by Frans C. Verhagen, M.Div., M.I.A., Ph.D., sustainability sociologist
The International Institute for Monetary Transformation (IIMT)
The Tierra Solution is not simply an idea. It presents the conceptual, institutional and strategic dimensions of a proposal for a just, sustainable, and, therefore, stable world order by simultaneously dealing with three of the world’s major challenges: the climate crisis, the economic crisis and unsustainable development in the global North and South. It proposes taking the world’s most basic global system, i.e. the international monetary system and transforming it by basing it on a carbon standard. This carbon-based international monetary system would push nations to decarbonize, i.e. base their societies on renewable energy. The higher their rate of decarbonization, the stronger their economy and their currency. Taking the Tierra Solution as a pathway to this transformed world order would result in a triple win situation by avoiding the looming climate catastrophe, by effecting a just, sustainable, and, therefore, stable international monetary system and advancing low carbon and climate-resilient development.
The above argument is made in the 348 page book entitled The Tierra Solution: Resolving the Climate Crisis through Monetary Transformation details of which are presented in this issue’s banner sponsored by Cosimo Books. Its subtitle shows the main emphasis of The Tierra Solution: it wants foremost to deal with the urgency of the climate crisis and the inability of government, business and civil society to effectively deal with it. The latest conference of the UNFCCC at Doha which concluded on December 7 showed that its outcome that does not match that urgency of the climate crisis.The Tierra Solution presents a pathway out of the climate crisis that is definitely outside the box and not at the outside of the inside of that famous box. It is a transformational, not reformist pathway. In other words, the transformed international monetary system upon which it is based goes beyond the IMF monetary reforms, which are changes at the periphery of an unjust and unstable system. While a return to the gold standard in its various forms is being advocated by a significant number of observers, basing the international monetary system on a carbon standard in order to deal with the climate crisis is “innovative” according to Canadian businessman Maurice Strong of Earth Summit fame.
The structure of The Tierra Solution book was determined by the supreme challenge of making a strong case for an out-of-the box proposal that many considered “too grand”. Therefore, six of its ten chapters were used to prepare the ground before the actual proposal was presented. Thus, the book is divided in two parts: Background and Future.
The chapter descriptions in the book’s Introduction provide a good overview of its contents and structure. In some of those descriptions I have added some remarks in italics that reflect an updating since its publication in June 2012. Cf. http://cosimoblog.blogspot.com/2012_06_01_archive.html
Chapter 1 describes the climate issue and the need for climate justice in order to make real progress. It also discusses the challenge of an equitable carbon budget, which will be a major negotiation issue both at the Durban conference in 2011 and the following UNFCCC conferences. During the Doha conference of 2012 the US Delegation seems to sign on to the two notions of climate justice and the need for an equitable carbon budget.
Chapter 2 discusses the various carbon-reduction methods and the selection of one that seems to fit best with a carbon-based international monetary system. The emphasis is placed on the criteria for the selection of the most appropriate method for the Tierra Solution: a method that is global, fast, formidable, and fair. Thus, the Fee & Dividend method is chosen above the cap-and-trade approach. Basing itself on James Hansen’s recommendation of the need to return to 350 ppm and using the Fee & Dividend approach the 350.org movement under the leadership of Bill McKibben is making great strides in its “Do the Math” campaign for divestments out of fossil fuel companies. The business section of New York Times on December 5 covered it in a lengthy article entitled “The Divestment Brigade”. Bill McKibben’s opinion on The Tierra Solution is worth noting. “The further into global warming area we go, the more physics and politics narrows our possible paths of action. Here’s is a very cogent and well-argued account of one of the remaining possibilities.”
Chapter 3 considers the recent history of the international monetary system in terms of the major monetary events and trends of the last seventy years and ends with an analysis of the Great Recession of 2007-2009.
Chapter 4 covers the present monetary structure and the workings of “the Questionable Quad” (i.e., the International Monetary Fund, the World Bank, the World Trade Organization, and the Bank of International Settlements) and points to the various monetary unions that can be building blocks of the global monetary union of the TFD system. Given that the introduction of a monetary standard removes the necessity of a global reserve system, an extensive discussion is presented about reserve currencies. The chapter concludes with the identification of eight serious shortcomings of the present international monetary system.
