What’s the Keynesian eco-plan?

( – promoted by buhdydharma )

This question dates back to a conversation I had some time ago with bobswern, who advocates some form of Keynesianism, as to the efficacy of a renewed economic stimulus.  The problem here is that the current industrial society is based on a foundation of oil consumption, so more economic growth = more oil consumption = higher gas prices = more global warming.  I want to know, then, what’s the Keynesian plan for the environment?  I am not trying to attack here — but I’m curious as to how well thought out the “stimulus” plan is.  My own advocacy involves the transition to a more humane economy, rather than a mere renewal of “economic growth.”

(crossposted to Orange)

So, OK, Keynesianism.  You have a number of writers here on DailyKos.com (and elsewhere) who advocate for a bigger stimulus and “more economic growth,” among which bobswern is my favorite.  Over at firedoglake, moreover, there is letsgetitdone, who writes against the deficit hawks with regularity.  I suppose the most visible of the mainstream media’s Keynesians is Paul Krugman, who has been vocal about the need for a “second stimulus.”  And then you have a couple of economic writers with books recently out on this topic: e.g. Robert Skidelsky’s Keynes — The Return of the Master, or Paul Davidson’s The Keynes Solution — The Path to Global Economic Prosperity.

To these writers it must be amazing that so little is being done to stimulate the ground level economy as it threatens to tank again, or should I say tank further.  But this isn’t really about bobswern, whose diaries I typically enjoy reading — what I wish to examine, here, is the idea that more economic stimulus, and more economic growth, will solve the world’s ecological problem, its problem with the “metabolism of society and nature.”  I don’t see it.  The Keynesians, then, need a plan for the Earth’s ecosystems.

A few brief words about Keynesianism — the notion at stake with the advocacy of a stimulus is that of increasing economic circulation — the exchange of goods and services — by putting money in the hands of those who are most likely to spend it.  From the Wikipedia page:

Keynes argued that the solution to the Great Depression  was to stimulate the economy (“inducement to invest”) through some combination of two approaches: a reduction in interest rates and government investment in infrastructure. Investment by government injects income, which results in more spending in the general economy, which in turn stimulates more production and investment involving still more income and spending and so forth. The initial stimulation starts a cascade of events, whose total increase in economic activity is a multiple of the original investment.

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Thus the Keynesian solution to the Great Depression was to reinflate the economy through government programs, target to stimulate the circulation of goods and services among the public at large, just as the Keynesian solution to the current Great Recession is to intensify the “stimulus.”

The book by Skidelsky and the book by Davidson (cited above) have a lot of historical review and “mainstream” economic debate.  I am still looking them over.  They both endorse the capitalist system, though what interests me are their most humanistic moments.  Skidelsky:

Keynes had a political objective.  Unless governments took steps to stabilize market economies at full employment, the undoubted benefit of markets would be lost and political space would be opened up for extremists who would offer to solve the economic problem by abolishing markets, peace and liberty.  This in a nutshell was the Keynesian ‘political economy.’ (xviii)

I’m sure such a message would appeal to plenty of readers here, who are concerned that the forthcoming November elections will result in Democratic losses and Republican victories.  As for the Davidson book:

The government has an important role in ensuring a recovery that is as quick as possible from our current recession by promoting increased market demand for the products of business firms, thereby creating profit opportunities that will encourage enterprises to create more job opportunities.  This role requires the government to reject the idea that all that may be necessary is a little pump priming or jump-starting to get the recovery going.  A fiscal spending policy that ensures strong and persistent recovery with less worry about the size of the deficit and total government debt incurred is essential. (27)

Now, of course, there’s been plenty of government spending over the last couple of years — but it hasn’t really stimulated much demand.  Instead, people are paying off debts.  Davidson is recommending the sort of spending that would fuel economic growth.

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— Analysis —

Some kind of further economic stimulus would be beneficial, to America and to the world, if it ameliorated the plight of the worst-off.  But the primary necessity at this point is the humanization of the economy.  In this regard I am referring to the idea of a return to local production for local use, to sufficiency in the basic necessities for everyone, and to meaningful work toward a sustainable future.  This would be a “utopian” economy in the good sense, as a goal of our aspirations.

If we look at it merely as an economic program, however, I do not see how the Keynesian prescription for the current economic “Great Recession” can attempt to produce anything besides “economic growth.”  Whether it actually produces such growth is another question.  The economy is not a bunch of numbers, but rather a living, breathing thing, just as the planetary ecosystems upon which it depends are also living, breathing things.  Moreover, there are some problems with the idea of more “economic growth” in this era.  The Great Depression of 1929-1932 took place in an earlier era of capitalism, in which much of the United States and of the world was relatively “undeveloped.”  We, on the other hand, live in an era in which capitalist development inches closer each decade to a state of exhaustion, both of nature and of the working class.

