Ira Magaziner On ‘Creative Destruction’: From Buggy Whips To The Global Warming Imperative
Ira Magaziner On ‘Creative Destruction’: From Buggy Whips To The Global Warming Imperative
Editor’s note: The Wonk Room is reporting from the Clinton Global Initiative conference this week. This is our sixth post.
On the final day of the Clinton Global Initiative, the Wonk Room caught up with Ira Magaziner, the senior advisor for policy development in the Clinton White House and now the chairman of the William J. Clinton Foundation’s Climate Initiative. We discussed the Clinton Climate Initiative’s approach to the challenge of global warming, including its work to advance energy efficiency projects in the world’s cities from the Empire State Building to Lagos, Nigeria. Magaziner also directly addressed why critics argue that advocacy of clean energy is a socialistic economy killer, citing Adam Smith’s recognition of the need for governmental action to address market externalities. As we neared the conclusion of the interview, Magaziner tied all the threads of the conversation together into one impressive discourse on building a clean-energy economy.
Watch it:
CREATIVE DESTRUCTION — PAST VS. THE FUTURE
MAGAZINER: Schumpeter — yet another capitalist economist — talked about creative destruction. Periodically, as new technologies develop and new needs arise, business systems and economic systems need to be remade — creatively destroyed and remade. We don’t need a buggy whip industry any more. We’ve got automobiles. And the buggy whip guys may not like it, but they ought to switch to making automobiles if they’re going to have a future.
What always happens in those periods of transformation is that some people oppose and some people see the future. We went from mainframe computers to minicomputers to PCs. And as we went through those transformations, different companies succeeded. DEC and Wang and companies that were the minicomputer companies didn’t understand the potential of the PC. So you had the Dells and others who developed them. In some cases, companies do make the transformation and they go with the future instead of the past.
We have a similar situation with clean energy and energy efficiency. You have some companies now, like GE, and there’s a bunch of others, who are saying, “I want to go with the future, and I’m going to invest in wind, I’m going to invest in solar. I’m going to invest in these things that I know are going to eventually be the future.” And you’ve got others who say, “I’m going to defend the past and stick with what I’ve got,” and fight Congress to prevent the future from coming.
BRINGING THE FUTURE FASTER
MAGAZINER: I think, in this case, in the case of clean energy, we have a public interest in bringing the future faster, because of global warming. We know that if we don’t bring the future faster with clean energy and with energy efficiency, that it’s going to have a tremendous economic and social cost. Therefore, we have to accelerate the process of that future coming.
That’s why government has to especially play a role in this revolution. I mean, it played a stimulative role in the Internet revolution, but in this revolution it has to play a much more active role. Because the negative consequences of not doing so are going to cause governments and people and economies tremendous unhappiness.
There have been so many reports written. The thousands of scientists in the International Panel on Climate Change established that the world is warming, they’ve established what the impacts can be, and there’s only now a few dissident scientists left. The overwhelming 99.9 percent opinion is very clear on this.
Economists like Nicholas Stern who have done serious work on this have said we can lose 5 to 10 percent of GDP in the next ten years, fifteen years if we don’t act, because of all the major dislocations. And if we spend one percent of our GDP to bring the transformation faster, we’ll save ten percent or 15 percent of our GDP. So there are enough studies out there.
THE CLINTON CLIMATE INITIATIVE
MAGAZINER: What we’re trying to do with the Clinton Climate Initiative is to make it real.
It’s very important that global leaders, the political leaders agree to set targets to reduce greenhouse gas emissions. It’s very important they pass legislation to put a price on carbon — because it does have a price for society — to help speed the transformation.
What we’ve said, what we’re doing, is say, even after that’s done, what you’re going to still need projects that demonstrate in large scale how to do this, what the business models are what the government models should be, so that government money gets spent well, carbon credit money gets spent well, and ultimately businesses can move into this in an accelerated way to make this happen. And so that’s why we’ve focused on these projects.
We’ve worked on energy efficiency, clean energy, and the third area we’re working on is forests, preserving forests around the world. What we as a human race have been doing is at the same time we’re putting all this CO2 into the air — which is poisoning the atmosphere — we’re cutting down the forests — which are nature’s way of taking carbon dioxide out of the air. We’re making the problem worse on both ends.
