The Politics of the Green New Deal: Part 2 on Capital

Posts in this series
Part 1 on Labor

In Part 1 I discuss some of the ways the working class will be affected by disruptions brought on by climate change, and some of the ways the Green New Deal proposes to ease those burdens. Climate change will also hurt capital and capitalists. It’s not possible to outline all the potential damage and disruption so I’ll just lay out some of the obvious problems.

Real estate investments are in danger. Some of that impact will be borne by small landholders, owners of vacation homes on Galveston Bay or condos on the beach in Naples FL, for example. But much of it will be borne by larger holders, such as owners of apartment complexes near the coasts, marinas, and commercial property near the coast, and the owner of Mar-a-Lago. Rising sea levels will also affect the infrastructure of cities on the coast, such as Miami, which is already planning to spend $100M on flood protection.

The coasts aren’t the only areas facing weather problems. Wind storms are becoming more serious; recently extraordinary winds blew the roof off a warehouse near Dallas. Here’s a Wikipedia page documenting tornadoes in the US in 2019. It shows we have already had 3 intense tornadoes, including the two that struck Alabama recently. We can expect more.

Wildfires are a terrifying danger in drought-stricken areas. PG&E, the California utility giant, filed bankruptcy January 29, 2019 to deal with its liability for damage from wildfires it caused. The Los Angeles Times wrote:

PG&E said a Chapter 11 bankruptcy filing, which allows the company to continue operating while it comes up with a plan to pay its debts, was the only way to deal with billions of dollars in potential liabilities from a series of deadly wildfires, many of which were sparked by the company’s power grid infrastructure.

Financial pressure has been mounting on PG&E since October 2017, when a series of wildfires ravaged Northern California, killing 44 people. State investigators determined that PG&E’s equipment sparked or contributed to more than a dozen of those fires, which killed 22 people. The company’s crisis only grew with the November 2018 Camp fire, which killed 86 people and destroyed most of the town of Paradise.

PG&E arranged a $5.5bn interim loan from a consortium of banks but creditors objected and then the Bankruptcy Judge stated serious concerns. According to the Wall Street Journal, the Judge noted that PG&E was under criminal probation after a criminal conviction on six counts arising from the deadly San Bruno fire. The federal District Court in that case imposed a public safety regime on PG&E, and the later fires might be deemed to be the result of violations of parole, in which case the supervising court could replace management. That would be a breach of the financing loan. The Bankruptcy Judge also noted the strong possibility of more wildfires in 2019, saying that more damages could tip PG&E into default. Either default would give the bank lenders control of the company in Chapter 11 and the creditors objected to that possibility. The costs of this bankruptcy are horrendous, and will be borne at least in part by people forced to be customers of PG&E because it’s a monopoly. Some shareholders have suffered losses in stock value, and more may be lost. The stock is down $50 since September 2017 to about $20. It’s an ugly story and it’s going to be repeated.

Climate change will also damage the oil and gas industry. A number of huge petrochemical plants and refineries are located in hurricane territory. Here’s a detailed map; see for yourself. Last year refineries on the gulf coast of Texas were hit by Hurricane Harvey. Harvey weakened to a Category 3 hurricane before making landfall, and the damage was mostly from flooding. The loss of capacity caused spikes in gasoline prices for consumers. Some of the losses to refineries will be covered by insurance. But insurance companies are just for spreading risk, not eating it, and that implies a rise in the cost of insurance. Here’s an excellent article by Bradley Hope and Nicole Friedman in the Wall Street Journal from October 2018, focused on the impact on reinsurance companies. Here’s a taste related to studies predicting increased likelihood of hurricanes in the Persian Gulf:

“Climate change makes the historical record of extreme weather an unreliable indicator of the current risk,” says Stephen Pacala, a board member at Hamilton Insurance Group Ltd. and a Princeton professor, who wasn’t involved in the study. “So, what’s the insurance industry to do? No hurricane has ever threatened the massive unarmored oil and gas infrastructure in the Persian Gulf.”

So what dose the Green New Deal offer to capital?

Section 2.1 (I think; whoever made up this numbering system is a traitor to clarity) calls for

… building resiliency against climate change-related disasters, such as extreme weather, including by leveraging funding and providing investments for community-defined projects and strategies …

The emphasis on community planning is notable. Section 2.2 calls for rebuilding infrastructure. Section 2.4 calls for upgrading the power grid. Section 2.5 calls for rebuilding existing buildings to improve durability among other things. Section 4.1 requires insuring sufficient capital for entities, including businesses, working on the goals of the Green New Deal. Section 4.4 calls for educating workers so they can handle the new work that will need to be done. Section 4.11 calls “… enacting and enforcing trade rules, procurement standards, and border adjustments with strong labor and environmental protections ….” Section 4.14 calls for strict enforcement of anti-trust and other laws to encourage competition and discourage monopoly.

I’d say that’s a fairly strong plan for decent businesses under the Green New Deal. True, it doesn’t give capital a free hand to make the overarching decisions, and it doesn’t give capital all the money, and it has other provisions that hem in capital, but it sure doesn’t sound like the socialist dystopia the Republicans are shrieking about.

