Climate Change and the Public/Private Debate

In my last post, I drew attention to the debate between Keynes and Hayek and the way in which their differing economic views came to define many of the opinions of the left and right, respectively. The key point to take from this debate, for me, is that both men, Keynes willingly and Hayek reluctantly, admitted the need for State intervention into the private sphere. The difference between the two thinkers was how far and how deep this intervention should go. Hayek always maintained that the State should be peripheral, and confined to only the most basic elements of welfare like health and education. Keynes, in contrast, held that the State's role within the economy should be dictated by circumstance. If unemployment was high, as it was for much of Keynes's career, governments should intervene to create employment. But, if social concerns were not so acute, the State could afford to be more subdued. Famously, when confronted with the criticism that he had altered his monetary policy, Keynes is alleged to have said: "When the facts change, I change my mind. What do you do, sir?"

The lesson, therefore, is where one decides draws the line between the private and the public sphere, not a decision between public and private in themselves. This line, as Keynes made clear, is constantly shifting as discoveries, disasters, and fortune alters the economic, political, and social landscape. We must constantly keep asking how far the State should be able to encroach on private life, and how much reign should be granted to the pursuit of private enterprise?

Arguably, these questions have never carried as much weight as they do today. The world is confronted not only with an economic crisis of unprecedented scope and scale, but an environmental crisis that is destined to impact the course of human history in profound and perhaps yet unseen ways. When Keynes wrote his great works of economics, his principle concern was unemployment. Today we must add to that the fear of environmental calamity.

With this in mind, it seems increasingly clear that State intervention on a national and international scale is required to ward off these twin dangers. How else are we to secure both economic prosperity and a viable and environmentally sound future? Such is the depth to which Keynesian thinking has been relegated, however, that government action, particularly in the United States, is regularly perceived as, at best, a violation of personal liberty, and, at worst, a maniacal plot to enslave. Free-marketeers still vociferously maintain that a market unencumbered by regulation is the most effective way to combat the dangers of climate disaster and economic ruin. I believe they are wrong on both counts.

Both Europe and the US were plunged into financial crisis at the same time, but whilst America continues to demonstrate tentative recovery and a declining unemployment rate, the EU languishes in recession. The simple reason for this is that the US continues to bolster its economy through stimulus, whilst endeavouring to minimise cuts. The economy is being allowed to recover before it is attacked. In Europe, the opposite is the case. Germany dictates crippling terms to 'lazy' southern Europeans leading to record levels of unemployment, and shrinking economies. In Britain, unemployment stands at a 17-year high and the economy has flatlined. The image of the private sector saddled up and riding to the rescue of a beleagured public sphere has failed to materialise.

Likewise, there is pretty clear evidence that the markets alone are not fit to take on the challenge offered by climate change. For a start, there is just too much vested interest at stake. Companies like Chevron, BP, Exxon Mobil, and Shell stand to lose billions if the markets decided to treat global warming seriously. This is because the reserves, on which the value of these companies is based, must be left in the ground if we are to meet climate targets. On top of that, the private sector is simply incapable of moving fast enough on its own and huge government backing will be required if we are to build sustainable industry and innovative technology. At the moment, our fossil fuel consumption is going up exponentially, and not down as it needs to.

The problem for any realist, anyone who can see the very real danger in government inaction, is that they are inevitably confronted with waves of vitriolic ideology. The public vs. private debate has become so toxic that those on the private side have lost all sense of context, pushing the idea of the State as an overbearing force of oppression, and seeing conspiracy in the most strongly supported scientific data. We need to stop thinking of public and private in terms of opposites, but in a way which harnesses the best qualities of both. Innovation, solidity, and, yes, regulations. It is only through cooperation, redirection, and by harnessing the creativity of private industry that a way out of these twin crises can be found.