Ocean Rebellion activists, one dressed as Boris Johnson, set fire to the sail of a small boat next to the River Clyde, opposite the Scottish Event Campus, where the COP26 will take place, in Glasgow, Scotland, on Oct. 27.RUSSELL CHEYNE/Reuters
John Rapley is a political economist at the University of Cambridge and the author of Twilight of the Money Gods: Economics as a Religion and How it all Went Wrong.
Just when you thought it was safe to return to normal, along comes a climate summit to remind you that this crisis has only just begun.
If COVID-19 was merely the opening act for the main event, it drew attention to the dangers of uncontrolled economic growth. During the long lockdowns that resulted, we had a lot of time to reflect on how we lead our lives. Research shows that many of us have decided not to return to the old normal, but to consume less and, to judge by labour markets, possibly not to work so hard either. Lifestyles less absorbed with an endless need to get ahead and buy more stuff should create a propitious environment for next week’s 2021 United Nations Climate Change Conference (COP26), in Glasgow. Moreover, the calculus of climate change should make preventing it a no-brainer: not a cheap proposition, but a bargain compared with the cost of ignoring it.
But here’s the problem. The returns on investment in a green transition, though huge, will pay out over many years. The costs, on the other hand, are immediate. If they’re to prove effective, they’ll also need to be substantial. To generate the capital needed for a massive wave of investment in green technology, we’ll have to pay a lot more for all the energy we consume – not just on our heating and gas bills, but on most everything we buy (since everything we buy requires energy to produce). As a result, we’ll have to consume less.
The type of investment needed to avert climate breakdown and create a sustainable future will probably yield a return, or what economists call a discount rate, somewhere in the range of 1 per cent to 2 per cent. In other words, this is an investment that will pay out over generations. That might wash in a country like, say China, whose leaders frequently place their current actions against the backdrop of thousands of years of history. But us? We live in democracies. Our leaders seldom look past the next election.
In fact, our current economic model is based on quick gains. Many of us with stock-market investments keep a daily eye on share prices, dumping companies that don’t boost our overnight wealth. And who among us, in a time when house prices rise 40 per cent a year, would forego real estate to invest in a bond that will take a generation to yield that kind of return?
It’s this sort of trade-off that has helped spur the energy crisis now gripping much of the world. Faced with the difficult calculus of a green transition, governments have employed partial measures that postponed tough decisions: raising carbon prices to phase out fossil fuels, but avoiding the New Deal-style investment needed to build the energy infrastructure that will smooth the transition. There resulted the short-term expediency of substituting cleaner natural-gas for coal and oil, raising demand for the fuel faster than supply. It was just a matter of time before a supply shock hit. As a result, with energy prices surging, politicians from U.S. Senator Joe Manchin to British Chancellor of the Exchequer Rishi Sunak are now saying the price of climate action is just too steep.
But what are the options? The scientific consensus is that it’s now or never. We either bite the bullet, or accept the grim advance of climate breakdown and the possible collapse of civilization. And here’s what everyone knows but nobody wants to say openly: Since the real breakdown might not happen for a few decades, older voters, who remain the biggest constituency in Western countries, could opt to kick this can down the road. No wonder Greta Thunberg gets so worked up when she talks about how older generations stole her future.
But that may be too pessimistic. That same calculus that leads people to kick the can down the road, can equally be turned around to produce the opposite outcome. Sure, we humans have shown a spectacular disregard for future generations in the way we’ve lately managed the commons. But when it comes to our own future generations, to our children and grandchildren, we act differently. Many people make considerable sacrifices to invest in their children’s education or to help them get onto the property ladder, investments which in most cases pay them nothing. Nothing, that is, but the satisfaction they are bequeathing their descendants a better future.
Moreover, history has revealed that we can be persuaded to extend the love we show our own children to the children of others as well. In fact, on this point, democracies don’t stack up so badly. They’ve previously reconciled the imperatives of immediate, individual sacrifice and long-term, collective gain, whether in fighting world wars or in the investment programs that created the welfare states “fit for heroes” that followed them (as British politician David Lloyd George put it after the First World War).
What may be lacking is not will, but the leaders to mobilize it. Politics today has come to be defined largely by the politics of triangulation, of cutting and dicing the electorate and then targeting policies at specific constituencies so as to cobble together winning electoral coalitions. But it hasn’t always been this way. In fact, we can find the origins of triangulation in those periodic statements you receive for your investment portfolio.
Until the 1980s, corporate executives tended to think strategically in their decision-making. But around that time, influenced by some then-new currents in economic thought, there emerged the doctrine – some might say the cult – of “shareholder value.” CEOs were henceforth to be assessed quarterly or at most annually, with their compensation reflecting the short-term earnings gains and share-price boosts they could deliver their investors.
This was mirrored in politics by the rise of the median-voter model, which gave rise to the “permanent campaign.” Thereby were citizens reconceptualized as consumers, to whom political products could be exchanged for votes. Just as shareholder value frequently boosted quarterly returns at the expense of long-term sustainability, for instance by incentivizing asset-stripping or dividend-payments over investment, so did its political corollary substitute the brief horizons of electoral cycles for the decades-long visions needed for political-economic sustainability.
Plainly, this model of economic and political management is not up to the task of the environmental crisis. However, things may be changing. In Germany today, coalition talks between ideologically disparate rivals may hint at the emergence of a new model. The free-market, fiscally austere Free Democrats and the big-state, fiscally expansive Greens may have almost nothing in common. However, both are favoured by young voters, and both reject status-quo incrementalism to focus on questions of long-term sustainability: fiscal, for the FDP; environmental, for the Greens. Politics with long time-horizons may thus find a new home in such coalitions.
Today, we have just pulled through a pandemic where a younger generation, little threatened by COVID-19, willingly succumbed to punishing lockdowns, job losses and home-schooling in order to protect their more vulnerable compatriots. As postwar governments did, when they build “lands fit for heroes” to reward the sacrifice of the so-called Greatest Generation, the citizens of today’s West should stand ready to do the same. We need leaders with courage to rise to the occasion. And while the hill we have to climb is huge, it may be too early to bet against democracy pulling it off again.
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