Wednesday, November 13, 2013

A green industrial strategy?

When I wrote the precursor to Elegant Technology that was published in Finland in 1989, I was shocked to learn that many of my readers thought my book was funny—as in it made them laugh. This was noted in several reviews. I didn't know just how to respond—while I like to think that I have a pretty good sense of humor, I certainly did not write anything I deliberately tried to make funny.  So of course I asked anyone who would answer what he or she thought funny.  One answer was my contention that we could organize a conversion to a green society using largely the same organizational techniques used by the military-industrial complex.  I certainly did not think such a suggestion funny.  After all, a green technology would be, by necessity, bleeding-edge sophisticated and no one got to do bleeding-edge like the MIC.  Why not borrow such a strategy?

The real reason folks thought such a suggestion funny is that when they thought about environmental problems, their knee-jerk reaction was to reach for the Garden of Eden, back-to-nature solution.  The fact is that this option was eliminated so long ago, it is not even worth considering but there it is—the first suggestion at every gathering of environmentalists.  If you don't believe me, I encourage you to read the comments this video provoked—follow the link.  Garden of Eden thinking lives on.

Transcript: PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I'm Paul Jay in Baltimore.

We're continuing our series of interviews about the question: does the United States need a new industrial policy? And I say newbecause as we have pointed out in these series of interviews, there is an industrial policy in the United States and it's called militarism. Some people have called it the military-industrial-congressional complex. So does America need a different industrial policy than that?

Now joining us again to continue our discussion is Bob Pollin. Bob is the cofounder and codirector of the PERI institute in Amherst, Massachusetts. And thanks for joining us again, Bob.


JAY: So, as I said, if you haven't watched the other segments, you probably should, because we're going to just carry on the discussion from where we were. So, Bob, if militarism, which has been an industrial policy in the United States at least since the First World War, if that's to change, what would it look like?

POLLIN: The military model has a lot to offer when we think about an industrial policy to revitalize manufacturing, to move manufacturing into the green economy, to have an energy sector that is supported by industrial policy, that is, we have very strong public-private partnerships. So we do have a private sector, obviously very active in the military-industrial complex. We have subsidies. We have large guaranteed markets with the military being a big buyer. This is very important.

If we think about, again, the failure of the Solyndra company, the solar energy company, as an example of how not to do industrial policy, the solar industry, the clean energy industry could be supported by government purchases. We could also have policies that provide a guaranteed market. They're called—feed-in tariffs is the technical term. And these operate, for example, in Germany now, and they were started in the United States, they were started in California under Jerry Brown way back in the 1970s, in which utilities had to guarantee to renewable energy suppliers that they would purchase the electricity that is provided at a fixed price, so that providers of solar energy, providers of wind power would have a guaranteed market, so they would—so private investors would invest, they could calculate their market, they could know what the price is going to be, which is exactly what the Pentagon has done over and over again, including—as we've talked about, including in developing the internet. So we have a decent model there. The model has to be pushed out. Another example, if we think about an intersection of public and private: public transportation, building out a high-quality bus service and rail service. You have a guaranteed market, you have private firms that would be producing the cars and buses, and that would help revitalize the auto sector, and the Midwest more generally.

JAY: Just to be clear, when you say build the model out, you mean a policy at the scale or approaching the scale of the Pentagon, but not run by the Pentagon, with clean energy as the objective rather than making war machines.

POLLIN: Clean energy would be the objective if, you know, for a Green policy, and manufacturing in general. I mean, okay, you know, if we think about transportation, if we think about building public transportation at the scale that would enable us to reduce all the problems caused by the car culture, including emissions, but not just omissions—we're talking about land use, we're talking about cities, and so forth—all of those things require an industrial policy that is not assuming that the free market—. And here we're not talking about the free market, we're talking about Wall Street, because essentially industrial policy gets set through Wall Street decisions as to what they're going to finance, unless we have some kind of counterforce. And the counterforce would have to be public industrial policy.

JAY: I mean, there was a moment for that during the Obama administration—€”and I always thought one of the most telling moments—€”which is they could have done this with General Motors. They have €”given General Motors this, a public-interest mandate, production of vehicles and many other things, from windmills to who knows what, but use that industrial base for clean energy production and give it a public-interest mandate. They virtually own the place at the time. And they shied away from that, even though there'd been all, you know, rhetoric that one would have thought would have led to that during the election campaign that elected President Obama in the first place.

POLLIN: That's true. They could've done a lot more. They didn't do zero. The main thing that they did accomplish is that they did impose gas-efficiency standards for cars that are going to be very important over the next decade in dramatically reducing greenhouse gas emissions, so that by 2025 the cars have to run on average at 54 miles per gallon.

