Yves here. It is striking to see the degree to which businesses actually give top priority to maintaining their management authority over maximizing profits, despite neoliberal theory saying the opposite. Even though the latest example is the clean energy case presented long-form below, Michal Kalecki explained the basis for this behavior in his 1943 essay on the barriers to achieving full employment. As we are seeing now, a (merely somewhat) tight labor market undermines the power of bosses. From Kalecki:
It should be first stated that, although most economists are now agreed that full employment may be achieved by government spending, this was by no means the case even in the recent past. Among the opposers of this doctrine there were (and still are) prominent so-called ‘economic experts’ closely connected with banking and industry. This suggests that there is a political background in the opposition to the full employment doctrine, even though the arguments advanced are economic. That is not to say that people who advance them do not believe in their economics, poor though this is. But obstinate ignorance is usually a manifestation of underlying political motives.
There are, however, even more direct indications that a first-class political issue is at stake here. In the great depression in the 1930s, big business consistently opposed experiments for increasing employment by government spending in all countries, except Nazi Germany. This was to be clearly seen in the USA (opposition to the New Deal), in France (the Blum experiment), and in Germany before Hitler. The attitude is not easy to explain. Clearly, higher output and employment benefit not only workers but entrepreneurs as well, because the latter’s profits rise. And the policy of full employment outlined above does not encroach upon profits because it does not involve any additional taxation. The entrepreneurs in the slump are longing for a boom; why do they not gladly accept the synthetic boom which the government is able to offer them? It is this difficult and fascinating question with which we intend to deal in this article…
We shall deal first with the reluctance of the ‘captains of industry’ to accept government intervention in the matter of employment. Every widening of state activity is looked upon by business with suspicion, but the creation of employment by government spending has a special aspect which makes the opposition particularly intense. Under a laissez-faire system the level of employment depends to a great extent on the so-called state of confidence. If this deteriorates, private investment declines, which results in a fall of output and employment (both directly and through the secondary effect of the fall in incomes upon consumption and investment). This gives the capitalists a powerful indirect control over government policy: everything which may shake the state of confidence must be carefully avoided because it would cause an economic crisis. But once the government learns the trick of increasing employment by its own purchases, this powerful controlling device loses its effectiveness. Hence budget deficits necessary to carry out government intervention must be regarded as perilous. The social function of the doctrine of ‘sound finance’ is to make the level of employment dependent on the state of confidence….
We have considered the political reasons for the opposition to the policy of creating employment by government spending. But even if this opposition were overcome — as it may well be under the pressure of the masses — the maintenance of full employment would cause social and political changes which would give a new impetus to the opposition of the business leaders. Indeed, under a regime of permanent full employment, the ‘sack’ would cease to play its role as a ‘disciplinary measure. The social position of the boss would be undermined, and the self-assurance and class-consciousness of the working class would grow. Strikes for wage increases and improvements in conditions of work would create political tension. It is true that profits would be higher under a regime of full employment than they are on the average under laissez-faire, and even the rise in wage rates resulting from the stronger bargaining power of the workers is less likely to reduce profits than to increase prices, and thus adversely affects only the rentier interests. But ‘discipline in the factories’ and ‘political stability’ are more appreciated than profits by business leaders. Their class instinct tells them that lasting full employment is unsound from their point of view, and that unemployment is an integral part of the ‘normal’ capitalist system.
If you haven’t yet come across it, I strongly urge you to read this seminal essay.
Now to the climate change version of this behavior. In addition to the usual “don’t tell me what to do” reflex among executives and business owners, we also have intense lobbying by dirty energy interests that stand to lose.
By Nick Cunningham, an independent journalist covering the oil and gas industry, climate change and international politics. He has been featured in Oilprice.com, The Fuse, YaleE360 and NACLA. Originally published at DeSmogBlog
Wind, solar, and batteries are already the cheapest source of electricity and an aggressive shift to clean energy makes more economic sense than a slow one, according to a new study. However, an enormous lobbying effort is underway to block climate policy in the $3.5 trillion budget bill under consideration.
