BOOK REVIEW: THE NEW NEW DEAL and CLEANTECH NATION
THE NEW NEW DEAL by Michael Grunwald, Simon & Schuster, New York , 2012
CLEAN TECH NATION by Ron Pernick and Clint Wilder, Harper Business, New York, 2012
THE NEW NEW DEAL by Michael Grunwald and CLEAN TECH NATION by Ron Pernick and Clint Wilder provide the most coherent overview and in-depth analyses of global green trends and are importantly related. In 2012 the world embraced cleantech and accelerated the green transition from the 300-year fossil-fueled Industrial Era to the Solar Age I described in The Politics of the Solar Age (1981) after my six-year stint as a science policy wonk in Washington. In July 2012, 191 country members of the United Nations (UN) pledged in their Declaration at the RIO+20 summit to stop subsidizing fossil fuels and 19th and 20th century industries and shift to growing cleaner knowledge-rich economy sectors and jobs, which the UN calls THE GREEN NEW DEAL. Sadly, the USA, my beloved adopted country, was the fossilized laggard - still fighting a rearguard action in Washington while numerous polls confirm that U.S. citizens overwhelmingly support this shift to the 21st century green economy.
In THE NEW NEW DEAL, Michael Grunwald describes how U.S. President Obama, after less than two months in office, passed his American Recovery and Reinvestment Act (ARRA) and how this much-maligned "stimulus" not only turned the economy around, but laid the "New Foundation" he had promised for a 21st century economy. Grunwald's in-depth reporting reveals how ARRA really worked and reveals its unrecognized boost to the now rapidly growing green economy, in spite of all the obstacles. This untold story is riveting, with blow-by-blow accounts and interviews with the full cast of characters: the Obama team with its green energy visionaries installed at the lumbering Department of Energy (DOE); its squabbling economic advisors; the fossilized grandees in the Senate and anti-science nitpickers in the Congress as well as the gotcha media.
The Washington bureaucrats were rudely stampeded by Obama's urgent timelines to save the cratering U.S. economy losing almost 800,000 jobs a month with GDP falling by 9% as he took office in late January, 2009. Grunwald documents the deep passive resistance in Washington to the first African-American president, his tall brilliant lawyer first lady and this spectacular new family in the White House. The Republicans openly vowed to make Obama a one-term president and block his every legislative move. They would oppose his use of similar Keynesian stimulus to that used by George W. Bush and preceding presidents back to Franklin Delano Roosevelt. The 1930s New Deal of FDR had been bitterly fought by the economic fundamentalists at the University of Chicago, the neocons and the laissez faire academics and foundations that spread their message throughout Latin America.
Fast forward to the 2007-2008 crash of deregulated Wall Street, the collapse of Lehman, AIG, Fannie Mae, Freddie Mac and the rapidly-contracting domestic money supply which relies on private bank loan issuance and the securitization of their mortgages, car and credit card loans. As credit shrank and securitization markets dried up, economists were divided by their textbooks between Keynesian stimulus, tax cuts, lower interest rates versus laissez faire, austerity programs and "cleansing" of the over-leveraged bubble. The Bush administration's hated $700 billion TARP rescue was rammed through Congress by Treasury Secretary Hank Paulson, to their utter confusion and the fury of voters who asked "Where is MY bailout?" TARP was sold to Congress to help homeowners modify the terms of their underwater mortgages and prevent waves of foreclosures. Instead, with no strings attached, Paulson switched to direct bailouts of the biggest banks, on the textbook theory that his would "trickle down" to Main Street and the real economy. Only in 2012 did lawsuits by Bloomberg and pressure from over 300 Congress members force the Fed to reveal the additional over $16 trillion it had dished out its discount window at zero interest to big banks including many in Europe from 2007 to 2010. Bush-appointed Inspector General of TARP, Neil Barofsky surveyed all commitments of taxpayers funds by all government agencies, including the takeovers of Fannie, Freddie, GM, Chrysler, AIG, etc., totaling $23.7 trillion (see Bailout).
