Video:
Audio:
Subscribe and Listen on: Apple Podcasts | Spotify | Stitcher | Google Podcasts
You can find all our Economics and Beyond audio podcast episodes here: https://www.ineteconomics.org/perspectives/podcasts
Transcript:
Rob Johnson:
I’m here today with Bob Pollin from the University of Massachusetts in Amherst, and the co founder and co director of the Political Economy Research Institute, PERI. We’re here to talk about anything he wants to talk about, but particularly his brilliant work related to climate in his recent co authored book with Noam Chomsky, and how this new administration in this world is going to embrace the challenges that they frame in their writing. Bob, thanks for joining me today.
Robert Pollin:
Great being on. Thank you, Rob.
Rob Johnson:
So right now, we’re in this turmoil. The notion in March of last year was that the pandemic was a surprise, a transient surprise, it seems to be much more resilient. We’ve gone through a presidential election, we have a new administration, and this ominous specter of climate change and how would I say, the displacement of just about everything, including life on earth stands out on the horizon. What do you see? What gives you heartburn? What are you cheering for? What do you wish you were seeing in this context?
Robert Pollin:
That’s a lot, but right, since the pandemic hit basically, in mid March, we can look at the standard statistics on employment that I find more illuminating. Just look at the number of people that have applied for unemployment insurance, since March to now, I just actually calculated it last night. It’s 47% of the labor force. Meaning sometime between last March and now, roughly half of the people that work in the United States have become unemployed. So in terms of the severity of the downturn, it’s equivalent, or not more so than the 1930s. We’ve got to get out of it. Sure, when people get inoculated, hopefully we’ll be able to reopen.
But we do need the booster, because people have been left behind, businesses have failed. State and local governments are broke. And in March, we passed the first stimulus program that was 10% of GDP, the CARES Program. We need more. In December, they passed the COVID-19, that was 900 billion, about 4% of GDP. And now, Biden is talking about another 1.9% of GDP about 9%, all of that is needed in order to just lift the economy back off. Otherwise, we’re going to be stuck in a very, very slow halting recovery. That’s short term. In terms of a sustainable growth path to return to, obviously, we have to deal with climate change in a dramatic way, that has not happened.
The proposal that Biden had when he was the candidate, Build Back Better, was reasonably good. There were things about it that I thought were okay. The number one thing that I thought was okay, was the scale of spending. He’s proposing 2 trillion over four years, which is more or less in line with what I think is a reasonable number. The other parts that I thought were okay, was that he does give attention to the quality of job creation, not only numbers of jobs, the quality of jobs. And he does talk about the transition for workers and communities in the fossil fuel-dependent area. So those are all good things. There are things I don’t like about it, but those are the basics. And these are things that I think have to pass in the next few weeks. Because after that, then you lose your political momentum.
Rob Johnson:
I had a remarkable experience in the January of 2019, where a bunch of people came to the Swedish Consulate, from Sweden. And they said, “Mr. Johnson, you have to, at INET, recognize that the growth model of Europe is now the growth model the American growth model’s failing.” So I continued to listen. And they said, “In the old days…” They said, “Deregulate everything, make the supply side flexible, you can reallocate resources to be more efficient, and you’re off to the races.”
And they said, “Now with Donald Trump as president and all this anxiety, and the displacement coming from automation, and machine learning and globalization, the American people are terrified. And out of their despondency, they’re becoming politically resistant to anything. And we need to grow and we need to transform our energy systems. And the whole world depends on the United States. And while the European model used to be called sclerotic, we in Sweden,” this was their quote, “we don’t protect jobs, we protect people. We transform pensions, they stay with you. We keep you and your children in school, you have your health care. Everything works, provided, you’ll play along with relearning to be productive in the next or another sector.” And that’s the new growth model. If you don’t protect people, people will resist change.
And when I’ve read your work on climate, a substantial portion of the mystery of why we’re not evolving, has had to do with that human resistance. Particularly within a country where people are terrified because they won’t get adjustment assistance. So those things change.
Robert Pollin:
No, no, actually I’ve been doing this work for different groups in Appalachia. Just actually finishing this project now. The number one issue is, you’ve got to tell us the story that’s real. If you talk about something equivalent to trade adjustment assistance, or other transition programs, they call it burial insurance. They say, we’ve been mistreated, we don’t believe you, it’s not going to be anything good. And so a lot of the research that I’ve been doing, in fact, we’re putting out this one for West Virginia, next week, is to say, look, here’s what it really takes. The number of jobs that are going to be created through transitioning to the green economy far outstrip the job losses that you will experience annually in West Virginia.
But number one, we do have to do the investments in West Virginia in the green economy. And number two, we’ve got to be able to move the people and communities in a reasonable way. So the transition, it can’t be just handout. Here’s $10,000 and go join this training program. We have to do these things, we have to guarantee their pension. We have to guarantee that they get another job. We have to guarantee that the pay at the new job is at least as good as the old job. And yeah, retraining as necessary, relocating as necessary. And it has to be real. So a lot of what we’ve done is budget out these things. Even for West Virginia, where you have a high proportion of fossil fuel workers, even for West Virginia to do all of those things, the overall budget to give everybody another job at good pay, relocate if need be, retrain if need be, it’s like one 10th of 1% of the state’s GDP. It’s peanut, but you have to do it.