Wind turbines in Oregon. Credit: Nick Cunningham
A slow transition away from fossil fuels would be “more expensive” than a rapid shift to renewable energy, according to a new study, a conclusion that stands in sharp contrast to fossil fuel industry talking points aimed at heading off aggressive climate policy currently being shaped in Congress.
An accelerated clean energy transition would lead to “net savings of many trillions of dollars,” a calculation that does not even take into account the damages from unchecked climate chaos, the recently released study from Oxford University found. On economics alone, the logic of a rapid shift to renewable energy is obvious and necessary.
“The belief that the green energy transition will be expensive has been a major driver of the ineffective response to climate change for the last forty years,” the researchers write. “This pessimism is at odds with past technological cost-improvement trends, and risks locking humanity into an expensive and dangerous energy future.”
The authors note that outdated thinking on renewable energy — that it comes with tradeoffs like higher electricity prices, for instance — has long dominated policy discussions. Echoes of this idea can be found today in mounting attacks by a network of lobbyists and think tanks on the climate provisions in the Democrats’ $3.5 trillion budget package.
But that line of argument has been inaccurate for years, and the Oxford study says it is now decisively wrong. “Our analysis suggests that such trade-offs are unlikely to exist: a greener, healthier and safer global energy system is also likely to be cheaper,” they write [original emphasis].
The U.S. has a chance to solidify an accelerated track towards cleaner energy. The Democrats in Congress are working on legislation that would push the U.S. electricity system to roughly 80 percent carbon-free power by 2030, a definition that includes hydro and nuclear power, up from around 40 percent today.
The so-called Clean Electricity Payment Program (CEPP) is complex, but it essentially rewards utilities that move quickly to add renewable energy to their portfolios with each passing year, while imposing fees on laggards who move slowly.
Industry Ramps Up Misinformation
Building the more than 600 gigawatts of solar, wind, and batteries needed to get to the 2030 target would put a lot of people to work. One study from the Analysis Group finds that the CEPP would help create an estimated 7.7 million net new jobs over the next decade as the electricity sector moves rapidly to scale up renewables.
But the win-win logic of creating jobs and cleaning up the electricity sector is not the message that industry front groups and their lobbyists are engaging with.
In the past few weeks, a constellation of right-wing think tanks, front groups, and trade associations have mobilized to defeat the CEPP, as well as the broader $3.5 trillion budget package — nicknamed the Build Back Better bill — under consideration by the Democrats in Congress.
Many of the misleading talking points being pushed by these lobbyists take the familiar form of outdated notions that renewable energy is expensive. They also opportunistically try to link the proposed bill to electricity blackouts, which have occurred in various parts of the country this year, including from soaring temperatures in California and extreme winter storms in Texas, while conspicuously ignoring the fact that these disasters are made worse by climate change.
For example, the Institute for Energy Research and its advocacy arm, the American Energy Alliance, warned that the CEPP would lead to “skyrocketing costs and rolling blackouts,” and that it will “kill the U.S. economy.” Both groups have extensive ties to Koch Industries and regularly push pro-fossil fuel rhetoric.
Other groups have sought to revive well-worn arguments about wasteful spending, while adopting a new campaign warning about inflation. Indeed, raising the dangers of inflation has become one of the central attack lines by right-wing groups in recent months as the budget negotiations drag on.
For example, Americans for Prosperity (AFP), a group founded by David Koch, has held public events in August and September that put pressure on Congress to “end Washington waste,” and warn about inflation, an echo of the Tea Party events from 2009, which in many ways was an astroturf phenomenon.
In one September 17 post on its website, AFP linked to an analysis by the Independent Women’s Forum (IWF), which recently launched an Inflation Tracker. IWF says the “inflationary” $3.5 trillion plan would “hurt poor, elderly, minorities.” IWF also has extensive Koch ties.
