Race to the bottom | Financial Times

American states have long competed with each other for everything from jobs and tax incentives to — amid Covid-19 — vaccines and respirators. All too often this becomes a race to the bottom that no one really wins, a topic that I explore in my latest column looking at how Miami is luring Wall Street and Silicon Valley money with promises of a more business-friendly environment.

Southern red states have long courted jobs and investment from the north with deregulation, tax cuts and lax labour laws. Florida and Texas, in particular, have benefited from this sort of arbitrage in recent years. But the problem with the approach is that it all too often ends up being a kind of zero-sum game in which investors benefit and public infrastructure and investment suffers. There is a reason, after all, that Florida is also called the Swamp, and it’s not just about the Everglades — this place is among the top three states in the country for the , and is a hotbed for . Read the links above, or just read a .

But climate change takes the political stakes of this Hobbesian game to a new level. Look at what happened in Texas last week, which suffered from a freak winter storm that overwhelmed the power grid and left millions of people without food, water or heat. Families froze, with some suffering from carbon-monoxide poisoning after trying to burn sticks and charcoal in their homes to keep warm. On Friday were under orders to boil their water to avoid contamination from broken pipes and raw sewage.

This is the state that some economists believe was supposed to represent — a cheap housing, low regulation sort of place. Over the past few days, it looks more like Sudan. The state is hording one of its key resources — natural gas — with Governor Greg Abbott issuing an emergency order to stop the flow across state lines so that Texas can get its own power generators online as black outs continue. Traders and regulators in other states are arguing that this is unconstitutional.

Forget about petrol-politics abroad. We’ve got them here at home.

My Moral Money colleagues tell me that real change is coming on climate, not only from regulators but from the market itself. My question to you, Peter, is this: what should we expect in the market if the Biden administration, Larry Fink or both push companies and local municipalities to start accounting for such risks on their balance sheets?

Recommended reading/viewing

  • I’m a big fan of the labour economist Clyde Prestowitz, whose new book on China, The World Turned Upside Down, is a must read. For a hack, check out his recently.

I’m a big fan of the labour economist Clyde Prestowitz, whose new book on China, The World Turned Upside Down, is a must read. For a hack, check out his recently.

I’m no huge fan of Rupert Murdoch, but I love that he forced Google to finally pay for the content it’s been monetising for free. It’s absurd that media organisations ever gave away their products to Silicon Valley, and Murdoch was the first to say it at a time when much of the media industry was still drinking the Big Tech Kool-Aid. The real change will be if other news organisations without his muscle will be able to cut decent deals.

Speaking of Big Tech critics, read my friend Jonathan Taplin on why than we think.

The FT’s Big Read on the digital renminbi and The Wall Street Journal’s page one on China’s  are both worth a close read for what they say about the Chinese approach to both technology and private sector power.

Peter Atwater responds

While I see lots of private sector enthusiasm toward the profit opportunities inherent in the ESG revolution, I see little interest in paying for the consequences of our existing failures. It looks to me like business leaders, wealthy individuals and state and local policymakers are all playing the same game: Heads, we win — tails, we turn to Washington for a bailout. Given the magnitude of the remediation required, everyone is counting on the federal government to foot the bill. In the meantime, party on.

And here is where I get very frustrated. When it comes to burden sharing, no one is stepping up. In fact, just the opposite. Among big business leaders and the financial elite, there is a culture today of extreme burden avoidance. When the going gets tough, those who are able, leave.

Higher taxes?  Higher employee wages? Heck, just 48 hours in freezing cold weather amid a power outage, and those who can, take off — leaving the crisis and its aftermath to those left behind.

I don’t know if this past week’s outrage over Senator Ted Cruz’s trip to Cancún represented a tipping point, or not, but I sense a groundswell of anger aimed at the endless, in-your-face mobility that is only available to the elite.

Main Street has had enough. “Glocalism”, which used to suggest being global but with local interests, now means having one foot already out the door. People want to know whether you’re with me permanently — in sickness and in health — or not. The elite can’t keep having it both ways.

And here is why I think Walmart’s decision this week to is so significant. As much as many local communities once opposed new stores, Walmart has stayed — and it has stayed everywhere. As a national bricks-and-mortar retailer, it can’t cut and run. And its clientele is Main Street.

If I were running a business I would be paying attention. Walmart is signalling that focusing on the common good is good business.

Rana, I don’t know whether this kind of private sector effort will flow into the bigger environmental vulnerabilities you were focused on. It was refreshing, though, to see a major business step up, especially at a time when so many others seem eager to run away from this country’s real challenges.

Edward Luce is on book leave and will return in mid-March.

Your feedback

And now a word from our Swampians . . .

In response to ‘A dangerous normalisation of unprecedentedness’:

“I do forecasts for a living, but I don’t claim to be ‘confident’ about the future. Statisticians have an old saying: ‘every model is wrong, but some are useful’. All I can do as a forecaster is to be ‘useful’ — to point people towards doing something useful. But I’m never going to be right by design, with no luck involved. I’ll never forget what sociologist Andre Gunder Frank said way back in 1981 when I was studying economics and social policy at the LSE: ‘Equating economic forecasting with astrology is an insult — to astrologers’.” — Douglas Hayward, London, United Kingdom

“Just in my own life, I can recall standing on a remote football oval in rural Tasmania wondering whether this was the end — the Cuban missile crisis. Later, in the ballot for conscription with the prospect of fighting a filthy war in steaming jungles for a useless cause. Or having to take a job overseas, leading to a permanent split in my family, when interest rates hit 18 per cent and we were going out the financial back door at a rate of knots. Life is uncertain. We need to teach ourselves, and others, resilience, stoicism, presence in the moment, joy in what exists now.” — David Ritchie, Canberra, Australia

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