The solution to the next 100 years where everybody wins

Introduction

I was listening to Elizabeth Warren (who is admirable) discuss the current failings of capitalism, to wit, trickle down doesn’t work and progressive taxation is a no-brainer, and I had just finished reading something about the economic boom that followed WW2, and I decided that the correct course for the future was not being sold sufficiently persuasively in the world’s largest economy – the US. If you only focus on regulation and taxation their right goes bat-shit insane and the whole discussion founders. Now eventually the crisis will become big enough that the noise of the far right will be drowned out but how much damage will have happened by then? What if more effort was put into persuading them now?

There are aspects of the necessary policy that can be phrased more palatably for the right. Cynically one could say that you just have to make clear that this is a huge opportunity for capitalists to keep their hands on the reins. Well, to some extent this is true. I think we are seeing the capitalists of the future right now. Elon Musk of SpaceX and Tesla is a perfect example of of the current acceptable face of capitalism.

How to simulate a war

Economists seem to agree that the massive destruction of WW2 was a major factor in the subsequent 30 years of growing prosperity as the world flew into action reproducing, rebuilding and exploiting the technological breakthroughs. We can simulate this effect by regulation of our current capitalist, free market systems.

This is not just a code for progressive taxation although that is unquestionably part of the solution. The other part is the increasing of taxes on the polluting industries to pay for the ever more complete clean-up of their waste. (This is called a Pigouvian tax and Pigou first wrote about them in 1920. My suggestion here is that the problems with the idea can be overcome if the benefits are well explained.) This begins with the elimination of the subsidies of these industries. The crucial by-product of these actions is that the alternative industries become profitable and rich areas for investment and profit.

This idea is not novel at all but those on the left of politics are failing to make clear the aspects of this process that would appeal to those on the right. The discussion wallows in regulation and taxation so that those on the right, and often those in the centre as well, just switch off.

Our growing understanding of the Dismal Science and our ever improving ability to manipulate our economies suggests that, instead of waiting for uncontrolled historical events to shape them, we should be prepared to take control of the forces at work and bend them to our will. This is a rejection of the notion that market forces alone will make these decisions with the greatest wisdom. Such a statement is sometimes taken as a complete rejection of any role for market forces. That is a foolishly simplistic response. It is not the case that freedom cannot be limited without being lost. It is never unlimited in the first place. All that’s being discussed is whether actions are allowed to roll on guided by an oligarchy or by a broader section of the community – the electorate in fact. In this case a degree of regulation of enterprise such has always occurred but now with a long term strategy in mind.

So, what am I talking about specifically? While the policy would be reflected across many industries, it is most useful to pick one example and run with it. Coal fired power stations provide a vast amount of the energy that drives our modern economies. Coal reserves still in the ground are vast and may well last a couple of hundred years. I don’t want to be side-tracked here into a discussion on global warming. My position as a biologist of sorts is that I have grave misgivings about taking all the carbon that was laid in the earth during the Carboniferous period which lasted about 60 million years and reintroducing it to the biosphere over about three hundred years. To me it is self-evident that such an experiment, which we are about half way through, may have an outcome which we would all consider undesirable. (That’s the most restrained language I can manage.)

The desire to continue the experiment in atmospheric manipulation is felt most strongly by those who have vast capital invested in it. This is natural. Inertia and a fear of the unknown are also natural responses to change. My suggestion is that there are massive commercial opportunities awaiting these same people if they take up the challenge of building the new infrastructure that will be needed if coal is gradually made uneconomic because it must become clean and begin to restore the atmosphere. They have the expertise. If power has to come from sources other than coal and oil, the energy grids everywhere will have to be restructured. For instance, not only does solar provide power in varying quantities in the course of a day but the locations convenient for gathering solar power are not usually coincident with coal-fired power stations. The grid would need partial reconstruction. The same with wind power, wave power, geothermal power and so on. Many alternative power sources are diurnal so power storage becomes an issue as well and the solutions will require further investment. In short, work for the works and opportunities for the capitalists – the regulated capitalists.

If power from coal is made progressively more expensive by regulations which act by requiring the companies to bear the environmental costs of production, then the alternative sources of power will become economic. Experience indicates that corporate power is capable of delaying such regulation until a crisis is upon us. If you see no sign of the crisis at present then be assured, there will come a time when the crisis is plain to all. Crises are always more difficult to spot when your livelihood depends on not seeing them. I return to my point though, this crisis is not an attack on capitalism – it is an opportunity for capitalism. All that’s required is to come to grip with the facts and to seize the day.

Finally, some may say that this is all old hat and that this is the strategy currently being applied. My response is that, while the strategy has been known since 1920, it is not being explained in such a way as to sway the majority and have them realise that it should be supported by their votes and demanded of their politicians. The strategy is being fought bitterly by the right because they see any regulations as an attack on capitalism and a prelude to its complete elimination. This falsity is where the danger lies and this is the point my argument is supposed to address.

Capitalism, which has lifted more people out of poverty over the last 40 years than all foreign aid and all alternative economic systems, has a new mission. A new opportunity. We have to rebuild civilisation so that it functions with new energy sources in a sustainable fashion and, in the process, distribute the rewards of these endeavours more equitably. Economic growth needs to be measured not simply by the level of production but by the improvement in quality of life balanced against the resources used. This a much more complicated metric but it is time we changed the game to reflect the future we want.

Note: My comment about foreign aid above is in no way a suggestion that foreign aid is not a Good Thing, but when India and China decided that a little more free market capitalism might be worth a try, roughly a third of the world’s population began a rapid rise in their standard of living. There are many, many problems that arise from this but to deny the right of people to strive for a better life, to deny that millions in India and China are better off now than they were 40 years ago, is unjust in the first case and simply wrong in the second.