The Wall Street Journal looked at AFP’s recent attempts to drum up anger at federal spending and found that the front group is struggling to break through with conservatives who are more animated by culture war issues related to mask mandates and vaccine requirements. In an effort to appeal to people, AFP has been “name-checking” mask mandates, and then trying to connect them to the dangers of big government in general, and urging people to oppose the budget bill.
In September, the purportedly non-partisan Citizens Against Government Waste (CAGW) named House Speaker Nancy Pelosi and Senator Bernie Sanders as their “Porkers of the Month,” a derisive award it hands out to government officials who “endanger America’s financial stability.” CAGW, which has received funding from tobacco companies, Exxon, and right-wing foundations, uses similar talking points: the budget bill is costly, will push up inflation, and will result in taxes on American families.
Right-wing groups don’t oppose all government spending on energy. The National Taxpayers Union, which claims it fights for free enterprise and against government waste, recently defended oil subsidies while criticizing incentives for renewables.
But these are all small examples of what has become a massive corporate lobbying blitz to kill the budget bill. As the Washington Post reports, the largest corporate entities in the country, including ExxonMobil and Pfizer, and powerful lobbying groups, such as the U.S. Chamber of Commerce, PhRMA, the National Association of Manufacturers, and the Business Roundtable, are pulling out all stops to prevent passage of the budget bill.
As the Post reports, the Chamber is spending heavily on ads targeting the handful of wavering corporate-friendly Democrats, and has vowed to cut off support for any member of Congress that votes in favor.
DeSmog reached out to the Chamber of Commerce, the Institute for Energy Research, the Independent Women’s Forum, Citizens Against Government Waste, the National Taxpayers Union, and Americans for Prosperity. IER responded but did not provide comments in time for publication.
Only AFP answered questions. When DeSmog cited the Oxford study and the cheap cost of renewable energy, Lorenz Isidro, an AFP spokesperson, said: “Top down energy mandates like the Clean Electricity Standard do little if anything to actually improve the environment but would increase energy rates, make everything we buy more expensive, and leave everyone worse off, particularly the least fortunate.”
But as the Oxford study shows, renewable energy is the cheapest source of power generation, and a faster transition results in more economic benefits. The corporate ad and lobbying campaign currently underway is full of misinformation.
“I am not surprised to see the oil & gas industry lobbying to water down efforts to replace their energy product with renewables + storage,” Matthew Ives, one of the authors of the study, wrote in an email. “They have been actively lobbying to reduce investment in renewables for a long time but I don’t think they, even with their wealth and influence, could hold back the tide of technological advance that is happening in these new clean technologies,” he wrote, adding: “I’m afraid the train has left the station.”
Arguments about inflation also appear opportunistic; economists are debating whether inflation is a temporary phenomenon related to the pandemic. In any event, the suite of social and economic programs included in the budget reconciliation bill — paid family and medical leave, universal pre-K, an expansion of Medicare, free community college, to name a few — are aimed at lowering the largest expenses in most people’s lives.
In fact, an analysis from the Institute on Taxation and Economic Policy finds that most of the benefits of the budget bill are concentrated on the poorest 20 percent of taxpayers, and just about every American would receive a tax cut except for the richest 5 percent.
On top of that, the tax hikes on the rich are intended to offset the cost of the overall package, so claims of enormous deficits are inaccurate. Finally, the spending is spread out over ten years, not all at once.
Whether or not the claims are accurate, Republican politicians and right-wing groups have seized on inflation as an intentional messaging campaign to scare the public away from the budget bill.
Their sky-is-falling rhetoric about renewable energy is part of a longer pattern of behavior of manipulating economic data, says Kathy Mulvey, accountability campaign director for climate and energy at the Union for Concerned Scientists, told DeSmog.
“Fossil fuel companies are not reliable economic messengers,” she said. “They seem to be just all-in on delaying the transition in a way that might protect quarter-to-quarter returns to shareholders, but the evidence is mounting that it could prove financially ruinous for everyone and for the economy.”
