gross domestic product of the US. The market capitalisation of the world’s stock markets is only about $120tn.

To be fair, if “punching up” text to grab public attention were a crime, many journalists would be doing time alongside PR professionals. GFANZ is happy to explain that $130tn is not ready funds, but total assets managed by member financial institutions. These have all committed to setting targets at five-yearly intervals. Those way markers are meant to take them to net zero in their operations and asset bases by 2050, starting in 2030.

However, $130tn may still be wrong even as an aggregate of member assets. Banks account for half of the total. And banks habitually count single assets several times through chains of lending. . . . Asset managers, the other half of GFANZ’s membership, do something similar when they subcontract specialist fund management to one another.

But however many trillions are ultimately committed (and Lex’s writers are not alone in thinking that it will be less than advertised), the cost will not be confined to the high percentage of that money that will almost inevitably be frittered away. The underlying purpose of this capital commitment is, after all, to finance an approach to climate change that owes more to human psychology and to political opportunism than to any reasonable assessment of how to proceed (such an assessment would feature realistic risk–reward calculations of a type that are taboo): It will make life worse for those who end up paying for it. That it will, in all probability, have little effect on the climate is the final twist of the knife.

Or is it? Sternberg suggests that using the private sector in this way is, effectively, a device to dodge democratic accountability. As the earlier discussion of stakeholder capitalism and ESG would indicate, he’s not wrong. That is what the game is, and it will be taken as far as it possibly can. Nevertheless, as much as Lex’s writers admire the intentions behind GFANZ (the FT, a left-leaning paper for decades despite its popular reputation, has embraced a lightly camouflaged form of climate fundamentalism for quite some time), they do not think that the private-sector action alone will be enough. “The reality,” they write, “is that carbon transition will require huge state intervention and investment.”

That’s true too and, at some point, in democracies anyway, it is going to mean securing some degree of popular consent, however much that “some” has been shrunk by corporate, regulatory, and legal action. That is why Western ruling establishments are so neurotic about any dissent from the Paris script, let alone any more profound disagreement over what is happening to the climate. And that it is why they are working so hard to package the current approach as the sole viable course, and, critically, a done deal. They will need voters to believe that matters have reached such a point, whether in climatological or political terms, that they have no alternative other than to go along.

But efforts to put the electorate into that frame of mind will not be helped if climate policies trigger a crisis on the scale of the 1970s oil shocks. Naturally, the argument is being made that the recent surge in energy prices is a reason to proceed even more quickly with the energy transition, but that will be a hard sell. Those prices — which can be partly attributed to climate policies, but only partly: other factors are also to blame — could easily put the climate establishment on the defensive. The consequences of a harsh winter in the Northern Hemisphere will not be limited to battered household finances and cold homes.

Even if a crisis is avoided this winter, the chances of one occurring in a winter to come are only going to increase over the next few years as the West moves deeper into the carbon transition. That’s because renewables will still be dogged by their intermittency problem (the sun doesn’t always shine, and the wind doesn’t always blow), a problem for which there is, as yet, no workable solution. This is why Macron is (rightly) changing course on nuclear energy, throwing his support behind a technology that has been anathema to most greens for decades.

It is not only Macron who is doing so: France is not alone. And this report from Euraktiv made intriguing reading:

A proposal to bring both nuclear power and natural gas into the bloc’s green finance taxonomy is circulating in Brussels. The paper has been branded as a “scientific disgrace” by campaigners who warned it would damage the EU’s credibility on green finance.

The so-called “non-paper”, obtained by EURACTIV, lays out detailed technical criteria for gas to qualify as a transitional activity under the EU’s sustainable finance rules.

To qualify as a “sustainable” investment, gas power plants or cogeneration facilities must not emit more than 100 grams of CO2 equivalent per kilowatt-hour, according to the draft paper.

It comes in the wake of declarations by European Commission President Ursula von der Leyen, who said the EU executive would soon [put forward] proposals on gas and nuclear as part of the bloc’s green finance rulebook.

