The Whole Field

In recent years, an intense debate has unfolded over the policy and politics of the green transition.¹ But—after a brief cresting—the political moment that gave new life to the topic appears to be receding. The Biden agenda has lost momentum, inflation has moved center stage, and the near-term prospects for Green New Deal-style legislation have faded. Neverthless, the Covid-19 pandemic fractured long-held economic dogma, and just as the political economy of a green transition appears more challenging than ever, the policy debate is flourishing. The time is therefore right for reflecting on the strategic means and political prospects for the green transformation.

Concerning means, planning will be essential. The focus, energy, and uncertainty-reduction of well-executed planning are essential to meet the challenge before us, given the transition’s necessarily sweeping scope and speed. The alternatives—relying either on independent local decision-making or on market-based coordination—range from infeasible to intolerably risky.

Concerning politics, the situation is knotty but not hopeless. It is no longer obvious that the Green New Deal framework—which ties inequality with climate policy—will offer success. In the unequal societies we inhabit, this strategy generates as many oppositional coalitions as it does supporters. Furthermore, given their track record and feeble plans, we cannot place hope in preemptive action by rationally long-termist elites. Still, as in nature, there are tipping points in politics. It is to these that we must look to generate the political will required for transition planning.

Designing the transformation

Legitimate debate on the future of sustainability is not about the ends—bringing human life on earth in accordance with the planetary boundaries—but about the means. What, then, is to be done?²

The answer is simple enough: reduce net greenhouse gas emissions to zero, re-wild significant parts of the earth, phase down the consumption of animal proteins, and convert material use to a circular economy. But the execution is fiendishly difficult: closing all coal mines and oil and gas wells is an obvious priority,³ but in which order, when and where? What about factories and powerplants? Do we begin with the Ford car factory in Cologne, Germany; the state-of-the-art West County gas powerplant in Palm Beach, Florida; the integrated steel works at Port Talbot, Wales; or the pork slaughterhouses near Sioux Falls, South Dakota? Should they be shut down or converted? On what timelines, and to what use? What should the workers of these plants do? What areas of land should be taken out of agriculture or other human use and re-wilded? How should these adjustments be shared between the Global North and the Global South?

Just as importantly: what alternatives should be invested in? How shall the massive needs of shelter, food, mobility, healthcare, and education, be provided for in a sustainable manner? From which production sites, using which raw materials and technologies?

Quickly, the practical details of the transformation converge around an age-old question: how to coordinate a complex division of labor. They do so under new circumstances but facing the same challenges: what should be produced, by whom, and who should get it? Who decides this, according to which guidelines and principles, and accountable how and to whom? How are the choices of each made to fit with the choices of all?

Responses to these questions can be divided broadly into three categories: independent local decision-making, market-based coordination, and planning.⁴ A study of their respective strengths and weaknesses shows that, given the task before us, planning is key.

The limits of local decision-making

The first category, independent local decision-making, has obvious resonances with the history of the environmental movement.⁵ However, as a coordination technique, local decision-making is inherently limited in scope: truly scaling production down to the local level would likely involve foreswearing the basic amenities of modern life, rendering it politically infeasible. If attempts are made to preserve extensive production networks, localism either fails at coordinating them, or converges on market or planned coordination.⁶

Markets to the rescue?

Given the trajectory of economic experiments throughout the twentieth century, market coordination is the favored means among powerful interest groups across the political spectrum. And indeed, while market coordination has significant flaws, it is a powerful social technology.

How does it work in practice? A good description is given in Hayek’s classic “The Use of Knowledge in Society”:

Assume that somewhere in the world a new opportunity for the use of some raw material, say tin, has arisen, or that one of the sources of supply of tin has been eliminated. It does not matter for our purpose—and it is very significant that it does not matter—which of these two causes has made tin more scarce. All that the users of tin need to know is that […] [because tin prices have increased] in consequence they must economize tin. […] the effect will rapidly spread throughout the whole economic system and influence not only all the uses of tin, but also those of its substitutes and the substitutes of these substitutes, the supply of all things made of tin, and their substitutes, and so on.⁷

In contrast to planning, Hayek argued, market coordination requires no one to “survey the whole field.” Instead, markets weave together many “limited individual fields of vision” via price signals, like the increase in the cost of tin. In this manner, markets both mobilize the tacit and local knowledge dispersed among different people and coordinate the various actions thus taken, without the need for any overarching plan or vision.

How can this mechanism be used to coordinate the sustainability transition? The default option is externality pricing. To generate this new signal, the problem in question—whether emissions, land use, phosphorus or nitrogen use—is quantified, i.e. firms are forced to record their CO2 emissions, their nitrogen use, their plastic waste, and so on. Once quantified, a fee is attached to each increment, either with a tax or a cap-and-trade scheme. Prices change, and the Hayekian mechanism drives corresponding changes in the division of labor.

