Industrial Policy at the United Nations

Secretary General Ban Ki Moon has been criticized by some as being invisible, at least compared with his rock-star predecessor, Kofi Annan.  However, he has emerged as UN frontman for a new campaign from the UN for a plan for a simultaneous global jobs and economic recovery program together with green program.  The SG’s program is outlined in op-ed form here in this SF Chronicle piece, “We Need a Big Green Jobs Machine,” SFGate, Wednesday, November 26, 2008.  The SG says:

At a time when the global economy is sputtering, we need growth. At a time when unemployment in many nations is rising, we need new jobs. At a time when poverty threatens to overtake hundreds of millions of people, especially in the least developed world, we need the promise of prosperity. This possibility is at our fingertips.

Economists at the United Nations call for a Green New Deal – a deliberate echo of the energizing vision of President Franklin Roosevelt during the Great Depression of the 1930s. Thus the U.N. Environment Programme has launched a plan for reviving the global economy while dealing simultaneously with the defining challenge of our era – climate change. It urges world business and political leaders, including President-elect Barack Obama, to help redirect resources away from the speculative financial engineering at the root of today’s market crisis and into more productive, growth-generating and job-creating investments for the future.

This new “Green Economy Initiative,” backed by Germany, Norway and the European Commission, arises from the insight that the most pressing problems we face are interrelated. Rising energy and commodity prices helped create the global food crisis, which fed the financial crisis. This in turn reflects global economic and population growth, with resulting shortages of critical resources – fuel, food, clean air and water. The commingled problems of climate change, economic growth and the environment suggest their own solution. Only sustainable development – a global embrace of green growth – offers the world, rich nations as well as poor, an enduring prospect of long-term social well-being and prosperity.

This is consonant with UN advisor, and Millennium Development Goals devisor, Jeffrey Sachs’s recently expressed view that Washington should pay Detroit to convert itself into a sort of green machine, or green machine manufacturer, all its own (one might usefully contrast it with Holman Jenkins’ view, in the November 26, 2008 WSJ, of what’s wrong with Detroit):

Rather than kill the auto industry, and destroy the U.S. economy in the process, we should fix the industry with a sense of national responsibility and purpose ….  There are many crucial issues for the design of a long-term restructuring. The government needs the authority to steer a public-private consortium to create a high-mileage-vehicle economy in the coming decade. Public and private funding will be needed for research, development and demonstration of breakthrough technologies. During the restructuring, taxpayers will need protections, including warrants or equity shares, limits on industry compensation, and an equitable restructuring of worker benefits, a process that has already begun because of market hardships.

Everywhere one looks, it seems, industrial policy is the answer.  Count me among the unimpressed.  If one wants to make the case for environmental changes, then one should be honest and say that it costs money and that money spent on it will not be available to be invested in something else or in consumption, including consumption by very poor people in the world.  I am with Greg Mankiw’s Pigou Club; raise gas taxes in the US permanently and let the market do its work in coming up with efficiencies.  But don’t pretend that the jobs created by investment in green technology in Detroit or elsewhere around the world represent something other than a limited knock-on effect of money taken from investment that otherwise would mostly have gone into something else, as investment in something else or consumption of something else.  

And the idea that the assembled economists of the UN will come up with a global industrial policy … I suppose one should start by asking how far behind Europe and the rest of the industrialized world have fallen merely in funding the UN’s heroic MDGs, quite apart from whether they would, or would have been, effective or not.  Once we sort out the MDGs and the matter of UN-sponsored five year plans, we can get on with discussing UN global industrial policy.  

But possibly I overreact; this op ed ran in the San Francisco Chronicle, after all; evidently neither the WP nor the NYT thought it sufficiently compelling to bother to pick it up.  Although it did run in Globe and Mail in Canada, and in the Guardian, where, as they say, comment is free.