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Transcript
Rob Johnson:
This week I’m bringing you an interview with Adam Tooze, a professor of history at Columbia University, and director of the European Institute. Back in January 2020, when I was in Davos for the World Economic Forum, I had the pleasure of speaking with Adam about his work on financial history and how it relates to the Green New Deal. Although we weren’t talking about the coronavirus at the time, our conversation dives into how governments and society can respond to major existential crises.
I’m here today in Davos with Adam Tooze from Columbia University. He’s been, how would I say, shifting from financial history into climate future, and Adam thanks for joining us.
Adam Tooze:
It’s a pleasure to be here.
Rob Johnson:
While I was flying here, I got to read a draft of a paper that you were writing, which kind of, what I said was the first time I’ve seen somebody try to create a window into the politics of climate transformation. And you talked a lot about the Green New Deal and people attaching other dimensions to the Christmas tree. As someone who used to work in the legislature, I know how people put their ornaments on the tree, because if something has to be done, a whole lot of extra garbage if you will gets carried in with it. And I saw you talking a lot in there and in your article in Social Europe, relating to the challenge of the U.S China relationship in the context of the formidable goals that we have to meet in climate. Let’s start by talking, I would say as a bridge from your work in finance, the Green New Deal, MMT, and how do you see what’s being proposed there? Is that a big contributor? How do you see where that fits into the conversation?
Adam Tooze:
Well I guess what really grabbed my attention as a historian who started out working on the, first off the 20th century, the period of the 1930s and 1940s, is the extraordinary influence of the history of the New Deal in World War II on the climate politics of the U.S. in the period 2018 to 2019. If you read deep into the policy papers such as they are that informed the AOC vision of a Green New Deal, her staff, all over the experience of the U.S. in World War II, Roosevelt’s famous promise to produce an outlandish number of bomber aircraft is cited as an instance of the way in which the American state, the American government can stimulate innovation and technical breakthroughs in the United States. The whole program feeds off the drama and the charisma, if you like of that earlier moment in the economic and political history. And that for me was irresistible as a topic to think about.
And of course, we’re talking about period of an economy which is deeply depressed, where there is very little inflation pressure. And then we’re talking about an economy which goes into war mode and where prices are controlled by price regulations, J.K. Galbraith being one of the people involved in that. So it also throws up a whole set of issues which we’re running very currently of course in the MMT debate about what inflation is and the role of monetary economics and explaining inflation. And of course, then AOC opened the door to the link between MMT and the Green New Deal.
But as you hint the thing that I really wanted to focus on is this issue of what the geopolitics of such a dramatic, progressive state led program of energy transition would be. And if we think the analogy to World War II to its logical conclusion of course it begs the question, because as any historian of World War II will tell you, the war was not won by the exclusive efforts or the mobilization of the resources of Western capitalism alone. And they were highly significant and contributed in various ways. But, a lot of the dirty work, a lot of the ground game was down to the Soviet Union and its rather different model of mobilization.
Rob Johnson:
Strange bedfellows as they say.
Adam Tooze:
Exactly. And the question for me is really, if we throw ourselves, if we, and it’s not a historian’s nitpicky kind of argument, you shouldn’t be using historical analogies, for me it’s more interesting to ask what happens when you do. So we are going to use this historical analogy, what else might we draw from it? And what it leads me to immediately is not just a question, and a set of questions about American domestic economic policy, but also about its foreign relations.
And the question fundamentally of how a progressive green energy transition politics, how it stands in relation to the great geopolitical question of the day which is the relationship of the West, the United States, but not only United States, also Europe and our partners in east Asia, to China. And there is an implication that one could draw from the historical example, which is that we didn’t do this on our own the first time around, and we will not be able to do this on our own this time around either. So we have to bite the bullet and we have to think hard about what that implies for a progressive economic and climate policy.