Alternatively, direct upstream action—bans on fossil fuel extraction and land use—can be decreed, and prices left to adjust to the changed supply landscape.

With prices thus amended, everything else proceeds as before: the same algorithm of market competition, but working with updated data. Through first and second-round price effects, the new prices will percolate through the economic system, so that adjustments happen not just in the production and use of fossil fuels, but also in their “substitutes and the substitutes of these substitutes, the supply of all things [related with fossil fuels], and their substitutes, and so on.” This is the power of the market mechanism, particularly when coupled with clear bans and mandates.

While powerful, three problems emerge with market coordination in the case of the sustainability transition: knowledge, caution, and path dependency. These problems make an excessive reliance on market mechanisms risky—indeed too risky for markets to act as the sole or main tool to coordinate the transition.

The problem of knowledge arises as follows. In calm and stable times, the commercial success of a new technology or industry is a reliable signal for investment. Take the case of mobile phones and their network infrastructure. Despite a number of market failures,⁸ prices and profits communicated knowledge about productivity and prosperity, attracting capital towards the rising industry. Networks were built out (at least in densely populated areas), and a Schumpeterian process of creative destruction took place, changing the technological profile of the communications sector.

When prices change rapidly, however, the Schumpeterian process can lose its compass. In a context of pervasive uncertainty, neither firms nor financial investors will know which technologies and business models will be successful tomorrow. While this does not necessarily kill investment, it tends to make it haphazard: just like the Keynesian beauty contest,⁹ financial investments can become profitable solely by enough investors believing them to be a good investment. Bubbles and self-fulfilling prophecies take over,¹⁰ skewing the reliability of the market logic. They may scale up (or shut down) the right technologies and industries—or the wrong ones.¹¹

In volatile times, investment markets thus lose their bearings: they communicate expectations—capricious and subject to whims and fashions—instead of knowledge. Even when adjusted with externality pricing, they can guide economic activity in the wrong direction.

The problem of caution, too, arises from volatility and uncertainty. Where firms are unsure about the competitive playing field of the future, they often respond by reducing real investment, preferring liquid over fixed assets and dividend pay-outs or stock buybacks over the financing of new ventures. Even where the problem of knowledge is avoided, and externality pricing or upstream bans change prices as intended, causing only sustainable ventures to emerge as profitable, a climate of caution may throttle capital flows in their direction. Instead, investors may well prefer government bonds, blue chip equities, real estate, and other apparently low-risk assets. This caution—liquidity preference, in Keynes’ vocabulary—slows down the transition. New sustainability ventures would be forced to rely on slowly accumulating internally-generated financing, while incumbent firms, capable of borrowing against the collateral of their existing assets, would continue to receive funding on overly generous terms.

A third problem, the problem of path dependency, further lowers the effectiveness of markets and prices for coordinating a rapid green transition: lock-in effects predispose firms towards marginal change, away from systemic change.¹² When price pressures start to bite, a coal company, for example, is likely to respond first by searching for efficiencies in its operations, cutting staff, investing in the latest generation of familiar machinery, and asking for rebates from its suppliers and subsidies from the state, while continuing to mine coal. It is unlikely that the firm will respond by quickly abandoning its core business to transition to renewables or leave the energy sector altogether. Price pressures must reach high levels—at which point both their political feasibility¹³ and their information content¹⁴ becomes questionable—for well-travelled paths to be abandoned.¹⁵

This problem of path dependency can be overcome through directly banning fossil fuel production and consumption. But this only pushes back the problem by one step. It would be both irresponsible and politically suicidal to decree a ban tomorrow: empty groceries and pharmacies, black-outs and brown-outs, and freezing homes and schools would unsettle society at large and topple the government of the day. Decreeing a future ban on fossil fuels in ten, twenty or thirty years without a plan for their replacement, on the other hand, would be very similar to externality pricing: the essential decision-making—what to shut down and when, what to scale up and where—would be left to a market system that is not very good at coordinating rapid systemic change in a context of uncertainty.

The urgency of the sustainability transition puts market coordination in a bind: adjust prices gradually, to preserve the functioning of market mechanisms, but risk a tardy transformation because of path dependency; or adjust prices aggressively to speed up the transformation, but risk market mechanisms malfunctioning because of the problems of knowledge and caution that emerge in markets operating under deep uncertainty.

Planning: who, how, and for what?

This leads us to the third family of coordination mechanisms: planning. 