The Green New Deal Challenges The Domination Of Capital

The Green New Deal is an overarching statement of political goals for the Democratic Party, something the party has not had for decades. It lays out a vision of a future inspired by the best the party has to offer, Franklin Roosevelt’s Four Freedoms, which he laid out in January 1941 as the US stared at the unfolding crisis in Europe. In this post I called for just such a statement, and this is everything I could have hoped for. It is a combination of Roosevelt’s unfinished goals and the massive work done by liberals to expand the reach of the Constitution to previously disfavored groups. It offers hope and possibility as we confront the crisis of environmental disaster.

It also offers a stunning contrast to the closed and frightened Republican/MAGA plutocratic vision for this nation. Their hounds immediately attacked the messenger, the message and anyone who might want to consider the message with their usual childish insults and trollish memes, their version of political discussion. A few conservatives recognize the seriousness of the problem of climate change, but have nothing to offer, as reported by Emily Atkin in The New Republic.

Here is the text of H.R. 109. I encourage everyone to take a few minutes and read it. The summaries I’ve seen are insufficient to convey the brilliance of the document.

The Green New Deal acknowledges that meeting the challenge of impending climate disaster will be enormously disruptive. It’s most important virtue is that it doesn’t assume that the entire burden of the disruption will be borne by working people. Instead, it insures that workers are protected from disruption, not with some phony job training program, but with real protection. Equally important, it insures that capital will not be able to grab vast profits or control adaptation for their cash benefit.

Capitalism has brought staggering social and environmental changes in this country. Frequently, the technology that has produced those changes was the product of government research and development. Capitalists imposed all the costs of those social and environmental changes on working people and the poor while sucking up all the benefits for themselves. You don’t see the rich living next door to petroleum processing plants or airports or gravel pits or trash dumps. You don’t see their kids suffering from asthma caused by factory pollution or heavy truck traffic or worse. You don’t see them unable to pay medical bills or take their kids for needed medical attention. That’s for the little people.

The Green New Deal says that’s over. When the price of natural gas dropped, capitalists stopped using coal, and coal miners lost their jobs, their insurance, their homes and their futures. Under the Green New Deal, when natural gas is phased out every displaced worker will have a job and health care, because the Green New Deal offers a job guarantee and insists on universal access to health care. Communities, especially marginalized people, will participate in decisions about location of new manufacturing facilities and other issues affecting them, and that participation will enable all of us to protect ourselves from the costs capitalists impose on us today.

The Green New Deal recognizes that a substantial research and development program will be needed to create new technology to meet its goals. That’s going to be funded by the government. But this time there is no free ride for the capitalists. Section 4.1 requires the government to provide and leverage

… in a way that ensures that the public receives appropriate ownership stakes and returns on investment, adequate capital (including through community grants, public banks, and other public financing), technical expertise, supporting policies, and other forms of assistance to communities, organizations, Federal, State, and local government agencies, and businesses working on the Green New Deal mobilization ….

The entire document is designed to rebalance power in deciding the future of the nation. It is explicitly small-d democratic. It explicitly favors the interests of the vast majority. It explicitly slashes the power of the rich to dictate what, if any, response will be made to the threat of climate change.

This rebalancing is a serious challenge not just to capital and the rich, it is a serious challenge to both parties. Democrats claim to be the party of the people. The Green New Deal forces them to prove it. The Republicans represent the interests of the rich against the interests of working people. The Green New Deal makes this contradiction concrete. Both parties claim to want the best for the future of the country. The Green New Deal forces them to come up with positive programs or to do nothing in the face of mounting inequality, a zero-sum political economy, and impending environmental catastrophe.

There’s an even more direct assault on the dominance of capital in the Green New Deal. It calls for decarbonization of the economy. That directly threatens the wealth and power of a number of rich people, for example, the Koch family, whose fortunes are grounded on petroleum. The value of their fortunes will fall as oil becomes a mere feedstock for chemical processing. So will the fortunes of others, Russian oligarchs, Saudi princes, and African kleptocrats. The finances of a number of regimes of varying degrees of hostility to the US, including Russia, Saudi Arabia, the oil emirates, Iran, Iraq, and maybe ISIS. Their power will drop as the value of their natural resources falls. These are ruthless people with no interest in planetary survival. They will fight to the death to prevent the loss of power and wealth.

Meanwhile the media focuses on the horse-race and the cost. Can the Green New Deal pass? How could we ever pay for it? Every single article I’ve read makes a point of saying it’s politically impossible and almost all whine about the money. No one thinks the Senate with its piratical crew of Republican science deniers and Trumpists will ever pass it. And costs are not an issue until we agree to move it forward, and when it becomes real, brilliant economists like Stephanie Kelton will lead the way.

Right now every Democratic politicians opposed to the idea has to explain why their tweaks to neoliberal capitalism will accomplish something without crushing their voters. Republicans will continue to deny until the evidence overwhelms even their astonishing capacity for self-delusion. The rest of us have a planning document, something we can turn into legislation, something we can actually do that will make a difference. We’ll be working on it while the brain-dead bitch about the impertinence of the youngs, and politicians pour perfume on their campaign treasuries to hide the stench of raw petroleum.