Rob Johnson:
That’s right.
Robert Pollin:
You have to be serious about it. Because I give these talks and I hear this, “Oh, fine, Professor, that all looks good on paper. You know what, you’re going to keep your job. When the coal mines shut down, you still have your job, you’re fine.” But we’re not, because everything you’re saying isn’t going to happen. It would be great if it did happen, but it’s not going to, because the environmentalists and left people that don’t care about us. They hate us. And I try to fight against that, though. That’s kind of the dynamic. And it’s true that, let’s say you don’t even give a damn about these people in Appalachia, people committed to their communities in the coal regions or fracking. But let’s say we really want to push a climate stabilization project. We will not succeed politically, unless we get these people on board.
Rob Johnson:
That’s right.
Robert Pollin:
Yeah.
Rob Johnson:
Well, you’re singing the music to my ears. I’m a boy that grew up in Detroit. I watched the country after the Voting Rights Act and the Civil Rights Act, divorce, the community where I lived. America divorced Detroit and they blamed the victims. There was no adjustment assistance. And you were talking about all the different dimensions, but even what I will call the non treated local goods, things like movie theaters and restaurants. They’re not part of that change in the auto industry, when the Japanese skills came to a blossom. And the dollar was overvalued, and all that other stuff. But those people who have skills need to redeploy their restaurant, to follow the migration of people. And that’s another dimension of what happened, Detroit just collapsed, as everybody now knows.
Detroit is a very good, what I’ll call canary in the coal mine example, for what not to do in transformation, if you want to have a coherent society. And the cynicism there reminds me when I was a freshman at MIT. I walked into my first economics class, and they started talking about equilibrium. I wasn’t trying to be as smart ass, I raise my hand and said, “Are you just assuming a happy ending?” And the professor looked at me. So I was on the side of your West Virginians it’s in that particular moment.
Robert Pollin:
Well, look, even the people that hired me, West Virginia Budget, whatever it’s called, Budget Policy Ohio Valley Research, there’s three, four groups. And I just sent them the study last week. This one guy in particular, he said, “Well, I’m a hillbilly from West Virginia. And nobody’s going to go for this, because what you have to prove is, if we were to build up coal, it’s still going to be fewer jobs.” And I said, “Well, that is not really the issue. We’ve got to contract coal, but the transition has to be real, it has to be robust. It has to be respectful.” And I said, “Germany is doing it, has been for decades.” In the Ruhr valley of Germany, is a beautiful example of a good transition. And right there in the Ruhr Valley, they are building out these really innovative things like using the open coal pit and running hydro plants, running water down the pit, when there’s an excess supply. They run the water backup and they’re generating electricity. And then they have batteries, gigantic batteries right there in the pit.
And the batteries then charge something like 400,000 home. So why can’t we just copy these things? But it has to be real. It can’t be, okay, we say it, a couple of professors. We have a conference, then nothing happen. That’s what they think, and they have very good reason to think that’s what is a likely outcome. So we’ve got to fight to make this real. Luckily, a lot of the groups have realized this. And in fact, I was just on a call with the so called Green New Deal coalition on exactly this point.
Rob Johnson:
Well, that’s what my Swedish guests were essentially saying. If the people believe the government will work to facilitate a transition and take care of them, then they’re amenable to the dynamic evolution. That’s the new growth model. People matter more. And I look at this, I’ve seen a lot of symptoms over the years. I worked a lot, as you know, on financial reform in the Dodd Frank years and TARP and all of that. And what I saw, as Occupy was building up, the Tea Party was building up, was a certain cynicism about government. And I remember very vividly, there was a podcast and a musical artist named Stuart Zechman came on. And he said, “There’s an anonymous Obama official says it can’t be like the New Deal anymore. Because when you look at the Gallup polls, even the progressives don’t believe in government.”
And Stuart, who was the guest, went on and looked in the Gallup poll, and what did it say? It said, even the people on the left think the government is captured by money politics, and won’t serve them, because it’s not designed to serve them.
Robert Pollin:
Well, that’s true.
Rob Johnson:
But we’ve got an exciting thing going on right now, which is, even those powerful people have to breathe 20 years from now and their children and their grandchildren. So we do have a common purpose.
Robert Pollin:
Certainly Biden was not my top candidate for the democrats. In fact, he may have been my last candidate. But there are some positive signs. I mean, I have to say I’ve moved by just reading this morning, the Treasury Secretary Yellen, just saying, “We need a big stimulus, because people are hurting.” I mean, when was the last time we had a treasury secretary say such a thing?
Rob Johnson:
That’s right.
Robert Pollin:
And she’s insisting. And she’s saying, “Sure, there’s inflation fears, but they’re far outstripped by the fears of people’s lives getting ruined, having been decimated.” 50%, roughly, of the of the labor force has applied for unemployment insurance. And in California, I was just looking, it’s 60%. So we’ve got to build the foundation, rebuild it, the stimulus program that Biden has is pretty good. And then we have to do the clean energy transformation. And again, I think it’s pretty good. Actually budget-wise, his allocation is higher than what they’re talking about in Europe.
Europe, they have all the lingo, but I’ve looked at it, and at least what they’re talking about is a half a percent of GDP, a year, at least so far. Which won’t get you very far.