So we have major projects that we’re doing in Indonesia, and Cambodia, Guyana — Africa and the tropical countries — to help preserve forests and create economic value in preserving forests.
So that’s what we’re up to and we’re trying to make our contribution. That’s going to require a lot of different groups working in a lot of different ways to make a contribution.
THE MULTIPLIER EFFECT
MAGAZINER: What we do is: we do these projects and can measure the direct impact, and say there’s this many millions of tons less of CO2 going into the air because of the projects we have done. And then we’re creating these models which we can spread to others, so that we can have a multiplier effect that multiplies the impact of what the direct projects we’re doing can accomplish.
That’s why when we show that we can do an integrated waste management project in Delhi — in a very complicated, large city that’s never had integrated waste management — what we did in Delhi is the first integrated waste management project in the whole of southern Asia. We showed that it can work, it’s actually returning a profit to the commercial developers, it’s saving the city money, and it’s working in terms of making Delhi a cleaner place.
And now there are ten other cities that are ready to do it. As soon as we finish the project in Lagos — Lagos, Nigeria is a place with 21 million people in that city, growing a million and a half people per year — and they had no waste system. We’re putting the first integrated waste system there. We’re now doing it in Dar Es Salaam and Tanzania. We have requests from a number of other African cities. So our goal is to create these models and then spread them, because that’s really where we’re going to get at the problem.
- Comments
- 1
JP Morgan CEO Jamie Dimon Uses CGI Stage To Hit Regulatory Reform
JP Morgan CEO Jamie Dimon Uses CGI Stage To Hit Regulatory Reform
Editor’s note: The Wonk Room is reporting from the Clinton Global Initiative conference this week. This is our fifth post.
In the wake of an economic crash caused in large part by financial wizards passing paper back and forth without creating anything, panelists at the Clinton Global Initiative today discussed how to make banking more socially useful. The discussion inevitably wound its way to the regulatory reform package currently before Congress, at which point JP Morgan Chase CEO Jamie Dimon seized the opportunity to attack the idea of creating a Consumer Financial Protection Agency (CFPA):
We need to simplify and strengthen our system, not add. We’re trying to just add multiple layers of regulation. I tell people, if our legal department didn’t do a good job, we would fix our legal department. The government would create another legal department. [laughter] And all you’re doing is replicating the same thing in a different form.
Listen here:
However, the CFPA is not meant to replicate existing agencies, but to fill a void that currently exists, as no agency is solely responsible for consumer protection. It will also remove the consumer financial protection responsibilities from the other regulators, such as the Federal Reserve, the Office of the Comptroller of the Currency, and the Federal Trade Commission, in a sense providing some of the simplification that Dimon says is necessary.
“I think clearly you have had a lot of abuses, and whatever was on the books wasn’t being enforced,” said Morris Goldstein, a former top official at the International Monetary Fund and a researcher for the Peterson Institute of International Economics. “I think it makes sense to try to wrap it together and give someone the responsibility to deal with the great bulk of it.”
With his choice of language disparaging the CFPA, Dimon is channeling the Chamber of Commerce, which is circulating ads warning against the CFPA proposal that read “maybe instead of making government bigger, we should focus on making government better.” Plus, as CAP’s Andrew Jakabovics and Jeff Chapman found, JP Morgan was no angel during the subprime boom:
JP Morgan Chase, like other major banks in 2006, was much more likely to charge higher prices to African-American and Hispanic borrowers than whites and Asians, even among high-income borrowers. Over two-thirds of JP Morgan Chase’s higher-priced lending was done through a subprime arm—Chase Manhattan Bank.
As David Lazarus put it in the Los Angeles Times, “if banks play fair and keep their noses clean, they’ll have nothing to fear. So why are they so fiercely opposed to having a new cop patrolling the neighborhood?” Indeed, the banks look like they are using the spectre of big government to defend their right to rip-off and deceive consumers.
