The much-anticipated release of Rep. Alexandria Ocasio-Cortez’s (D-N.Y.) Green New Deal already has forced one of the most consequential debates in American history. But its substance leaves the field open to a more effective alternative.
First, it’s important to understand what’s proposed. Far from socialism, the Green New Deal (GND) embraces fundamentally Keynesian approaches to mobilize the nation to address massive environmental, social and labor problems that already are harming the prosperity and security of the Republic itself. That is, the GND sees climate change as a way to direct federal dollars to stimulate economic, social and political opportunity for those excluded from the 2019 economy.
But as a non-binding resolution it neither authorizes spending nor appropriates tax dollars, meaning there is no price tag, and that the primary purpose of the document is to launch the most significant debate Washington has seen since abolition.
The preamble sets the stage with a precise summary of AOC’s worldview. Climate change is a massive threat to Americans and people around the world; the transition to clean energy, manufacturing and agriculture represents an enormous opportunity for sustainable economic growth that will benefit all Americans; and vulnerable communities need prioritization and participation to ensure the transition serves to improve their disadvantaged economic, social and political reality.
The resolution offers a program called the "Green New Deal Mobilization" to initiate a crash, 10-year, U.S. transition to net-zero emissions as a means to right some of the injustice AOC sees on our nation’s streets. In this section, the policy meat of the agenda, the text is very broad and thin, with agriculture, for example, receiving less than 75 words. The text is also very stakeholder-focused, with objectives optimized for community participation and the strengthening of organized labor.
Here is a quick summary of the 14 objectives that make up the mobilization:
Build national resilience to the unavoidable effects of climate change;
Invest in a new generation of clean and safe urban infrastructure;
100 percent of U.S. power from "clean, renewable and zero-emission energy sources";
Rebuild the national energy transmission network using smart grids;
Upgrade all buildings to reduce emissions;
Ensure clean manufacturing and expand the U.S. clean-tech sector;
Remove emissions from agriculture;
Rethink the transportation system to achieve zero emissions and universal access;
Mitigate the health effects of unavoidable climate change;
Remove carbon from the atmosphere through low-tech, natural systems;
Restore damaged ecosystems;
Clean up legacy hazardous waste sites;
Solve any other emissions problems; and
Help other countries create their own Green New Deal.
After the "what" of the mobilization is laid out, the resolution turns to the "how." At the top is funding, thoughtfully presented as needing many types, although direct government spending and grants are paramount, but also financing and equity investment that generates a return for the public’s money. Transparency, inclusive participation and prioritization of the most vulnerable are key characteristics, as well as numerous paragraphs to strengthen the role of unions and address the ongoing concentration of economic power.
The resolution closes on a populist note, specifically stating that the Green New Deal will provide "all people of the United States with high-quality health care; affordable, safe and adequate housing; economic security; and access to clean water, clean air, healthy and affordable food, and nature." Here’s where Rep. Ocasio-Cortez is speaking to her base — those hardworking Americans who just want the basics to be better.
A big win
Ideological critics certainly will attack the proposal, first to deny its basic premise, then for its more liberal (although still far from socialist) details. Moderates are already questioning how realistic the GND is.
At the end of the day, that is its purpose. The non-binding Green New Deal resolution is a political prop, not a policy framework. It is a prop designed to raise awareness of the urgent risks and the enormous scale of the challenges before us, and to inspire or cajole action. Yes, there is too little policy detail to judge whether it would work and how much it would cost. But the last proposal to seriously address climate change in Congress, the Waxman-Markey cap-and-trade bill a decade ago, was much less forthright about the scope of the problem or the required scale of the response.
At the end of the day, a national mobilization is necessary to address the multiple converging perils facing the United States.
And here, the real service provided by the release of the Green New Deal is the space it creates to have this debate and to develop desperately needed plans to address the single greatest threat to the U.S. and the world. As George Marshall famously observed, "It’s not the plan but the planning" that matters. Indeed, Speaker of the House Nancy Pelosi already said as much in response, saying that the GND will be one of many suggestions she expects to receive. That’s already a big win.
Another service the GND provides is the staking out of the leftmost parameter of the debate and taking fire from critics and climate deniers. Given AOC’s own brand and the support the resolution has received from progressives such as Sen. Bernie Sanders (I-Vt.), Sen. Elizabeth Warren (D.-Mass) and Rep. Jim McGovern (D-Mass.), it’s hard to imagine anything arriving that is more politically liberal. And while adhering to an established ideology comes with some real advantages, it also carries real consequences. In this case, that means surrendering the high ground in the coming policy debate.
A friendly amendment
While the science is clear on the need for massive national transition, and the politics of any transition require it to improve the lives of Americans and the nation’s strategic position, the analogy to the New Deal and its Keynesian approach is difficult to square. The original New Deal reduced the suffering of a population that was one-quarter unemployed and lacking any meaningful retirement security. Yet the alphabet soup of stimulus programs and reforms simply were unable to restore secular demand, and our economy crashed again in the second dip of the great depression, in 1937.
The thinking behind both the mobilization for World War II and for the post-war boom that followed was not Keynesian. Where Keynes was focused on how government could stabilize the boom-bust cycle through well-managed markets, the economic engineering done for and after World War II were of a completely different — and higher — order. These economic strategies aligned three macro factors in a relationship designed to allow our economy and nation to succeed: they identified large pools of demand for goods and services; contracted directly or subsidized capital to serve that demand; and they designed the economic engine to, in part, minimize stranded assets caused by the transition between economic engines.
In other words: Demand + Capital – Stranded Assets = Economic Engine.