Rob Johnson:
And you have clashing or different philosophical traditions, different modes of social organization in the role of government in society. In some of the conversations I’ve had here at Davos, people are saying for 40 years in America government has been part of the problem, not the solution in the mantra that started with Ronald Reagan. People have said, the State is a source of inefficiency and they have almost deified markets. Well we’re now in a place where very few people think unfettered free markets will address the scale of what you might call collective action and externalities that are in the mix. And so it’s very hard for people who have become successful believing in one philosophy to shift gears suddenly, and know that they’ll, which you might call, maintain their reputation or the affirmation of their peers. It’s also hard for private sector businesses to say, I’m going to take the lead on climate and start losing market share to everybody who doesn’t participate and make the, what I’ll call collective sacrifice.
So there are a whole lot of things right now that are just in the West in tension. Now you couple things with China, a country that went through the Opium Wars, and the humiliation of the Japanese invasion, regaining its stature as a world leader, in America being frightened that its leadership is diminishing or plateauing in some kind of horizon at the hands of the Chinese. Now you go to the two different philosophical systems, the Confucian and Cartesian Enlightenment systems don’t deal with experimentation and uncertainty and things like that in quite the same way. This is a very, very complex cocktail to put together and see it coming out constructive. But necessity is the mother of invention.
Adam Tooze:
It’s certainly complex. I’m not sure I would quite pitch the difference in climate politics and the culture of climate politics between the U.S. And China in that way. To me the more striking thing is that the two great Asian powers of the 21st century, the two states with the most rapid economic growth, with the largest populations and with therefore the most on the line with regards to the energy transition, have both, despite their very different cultural traditions, found ways of embracing climate science. It’s particularly striking really in the case of Modi’s India, which where after all there is an outright challenge by Hindu nationalism to of the authority of Western science. And nevertheless, Modi’s leadership has been one in which India has taken ownership of the climate issue.
They have moved out of the climate justice position, which they most forcefully advocated from the early ’90s onwards, which said quite reasonably that this was a problem created in the West and therefore for one for the Western powers to fix, and Delhi is now talking about the moment at which its CO2 emissions will stabilize. They’re very actively embracing renewable technology. They see it not really as a competitive disadvantage but as an opportunity for India, because in the end renewable technologies will be more efficient, and the same is true for China. And the more astonishing thing of course is that it’s precisely the Western quote-unquote political culture of the United States, which is not capable of stabilizing its political system around the authority of science, which America of course contributed to more than any other state.
If you look back in the history of you refer to the fact I’m working now on a project on the history of the climate problem and climate politics. It is America from the ’60s onwards which is really the hub of climate science also of the new wave of environmentalism with Earth Day in 1970. And it is American politics, which is grappling very actively with the question of energy and energy pricing throughout the 1970s. And it’s that country where, thanks to the efforts of the fossil fuel coalition and Republican political entrepreneurs, where the solidity and the authority of climate science has collapsed.
Rob Johnson:
Yeah. I actually dread it’s slightly more bipartisan than just the Republicans. I’ve worked on both sides of the aisle and I see a whole lot of Democrats, in the Senate particularly, frustrating climate change even when Obama had both houses on his side.
Adam Tooze:
This is I think the lesson that we have to really take seriously which is that even in, to my mind the unlikely event that the Democrats sweeping the presidency and Congress in November 2020, the limits will still be that, because in the Senate there is a blocking coalition of fossil fuel Democrats and Detroit Democrats that have sabotaged any previous effort to ratify a binding treaty. And the rest of the world has to move on. America is no longer the major source of CO2 emissions. Its most destructive role now is that it anchors a coalition of hostile states which builds legitimacy around that position, Brazil, Australia, the list is long, Russia, Saudi Arabia, all potential members of that coalition. But the coalition of the willing is far larger fundamentally, and has far greater legitimacy and that is anchored on the relationship between the big three, big four if you count Japan, which is a rather reluctant recruit to that number.
So, those for me are the stakes of climate politics this year. And they’re extremely urgent because Glasgow COP26 is the moment where the COP process has to redeem itself from another period, basically in which its legitimacy has come increasingly into question. Paris 2015 was always really a gamble on further improvement of ambition. And Glasgow is going to be meeting at a post-Brexit Britain 10 days after the American election and the moment at which the U.S. exits the Paris agreement is literally one day after the American election. So, November 2020 could not be more significant moment, really, I think for the future of global climate politics. Everything revolves around what happens at that moment. It isn’t of course that if we have another Copenhagen it’s over, but we got the wheels back on the bus after Copenhagen because the Americans, because the Europeans stuck with it, China and India came on board and Obama was willing to then do the bilateral deals.