Rob Johnson:
And you have a lot of inner regional tension within the EU, which is sort of partially developed structure that inhibits what I’ll call a unified entrusting thrust from emerging.
Robert Pollin:
Yeah. So at least Biden is more like 2% of GDP, which is around the range where I think that we can make some real progress.
Rob Johnson:
Well, in some of your past writings and recent writings, you’ve identified sources of resistance. And I remember a wonderful piece you wrote in the nation several years ago, made three, [inaudible 00:17:11] I call, three principal nodes of resistance. One, which we might call the plutocracy of concentrated ownership in the fossil fuel business. And that they will play the games of political economy and money and super PACs and all that stuff, to preserve their assets that probably have nothing like the value that they would have had yesterday, or in a steady state.
The second I recall, was a fear of the communities with its concentrated workers in the fossil fuel industry, like West Virginia, and the transition that you’ve talked about. And then there was a third, which was the equivalent of, I remember being in school in the OPEC years, where there was the equivalent of a supply shock, as you take down the fossil fuel supply. Not because it’s displaced competitively, because we can’t afford to burn at that rate, you might induce a slump with a supply shock. And we have to react to that. I know you’ve had very, very beautiful responses to each of these three. But why don’t we, for the listeners, talk about, particularly that third one. How do you deal with that supply shock? Do you bring on the renewables faster, which creates jobs in the transition? What’s the recipe for breaking this law game?
Robert Pollin:
If we follow the Intergovernmental Panel on Climate Change, the IPCC, which is the [inaudible 00:18:45] organization, at least disseminating the scientific research. They said that we have to reduce emissions by 45% as of 2030, and be at zero by 2050. So if we do that, I think it’s totally realistic to invest… We’re not shutting down the fossil fuels to zero tomorrow, we’re going to shut it down over 30 years. And with a big, half of it, let’s say, roughly in 10 years. But even that, the cheapest way to replace fossil fuel energy is through energy efficiency investment. And it’s the easiest, it’s very low tech. I mean, 40% of our all energy consumption is buildings. And just to make buildings more efficient, is not that hard.
You can get to 30 to 40% increased efficiency pretty cheaply, according to the engineering literature. So start with that, and then also, the building out solar and wind, especially solar. I mean, solar has come down in costs 80% in eight years. And this has even, I’ve been tracking even the Energy Department, US Energy Department, under Trump, has documented it. You weren’t allowed to write a memo under Trump in the Energy Department and mention the word climate change. But they themselves put out these comparative statistics showing that solar is cheaper than coal, now. And way cheaper than nuclear, now. So we can be building it up incrementally and increasing efficiency, such that we can hit a 50% reduction in nine years. I mean, I’ve modeled it, I’m not the only one.
My models are different than, for example, this work of these two guys, I’ve worked with this group. Zero emissions, ZCAP, action plan with just [inaudible 00:21:00] of that. And they have these two energy modelers, Jim Williams and Ryan Jones. For the first time, I worked with their model. They asked me just to estimate the job impact of their model. Their model is different than mine, they’re specialists in different ways. But the result actually, was pretty close to mine. So that was affirming. Can we hit a 50% reduction in nine years? Yes. Will it be exorbitantly expensive? No, but it is two to 3% of GDP. It’s not 32% of GDP, so it can be done. The technology is there. The money needs to go there. But then there’s the politics. So then sure, there’s the resistance of the fossil fuel plutocrats, as you said. And then there’s the resistance of the workers in communities that are dependent, we have to address both of them.
Rob Johnson:
Well, I think it’s a very interesting thing to hear you talk so enthusiastically about greater efficiency and renewables. Because many of the people, even left economists have said, we have to go to what they used to call degrowth. In other words, we’re not going to change the microstructure of use and production of energy in relation to carbon burning fast enough. So we’ve got to just go into a permanent slump. While I would stay in the state of despair in our political economy, that’s tantamount to an authoritarian government.
Robert Pollin:
It’s a disaster. I mean, I’ve written about it. I’ve been in a debate with these people for years. I like them, they mean well-
Rob Johnson:
They’re well-meaning, yeah.
Robert Pollin:
I know they mean well. I wrote a piece in New Left Review a couple years ago that’s had hundreds of responses, including calling me a racist and an imperialist, and on and on. But basically, the simple logic just doesn’t work. The only economist that I know of that actually modeled degrowth in a sympathetic way, is Peter Victor at the University of New York. And he’s a good economist. He’s Canadian, he shows it for Canada. And he says, okay, here’s how we can get emissions down by, I think it was 80% in 30 years in Canada. And then if you actually go inside the model, yeah, you can get there. But then GDP also goes down by 80%. I don’t think so. I don’t think we’re going to get anybody supporting 80% GDP contraction.
On top of that, if you don’t change the energy system, but you just degrow, what happens? The math is like sixth grade math. If you keep the state management system, and you contract the economy by 10%, you contract emissions by 10%. It’s proportional. So we don’t even get degrowth. 10% GDP contraction is a depression. And we don’t even get close to a zero emissions economy. So the only way is to transition the system through renewables and efficiency. And I just want to say in defense of… A lot of these people get into the rhetoric, but this guy, Peter Victor, and the other leading economist in this was named Tim Jack. They had a piece, for example, [inaudible 00:24:39] a year ago. And if you get past the rhetoric, they’re basically saying the same thing that I’m saying. There’s minor differences, but they’re really, really not saying degrowth delivers climate stabilization. They’re really saying, we need something akin to this green investment project.
