climate change

Republicans Put the Oil Industry Above Economic Growth

There will be blood. Photo: ROBYN BECK/AFP via Getty Images

The GOP is the party of growth and economic dynamism. Contrary to the claims of progressive propagandists, Republicans don’t oppose statist economic policy because they are indifferent to the well-being of the market economy’s “losers.” Rather, conservatives oppose “big government” because they believe that industries should live and die on the basis of their productivity, not their political connections. The creative destruction inherent to the free-enterprise system will harm some economic incumbents, to be sure. But the harms of sacrificing the nation’s prospects of long-term growth — which is to say, our collective prosperity — to the parochial interests of politically powerful but economically declining industries would be far greater. As Secretary of State Mike Pompeo argued last year, “Innovation is driven by competition and not by government diktats.”

This is the Republican Party’s official economic philosophy (Donald Trump’s haphazard heresies notwithstanding). The GOP’s actual economic agenda is quite different. Throughout the four decades since Reagan’s revolution, the Republican Party has been a stalwart supporter of government subsidies to its favorite agricultural concerns and weapons manufacturers. In fact, through its tireless advocacy for the military-industrial complex, the GOP has effectively pushed for the expansion of a massive government jobs program that conscripts millions of U.S. workers into economically unproductive — but politically sacrosanct — forms of labor (including the production of trillion-dollar boondoggles like the F-35).

In our dawning age of climate crisis, however, the dissonance between the GOP’s paeans to “creative destruction” and its blatant cronyism is sharper than ever.

At last week’s presidential debate, Joe Biden said that the long-term goal of his climate policy is to “transition from the oil industry.” On the merits, this shouldn’t have been a newsworthy statement; how could one possibly accept the reality of climate change and not support the eventual withering away of the fossil-fuel sector? And yet, Biden’s statement did constitute a bracing acknowledgement of a fact that he has taken pains to elide: Although moving to a clean-energy economy will leave the nation as a whole much better off than it otherwise would be, such a transition will impose costs on a variety of interest groups, including workers in the oil and gas industry.

Policy-makers can and should ensure that such workers do not suffer a reduction in living standards and that they have state-funded opportunities for retraining. Next to the costs of inaction on climate change, even directly replacing oil workers’ lost income for life would qualify as “cheap.” But oil-industry workers have good reason to doubt that the government will compensate them for economic dislocation (just look at how much Trade Adjustment Assistance didn’t do for manufacturing workers on the Rust Belt). Regardless, those oil-sector workers who value the specific trade they’ve mastered and the specific workplace community they belong to will suffer intangible losses from an energy transition that can’t be defrayed.

So, Republicans pounced on Biden’s comments. Texas governor Greg Abbott lamented that the Democratic nominee “just killed paychecks earned by hardworking families in Texas,” while South Carolina senator Lindsey Graham declared that “Biden just lost Pennsylvania.” Yet, in decrying Biden’s climate policy on these grounds, Republicans were effectively advocating for the U.S. government to prioritize the survival of a stagnant industry over GDP growth — and the job security of politically powerful workers over economic dynamism — precisely the kind of progressive “crony capitalism” that conservatives purport to oppose.

After all, in concrete terms, Biden’s “transition from the oil industry” just means discontinuing the roughly $5 billion in direct government subsidies that the sector collects each year (which would still leave the industry collecting hundreds of billions of dollars in indirect subsidies as society absorbs the externalized health, economic, and environmental costs of fossil-fuel production). Further, the economic costs of runaway climate change are now so vast and readily apparent, wide swaths of corporate America are calling for the oil industry’s controlled diminution, while large holders of private capital are directing investment away from the sector. Four years ago, energy companies made up 7.5 percent of the S&P 500, according to Siblis Research; today, that figure is down to about 2 percent. Even oil companies themselves are preparing for a “transition from the oil industry”: BP has pledged to slash oil and gas production by 40 percent by 2030 as it increases investment in renewables.

Put simply, climate inaction is not in the financial interest of the people who own our country. As the historian Adam Tooze recently explained:

The dominant shareholders in big corporations are institutional investors who juggle giant portfolios, in which every firm is held alongside its rivals … This changes the game. What is good for one individual firm may not be good for the whole. The fund managers who run these portfolios have an interest in maximizing the aggregate on their stock holdings, not the performance of individual stock … Oil majors like Exxon are big business, and an energy transition will be painful for them. But their specific concerns pale by comparison with the interest of BlackRock in the reproduction of the whole. 

This fact isn’t lost on the “dominant shareholders.” Last month, Trump’s own Commodity Futures Trading Commission released a report warning that climate change is making the world unsafe for capitalism. In the face of the “frequent and devastating shocks” wrought by unabated warming, the “fundamental conditions supporting our financial system” could prove impossible to sustain,” wrote the study’s authors — who were, among others, market analysts from Morgan Stanley, S&P Global, Vanguard, BP, ConocoPhillips, and Cargill. To maximize long-term economic growth and minimize the social harms of climate change, the CFTC report called for raising the costs of oil production through a carbon tax while subsidizing renewable energy development. And it emphasized that the more policy-makers do to expedite the onset of the energy transition, the more gradual and orderly that transition will be.

Graphic: NGFS

Thus, even if Trump’s psychopathic energy policies persist, global capital is going to keep drifting away from dirty energy. Absent aggressive federal policy, this drift will (almost certainly) be too gradual to avert ecological catastrophe. But it will be sufficient to make oil a declining industry and green tech a growth sector.

All of which is to say: If you are the kind of conservative who believes that private investors know best, that long-term growth should take precedence over the parochial interests of organized labor, and that America must tolerate “creative destruction” in order to dominate the industries of tomorrow, then you should applaud Biden’s vow to “transition from the oil industry.”

Of course, conservatives withheld such applause. And Biden has spent the past few days assuring voters that his commitment to getting America off oil is akin to a chocoholic’s commitment to eating fewer sweets — a half-hearted resolution that’s destined for perpetual postponement.

The fact that plainly stating one of the most obvious economic consequences of sane climate policy (that it will greatly reduce employment in the oil industry) constitutes a “gaffe” is dismaying. But, in the context of America’s “free-enterprise system,” the political toxicity of Biden’s remarks is understandable. For decades, conservatives have rationalized our nation’s threadbare safety net and limited collective bargaining rights by casting each as integral to high rates of growth and innovation. This idea has long been suspect; social-democratic Sweden ranks ahead of the U.S. in the Global Innovation Index, and multiple studies have shown that social welfare programs facilitate entrepreneurial activity by lowering the costs of striking out on one’s own. But even if this weren’t the case, the political obstacles to an energy transition in the U.S. would establish the obsolescence of conservative economic dogma: In a country where affordable health care is a privilege restricted to full-time workers, where collective bargaining rights are highly limited — but more prevalent in the fossil-fuel sector than the solar or wind industries — and where the federal government has repeatedly demonstrated that it is unable or unwilling to ensure the financial security of workers displaced by policy-induced economic disruptions, it’s perfectly rational for oil-industry workers to oppose the policies necessary for sustaining American growth and economic competitiveness.

Democrats share some of the blame for this state of affairs. But, at least officially, the party now recognizes that there is no tension between generous welfare programs and strong labor rights on the one hand and innovation and growth on the other; to the contrary, the former are prerequisites for making the disruptions necessary for achieving the latter politically feasible. Some intellectual defectors from red America have reached a similar conclusion.

But the Republican Party remains committed to subsidizing waning industries — and pushing social welfare policies that discourage innovation — while accusing their rivals of doing the same.

Republicans Put the Oil Industry Above Economic Growth