Covid-19 and the Green New Deal
By Mariana Mazzucato, Professor at University College London (UCL)
The 21st century is increasingly being defined by the need to respond to major social, environmental and economic challenges. Sometimes referred to as ‘grand challenges’, these include the climate crisis, demographic challenges and promotion of health and well-being. Behind them lie the difficulties of generating sustainable and inclusive growth. These problems are ‘wicked’ in the sense that they are complex, systemic, interconnected and urgent, and require insights from many perspectives. Poverty, for example, cannot be tackled without attention to the interconnections between nutrition, health, infrastructure and education, as well as redistributive tax policy.
Compounding this, the COVID-19 pandemic has shown us how unprepared we are to react to crises of such scale and complexity. Earlier this year, the news media was full of frightening images of overwhelmed firefighters – not overwhelmed healthcare providers – and we thought this would be the story of 2020. The climate emergency may not be making the headlines, but it is still the story of 2020 – and the coming century.
COVID-19 is a product of environmental degradation, and has been dubbed “the disease of the anthropocene”. This pandemic, and the recovery we need, is a time to understand and explore how to do capitalism differently and move towards a climate-resilient, long-term and sustainable economy.
This requires a rethink of what governments are for: rather than simply fixing market failures when they arise, they should move towards actively shaping and creating markets to take on society’s most pressing challenges. The green transformation of our economies is not an expensive luxury, but rather the only way through the COVID-19 crisis that ensures resilience against future risks of the same size, scale and severity.
With less than 10 years recognized as the window of opportunity to keep global temperatures within the 1.5 degree increase, agreed in the Paris Accord, the clock is ticking to mitigate the worst outcomes of the climate crisis. But fear does not get us a green recovery. Only by turning climate change into positive opportunities for investment and innovation will a green transition come about, affecting production, distribution and consumption across the economy.
The Green New Deal plans that have been picking up traction around the world over the last few years must aspire far beyond just mitigating the climate crisis, and must be focused on new opportunities for investment and innovation – they must include finding clarity and courage in the policy arena, unlocking hoarded investment in the business sector, and supporting workers to acquire new skills. Now, these have turned into “‘Build Back Better” and Green Recovery plans, as, post-pandemic, the need is being recognized for an economic renewal plan for the entire economy, across different sectors and actors – public, private and civil society.
What is required is a mission-oriented innovation approach, which sets a clear direction for change and renewal, while at the same time using the full range of government instruments – from procurement to guaranteed loans, grants and prize schemes – some of which are now more fully open to experimentation in the COVID-19 response, such as conditionalities on government assistance. The change must occur at all levels – local, regional, national and international.
In the current crisis, for instance, several countries have adopted conditionalities to the bailouts related to the reduction of emissions, protection of workers’ rights and banning of financialized practices. In France, government bailouts for both Renault and AirFrance were conditional on carbon reduction commitments. France, Poland, Belgium and Denmark also denied state aid to any company domiciled in an EU-designated tax haven, while also barring large companies from paying dividends or making share buybacks until 2021.
Markets will not find the green direction on their own: there is not yet a ready-made route that will make multi-directional, experimental, green innovation profitable. Regulation and innovation will only converge a green trajectory when there is a stable and consistent direction for investment. Business does not invest unless it sees an opportunity for growth – so turning mitigation and adaptation into opportunities for investment and innovation is key. This requires more than market-fixing ‘bandages’ like tax incentives alone: it requires bold investments like those witnessed in Roosevelt’s New Deal in the wake of the Great Depression.
The 1960s moonshot mission – to get to the moon and back again in one generation – was clear on the goal, clear on the expense required, clear on the risk and uncertainty, and clear on why it is ‘worth it’. This is a good guide. Mission-oriented innovation policy defines an ambitious goal, and then uses this to create a long-term policy landscape, setting out concrete tasks that mobilize various actors for bottom-up experimentation across different sectors. In the same way that going to the moon required investments in nutrition, textiles, electronics and metals, green missions will require investments in energy, transport, nutrition, health and areas that will allow manufacturing to reduce its material content.
To battle the climate crisis, and use it as a spur for a green economic recovery from the COVID-19 pandemic, we can transform today’s fears of uncertain outcomes into missions to be accomplished, that are as bold and inspirational as the 1969 moonshot. This will require visionary leadership, patient strategic finance, a grassroots movement and bottom-up innovation – taking the complexity and difficulty of the threat seriously, and mobilizing across the economy to meet it.
Mariana Mazzucato is Professor in the Economics of Innovation and Public Value at University College London and the Founding Director of the UCL Institute for Innovation and Public Purpose. She is also a member of the United Nations Committee for Development Policy. Her new book on this topic, Mission Economy: A Moonshot Guide to Changing Capitalism, will be released in 2021.
*The views expressed in this blog are the author’s and do not necessarily reflect the opinion of UN DESA.