In our era, as economic growth rebounds, so also does the price of oil.  Ian Welsh has noticed this:

After all, if the government can print money for banks, why not for jobs?

The reason not, folks, is that if you do that, oil will go back to levels which will crash out the economy.

The real, actual, economy, is not one spreadsheet.  It consists of people doing things, and the vast majority of those things require energy.  The ur-energy is still oil.  And no, there is not enough oil to go to full capacity utilization-because doing so will kick gasoline well over $5/gallon.

Until that problem, among others, is fixed, the economy is never going to be really good for Americans ever again.  Every attempt to fix things which does not fix energy, will not work for any useful length of time.

I suppose that one way around this would be for the Federal government to create a stimulus that would be entirely devoted to creating an “alternative energy” economy.  This itself, however, would solve only half of our problem with fossil fuels.  Government programs promoting “alternative energy” typically promote solar, wind, geothermal, and so on as a supplement to the fossil fuel economy which dominates our civilization now: nobody is yet proposing that we phase out fossil fuels altogether.  The problem is that the fossil fuel economy is ideal for the capitalist system; fossil fuels are the cheapest option in terms of energy return on energy investment, and when they become so expensive that other options are cheaper, the whole system will very likely be in trouble.

Thus providing a “stimulus” which does something about the oil bottleneck (as Welsh mentioned it) is only half of the problem.  The other half of the fossil fuel problem is that of abrupt climate change, and I don’t see it being solved so easily.

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At present, I do not see how the problem of abrupt climate change can be resolved with the problem of an expanding, capitalist economy.  At minimum, we are asking the global economy to ignore its fossil fuel “assets.”  This will require, at some eventual point, an international agreement to keep the grease in the ground — to plug up the oil and natural gas wells, to abandon the coal mines, and to give up on future exploration — in short, to phase out the fossil fuel industry altogether.  By the logic of the capitalists this represents an enormous “opportunity cost” — witness, for instance, the Saudi Arabian reaction to last year’s Copenhagen conference — they would like to profit whether we use the oil or not.

Ultimately what I am suggesting is that “economic growth” will have to be reversed if we are to do anything about our abrupt climate change problem, or for that matter about any of our other ecological problems.  For a sustainable future we will need a shrinking economy, an economy which will compensate for its year-by-year reduction of throughput in “goods and services” by becoming a more humane, more ecologically sustainable economy in each successive year.  Saral Sarkar suggested such a thing in his book “Eco-socialism or eco-capitalism?”  The late Teresa Brennan suggested an economy which, though it be otherwise permissive of small business, had slowed down enough to conform to the rhythms of the natural world.

Now, the economist Minqi Li has already given up on the growth paradigm in this regard.  Li suggests:

After centuries of global capitalist accumulation, the global environment is on the verge of collapse and there is no more ecological space for another major expansion of global capitalism. The choice is stark-either humanity will permit capitalism to destroy the environment and therefore the material basis of human civilization, or it will destroy capitalism first.

You’re going to save capitalism from this outcome, bringing us back into the growth paradigm while saving the Earth at the same time.  How?

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So from here I concede the stage to the Keynesians.  Dear Keynesians: what is your eco-plan?  How do you plan to resolve the contradiction of an expanding capitalist system grinding up the world into “goods and services” with that of a finite planet Earth vulnerable (at least) to abrupt climate change through the salting of the atmosphere with carbon dioxide from exhaust pipes?  I’d like to hear your solutions.

54 comments

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    • Edger on August 15, 2010 at 4:40 pm

    With denial, probably?

  1. They don’t have one and if you ask me they have no adherence to any economic theory other then pillaging, terrorizing, killing, that they call ‘wealth creation’. To these chilling psycho’s, disasters are just another business opportunity for profit and ‘growth’. Everyday I ask myself why don’t they see that they are killing the golden goose.

    In a sane society Larry Summers would be called what he is a sociopath, one who should not have any power at all none of them should. There is no humanity in any aspect of our current thinking. Our education system, our twisted use of social science’s, our politics, everything evolves around tarting up destruction and calling it ‘the good’ or growth, competition, freedom…

    Their is no solution that will come from these so called leaders or the elite in bred institutions that spit these people out. For such a educated lot they seem unable to grasp the concept of cause and effect let alone the fact that humanities interests are hooked to the earths. This is not growth it’s killing growth as poisoned earth cannot grow anything. It’s not progress either, nobody benefits not even those who are at the top. there is not a strong enough boat they can build to withstand what they are creating and it’s not wealth.                    

