Many people feel that the capitalist economic system delivers wealth to a few and somehow cheats the rest of opportunity.

I agree: our market system is being looted by a small minority and the only real solutions call for courageous measures.

It has been all too easy for things to slide to excess. Traders in financial markets manipulate prices to obtain higher bonuses.

They and their managers take massive gambles with shareholders’ money because these are essentially one-way bets – governments and central banks will bail them out if things go awry.

The management teams of large companies reward themselves with larger and larger compensation packages virtually independent of the performance of their enterprises.

In a more subtle strategy, and without perhaps considering the effects, business leaders can end up looting the future by investing insufficiently for the longer term. They are playing a game skewed towards the pursuit of short-term profits in order to achieve higher personal payouts.

In industry we see increasing forms of cartel-like behaviour everywhere. The big banks offer essentially similar services on similar terms and extract monopoly rents, often in egregious forms such as massive charges for late payments or unauthorised overdrafts for retail clients.

Large pharma companies actively work to extend patent protection on drugs and to limit the ability of generic drug makers to compete effectively.

Underdone oversight

But how can all this happen when the institutions of the market system are supposed to prevent them?

Companies are overseen by boards of directors who represent the shareholders and determine management compensation. Investors control the capital base of enterprises and have the power to replace the boards of directors.

Market activity is undertaken within a framework of laws and regulations overseen by central banks and by regulatory agencies staffed by civil servants and, over them, sit the elected representatives of the people.

In theory, it should work flawlessly, but too often the structure fails, and it’s not all that hard to explain why.

Let’s start with publicly traded companies. Many are actually controlled by their management rather than by independent directors. In the US it is still common for the CEO to also be the chair of the board and so play a major role in choosing those supposed to provide oversight. In any case, we typically see the same people serve on multiple boards while the CEO of one company sits on the board of another. No wonder boards endorse egregious compensation schemes.

But shouldn’t the shareholders throw out all the rascals on the boards? If by a shareholder we mean someone with deep knowledge of a company and a commitment to enhance its long-term performance, then many large companies have no shareholders at all.

The investment logic of diversification and the rise of passive investing (where investors only track the performance of a share index like the S&P 500) drives individuals to spread holdings out on a global basis. Large investing institutions, often largely passive themselves, hold positions in too many enterprises to either understand or care about individual cases.

And a situation has emerged where a handful of giant funds own a large share of the total value of listed companies so that their executives become part of the same pattern of behaviour. The ultimate shareholders – pension plan holders like you and I – are often too busy, don’t care, or don’t understand.

Revolving door

Now let’s turn to the regulators. They have deep problems which we don’t like to acknowledge.

First, they struggle to hire talent which can match the companies they are regulating. The ambitious and clever graduate can choose US$100,000 a year at a Central Bank or US$1m at the investment bank of their choice. This is made worse by the revolving door problem. If you know that, in a few years time, you will be seeking a job at a bank, just how tough on them are you going to be now?

What of their political masters? Well, former politicians, ex-presidents and ex-prime Ministers perform the revolving door trick very well.

More important, it takes money to win elections. Who has the money to donate? The companies and their key executives. The US offers the extreme of this situation. And the more regulated an industry is, usually the more concentrated it is among a handful of companies, meaning the reward for influencing regulation are concentrated in the enterprises that can do the most harm.

The benign term for all this is ‘regulatory capture‘.

Fishy business

Enough said. As world leaders from business and politics prepare to meet at the World Economic Forum in Davos, what should be done?

Two cautions. Because the money and power in the system is controlled by the looters, every ameliorating action will be fought tooth and nail. And, there is no magic cure: the most we can aspire to is to make things incrementally, but materially better.

The fish stinks from the head so we should start there. We must dramatically curtail the role of money and patronage in politics. Only if this is done will it be feasible to rebuild the regulatory apparatus and break the cartels.

Now consider the comprehensive failure of corporate governance at large public companies. I suggest that the large public company has had its day. Public listing is not needed to raise essential capital, as was the case in its 19th and early 20th-century heyday. The stock markets today are for speculation, for games by competing algorithms and profit-taking for insiders.

We should discourage ‘public’ ownership in favour of private ownership and partnerships. Then, more people with the power to control will also have an incentive to think long term and to contain risk.

George Feiger is Executive Dean, Aston Business School, Aston University.

This article was originally published on The Conversation in cooperation with the World Economic Forum to coincide with its annual meeting in Davos, Switzerland. Read more here, or read the original article.

