By Michael Hoexter, a policy analyst and marketing consultant on green issues, climate change, clean and renewable energy, and energy efficiency. Originally published at New Economic Perspectives. This is the second of three parts. Part one is here.
Policy Instruments to Realize the Pedal-to-the-Metal Plan
The above list of technological changes to radically reduce and eventually zero-out society’s emissions using current and near-future technologies would represent the largest construction project in the history of humankind by far, occurring over several decades. While these developments are required to preserve something that resembles society and what might be called appreciable human wealth, in themselves they are not objects of desire for significant portions of the public nor do many private investors see attractive returns in them, so that it cannot be said that market demand currently exists for this type of transformation. Still, many individuals would probably come to enjoy, for instance, the amenities offered by the zero-carbon infrastructure once built, as political battles and the battles around finances, land use and the noise and inconveniences of the construction period had receded into the past.
Furthermore, as I have argued, even if that demand existed, the visible or invisible hand of the market would be insufficiently skilled at creating the coordinated infrastructural systems that are here prescribed. While it would be ideal if we were to set a price on carbon and let, as is current lore, the “market do its magic”, market actors could not “see” far enough into the future to plan for a net-zero carbon emitting society, nor would it be in their immediate economic self-interests to do so. Many of the foundations of the net-zero carbon society would then be designed either directly by government actors, according to an overall high-level plan or set of principles similar to this one, or by private sector actors following strictly enforced regulatory codes that yield a very-low or net-zero carbon outcome in the near term.
Aside: Government as Foundation of All Complex Economies
While the specifics of government action to implement the Pedal-to-the-Metal Plan will be sketched below, it first makes sense to clear away remaining disinformation and prejudice about government in all types of complex economies, the type of economy that has dominated the world for the past two centuries. The dominant model of the economy communicated by neoclassical economics is that government is an “add-on” or intruder in a fundamentally state-less market. In that state-less market, the basic social and economic interaction is that of ungoverned buyers and sellers finding each other and meeting each other’s needs and desires through exchange of goods and services. The neoliberal political movement, now dominant in parties of both the Right and nominal “Left”, has attempted to further marginalize government as an instrument of economic change by claiming that markets are always “better” or more efficient ways to organize the economy than via government planning and commissioning of various agencies or projects.
Despite these ideological paeans to markets that are erroneously built into the frame of contemporary political and economic discourse, in reality, neoliberal political actors have enthusiastically reinforced the military and repressive functions of the state as well as increased government supports for large financial and corporate entities. To these neoliberals, government is a government of convenience and it is often convenient for government to direct its repressive apparatus at the less privileged or foreign “Others” rather than at themselves, at their patrons, and their excesses or misdeeds.
Because of the academic dominance of neoclassical economics and the political dominance of neoliberalism, frank and open discussions of the reality of government’s role are few and far between. The lack of a reasoned and empirically valid discourse on government’s role has in turn hampered democratic control of the instrument of government. There is a very vocal class of true believers in the neoliberal/neoclassical vision calling themselves libertarians that claim to pursue the chimerical ideal of a stateless or almost stateless economy and complain loudly of any activities of government that supports the less advantaged. Claiming to speak with the authority of the classic liberal tradition and for freedom, this group has pulled most parties of the Right and many in the center and moderate “Left” into a position where they cannot openly endorse government support for the less well-off. The combination of academically respectable neoclassical economics with the fanatical but relatively privileged political minority of libertarians, enables government’s role to be discussed only in disparaging terms and without full clarity.
As government will play a critical role in the transition to a post-carbon energy system, it makes sense to address and/or preempt the inevitable screams of protest from neoliberals and libertarians. The libertarians will claim that the Pedal-to-the-Metal Plan is designed as a “statist” takeover of the economy, ignoring the fact that all complex economies are more or less “statist”. Libertarians also “like” the state when, as I mentioned earlier, it is convenient for them: when the state is repressing others they don’t like or respect or when it makes the wealthy wealthier. Government plays a critical role in any economy which those libertarians or neoliberals would want to live: if that were not the case libertarians would be open neo-primitivists or lawless brigands of which very few of them are. The binary “statist” vs “libertarian” or its equivalent (“government” vs. “market”) misleads most contemporary thinkers about the economy into thinking that the activities of the state are not in fact integral to the economy as a whole. In this environment the discussion becomes “more” or, it seems always preferably, “less” state rather than “how” the government can better serve the people and their aims and welfare.