JAY: But in terms of an industrial policy, that would've been a golden moment to take advantage of the situation. And they simply—I think this leads to the next kind of question, which is, if they didn't change the form of ownership in some way of General Motors, if it just had a narrow serve-the-shareholders mandate, which is what they essentially gave back to General Motors, then they ended up where they are, which is let's just make cars again, but with less workers and more efficiently and better management, but essentially just making this, you know, with better fuel efficiency, yes, but certainly nothing to do with an industrial policy.

POLLIN: Well, I guess it depends on what we define as industrial policy. I think that having the fuel efficiency standards are important. It's true that it is not changing the nature of the corporate business model. That also has to change. In fact, we have a lot of evidence in the energy sector itself, both in the United States and throughout the world, where we do have a wide range of ownership forms. We have a very high proportion of utilities—in the United States still, but elsewhere in the world—that are publicly owned. We have energy companies. In Europe in particular, we have community-owned renewable energy companies.

Indeed, in Europe, in Germany, Sweden, Denmark, and the U.K., 40 percent of all the wind energy that is generated in the world is coming from those countries, of which almost all of it is community-owned wind farms. They're not these gigantic corporate-owned windfarms. They're located in communities, they're controlled by communities, and they've gotten a lot of benefits out of this kind of community ownership in windfarms, not the least of which is that you have the community supporting it. And when the community supports the wind farm, then all the years that it takes to go through through the red tape to fight to put up a turbine, for example, gets dramatically reduced because it's the community's own property.

JAY: And, in fact, you argue in one of your recent papers that you really can't change the industrial policy without expanding these forms of community public—various forms, alternative forms to straightforward corporate ownership. What's your point there?

POLLIN: We've been dominated by the Wall Street model of corporate governance and we know what the outcome there is. The outcome is that you have among other things an investment strategy that is basically driven by bubble psychology. And we do get—you know, we get rapid expansion in the economy when we have a bubble going up, but then we get the crash, as we are experiencing now, and we can't dig out of it.

Alternative ownership forms, community ownership forms, public ownership forms will make for a much more stable investment process. That alone is important, stability in the investment process, because to develop new technologies and to have them integrated into the economy is a long-term process that requires long-term planning horizons, and you cannot expect to get high rates of profit every year from these kinds of activities. So that's why you need planning.

On top of that, again, getting the community involved and having community support transforms the process in many ways. It integrates the community, the commitment to job creation. And decent job creation gets integrated into the model.

And these models to work. You know, it's not pie in the sky. We have community-owned windfarms in the Midwest and Minnesota and South Dakota, and they work. And why were they created in those places? To support the agricultural communities in those regions.

JAY: Right. Well, the right wing of both parties at this point would say this is the road to socialism.

POLLIN: Well, okay, fair enough. You know, we can use that label. And I myself don't have a problem with that. Obviously I'm talking about some democratic forms of socialism. But more importantly than the label socialism, social democracy, public ownership, mixed ownership, the most important thing is that we know that we have a failed model in a Wall Street-driven economy that produces financial bubbles, and then we have—we socialize the losses created by the financial bubble. So we already have a form of socialism. We have socialism for Wall Street.

JAY: Well, the other form of socialism that doesn't get talked about very much is the military. I think you were saying it's close to 5 percent of the economy. It's all publicly owned. And that doesn't get called socialism.

POLLIN: And, by the way, it also provides pretty good health care for all the people in the military. So we have a health care system, we have an industrial policy, we have an employment policy all operating within the Pentagon. So what I'm saying is, yeah, we can move that model into other areas, the most obvious being in the energy area, which we have to move there if we're going to have any hope of not confronting the ecological crisis that climate scientists say is around the corner. We can't wait for 20 years to be totally in the ditch with this, because we have to make changes on an incremental basis. We should have started a long time ago, but we can still do something starting now.

JAY: Alright. Thanks for joining us, Bob.

POLLIN: Okay. Thank you very much, Paul.

JAY: And thank you for joining us on The Real News Network.

Robert Pollin is Professor of Economics and founding Co-Director of the Political Economy Research Institute (PERI) at the University of Massachusetts, Amherst. His research centers on macroeconomics, conditions for low-wage workers in the U.S. and globally, the analysis of financial markets, and the economics of building a clean-energy economy in the U.S. Most recently, he co-authored the reports Job Opportunities for the Green Economy (June 2008) and Green Recovery(September 2008), exploring the broader economic benefits of large-scale investments in a clean-energy economy in the U.S. He has worked with the United Nations Development Programme and the United Nations Economic Commission on Africa on policies to promote to promote decent employment expansion and poverty reduction in Latin America and sub-Saharan Africa. He has also worked with the Joint Economic Committee of the U.S. Congress and as a member of the Capital Formation Subcouncil of the U.S. Competiveness Policy Council. more

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