Climate, Financial Crises Two Sides of One Coin

The key issue behind both the global economic and climate crises is exactly the same: “mispricing risk,” Thomas L. Friedman writes in the New York Times. “We have been mispricing risk in both arenas,” he contends, “producing a huge excess of both toxic assets and toxic air that now threatens the stability of the whole planet.” Only “smart regulation and carbon taxation can heal both.”

The issues are connected, Friedman writes. “We built more and more stores in America to sell more and more stuff, which was made in more and more Chinese factories powered by more and more coal that earned more and more dollars to buy more and more US T-bills.” Sure, this was a “powerful engine of wealth creation,” but with an unacceptable result: Companies ended up “privatizing their gains and socializing their losses.” (More Thomas Friedman stories.)