NonProfit Opinion Center
It's the New Economy, Stupid
Post by John Cavanagh and Robin Broad on Friday, 30 November 2012
Most progressives have long embraced a clear alternative to the conservative story that prosperity flows best from a “free market” unfettered by government regulation and taxes. The standard progressive response: government incentives and spending are essential to spur the creation of jobs, and unions and regulations can make them “good jobs.”
President Obama’s re-election by a surprisingly healthy margin (he won by 3.5 million in the popular vote and by 126 in the Electoral College) confirmed substantial support for this overall approach to the economy. Despite deep economic suffering throughout Obama’s first term, the public validated his advocacy for more progressive taxes, his ideas about the positive role that government must play in regulation, and his call for public investment in training, education and research. All of this adds up to a significant defeat for the free-market ideologues who lined up behind Mitt Romney.
But here’s the catch: while Obama’s policies have the short-term potential to improve the lives of many Americans beleaguered by the economic slump, the approach he champions is insufficient to tackle the long-term problems we face. To secure a safe and prosperous future for subsequent generations, efforts to reduce unemployment and curb inequality must be considered alongside urgent threats to the environment and democracy. These crises present a compelling argument for systemic change.
Just a week before an election in which both candidates largely ignored the environment, Hurricane Sandy devastated the East Coast and put climate change at center stage. Who would have imagined Bloomberg Businessweek with a cover trumpeting “It’s Global Warming, Stupid,” as the magazine did just days after the storm? Climate chaos is at the core of our environmental crisis, but the problem also includes dwindling supplies of potable water, the destruction of forests and oceans, and the depletion of the planet’s biodiversity. Simply put, jobs that threaten the environment cannot be considered good jobs.
The assault on democracy by growing corporate control of our workplaces, our politics and our economy presents another deepening crisis. Roughly $6 billion was spent to influence and distort the political process in the 2012 elections, with a huge portion of this staggering sum coming from Wall Street and the wealthy. This dire situation demands that we put a premium on alternative forms of collective ownership and a shift from giant corporations and banks to smaller enterprises rooted in communities.
To address these multiple crises, we need broader metrics to measure progress and new paths to get there. What many progressive advocates are calling a “new economy” framework emphasizes not just new jobs but also new policies that simultaneously create a fair economy, a clean environment and a strong democracy. As a movement begins to coalesce around these issues, one of its toughest challenges will be to persuade more political and business leaders, mainstream journalists and economists locked in an outdated Keynesian worldview to take its ideas seriously.
What would a new economy look like? When it comes to promoting fairness, environmental sustainability and democracy, Walmart jobs, for instance, are triple offenders: they are nonunion poverty-wage positions, they support a corporation with a climate footprint half the size of France and they undermine community jobs on Main Streets all over the world.
For a positive example, consider what could be done to transform the waste management industry. Most of our trash goes into landfills that leach toxins into the soil and water, or into incinerators (often in inner-city neighborhoods) that belch toxic fumes. Rising asthma rates in urban communities of color and increasing greenhouse gas emissions are among the results. Yet according to a Tellus Institute study, the United States could create more than 2 million jobs by 2030 by transforming our waste management from incinerators and landfills to recycling and composting. Many of the jobs could shift from large private corporations to municipal unions. As groups like the Global Alliance for Incinerator Alternatives and the Institute for Local Self-Reliance stress, this shift would tackle the environment, equity and racial justice all in one shot.
Or consider the holistic approach articulated by Ai-jen Poo of the National Domestic Workers Alliance: a “caring economy” that emphasizes caring for the planet, a fairer distribution of resources and dignified jobs, as well as caring for our elders and those the market leaves behind. Poo and Sarita Gupta of Jobs With Justice have helped build the Caring Across Generations campaign with more than 200 allied groups. The campaign has constructed a bold policy platform to create 2 million eldercare jobs, enhance job quality with wage and overtime protections, give workers proper training, provide a road map to citizenship for those who need it, and make care affordable for seniors and their families. The campaign is building the power to win such initiatives and pay for them through cuts in defense spending and a series of fair tax initiatives.
