Post by addisona on Mar 2, 2022 12:46:24 GMT
Nationalizing Fossil Fuel Industry Is a Practical Solution to Rising Inflation
Since mid-2020, inflation has been rising, with the level of average prices going up at a faster rate than it has since the early 1980s. In January 2022, prices had increased by 7.5 percent compared to prices in January 2021, and it now looks like the U.S. may be stuck with higher inflation in 2022 and even beyond.
Why are prices rising so dramatically? Are we heading toward double-digit inflation? Can anything be done to curb inflation? How does inflation impact growth and unemployment? Renowned progressive economist Robert Pollin provides comprehensive responses to these questions in the exclusive interview for Truthout that follows. Pollin is distinguished professor of economics and co-director of the Political Economy Research Institute at the University of Massachusetts at Amherst.
Energy: Precisely because burning gasoline, heating oil, and other fossil fuel energy sources is the primary cause of climate change, what we most need to accomplish is to dramatically lower demand for fossil fuels. In other words, pushing fossil fuel prices back down is not helpful in terms of addressing the climate crisis since it would encourage greater fossil fuel consumption.
As such, government policy now needs to commit to both keeping fossil fuel energy prices high, but then to protect energy consumers from the impact of these high fossil fuel prices. This will require large-scale investments in energy efficiency, in all areas of buildings, transportation and industrial activity. Greatly expanding public transportation offerings is one place to start. Providing large subsidizes to retrofit residences with low-cost LED lights, improved insulation and high-efficiency electric heat pumps to replace inefficient boilers is another critical area. Government policy then needs to massively accelerate the production of clean renewable energy sources to supplant our existing fossil fuel energy infrastructure. It is already the case that the costs of generating electricity with solar and wind power are at parity or lower than with fossil fuels. Of course, not all of these investments in energy efficiency and renewable energy will have an immediate impact. Therefore, for the immediate term, the government should provide people with energy tax rebates to compensate them for the impacts of any temporary spikes in energy prices.
The more basic solution here would be for the government to take over the U.S. fossil fuel industry. Under a nationalized fossil fuel industry, the necessary phase-out of fossil fuels as an energy source can proceed in an orderly fashion. The government could then set fossil fuel energy prices to reflect the needs of both consumers and the imperatives of the clean energy transition. At present, the U.S. government could purchase controlling interest in the three dominant U.S. oil and gas companies — ExxonMobil, Chevron and Conoco — for about $350 billion. This would be less than 10 percent of the $4 trillion that the Federal Reserve pumped into Wall Street during the COVID crisis. More generally, these costs should be understood as trivial because nationalization would end these corporations’ relentless campaign of sabotaging the clean energy transition.
Wages: It is crucial to frame these current wage increases within the broader historical context. Over the past 50 years, the average wage for U.S. workers has stagnated (after accounting for inflation). Thus, as of January 2021, the average wage for nonsupervisory workers was at $25.18 an hour, while this figure for 1972, adjusted for inflation, was $25.28 per hour. This is while average labor productivity — the average amount each worker produces over the course of a day — has increased nearly 2.5-fold between 1972 and 2021. Thus, if average wages had risen in step with productivity gains, and no more, between 1972 and today, the average worker’s wage last year would have been $61.94, not $25.18.
Indeed, a major factor keeping inflation low for the previous 30 years was the fact that workers didn’t have the clout to bargain up their wages. Alan Greenspan, the chair of the Federal Reserve from 1987 to 2006, explicitly acknowledged this fact. He observed in 1995 that, even at low unemployment rates, U.S. workers had become “traumatized” by the loss of bargaining strength, resulting primarily from global outsourcing that pitted U.S. workers against those in relatively low-wage economies, such as China and Mexico. Greenspan was effectively describing what Karl Marx termed the “reserve army of labor,” in Volume 1 of Capital, except that the reserve army now operates on a global scale.
truthout.org/articles/nationalizing-fossil-fuel-industry-is-a-practical-solution-to-rising-inflation/
Since mid-2020, inflation has been rising, with the level of average prices going up at a faster rate than it has since the early 1980s. In January 2022, prices had increased by 7.5 percent compared to prices in January 2021, and it now looks like the U.S. may be stuck with higher inflation in 2022 and even beyond.
