Handouts alone are no solution to fixing the economy or the environment: Don Pittis

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Handouts alone are no solution to fixing the economy or the environment: Don Pittis

by - 4 min read

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Conservative politicians who think action on climate change is a left-wing project should look to Britain.

While not advertised under the Green New Deal banner, the U.K.’s climate plan, expected to be approved by Britain’s Conservative government, has many similarities, intending to boost the economy while fighting climate change.

Many Canadians, observing extraordinary levels of flooding, windstorms, forest fires and drought have come to accept that “something’s going on,” as Ontario Premier Doug Ford said during a visit last week to flooded Ottawa suburbs.

As Michael Morrice, an entrepreneur and activist who recently became the federal Green Party candidate in the southern Ontario riding of Kitchener Centre, repeatedly insists, fixing the climate can be good for business. And as Morrice has shown, business-friendly climate change success does not require handouts.

A decade ago Morrice set up Sustainable Waterloo Region, a non-profit group to support and publicly recognize businesses that cut their carbon footprint. Within five years, he told me, 14 per cent of the Waterloo workforce was working for an employer committed to the scheme.

Like winning a war or going to the moon, experts say, government investments in green projects can create radical new technology that the private sector could never afford on its own. (NASA/David Scott/Reuters)

“And they were saving money while they did it,” said Morrice. 

As political parties and activists across the spectrum consider election-winning strategies that include climate action combined with a stronger and fairer economy, it is a message they will likely want to consider.

Transformational impact

But when they do commit to using their enormous spending power, governments can have a transformational impact, says British-based scholar Mariana Mazzucato using evidence from the most successful parts of the U.S. economy. 

In her 2015 bookThe Entrepreneurial State, the economist’s intent was, as the book’s subtitle suggests, “Debunking Public vs. Private Sector Myths.” 

Mazzucato makes the strong case that, contrary to the stereotypical neo-liberal view that the private sector creates wealth while governments spend it foolishly, the most vibrant parts of the U.S. economy have been a direct result of government investment.

“From the internet to biotech and even shale gas, the U.S. state has been the key driver of innovation-led growth —willing to invest in the most uncertain phase of the innovation cycle and let business hop on for the easier ride down the way,” Mazzucato writes.

Private sector risk-takers might not call it easy, but as Mazzucato points out, Uber would not exist without government-funded GPS. The billions in the coffers of Google, Facebook, Amazon, Apple, Samsung, Tesla, SpaceX and many lesser companies would simply not have happened if taxpayers had not financed the technology they depend upon.

Even the earlier generation of computer technology credited to Bell Labs was based on a government deal forcing the telecom giant to divert a share of its windfall as a monopoly to R&D.

Otherwise the money would have simply disappeared into the pockets of shareholders — reinvested yes, but usually in financial endeavours that would show a short-term return, not in the highly risky original research that transforms economies.

And as governments consider how to reshape the economy to fight climate change Mazzucato has said perhaps the most wasteful way to spend is to simply hand out taxpayer money to companies to do what they were going to do anyway.

“You give them some sort of tax incentive to do it,” said Mazzucato, in a recent interview about her latest book, The Value of Everything.

In her book, economist Mariana Mazzucato demonstrates that rather than being a waste, government money spent on risky research is key to U.S. private sector wealth, a business-friendly lesson for the Green New Deal. (Penguin)

Instead, she says, governments must spend on green innovation the same way they spent on winning a war or launching a moon shot, with a goal firmly in mind. The modern green equivalent is ARPA-e, similar to defence research (DARPA) and space research (NASA), except directed at “high-impact energy technologies that are too early for private-sector investment.” 

One common argument against government-directed investment is that governments aren’t qualified to “pick winners,” but Kyla Tienhaara, Canada Research Chair in Economy and Environment at Ontario’s Queen’s University, says that seems to be forgotten when taxpayer money is directed into projects like pipelines.

Tienhaara conducted research on green stimulus spending following the 2008 credit crunch, and she discovered that in many cases taxpayer cash labelled green turned out to be handouts to the better-off or to corporations in ways that did not necessarily advance a climate agenda.

She cites a British Columbia transmission line funded under a green infrastructure project.

“The only people wanting to use that amount of electricity up there were actually mining companies,” said Tienhaara.

Canada can be a player

She also points to taxpayer-funded carbon capture and storage that she says was mainly a justification for the oil and gas industry to keep producing as normal.

Just because Canada is a small economy does not mean it cannot be a player. Artificial intelligence funding, for example, has demonstrated Mazzucato’s contention that unlike handouts, creating an area of radical expertise attracts a cluster of businesses that gather to feed off the groundbreaking ideas that result.

On the Green New Deal front, Tienhaara said there is plenty of room for Canada to compete by investing in appropriate specialities that might include such things as radical cold-weather construction or energy-storage technology.

Tienhaara says research investment need not be just in high technology, but in new ideas about “decoupling,” a term for thinking of ways to separate economic growth from climate destruction, and on how to stimulate climate action at the grassroots level.

Community involvement is exactly what Priyanka Lloyd’s organization, Green Economy Canada, is all about. A biochemist with an MBA, she heads a national organization that has grown up out of the Waterloo project that Mike Morrice founded a decade ago.

Lloyd’s group, now operating without government funding since the scrapping of Ontario’s cap-and-trade program, cancelled by the new provincial government, is working to support green business hubs like the original Sustainable Waterloo in cities across Canada.

Lloyd’s organization acts as a national hub for new regional hubs that share ways for small and medium enterprises to boost their bottom line with things such as improved lighting, keeping in the heat and advanced telecommunications systems to save money — and carbon — on unnecessary airline trips.

Lloyd says while the group continues to seek donors to supplement the small fees it collects from members, the loss of government support is not going stop the effort.

“We’re scrappy and resourceful, and the work is important.”

Follow Don on Twitter @don_pittis

This story originally appeared on CBC

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