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This Historical Moment Demands Transformation of Our Institutions. The Green New Deal Won’t Do That.

The Green New Deal now taking shape in Washington will aim to address climate change through economic policies. While many of the potential policies being discussed, including a more steeply progressive income tax, would in themselves be positive developments, none of them would reduce greenhouse emissions as deeply as is required. To understand why, we…

Written by

Lisi Krall


Originally Published in

The Green New Deal now taking shape in Washington will aim to address climate change through economic policies. While many of the potential policies being discussed, including a more steeply progressive income tax, would in themselves be positive developments, none of them would reduce greenhouse emissions as deeply as is required. To understand why, we should first look back at the economic foundations of the Depression-era New Deal, which is serving as inspiration for the Green New Deal (GND).


The original New Deal attempted to solve what were the particular manifestations of capitalism’s contradictions that surfaced in the 1930s.  In simplistic terms, overproduction, a common problem of industrial capitalism, resulted in massive unemployment and a multiplying effect that eventually created 25% unemployment by 1933. The New Deal firmly established the role of government in stabilizing an otherwise unstable system.  It also institutionalized a much needed social welfare foundation to underpin a system which could not be relied on to consistently provide people with income. 


The New Deal was given theoretical support by the Keynesian revolution, which provided a different perspective on the role of government in managing the problems of an advanced capitalist economy. Despite the rise of neoliberalism, the institutional fabric that we function with today is still of that New Deal/Keynesian ilk.  


One of the most important policies for unequivocally ending the Great Depression (reinforcing the legitimacy of Keynesian policy) was the massive spending on military production for World War II.  The government ran huge deficits to fund the war effort, and after the war, the debt was repaid as the economy expanded (boosted partly by the fact that all other industrialized nations had been decimated).  


World War II was an external and immediate exigency (in some ways analogous to climate change) that required production and price controls as well as rationing in the short run simply because the economy could not produce what was needed immediately for the war and simultaneously provide consumers with all they wanted.  While those economic interventions were temporary, military spending became a more institutionalized part of the participation of government in the economy.


The New Deal and the Keynesian framework were clearly predicated on reinvigorating growth and curbing stagnation—the latter an inherent tendency of a mature capitalist economy.  And the problem of maintaining growth became increasingly difficult beginning in the latter half of the 20th century, which is to say the problem of stagnation (not simply downturns associated with the business cycle) became increasingly problematic. 


Our history with this New Deal legacy should sharpen our understanding of capitalism in the following ways. We should by now understand that capitalism is an unstable economic system that tends toward both growth and stagnation and stagnation is both cyclical and secular.  It is a system with systemic problems of inequality that exacerbate its instability. The inherent instability of the system and its inequality can be managed through various applications of fiscal and monetary policy augmented with a sound social welfare foundation, as well as more direct facilitation of the process of insuring investment outlets (again military spending is a good example of this). 


For the sake of exposition, I’m going to label this mix of problems and challenges the first contradiction of capital. All policies here pivot around growth with the exception of some mechanisms for redistribution of income.  Nowhere in the landscape of the New Deal was there any recognition that there were problems with growth itself or fossil fuel use. As Stan Cox wrote, “As far as I know, no one complained at the time about the 65 percent increase in fossil fuel consumption that occurred between 1935 and 1945 thanks to a growing economy.”  This was because the danger of running up against future biophysical limits was not recognized.


The problem of biophysical limits has now presented itself in no uncertain terms with the reality of climate change (and for those who care to look into the myriad of other examples of the ecological decay of Earth). Climate change is where the rubber meets the road in confronting what I will label the second contradiction of capital.  Energy in one form or another is the food of economic life. Growth depends on it and despite all the rhetoric to the contrary there are limits to what we can expect without it.


As far as I can tell this means we’ve got a problem, not just with climate change but with our ability to manage it and also manage the first  contradiction of capital. It seems the two contradictions cannot be solved simultaneously [see Krall and Kiltgaard (2011) and Klitgaard and Krall (2012).]  We can’t both grow and de-grow at the same time. 


Absolute decoupling remains an illusion, but I get why people might be attracted to it since the other choice is to face the problem of the dueling contradictions of capital.  It’s the same reason we get the GNDealers talking up a carbon tax and letting the magic of the market and human ingenuity take us to ever-higher pinnacles of progress.  I heard Thomas Friedman on NPR’s  Science Friday refer to this as “mean green” and tell us that green is the new, red, white and blue.


Let’s be clear—the GNDealers are counting on technology to absolve us from having to figure out how to resolve the first and second contradictions of capital simultaneously. The GND’s problem, as I understand it, is that it wants to deal with the first contradiction of capital  (job creation and new outlets for capital investment) and the second contradiction (biophysical limits) by assuming that we can transition to renewable energy seamlessly and at unrealistic speed, ultimately achieving both green growth and job security.   Of course, they advocate robust policies for dealing with inequality in addition to the benefits of employment through the build-up of a renewable energy infrastructure.  The implicit assumption is that by dealing with the first contradiction we will simultaneously deal with the second contradiction.  Problem solved?


