Turning point Corona

Andreas Marx climate change, Corona virus, Forum, Pandemic, Verkehr + Umwelt

The Covid-19 pandemic shows how fragile and risky an unsustainable, uncontrolled globalisation is. The consequences force us to think about holistic alternatives that combine epidemics and climate protection.

Author: Andreas Marx

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Automatisch generierte Beschreibung

Pandemics as consequences of our hypermobile world society

Does it make sense to think about how to prevent the next global pandemic even though the corona disaster is still in full swing? I think it does. Many scientists agree that the next viral infection will only be a matter of time. Emerging viral diseases, which include not only Covid-19 and Sars but also AIDS and Ebola, do not originate in humans but are transmitted from animals to us (zoonoses). Sars and Covid-19 were transmitted by wild animals[1]. The rapid worldwide spread of the virus is clearly due to the global networking of the world. 

“It is no surprise that one day a major pandemic will break out. The coronavirus shows that we as humanity are not yet able to provide fundamental global public goods. This also applies to global climate policy. But the coronavirus also teaches us that prosperity in the 21st century will depend on these public goods. Again, preventing pandemics has that in common with climate policy.”

Ottmar Edenhofer, Professor for the Economics of Climate Change at the TU Munich and Director at the Potsdam Institute for Climate Impact Research in DIE ZEIT 11.2020

A pathogen that knows no borders has made it clear: in times of crisis, all governments initially concentrate on the home country. International cooperation is of secondary importance. 

Since the next worldwide virus infection cannot be avoided in our interconnected globalized world, it is time to adapt contingency plans to the lessons learned from Covid-19. The focus must not only be on medical care, but especially on measures to prevent the rapid spread of pathogens and the emergence of devastating economic crises. The international community, which has grown together, must be enabled to contain local risks in this way before they mutate into a global danger. Sociologist Ulrich Beck calls this a global risk society[2]

The costs of the impending global recession due to the current pandemic cannot be estimated at present, but astronomically high figures are to be expected. In order to avoid worse, the state must step in in an unprecedented way to prevent an imminent collapse of the economy. Is this the price for our merged world, where nothing seems far away anymore? 

Global markets and transport volumes

Hardly any other topic is discussed as intensively and controversially as globalization. Worldwide economic growth and prosperity, the convergence of cultures and undreamt-of opportunities for development compete with the fear of economic dominance, the loss of regional diversity, ecological overexploitation and a growing gap between rich and poor.

Falling transport costs, low energy prices and decreasing customs duties are among the central prerequisites of globalization. Communication costs as well as sea and air freight costs have fallen massively in recent decades. And the level of customs duties has also reached a historic low. 

Since 1930, the cost of sea and air transport as well as telecommunications costs have fallen massively. Within 70 years, the costs of sea freight and air transport have fallen by 65 and almost 90 percent respectively. (https://ourworldindata.org/grapher/real-transport-and-communication-costs?time=1930..2005)

Within 30 years, exports of goods and services from Germany have increased almost eightfold. The trade of all economies in goods and services grew even more dynamically. Between 1985 and 2015, world trade increased by 930 percent, from 2,310 billion to 21,447 billion US dollars (https://www.bpb.de/nachschlagen/zahlen-und-fakten/globalisierung).

Global supply chains mercilessly exploit the comparative cost advantages of each individual market to produce as cheaply as possible. The transport required for this is too cheap, since it does not take external effects (including externality) into account. Economists use the term uncompensated effects of economic decisions on uninvolved parties. In other words, effects for which nobody pays or receives compensation. 

The importance of free Community goods

If we overexploit resources, for example by using the world’s oceans as a dumping ground for waste or environmental toxins, the self-interest of individuals will prevail over the welfare of the community. That is why policymakers worldwide must manage these free and public goods with foresight, and price their use effectively, for example with the treatment costs for contaminated water or a price for the release into the atmosphere at CO₂. The free goods will thus become scarce goods for which markets and market prices are formed. State management can thus secure the free resources in the long term and protect the freedom for a clean use of all. There are already good approaches to pricing the consumption or deterioration of free goods according to the causes, but we are still at the very beginning. 

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Automatisch generierte Beschreibung
Global world trade takes place predominantly by sea. The interactive data visualization, created by the London-based data visualization studio Kiln and the UCL Energy Institute https://ourworldindata.org/trade-and-globalization, provides insight into the complexity of trade. It shows the position of cargo ships on the oceans worldwide.

