Unpacking the Just Transition (Part Two): Debating the just transition between recovery and reconstruction

Unpacking the Just Transition (Part Two): Debating the just transition between recovery and reconstruction We are entering an era of decarbonisation where those stuck in the old fossil economy will find themselves in civilisational backwaters from which they may not return. The flurry of new technologies in what has been called the rise of ‘electrostates’ cannot be dismissed – they will have geopolitical significance for all of us. Saliem Fakir Follow Save More
Saliem Fakir is Executive Director of the African Climate Change Foundation
Part Two in a three-part series. Read Part One here .
*“What Jacob Burckhardt said of ‘great men’ most Americans might well say of their elite: ‘They are all that we are not.’” (C Wright Mills, *The Power Elite*)*
*“People who know only economics do not know much about economics.” (John Kay and Mervyn King, *Radical Uncertainty*)*
Among environmental groups, there is an eagerness to insert green recovery plans (like the Build Back Better campaign, which rings hollow in countries with high inequality) into the phase of economic collapse post Covid-19, which in the case of Africa already looks like a long, bleak and unpromising recession.
Transitions can effect change – they change the substance, but they often keep the form. They may well preserve and deepen the crisis of structural inequality and give the elites something new to spend on. Or they may well deepen the social crisis so much that the form cannot survive in its old structure. In many countries, climate transitions, post-Covid-19, are at the fork in the road – between tinkering on the edges or shifting the entire base of the form.
The recent National Income Dynamics Study (NIDS, 2020) by University of Cape Town economists reveals the way structural inequality manifests across racial and gender dimensions in South Africa. The authors described the post-Covid-19 period of job losses as shocking and reminiscent of postwar conditions. Between 2009 and 2019 about 2.4 million new jobs were created as the economy grew. Come Covid-19, a decade of jobs created are all but lost – the figure is stark and recent estimates suggest three million jobs will have been lost by the end of 2020.
If not an economic bloodbath, then at least a war on the poor.
Youth unemployment is estimated to be about 70%. If you are rural, poor, female and unskilled your chances of being employed are slim. If you are white and skilled chances are that you will share such a privilege with 79% of other whites who can work from home. As the post-Covid phase has shown, external shocks have a way of unseating the illusion of a better life simply because you earn income today, for as the pandemic shows, you can end up with an empty hand tomorrow and the future no longer exists.
Reconstruction and recovery are not new phenomena – even those least regarded as leftist governments have used crises to move the whole of the elite establishment into structural reforms following the effects of external shock. Extreme crisis often trumps ideology – until things settle, of course.
Franklin Roosevelt introduced the New Deal (from which the Green New Deal draws its inspiration) with significant Keynesian-inspired spend and social welfare programmes that lifted millions of Americans out of poverty. There was no austerity: the government just let debt rise until the abyss was over.
The new deal had three key elements: relief for the poor and unemployed; an economic recovery stimulus to bring the economy back to its normal state; and restrictions on finance such as the passing of the Glass-Steagall Act that restricted banks from engaging in speculative investments. The other big achievement was the creation of the Civilian Conservation Corps to create rural employment and deal with land degradation.
The conservative politician William Beveridge, having seen the devastation of the post-World War 2 period in the UK, was able to push for a review of the economic situation in Britain that led to the Beveridge Report and significant social reforms. The report was undergirded by tackling the five giants of the reconstruction programme: “want, disease, ignorance, squalor and idleness.”
These five giants could not be a better description of our times and which too must be slain today if any just transition recovery or reconstruction programme is to work. Before we miss the picture here, it is important to note that both the New Deal and Beveridge Report moved their world to a more caring and inclusive economic deal by ensuring that the injection of new government spend (Keynesian measures) was accompanied by a lasting safety net.
In essence, Europe and China are in the throes of arranging a new civilisational model, but they are not necessarily doing it all for all of us. Their venture into this new world has not only just-transition implications for themselves, but at once we have this other problem: what their green endeavours mean for the rest of the world.
More importantly, they covered system-wide change and did not try to solve one sector’s problem as if it was divorced from the rest.