Planning—the setting of economic priorities via non-market means—must be distinguished from a command economy. A command economy, in contrast to planning, is one particular way of injecting plans into the division of labor, namely with command and control measures.¹⁶ As France, Sweden, Japan and other mixed economies demonstrated in the wake of WWII, there are many other ways to introduced plans into an economy: from direct public investment, via taxes and subsidies, to banking regulation, credit guidance, and foreign exchange allocation, to name but a few.¹⁷ The advantage of planning is its ability to focus resources, create and channel energies, and reduce uncertainty. Pierre Massé, former General Commissioner of Planning in France, called it l’anti-hasard.¹⁸ 

When the Monnet Plan was introduced in France in 1946, its goal was to reach the nation’s pre-war production level by 1948, and then surpass it by 50 percent by 1950. Under the slogan “modernization or decadence,” it prioritized investment over consumption, allocated scarce US dollar reserves to their most important uses, and channeled resources into sectors identified as crucial for restarting and growing France’s economy. “Bottlenecks were broken during the early days,”¹⁹ and while not all targets were reached, the plan provided “discipline, direction, vision, confidence, and hope.”²⁰

The Monnet Plan navigated a situation not entirely unlike our own. In the postwar moment, both domestic funds and foreign exchange were scarce. Since dollars and francs were not freely exchangeable at the time, they had to be budgeted for separately, acting as a double budget constraint. Today, we again face a double budget constraint: economic and ecological.

The Monnet Plan navigated this tightly binding double constraint through prioritization. Instead of attempting to plan for all sectors, the Plan focused on six strategic industries: electricity, steel, coal mining, transport, cement, and agricultural machinery.²¹ The lesson for today is obvious. Focus on the five sectors driving climate change, land use, and biodiversity loss today: energy, transport, industry,²² housing, and agriculture.

The process of sectoral planning was led by a core staff in the Commissariat général du Plan, numbering around 100. This core staff cooperated with a number of so-called modernization commissions, composed of representatives from the state, employers, and trade unions, which tackled either specific sectors or cross-cutting themes like finance or labor. These commissions, according to haute fonctionnaire Massé, were “probably the most consequential creation of Jean Monnet.”²³ With ten to thirty members each, they acted as two-way transmission belts: in one direction, providing the Commissariat général du Plan with expertise on feasibility; in the other, generating commitment among firms and unions to help realize the plan’s targets.

We can imagine a similar planning process for today: a small core planning unit could be set up as the central hub, whose primary task would be to assemble transition commissions for each of the five sectors, as well as for interrelated issues like financing, labor, and regional balance. These commissions, facilitated by the core staff, would lay out transition paths that meet the double budget constraint of today. Like the old Commissariat général du Plan, the core unit would have to be located at the highest levels of government, in order to fulfill its most important function: bringing coherence to government action.

Once a set of transition plans has been drawn up, the political process would determine which tools to use for injecting these plans into the economy: public investment, targeted taxes and fees, outright bans, subsidies, nationalizations, and so on. As in the post-war mixed economy, prices and competition would continue to coordinate a large amount of economic activity, to ensure room for bottom-up initiatives and to preserve the commercial pressures that support the efficient use of resources. Prices and profits would also provide important data that the transition planning unit could use as plans developed over time. 

The overall shape of the transition would be guided by the sectoral plans, whose effectiveness would unfold in two stages: first, in the drawing up stage, where they provide a focal point for aggregating the knowledge and interests of different actors.²⁴ Second, in the implementation phase, public investment, regulation, tax policy, and other public policy levers are used to steer sectors onto their planned trajectories. 

Sectoral planning will inevitably get things wrong, both because of imperfect knowledge and because the future is inherently uncertain. Moreover, planning excels at effectiveness—getting the job done—not necessarily at efficiency, i.e. delivery at lowest cost.²⁵ 

But a perfect method for coordinating the transition will not be found, and certainly not in time. The question is how much risk taking and social learning does an approach enable? And how likely is it to deliver the transition in time? By giving systemic direction to public and private investment, sectoral planning enables bold and rapid experimentation, and coherent and effective action—precisely what is required today.

From policy to politics

The above is, of course, a set of technical-administrative considerations, which carries a set of assumptions and preconditions.

A first set of preconditions includes elements of an administrative-cultural nature. Both French indicative planning and Japanese industrial policy (sectoral planning by another name) relied on pre-existing traditions of capable and confident state administrations. But while insufficient state capacity is a serious challenge, the deeper problem is a different one: what are the politics of a rapid and planned transition? What majority will demand and approve this?

Where the political preconditions are in place, planning is likely to succeed. In an emergency, old institutions can be adapted, and new institutions can be built.²⁶ Indeed, according to Massé, “Rather than being defined by its purpose, structure or means, French planning [was] characterized by its esprit. The esprit of the plan [was] the concert of all the economic and social forces of the nation.”²⁷ In other words, politics is the deep constraint: support from a wide majority “of all the economic and social forces” is the necessary condition for planning.