Rob Johnson:
But what we have in the America is, I’ll call a situation, where social design is too heavily dominated by money. And what Mancur Olsen called The Logic of Collective Action, narrow, concentrated interests, who would be, how would I say, losers in the short run though I don’t quite know what that means if you’re going to shut off the oxygen on planet Earth. But those industries which would bear a part of the lion’s share of the distributional burden of adjustment, can dig in their feet, and the broad collective wellbeing can be thwarted or has been thwarted.
Adam Tooze:
And the coalition is really interesting because it’s not any longer adequate to say it’s all oil driven. It really isn’t. Exxon and company can see the writing on the wall. They know the way in which BP and Shell are shifting for instance. They are moving into a position where they’re advocating a modest carbon tax. It’s clearly a clever strategic retreat. The real diehard opposition comes from two groups which is coal, and on the other hand ideological oligarchs. Basically people with an agenda and with enough billions to sway the American political system.
Rob Johnson:
And a lot of people who are afraid of losing their career or who owns suburban real estate. But having a car for 55 minutes in each direction is not part of a system that’s going to cohere. There are all kinds of adjustments and displacements that are in the offing that are creating dread. So, how do I say if you were the doctor, you’ve diagnosed things, what would you prescribe to move us out of this stall point?
Adam Tooze:
Well I really insist that, this is going to sound like a cop out, but I am a historian, I remain a historian. Early on you introduced me by saying, “and I’m moving from financial history to the climate future,” I’m really not. I’m moving from financial history to climate history because I think of the entrenched problems in disciplining and regulating global finances in some sense, both closely related to, and in fact causally linked to the problems of managing the fossil fuel economy. And this for me is another stab at trying to understand the last half century of global history this time through the lens of the energy system.
Rob Johnson:
Well, there’s a crossover that I perceive quite powerfully, which is many people on the left when 2008 happened said, thank God this fantasy of unfettered, free markets crashed, and we’re going to get back to proper supervision, regulation, and governance. What emerged with Occupy, Tea Party, and what have you was despondency about the role of government after the bailout distribution was quite skewed, and appeared to be unfair. So now you have a larger coalition of people distrusting government as we enter into a challenge that requires collective action. I think that’s a very powerful.
Adam Tooze:
And it’s even closer because the great despair of the American mainstream environmental politics, Big Green was the failure of cap-and-trade legislation in 2009. There is a sense in which we just don’t think these histories as joined up as they should be. The first advocates of a Green New Deal were the Obama administration. It’s there in black and white. If you go back to the history, it took me by surprise because I had immersed myself in the financial history and the history of the financial crisis. And I had not understood, until I started revisiting this entire history from this angle, how incredibly closely related these histories are. And the Obama administration, bonafide has three agenda items. One is managing the crisis and doing financial reform, another one is healthcare reform, and the third is the Green New Deal. And they sacrifice the Green New Deal to the imperatives, legislative imperatives of healthcare and Dodd-Frank is likewise mutilated in that process. We say sacrifice, what we really mean is the Republican opposition, die-hard as it was, required that sacrifice.
Rob Johnson:
Well, it was transfer of control of the House, and then the Senate, and then the White House.
Adam Tooze:
It was absolutely brutal. But the legislation on cap-and-trade failed before they lost the majority. It failed in 2009, and that produced, amongst the environmental left, a disillusion which indeed closely parallels that of Occupy with 350 McKinney’s new movement and the sunshine movement which has come out of that which are all, I think of, as part of the fraying, if you like, of the coalition around Obama and helps us to understand the current disunited condition of the Democratic party and the difficulty of getting on the same page in opposition to Trump. And you can say the same thing and when we were talking earlier about the U.S. here, but the same is true of the European energy transition, where there is this huge boom started by Germany, but then others bandwagoning on that model of the feed-in tariffs, which the Germans used to energize the solar and wind boom in Germany. And then the Eurozone crisis hits.
