December 7th, 2008
International Security and the Economy
This month’s newsletter focuses on international security through an economic lens. We all know of the difficulties facing the economy, both at the domestic and global level, and that is an important issue that the incoming administration will have to face. Economic stability is essential to international security, yet how to rebuild that stability is a question on everyone’s mind.
The following articles address economic issues from a variety of perspectives. Some of the authors below argue that high scale investment in the economy through economic stimulus packages and private sector subsidies are necessary to jump start the economy. Others take a more conservative approach, arguing that too much government intervention in the economy could be ruinous.
To what degree should the government intervene in the economy? What is the best way to recover from the current economic troubles? Should the government focus on green energy investment to combat both economic turbulence and global warming at the same time?
“Green, Easy and Wrong” The Economist
This article addresses the push by domestic and international actors to stimulate the economy by subsidizing the green movement. Can government investment in green technology successfully integrate the problems of economic meltdown and global warming and combat both problems at the same time? The author argues that while green energy should be an important focus of U.S. government policy, the issues need to remain separate. Government subsidies have the potential to worsen the economic crisis.
“How Capitalism Will Save Us” Forbes
Steve Forbes presents a more optimistic view of the current economic crisis. He argues that liberal economic policy brought on the problem, but it is possible to pull out with minimal effort if governments choose policies that promote, rather than hinder, growth. The cash is available, Forbes argues, but countries are reluctant to release it into the economy. The U.S. government needs to make smart policy choices rather than increasing regulations and taxes that would inhibit economic recovery.
“How to End the Recession” The Nation
Robert Pollin states that a large scale government stimulus package is needed to end the recession. He argues for the need to focus on economic stimulus to citizens and green public investment to both revitalize the economy and take immediate steps to reverse global warming. Economic stimulus will stabilize individual households, allowing people to reinvest in the economy, while green public investment will create domestic middle class jobs, keeping the investment within the U.S.
December 8th, 2008 at 5:49 am
Regarding “Green, Easy and Wrong”
If I had the chance to talk to the editors of the Economist, I would tell them they should read Arjun Makijani’s book, Carbon-Free, Nuclear Free: A Road Map for U.S. Energy Policy. (Arjun is a MIT trained physicist and you can download the book free at his website, see http://www.ieer.org/)
I say this is because the Economist argues against supporting alternative energy initiatives in a most dismissive manner. I suspect they have their own agenda which likely supports nuclear power rather than alternative sources.
Yes, putting solar collectors on rooftops in Germany probably was not the best idea, but please notice that the photo the Economist uses is not in Germany but in a desert environment, probably California, Arizona or Nevada. If you read Arjun’s book, you will see that locating large numbers of collectors in these environments can generate huge amounts of power which then can be routed elsewhere. This is only one aspect of the detailed plan which he has created that clearly shows the US can generate all the electricity it needs without building any nuclear or coal-fired power plants.
December 17th, 2008 at 3:47 pm
It seems there are three “crises” facing us: economic stability, international security/nuclear proliferation and energy. Would the “magic bullet” of massive green energy projects be the key to resolving them all?
By selecting green energy as the priority crisis and solution would we be overly focused and relying too much on politicians picking winners and losers? The opportunities for waste, inefficiency and corruption abound and the recent examples provided by an Alaska Senator, Illinois Governor and $50 billion fraud-missing SEC don’t inspire confidence in government.
Wouldn’t a cut in the corporate tax rate as recommended by Steve Forbes stimulate investment broadly in productive industries, not just in energy, and make U.S. products more competitive globally? A cut in capital gains taxes should also stimulate investment in private sector companies which produce what the marketplace demands, not what politicians decide. Such tax cuts could have an immediate impact across the entire economy, without the lag-time of building a green energy infrastructure in select states.
I agree that if the economic crisis is not solved first and decisively we are unlikely to make much progress on the other crises. It appears the upper middle class, the investor class, is paralyzed by a rational fear. While now may be an ideal time to buy stocks, real estate, autos and other major items, it takes uncommon courage to do so while facing uncertainty.
The incoming government has committed to raising income, capital gains and estate taxes, to “spread the wealth” and expand Medicare. All this is in addition to a massive stimulus funded by debt. Such an atmosphere does not stimulate risk-taking but rather a “hunker down” mentality. Until the agenda is clarified we may be in a slow or no growth period for some time. This would not bode well for much progress on any of our crises.
December 18th, 2008 at 7:56 am
While I do share some enthusiasm and support for the idea of a green revolution (see Thomas Friedman) as a means of economic recovery, it clearly is only one part of the solution. It is a forward looking idea with long-term potential.
The troubling part of the solutions offered by the 3 authors (and most of the debates taking place today) above is that they are very much a top-down approach to building economic security. Consider how the foreclosure problem has focused almost exclusively on the interests of the lending institutions while solutions for homeowners are a footnote to the discussions; consider how the bailout is being funded by the taxpayers instead of the companies who got themselves into the mess (see Nader who suggested implemented a securities speculation tax to fund the $700 billion); consider how little concern there is for the declining real wage of American workers since the 1970s while corporate tax income (as a % of overall federal revenue) have declined steady for over 50 years (despite massive record profits).
I laugh when I hear liberals and critics (typical offenders) say the end of capitalism is near. Its the “end of history” thesis all over again. More regulation is inevitable and necessary. There need to be checks against market failures and greed. I would agree with Forbes that the free-market perhaps shouldn’t bear all the blame: if the regulatory schemes/enviroment allowed for the crazy speculation, then companies were certainly sensible in pursuing profit. But at what cost? It appears we’ve been extremely shortsighted in how we evaluate costs - its not merely about costs to the company, its owners, or its employees, but to society as a whole. Who will bear this burden?
As has been summed up quite well by Gretchen Morgensen, Kevin Phillips, and others, the most troubling aspect of our trajectory is that the gains of our current financial system are heavily privatized while nearly all the costs are socialized. More balance and sensibility are required in our financial capital markets so we can protect our human capital. This is critical if we are to cope with the scales of our decisions in an increasingly interconnected and globalized world.