Two other important discussions have to take place before the proposed transformation of the international monetary system can be presented: therefore, Chapter 5 discusses the role of government in monetary and financial affairs because (at least in the U.S.), this issue divides the two main political parties, to the detriment of the common good in the U.S. and even the world. Thus, the argument will be made that banks should not engage in money creation and control; that the emergence of more public banks is a beneficial development; and that the U.S. Fed should be democratically controlled.
Chapter 6 presents the need for value-based planning, particularly the need for the value of monetary justice as the guiding principle in global governance system discussions and negotiations. This argument is made after having presented the contextual sustainability framework with the sustainability model of economics.
PART II presents the architecture of the TFD (Tierra Fee & Dividend) system, together with a discussion of its strategy and its prospects, keeping in mind John Maynard Keynes’ acute observation about the introduction of new ideas when he said: “The difficulty lies, not in the new ideas, but in escaping from the old ones.”
Chapter 7 begins by outlining the monetary architecture of the TFD system, including a brief discussion of the nature of money, followed by a description of the TFD’s six monetary components. Its carbon-based monetary standard, with its unit of account—the Tierra—is described first, because it forms the heart of the new monetary paradigm. The significance of the carbon-based monetary standard is shown in the discussion of fixed (but flexible) exchange rates that would replace the volatile rates with their financial imbalances. It also is considered in the discussion of the balance of payments mechanism that now includes carbon accounts (together with traditional financial accounts). The administration of these four monetary components—the carbon-based monetary standard, carbon based currencies, exchange rates, and the modified balance of payments mechanism—is the responsibility of the Global Central Bank’s Governing Council, which is made up of representatives of regional monetary unions. Conflicts in this monetary system are settled in a Tierra Monetary Court.
Chapter 8 clarifies the significance of the TFD system as a whole by considering its presumed impacts on the monetary, climate, financial, economic, commercial, and global governance systems. This chapter focuses on several issues in each system, showing how the TFD would resolve them or reduce their adverse impacts. Here, the potential of this new global governance system is shown in its capacity to provide the world with ample credit and liquidity, without causing sovereign debt and inflation. Thus, the challenge becomes to have the Great Monetary Transition take place. This transition would move from a costly global reserve system (based on the U.S. dollar and other reserve currencies) to a reformist system of SDRs (Special Drawing Rights) and finally to the transformational TFD global governance system.
The TFD’s two-pronged strategy and its prospects constitute the two final chapters.
Chapter 9 describes the top-down strategy, where the U.N. General Assembly would pass a resolution to establish the U.N. Commission of Experts on Monetary Transformation, Climate Change and Sustainable Development. Its mandate is to develop recommendations for a U.N. Framework Convention on Monetary Transformation, the Climate Crisis, and Sustainable Development, together with a Monetary Agenda for Climate and Development Action. It also describes a bottom-up strategy, consisting of national TFD Working Groups that are to be part of the Global Network for Monetary Transformation (GNMT). The Network and its working groups would engage in research, education, and action. Their educational activities would consist of stimulating national debates about the connections of climate change, development and a carbon-based international monetary system. These debates would have as a practical outcome the willingness of their government leaders to sponsor the above U.N. General Assembly Resolution and/or engage in serious consideration of the TFD as a post-Kyoto or post-Rio 2012 global governance candidate.
Chapter 10 describes the prospects for the Tierra system. It describes the rationale for the TFD, objections to the TFD, and responses to those objections. It also discusses three promising trends: monetary developments in 2011; the growing assertiveness of BRICS and developing countries; and the increased effectiveness of civil society in global affairs.
An unsolicited review of the book on Amazon at- http://amzn.to/TNVUcg sums up the essence of The Tierra Solution’s bold vision and the need for an active dialogue on integrated global governance. “This book, if anything, is thought-provoking. I sincerely believe that while the adoption of a policy such as the Tierra Solution may seem like the stuff of pipe dreams, this does not change the fact that we need to start talking about these things and opening our minds to the idea that big changes need to be made. This is a great book for both policymakers and regular citizens to read, because the time is ripe for an active dialogue that leads to actual changes. Who knows, in the future, an “impossible” solution such as this may be made possible by virtue of sheer necessity and urgency.”
Article by Frans C. Verhagen, M.Div., M.I.A., Ph.D., author and sustainability sociologist