The world economy has had itself a start to the week, and not in a good way. The creep of COVID-19 across the world has revealed the interconnected nature of just about everything, particularly global markets.
An oil price war triggered a massive stock market crash around the world. The S&P 500 contracted more than 7 percent in response, continuing a monthlong dip and triggering a 15-minute timeout because apparently traders are like kindergarteners. Other markets experienced similar drops. If you’ve got stonks or a 401(k), this is bad news. If you want to transition away from fossil fuels and build a climate-resilient, fair economy, well, this also isn’t exactly good news. But there is a major opportunity facing governments as they try to deal with the coronavirus fallout.
Allow me to explain, but with the caveat that a global pandemic is horrible, full stop. People are suffering, and the threat of this becoming much worse before it gets better is very real. The resultant drops in oil use and carbon emissions or the loss of oil jobs we’re about to talk about may be a relief to the planet, but they come at the very high cost of human life.
The threat of things getting worse is precisely what could drive a recession. The drop in oil prices is making it suddenly unprofitable to frack for oil and gas in places like Bakken Shale in Montana and North Dakota or Eagle Ford in Texas. That puts workers at risk of losing their jobs, and it also causes the U.S. economy as a whole to wobble a little closer to recession territory because we’ve become so dependent on the oil industry. The Wall Street Journal notes that up to half of public fracking companies could go belly-up if oil prices stay this low. There’s also a number of other issues, like the industry taking on heavy debt, that I won’t get into, but you should read this excellent Slate summary if you want an overview.
The Trump administration has responded by reportedly considering a bailout for these companies. This is, to put it politely, absolutely fucking ridiculous (which of course means the administration will almost certainly move forward on it). It encourages risky behavior by CEOs and props up an industry that has done an amazing service to everyday Americans but needs to be wound down. A bailout would put that off and make the actual crash much harder at the end, especially since fossil fuel companies have a pretty dismal record of actually caring for workers when the bottom drops out (See: coal).
“We know capitalism is bad at managed declines,” Mark Paul, an economist at the New College of Florida and senior fellow at Data for Progress, told Earther. “Managed declines don’t quite exist in the market system, and so the question is, who’s going to stand in and protect these workers?”
The answer is clearly not the Trump administration. But it should, in theory, be a potential Democratic president, should one win the White House in November. Whether Trump bails out the fracking industry or not, now is an unprecedented opportunity to help ensure a just transition away from oil and usher in a prosperous clean energy economy. Because oil prices aren’t the only thing dropping. Treasury bond yields—basically an avenue for the government to borrow money—have cratered to historic lows. These are safe assets investors turn to in times of market chaos like the current one.
Ten-year treasury yields are currently below 0.5 percent. If you aren’t market-savvy, I feel you. But suffice to say, this opens up a major avenue for the U.S. government to borrow a crapton of money on the cheap.
“The federal interest rates are so low that they’re even potentially lower than the rate of inflation, meaning that people are paying us money for the privilege of us using their money,” Costa Samaras, the director of Carnegie Mellon’s Center for Engineering and Resilience for Climate Adaptation, told Earther.
So you have a lot of unemployed skilled workers, the possibility to borrow money for better than free, 10 years to cut carbon emissions about 75 percent, and a world where basically everything runs on fossil fuels. In response to the crisis spurred by COVID-19, some governments will almost certainly bushwhack further down the neoliberal pathway of austerity outlined in Naomi Klein’s The Shock Doctrine. The far-right Brazilian government, for example, is already calling for more “reforms” on top of the ones passed last year that include raising the retirement age.
But a progressive president (or one looking to extend an olive branch, cough, cough, Joe Biden) could well turn away from shock doctrine tactics and toward something that empowers people. Call it the tranquility doctrine (sorry, still working on that one). The government has a once-in-a-generation chance to borrow a massive amount of money and invest it into low carbon everything.
“This is a no-brainer that we need to reinvest in infrastructure, and then it has to be low-carbon,” Samaras said, noting the U.S. has a $2 trillion infrastructure to-do list.
Both he and Paul advocated for a shovel-ready projects like fixing the backlog on the to do list. Samaras also pointed to pouring money into clean energy fields that map well with oil workers’ skills, like geothermal power plants, or experimental projects like carbon capture that will be needed by midcentury to keep the world from heating up catastrophically.
“Basically you have to have choose the best bang for the buck as much as you can,” Samaras said. “And if the best opportunity is not there, look for the next best one. And [if] that one’s not there, look at the next one after that.”
Those might include projects that are less sexy than capturing carbon from the air, but that are nevertheless vital to preserving a habitable planet. That could include a cash-for-clunkers-type program for internal combustion engines, expanding public transit funding, green infrastructure that captures stormwater, and a government work program modeled after the New Deal’s Civilian Conservation Corps (which, it should be noted, is wildly popular with voters). Paul also called for investing in energy efficiency, particularly for schools and low-income communities.
“That’s [a] really important type of fiscal stimulus, primarily because it’s relatively labor-intensive, so you’re going to get a large employment effect for every dollar you spend on the program,” he said. “And we know that energy efficiency is some of the best low-hanging fruit out there in terms of reduced emissions per dollar spent.”
Like I said, not sexy. But the alternative is living in a bifurcated society of the uber-rich and everyone else against the backdrop of a Mad Max hellscape, so let’s hear it for efficient sliding glass doors!
If a progressive president really wanted to go hard on climate, there’s also no better time than now to nationalize the fossil fuel industry, since it’s fast becoming a distressed asset and, again, the rate of borrowing money is so cheap. If it sounds like a bridge too far, consider airport security getting nationalized after September 11. The history of nationalization goes back further than that; heck, it’s as American as apple pie.
“During World War II, the government nationalized dozens of industries,” Paul said. “And not only did they nationalize dozens of industries, but they also created many industries simply out of thin air that didn’t exist to meet the needs of the government at the time. So I think there are strong precedents for nationalization here in the United States.”
All of this will require borrowing money, which Paul said is perfectly fine. In a blog post for Data for Progress, he and Julian Brave NoiseCat lay out why “But how would you pay for this???” is a false premise. Deficit spending can yield major dividends, especially in the face of a crisis like a coronavirus-driven recession or one climate change could bring if we let things get out of hand.
The Green New Deal has never been a political pipe dream, just a major federal project that requires political will and money. The second part has never been easier to come by. TBD on the first, but Democrats would be wise to start mustering some up soon.