Remaking Post-Covid-19 Western Capitalism : Lessons For The East

As the world emerges painfully from  the lockdown cure that is likely to be far worse than the disease of Covid-19, we are now being sold yet another bill of goods. We are told from almost every quarter that the economic recovery from the pandemic-panic induced lockdowns has to be “green”. Political leaders and mass media editors hitched to the climate change bandwagon cite the well-known if cynical slogan “never let a crisis go to waste” – commonly attributed to former President Obama’s Chief of Staff Rahm Emmanuel. Politicians and “thought leaders” ceaselessly claim that massive sums of money need to be spent on economic stimulus plans to recover from the self-induced economic coma and that the spending has to be “sustainable” (aka “green”). Not only will this save us from the “crisis of capitalism” but it is deemed vital for the future of human civilization itself.

Prince Charles – the famous prognosticator of apocalyptic climate change a la Al Gore – said at the opening of a virtual World Economic Forum event that the global pandemic presented an opportunity to “reset the global economy and prioritize sustainable development”. Using very similar language, the founder and chairman of the World Economic Forum Klaus Schwab calls for the “Great Reset” of capitalism. Seeing a ‘silver lining’ in the pandemic which showed how quickly radical changes in lifestyles are possible, he advocates “radical changes” to “create a new economic system” which builds a ‘green’ urban infrastructure.

The calls by Prince Charles and Klaus Schwab for “remaking capitalism” are in lock-step with the stated aims of Christiana Figueres, the former executive secretary of the  U.N.’s Framework Convention on Climate Change. Leading the UN’s climate change juggernaut, she had demanded “setting ourselves the task of intentionally… chang[ing] the economic development model that has been reigning for at least 150 years, since the Industrial Revolution”.

In discussing the EU’s trillion-euro plan for economic recovery from the pandemic, European Commission President Ursula von der Leyen promises to put the European Green Deal “at the centre”. Her colleague and political ally German Chancellor Angela Merkel concurs, “With the European Green Deal the EU Commission has shown the way forward…it is important that recovery programmes always keep an eye on the climate, we must not side-line climate but invest in climate technologies.” Across the English channel, UK Chancellor Rishi Sunak’s £600 billion recovery package to be unveiled next month promises nothing less than a “green industrial revolution”. It will create “green jobs” and supply “clean energy”, consistent with the country’s commitment to reducing greenhouse gas emissions to “net zero” by 2050.

Across the pond, the Washington Post reports that the Democratic presidential nominee Joe Biden is “embracing the Green New Deal’s framework, setting a deadline to achieve net-zero emissions by 2050 and vowing to create a clean-energy economy with new jobs”. Mr. Biden’s support for Green New Deal rhetoric of his party’s left-wing — represented by the likes of Elizabeth Warren, Bernie Sanders and Alexandria Ocasio-Cortez — promises policy proposals including a carbon tax, $1.7 trillion in “green” spending, a ban on oil and gas drilling on public lands, and a carbon tariff on imports.

The developing countries are having none of this. Instead of costly subsidies and infrastructure investments on intermittent and low density “renewable” technologies, they will opt for further investments in an established energy system that has been developed over the past century. Thus, in a scramble to jump start its economy from the pandemic-induced slowdown, China approved nearly 10GW of new coal-fired power generation capacity in the first quarter of this year, roughly equal to the capacity approved for all of 2019. A recent report from the International Energy Agency found that “global approvals of new [coal] plants in the first quarter of 2020 (mainly in China) were at twice the rate seen in 2019”, with a long pipeline of projects under construction. Wood Mackenzie, a consulting company, estimates that there will be a net increase in global coal-fired power capacity this year, with 22 gigawatts of closures in Europe and the US more than offset by 49 gigawatts of plants opening in Asia.

For the billions of people that have newly emerged from poverty in recent decades and are beginning to enjoy the early fruits of economic growth and technological progress across Asia, Africa and Latin America – among the greatest achievements in human history – the West’s ideological crusade against capitalism and economic growth may seem self-indulgent if not altogether grotesque. Policy makers in the poorer countries are fully aware that their economies cannot do without fossil fuels. Available and affordable energy, deliverable at scale, is the sine qua non of economic development. Industrialization, urbanization and middle class living standards are not the curse words that they have become for the West’s left-leaning intelligentsia. They are aspirational goals that can only be delivered by oil, gas and coal which account for 85% of global primary energy supply.

Many developing countries with large segments of the population living hand to mouth have disastrously replicated the strict lockdowns of the West without the capacity to provide the kind of welfare assistance that the developed countries have extended to their citizens. As one of India’s leading industrialists Rajiv Bajaj put it, the country has “…flattened the wrong curve. It is not the infection curve, it is the GDP curve.” The developing countries need a post-Covid-19 recovery plan that focuses on “green new deals” as much as a hole in the head.