Green Keynesianism, De-Siloed

Here are two positions I think have big problems:

1. What we need are green jobs.  We can revitalize our economy by steering massive investment into alternative energy technologies and conservation.  That way we can have growth and sustainability, together.

2. What we need is to reject the growth paradigm.  Economic growth can’t go on in a world of finite resources.  We have to shrink our economy, starting now.

Each of these demands more time and space to debunk than I can provide right now.  (As usual I am up against harsh deadlines.)  Suffice it to say, the first is not green enough, the second too single-mindedly so.  I agree with Yves Smith that the scale of retrenchment we are going to need to deal with climate change on a viable schedule (if there is a viable schedule) can’t be offset by greentech.  There is an absorption problem: we cannot replace a century of fossil fuel-oriented investment with a decarbonized alternative in the space of a decade or so.  This is not an argument against greentech, of course, just that, from the point of view of growth and employment it simply isn’t enough.

On the other side, the anti-growth crowd really doesn’t get it.  If you’re against growth, you should be tickled by the sequester, the Eurozone’s austerity policies and all the rest.  Recession does wonders for reducing carbon emissions and other forms of pollution, as well as reducing the stress on nonrenewable resources.  But the whole point of being green is to improve our long run standard of living, not reduce it.  And the key insight is that economic growth is growth in value, which means anything people are willing to pay for, and not necessarily “stuff”.  The goal should be to rapidly shift production, especially in rich countries, away from resource-intensive goods to things (design, service) that replace physical throughput with human intelligence.

So that should clue us in to the third alternative: yes, we need to curtail investment and consumption in resource-intensive goods, especially those that will condemn us to the likelihood of horrific climate change, and promote expenditure-switching, and not only to clean energy-related goods, but also anything else that can improve our quality of life.  The alternative to more highway construction and ICE cars is not only cars with other fuel systems or even mass transit, but also better-designed and longer-lasting appliances, fresh bread at the corner bakery, more yoga (or economics) teachers or whatever sustainable forms of economic value people come to prefer.

And how to do that?  1. Massively and quickly raise the cost of unsustainably produced goods, especially by putting a stiff price on carbon.  2. Recycle the carbon revenues as frictionlessly as possible back to consumers, so they can switch demand to other things.  (This is one reason why carbon permits need to be auctioned.)  3. Maintain during the transition an especially watchful and vigorous macropolicy designed to ramp up public consumption and investment during periods in which private spending falls short.  #3 requires forward planning, so that governments at all levels have a portfolio of nonpolluting projects–-and not just those relating to energy---that can be initiated at short notice.

Note that this vision of Green Keynesianism is based on the rejection of silos.  Spending withdrawn from the carbon-dependent economy does not all have to be redirected to alternative energy, efficiency, or other officially “green” items.  We might have to make do with less energy and forego some of the things that energy is used for.  We might have to travel less, especially by plane.  We might have to change our diet if some foods, like meat, become a lot more expensive.  Not all energy-based problems can be solved within the time frame we have to cope with.  The Keynesian part, which is also (and this was definitely Keynes’ own view) about maintaining the quality of life, is making sure that, despite whatever constraints we face, we adopt policies that promote more and better income, employment and consumption.  Thinking about what those policies ought to be is the job for Green Keynesians today.