The role of government in complex societies is empirically obvious but in the context of the above multi-decade, multilateral propaganda campaign it makes sense to re-state its functions with regard to the economy:
1) Supply and management of a national currency
2) Supply and administration of a legal system and enforcement of contractual obligations
3) Prohibition/inhibition of damaging behaviors (via legal and economic methods)
4) Stimulation, creation and financial support for socially valuable functions and behaviors (via fiscal policy and moral support)
5) Provision and maintenance of vital public infrastructure and services
6) Funding and delivering basic and advanced education
7) Regulation of interest rates and the private banking system
8) Long-term planning, networking, and social coordination beyond the scope of individual private sector concerns
9) National defense
10) Maintenance of scientific data collection and analysis systems
11) Maintenance and funding of a program of basic scientific and technological research
12) Maintenance and funding of basic and exemplary national cultural goods
13) Protection of significant natural resources.
In any and every viable complex economy and society, in which either libertarians or non-libertarians would want to live, governments are delivering these functions, even though neoliberals and libertarians express an ideological dissatisfaction with the fact that government is the supplier. To the naïve listener, neoliberals and libertarians can only appear to “know better” about government’s role in the economy, only if the fictions of neoclassical economics and libertarian political smears about government’s complete fallibility are mistaken for a description of economic and social reality.
The Pedal-to-the-Metal Plan Produces a 15-20 year Wartime Economy for Peaceable Ends
Even though government is the sine qua non of any complex economy throughout history, the self-rescue of complex societies in the face of the human-caused climate crisis will require a level of government involvement which is very much beyond the tastes and ideals of neoliberals or libertarians. The plan does not yield a “hedonic paradise” or utopia for either Right or Left but instead the rewards and privations of a wartime economy stretched out over a period of 15 to 20 years. There will be a lot of work to do and some of it will seem laborious. The type of work available and the amount of work (more) will change. Some businesses will thrive and others will need to adapt quickly or go out of business. Much of the economic activity that we currently engage in, with the technologies that we use, will be either gradually or immediately altered by the movement away from fossil fuels and towards renewable energy and efficient use of energy. Some enjoyable activities that are currently cheap will become expensive while new enjoyments will take their place. During the period of its building, we will not necessarily slip easily into the zero-net carbon society; there will be bumps along the road, for some more aggravating than for others.
The critical element in a wartime economy (without fighting a war) is the exercise of the authority of government to expand public finances as a proportion of the economy as well as regulate and alter the entire economy to serve a mission deemed to be in the common good. To do so, government needs to achieve a high degree of legitimacy, a legitimacy that is often conferred by attack by an external enemy. In our current period, government does not have this level of legitimacy though it has more potential legitimacy than the highly vocal but deluded libertarian Right (or for that matter the “real” far left) give it. In order to implement this plan, large scale social movements would need to emerge that would effectively hold government accountable to the task of protecting its people and rid to a great extent the legalized corruption of government in its current plutocratic form. A government that is recognized as defending only the 1% cannot reasonably or effectively institute a wartime economy, especially one that will last for at least 15 years.
Because of the influence of neoliberal and libertarian ideology in current understandings of what government can and can’t do, it makes sense to pre-empt, again, the inevitable objections from this quarter head on. Realizing early on that climate change requires massive government action, many neoliberals/libertarians and those on the political Right who share their views have tended to deny that human-caused climate change either exists or if it exists it is not a problem worth addressing. As Joe Romm has written, the Right has denied climate change because it doesn’t like the solutions to climate change, i.e. a pro-active government that will transform society’s energy system and with it, no doubt reordering or disturbing some of the traditional hierarchies of power and wealth which the Right has historically seen as its mission to protect.
