The Emerging Green Economy Debate

March 6th, 2009

The Green Economy appears to be gaining ground worldwide, but is already starting to be opposed by some free-market ideologues. The news is full of reports on green jobs and green economy initiatives, both in the U.S. and elsewhere, but spokesmen for some conservative think-tanks are already falling over themselves to warn of dire consequences.

Max Schulz, a senior fellow at the impressive-sounding Manhattan Institute’s Center for Energy Policy and the Environment, warns that “Inefficient eco-friendly technologies destroy more jobs than they create” (The Green-Jobs Engine That Can’t, City Journal Winter 2009). The Manhattan Institute’s Center for Energy Policy and the Environment “advances ideas about the practical application of free-market economic principles to address today’s energy issues.” According to their web site, they are “leading an effort to show how a pro-growth, supply-side energy policy can be harmonized with a concern for the environment.” But others argue this is very much the philosophy that got us into the present crisis.

The central issue is whether sustainable initiatives are viable unless the market already supports them. Traditional economists argue that they are not, and some even dispute the concept of “market failure,” claiming there can be no such thing in a capitalist system. Even many sustainability advocates are inclined to push conservation and other measures on the grounds that they will result in cost savings as well as reducing environmental and social harm. But the deeper problem is that the market only recognizes near-term economic costs and benefits to individual participants, and fails to include “externalities” and systemic variables. The most obvious evidence for this is the current financial meltdown, which apparently took most analysts as well as most private investors by surprise. The “market” failed to factor in the systemic risks that snowballed when individual institutions pushed the limits on financial instruments that were, initially, designed to spread risk and minimize loss.

While there is plenty of room for debate as to the “causes” of the present crisis, there is no doubt that it is deep, global, and likely to be prolonged – not only by all the usual economic factors, but also by the fact that no one knows what it really means to “get the economy back on track.” It seems unlikely that we can return to anything like the previous pattern of “economic growth” without rapidly increasing fuel prices, significantly altered consumption patterns, rebuilding much of our infrastructure, and most of the other “radical” changes being sought by the Obama Administration – many if not all of which are likely to be resisted by the conservatives in Congress. The possibility of finding a new, interrelated solution is to a large extent what our 2009 Green Ventures Conference is about.

As author Jonathan Schell notes,

“The contemporary crises are interwoven, forming a kind of Gordian knot. The world does not have the luxury of dealing with them seriatim. Consider the relationship of the collapsing economy to the collapsing environment. Joseph Stiglitz has noted that economists are wondering if the graph of the economic crisis will eventually prove to be V-shaped or U-shaped; but he argues that it will prove to be L-shaped. Indeed, there can be neither a V, a U or any other upward-turning graph if the remedy does not include a green revolution and a sustainable-energy program. A dirty recovery, even if possible, would be worse than no recovery. It would be the quickest path to a bigger bust. The upturn cannot in truth be “re-” anything – short of revolution – for the just-crashed “successful” economy, excellent as it was in producing cheap goods, was also producing environmental catastrophe. (Paradoxically, the recession, by cutting back on fossil-fuel use, may have done more to ease global warming than electric cars or solar panels could have done in a comparable period.) Environmentalists have long observed that if China tries to reach Western standards of living along the automotive, carbon-gushing Western path, the planet will be cooked to a cinder in short order. Now we are all in a sense in the Chinese boat. China can’t have the economy we so recently had, and we can’t have it again either. We’ll all have to have something quite different.”

–Jonathan Schell, Obama and the Return of the Real, The Nation, February 9, 2009.

If we don’t use this crisis to make fundamental changes, then the opportunity it represents for real reform may be lost for another decade, a decade which – according to many scientists – may be the last one we have in which to avoid planetary catastrophe. As Jim Wallis, editor of Sojourners Magazine, stated at Davos – “if this crisis doesn’t change us, then all the pain and all the misery it will create will be in vain” – but this remains at this point still a minority view. The news media, and apparently many in the Congress, continue to see “restoring the economy” as separate from “reforming the healthcare system” or “transitioning to renewable energy,” and are currently debating whether the President can achieve “all of these things” at once. But the reality, as Schell points out, is that they are interrelated. It’s hard to believe that the $150/barrel oil, which caused gasoline prices to go beyond $4 a gallon and shifted a trillion dollars out of the hands of US consumers, had nothing to do with the slowdown in consumer spending, the growing number of mortgage defaults and foreclosures, and the collapse of the entire house of cards built on sub-prime mortgages, complex derivatives, and credit default swaps.

There’s a lot more I’d like to say about this, and I hope to do so in the coming days and weeks leading up to our May conference.

(Crossposted at

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