Why are prices rising so dramatically? Are we heading toward double-digit inflation? Can anything be done to curb inflation? How does inflation impact growth and unemployment? Renowned progressive economist Robert Pollin provides comprehensive responses to these questions in the exclusive interview for Truthout that follows. Pollin is distinguished professor of economics and co-director of the Political Economy Research Institute at the University of Massachusetts at Amherst.
Energy: Precisely because burning gasoline, heating oil, and other fossil fuel energy sources is the primary cause of climate change, what we most need to accomplish is to dramatically lower demand for fossil fuels. In other words, pushing fossil fuel prices back down is not helpful in terms of addressing the climate crisis since it would encourage greater fossil fuel consumption.
As such, government policy now needs to commit to both keeping fossil fuel energy prices high, but then to protect energy consumers from the impact of these high fossil fuel prices. This will require large-scale investments in energy efficiency, in all areas of buildings, transportation and industrial activity. Greatly expanding public transportation offerings is one place to start. Providing large subsidizes to retrofit residences with low-cost LED lights, improved insulation and high-efficiency electric heat pumps to replace inefficient boilers is another critical area. Government policy then needs to massively accelerate the production of clean renewable energy sources to supplant our existing fossil fuel energy infrastructure. It is already the case that the costs of generating electricity with solar and wind power are at parity or lower than with fossil fuels. Of course, not all of these investments in energy efficiency and renewable energy will have an immediate impact. Therefore, for the immediate term, the government should provide people with energy tax rebates to compensate them for the impacts of any temporary spikes in energy prices.
The more basic solution here would be for the government to take over the U.S. fossil fuel industry. Under a nationalized fossil fuel industry, the necessary phase-out of fossil fuels as an energy source can proceed in an orderly fashion. The government could then set fossil fuel energy prices to reflect the needs of both consumers and the imperatives of the clean energy transition. At present, the U.S. government could purchase controlling interest in the three dominant U.S. oil and gas companies — ExxonMobil, Chevron and Conoco — for about $350 billion. This would be less than 10 percent of the $4 trillion that the Federal Reserve pumped into Wall Street during the COVID crisis. More generally, these costs should be understood as trivial because nationalization would end these corporations’ relentless campaign of sabotaging the clean energy transition.
Wages: It is crucial to frame these current wage increases within the broader historical context. Over the past 50 years, the average wage for U.S. workers has stagnated (after accounting for inflation). Thus, as of January 2021, the average wage for nonsupervisory workers was at $25.18 an hour, while this figure for 1972, adjusted for inflation, was $25.28 per hour. This is while average labor productivity — the average amount each worker produces over the course of a day — has increased nearly 2.5-fold between 1972 and 2021. Thus, if average wages had risen in step with productivity gains, and no more, between 1972 and today, the average worker’s wage last year would have been $61.94, not $25.18.
Indeed, a major factor keeping inflation low for the previous 30 years was the fact that workers didn’t have the clout to bargain up their wages. Alan Greenspan, the chair of the Federal Reserve from 1987 to 2006, explicitly acknowledged this fact. He observed in 1995 that, even at low unemployment rates, U.S. workers had become “traumatized” by the loss of bargaining strength, resulting primarily from global outsourcing that pitted U.S. workers against those in relatively low-wage economies, such as China and Mexico. Greenspan was effectively describing what Karl Marx termed the “reserve army of labor,” in Volume 1 of Capital, except that the reserve army now operates on a global scale.
truthout.org/articles/nationalizing-fossil-fuel-industry-is-a-practical-solution-to-rising-inflation/