“We need more renewables. They are cheaper, carbon-free and homegrown,” von der Leyen wrote on Twitter after an EU summit meeting two weeks ago where leaders debated the bloc’s response to rising energy prices.

“We also need a stable source, nuclear, and during the transition, gas. This is why we will come forward with our taxonomy proposal,” she added.

Natural gas too, eh? That will horrify some climate warriors in the U.S.

Then there’s this (from the Financial Times):

A dozen union chiefs from across Europe have pressed world leaders to factor in nuclear power as they discuss how to accelerate the path to net zero emissions at the global climate summit in Glasgow.

“COP26 is a chance for policymakers to choose emission-free energy, good jobs and sustainable prosperity. That means choosing nuclear power as part of a balanced energy system,” the leaders wrote.

The union bosses said they agreed that the world needed more clean, reliable and affordable energy that would provide quality employment for their members.

“Too often, climate activism and discourse has ignored nuclear and muted the voice of the people who rely on it. People are crying out for practical solutions to the climate crisis, ones that offer real hope in a green economy,” they added . . .

Some interesting political fault lines are opening up . . .

There are, of course, two sides to the effort to enlist the private sector in the climate wars. One involves encouraging the “right” sort of investment, the other discouraging the “wrong” sort of investment. The latter shows every sign of being rather too effective rather too soon, as even Carney appears to acknowledge:

There is no green switch we can flip, and move from being economies where four fifths of global energy is supplied by fossil fuels today, and overnight be 100pc supplied by renewables.

In an article for the Daily Telegraph, Ambrose Evans-Pritchard, an enthusiastic backer of renewables, writes:

It has been a mistake to vilify the whole fossil industry, lumping good with bad, in an indiscriminate rush to disinvest.

Campaigners treat drillers with very low rates of methane leakage as if they were scarcely different from bad actors spewing out 20 times the stuff. Our heating, power, and industrial infrastructure still depends on that [natural] gas, so the green imperative is to buy it from the right sources, rather than abdicating in spasms of emotion.

Also in the Daily Telegraph, Jeremy Warner:

Since the start of the pandemic, ongoing global investment in energy has fallen by around a third. According to some estimates, it is running at approximately half the level needed to power a world economy that is firing on all cylinders. The deficiency is at its most acute in hydrocarbons, where the proselytising pressures for divestment have become almost irresistible.

Nor has investment rebounded in the way it normally would in response to higher prices. With their climate change agendas, governments are perilously close to imposing a hugely costly energy crisis on themselves. Investment in alternatives is still nowhere near the critical mass needed to fill the growing gap being left by old and dependable energy sources.

“If you take away supply, but demand does not change”, Bernard Looney, chief executive of BP, said this week in response to calls to halt further North Sea drilling, “all that happens is that prices go up”. By curtailing emissions within the UK, we merely export them to places that are less choosy, notably China, whose economies benefit at our expense. It’s a high price to pay for virtue.

Warner notes that “oil and gas will long remain our primary source of life enhancing energy,” but

the industry is being driven underground by politicians and regulators too cowed to stand up to the hysteria of the climate change activists. The enemy within is almost as bad as the holier than thou pressures from without; oil company boards, together with those of their bankers, are these days stacked with well meaning do-gooders more focused on bowing to the campaigners than the demands of shareholder value.


Not so much. Please see above.

Warner concludes as follows:

Boris Johnson believes the green transition offers the chance of economic rebirth. I hope he is right. Just as likely it marks another staging post in self inflicted Western decline. You go first, says China, hoovering up the world’s productive capacity as it goes.

Warner may “hope” that Johnson is right, but, understandably enough, I don’t think he believes it.

There is, I reckon, major trouble ahead and corporatism’s corruption of capitalism is helping bring it our way.

The Capital Record

We released the latest of our series of podcasts, the Capital Record. Follow the link to see how to subscribe (it’s free!). The Capital Record, which appears weekly, is designed to make use of another medium to deliver Capital Matters’ defense of free markets. Financier and NRI trustee David L. Bahnsen hosts discussions on economics and finance in this National Review Capital Matters podcast, sponsored by National Review Institute. Episodes feature interviews with the nation’s top business leaders, entrepreneurs, investment professionals, and financial commentators.