It’s unfortunate that other people get all caught up in this rhetoric. And they think that saying you’re for degrowth means you’re against capitalism. If you’re for a green transition with the energy system growing, that means you’re a capitalist, and it’s just kind of silly stuff, frankly.
Rob Johnson:
Well, there’s also a lot of discussion about how to finance the Green New Deal. We have a lot of debates related to the notion of MMT, Modern Monetary Theory and so forth. And I laugh because I remember MMT emanating in republican supply side discussions during the Reagan years, when I worked on the Senate Budget Committee. And the guru was Warren Mosler.
Robert Pollin:
Oh, really?
Rob Johnson:
So it wasn’t really a far left notion at that time, it was the supply side, growth can be financed without inflation. And it was an MMT-like precursor. But that aside, we see a lot of people resistant to that kind of funding. And people often use the fear of inflation when they’re using the kind of yin and yang of central bank policy. But I’ve often asked friends, I kind of try to stand them up a little bit. I say, “Okay, so we can have 2% inflation and die, or 4% inflation and transform the energy system, so we go on living. Why is it better to die and keep the inflation rate lower?” I don’t understand how we’re formulating our trade offs. And I think it’s, in part, the mindset in a society where almost everything is modeled as a private good. Where the scope and scale of this challenge is a public good, of enormous proportion and implication. And we’ve just got to shift gears. But how do you see it? How do you see what central banks want to be studying, doing to play a role?
Robert Pollin:
That’s a great question. So I’ve also had debates with the MMT. I mean, there’s certainly positive features to MMT. But I actually don’t think they’re very original. I mean, it’s debt monetization. Can the Central Bank buy up government bonds and retire them? Of course! Central Bank does it all the time. The question is, can every central bank do it? Under what conditions and to what extent? So the financing, like in the book with Noam Chomsky, I talk about a global financing. And about, I forget exactly, but I propose something on a third of the overall financing should be essentially the Fed and the European Central Bank buying green bonds all over the world. Not just in the US and Europe, but everywhere. So that’s the debt monetization part. But the other things that I suggest are simple things. Like cutting military spending. Cutting military spending by even 5%, that’ll get you 15% of the way that you need for financing the Global Green New Deal.
Another is, we talked before about Jim [inaudible 00:28:41] and a carbon tax with redistribution. So if you introduce the carbon tax, and then I calculated in the book with Chomsky, I said, redistribute 75% of the revenue back to people, equal shares. I think I calculated, every person on earth gets an equal share, everybody gets $60. Well in the US, $60 doesn’t mean too much. But in Kenya, a four-person family getting $240, that’s going to be, I don’t know, 10, 15% of their income. So that will be another source. And you still have 25% of the money that can go into investing in the green economy.
And then the fourth thing is to eliminate fossil fuel subsidies. Fossil fuel subsidies are massive. The thing though, is most of it is a form of egalitarian redistribution, because it just makes it cheaper for people to buy fossil fuel energy. So instead, you use that to build up the clean energy economy and subsidize that, basically those four things pay for the whole project. Now, there’s of course, a lot of refinements, but that’s basically it. Analytically, it’s really not very hard. And sure, we should do debt monetization. I don’t think we should do it 100%, but-
Rob Johnson:
Make a contribution, yeah.
Robert Pollin:
Yeah, yeah.
Rob Johnson:
Well, I think it’s very interesting. Because when I talk to friends of mine from the Wall Street days, who are prudent, deficit, hawk types. They don’t mind their bailouts in 2009 and presently. But as they say, we’re protecting assets, not people. But some of them maintain a faith in the kind of trickle down idea, that if you maintain the value of assets, then the economy won’t go over the cliff. But there’s also a lot of inefficiencies. And I keep trying to tell my friends who are the deficit hawks, you should be taking on the extraordinary difference between the profitability of the pharmaceutical industry in this country, and in other countries. And the role of the public sector and the costs to Medicaid and Medicare associated with that. Daniel Ellsberg talks very vividly, in his most recent book, The Doomsday Machine-
Robert Pollin:
I love that book-
Rob Johnson:
… the need to bring down significantly the stocks of nuclear weapons and not modernize them. And devote some of that savings to finance climate change. Then we live less dangerously and safer and longer. And he and I made a three-part video for my Young Scholars Convention-
Robert Pollin:
Great, wonderful.
Rob Johnson:
Where he really put it out there, really beautifully. But I see all kinds of ways in which deficit hawks could really go to work. But they’ve got to buck heads with concentrated power in our political economy, in order to contribute to these things we now need. But I think that’s part of the recipe.
Robert Pollin:
Well, so first of all, the Ellsberg book, I love that book. And subsequent to my reading it, Dan is now a fellow at PERI.
Rob Johnson:
He told me that, yeah.
Robert Pollin:
Yeah. And actually, it was… okay, I might have thought of it myself, but actually it was in discussions with him and his wife, Patricia, that they said, “Why don’t you just finance this through cutting nuclear spending?” And so I actually calculated it. So in the book was Noam, I forget exactly how much I said, that cutting military spending would be, I don’t know, 15% of the total. But I said we can either cut across the board, just all forms of nuclear spending, or just cut 75% of the nuclear projects. And you can leave everything else alone, even though I don’t agree with that. But sure, there’s no-
Rob Johnson:
[crosstalk 00:32:58] experiment, yeah, that’s good.