The Federal Environment Agency has dedicated a special website to the topic of maritime transport: https://www.umweltbundesamt.de/themen/wasser/gewaesser/meere/nutzung-belastungen/schifffahrt#fakten-zur-seeschifffahrt-und-zu-ihren-auswirkungen-auf-die-umwelt

Worldwide, maritime transport has increased continuously over the past decades. An annual increase of 2 to 3 percent is expected by 2020. Currently, about 90 percent of world trade is carried by sea. Of about one third of the world’s ship movements, the port of destination or departure is in the European Union (EU). The North Sea and Baltic Sea are thus among the most frequently and densely sailed seas in the world. For example, more than 30,000 ships pass through the Kiel Canal every year, and about 2,000 ships sail the Baltic Sea every day and at all times.

The marine environment is heavily polluted by shipping. The state of the marine environment is adversely affected by environmentally hazardous chemicals in ships’ paintwork, the introduction of alien organisms as fouling or with the ballast water, the discharge of waste water and waste into the sea, pollutants from exhaust gases or oil pollution and ship noise. Shipping traffic on the world’s oceans is already responsible for around 2.6 percent of climate-damaging global CO2 emissions.

Worldwide competition of business location

The Corona crisis raises a number of questions on the global division of labour and borderless freight transport: 

In 2018, pharmaceutical and similar products worth €83 billion were exported and €59 billion imported. In the past, Germany was considered the “pharmacy of the world” [3]. Why was the production of pharmaceuticals such as antibiotics and important medical products such as protective and disinfectant agents shifted to the Far East? (The same applies to other key industries).

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Automatisch generierte Beschreibung
Value of imports and exports of chemical-pharmaceutical products in Germany 1991-2018 in billion EURO (Source: Statista.de)

Of course it’s about money. Often it is the short-term economic success that counts. The long-term consequences are usually not considered or too often accepted without hesitation when deciding on a location. It’s a pity, because the careless migration of production abroad can cause lasting damage to the competitiveness and future success of German industry. At the latest when the demand for these products is covered on the domestic market of the country of emigration and the imported knowledge is used to offer cheap products on the world market, the wave of relocation will begin to recede. Many a manufacturer (with outsourced production) will then be competing with its former own products.

What could be a solution?

There are no simple solutions. But an effective lever is the level of transport costs. The higher the transport costs, the less worthwhile the intended movements and flows of goods. The so-called external transport costs can serve as a cause-based approach. Here, transport is consistently burdened with the amount of damage caused to society by the impairment of the environment and the consumption of free goods[4], such as air and water. 

a)  External costs of transport

External effects are present when the activities of one economic entity (production or consumption) have a positive or negative impact on other economic entities without any counterpart (payment or compensation). External effects mean that the costs to be borne by the consumer or producer (internal or private costs) do not necessarily correspond to the total economic costs (social costs). If the effects are negative, the difference between the actual social costs and the internal costs is called external costs. As these are not included in prices and are therefore assumed not to be included in production or consumption decisions, misallocation occurs, i.e. excessive consumption of one or more cost factors[5].

            Internal costs + external costs = total costs

The “external costs of transport” are costs that are caused by the mobility participants but not borne by them. 

External costs of transport in the European Union (EU28) in 2016 by cost category and mode of transport, graph: EU Commission 2018: Multimodal Sustainable Transport: which role for the internalisation of external costs Preliminary results of the study: “Sustainable Transport Infrastructure Charging and Internalisation of Transport Externalities”. Brussels. 17.12.2018, p. 3 https://www.zukunft-mobilitaet.net/168934/analyse/externe-kosten-des-verkehrs-eu-2016-europaeische-union-nach-verkehrstraegern/

In absolute terms, road transport accounts for more than three quarters of the external costs of transport. The large volume of traffic compared to other modes of transport contributes to this result. The majority of the absolute external costs of road transport are made up of environmental, accident and congestion costs (the latter are not included in the data on which the graph is based). In maritime and air transport, environmental costs (air pollution and climate change) are the main component of absolute external costs. In comparison, the absolute external costs of inland navigation and rail transport are much lower.