For World War II, the formula is familiar: Weapons + Cost-plus Contracts – Unemployed Workers. After 1945, the formula was profoundly different: Suburbs + Subsidies – Unemployed Veterans. The key was to ensure that the demand and capital being harnessed were deep, durable and capable of recycling potentially stranded assets (labor, capital equipment, real estate, natural resources).
Used as the economic foundation of two of America’s grand strategies, the nation was thus able to turn on a dime, win a world war, break the grip of the great depression and set the United States up to defeat the Soviet Union in a contest of economic and political systems. But nearly 75 years later, we have yet to revisit that aging economic engine despite homebuyers and investors abandoning the suburban hypothesis, and while climate change and the re-emergence of Asia are forcing a global economic re-think.
In this light, the GND’s prescription is akin to bolting on green energy and new infrastructure spending to an economic engine that rusted out decades ago. Further, because the GND does not lash itself to a pool of secular demand (demand for things Americans will work hard to earn for years if not decades), it likely will face a similar fate to the original New Deal, perhaps crashing sooner due to historically high level of debt in global markets present today.
Fortunately, as we laid out in our 2016 book, "The New Grand Strategy," there is a formula for a sustainable American economic engine. The demand is there, the capital is there and the primary potential stranded asset has plenty of valuable alternative uses. Even better, we don’t need to wait on Washington to act. Let’s break it down.
Demand. Sixty percent of Americans want a walkable lifestyle, according to the National Association of Realtors. That’s three times the demand for housing after World War II. Walkable communities are more energy-efficient, healthy and inclusive by design, and by unleashing a walkable housing boom, we can provide the efficiency gains, state and local revenues, and private demand signal that can deliver a 100 percent renewable transition such as the one laid out in The Solutions Project, without raising federal taxes to do it. It's actually suburban sprawl that requires burdensome taxpayer subsidies, not walkable places.
Beyond walkable places, there is massive global demand for food, requiring an increase global agricultural production by 60 percent by 2050. One hundred percent of that new production needs to be regenerative, sequestering carbon, healing our soils and cleaning up our water. That’s great news for our agricultural heartland.
Finally, the world is desperate for new building materials, with Asia growing its cities and middle class and the United States poised to add 100 million new citizens before 2050. In the same way we cannot power the future with fossil fuels, we cannot build a sustainable future out of the materials of the past: concrete; steel; aluminum; lumber; and gypsum. We need a lower-carbon palette of building materials and all the new products and manufacturing that entails.
All three sources of demand are more than enough opportunity for widespread prosperity.
Capital. America is poised for a post-Keynesian economic engine, in which substantial amounts of financing come not from public treasuries, but from institutional investors, such as pensions and reinsurance, who now understand that their fiduciary obligations require them to invest long-term in the health and sustainability of the system itself. By allocating just 10 percent of their portfolios to strategic impact investing — the infrastructure and assets of a sustainable economy — they can replace much of the missing capital from Washington while boosting their overall rate of return.
This pool of long-term capital had not yet formed in the middle of the last century, so Keynes and FDR could not have considered tapping it. But today, the money is there. The top 400 institutional investors control more than $65 trillion in assets, while the total cost of sustainable infrastructure in the United States is roughly $4.5 trillion over 10 years.
When that money finally adopts a hard-nosed set of requirements for walkable investments, regenerative agriculture and energy and material efficiency, the market will respond faster than anything Washington could do. And led by groups such as CERES’ Investor Network on Climate Risk and Sustainability and Focusing Capital on the Long Term, it is only a matter of time.
Stranded Assets. The assets most at risk of being stranded in the transition to a zero-emission world are hydrocarbons: oil and natural gas. While society can do little else with coal besides keep it in the ground, it’s become clear that the world cannot transition in the time remaining without finding alternatives to the extremely carbon-intense palette of building materials we currently use. We simply cannot build the future out of the materials of the past.
Concrete alone accounts for more than 5 percent of global emissions. The most available alternative is hydrocarbons, which are already replacing metals in the production of vehicles, are essential to every wind turbine and solar panel, and are rapidly replacing building and infrastructure components. With lightweighting, mechanical and composite advantages that enable much higher degrees of efficiency as well as recycling — and with unsubsidized renewable energy already outcompeting fossil fuels — a material transition will help move oil and gas from being part of the problem to being part of the solution.
So, the formula for the new grand strategy is Walkable Communities + Institutional Investment – Hydrocarbons = New Economic Engine.
The exciting thing about this new economic engine is that it does not need Washington to act, which won’t happen until at least 2021 anyway. Because the demand is already there — homebuyers want walkability and investors want green investments — a cluster of institutional investors, blue-chip companies and consumer finance firms working with willing mayors and governors need only take the next logical step and adopt the integrated, straightforward business models that turn historic levels of consumer demand for walkable lifestyles into an economic force that essentially hacks our broken economy. We cannot afford to wait.
Walkable places can come in any size, from agricultural villages, to suburban towns, to vibrant cities and are growing in red and blue states alike. Walkable places powered with renewable energy, served by efficient and accessible mobility, fed by regenerative agriculture, and built with sustainable materials can reduce more than 90 percent of America’s emissions and put our people and our capital back to work.
It’s a new American Dream, and that’s a vision most Americans can get behind.
Patrick Doherty is a founder of Long Haul Capital Group and co-author (with Col. Mark "Puck" Mykleby (USMC Ret.) and GreenBiz Executive Editor Joel Makower) of "The New Grand Strategy: Restoring America’s Prosperity, Security, and Sustainability in the 21st Century."