And the first programs which are shut down in Spain and Italy are the very expensive solar subsidy systems. If you want to understand why renewable energy investment in the Eurozone, which was formally world leading has collapsed to a fraction of what it was at its peak, the logic of the macroeconomic crisis in Europe is absolutely imperative, right? So part of my project is to really tightly hook these things up, not just in the fantasy of a Green New Deal which is how we’ll respond to a crisis in future, but to actually understand organically how all the way we look back to the crisis in Bretton Woods in the early 1970s. Monetary dis-articulation if you like, is linked to ructions, tensions within the energy system of the world economy.
Rob Johnson:
Let me take you even to a more distant history. When we talk about MMT related to the New Deal, one can read about the origins of central banking. When I look at contemporary central banking, its macro stabilization is one task, lender of last resort crisis management is a second, but the third task was the original task, which was mobilizing resources for war. Now the enemy in this juncture is climate and time, it’s not another society. And when I hear people say, you shouldn’t have monetary finance, I’m concerned because essentially what they’re saying is we want 2% price stability, and maybe turn off the oxygen, instead of 4% inflation and a continuation with environmental transformation. By just what I will say willfully blocking off that avenue in the name of price stability that feels sort of like dinosaur logic to me.
Adam Tooze:
It is. And I think, however, I also have to say that I find the position of the left on this to some extent tilting at windmills or deliberate conflation of different issues. It’s just not obvious that for sophisticated economies like those of the United States and Europe, we need anything like World War II mobilization to do the energy transition. The most dramatic estimates suggest that we need to be spending 2-3% of GDP in new investment over on top. Crucially what we need to do is stop investing and stop subsidizing fossil fuel. And if we swap the hundreds of billions of dollars, which go into that every year, into a concerted renewable energy drive, if we double down on R&D and R&D spending figures are low hundreds of billions, not trillions…
Rob Johnson:
And you can take on pharmaceutical deregulation and raise a little more taxes.
Adam Tooze:
There’s a sense in which this is an irrelevant argument to a large extent, right? Given the scale of the deficits the Republicans have run by ruinously unfair tax cuts, that would pay for the Green New Deal. Perfectly happily, right? The one for me of the puzzles really of the attraction of the ’30s and ’40s, as a way to think about this, I think it serves as a crowbar in the U.S. for saying, no government can do positive things, like winning the war against Nazi Germany [inaudible 00:19:30]. Remember that, that was positive, government did that so therefore. But in other respects, the analogy between World War II and the climate challenge is very poor. Because there isn’t going to be a happy day when we win and there’s VE Day and VJ Day, and then we kiss each other and go on to a happy future, the G.I. Bill. This is forever, forever, forever, forever right? It’s a grinding process.
Rob Johnson:
And the other dimension is the Green New Deal people kind of tout a Keynesian stimulus. Keynes said dig ditches and stimulate aggregate demand, you’re done. What you do with the money here is critical to whether you succeed or not.
Adam Tooze:
It’s not Keynesian in that respect at all. It’s actually more classically industrial policy. At the limit, if you run into any kind of financing problem I’m completely with you. We could finance anything we can do. The question is, do we want to do it right?
Rob Johnson:
And what do we do and how does the arm wrestle of who gets the industrial policy subsidies play out?
Adam Tooze:
I understand it in political terms because from the point of view of AOC and the left wing of the Democratic party it’s about linking these agendas together and creating a radical package. But from the point of view of the practical politics I think to some extent it’s a red herring.
Rob Johnson:
Yes. Well, we should probably continue this when we get back to New York and explore how you say more dimensions, but thank you for taking the time today. I have enjoyed seeing you impart your insights to Davos and look forward to your next studies and books and so forth to illuminate things, in the context of history for us all. I think reintegrating history with economics is one of the greatest contributions anyone can make to economics education at this juncture. And you’re at the vanguard of that. Thank you very much.
Adam Tooze:
Thank you very much. It’s always a pleasure.