In the 42nd episode, David is joined by Dr. Anthony Bradley, professor at the King’s College and research fellow at the Acton Institute, for a deep and wide conversation on the anthropology of economics, the realities of inner cities, the need of the hour in job creation, and so much more. Dr. Bradley is one of the most compelling public intellectuals today making the case for a free and virtuous society, and the insights shared on this week’s podcast are, well, memorable.

I should mention that David has a new book out, There’s No Free Lunch: 250 Economic Truths, a book that uses 250 very well-chosen quotes from the likes of Adam Smith, Milton Friedman, and Friedrich von Hayek to illustrate some essential if often forgotten truths about free markets. We’ll be writing more about it in due course (spoiler: highly recommended).

Miami Forum

NR Institute is holding a forum on capitalism in Miami on November 22, with Miami mayor Francis Suarez and Vivek Ramaswamy, author, entrepreneur, and much, much more.

Details here.

The Capital Matters week that was . . .

Supply Chains

Iain Murray:

Now that Transportation secretary Pete Buttigieg has returned to his job, he is claiming that the current supply-chain crisis is occurring because, well, President Biden is just so darned good at his job. He told CNN’s Jake Tapper, “Demand is up because income is up because the president has successfully guided this economy out of the teeth of a terrifying recession.” The problem is that virtually everything the administration is trying to do will likely make the problem worse.

Take demand. The administration is pushing a $1 trillion infrastructure bill and a reconciliation bill for which the final cost, though yet to be determined, would likely be upwards of $2 trillion. The aim of these bills is to put more money into the economy. That money will fuel more demand, both directly — in the form of, say, increased purchases of parts for electric-charging stations — and indirectly, as child-care subsidies push consumers to spend more in other areas.

That will all place extra stress on the supply chain, which is really more like a network, where distortions in one area can cause more distortions in others. Heightened demand for one good can lead factories to produce it around the clock, which can in turn increase those factories’ energy demand. This not only pushes up energy prices, but creates shortages or inflation in other goods now produced in lower quantity . . .

Dominic Pino:

Senator Josh Hawley is making the public case for his “Make in America to Sell in America Act.” What the bill lacks in a catchy acronym, it also lacks in intellectual rigor and chances of becoming law . . .

Dominic Pino:

DHL releases service announcements every week so shippers in their network know what to expect at ports all around the world. The most recent announcement came out today, and it shows that the situation at America’s top West Coast port complex is not improving . . .


Daniel Pilla:

In the latest round of spending negotiations, it appears as if the White House has abandoned the wildly invasive plan to require banks, credit unions, and other financial institutions to report account data to the Internal Revenue Service on an annual basis. Recall that tucked into the House’s reconciliation bill was this provision, which would have required all financial institutions to file an annual report to the IRS on all accounts with “gross flows” of $600 or more per year. That is, if the total of your account’s in-and-out transactions equaled at least $600, the activity would be reported to the IRS . . .


Guy Bentley:

The Food and Drug Administration is facing backlash from anti-vaping members of Congress and other public-health campaigners for officially authorizing an e-cigarette as “appropriate for the protection of public health.”

The FDA’s decision to approve the Vuse Solo e-cigarette last month is a historic one: It marks the first time that America’s leading public-health agency officially recognized the potential of e-cigarettes to help smokers quit.

“The manufacturer’s data demonstrates its tobacco-flavored products could benefit addicted adult smokers who switch to these products — either completely or with a significant reduction in cigarette consumption,” said Mitch Zeller, head of the FDA’s Center for Tobacco Products.

The FDA’s decision is both welcome and overdue . . .

Kevin Hassett:

In the first eight months, the Trump administration issued 67 deregulatory actions and 3 regulatory actions, far outpacing the goal of 2 deregulatory actions for every 1 regulatory action.25 That translated to more than $8.1 billion in present-value cost savings. Once fully in effect, 20 major deregulatory actions undertaken by the administration were calculated to save American consumers and businesses over $220 billion a year. Under President Trump’s administration, regulatory costs tracked by the Office of Information and Regulatory Affairs fell by $50 billion, and costs were on track to fall by at least $52 billion in 2020. Nor were these giveaways to the rich. Deregulation in two key sectors — prescription drugs and Internet access — helped the poorest fifth of households eight times more than the richest fifth.