Robert Pollin:
Yeah. I think that Ellsberg, Dan and Patricia both, are totally on the right track. And any deficit hawk should, in principle favor, getting rid of wasteful spending on the military. And as you said, also on medical care. So we have this medical health care system that we spend 18% of GDP, which is double the other advanced economy.
Rob Johnson:
Yeah, and we rate 38th in the World Health Organization’s ratings of the quality of the health care experience.
Robert Pollin:
We’re exactly 38, you’re right.
Rob Johnson:
That’s a troubling situation. I want to say to Ellsberg’s credit, there is a benefit in addition to the budget savings, which is if the nuclear stocks come way down, the probability or even the possibility of what they call the nuclear winter, which you can read about nature in Science Magazine, goes to zero. And that’s a hypothesis or a scenario you might say, it’s not really a hypothesis. It’s a scenario where if the nuclear scale is so high, and there’s a conflict, about, I think he said something in the neighborhood of 800 million people would die from the explosions. But the fires burning the upper atmosphere and turning us into an ice age would take six and a half billion of the 7 billion people to their grave within a year’s time.
So he’s talking about safety, as well as savings to contribute to… Another form of safety, that’s amazing piece of public policy that if we’re going to build back better, we better get on our force for that one.
Robert Pollin:
No, and I think that well, yeah, if we have to promote a book here, his book is just magnificent. And he’s since been here at UMass, and we’ve had him lecture, which has been really exciting. He’s also an absolutely first rate economist.
Rob Johnson:
Yes, he is.
Robert Pollin:
And he said, he spoke at PERI, he said, it’s the first time since the Pentagon Papers that anyone has invited him to give an economics lecture on anything. He lives 20 minutes away from UC Berkeley, they’ve never-
Rob Johnson:
I know-
Robert Pollin:
… wanted him to give a economics talk. But his work on uncertainty in the ’60s was fundamental.
Rob Johnson:
It was a landmark, yeah.
Robert Pollin:
And he’s still the-
Rob Johnson:
[crosstalk 00:35:40] game theoretic, under radical uncertainty, comes up with very different sensibilities than the [crosstalk 00:35:47].
Robert Pollin:
Yeah, and he’s still absolutely sharp in doing it. And some of us, when he came, he talked about the Ellsberg paradox, and he’s Ellsberg. It was really fun having him.
Rob Johnson:
Yeah, that’s great. That’s great. Well, coming back to the climate issues, we’ve been talking about budget, we’ve been talking about financing, we’re talking about the technology of change, the adjustment assistance. But there’s another looming challenge here. We have watched the disintegration of trust, the despair that’s come to the surface in many countries with Brexit, what I’ll call the otherness of America, the nationalism. We’ve got to go back to the idea that we’re all in this together. To use a simple example. India is a very large place. And per capita, burning of energy, BTUs per person, they burn about one 10th of what the Americans do.
So they can look at us and say, we’re poorer than you, we need to grow, you guys need to cut back. But we can’t really play a kind of musical chairs game, where the clock will run out and we’ll all suffer. How do we get to the place to coordinate global reduction? Because your book, I think it’s your book or one of your articles, enunciated that the US and China are the biggest put together, they’re 42%. If you throw in Europe, you’re at about 52%. The other 48 matters a lot. There needs to be global adjustment assistance, global transformation assistance and coordination on a timetable that’s very urgent. How are we going to pull that together?
Robert Pollin:
Yeah. So I’ve done work in India and other developing countries. I had this project with United Nations Industrial Development Corporation on transition in developing countries. And I’m doing another one now with UNCTAD, United Nations Trade. So really, the one I’m doing with UNCTAD right now, is exactly on how you finance in the developing economies to transition. Again, you know the basics. Of course, there’s a lot of complicated stuff. The basics are really simple. India can grow just fine with clean energy. They do the transition too. My co workers, they’re Indian co workers, wrote a brilliant paper on, let’s assume, as part of this thing, instead of fossil fuel subsidies, we just give out solar energy for free. And in the rural areas of India, basically, half the people have no electricity whatsoever.
If you start putting up small scale solar operations, this is going to be transformative for their lives and just making their lives better. And you’ve got clean energy. But it has to be subsidized. It’s not going to happen if it’s not subsidized. So the rich countries, especially the US, yes, we have to subsidize. And part of it can be through buying these bonds. We can think about different mechanisms, but just basically, India or Kenya, they float green bonds, and the US Treasury buys them. Or the US gives them to the World Bank or whatever the details are. And it has to be at scale, it has to be at 1% of global GDP. That’s the part where debt monetization can work just fine.
So it’s not taking money out of anybody’s pocket. It’s just creating new activities and new financing. So yeah, that’s a project I have right now with UNCTAD, and of course, I’m not the only one. But I don’t think that the basics are that hard. It’s really working out details, but really, it’s working out policy. And the rich countries just have to acknowledge that, yes, the low income countries can grow. But as you just said, if they grow, and they say, well, we’re not rich, you’re rich. So we have to grow. But if we’re saying that means growing on the basis of fossil fuels, it doesn’t matter what happens in rich country. We’ll blow out the carbon budget in seven years. If you just take India, Indonesia, Mexico, Brazil, if they grow on the basis of fossil fuels, it doesn’t matter. We will never hit the emission reduction part.