Grunwald portrays the Obama administration's travails over its $787 billion ARRA, miraculously enacted in February 2009 - far bigger than FDR's New Deal. He details the many studies showing how this derided "stimulus," supposed a failure, had actually reversed the free fall and succeeded in creating 2.5 million new private sector jobs in the face of the staggering losses of 700,000 state and local government jobs in textbook efforts to balance state's budgets. While the Fed realized that the domestic money supply was collapsing, Bernanke's textbook answer was feeding more free money to big banks, where instead of "tricking down" most went offshore to create asset bubbles in Brazil or bet on the euro or how soon EU sovereign bonds might default. We cannot untangle to what extent Obama's ARRA, the TARP, or the massive efforts at the Fed including the money-printing QEs 1, 2 and recently 3, saved the U.S. economy from a second depression. This focused for the first time on the politics of money-creation itself and credit-allocation, as the public saw daily on TVs their money rolling off printing presses.
The most interesting hidden story that Grunwald tells is the extent to which Obama's $787 billion ARRA including $90 billion for the green sectors and how start-ups leveraged another $100 million of private capital. Grunwald takes U.S. inside DOE and recounts how Nobelist physicist Steven Chu created ARPA-E turning this turgid bureaucracy into a hot-shot venture capital group and running rings around its Bush era loan guarantee program. The scientists and venture capitalists Chu recruited sacrificed their bigger salaries to join Chu and fostered the invention of electro-fuels, accelerated research augmenting that of their National Renewable Energy Lab and jump-starting dozens of now thriving companies in solar, wind, geothermal, alga-base biofuels and the deeper revolution in energy efficiency. This stellar performance was overshadowed by the Republicans in Congress witch-hunt over the Solyndra deal which was a small part of the less than 2% failure rate of Bush's original loan guarantee program and caused largely by the massive drop in prices of solar panels due to China's exports.
As one who voted for Obama and a private green investor, I too had been disappointed by his administration's performance. I opposed his focus on carbon cap and trade, since climate change requires a much broader approach to the problem: by phasing out subsidies for fossil fuels and focusing more on the solutions now finally espoused by those 191 countries, the OECD, the World Bank and the G-20 in moving to direct investment in growing the green economies to scale. I also faulted Treasury Secretary Timothy Geithner for focusing on banking and finance rather than understanding that housing and the foreclosure tsunami were in fact, just as important macroeconomic issues. Yet after reading Grunwald's THE NEW NEW DEAL, I have a deeper understanding of the multiple sources of opposition Obama faced: the entrenched power of Wall Street, the fossil fuel and nuclear lobbies, the medical -industrial complex, big agribusiness - all fighting to maintain their positions and subsidies.
Reading CLEAN TECH NATION, subtitled "How the USA Can Lead in the New Global Economy" by Ron Pernick and Clint Wilder buttressed my new view of the Obama performance and gave me hope for the U.S. future in spite of the political gridlock and the avalanche of fossil-fuel based money pouring into Republican coffers since the Supreme Court decision of 2010. The politics of the transition to the Solar Age is heating up, but Pernick and Wilder tell another hidden story: the Green New Deal is winning! All this evidence the authors cite is largely under-reported by the mainstream media whose ad revenues still come from the fossilized sectors hyping "clean coal" and "safe, clean nuclear power." This inevitable media bias was the reason I founded Ethical Markets Media (USA and Brazil) in 2004 as I despaired of citizens ever getting coherent coverage of the green transition I had been predicting since 1981. Thus, we produced TV shows on "Growing the Green Economy"; "Green Building and Design"; "Socially Responsible Investing"; "Redefining Success" and our current series on "Transforming Finance" to illuminate not only the green transition underway worldwide since 2007, but also the economics paradigm shift underlying this transition and the new scorecards of progress beyond GDP.