  2. The future you consider to be far, really isn’t, at least not technologically.  And I am not Free Energy CT dude.  I have been tracking at least a double handful of solar energy, wind and battery projects, that not only could replace fossil fuel energy but bring it down below the expense of unsubsidized fossil fuel production.

    What the powers that be can do is bottle things up, to a certain extent, in the development stage, but this cannot last that long either.  I do not believe in a vast world conspiracy to keep energy technology buried, and even if there was one, it would be an imperfect conspiracy at best.

    The time will come, in most of our lifetimes, when it is literally cheaper to go solar/wind/battery than it will to burn gas.  Organic solar cells can be printed like newspaper — and this is happening, today.  Solar paint is in the pipeline, too.  These things are relatively inefficient, right now — but when they’re as cheap as, or cheaper than paper, this partially covers the efficiency discrepancy, and the efficiency is getting better and better.

    Oil, unfortunately, will not be going away soon, not as an energy technology but in order to make plastics.

    But if I live to be 100, which I doubt, even without relying on pie-in-the-sky things like fusion power, I believe I would see the day when renewable energy that is too cheap to make the average consumer pay for, will arrive.  It may be a cost, still, for massive companies and industries.  But for ordinary people, cost wise, it’ll become like long distance, at some point, almost too cheap to worry about charging for.  And I say that not because I’m a starry eyed dreamer, but because of some basic numbers.  When covering your roof with solar power is as cheap and no-brainer a scenario as putting a roof up to begin with — or adding a covering to an existing roof, this changes things.  When adding solar power to your home becomes as thoughtless as painting your house, this changes things, drastically.  There’s so much uncovered land there, it’s not even funny, even when the efficiency is low, that’s a huge amount of energy.  And the efficiency is not going to stay low, and will not be very low when it starts becoming the kind of no-brainer I speak of.

    As to the fossil fuel industry conundrum.  We could replace fossil fuel today, for most things as an energy source, if we were willing to go nuclear with newer, cleaner (not clean) technologies (airplanes might still be a problem and need to use dead-dinosaurs).  But even without nuclear, which the public is still dead set against (and I can’t say I blame them), the time is fast approaching when oil and gas as fuel is a political and economic problem, but not a technological or basic cost problem.

    It could be that too-cheap-to-meter electrical power would crash the economy, or set in motion an economic disaster, and I do not speak to the capitalism aspect.  But if that happens in a timeframe more than 5-10 years out, it won’t be because gas is cheap while alternatives are expensive.

  3. Here’s a response to my diary you might be amused to read:

    http://www.dailykos.com/commen

    Oh, and don’t forget that the Anticapitalist Meetup is at 3pm PT/ 6pm ET!

  4. In Portugal…  

    “I’ve seen all the smiles – you know: It’s a good dream. It can’t compete. It’s too expensive,” said Prime Minister José Sócrates, recalling the way Silvio Berlusconi, the Italian prime minister, mockingly offered to build him an electric Ferrari. Mr. Sócrates added, “The experience of Portugal shows that it is possible to make these changes in a very short time.”

    Nearly 45 percent of the electricity in Portugal’s grid will come from renewable sources this year, up from 17 percent just five years ago.

    So what could we do in the US for an investment of about $1 trillion, which is what Paul Krugman and many other “Keynesians” suggested for the original stimulus?

    Taking the wind facility at Roscoe, Texas as a reasonably representative example of cost/benefits…

    A $1 billion investment now produces 785 MW of electricity.

    Total US demand for electricity in the winter is about 756 GW, and so…

    One thousand Roscoes, or a $1 trillion investment could transform just about all the production of electricity in the United States to renewable sources.

    Would this simultaneously solve every environmental problem in the world?

    No.

    But would it be incredibly beneficial to the environment now and for all future generations?

    Yes.

    And it would also produce a heck of a lot of jobs!

  5. businesses will have solar panels and reinforced clean roofs (without asphalt shingles etc.) to capture and hold rain water for recycling for a myriad of purposes, among which, for residences at least,  is on site food production. As precipitation is always uneven in a given area, this water could easily be shared.

    I would imagine that people would share energy also. In fact, the future must be all about sharing. Community and consciousness must transform political and economic thought, and it must start locally with basic needs – as many people have talked about here. In fact, I don’t see how basic,resource competitiveness can survive. The great age of fighting over resources will end, and thus will end war.

    It must be so for our children. It must!!!!!!!!!!!