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Automatisch generierte Beschreibung
External costs of transport by mode of transport in absolute terms (EU28 in 2016); congestion costs in road transport are not shown as congestion costs for the other modes of transport are not available, Graphic: EU Commission 2018: Multimodal Sustainable Transport: which role for the internalisation of external costs Preliminary results of the study: “Sustainable Transport Infrastructure Charging and Internalisation of Transport Externalities”. Brussels. 17.12.2018, S. 4

b) Damage costs and avoidance costs

The transport sector is the black sheep when it comes to climate protection. Avoiding, shifting and reducing are the challenges with which transport can make a substantial contribution to reducing emissions. This should be achieved by requiring each transport user to compensate in monetary terms for the environmental damage he or she causes.

The German Federal Environment Agency has drawn up a methodological convention for determining and apportioning the follow-up costs of transport, the 3rd edition of which contains current cost estimates. This only refers to domestic transport in Germany. The values for international air and sea transport still have to be determined. https://www.umweltbundesamt.de/sites/default/files/medien/1410/publikationen/2019-02-11_methodenkonvention-3-0_kostensaetze_korr.pdf

In the climate field, the damage cost approach is used to estimate the amount of damage caused to society by greenhouse gas emissions and the resulting climate change. 

The abatement cost approach, on the other hand, estimates the costs that society will have to bear if it wants to limit climate change to a specific goal, i.e. avoid greenhouse gas emissions. 

All cost rates in the Methodological Convention pursue the former objective of determining the damage in monetary terms that society suffers as a result of environmental pollution. The damage cost approach, which is used to determine the cost rates of the method convention, corresponds to this concept.

The use of the abatement cost approach, on the other hand, is appropriate where the amount of pollution to be avoided (e.g. greenhouse gas emissions) has been politically determined and the costs of the measures that contribute to achieving these reduction targets are to be estimated. 

Transport intensive products will become more expensive and the demand for them will decline. It does not have to be the 20th T-shirt for 5 €, which requires 2,500 l of water for its production. 

Conclusion

As the current Covid-19 pandemic reveals, globalization has sensitive side effects, even though the worldwide supply chains are economically extremely interesting. In the long term, regional production capacities will become extinct, as will numerous indigenous animal species that are threatened by introduced species[6].

The actually caused consumption of resources, the sustainable burden on the environment and thus the endangerment of the world climate and ultimately the future of mankind are usually completely ignored in decisions about possible relocation of production to low-wage countries, as they do not appear in any calculation.

“Corona threatens your own father or grandmother, climate disaster your own grandson.” 

(Richard David Precht, “The Great Awakening” in DIE ZEIT 16.2020)

An increase in transport costs by the immanent external costs caused by the respective means of transport leads to more fairness in the choice of location and to sustainable traffic avoidance. Then even nonsensical transport would be completely unprofitable. Just think of crabs sent from Büsum to Morocco to be peeled, or potatoes sent to Eastern Europe to be peeled and packed and then sent back to Germany… 

A cause-related burden on means of transport not only reduces the traffic itself, but also all related influences, from the risk of a pandemic to the sustainable strengthening of local division of labour, to the improvement of climate protection and the CO2 balance. In addition, environmentally friendly means of transport become significantly more attractive and the modal split is permanently postponed.

If the “real” costs and effects of transport have to be paid for by the polluter, traffic that affects the environment will become significantly more expensive in some cases. But at the same time, the chances of environmentally friendly and regional alternatives, of traffic avoidance, modal shift and reduction are improving. And all this without impairing people’s mobility.

Unlike mobility, transport is only the means to an end. Transport is defined as: 

Targeted movement of people, goods, messages using energy and information, including support processes (e.g. storage and handling processes)

Concrete approaches and implementation recommendations for the above-mentioned internalisation of negative external effects have been in place since 2007 for charging for environmental damage. Ultimately, this method will only be feasible if it becomes a global standard.

The current Covid-19 disaster, despite the unspeakable suffering that the crisis has caused worldwide, at least offers a real opportunity for the necessary consent to such a serious paradigm shift. 

It is not a question of sealing off but of fair competition which is not at the expense of the general public (public good clean environment). 

If nothing changes, one can only hope that the next global pandemic will not reach us so quickly. Think global – act local is therefore an essential insight from the current catastrophe.

 

Summary

Can we continue as before after the current virus pandemic? 