As Cox points out, our short-term problem is that a declining ceiling on greenhouse emissions will in fact require allocation of energy among sectors and rationing among consumers simply because the ‘external’ problem (climate change, analogous in this example to WWII retooling to make war munitions) has to be solved quickly and it will require fossil fuel to do that.  In Cox’s words: “If we are to avoid climate catastrophe, we have to simultaneously bring an end to fossil-fuel burning and develop vast renewable energy capacity, both starting right now and both on a crash schedule.  That means the everyday economy must find a way to run on much less available energy.”


Ideally that policy measure should lead us to an ever clearer understanding that our short-run energy problem (the conversion problem) is but a variation on a much larger long-run energy problem (fueling an expanding economy on renewable energy while providing equity in access to energy). This is evident to everyone who is willing to scratch the surface of the Jacobson and Delucchi “100% renewable for 100% of rising demand” studies and published analyses that are critical of their studies.


Actually, if we were willing to pay attention to ecological decay and the 6th mass extinction we would understand that it isn’t simply a long-run energy problem we have, it’s a long-run growth problem.  That understanding changes everything, especially if it can’t be solved technologically. Yes, the rubber is meeting the road.    


The truth that the GND doesn’t appear to want to face is that we’re not simply dealing with some variation on the problems that the New Deal and its institutional legacy were meant to confront.  We are dealing with something that is much more complex and foundational.  We are dealing with two contradictions of capital that work against each other.  If we approach our present situation as if it is just another variation on an old problem (the first contradiction of capital) we will not be able to confront the second contradiction of capital. That’s because in the traditional New Deal queue we will cook ourselves for jobs and short-run economic stability through growth before we’ll pay attention to biophysical limits.  The problem is that it isn’t all that clear what cooking ourselves will mean for the quality of human life (not to mention other-than-human life) either in the short or the longer term. Let’s just say it looks like a decidedly downward trajectory for all parties concerned.


The challenge for the GND is to be revolutionary in the face of climate change. It seems clear we can’t solve the contradictions of capital with the same institutional baggage.  Assuring some measure of equality in the face of reduced energy will require limits. The build-up for WWII provides a precedent for our capacity to impose collective limits when we have to do so.  Collective limits are managed fairly only when reinforced and fortified with expansive social welfare institutions.


But we also need institutions that orbit around limits and not around growth and stagnation. The quick and decisive transition to renewable energy, orchestrated with strict limits, a commitment to equity, and rationing of both production and consumption will help us to begin this revolutionary transition recognizing that the 21st century problems of capitalism are unique.  


Access to energy must be resolved through rationing and not through markets for two reasons.  The market can be relied upon neither to produce what is necessary and not simply profitable nor to ensure sufficiency for all. More importantly, the market goes with the market economy which is not just a mechanism of allocation but a complex system of expansion and stagnation that generates inequality in its wake. (The market economy also has a tremendous penchant for drawdown of resources and ignoring the ecological integrities of Earth as well as sloughing off externalities).


So far the Green New Deal seems to be the same institutional package as the New Deal.  Unfortunately the landscape of contradictions that afflict capital has shifted. What we have on our hands is not more of the same; we have something categorically and foundationally different. We can’t end growth simply by  imposing external limits (caps on carbon for example) without simultaneously confronting the inner dynamics and problems of the first contradiction of capital. Instead we must rely on robust forms of limits coupled with more robust forms of redistribution. And much of our production (of energy, of transportation etc.) can no longer be merely a prerogative of capital. It must be directed and the social relations surrounding it must be redefined.


Historically we have managed the internal contradictions by assuring growth and drawdown of our ‘natural capital’. The problem of external limits has been ignored or inadequately managed with minor taxes and regulations.  But when growth is no longer an option to counteract the internal contradictions of the system, and when minor taxes and regulations no longer suffice to keep the economy within biophysical limits, we are required to move in a different direction.  Unless the movement to implement a GND understands that the burden of the historical moment is not merely to provide short run prospect for jobs and to replace fossil fuel with renewable energy, it will be inadequate to the historical moment.


The challenge of the GND is to erect a new economic framework that will allow us to exit the impossible prospect of trying to resolve both the first and second contradictions of capital that define 21st century capitalism.  Renewable energy technology doesn’t rise to the requirement of managing either the first or second contradiction, as much as we’d like to believe otherwise.  A carbon tax or a cap in conjunction with the hope that the market will handle the rest is a strategy that demonstrates a gross lack of understanding of 21st century capitalism and its capacities and inclinations as well as an overly optimistic view of technology.  


Let’s be clear, neoliberal economics is not our only problem, though there is no question neoliberal economic policy has made both the first and second contradictions of capital worse; it has also created a fundamentalist ideology about markets that has dribbled into the lexicon and thinking of the mainstream (Thomas Friedman, for example).


An unequivocal cap on carbon and rationing of production and consumption is the beginning of a new institutional approach to a new economic order.  As Cox notes, “The Green New Deal would not achieve an economic transformation,” and this historical moment demands such a transformation.


The historical moment demands the institutions of limits. Limits that not only constrain resource use but also find expression in the institutional fabric of our economic order (in production and distribution).  We must become collectively constrained in economic life.  Limits must move beyond the realm of individual conscience and choice and take up residence in the ordering of economic society. This is the challenge of a revolutionary GND.



Lisi Krall is a Professor of Economics at the State University of New York, Cortland. Her numerous essays and articles appear in diverse journals from the Cambridge Journal of Economics to Behavioral and Brain Sciences.