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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 Politics of The Green New Deal: Part 1

The Green New Deal starts with the recognition that drastic changes to society and the economy are necessary to cope with the dangers of climate change. I see two basic assertions behind the Green New Deal. First, it says that the pain and costs of restructuring the economy will not be borne by the working class, as has been the case in every other economic disruption. Second, as a nation we cannot allow capitalists to dominate our future. There is a lot to unpack in these two issues, so this is the first of a short series.

In the course of the first part of my neoliberalism project we saw the effects of capitalism on the working class*. This aphorism from Thucydides sums up human history nicely: “the strong do what they can and the poor suffer what they must”. We saw this in the history of the English enclosures discussed by Polany; the use of state militias to break strikes in the US; and in Foucault’s discussion of the way the state forced people into becoming good little factory workers, supervised closely, but largely self-governing, self-controlled.

Republicans have hated the New Deal since forever. The Democrats started cringing over it right after WWII amid Republican fear-mongering about Communists. The Democrats gave the capitalists their first win with the passage of Taft-Hartley in 1947 and their aggressive purge of every element of leftist thinking in their ranks. Liberals joined the Capitalist Celebration; they gradually embraced deregulation, and they did nothing to protect unions, the source of worker power. Democratic wonks became experts at explaining the virtues of the market and the evils of Big Government, and crafted ever more complicated solutions to the problems created by rampant capitalism.

It was with this mindset that the US confronted the biggest crisis facing the working class, globalization. Clinton and the Democrats embraced NAFTA, and so did Democratic wonks. Paul Krugman wrote an article for Foreign Affairs attacking unions for saying that NAFTA would cost US workers their jobs. Nonsense, said Krugman. The impact would be marginal, and the Fed would simply cut interest rates to keep the economy roaring; special bonus: job training programs. This mentality continued to dominate US politics and Democratic party wonks as manufacturing jobs vanished. The promised solutions didn’t work. Capitalists got rich, and the burdens were pushed off onto the working class and small towns across the country.

Here’s a recent defense of NAFTA from the Council on Foreign Affairs. It admits that NAFTA contributed to the decline of US manufacturing jobs, but ignores what happened to the fired workers. It claims that NAFTA provided benefits to the economy as a whole, without specifying who reaped those benefits. It adds this:

Edward Alden, a senior fellow at the Council on Foreign Relations, says anxiety over trade deals has grown because wages haven’t kept pace with labor productivity while income inequality has risen. To some extent, he says, trade deals have hastened the pace of these changes in that they have “reinforced the globalization of the American economy.”

Translation: capitalists replaced well-paid manufacturing jobs with cheaper foreign labor, to their benefit and that of their corporations. They ignored the impact on workers, who lost their livelihoods, their insurance, and more. The impact of free trade with China is even greater, according to a recent study, and neither party lifted a finger to help.

The Green New Deal recognizes that climate change is going to create massive disruption, including staggering losses in economic output and damage to property and infrastructure. In the ordinary course of things, the costs of coping with these disruptions would be borne by the working class. After all, the entire point of capitalism is rising profits for capital, and if that imposes costs on the working class, so be it.

To meet the goals of the Green New Deal we will have to reduce our reliance on fossil fuels. Coal mining jobs are already vanishing, and jobs in oil and gas production are next to go. The latter sector currently employs an estimated 2.1 million people directly and indirectly. Every one of those jobs lost in these and other fields will cost families their incomes, their health insurance, their physical and mental well-being, and their hope of retirement security. Their home lives will be damaged as they cope with unemployment. Marriages will be lost, children will be injured, and elderly parents will be affected in their own financial security, and the pain of seeing the injuries to their children and grandchildren.

New jobs will be created, but where? If the jobs are far away, the unemployed will have to bear the cost and emotional drain of moving. It’s especially difficult for older workers, and the strains of moving teen-agers adds another layer of difficulty. For some, moving will be a positive, an opportunity to start over. But for many others, it’s the loss of a sense of place, the connection to the people and places in which they are comfortable.

One critical roblem is the loss of a home. Home ownership has decreased from 68.6% to 63.7% since the 2007 Survey of Consumer Finances, but for many Americans the home represents a significant part of family wealth. See Tables accompanying the 2016 Survey of Consumer Finances, Tables 9.07, line 6, and 9.16 line 6 and line 89 et seq. If there is mass migration to new jobs, there will be substantial losses of wealth for many families. To the extent people are forced to move from areas with low-cost housing to high-cost housing, there will be financial difficulties.

The Green New Deal says that we need to deal with these problems directly, not through some complicated 60 point plan relying on some newly created market or capitalists, but by direct government intervention. Section 4.5 requires the government to direct :

… investments to spur economic development, deepen and diversify industry in local and regional economies, and build wealth and community ownership, while prioritizing high-quality job creation and economic, social, and environmental benefits in frontline and vulnerable communities that may otherwise struggle with the transition away from greenhouse gas intensive industries;

Section 4.15 directs the government to provide

…all people of the United States with—
(i) high-quality health care;
(ii) affordable, safe, and adequate housing;
(iii) economic security; and
(iv) access to clean water, clean air, healthy and affordable food, and nature.

Taken as a whole the Green New Deal rejects the neoliberal program of protecting capital at all costs, in favor of putting people and the planet first.

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* I’m going to use the term working class in this series, because as I see it, the conflict is between the working class and the capitalists. In general, by working class I mean everyone who must sell their labor in order to eat. I’ve been in the habit of using the term “workers” but I’m tired of euphemisms. This definition covers a wide range of incomes, but it’s stupid to pretend that middle class people living paycheck to paycheck or people with much higher incomes who have little wealth have interests that are differentiable in any meaningful way. The Fed says that 40% of US households could not pay for an unexpected $400 expense without borrowing or selling an asset. The most recent Survey of Consumer Finances (2016) says that the conditional mean value of retirement accounts for the group with income between the 50th and 90th percentiles is $157K, from which I’d estimate median net financial wealth for that group is in the range of $300K. That means they have to keep working. I’d guess that most of the people in the top 10% of wealth could mostly make it if they were forced out of work, but certainly not all of them. They may think of themselves as wealthy because they own real estate and financial assets, and they may identify with the truly wealthy more than the working class; but I see it their real interests are aligned with those of the working class, because if that group fails, their wealth will be worthless.

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.