British scientists have just discovered one of the richest stores of carbon on Earth: 145,000 square kilometres of peatland – an area larger than England – in the forests of the central Congo basin.

The reservoir of compressed plant material holds at least 30 Gt (billion tonnes) of carbon. And this pristine and undisturbed sink of peat is the equivalent of about two decades of fossil fuel combustion in the United States.

The discovery, reported in the journal Nature, is significant for three reasons. One is that it adds a substantial new component to one of the most head-scratching problems in climate science: the arithmetic of the carbon cycle, a cycle vital both to all living things and to climate machinery.

The second is a reminder that, in a world combed by geographers and topographers, monitored for 30 years by dozens of orbiting satellites, and explored and exploited by more than 7 billion people, there is still scope for important discovery.

Third, if this carbon store is opened up to development, it could end up emitting a massive volume of CO₂ with disastrous results for global climate. This is already happening in Indonesia, where huge areas of peatland swamp forest are being logged, drained, burnt and cleared for oil palm plantations, making the country the world’s fifth biggest carbon emitter.

‘The largest peatland complex in the tropics’

“Our research shows that the peat in the central Congo Basin covers a colossal amount of land. It is 16 times larger than the previous estimate and is the single largest peatland complex found anywhere in the tropics”, said Simon Lewis, a geographer at the University of Leeds, and one of the discoverers.

“We have also found 30 billion tonnes of carbon that nobody knew existed. The peat covers only 4% of the whole Congo Basin, but stores the same amount of carbon below ground as that stored above ground in the trees covering the other 96%.

“These peatlands hold nearly 30% of the world’s tropical peatland carbon, that’s about 20 years of the fossil fuel emissions of the United States of America.”

Working with Congolese colleagues, Professor Lewis and his co-author Greta Dargie discovered the peatlands in 2012, during a field trip to the swamps of the Cuvette Centrale at the heart of one of the world’s last remaining great forests in the Republic of the Congo.

They found a vast extent of dense peat around two metres in depth – and sometimes almost six metres – and used space-based instrument measurements to map an extent of 145,000 sq km.

Stores of buried peat should be no great surprise in the wetlands of a tropical rainforest: swamp water would prevent organic decay, and peat would build up, as it has for instance in the rainforests of Borneo. But the scale of this carbon sink is unprecedented.

Coal in formation

The carbon sink in the African peatlands is preserved plant material stored over huge periods of time. Plants photosynthesise tissue from carbon dioxide in the atmosphere; humans and animals and fungi consume the plants and return most of the carbon to the atmosphere.

A residue, however, is preserved in the soil, as semi-decayed wood or foliage, or on the seabed as the carbon shells and bones of sea creatures, and this difference between source and sink is what perplexes climate scientists. 

They need to know how to work out, in ever finer detail, the rate at which the world will warm as a consequence of two centuries of combustion of fossil fuels – because oil and coal and natural gas were also once living tissue, made by ancient photosynthesis.

So researchers have tried to assess the quantities of soil carbon stored as peat under the thawing Arctic permafrost, they have asked themselves questions about the impact of wildfires in the world’s forests, they have tried to complete the intricate arithmetic of the effect of climate change on how much carbon the forests can absorb, and on the overall impact of global warming on the world’s grasslands and savannahs.

And at every point, they have found new riddles to solve: are the oceans responding to climate change by gulping down more carbon? What role do fungi have in the uptake of carbon in the soil? And why are the world’s fjordlands so important as carbon reservoirs? So the Congo basin discovery adds a new dimension to the calculations.

Radiocarbon evidence suggests the carbon sink has been accumulating for the last 10,600 years, and the discovery increases the best estimate so far of tropical peatland by up to 36%.

Protection is urgent

Now, the next step is to find ways to protect the find, says Professor Lewis: “Peatlands are only a resource in the fight against climate change when left intact, and so maintaining large stores of carbon in undisturbed peatlands should be a priority.

Our new results show that carbon has been building up in the Congo Basin’s peat for nearly 11,000 years. If the Congo Basin peatland complex was to be destroyed, this would release billions of tonnes of carbon dioxide into our atmosphere.”

Dr Dargie added: “With so many of the world’s tropical peatlands under threat from land development, and the need to reduce carbon emissions to zero over the coming decades, it is essential that the Congo Basin peatlands remain intact.”

Tim Radford writes for Climate News Network, where this article was originally published (CC BY-NC-ND).