With the world falling into its first truly global recession, it is fascinating to see how quickly the theories of John Maynard Keynes have regained their political sway. Loyal readers of this web log may know that not only do I have a long standing admiration for the work of Keynes, I have also argued academically that just as his fiscal policy may have proven to be ineffective in one single country (given flexible exchange rates), the same measures may turn out to be surprisingly effective if applied to the aggregated world economy.
In some regards, as with the notion of post-scarcity, Keynes was profoundly prescient. In others, as with the natural environment, he was firmly a man of his time. Instead of pursuing the highly anachronistic task of criticizing Keynes for this shortcoming, I think a more fruitful task would be to develop the rather timely branch of Green Keynesian Economics. Though I am certainly not the first to suggest that we should green the present bailout (and less than a week ago I even came out in “praise of wind turbines”), there is definitely room to elaborate on these ideas as I think that we have not yet fully recognize how well the present economic turmoil lends itself to kick-start the “sustainable transition”.
Unlike traditional green thinking however, I believe that first of all, such a kick-start has to be aimed at restoring overall global demand. Only with the integrity of the economic system secured, providing a “market floor” of sustained global growth, will we have the financial resources necessary to pursue other policies.
Instead of desperately trying to rescue sun-set industries such as car manufacturing we should seize this opportunity to finally bring them down. Uninhibited by the structural opposition of the car industry, massive investments in more sustainable modes of transportation would become politically possible. By retraining car workers to build high-speed trains and buses, the shift could also be made less painful on the individual level.
This far I am not claiming much originality. But what is missing in the standard Keynesian analysis is how an economic recession can be used to shift long-term social priorities, in this case in the direction of sustainability. While Keynes is famously quoted for saying that “in the long run we are all dead”, the same will hopefully not be true for our children. And to ensure them environmental sustainability, it falls upon us to urgently reorientate our society in the direction of scientific discovery. Instead of the public works of the thirties such as roads and dikes, we should now invest in particle accelerators, testbeds for material science and space industries. At the same time, progressive taxation should be used to raise overall educational standards and promote a culture of learning, capable of rapidly increasing the rate of innovation.
Labels: research, space