Disruption Demands Heroics
The songwriter Bonnie Tyler (of “Total Eclipse Of The Heart” fame) had another hit entitled “Holding Out For A Hero” as part of the soundtrack for the iconic 1984 film Footloose. It includes the following lyrics:
Where have all the good men gone
And where are all the gods?
Where’s the streetwise Hercules to fight the rising odds?
I need a hero
I’m holding out for a hero ’til the morning light
He’s gotta be sure
And it’s gotta be soon
And he’s gotta be larger than life!
Indeed. We’re all looking for a hero to rescue us from the current crisis.
Sadly, what we face is a ‘sub-crisis’, a crisis within a meta crisis.
This week marks the 50th anniversary of Earth Day, but due to the coronavirus, it won’t include mass protests or celebrations. Around the world, streets are empty; as are offices and many factories. But the meta crisis called climate change remains a threat to life on earth. While it doesn’t have the immediacy and mass panic of a pandemic, it is a real and present danger.
Through the current coronavirus pandemic, we have come to realize that the global economic system is highly precarious. It only took a virus (with a relatively low mortality rate) to tip it and cause widespread panic, a global economic shutdown, and a precipitous decline in the financial markets. We are now seeing, for the first time, negative pricing for oil futures.
We need a hero and that hero is… all of us. Locally and globally.
But where do we start? What are the biggest challenges and how can we change? Fundamentally, what is the narrative that can take us forward, together?
Undoubtedly, COVID-19 has given us a better perspective on our collective identity as a species and brought humanity into a new worldview. We have felt a real threat to ourselves and our societies. But it’s just beginning.
While the destabilization of the global economy has brought about great empathy and a sense of a common purpose in some leaders, we also need a comprehensive investment in underlying infrastructures. If we consider some of the great paradigm shifts in human history — what the Austrian political economist Schumpeter called “creative destruction” — the catalyst to change economic models and forms of governance has been investments in infrastructure (think railways, electricity grids, roads and airports).
The world currently faces a convergence of technologies that can radically transform how we power our economies, move goods and people, and collaborate. In short, the opportunity at hand is to build a new “ecological civilization”.*
The heroic part is in how we can influence our leaders — and do our own part to change our lifestyles and organize — so that this occurs. It will take trust and it will take cooperation at all levels of society. It will also take a cohesive vision.
This is our ‘rubicon moment’ as a species.
Why infrastructure and why now?
The time is ripe for a significant systemic change. Not a ‘tinkering around the edges’ and certainly not supporting ‘the way it was’. This entails a bold re-building of underlying infrastructures, including a rapid transition to renewable energy sources to power our economies. If we are to ensure resiliency in our economies, this transformation is critical.
According to Jeremy Rifkin — a respected advisor to heads of state around the world and the famed author of more than 20 books, including his most recent, Green New Deal — infrastructure is:
“A techno-socio bond that brings together new communications technologies, new energy sources, new modes of mobility and logistics, and new built environments, enabling communities to more efficiently manage, power, and move their economic activity, social, life and governance.”
Rifkin’s vision of the future — which is a near-term reality with technologies already at hand — buildings function as zero-carbon energy-efficient smart nodes embedded in an Internet of Things (IoT) matrix, and green micro power plants are networked with distributed energy storage. He argues that collaboration between local and federal government; the real estate sector — described as “the most vulnerable to becoming the biggest stranded asset in the world in the coming decade”; and pension funds (the world’s largest pool of investment capital), is required.
Creating public-private partnerships under an ESCO (energy service company) business model, he has recommended 23 actions (all U.S.-focused) as part of what he describes as an emerging consensus on initiatives that need to be happen concurrently to accelerate progress toward a better future. In total, he proposes a $9.2 trillion investment in infrastructure, understanding that every dollar invested adds $3 to the U.S. GDP and creates millions of new jobs.
For me, these are the top-10 initiatives of his Green New Deal (in no particular order):
- Implement a carbon tax that will increase over time with a significant portion of the revenues returned to vulnerable families and the rest going to help finance green infrastructure.
- Ensure that the world’s leading economies continue to collaborate to ensure there is interconnectivity and transparency in the deployment and operation of smart green ‘glocal’ infrastructure, including standardized interconnections between IoT technologies.
- Enact legislation to establish a Green Bank that can provide funds to state, county, and municipal green banks that leverage these funds with pension funds and other investment capital to scale green infrastructure build-outs.
- Institute graduated tax hikes on new internal combustion vehicles, and grant tax credits on the purchase of electric vehicles.
- Transition public land to zero-emission assets and infrastructure, including tax credits, deductions, grants and low-interest loans to encourage the retrofitting of buildings to increase energy efficiencies.