For Beveridge, the National Health Insurance (NHI) remains one of the most enduring legacies (even though what has happened to the NHI after the Thatcher and Blair periods may be turning Beveridge in his grave). The safety net – a wide suite of social protections including income supplements, health insurance and free public education – gave a short-term lift to poor households and improved household savings and income in the longer term. If anything, democracies can offer, as the dividend from political freedom, the freedom from the dominance of unjust economic deals and despairing human wants.
Those countries that have long built a strong social welfare system have had the most inclusive measures for dealing with external shocks – they have built around pure income measures of success an added layer of other social protections that have allowed their citizens to rebound faster and more effectively as a result of Covid-19.
The Covid-19 crisis has also provided an opportunity to change the trajectory of the future.
If anything, Europe is engineering one of the biggest experiments in future-proofing its economies through the Green Deal (GD). The green component is part of a broader stimulus package and is undergirded by a firm and well-structured decarbonisation policy aimed at reaching net zero by 2050.
The GD is meant to drive a transition and is accompanied by a sizeable Just Transition Fund that is now hardwired into the broader European Union recovery package. The GD is a $1-trillion investment plan for the next 10 years aimed at reducing emissions by 55% by 2030. It is the most systematic approach to extracting its production and consumption from an old energy system into the new.
Not to be left out in the cold of the new civilisational push, China too seems to be heading that way, with announcements recently by President Xi Jinping that the country seeks to peak coal consumption by 2030 and reach net-zero carbon emissions by 2060. Other advanced economies are following suit, even if driven by a mimetic impulse.
In essence, Europe and China are in the throes of arranging a new civilisational model, but they are not necessarily doing it all for all of us. Their venture into this new world has not only just-transition implications for themselves, but at once we have this other problem: what their green endeavours mean for the rest of the world.
African trade negotiators are wary that the EU’s Green Deal will use new sustainability standards as forms of non-tariff barriers and carbon border tax adjustments to limit not only the flow of goods that threaten their own sectors but also force those countries to adjust to these new measures as they have to undertake costly transitions without having the requested resources, institutions and capabilities to do so.
We are entering a new era of systemic decarbonisation where those stuck in the old fossil economy will find themselves in civilisational backwaters from which they may never return. The flurry of new technologies, in what a recent Foreign Affairs article called the rise of “electrostates’’, cannot be dismissed for the geopolitical significance they will have on the rest of us.
They range from where valuable strategic minerals are secured, the development of global research and development, the availability of finance (given that most western development finance institutions are no longer keen to fund coal), to critical industrial intellectual property in these new technologies and the way in which regional trade agreements are structured. China’s own Green Deal (even if it has not labelled it as such) envisages expanding the scope of nuclear power (specifically small modular reactors), aimed also at exporting the technology as countries develop more electro-centric forms of energy in transport and other sectors.
If they climb the new technology wave they will drive it, too, and soon we will be drawn into this vortex – by the scruff of our necks or willingly.
You may well have green apartheid or what in turn could be the Green Deal Consensus – like the Washington and Beijing Consensus.
Finally, we must not lose sight of an important shift in the globe in the past 40 years: the role of finance capital. A development in which finance capital dominates production capital, as noted by historians such as the late David Graeber and the economist Mariana Mazzucato. Graeber and Mazzucato were echoing the observations of the Austrian thinker Rudolf Hilferding (he was also finance minister during the Weimar Republic) on what international finance was all about in his seminal work *Finance Capital *(1920).
Hilferding’s main contention was that extensive liberalisation of finance capital is not only a source of instability (given greater depth of analysis by the economist Hyman Minsky) but, profoundly, the way capital works is that it seeks to own nothing physical *per se,* yet lays claim to so many things as its own, over many geographies unhindered by boundaries or conscience – it is just an insatiable Faustian beast.
The key to a Green Deal civilisation, it would seem, is the need for an enlightened relation between monetary policy and the fiscal space governments are given and in which finance capital is increasingly directed not only to consumption, but to the productive base. An essential element of both China and the EU’s Green Deal is the increasing presence of the state – perhaps with different temperaments and logic, with China far more state-centric. DM