The economy needs to be green to be 'fixed'
As is often the case, The New York Times serves as a good example of the mistaken assumptions underlying conventional wisdom. In his Sunday Magazine cover story, “The Big Fix,” Times economic columnist David Leonhardt combines many of the misconceptions surrounding the idea of “green jobs.” As I fretted in a previous post, some writers, including Leonhardt, seem to be setting up some sort of cosmic battle between green jobs, cap-and-trade, and economic growth:
Of the $700 billion we spend each year on energy, more than half stays inside this country. It goes to coal companies or utilities here, not to Iran or Russia. If we begin to use less electricity, those utilities will cut jobs. Just as important, the current, relatively low price of energy allows other companies — manufacturers, retailers, even white-collar enterprises — to sell all sorts of things at a profit. Raising that cost would raise the cost of almost everything that businesses do. Some projects that would have been profitable to Boeing, Kroger or Microsoft in the current economy no longer will be. Jobs that would otherwise have been created won’t be. As Rob Stavins, a leading environmental economist, says, “Green jobs will, to some degree, displace other jobs.”
Later in the article, he kinda sorta argues that this might all be necessary in the long-term .. but first, let’s deconstruct his arguments.
First, will those poor utilities and coal companies lose jobs? The coal companies will lose a few jobs, but they don’t have many anyway; and for the utilities to lose jobs, there would have to be a massive deconstruction of our electrical system, which is unlikely to happen.
Ironically, Leonhardt spends considerable space in the article talking about one of my favorite books, Mancur Olson’s The Rise and Decline of Nations. To his credit, Leonhardt explains Olson’s theory pretty well — basically, over time, since it’s easier for small groups to organize than larger ones, and since big organizations like big corporations can organize among themselves much more easily than the population at large, the body politic will become “sclerotic.” As in blood vessels, the political system will become gummed up by “special interests” — like coal companies and utilities. So he’s using an example of a malady he’s describing to argue against clean energy investments.
Second, and most central to anti-green rhetoric, electricity bills will allegedly go up, thus jobs and everything else, including economic growth, will go down. There are two ideas being perhaps unfairly intertwined here: cap-and-trade and green collar jobs programs.
Whatever its merits, cap-and-trade need not be linked to green collar jobs. It could be linked — as dirty sources of electricity become as expensive as their true costs would indicate, wind turbines and building retrofitting will become attractive as investments, so cap-and-trade could drive green collar jobs — although for the stimulus, which needs jobs now, now, now, that might take too long.
On the other hand, it should be perfectly possible to create millions of green collar jobs without cap-and-trade legislation. These are actually the green-collar jobs being created in the stimulus package — building retrofitting, subsidies for wind and solar energy, even the pathetic extra funding for mass transit.
Far from making electricity more expensive, the direct public construction of alternative energy systems could conceivably decrease the cost of electricity. At the very least, these green collar stimuli could keep electricity at a similar cost, even as coal plants are ideally being decommissioned. Or, as seems increasingly likely, no new coal plants will be constructed, and the increase in electricity demand could lead indirectly to higher prices, which could be mitigated by some construction of wind and solar electricity-generating systems.
Which leads us to the third fallacy from the Leonhardt’s quote, that green jobs will simply displace other jobs (I’m not giving Stavins an out with his “to some degree” qualifier). Adding wealth by retrofitting buildings, building wind turbines, and creating transit is not "displacing jobs,” it’s adding jobs.
But there’s a bigger problem with this approach, which pops up at the beginning of Leonhardt’s article:
The economy will recover. It won’t recover anytime soon … What will happen once the paddles have been applied and the economy’s heart starts beating again? How should the new American economy be remade? Above all, how fast will it grow?
My hypothesis is this: Unless the economy is making the transition to a green, sustainable, manufacturing-based economy, the economy’s growth will be sporadic and short-lived. In fact, the whole concept of growth will have to be reoriented towards the creation of wealth that does not deplete resources and destroy ecosystems.
In other words, green collar jobs programs are part of a system-wide, long-term response to our economic troubles, not one element in a business-as-usual economic cycle of recession and growth. As David Lindorff argues, “our national economy will never ‘bounce back’ to where it was in 2007.”
Leonhardt does go deeper than the business cycle when he identifies two causes of our current problems: the transformation from an “investment” economy to a “consumption” economy, and the loss of global leadership in education.
When you hear from an economist that we’ve been “consuming” too much, you should be very skeptical. What’s likely to come next is the advice that we have to “tighten our belts.” This sort of belt-tightening talk from economists is supposed to be hard-headed and realistic, as opposed to the soft and fuzzy environmentalist warning to stop using up all of our resources and destroying the biosphere.
But it’s usually a diversion, which really means “big business and the very wealthy need to have whatever resources are left after big business and the very wealthy have led us down the road to economic catastrophe, because only big business and the very wealthy can create jobs.”
In reality, the middle and lower classes have not gained appreciably in the last 30 years, so they are not the ones creating the huge debt that is threatening to drown the economy. And it’s not just consumers buying big TVs on credit that is the problem, its big corporations outsourcing good manufacturing jobs and binging on short-term, Wall Street-inspired financial shenanigans that has led to the lion’s share of our economic problems.
The old economy is not going to come back. We need a new economy, based on a thriving middle class, a green, domestic manufacturing economy, and a rebuilt, green infrastructure. Those would constitute a real “big fix.”