Corona – or what we learn from the pandemic, or what we have not yet learned from Sars, Ebola and AIDS

Even though the crisis is far from over, questions still need to be asked, the answers to which are of utmost importance to prevent future epidemics or pandemics:

a) When will the next virus mutated from animal to human reach us?

b) Does boundless globalization make any sense at all in the face of growing pandemic risks? 

      Shouldn’t the consequential costs of the crisis be included in the assessment of locational competition?

      Why is the availability of drugs like vaccines or antibiotics and also    

      medical protective equipment this bad?

      Is the helpfulness of the European states also so meagre because all their goods come from the Far East?

c) Is a sustainable solution to the problem even conceivable and what might it look like?

Social and environmental dumping distort competition[7]

Our globalised world, based on the division of labour, requires a complex interplay of production and transport. It is not unusual for a complex end product sold in Europe to contain components from more than 100 countries scattered around the globe. Any disruption to this sensitive mechanism has massive effects on availability, as the current crisis clearly shows using the example of medical and care products. How does this happen?

Key industries that follow the lowest cost level of production to every corner of the globe require global and, above all, long production and supply chains that involve an immense logistical effort. The cheaper the transport costs, the more likely it is that even global supply chains will pay off to relocate production to low-wage countries, even with minimal cost differences. 

Why are transport costs actually much too cheap? Especially over long distances? 

  1. On the one hand through wage and social dumping in maritime transport. Ships that sail under flags of convenience in order to legally apply the lowest labour and wage standards distort competition.
  2. The consumption and pollution of free goods such as air or sea water is now completely free of charge and has reached a level that poses a global threat to environmental health on an unprecedented scale.
  3. Even the slightest cost advantages of production, no matter how far away, are exploited without differentiating according to the system relevance of the goods. Since there is also no “regional back-up” for products of epidemic control, such as food and medical products.

Worldwide transport chains have nothing to do with mobility, since the increased transport volume is only created by relocating production and intensifying trade, rather than using regional products. Anyone who shifts the production of vital products to the other end of the world without hesitation creates dependencies that lead to considerable supply bottlenecks in global crisis situations, as we are currently experiencing with medical protective equipment and medicines. If strategically important products become objects of speculation purely for profit, bottlenecks and emergency situations threaten. 

The German pharmaceutical industry, once known as the “Pharmacy of the World”, has imported more and more goods over the last 20 years. 2018 in the value of 59 Billion € p.a.  

Traffic as a lever 

Fair global competition is only possible through cause-related transport costs.

The costs of the growing volume of transport are borne only to a very small extent by the polluters, and the burden on the environment is accepted cheaply. If the polluters had to bear the actual costs of resource consumption and impacts, this would significantly increase transport costs and consequently lead to a decline in global trade. Prevention, modal shift and reduction of traffic would be the result. At the same time, however, the opportunities for environmentally friendly and regional alternatives would increase and a shift to low-emission means of transport would be the result.

The dependency on global supply chains for products of key industries must be significantly reduced in order to ensure the basic supply of key products such as medicine and protective clothing in the long term. It is not surprising that worldwide bottlenecks arise when production is concentrated in a few countries in the Far East, which are themselves hard hit by a pandemic. Regional production sites (EU internal market) reduce dependency and are closer to demand. Medicine, food and energy should remain safely available even in times of global crisis and closed borders. 

Avoidance of: 

  • Bottlenecks in medical care (capacity, personnel, products)
  • Existential dependencies on global production chains 
  • Dependence on basic services (self-sufficiency) 
  • Traffic without mobility gain 

The reduction of distortions of competition through worldwide minimum requirements implemented by individual states:

  • Binding standards such as social charter, child labour, minimum subsistence level, minimum income
  • Environmentally neutral production, either all polluted and damaged common goods consumed in production processes are returned to their original state or a monetary compensation amounting to the neutralisation expenditure is due
  • The transport costs of each product movement are debited with the external costs they cause
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Automatisch generierte Beschreibung
Containers, standardised freight containers that can be transported equally by ship, rail or truck, have decisively promoted the globalisation of trade in goods, but have reduced the number of jobs in the ports. One of the world’s largest fully automated container ports is located in Hamburg-Altenwerder. (© Reuters / Christian Charisius)
https://www.bpb.de/izpb/262129/vor-und-nachteile-offenen-welthandels?p=all

As a result, trade flows are curbed and at the same time regional production is strengthened in competition, as they become comparatively cheaper, also in relation to low-wage countries.   