Rob Johnson:
Well, this is very important. I think the there’s a node in this process or this chain, which is the rivalrousness and the mutual resentment in recent years of the US and China. Take a gentleman like… I have very facile and very constructive relationships between INET and China. But I experienced lots of people who, in the United States, people I went to high school with and things, want to blame China like they don’t play fair. Dean Baker has enunciated how a lot of this is being conjured up or stimulated during the Trump years, because what we’re really fighting about is intellectual property rights for the wealthy and the powerful vis-a-vis China. Where there is some question about what’s fair play.
But the US and China, China is, I’ll take Orville Schell to the table for a minute, his book, Wealth and Power is brilliant. Because it talks about after the shame or the pain of the Opium War and the Japanese Invasion, the Chinese want to regain the dignity of being a world leader. Of being a preeminent society, and the United States, at the same time, has been used to being the leader and would like everybody to follow in our footsteps and join our system. That tension between our identity and theirs has been like a tectonic plate clash. Not to mention that we come from different philosophical systems. That Western enlightenment, Cartesian determinism, versus the Confucian Taoist, grappling with uncertainty. We don’t see things through the same microscope or telescope. So you have these two places at the center of the world system, competing with each other, but needing to collaborate with each other.
Rob Johnson:
I think both sides, from my own working around there, I’ve spent a lot of time in China since 1990. And a lot of time in the United States talking about China with groups. I think both sides understand this. But how do we do the dance together? That will require collaboration that’s quite intimate from each side, together to work with all the others.
Robert Pollin:
Yeah. Well, there’s a lot of dimensions to it. But I mean, in the first instance, I think we want to think about China building increasingly their growth model around domestic consumption and rising wages, as opposed to exports. That will alone relieve the tension. I think, for the United States’ side, we have to stop this notion. They say, China manipulates its currency. Well, yeah. But let’s call that macro economic policy. Of course, they are. What does it mean to manipulate… the US also manipulates…
Rob Johnson:
Well, I was going to say, from my experience, working in the United States Senate and following a lot of committees afterwards. A lot of lobbyists for not making China a currency manipulator, were companies that were American headquartered, had foreign direct investments and their plants were in China. So this isn’t a nation against nation thing.
Robert Pollin:
No, no. I think if we move into a kind of a for wage-led growth model in China, and then we also, in both countries, we start talking about a green foundation, as it is, the fact that solar prices have come down 80% in seven years, which is astounding. It’s due to China. It’s due to their innovation. They’ve been remarkable and this should be celebrated. We should express our appreciation that they have taken the lead. Now fine, let’s compete. Let’s do better than… let’s build a solar panel. There’s a lot of room to bring down the cost further. And there’s room for both sides. There’s no room for fossil fuels for anybody. Transforming the entire global energy system, there’s room for a lot of producers in multiple countries. So that’s where I think we can establish some basis for cooperation and reasonable competition based on quality.
Rob Johnson:
Well, I think it’s very interesting, as I hear you say that, because it brings back echoes in my mind. I went to MIT as an undergraduate. I know a lot of people in the natural sciences who are academics. Almost all of them, including people from places like NYU and Columbia, right around the corner for me, are talking about wanting to have affiliates in China, because their government spends so much more money on basic science than the American government, at this point. That in order to be at the cutting edge, they have to have laboratories inside the universities in China. I found that just stunning. It never occurred to me, but they were talking to me about, China may spend six times the amount of money on basic, what I’ll call in the R&D, the R part. Six times the money of the United States. And their economy is getting to be almost the same size as ours, so it’s not…
Robert Pollin:
Well, Sweden also, I mean, proportional to GDP, is three or four times the United States. I mean, we’re just abysmally bad. And this is all part of this, what we were talking about before, that there’s a sense that whatever the government does is corrupt. And a lot of it is, but that also has to change. And so the commitment to research and among other things, building up a green energy economy so that it’s cheap for people. So yeah, you can actually have a better material life, in addition to saving the planet. These are all within reach. It’s just a matter of having the commitment. And again, I think, at least as a start, the Biden proposal that I think he’s going to introduce on Tuesday, formally, is going in the right direction, finally.
Rob Johnson:
I laugh at, I’ve mentioned to you my Swedish meeting, after they finished talking about sclerosis in Europe and the United States bogging down, because of the fears of large scale transformation related to technology and globalization. They started talking about perhaps the Chinese model has something to offer with more basic science. And Peter Goodman, from the New York Times, who I believe is based in London, he wrote a story about this group from Sweden. And it said, We Love The Robots, was the headline of the story. Meaning robots improve the production possibility frontier, and as long as you’re going to take care of me as a human, we can deploy them and climb the ladder. And the Chinese seem to be, whether it’s coercive or whether it’s like in Sweden, a consensus that that dynamic posture makes sense, I don’t know.
But I think the American model is being challenged now. Because we need to cooperate with each other and facilitate transformation, what I’ll call anesthetize or diminish, eliminate the resistance to transformation.
