Is Obama’s Economic Team Really Ready to ‘Green’ the Economy?

3 July 2009 :: J.E. Robertson

Larry Summers and Timothy Geithner have a few things in common, among them that they know the rigors of market economics, the ups and the downs, the arguments for and against regulation. They have both seen duty at high levels during good times and bad. But neither of them has a strong record of pushing to include real ecological math in the standard approach to judging value or resource availability across the economy broadly.

No one can question their experience or their knowledge, and they both are known for a fierce independent streak, but they are also both tied to the period of massive deregulation that led to the current crisis, and fair observers have to ask: do they really understand the need to feed green thinking into the whole economic outlook? Of course, it is only in the last few years that economists became aware of the need to include ecological calculations in the valuation of economic trends and assets.

One wonders if either has a flexible enough view of the marketplace to now include the complex and maddening array of deep resonance relationships that coalesce into ecology in a new model of economic growth and prosperity. To some extent, this has been ordered by their boss, and the public has been sympathetic and Congress is working to make sure that energy-related legislation is green enough, but really looking at the world through a new greener lens, from the perch atop the US Treasury Dept. is another thing altogether.

Because this has not been required in the job description before, because there is really no precedent, no record to go on, it is a must-learn, must-do task of the current and future Treasury secretaries which will demand of Mr. Geithner an astonishing amount of intuition and market savvy. Some make an argument about Timothy Geithner, however, that might explain how he will outperform anyone else who might have taken the job: he knows China.

Geithner not only knows China, he speaks Mandarin and has already been involved, in the early months of the Obama administration, in very high-level, even contentious negotiations with his counterparts in China, regarding details of the increasingly symbiotic economic relationship between the two nations. It could be that Geithner will simply follow the lead of those who know ecological economics, while using his depth of experience in the study of China to find artful ways to incentivize China’s adoption of greener behavior.

How could a Treasury secretary do this? The answer to that question lies partly in the daily exchanges between himself and Pres. Obama. It is a pressure game that must be invented. It is a trial-and-error exercise of the mind that cannot be allowed too much room for error. Geithner could succeed where Obama has succeeded at home, in demonstrating how effective it can be both politically and economically to work major green improvements to the economy into economic recovery legislation and needed regulatory reforms.

Shai Agassi, the founder of Better Place, a company that seeks to build a global network of electric car-battery switch-out stations, says China is the EV “tipping point”. If electric vehicles become the standard there, then the industrial momentum to produce them on a massive enough scale to completely overhaul the global auto industry will follow. China and the US could collaborate in a very fruitful effort to globalize the EV industry and speed the overhaul of the global automotive fueling infrastructure.

China could also mimic the desert energy plan being undertaken in the Sahara, where 400 billion € in new investment will be poured into building the world’s largest solar farm complex in the north African desert, for energy to be exported to Europe. China is seeing its western deserts expand at a worrying rate, and environmental degradation is rife across the country. An effective means of combatting sooty pollution that sometimes blankets China’s largest cities would be to build solar and wind farms in the no longer arable deserts.

Some pure market theorists would balk at the idea that the US Treasury secretary would be involved in something so specific regarding the planning of a Communist-run planned economy, but it would be foolish to miss the opportunity. With Geithner attuned to how China works and to how best to communicate in that environment, and with the urgent need to spur China to climate-responsible action, intense economic negotiations and strategy sessions that are already ongoing may offer an incomparable opportunity to make the needed transition to a world more sustainable and ecologically aware.

If Geithner were to undertake such an initiative and be successful, China could be brought to the table on major climate treaty negotiations; its industrial production capacity could be directed with great speed to producing the necessary tools and technologies that would help spread the renewable energy revolution across Asia, and the boom-time associated with the arrival of whole new industries could be spread across the two economies on which the world is now most dependent.

A direct benefit to the US would be the lowering of the costs of production for making the transition to a renewables-based energy economy, as China ramped up production of the necessary ingredients. Many other bold but convincing ways of integrating green thinking into the top level economic decisions made by US officials await debate and/or adoption, and the agenda laid out by Pres. Obama, to reform and rebuild the nation’s energy infrastructure and curb the negative impact on global climate, will require some of them.

Of vital importance, also, is the tempting and widely accepted attitude that long-term investment is not the best or most competitive behavior. Such reasoning has repeatedly undermined the transition to clean energy because the relatively easy money associated with the vibrant and volatile markets for carbon-based fuels is seen as a better business bet than the long-term economic or even societal benefits that might emerge from environmentally friendly choices that cost more in the short term.

Pres. Obama has said “we cannot rebuild this economy on the same pile of sand” and has given ample signs of understanding the market paradoxes inherent in the pile-of-sand problem, the valuing of immediate capital gains over the real generation of sustainable value. So we should expect his top economic officials will see the pile-of-sand problem as a focal point of steering a broad economic recovery that is genuinely sustainable as it relates to the value-base that makes the structure itself sound.

So, are Geithner and Summers and the rest of the top-tier economic team fully in the know on these issues, or is there a steep learning curve? Have they acquired adequate information on the human economic realm being just a small part of the ecological value-base? How do we work such wisdom into policy-making? There can’t be too many mistakes made in integrating traditional thinking on market dynamics, supply and demand and free enterprise, with a new, deeper understanding of the pervasive value of finite resources, or of renewable ones. These officials will be making key choices that decide how well and how smoothly we stage that convergence.

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