In the United States, President Biden’s Build Back Better plan was cut down to size by the plutocracy and the structural constraints of Congress.²⁸ In Europe, energy politics divides nuclear France from gas-dependent Germany, and coal-committed Poland from renewables champions such as Spain and Sweden.

More worryingly, the dominant discursive strategy to build a sufficiently broad and powerful majority, the Green New Deal approach²⁹, has triggered powerful opposition, casting doubt over its fundamental prospects for success. The opposition is structural. An abundance of research has clarified that Western societies are characterized by high economic inequality and high carbon inequality.³⁰ A Green New Deal would therefore hit the rich twice: both their extraordinary carbon consumption and their disproportionate share of prosperity would be under attack.

Further raising the stakes, the apple of discord is not just distribution. A key instrument for realizing the Monnet Plan was state-guided capital allocation. If state control over capital flows is to be re-established, this would either be prohibitively expensive, if done with derisking and subsidies,³¹ or a frontal assault on a specifically influential fraction of the rich, if done via financial repression. As the French business paper Les Êchos recalled: “the great forgotten constituency of the post-war reconstruction years was, of course, the stock market.”³²

In combination with the political inequality of our times, where the softer voices of the few tend to resonate louder than the cries of the many,³³ it is not obvious whether a Green New Deal is a winning strategy. At least internal to the rules of politics today, the extra votes won amongst the many may be outweighed by the extra resistance put up by the few.

Though climate change will be a permanent feature of our politics going forward, the tensions and divisions created by this triple inequality—wealth, carbon, power—may get worse, not better, on current trends. As climate change worsens, a Green New Deal coalition may well strengthen.³⁴ But this will scare the rich—rightly so—who may respond by attempting to weaken state capacity or the functioning of the economy,³⁵ while doubling down on prepperism and escapism (whether of the New Zealand, seasteading, or space colonizing-variety). This is hardly a recipe for generating “the concert of all the economic and social forces of [a] nation.”

An alternative to the class politics of a Green New Deal might be consciously to bet on “the far-sighted members of the ruling class.”³⁶ Perhaps with an eye to the pitchforks, bread riots, and climate refugees on the horizon, this could be termed a “sustainability politics of fear.”³⁷ Arguably, the EU Green Deal is the most advanced attempt in this vein. 

Time, however, is running out for this approach. Trying to preempt popular mobilization, and condemned to finding intra-elite bargains, the strategy has focused on minimally invasive policies. So far, these have not sufficed for shifting any of the major blocks onto a 1.5-degree trajectory. Richard Seymour is therefore right in describing “a united bourgeois front” as most likely “green on the outside, brown on the inside,” at least with respect to short- and medium-run time-scales.

If a Green New Deal cannot muster realpolitische majorities; if “a united bourgeois front” will not act fast enough; and if these impasses will deepen over time, are we in fact already faced with the end of climate politics?

The conclusion is dangerously incomplete.³⁸ Painting in dystopian colors can cause resignation just as much as it can spur direct action. More importantly, fear sparks fear, violence violence. As Battistoni and Mann argue, “If everyone expects that this “climate chaos” will lead us to turn on each other… that is what we will get.”³⁹

So yes, climate politics is jammed. Yes, neither the Green New Deal framing, nor climate technocracy can be counted upon. But as historians of structural transformations have long pointed out, we would do well to remember that the future is open. Consider that the Eastern Bloc looked stable until the eve of its collapse. In 1989, the unimaginable happened: The Polish government held contested elections, the Berlin Wall fell, and state socialist regimes abdicated. “Discerning diplomats and gifted journalists were caught off guard… Within Eastern Europe itself, the revolution came as a surprise even to leading dissidents.” Now came out of never.⁴⁰

What made for near-universal surprise was the revolution’s tipping point dynamic: as long as most people believed that the Eastern Bloc regimes would last long into the future, resistance felt foolish, indeed dangerous. But once the first cracks appeared, the dam broke and millions made their discontent known at once. A political configuration that had looked stable right until its tipping point was reached collapsed rapidly once that threshold was crossed.

2022 is not 1989. The green transformation is a generational task, not a revolution unfolding in a matter of months. But apparently stable political structures can shift rapidly when pushed across a tipping point. What we believe to be possible depends on what others believe to be possible. What we are willing to do and sacrifice depends on the actions and offerings of those around us. Given these interdependencies, long-frozen constellations can suddenly melt into cascades of furious activity. Given the right catalyst, what looks like an intractable collective action problem one day can be overcome by an outburst of energy the next.

This text was originally published in the first issue of  Grand Continent, Politiques de l’interrègne, Gallimard, March 2022.