I was able to report to the president that in just the first six months of his administration, businesses spent 5 million fewer working hours coping with regulations. Over four years, our deregulatory measures could save American households an average of $3,100 a year.

These were impressive numbers, the most impressive deregulatory impact from any administration ever. And yet, in that one presidential term, we had hardly made a dent . . .

Joel Zinberg:

On October 1, pharmaceutical companies Merck and Ridgeback Biotherapeutics announced that their investigational oral antiviral drug Molnupiravir reduced the risk of hospitalization or death by about 50 percent compared with placebo for patients with mild or moderate COVID-19. Now the breakthrough drug from the two American companies has been approved — in the United Kingdom. Americans will have to wait at least a month more . . . 

“Socially Responsible” Investing

Marc Joffe:

The rise of Environmental, Social, and Governance (ESG) investing in corporate securities has reached the municipal-bond markets. But recent experience shows that incorporating ESG factors into municipal investing can be a convoluted, quixotic effort . . .


William Luther:

September marked the fifth consecutive month of inflation at or above 4 percent. The Personal Consumption Expenditures Chain-type Price Index (PCEPI), the Fed’s preferred measure of the price level, grew 4.4 percent from September 2020 to September 2021. PCEPI inflation has averaged 2.98 percent on an annual basis since January 2020, just prior to the pandemic.

Fed officials and many economists have pointed to temporary supply constraints to explain the recent uptick in inflation. The supply constraints are real. And the Fed’s average-inflation targeting framework permits prices to rise above trend during such temporary anomalies.  But that doesn’t mean all is well. Indeed, the Fed’s failure to communicate how long it will tolerate inflation exceeding 2 percent risks setting an expectations trap . . .

Joseph Sullivan:

Last month Biden White House chief of staff Ron Klain supported the idea that inflation was a “high-class” problem. The data disagree: In September, America’s middle class suffered the most from inflation.

As the chart above shows, inflation’s peak punch hit both the middle and upper middle classes at 5.4 percent. While both suffered the same rate of inflation, those with lower incomes tend to have lesser means of adapting to the increases in consumer prices. The households with the lowest income experienced the lowest rate of inflation at 4.9 percent, and those with the highest income suffered slightly less consumer price inflation than their middle-income counterparts, at 5.3 percent . . .

Tomas Philipson and Jon Hartley:

In pushing his Build Back Better agenda, President Biden has touted redistributive taxes as a means of lifting the middle class. However, the Democrats’ $1.75 trillion budget proposal (scaled back from $3.5 trillion) could end up costing American workers more than they receive in benefits. Increased inflation, taxes, and debt that would result from the proposal would eat away at transfers to the middle class.

What matters to the households is not how much they receive but what they can buy — doubling your income is worthless if everything is twice as expensive . . .


Kent Lassman:

Short speeches are the bread and butter of every sophisticated practitioner of political theater. As a result, the first two days of COP-26 featured speeches from upward of 120 world leaders. In short, they seem to agree that the time is now for big, decisive, bold action. That is, big, decisive, bold action that won’t hurt them with their local constituencies. Russian president Vladimir Putin and Chinese president Xi Jinping skipped the meeting entirely, French president Emmanuel Macron left early, and Indian prime minister Narendra Modi arrived a day late, while Japanese prime minister Kishida pledged tribute of $10 billion over five years, and in a COP farewell, German chancellor Angela Merkel pleaded for an international carbon-tax regime. Meanwhile, President Biden — in a strangely relatable moment — was caught napping during the speeches, and host and United Kingdom prime minister Boris Johnson — the most articulate of the bunch — exhorted that merely talking about this issue would not be enough. He is certainly taken with the role of climate savior. It’s clear that other would-be climate saviors are not impressed . . .

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