Another dynamic example where a new-economy transformation is already happening in dozens of countries, including the United States, is farming. For the half-century after 1960, most governments promoted agribusiness farming, which is dependent on giant tracts of land and on chemical fertilizers and pesticides. But as fossil fuel prices jumped in recent years and yields from nutrient-depleted soils fell, some countries began looking to small-scale farmers who are abandoning synthetic chemicals in favor of natural inputs. Via Campesina, a 200 million–member coalition of small farmers, has promoted this approach as a way to cut farming costs, reduce greenhouse gas emissions, grow healthier food and give farmers more control over their future. In US cities like Detroit and Oakland, a younger generation is turning to small-scale urban agriculture of this type.
In other words, these initiatives are not pie in the sky or viable only in areas where the old economy is collapsing. In fact, new-economy jobs are expanding at the local level in other realms, and they could spread even further to meet our growing needs. There are new jobs in weatherizing and retrofitting buildings to make them energy-efficient. There are new jobs in credit unions and community-development financial institutions as people move their money from the Wall Street banks. And there are small businesses opening every week that are building what some of their leaders call “local, living economies.”
Academics and advocates at the forefront of the emerging new-economy movement are constructing an infrastructure of ideas and activism to promote their programs and help bring them to scale. On the ideas front, these include the New Economics Institute, the New Economy Working Group, On the Commons, the US Solidarity Economy Network, George Soros’s Institute for New Economic Thinking, the Capital Institute, the New Economy Network and publications like YES! magazine, to name but a few. (Indeed, the New Economics Foundation in England has a staff of close to fifty.)
New Economy Working Group co-chair David Korten, author of Agenda for a New Economy, and top environmental scholar and practitioner Gus Speth, author of America the Possible, have laid out comprehensive agendas to speed the transformation from a speculative and militarized Wall Street economy to a vibrant, green and caring Main Street economy. Korten’s agenda includes steps to break up the “too big to fail” banks as well as incentives to expand state and community banks and other locally rooted institutions. Both authors pinpoint strategies to speed the transition, such as shifting our measurements of economic success from sheer output to the things we value as individuals and communities. Again, this is not pie in the sky: Maryland has created an Office for a Sustainable Future that measures twenty-six economic, environmental and social indicators as an alternative standard of well-being. Vermont and other state governments have begun to follow suit.
There is also momentum on the activism side—some of it building on the Occupy movement’s compelling case that the entire system needs to be changed. In addition to local actions all over the country, several national progressive groups—including Jobs With Justice, National People’s Action, Grassroots Global Justice Alliance, the National Domestic Workers Alliance and Van Jones’s Rebuild the Dream movement—are helping to create a transformational economic agenda. An increasing number of “blue/green” alliances are forming to hammer out “just transition” job programs that would support clean energy. A group called Kentuckians for the Commonwealth has convened union members, environmentalists and others to spell out a “new power” agenda designed to move the state beyond coal to sustainable livelihoods. Last spring, the 99 Percent Power network pulled together labor, environmental and grassroots groups to take on corporations and banks. And the Labor Network for Sustainability is bringing the climate issue into union halls across the country and challenging leaders to address the crisis.
* * *
Gar Alperovitz, a leading new-economy strategist who co-founded the Democracy Collaborative at the University of Maryland, argues that these different layers of activity and thinking have great potential to come together in a movement that will break open the economic debate and spur transformational reform. But if fairness, environmental sustainability and democracy demand such far-reaching changes, why isn’t this on the front pages? Why isn’t the transition happening more quickly? And why aren’t more progressives making this the centerpiece of their work?