Robert Pollin:
Well, yeah, that’s obviously true. So having a decent welfare state. I saw, in the FT, the other day, Danny Roderick had an interview. And he said, “Well, we’ve think beyond the idea of a welfare state.” But the basic idea of giving people social protection is, whether you want to call it a welfare state or not, I don’t care. But the point is, yeah, that people don’t have to fear their livelihoods are going to get decimated. Like you talked about what happened in Detroit. That has to be built into the foundation of a decent society. And when we talk about mainstream economics, what is called labor market rigidity as a source of unemployment, because people are basically given too much, so they don’t really care about getting a job. So they’re unemployed.
But another way of using the term labor market rigidities, is just saying social protection. Foundations with a decent society. Because you’re a human being, basic things will be provided for you. And then yes, beyond that, we need to build, we need to innovate, we need to transform many things including the energy system. But the foundation of a welfare state, of a robust welfare state is critical. And I did work like 12 years ago in Sub-Saharan Africa. And even there I was arguing, of course it’s at a different standard. But let’s go there and let’s see how we can instruct them.
Rob Johnson:
Yeah. I know at INET, we’re doing a lot of work now on the transformation and development of Africa. We’ve got people like Mike Spence and Fatimah Denton and Rohinton Medhora, all of this. It’s a group in this commission on global economic transformation. But what we identified, and this is a group of 20 some people. It involves Danny Roderick and Joe Stiglitz and all kinds of folks. But the point of making Africa a focal point has to do with what we’ll call induced disruption. An equatorial region, subsistence farming will be destroyed by climate change. Automation, machine learning, meaning the East Asian development model, the past is not going to be prologue. But the key thing is, if you go to the International Office of Migration, which is now merged with the UN, the scale of envisioned population growth in Africa between now and 2070, is overpowering.
Their estimates are in the neighborhood of 5 billion people in Africa, in 2070. And without a development model, with the destruction of subsistence farming, which is the backbone of underdeveloped countries’ social stability, how are we going to stop from having what you might call the mother of all migrations? In the event that we don’t address these challenges. And a number of people are doing very interesting work, I imagine. I’d like to get more familiar with your work in the realm of Africa, because I think this is a critical part of humanity’s challenge.
Robert Pollin:
Oh, yeah. Well, I was lecturing at the African Development Bank two years ago, on, among other things, the green transformation for Sub Saharan Africa. And the people who were there were generally sub ministers, like from the Central Bank and the Treasury. So they weren’t energy specialists at all. But there are several countries that are energy exporters. And they were saying, “Okay, you want to destroy us, you want to make us more poor, because you don’t want us to use our fossil fuel assets.” And I said, “No, just give me a chance. Just listen and we can show how this green transformation can actually be really beneficial to your growth trajectory, including the fact, similar to India, that half of sub Saharan Africa, at least the rural areas, has no electricity.
So if we’re talking about moving away from subsistence farming, and moving people into rural farming, agricultural assistance kind of activities, you need to have electricity to make it go. And so I think that over the course of the week I was lecturing, I did manage to, I think at least, get a few people to think slightly differently. And it’s a long way to go. But we have to certainly deal with it. We have to be able to tell a story that is compelling at that level.
Rob Johnson:
Well, a couple of years ago, I did a conference in Beijing with a number of Africans and Chinese on the Chinese role in the development of Africa. Some of it had to do with technological possibilities, and some of it had to do with transportation systems. And I know there’s a lot of, what do I call it, yin and yang in all of it. There’s a lot of tensio, there’s a lot of suspicion and there’s a lot of potential. But in the aftermath of one of those meetings, I had a good fortune of meeting one of the very highest level of the Chinese leaders, it wasn’t Xi Jinping, but another individual. And we went through all of this.
He said to me, “Mr. Johnson, there is so much hostility towards China now. And I can understand that. There’s a fear of us, we’re large scale.” He made an analogy where he said, “We were like the thing that you pulled up with your tugboat in a development strategy, but we swamp the tugboat, because we were so large with the displacement of sectors and earnings all over the world.” And he said, “But we have no control over the trade adjustment assistance, or the kind of ways that Western economists talk about, you could have free trade and everybody be better off and nobody be worse off. It requires transfer payments. And your society is failing to do that and blaming us.” And he said, “And it will take on a rivalrous form when we get to Africa, as well. But there are a whole lot of people…” And he pointed me to a movie called Wolf Warrior 2, which was a story about someone who had been in the military and fell in love with a woman soldier, and that she was assassinated.
After he got out of the military, he went for his vengeance. But he discovered how Western colonialists were attacking Africa while he was looking for the killers of his loved one. And he ended up becoming almost the spiritual leader of African rebellion against the West. At one point, my friends in the film business told me that this was the third most watched film after one of the Star Wars movies and the Titanic, in the history of the world. Because so many people in China watched it-
Robert Pollin:
I never watched it.
Rob Johnson:
And the last piece, you can get it on iTunes or wherever. But the last part is they were reading in… well, it was in English subtitles, but they were reading in Chinese, from the statement in the document of the Chinese passport. And apparently, this was created during the time of Mao, about the purpose of your relationship with other developing countries. And reading from the passport was this patriotic thing. My understanding was, I have friends in the film business in China, because there’s a lot of high technology. I’ve done film projects there. And they said people would get up and sing the national anthem at the closing of the film. Music of the national anthem is not in the soundtrack, but they would just break out in the theaters. So there’s a fascinating challenge that’s global.