Unfortunately, the moderate Left and “centrists” that have had a hand in governing over the past two decades in the US, Europe and within the UN have shared with the Right the neoliberal ideology of government, so have avoided realistically describing government’s potential for action and then implementing decisive actions of government in the face of climate change. They take overly seriously the objections of the extreme Right and mainstream neoclassical economists that government is necessarily inefficient and tyrannical, while, they state or imply, markets are always democratic and liberty-enhancing. The implementation of their favored climate policy, carbon pricing, in an actually effectual form with an explicit and escalating carbon price, also requires a level of legitimacy of government action in the economy that “left” neoliberals tend to gloss over in making every effort to show that their policies are “market-based”. Whatever role one allots to carbon pricing within the broader framework of climate and energy policy, one cannot have an effective carbon price without widespread recognition that government has a legitimate right or even duty to intervene quite drastically in markets and in the decision-making calculus of consumers.
The “real” non-neoliberal Left, which in current American parlance would be considered further left than what some media pundits call the “far Left”, sometimes sees in action on climate change simply an extension of its historical mission, the leveling of traditional hierarchies of power and wealth. While it is true that there is a social leveling potential in government action on the scale of a wartime mobilization, the purpose of transforming the energy system is not identical to that mission either, somewhat contrary to the fears of the Right. Pouring climate action into the mold of traditional Left-Right arguments is fundamentally misleading because it doesn’t grapple with the actual requirements for the self-rescue of civilization to be effective. While the Left will be more comfortable with the idea of decisive climate action, that action will not necessarily yield the social utopia of the Left.
The Engine of Energy System Transformation: An Ethically-Driven, Dirigiste, Monetarily-Sovereign, Data-Open, Entrepreneurial State
The essential characteristics of government that are crucial in implementing the Pedal-to-the-Metal Plan are an ethical commitment to future generations, dirigisme, monetary sovereignty (or its effects), data openness and public entrepreneurialism.
A) Ethical Commitment to Future Generations – While most will claim that they have an ethical commitment to future generations, “talk is cheap”. If government acts purely or largely in the short-term interests of some or maybe even all of the current generation in the context of an unsustainable economy, it will by necessity exclude future generations from its policy orientation and actions. Rather than take politicians’ claims of ethical probity at face value, social movements motivated by concern for this and future generations will need to continue to hold politicians to an ethical standard that “deals in” future generations as well as serves the needs of the current generation in a more sustainable form.
B) Dirigisme – “Dirigisme” is French for “director-ism” and refers to a policy orientation of the State/government directing investment and taking an active managerial role in the economy. To implement the Pedal-to-the-Metal Plan, government must take on the leading role of overseeing investment and managing energy consuming activities within the economy at large via publicly-discussed, transparent planning that supports the goal of rescuing civilization from its fossil fuel dependency. In dirigisme, the public purpose has priority over any given private or corporate goal, though contrary to some of the fears and smears of the Right and center, the result is a government-led mixed economy and not a Soviet-style command-economy. A dirigiste economy can be more or less democratic, more or less authoritarian depending on the transparency and interactivity of its decision-making and viable channels for redress of excesses in government exertion of power in the economy.
C) Public Enterpreneurialism – The government will have an increased role as the creator of new enterprises or institutions that address the energy transition and increasing effects of climate change on the population. As much of the infrastructure to transition to a renewably generated electricity driven society will not yield much in the way of profits to investors, or if it did, those enterprises that owned the infrastructure could choke the economy, government must either financially support and heavily regulate new private services or found new public enterprises to deliver these services. In addition there will an intensified role for government in investing in scientific and technological research related to energy and climate. There are many such enterprises that will need to be either expanded, repurposed and/or refunded. As examples, some new public enterprises that will need to founded in the US are:
- Renewable Electricity Transmission Authority – Modeled on the existing federally owned transmission facilities in the Western U.S., a high voltage DC network of transmission lines needs to be built to connect high value renewable energy sources to where energy is consumed. This authority might also develop coordination between the regional grid management organizations in terms of energy planning and energy management, as well as the day-to-day “market operations” of the regional grid managers.