Let’s be realistic: despite the progress, there are serious impediments to a widespread embrace of new-economy ideas. The Great Recession is one of the biggest, since it has pressured so many people into looking for jobs at any cost. Instead of laying the groundwork for the new economy, Obama’s much-vaunted $787 billion stimulus package—which passed Congress just weeks after his inauguration in 2009—addressed the immediate crisis by pumping money into “shovel-ready” projects like highway repair and shoring up state and local treasuries to pay teachers, Medicaid providers and firefighters. But while such short-term solutions were necessary to stop the bleeding and prevent a global economic disaster, the president missed a historic opportunity to launch what many progressives at the time hoped would be a transformative Green New Deal.
To be sure, the Obama administration has made some small moves toward kick-starting a new economy. The president has raised fuel efficiency standards for cars, closed some aging coal plants, maintained incentives for renewable energy (efforts Paul Ryan derided as “green pork” in the vice presidential debate), and expressed a desire to eliminate tax breaks for oil and gas companies. Obama signed the Fair Pay Act on day nine of his presidency; his Labor Department has stepped up enforcement of labor laws; and he made the case for higher tax rates on the wealthy throughout the campaign. But these reforms have not gone far enough, and they are not part of a transformational whole. Also, some are undermined by other decisions, such as the attempt to expand offshore oil drilling and the rejection of bold proposals to tax Wall Street and corporate America fairly.
Moreover, Obama’s first-term policies did not save or create enough jobs to offset the losses or prevent a conservative populist backlash. As the stimulus rolled out, the Tea Party emerged to steer public anger, outrage and frustration into an attack on government and a call for tax cuts and “austerity.” As the Wall Street crash spread to Europe, Germany and the European Central Bank reacted with similar calls for austerity. And as Greece and other countries were forced to slash government spending as a condition for new loans, unemployment rose quickly across the continent.
In this climate, the mainstream economic discussion has narrowed, not widened. Rather than consider how to create a new economy from the bottom up, most commentators and decision-makers in Europe and the United States have descended into that age-old debate between those who believe a market “freed” from taxes and regulation serves the public interest best, and those who press for growth through increased government spending, regulation and progressive taxation. (An “age-old debate” indeed: one that the free-market side dominated in the 1920s, that the government spending/tax equity side won from the 1930s to the ’70s, and that the free-market side once again reigned over from the election of Reagan and Thatcher in 1980 through Obama’s election in 2008.)
It is easy to get swallowed up in this narrow debate to the exclusion of the broader discussion we so desperately need. Many unions and progressives in the United States and Europe have rallied behind the best of the Keynesians, such as The New York Times’s Paul Krugman and former Labor Secretary Robert Reich, who have argued for another round of stimulus and tougher financial regulation (challenging Treasury Secretary Timothy Geithner, for example, who opposes taxing stock and derivatives trades). But too few progressives have taken the extra step of articulating the need for holistic, systemic change.
Candidate Obama didn’t sufficiently address the broader issues either. Throughout the campaign, he argued convincingly that his plan to create jobs through growth and redistribution would be more effective than Romney’s “less government” approach. But over the course of three presidential debates, the environment and democracy were largely sidelined. And now that the nation has turned its attention to the high-stakes “fiscal cliff” debate, the focus has shifted to congressional negotiations over how to slash spending and cut the deficit. This will likely sharpen the sense that we must choose between austerity and government-led job creation.
So too in Europe, the French and Greek elections in May splintered the consensus on German-led austerity, but largely in a way that emphasizes Keynesian growth while marginalizing new-economy voices—despite the rich history of green parties in those countries and throughout Europe. Likewise, growth and jobs are the overwhelming focus in most of the global South, and few countries are trying much that is pathbreaking in terms of the environment (see sidebar). All over the world, governments are tinkering with the old economy when they should be transforming it into a new one.
* * *
A second huge impediment stems from the first: three decades of rule-rigging have deeply entrenched the free-market interests. Subsidies, incentives, patent laws, regulations, trade and investment rules, and tax laws hugely favor big corporations and the 1 percent. The number of these rules is so large, and the stranglehold of the 1 percent over most elected officials remains so strong, that it is difficult to determine reform priorities—much less strategies to link them with new-economy values.