Pernick and Wilder's deep knowledge of these growing green sectors in the USA and worldwide comes from their research and from their firm Clean Edge, a leader for over a decade tracking the research, technologies, start-ups, venture capital firms, banks, and the same beneficial effects of governments' standard-setting and Obama's ARRA documented by Grunwald. Even with my professional focus on green technologies since my 6 years in Washington advising the U.S. Office of Technology Assessment, the National Academy of Engineering and the National Science Foundation, I was surprised by Pernick and Wilder's in-depth look at the robustness and innovation of this green transition in the USA. Clean Tech Nation is literally a goldmine of un-reported progress in scaling solar, wind, geothermal and other green energy sources, the full contribution of efficiency, not only in buildings and infrastructure, but in every sector of our wasteful economy. The authors see the shift to sustainability in redesigning industrial processes, housing, transportation, cities, as huge business opportunities and next-wave job producers -- as we do at Ethical Markets Media. They show how carbon is making more efficient cement, and used as a feedstock for polymers and coatings; how waste streams are converted into resources, ZEB buildings (zero energy) producing all they need and even feeding grids. They map the shift to local distributed energy through micro-grids that are smarter and residential houses as batteries for recharging electric vehicles and utilities' load-balancing smoothed using solar, wind and natural gas for peaking. Clearly it's time to short U.S. coal and nuclear power while, as the authors note, monitoring the fracking of natural gas for threats to water supplies since it will replace much coal and serve as a bridge to the all-renewables future as early as 2030.
For green investors like me and our audience at Ethical Markets, this book will provide new avenues of exploration as we look for new winners for our battered portfolios. Pernick and Wilder also provide a 7-point action plan for public-private partnerships, including expanding REITs and MLPs (Master Limited Partnerships) to allow for green renewables; SolarTech's standards for contracts and financing, as well as green banks and a Smart Infrastructure Bank (focused on energy efficiency and renewables rather than more highways) similar to Obama's proposal.
Sensible standards and fiscal policies to provide certainty can also allow pension funds to access these new green investments, along with the green bonds already issued by the World Bank, and promoted by the Climate Bonds Initiative and the Green Victory Bonds of Green America. Meanwhile, all institutional investors led by those committed to low-carbon development such as the UN-Principles of Responsible Investment with $30 trillion AUM, can shift at least 10% of their assets away from their textbook formulas, now in risky hedge funds, private equity, commodity ETFs, even HFT in the desperate search for alpha. They can move to direct investments in growing green sector companies we cover in our Green Transition Scoreboard as we advise. Even further, Mercer International's reports now urge these institutional funds to move at least 40% of their assets into green sectors (half to hedge risks and half to capitalize on the new opportunities) so well described in Clean Tech Nation. Both books are valuable guides to the next decade, laying out the many viable options for growing knowledge-based cleantech societies in the USA and worldwide.
What these authors overlook is the deeper problem faced by debt-based money systems and how levels of un-repayable debt in the USA, Europe, Japan and other countries have historically led to restructuring and defaults over the past centuries as documented by Carmen Reinhart and Kenneth Rogoff in This Time It's Different (2009). Yes, scaling up the global Green New Deal will require at least $1 trillion of private investment annually until 2020, and the Green Transition Scoreboard® shows the world is on the right track. Both books show that government standard setting, reforms to tax codes, markets and metrics-based economic paradigm shifts are needed as well. Monetary reformers in the USA (www.monetary.org, The Money Fix), Europe (Positive Money, Green Money Working Group, Money and Sustainability) are now pointing to needed re-design of money-creation and credit-allocation and haircuts needed to write-down the mountains of un-repayable debts choking these economies. Beyond left and right and economics from laissez faire Austrians to Keynesians, economic policies based on such theory-induced blindness must accept that money is not wealth but the accounting metric we use to track the real economies of human energy, talent, ingenuity in using Nature's wealth and resources. Our future lies beyond digging up the earth and, instead, locking up and harvesting ever more efficiently than plants the daily free photons showering our planet from the sun.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.