- investor-owned railways in the US would need to be bought out by government and, as in some European countries, the rail rights of way would have to be operated as a non-profit public benefit corporation. This is to enable a massive build-out of rail and electrification of rail which are beyond the means of and not in the immediate economic interest of the investor-owned railways. These companies could form operating companies that run rail services on the federally-owned rights of way, thereby building on their existing core competencies in rail management. Multi-tracking all but the most sparsely traveled stretches of track would be part of the work of this authority as well as creating a realistic grade separation plan for existing and new rail lines.
- Increase Government Clean Energy Research Budgets 10 Fold – An already-existing entrepreneurial function of government that needs to be magnified under the Pedal-to-the-Metal Plan. There are some who exaggerate the need for innovation but research into energy related science and technology must continue at a much accelerated rate, especially in the area of energy storage.
D) Data Openness – While the government directing the effort to meet the climate challenge and transform our energy system must operate from a plan, the success of the plan must be measured according to data such as slowing level of emissions and eventual stabilization or even reduction of carbon levels in the atmosphere. The plan or government’s actions must not then be taken as objects of veneration or belief but subjected to the scientific method in as many aspects as possible.
E) Monetary Sovereignty – The vast public investments to shift society’s energy system will require government leaders to have the policy space necessary to spend trillions of dollars (or, in another nation, large amounts of the national currency) over and above levels of taxation. Only fiat-currency issuing governments, i.e. monetarily sovereign governments, can spend independently of the amount of taxes collected. Of course, the amount of spending required might lead to excess liquidity, unacceptable levels of currency devaluation, and inflationary pressures which can be counteracted by a number of policy instruments including carbon taxation, price controls, and voluntary methods like public bond sales. In the case of a Pedal-to-the Metal Plan for the Euro-Zone, those governments that have given up their own currencies would either need to re-issue national currencies or create a European fiscal union.
Actions of Government: Execution of the Plan
A government as described above would then need to execute the Pedal-to-the-Metal Plan or its equivalent. There is not enough space here to rehearse the obvious process required for such a massive project to be undertaken effectively. A number of institutional arrangements within government are possible but a good portion of the activity of government would be taken up over a two decade period by implementing the plan, mostly in the form of building infrastructure as described above. As there are other ongoing commitments of government, it might be that a Climate Change Plan Authority would be set up under the supervision of legislators and government executives. This authority would draft a detailed spending and management plan to achieve the technological and climate goals of the plan. A timeline for the achievement of individual plan objectives would be set up. Ambitious, rapid but also arbitrary deadlines for achieving objectives would then be put into place.
In the example of the US, Congress would authorize spending on the plan, which would result in several trillion dollars of additional government expenditure per year. As a monetarily sovereign government like the US can choose to spend without regard for balancing budgets, government leaders and economists would adjust taxation and other aspects of fiscal and monetary policies with an eye to potential inflationary pressures that might endanger the economy overall. On the other hand, once committed to acting on climate change with rapidity, concerns such as inflation become subordinate technical issues rather than the transcendental, ultimate evil that is ascribed to it by right-wing economists.
A fiat-currency issuing government such as the US federal government is then not “taking away” taxpayer dollars to spend on changing our energy system(even though these changes are of benefit to the taxpayers individually and as a whole). The government will need to raise some taxes to shape consumer and business behavior (see below) and to reduce the amount of money in circulation after the large increases in federal expenditure. The Pedal-to-the-Metal plan calls for new taxation to partially counteract the potentially inflationary push of the required government spending contained within the plan. However the notion that there must be a one-for-one increase in taxes to “pay for” federal spending is technically wrong and economic damaging to a weak economy like our contemporary one, starved of liquidity due to income inequality.
While in the US we are currently facing a government that is trimming its size, the Pedal-to-the-Metal Plan would increase the number of government employees to actually execute the plan and deliver the projects and services that will fall to government. In addition, there will be millions employed by government contractors who will be delivering project-based services to government, determined by a bid process. On the other hand, the hiring of new full-time government employees if they are fulfilling a valuable service to the public should be considered as preferable in many instances to the outsourcing the delivery of vital public services to private corporations.