Solis: ‘I Think We Miss The Boat’ If We Can’t Make College More Affordable
Solis: ‘I Think We Miss The Boat’ If We Can’t Make College More Affordable
Editor’s note: The Wonk Room is reporting from the Clinton Global Initiative conference this week. This is our fourth post.
Echoing the comments made by former President Bill Clinton, Secretary of Labor Hilda Solis took to the Clinton Global Initiative stage today to talk about America’s need — and apparent inability — to make enough investments in human capital. She pointed towards the Obama administration’s commitment to community colleges, which she called the “rapid, ready-response institutions” of America, but said that the real problem is tuition at four-year colleges:
The fact of the matter is, there are a lot of young people, young adults, that don’t have the financial ability to enter into a four-year university or, say, a tailored program that could take them even out of poverty. The President just recently talked about making an investment, $12 billion, in community colleges. And community colleges are kind of the rapid, ready-response institutions that allow for a broader group of people to enter into, say, very specified business training that they need. [...]
That’s one step in the right direction, but we need to also continue that and allow for four-year universities to make their tuition more available so that more people can go…I think we miss the boat if we don’t really talk about trying to spread that wealth, that educational opportunity.
Listen here:
The ever-increasing cost of tuition at higher education institutions is a serious problem, with a serious detriment of ideas for how to deal with it. In addition to the average debt load of $23,186 that today’s typical student borrower accrues, the National Postsecondary Student Aid Survey shows that 47 percent of full-time students are now working more than 20 hours a week (which is the recommended maximum), a number which goes above 50 percent for most underrepresented racial or ethnic groups.
The Lumina Foundation estimates that the American economy will face a shortage of 16 million college educated workers by 2025, and “the United States may not only be losing ground compared to other countries, but also in relation to its own population,” as the projected 13 percent increase in college enrollment over the next ten years would occur at a time when the U.S. population is increasing by 14 percent.
The government can increase student aid each and every year, but it won’t mean much unless the rate of increase in tuition can be reined in, as it makes little sense to have aid simply spiral out of control alongside tuition. And in the end, our future economic competitiveness depends on us finding solutions to these problems.
GE CEO Immelt: Government Has To Play A ‘Key Role’ In Clean Energy Investments
GE CEO Immelt: Government Has To Play A ‘Key Role’ In Clean Energy Investments
Editor’s note: The Wonk Room is reporting from the Clinton Global Initiative conference this week. This is our third post.
Earlier this year, the American Society for Civil Engineers roundly panned America’s disintegrating infrastructure, giving it an overall D grade and estimating that “it would take a $2.2 trillion investment…over the next five years to bring it into a state of good repair.” One of today’s discussions at the Clinton Global Initiative focused on how to develop infrastructure in both the U.S. and the rest of the world, and the role that government plays in such development.
General Electric CEO Jeffrey Immelt — who has been critical of the business community for investing too much money in preserving America’s status quo — noted that successful infrastructure improvements, particularly in creating the capacity for clean energy, means coordinating government standards with private investment:
The thing about infrastructure is that it’s a systems problem, and by a systems problem I mean you have to align technology, government policy, capital markets, execution skills — all have to be aligned to make it happen. And the government is a central part in how that goes, both in terms of the U.S., but also in terms of any country in the world.
Energy in this country, if we want to have a clean energy future, the investments are basically 40, 30, 20 year investments…I think, one of the key roles the government has to play is what are the standards? How should the capital markets work? How do you risk-share some of the key technology evolutions? And so, if you want to have effective infrastructure, you really do have to have a good public-private partnership.
Listen here:
In Immelt’s world, the government would set the standards, and then let the private sector loose to achieve them, or, as in China, lay out five-year plans for infrastructure development. This is a distinctly different take from most of the rest of the business community, which recoils from standards, aided by conservatives who claim that if we just “let the free market work,” everything will take care of itself.
Of course, Immelt must see a way for GE to come out ahead under such a policy, but that doesn’t mean that his viewpoint doesn’t make sense. Smart standards, regulation, and a cohesive policy from the government would make energy investment — and infrastructure development as a whole — much less scattershot and much more effective.