     

  6. … current idle labor and capital equipment can accommodate in revamping our transportation system from one focused on maximizing resource consumption over to one focused on being resource efficient. Of course, the mining of resource inefficiencies is not a long term sustainable basis for growth, but its a necessary activity and the fact that it can provide a substantial immediate surge of economic growth under current institutions makes it more compelling than the simple observation that its necessary.

    As far as the capitalist system more generally, it would be a fine thing to not save it as much this time around, given that saving it last time just led to capitalists assiduously pursuing the freedom to require needing to be saved again … but its not as if the insights of the General Theory go away, whether our reversal of the Second Gilded Age entails more to the mix of a mixed economy or entails supplanting capitalism with a system founded primarily on one of the viable alternatives of syndicalism, communalism, or natural-resource-feudalism.

    • jamess on August 16, 2010 at 4:01 am

    as an armchair Keynesian / David Korten advocate,

    my solution would include a overhaul

    of our Investment Model.

    Instead of investing/earning through “churning” the Stock Market,

    We need to re-link “earnings” to actual Physical Products produced,

    actual Physical Service performed.

    Perhaps Workers are given an allotment of Credits/Stamps/Tips,

    which they dole out with every Unit Produced.

    Investors collect the Credits/Chits to further trade and re-invest;

    Workers collect their Paychecks, and additional shares in their Profit-sharing, worker-owned Workplaces.

    I know this is a naive, oversimplification,

    and probably impossible given our current System Inertia —

    But somehow, “Paper Churn” must be reduced.

    “Useful Product” output must be increased.

    And people need to hone lives,

    attuned to the planet, and not to work.

  7. As long as the American “left” clings to ideas like:



    increased market demand for the products of business firms, thereby creating profit opportunities that will encourage enterprises to create more job opportunities

    there cannot possibly be any fundamental restructuring of the economy, no “perestroika”.  As no less a mainstream Keynesian figure than Robert Reich pointed out just this past week, corporate profits have become completely uncoupled from jobs and in particular, job growth.    Profit incentive no longer even works according to the model they claim to be wanting to apply, never mind within the context of resource and environmental carrying restraints.  It is usually the best course in making this kind of argument not to attack head-on at this sort of contradiction, and instead to commiserate, to help them see why their preferred approach fails even according to their own measurements.  

  8. in a huge way.  Keynesian theory is not about “reinflating” the economy, not at all.  Keynesian theory recognizes that a successful economy is MIXED.  Our current economic reality is not mixed.  And the inflated economy that we have experienced since the Reagan years is the economy of dumping Keynesian theories.

    There is no reason to assume that putting people to work would lead you directly to hell.  You want green jobs, fight for green job creation.  But I’m not afraid to fight for what I believe in.  I see it as necessary at times as sleeping and eating and snuggling.

    The only thing most Keynesian believers seek at this time is avoiding the suffering of humanity that we will experience while nonliving entities like corporations are flush and hale.

  9. An economy that is reeling in debt cannot borrow its way to prosperity anymore than a drunk can drink himself sober. This can never work folks. All this does is serve to concentrate the wealth, control, capital, and (eventually the) resources into the hands of the very top, and impoverish the rest of society over the long term.

    The only way to get out of this situation, is to retake the control of our Nation’s money away from the private (profiteering) Central Bank Monopoly, and return the control back directly in the hands of the U.S. Treasury with non-profit, debt-free money creation. This will allow our Country to extinguish its debts without the burden of new debt, and create enough liquidity to have a productive Economy (with no aggregate debt formed and no perpetual borrowing).

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    The other key emphasis is that we always here about how we need to be buying things, and shopping, and consuming to “help the Economy”.  This is yet another myth.  What we need to do is manufacture more goods and products here locally, and stop the consumption of imported products. So all of these so-called “free trade” agreements (NAFTA, CAFTA, GATT, etc.), which are really little more than MultiNational Corporation job & manufacturing relocation bills, that are endorsed by both Democrats and Republicans are the problem here. The Economy will revive if and only if America can reconstitute its once great Manufacturing base here locally again.

    ___

    We do not have a President in office today that understands or supports any of this.  Obama is part of the pro-NAFTA, pro-FederalReserveMonopoly, pro-CorporateOligarhcy, pro-KeynesianBorrowing fan club. The status-quo has not moved an inch. It doesn’t work, and it can never work. This is why the standard of living in America has steadily gone downward year after year, decade after decade. The Keynesian policy is a fundamentally failed one.

    And don’t listen to DKos.  DKos is a pro-Establishment site. They don’t talk about any real change or real government transparency over there. KOS thinks “the CIA does good all over the World.”  These people haven’t a clue!

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