Make Corporations Pay for the Green New Deal
A Green New Deal will require trillions of dollars of investment. But the government doesn’t actually need to put up all the cash — we can make corporations pay.
An often-overlooked source of funding for the Green New Deal is the private sector. Government does not need to foot the whole bill. It merely needs to spend enough, and legislate enough, to trigger a transformation of private investment. Even many liberal and left economists are stuck thinking that government has to pay for the whole Green New Deal, as if it were a welfare program. In reality, government merely needs to do enough to channel ongoing public and private investment in new directions.
The Green New Deal is not some discreet object to be purchased. Rather, it is a process of society-wide economic and technical change. The Green New Deal does not mean buying a bunch of new green stuff to bolt onto all the old dirty stuff; rather, it means changing how society invests. It means industrial planning. It means channeling flows of capital away from harmful activities like oil drilling and speculation, into socially useful work like building out the clean energy sector. Even if one ultimately wants to nationalize the means of production, green industrial planning within a capitalist framework is an important step toward deeper changes in our mode of production as a whole.
One very important source of badly misallocated capital is corporate America’s vast hoard of semi-hibernating cash. Last year the Federal Reserve reported that nonfinancial corporations held $4.8 trillion in cash. That sum is equal to almost one quarter of the entire US annual economic output, which last year was $20.5 trillion. And this $4.8 trillion in cash is only a subset of a larger, less liquid, hoard of $22.1 trillion worth of financial assets held by nonfinancial corporations.
This is not money paid out to stockholders as profits or to managers as bonuses. This is money retained by firms for investment. Technically much of this cash it is “at work” somewhere, in the sense that it has been invested, it is not currency piled in a vault. But it is at work primarily in the financial sector where it is fueling the next speculative bubble while doing little to grow the real economy.
Why are firms sitting on this money? Because they are waiting for the next big thing, the basis for the next long wave of accumulation: something equivalent to the sustained build-out provided by the advent of the internal combustion engine, or electrification, or the rise of personal computing and the internet. The Green New Deal’s vision of a civilization-wide, clean energy transition would unleash the hoarded corporate cash and be the basis of a new long wave of investment.
To meet the goals of the Green New Deal the US government would need to use a combination of regulation, investment, procurement, and subsidy. Legislatively, step one should be to stop all fossil fuel extraction on public lands and end all subsidies to the fossil fuel industry. The Natural Resources Defense Council (NRDC) estimates that federal subsidies for oil, gas, and coal production average about $26 billion a year. That sum could shift to subsidizing clean energy production.
Next, put the fossil fuel sector on an aggressive legal timeline towards extinction. At the same time, government needs to increase “renewable portfolio standards” — that is, increase the percentage of clean power each utility company is required to produce. What would happen to the money now invested in building oil pipelines? It too would shift into building the clean energy sector.
Legal changes like these would force a massive private sector build-out of clean energy capacity. Duke Energy could stay in business, but it would have to close its coal- and gas-fired plants, while building wind and solar capacity. Translated at scale across the economy, these sorts of dynamics would force the hoarded corporate cash to get off the speculative bench and get back into the real-economy game of actually producing useful products — such as electric vehicles, retrofitted buildings, massive wind farms, and photovoltaic solar panels on every roof.
Another tool for channeling investment is government procurement, what I have called the Big Green Buy. If the federal government performed energy-saving retrofits on all of its 450,000 buildings, that work would require a mix of public employees and private contractors. Similarly, if the public sector switched from gas to electric vehicles, private sector auto manufactures would have to invest to meet the demand.
If the government set out a schedule to buy all the energy it consumed from clean sources, who would build the needed wind turbines and solar panels? Perhaps someday worker- or state-owned firms but in the near term most of that demand would have to be met by private firms. A greening of government procurement would thus draw forth the nonfinancial sector’s financial hoard and shift capital away from filthy fossil fuels.
Far from “costing too much” the Green New Deal promises the very thing that Wall Street hoarding denies: more opportunity and more income for more people. After all, capital is like blood, it is only useful if it circulates.