Politicians Did Not Get Rich From Hollowing Out the Economy

In his inauguration speech Trump said:

For too long, a small group in our nation’s capital has reaped the rewards of government while the people have born the cost. Washington flourished, but the people did not share in its wealth. Politicians prospered, but the jobs left and the factories closed. The establishment protected itself, but not the citizens of our country. Their victories have not been your victories. Their triumphs have not been your triumphs and, while they celebrated in our nation’s capital, there was little to celebrate for struggling families all across our land.

He claims that politicians got rich by off-shoring jobs and driving up trade deficits. This is an instance of a standard Republican lie, that our problems are caused by politicians. In fact, all the profits from off-shoring went to corporate executives and owners of corporations. They made political contributions, sure, but that doesn’t enrich anyone. The gains to citizens were some lower prices at a cost of whatever wars and worse-paying jobs.

The decisions to off-shore and outsource jobs are made by corporate executives and controlling owners. They had many reasons to invest in other countries, ranging from a desire to protect their own businesses from being underpriced by foreign entitiesk, incentives offered by foreign countries, lower labor costs, and access to foreign markets among others.

US policy in both parties since at least WWII has been generally sympathetic to foreign investment for many reasons, not least the belief that nations linked by commerce and trade are less likely to go to war.

Foreign investment is always dangerous. The risks include expropriation, local governments that won’t or can’t stop violence against plants and equipment, lack of protection of intellectual property, and others. Karl Polanyi discusses these risks in The Great Transformation. Hannah Arendt agrees in The Origins of Totalitarianism. In different words, and with different emphasis, they say Western European capitalists solved this problem by enlisting the government to protect them when they invested abroad. The same thing happened here. Thorstein Veblen saw it clearly in 1904:

… [W]ith the sanction of the great body of the people, even including those who have no pecuniary interests to serve in the matter, constitutional government has, in the main, become a department of the business organization and is guided by the advice of the business men. Chapter 8, Principles of Business Enterprises.

Here’s a discussion of the implications of that statement for foreign investment.

Right down to today, capital enlists the support of the government to protect it so it can make profits in other countries, and government responds for its own reasons. We have always used military force for that purpose, but now the primary tool is trade treaties. The recent example of the TPP stands out. It was written by corporations and their lobbyists and lawyers, and supported by mainstream economists. It was opposed by working people and unions and most progressives. It was supported by a bipartisan majority of legislators. It should be noted that it was rejected by Trump and Sanders and disparaged by Clinton.

I won’t try to untangle all the interlocking interests, or to discuss the negotiations between the two camps, government and capital. But Trump’s assertion that Washington politicians got rich off foreign investment is stupid and false. The people who got all the money from from foreign investment are the executives and the obscenely rich people who own and control these corporations.

The incoherence of Trump’s statements in his inauguration speech and in his campaign speeches about corporate overseas investment is displayed in this New York Times article discussing Trump’s meeting with CEOs of giant US manufacturers. The reporters, Nelson Schwartz and Alan Rappeport, say that Trump told the “titans of American business” that they had better move manufacturing jobs here, threatened them with taxes that look like tariffs, and offered rewards like lower taxes and fewer environmental regulations. The reporters say that this is pointless, because taxes and regulations do not determine where corporate investment are made.

The reporters say that the real cause of overseas investment is Wall Street, by which they mean Capitalists, including hedge fund managers, giant Banks, and the richest investors.

In some cases, Gordon Gekko-like hedge fund managers are to blame, but much of the time, it is the drive for bigger returns on 401(k) accounts, pension plans and other retirement vehicles that depend on steadily rising corporate profits and, in turn, a buoyant stock market.

That’s just wrong. Many pension funds are operated by private Wall Street firms through Gordon Gekko-like managers. The largest funds spread management around among several management firms, and invest with hedge funds, and get investment advice from Wall Street firms for the funds they manage themselves. The idea that Wall Street cares about small investors or their IRAs is silly. I’ll just ignore the stupidity of using a movie character when it’s easy to identify the real perpetrators. You could just read this article to find one, Daniel Loeb.

The actual problem is that the federal government let the interests of the rich set our industrial policy with no public input, and actively ignored the interests of US workers and citizens, and sometimes even the security interests of the nation.

I suppose it’s possible that Trump meant that the rich have too much influence in government, and he means to change that. But seriously, can anyone imagine that the Republicans or the neoliberal Democrats will allow Trump to initiate trade wars over protectionist tariffs? Does anyone think that Trump will do anything to harm the interests of the rich, or that Trump doesn’t personally identify with the rich and their interests?

And exactly how is this different from that time President Obama chewed out the banksters over their greed in April, 2009? Nothing changed then. Why should this time be different?

It won’t be different until a solid majority of voters come to grips with the fact that the dangerous elites in this country aren’t college professors or scientists or liberals. The dangerous elites are the rich people who control the giant corporations and the people who support them, in and out of government.