Federal Reserve was the pivotal American institution in stopping a second Great Depression. Now, in an article this month in Foreign Policy , Tooze asserts that the Fed needs to battle climate change in the same way. Jerome Powell, the Fed chairman, would not call himself a climate-change denier. Indeed, he is probably the most powerful person in the American government who affirms climate science. Yet he has taken a subdued approach to mitigating climate change.
I talked with Tooze last week about whether climate change could really cause another global crash, how to think about climate policy in history, and what the Fed could do to decarbonize the economy. Our conversation has been edited for length and clarity. You describe a crisis in a near-term future, one where climate change has taken hold but where much of the economy is still tied up in oil. Adam Tooze: That skepticism is perfectly warranted. So the point, to me, is not so much the realism of that prospect, of the fact that we could have some kind of subprimelike scenario.
For me, the significant thing is that the argument is actually going on inside the establishment, in the network of financial regulators and central-bank thinkers. Are we likely to see a financial Minsky moment? I think that is a reasonable question mark.
We would need an entire network of causation to be there, which is what produced the unique crisis of to Meyer : What would cause that kind of sudden revaluation? Would there need to be a policy shock, such as the United States suddenly imposing a climate policy?
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Tooze: That would be one way in which this could be sudden. And then imagine some of the nonlinearities kick in, which the climate scientists tell us about, and we face a Fukushima-style event. What happens next? You then get nervous democratic politicians—and not necessarily those who are known for their populism, but just nervous democratic politicians—suddenly deciding that we have to stop doing one or another part of our carbon-based economy. It has to stop, and it has to stop immediately.
And then you get big shocks. Then you get sudden revaluations.
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That, I think, is the sort of scenario that the Bank of England people are working with. Who is in that group? Are those the oil majors such as Exxon, or does that encompass every construction firm? But Germany is far, far more exposed. A huge slice of their economy is basically all about internal combustion engines, and so that number includes all of those stocks, for sure.
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Meyer: And just to get back to the financial-crisis point, if there were some kind of immediate crunch, and all those stocks tanked …. Tooze: Yes. Meyer: In your view, what do you see as the goal of climate policy?
Is it only to reduce carbon emissions? Do you see any benefits to the economic transition that we scientifically have to make, beyond mitigating climate change?
hisonceter.tk This is not simply a zero-sum game; this is a structural transformation that has many very attractive properties. Then [you could] also link it to a revival of social democracy for the United States. Whether that will, in fact, ease the formation of majorities in Congress is another question. Because, after all, it does somehow have to get through the Senate, you know. Meyer: Yes, well, welcome to the life of a climate-change reporter.
Tooze : Exactly. Tooze : Realistic? I mean, depends what you mean by realism. The scale of the challenge requires a boldness of action for which there is no precedent. Tooze : Well, less large in absolute terms. Because even the U. It needs to be much bigger than the New Deal, which in fiscal-policy terms was really quite trivial. I mean, America can be an obstacle and get in the way, but none of the really hard choices needs to be made by America, and all the really hard choices need to be made by people like China and India and Pakistan and Bangladesh and Indonesia.
Is there a single historical analogy that we could think of—of a broad transition with no happy victory parades at the end? I mean, we never have. And furthermore, it has turned out to be exponential—a hockey-stick-style process. It strikes me, perhaps, as an indication of the poverty of our democratic imagination right now that we go backwards so much. One of the striking things about the American left is its nostalgia. Or if not the New Deal, then the Progressive era. Or if not from the Progressive era, then the Homestead Strike.
And that backwards move is—even among the smartest, smartest people on the American left—is a compulsion, almost. It seems to me, in some sense, a mirror image of the strange practice of originalist interpretation of the Constitution.
The sheer fact of the continuity of the American political argument, back to the founding, sucks people into this line of thinking. That like Reconstruction or the civil-rights movement, it needs to be something that people take on like a moral commitment, in the same way they take on genocide prevention as a moral commitment. Financial crises, particularly the Great Depression, spurred reforms to strengthen regulation. In the s, the government created federal deposit insurance, the Securities and Exchange Commission to regulate securities markets, and stricter bank rules encompassed in the Glass-Steagall Act, which among other things separated commercial from investment banking.
For more than a century, the Canadian system has proven itself far more stable than its U. A more concentrated and regulated financial system may have been slower to innovate, may have been slower to invest in emerging sectors, and may have provided services at monopoly prices.
- Reisende und Entdecker: Das Problem des Anderen in Tzvetan Todorovs Die Eroberung Amerikas (German Edition).
- The Panic of | Federal Reserve History.
- The Financial Industry and the Crisis: The Role of Innovation | OpenMind!
- Racconti di Donna (Italian Edition).
- Cerebrum 2009: Emerging Ideas in Brain Science, Foreword by Thomas R. Insel, M.D..
Development of the American Economy. Economic Fluctuations and Growth.
International Finance and Macroeconomics. International Trade and Investment.
Productivity, Innovation, and Entrepreneurship. The Science of Science Funding Initiative. The Women Working Longer Project. Illinois Workplace Wellness Study. The Oregon Health Insurance Experiment. He is also the Mitsui Professor of Economics at M.
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