Third, the progressive community overwhelmingly embraces the Keynesian growth framework. Most progressives are pressing for an ambitious jobs program paid for by fair taxes. But few distinguish between old-economy and new-economy jobs, or regard environmental protection as an integral part of social justice. Both of us have been involved in informal dialogues between new-economy advocates and progressive groups that focus on jobs and growth, and we have seen how hard it is for them to have a constructive conversation. For example, in several hundred towns in the United States and Europe, a “transition town” movement is attempting to eliminate greenhouse gas emissions through local experiments in sustainable agriculture, energy and transportation. But during an informal meeting that one of us convened, two leaders of national progressive groups dismissed such efforts as weak and ineffectual.
This leads to a fourth impediment: many of the local activists working on diverse new-economy projects—creating bike paths, supporting urban farms, advocating for wind-power subsidies—do not see themselves as part of a movement. Even labels and language reflect this obstacle: it is difficult for people who don’t speak a common language to come together. Are they members of a “new economy” movement, or a “sustainable prosperity” movement, or a “caring economy” movement, or something else that resonates with its constituent parts and also with the public?
Given these considerations, what is the road ahead? For this movement to grow, it needs three things: a more compelling story of the new economy, more support for local pilot projects and strategic wins at the national level.
When it comes to building a narrative, a more attractive new-economy vision has to be constructed, in part on the foundation of the widely shared view that Wall Street crashed our economy and corrupted our politics. If the Occupy movement popularized the call to end extreme inequality, Hurricane Sandy is popularizing the call to rebuild our nation’s infrastructure in a green and resilient manner. Weaving these themes together can make for a gripping narrative.
Of course, a cohesive story can go only so far without a cohesive movement behind it. To overcome some of the current divisions, new-economy advocates will have to expand opportunities for labor and environmental leaders to come together, and smaller new-economy groups will have to collaborate more (to this end, some are now talking about merging).
And to help sell the story, we also need fresh voices in the economics profession. For close to a century, most economists have been taught to embrace either free-market neoclassical economics or Keynesian growth economics, and their doctrinaire thinking has had a huge influence on the media, the broader public debate and government officials’ sense of what is possible. Thankfully, there is a core group of iconoclasts in the field—including the progressive economists at the Political Economy Research Institute at the University of Massachusetts and the great Herman Daly—who have trained a small but dogged set of “ecological economists.” This year, economist Juliet Schor teamed up with environmentalist Betsy Taylor to hold the first new-economy graduate institute; there are plans for another next year.
How should new-economy activists ground their efforts in local action? The Institute for Policy Studies is convening hundreds of neighbors in the urban Boston neighborhood of Jamaica Plain to build a “new-economy transition,” and it is facilitating the exchange of “community resilience” initiatives among activists from dozens of New England cities. By supporting local experiments, the movement can gain strength even if the national debate remains relatively narrow in the short term.
But new-economy advocates should also place a high priority on influencing the mainstream debate and policies over the long term. Clearly, organizations can’t change all the rules that have been rigged in favor of corporations and the old economy overnight, but they can build unified action behind a few winnable campaigns.
We see two particularly promising areas: fossil fuel subsidies and taxes. The group 350.org, which has led the fight against the Keystone pipeline, is working with Oil Change International and other groups to ramp up pressure on Congress to end fossil fuel subsidies; 350.org is also collaborating with the New Economics Institute on a campaign to press universities to divest from fossil fuels and invest in new-economy measures instead.
Likewise, broad coalitions have come together to make our tax system fairer, including coordinated efforts to raise taxes on the wealthy (led by Americans for Tax Fairness), on Wall Street (led by a new Robin Hood Tax campaign and Americans for Financial Reform) and on corporate tax havens (led by the Financial Accountability and Corporate Transparency coalition).
Wins on these fronts could make it possible to put the entire system of old-economy rules on the table. In the wake of Hurricane Sandy and the national elections, a clearer road map to the new economy is beginning to take shape.
Many governments and popular movements are embracing the need for systemic change, write John Cavanagh and Robin Broad. Read their piece “A New Economy for the Developing World .”