We’ve talked today about some of the challenge and some of the, we might call deficiencies in the American way of seeing. And I guess I’m curious what your final thoughts are, but I want to say one thing to you about you.
Robert Pollin:
Okay.
Rob Johnson:
There are all kinds of people who can do things with statistics and mathematics and they’re fancy. But a great economist is someone who picks the right problems that matter. And you and your institute have always done that.
Robert Pollin:
Thank you.
Rob Johnson:
In a way that I watch closely, as I try to understand what I should be doing with my team at INET. I think 80% of the challenge is asking the right questions. And you guys are really good at that, and your leadership is outstanding.
Robert Pollin:
I really appreciate you saying that. I teach a class actually, called applied econometrics, I have for 20 years. And that’s what I say in the first day. I said, “I’m not really that good of an econometrician. I don’t know all the techniques. I know some of the techniques, but I could learn the techniques when I need them. But the key thing is to ask the right questions.” Now, that’s what I want to instill in the students. But the thing I would say, you mentioned the trade adjustment assistance. And that was a great point that your Chinese official mentioned. That’s exactly the example that I hear when I talk to the union people in the fossil fuel industry and so forth. They call that burial insurance. They say, that’s the kind of bullshit that, when you talk about adjust transition, we hear trade adjustment assistance, which was pathetic, which was demeaning to us. And until we can get past that to say, okay, great adjustment, but it has to be so that people have another opportunity, another livelihood.
And it’s right in the Orthodox theory, yes, free trade is more efficient. So that it raises production possibility, it raises global income, but there are losers and winners. So the whole idea and the model, the simple mainstream model is winners compensate losers. But the losers really have to be compensated, you can’t just say that. So that’s, I think, critical to the whole green transformation. And that’s really interesting that your Chinese official recognized that as a major deficiency in the way we’ve done politics in this country.
Rob Johnson:
Well, I got very involved in the Detroit area in a lot of things. And I worked for six years in the United States Senate. I used to work with Don Regal and Carl Levin and Sander Levin and others on various projects. I wasn’t on their particular staff. But I go back there and I had a lunch in recent years, I think was about 2017. And it was at the Detroit Economics Club, I was just at one of the tables. A guy came up with me and he said, “You know, you’ve been doing a lot in China.” And I had just written something about it. And he said, “The problem we have is the Chinese came here, because they wanted to work with engineers. They wanted to learn precision machine tool practices. And they came here and tried to set up foreign direct investments. And the people in Washington killed it, because they said it was a national security risk. And so the Chinese pulled out their foreign direct investments and went home.”
And by the way, this wasn’t the central government. This is some provincial government that did a joint venture with Northwestern Detroit. And the guy looks at me, and this isn’t someone I know, but he knew who I was. And he said, “Mr. Johnson, all they ever do to Detroit in Washington is seduce and abandon. They seduce and abandon. We just had a vibrant reinvigoration working with these people and they took it away, and they didn’t offer us any project.” And that cynicism now is, in part, why Donald Trump won Michigan in 2016, in large part, because the city of Detroit stayed home.
Robert Pollin:
Stayed home, yeah.
Rob Johnson:
Relative to when Barack Obama beat Mitt Romney. [crosstalk 01:01:53] 22,000 people stayed home of registered voters, only 800,000 people live in that city. But the cynicism of the seduce and abandon is something we have to overcome-
Robert Pollin:
Absolutely-
Rob Johnson:
… as a society, right now. You’re hitting the nail on the head.
Robert Pollin:
Yeah, I mean, that’s why I say, of course, like I said, I was not a big Biden fan, but look, if he delivers on a serious stimulus and he delivers on a long term sustainable growth path. And Yellen is there, she knows what she’s doing. So we have some possibilities.
Rob Johnson:
Yeah. Well, there’s an analogy people always draw to Franklin Roosevelt. They talk about how he was kind of a silver spoon kid and all this stuff. But he had had some physical illness and polio, I believe. And somehow that crisis in his own personal life, grew some empathy. Well, I know that there have been crises in Joe Biden’s life. Whether he’s, how would I say, a visionary or not, we could all argue about, but he does convey an empathetic sense of pain and struggle and an awareness of that right now. Which I think is somewhat intentioned with the seduce and abandon slicksters. And there may be hope embedded in that.
Robert Pollin:
And let’s hope, let’s hope.
Rob Johnson:
Yeah. Well, thank you so much for spending the time with me-
Robert Pollin:
Great talking to you, Rob.
Rob Johnson:
It’s nice talking with you too. I hope from time to time, we can come back on this podcast and take the temperature of where we are, or yell at people when we’ve got to give them a nudge, or whatever, or celebrate them when they do great.
Robert Pollin:
Okay, well, it’s been great fun, and thanks for having me on.
Rob Johnson:
My pleasure. Best of luck to you. We’ll be watching your work and we’ll maybe do something together with Daniel Ellsberg and close the loop.
Robert Pollin:
Fun, that would be fun.
Rob Johnson:
Sounds good.
Rob Johnson:
Check out more from the Institute for New Economic Thinking at INETeconomics.org.