Women For Women International CEO Rebuts Exxon Mobil CEO Over Investment In Women And Girls
Women For Women International CEO Rebuts Exxon Mobil CEO Over Investment In Women And Girls
Editor’s note: The Wonk Room is reporting from the Clinton Global Initiative conference this week. This is our second post.
As I noted yesterday, one of the main thrusts of this year’s Clinton Global Initiative (CGI) conference is building up human capital. To that end, CGI brought together a rather eclectic group of individuals to discuss investing in women and girls as a way of bolstering human capital worldwide. The group included the CEO’s of both Goldman Sachs and Exxon Mobil, alongside Zainab Salbi, the CEO of Women for Women International, Robert Zoellick, the president of the World Bank, and Melanne Verveer, Ambassador-at-Large for Women’s Issues at the U.S. State Department.
Prior to the panel, former President Bill Clinton explained that, globally, women do two-thirds of the work, produce 50 percent of the food, but earn just ten percent of the income and own just one percent of the property. And when Exxon’s CEO Rex Tillerson asserted that “funding is not the issue” that keeps women and girls worldwide from gaining access to education and other opportunities that would boost their incomes, Salbi pointed out that less than one cent out of every dollar spent on development is being invested in girls:
But women still get very small, women and girls, get so very small, minuscule amount of funding…One cent of every development dollar, less than one cent goes to girls. So when you look at the larger scope of development money and how much is being invested in so many other things, women and girls get the least amount of funding. Money is not the problem in terms of if it’s available, but the political decision to say we need to invest much more in girls and women is not fully there yet.
Watch it:
That’s an awfully low percentage, especially considering the multiplier effect that investment in education for women can have. Plan International Australia found that “investing in girls is one of the best ways to end poverty, because women who are educated are likely to reinvest up to 90 per cent of their income in their family.” Plus, according to research from the World Bank, “economic growth is boosted by the number of girls who complete their secondary education and go on to earn higher wages,” which can be 10 to 20 percent higher with each year of secondary schooling.
As former President Jimmy Carter said, “the evidence shows that investing in women and girls delivers major benefits for society. An educated woman has healthier children. She is more likely to send them to school. She earns more and invests what she earns in her family. It is simply self-defeating for any community to discriminate against half its population.” And if, as Salbi says, it is just a matter of political will to get dollars to the right place, then pressure in the right places could work to turn the tide.
Clinton: ‘Higher Education Institutions Are Pricing Themselves Into America’s Decline’
Clinton: ‘Higher Education Institutions Are Pricing Themselves Into America’s Decline’
Editor’s note: The Wonk Room is reporting from the Clinton Global Initiative conference this week. This is our first post.
Photo courtesty of the Clinton Global Initiative
One of the main thrusts of this year’s CGI conference is discussing ways to build up human capital through public and private investments. This is particularly important here in America, as our educational attainment has stagnated, and we have lost the competitive academic edge that we used to hold over the rest of the world. Clinton touched on this, lamenting our falling academic standing:
In the last eight years, we went from first to tenth in terms of the percentage of 25-34 year olds holding a bachelor’s degree. That’s the most important unknown statistic out there…We are headed into long-term economic decline if we don’t do something about it.
He added that prohibitive tuition at college is contributing toward this problem, as “higher education institutions are pricing themselves into America’s decline.” Indeed, this is a real problem. As Michael Mandel at Economics Unbound pointed out, “college costs are up by 23 percent since 2000. But real pay for young college grads is down 11% over the same period.” Meanwhile, two-thirds of today’s college students borrow to pay for tuition, and their average debt load is $23,186.
“We’re soon going to have to change the delivery system in higher education,” Clinton said, noting that 17 states have authorized community college to offer four-year college courses and credits. The Senate passing the student loan reform package that the House approved last week would also be helpful (although that doesn’t get at the root cause of the problem, which is the price increase in the colleges themselves, which consistently grows faster than the rate of inflation).
We currently have a higher education system that is delivering less and less, but costing more and more. And if that trend continues, America can only continue to lose ground on the rest of the world.
Register
RSSLogin
Topic Cloud
ArchivesBlog RollAbout Wonk RoomContact Us
Donate
