Economists are often confused by their own wallowing in esoteric but useless mathematical formulations of unquantifiable human complexities. But we just can’t afford their foolishness anymore. Investment in infrastructure is desperately needed, but not by merely restoring the infrastructure of the old growth economy. That needs to be replaced by a new viable infrastructure for an ecological society. This paradigm shift will require re-thinking core economic ideas to transform economic and social relations.
Great Recession Redux
Old notions die hard. Case in point: the recent/current “Great Recession” of 2008 was/is the inevitable outcome of endless-growth economic policy – which is also destroying the ecosphere upon which we depend. Yet political and financial elites cling to their failed economic ideas. Some politically ignored but eminent economists have cut through that veil of illusion. Paul Krugman, Dean Baker, and especially Joseph Stiglitz – only two of whom are Nobel laureates – see right through it. No complex mysterious forces of economic nature beyond human understanding were at work. Just centralized financial power and greed were enough.
More important, the political-economic response protected the perpetrators and perpetuated the economics of ecological disaster. I love Joseph Stiglitz’s metaphor on how it went down. A deranged paramedic rushes the DWI culprit to the hospital, leaving his victim to bleed out on the street. Similarly, Wall Street’s gamblers were bailed out while the American people were left with a newly bloated national debt. Time for a paradigm shift.
Responding to Crisis
The same accelerating concentration of wealth, and faltering employment and wages that accompanied the housing bubble continue today. The “solution” proposed by most economists is either to “grow” our way out or cut government spending — more plutocratic ideology. The real solution is clear: Resuscitate the victim and charge the perpetrators for their crimes. Neither has happened or is about to. As the combined climate-disruption and economic-instability crisis intensifies, we may see a surge of interest in an ecological economic policy that can slow climate disruption while stimulating a viable economy.
Aside from prosecuting Wall Street criminals, let’s look at the economic-ecologic mess that we’re in and how it might be fixed. With a trillion dollar loss in housing wealth, the American unemployed and under-employed cannot engage in the spending that would stimulate the economy. And the financial geniuses of Wall Street can still borrow from the Fed at near zero interest with “quantitative easing.” They can “lend” that money to the government for a few percent more. It’s a totally secure investment for the plutocrats using none of their own “reserves.” Don’t look to Wall Street for a solution.
The biggest corporations have no incentive to invest their huge cash reserves in the faltering economy. Without evidence of demand, they will hold onto their cash. As a bonus, they get to keep hundreds of billions of their cash income overseas and avoid income tax. Bottom line: neither the corporate nor financial elite will solve the crisis they created. These scofflaws will act to increase their power and wealth until the government bails them out of the next crisis they cause.
Both the Keynesian and ecological economists would invest in infrastructure to improve both employment and economic health. This would stimulate demand in the economy and give the corporations a reason to invest in production. But just stimulating “economic growth,” without an ecologically grounded industrial policy would be like a band-aid without adhesive, or worse. Instead, a public investment policy heavily weighted toward investment in the replacement of carbon-based with carbon-neutral energy production is necessary. Throw in a living wage as public policy and the result will be a vibrant economy with minimized climate disruption.
Part II of this essay will discuss how infrastructure investment can energize the economy, but not by inducing unfettered “growth” for its own sake. Instead, we need big investments in stable ecologically viable development that simply retires the old fossil-fuel energy production and builds new industry for an ecological economy. Significant displacements of existing economic institutions will accompany such change, but they are necessary. The societal rewards will be immense.