In addition, long-distance travel in particular is naturally more expensive and less in demand for everyone. This raises the question of whether it would not make more sense to concentrate international understanding first and foremost on the European neighbours before long-distance travel and short trips to the other end of the world become commonplace? 

Subsequently, the following can be achieved:

  • Reduction of environmentally harmful emissions
  • Uniform and (hopefully) fair competitive conditions worldwide 
  • Products become more expensive due to the high proportion of transport costs
  • Increase in consumer prices (and perhaps conscious consumption)
  • Greater importance of product quality in the purchase decision
  • Sustainable lifestyle
  • Development of sustainable means of transport

What else is gonna change? Maybe will:

  • Nurses decently paid,
  • Home office solutions recognized as a real alternative,
  • Video conferences make traffic avoidable and reduce the need for office and parking space.

It will take years or decades for competitive conditions worldwide to at least reasonably converge. Against the background of the current pandemic, the global community is NOW sensitized and hopefully more willing to change its behavior comprehensively. So don’t waste time, because everything is cheaper than the cost of the current pandemic!

Reason for this article

Humanity in a stranglehold: a killer virus that is also bringing the world economy to its knees.

Since the outbreak of the Corona crisis in February 2020, I have been concerned about the real causes and wondering what lessons can be learned from this rampant pandemic.

I’ve come to the conclusion that we can’t go on like this. Just as after the devastating tsunami in Fukushima (Japan) exactly 9 years ago, in the wake of which reactor safety was critically reflected upon and ultimately a withdrawal from nuclear energy in Germany followed. 

It is well known that, despite the great human suffering and economic disasters, every disaster has positive effects, but these only make sense if the necessary measures are implemented by all those involved, which in this case means all over the world. An increase in the cost of transport can certainly restrict global trade if the resulting higher-priced products can be produced more cheaply at regional level. 

By avoiding traffic, we are also doing something to maintain a clean environment, which must be protected as a public good. Expensive, dirty transport will also lead to a shift to low-emission means of transport, which will make rail more competitive if we succeed in building up the necessary capacity.

Today I see in particular the opportunity to use the attention and willingness to change that this stroke of fate has triggered worldwide to take effective countermeasures and, above all, to enforce them globally. This would make it possible to better contain and control the next virus infection regionally and prevent its rapid spread around the globe. The consumption of resources and the rampant pollution of the environment could be significantly reduced sustainably and in the long term in order to make the earth a bit more livable again. Our children would have a long-term and healthy perspective. many young people rightly believe that the currently dominant generation of traditionalists has only one thing on their minds: to secure their prosperity for a great and as long a life as possible in retirement and not to care one bit about the future of the XY and Z generation.

  • Prevent social and environmental dumping worldwide
  • No longer destroy and waste free and public goods
  • Create regional backups for system relevant products
  • Sustainable growth – instead of globalization at any price
  • Damage and avoidance costs for each intervention in nature
  • Expand environmentally friendly means of transport and make them consistently competitive

“Corona threatens your own father or grandmother, climate disaster your grandson.”

(Richard David Precht, “The Great Awakening” in DIE ZEIT 16.2020)

Andreas Marx, 31.03.2020


[1] Jared Diamond and Nathan Wolfe “The virus market – If the trade in wild animals is not stopped, the world is threatened by the next pandemic” in Süddeutsche Zeitung No. 69, 23.03.2020

[2] Ulrich Beck (1944 – 2015) German sociologist

[3] Dr. Niklas Lenhard-Schramm ‘From the “Pharmacy of the World” to a Drug Importer’ in Deutsche Apotheker Zeitung No. 44 of 01.11.2018

[4] Free goods are the counterpart of economic goods and are characterized by the fact that they are available in large, sometimes almost unusable quantities. 

[5] “Marginal and total costs of air pollutants and noise in Germany” Stephan Andreas Schmid, 2005 

[6] In Germany, an estimated 1000 alien species are expected to occur.

[7] Social dumping: States which, due to their low wage levels, low social benefits and meagre occupational health and safety regulations, have competitive advantages over countries with higher standards.

environmental dumping: production without meeting environmental requirements, which achieves cost advantages over production under appropriate environmental conditions