- Prioritize and finance the upgrading of all water and sewage systems to be ‘climate change-ready’ (i.e. be resilient to hurricanes and other extreme weather events).
- Redeploy an increasing percentage of military expenditures to ensure troops are available to manage climate-related disaster response missions.
- Prioritize business support opportunities in the most disadvantaged communities to provide training for new employment opportunities that are part of scaling up of green infrastructure, and upgrading all public health services in these communities.
- Substantially increasing the taxation of the ‘super-rich’ (i.e. a 70% marginal tax on those making $10 million or more per year).
- Quickly phase out and eliminate fossil fuel subsidies that currently amount to at least $15 billion going to oil, gas, and goal industries in the United States.
Making up for Underinvestment
Unfortunately, infrastructure spending has not kept pace with the kind of techno-social development the world needs. In the case of the United States — a global laggard** in infrastructure spending among highly developed nations — McKinsey has projected that the world’s largest economy will need to increase its current overall infrastructure investment by 0.5% of GDP between 2017 and 2035 just to keep pace with the conventional infrastructure needs of the country.
Like all of us, the power grid is aging, becoming less reliable and costly. In the US, old thermal power plants need to be ‘retired’ during the next 10 years with the electric power industry having to spend hundreds of billions of dollars to achieve this. So if we are going to fix what’s broken and breaking, why not use the best and most economic technologies available to align with what we need to do to lower the world’s carbon reduction targets (as per the Paris Agreement of 2015)?
Consider the fact that in 2017, 43% of the primary energy in the world was used to generate electricity. Over the coming decades, we are going to use an increasing amount of primary energy as the transport sector decouples from fossil fuels and moves to electric vehicles powered by the electricity grid. Currently, electric vehicles (EV) make up just 4% of the auto market in China, the world’s largest, however, the country is looking to mandate that 60% of auto sales are electric by 2035. We also know that the automotive industry has committed hundreds of billions to EVs, with Tesla leading the way in consumer adoption.
The 3% Threshold
Given that just over 2% of the world’s passenger vehicles were electric in 2019, this may seem implausible.
Fortunately, when predicting Kondratieff waves of “creative destruction” (as per Schumpeter) , the Rule of Thumb is that when a challenger captures just 3% of the market from incumbents, the incumbents’ sales often peak and begin to decline, singling an entire industry’s demise while another arises.
Having dug up and burned (in a matter of a couple of hundred years) coal, oil and natural gas — essentially the remains of life (itself produced over millennia) buried for hundreds of millions of years — we are now paying the price for fossil fuel-driven industrialized development. The true costs of that deal are being realized in the form of increasing CO2 levels (and other Greenhouse Gases), the bi-product of the burning fossil fuels, the ramifications of which are increasingly being felt by all of us.
In short, we have created a Carbon Bubble for ourselves and if we are to avoid the rapid disintegration of our societies — of which we’ve been given a taste by the coronavirus pandemic — we need a radical ‘about-face’ in how our economies function and how different levels of government and the private sector work with one another.
The question is why are we so reluctant to make the change?
Several years ago I attended a lecture (sponsored by Shell, interestingly enough) by Jørgen Randers, one of the famous co-authors of The Limits of Growth. This 1972 landmark study looked at looming threats to humankind, and in 2012, he provided an update on his team’s research with a Global Forecast for the Next Forty Years. In a summary article for this research, he laments ‘short-termism’ as the hindering factor in seeing a meaningful response to threats such as the climate crisis:
“If we just decided to do something, it could easily be done. The problem is not a lack of technology, nor the economic cost, but the way we have chosen to organise our societal decision-making.”
Beyond short-termism, we also need to support leaders who can be champions for the kind of heroics needed to make such profound socio-economic transformations. It requires the strength to regroup, the conviction to conjure collective strength, and an internal fortitude to be resilient in the face of disruption. We need to share our scientific findings and learnings so that we can prepare ourselves what looks to be a very bumpy ride ahead.
Going back to the Bonnie Tyler song, maybe the “he” she was looking for in a hero is a “she” (a la Jacinda Ardern, New Zealand’s current Prime Minister). Perhaps though, the hero is a “we”…us, working together to re-engineer the scaffolding of our societies and how we structure our economies. I believe this to be true, and hope it will happen as more young people step into positions of power and influence.
* a term used by the Chinese since 2012 as part of their Five-Year Plans, a series of social and economic development initiatives issued over the past 67 years. China’s current Five-Year Plan ends this year.)
** From 2010–2015, China spent an annual average of 8.3% of its GDP on infrastructure. During the same period, the US invested just 2.3% of GDP on infrastructure (Woetzel et al., Bridging Infrastructure Gaps).