As the Northwest finds itself finally seeing blue sky and warmer temperatures I’m going to suggest something radical: go inside and watch a video on your computer. The video I am recommending is the opening episode of a series called The Commanding Heights, which is actually based on a book of the same name published in 1998. And while the series itself is eight years old, it seems even more relevant today because it explains the in-depth history of the battle between those advocating for more stimulus and jobs versus those advocating reduction of debt and belt-tightening. As I wrote a couple of weeks ago, this debate is one that profoundly affects investment in green jobs in our region, and thus the outcome of the region’s efforts to shift from a consumption economy to a conservation economy. The Commanding Heights series is an entertaining way of getting some grounding on the economic jargon being tossed around on the internet almost every day.
To save you time, I’m embedding the video here:
The story of the Commanding Heights is, on its face, a pretty simple one. The twentieth century was a battle of ideas between economists and policy makers who felt government ought to control, plan, and regulate large parts of the market place and those who felt that an unbridled free market economy was best. The two protagonists of the series are John Maynard Keynes and Friedrich Hayek, with Keynes on the side of intervention by government in the economy and Hayek arguing that intervention in the markets by government would lead to disaster.
The two men were profoundly but differently shaped by the cataclysm of the two world wars. Keynes felt that unemployment, rampant in Germany after World War One, was fertile ground for fascism. The hopelessness of not being able to find work pushed masses into rag tag groups of black shirts and brown shirts agitating for power in the streets. In Keynes view large scale and persistent unemployment was a pathway to social chaos and ruin for which desperate people might see fascism as a cure.
Hayek, on the other hand, saw the hyperinflation of the same period as the real culprit and source of Germany’s fall into totalitarianism. The burdens imposed on Germany by the Treaty of Versailles forced the government to print more money to pay reparations to the winning side. As a result, prices increased and hard-working people’s money, saved over many years, was suddenly worthless. Rampant inflation made strong central government a viable alternative, a sacrifice of freedom for stability.
In the end, Keynes’ view dominated economic policy after the depression and into the 1980’s when the so called Thatcher-Reagan revolution shifted the emphasis away from government programs intended to create employment and toward deregulation (The series points out that Thatcher’s revolution was far more significant and intellectually robust). Many economists point to this period as the beginning of the economic downturn we are in today because it fueled a huge expansion of the economy with poorly regulated consumer debt. Among those economists, ironically, is Alan Greenspan who expressed his regret about massive deregulation.
Now, why take a couple of hours to stare at a computer screen learning about 100 years if economic theory just as the sun is making its brief appearance? Because there is a lot at stake, right here and now, for green jobs. Local politicians from city council members to state legislators are under tremendous pressure to cut budgets, curtail spending, and limit debt. This fall, for example, Washington voters will consider Referendum 52 a measure to expand the state’s debt limit to fund school retrofits. Similar efforts are underway in Oregon. The success of these efforts depends on overcoming the doubts about debt that are falling like steady rain on the ears of local elected officials.
As Paul Krugman and others have argued, we are at a crisis point time with millions of people out of work. Recent statistics show that within the last 3 years employment among the working age population fell from 63 percent to 58 percent—a loss of 8 million jobs. And for anyone looking for work, it is getting more difficult with the average job search taking 35.2 weeks, almost 6 months. That’s compared to 21 weeks back in the last really big downturn in the early 80’s. It is a pretty hopeless picture.
But the good news is that in the Northwest the fall in employment seems to have taken a pause in Oregon, Washington, and Idaho. Those of us who are pushing for investment in clean-energy infrastructure need to continue to make articulate arguments about why now is not the time to pull back on spending and borrowing for clean energy. The Commanding Heights series provides a good grounding in how making the wrong decision at this crucial time could hurl us backwards, just as we are starting to make progress.