All Eyes on Manchin
The language used by corporate lobbying outfits on costly renewables, inflation and debt appear carefully crafted to appeal to one senator in particular: Senator Joe Manchin (D-WV), the pivotal vote in the Senate. At times, the language used by corporate lobbyists very closely echoes Sen. Manchin’s own arguments.
In a widely circulated op-ed in the Wall Street Journal in early September, Sen. Manchin expressed his opposition to the budget bill, warning of excessive spending and inflation. He also argued how spending today could leave the country ill-positioned for some future crisis.
Notably, the Chamber of Commerce seemingly adopted Sen. Manchin’s argument as its own, although it repurposed it to warn against the Chamber’s chief concern, the proposed higher corporate tax rates. “[T]ax increases will lessen the resiliency of our economy when crisises [sic] hit, making it more difficult to recover when the next inevitably does come,” the Chamber’s senior economist Curtis Dubay wrote.
Whether they are sharing talking points is unknown, but the Chamber very explicitly says that it is rewarding Sen. Manchin with campaign contributions, along with Democrats wavering on the budget bill.
On September 22, the Chamber launched a six-figure ad campaign targeting a handful of Democrats, urging them to block the entire budget bill, calling it an “existential threat to America’s fragile economic recovery.”
Sen. Manchin holds outsized influence over the final outcome. While he has expressed concerns about the CEPP, what he seems to ignore is the enormous opportunity that his home state of West Virginia could see from the budget bill in general, and the CEPP in particular.
“It gives us an opportunity to jump start clean energy in West Virginia. We’re still 91 percent coal-fired, and our electricity customers have paid massive rate increases over the last 10 to 12 years because we’ve doubled down on coal unlike most other states,” James Van Nostrand, a law professor at West Virginia University and director of the Center for Energy and Sustainable Development, told DeSmog. “Coal is not a cost-effective way to generate electricity anymore.”
A new study from RMI, a sustainability think tank, finds that compared to other regions in the U.S., Appalachia would see the biggest economic benefit from the growth of renewable energy over the next decade.
Van Nostrand agreed. “West Virginia would benefit disproportionately from all the money that would come out of the Clean Electricity Payment Program,” he said.
Sen. Manchin has repeatedly questioned why there is urgency around the budget bill, an odd claim given the accelerating climate crisis and the policy programs addressing it within the bill. The United Nations said on September 17 that unless the world dramatically accelerates climate policy to speed up the energy transition, the world is on track to warm to a catastrophic 2.7 degrees Celsius (nearly 5 degrees Fahrenheit) by the end of the century. U.N. Secretary-General Antonio Guterres said the “climate alarm bells” are “ringing at fever pitch.” If emissions are not cut drastically, Guterres says the world is in for a “hellscape of temperature rises.”
In early September, a group of 94 organizations, including environmental, faith, justice, and labor groups, sent a letter to Congress, calling on them to stand up to corporate lobbyists and pass the budget bill. “Now is not the time to let deep-pocketed corporate lobbyists stand in the way of vital public investments in an economy that works for all of us,” they wrote.
“Manchin knows better. He clearly knows better. He could deliver such huge benefits for West Virginia … Why would you say no to this? This is a no-brainer,” Van Nostrand told DeSmog.
Recently, the Intercept reported that Sen. Manchin continues to earn more than a half million dollars per year from his personal stake in his coal business. The New York Times pointed out that Sen. Manchin will preside over the Senate Committee in charge of writing the CEPP, while also being the Senator who has received more campaign donations from the oil and gas industry than any of his colleagues last year. Sen. Manchin did not respond to a request for comment.
Van Nostrand hopes that Sen. Manchin will realize the monumental opportunity that he has at the moment. “What is your legacy going to be? What are you going to put on your tombstone?” he said. “You’re the guy who blocked massive amounts of money that could have come to West Virginia because it wasn’t good for the coal industry and your own personal financial interest?”