Wednesday, February 17, 2021

The Death of the Carbon Coalition

 

The Death of the Carbon Coalition

Existing models of U.S. politics are wrong. Here’s how the system really works.

BY THOMAS OATLEYMARK BLYTH Foreign Policy

In 2020, President Donald Trump received more votes, almost 75 million, than any sitting president in U.S. history. And yet he lost the popular vote to Joe Biden, who received more votes than any presidential candidate in U.S. history—full stop. The 2020 election will thus go down in history as one in which Americans were both remarkably mobilized and sharply divided.

To date, the election postmortem focused on the role of the pandemic and its associated economic collapse, the long-standing divides uncovered by the Black Lives Matter protests, the appeal within a segment of the electorate of Trump’s personal brand, and an overestimate in the polls of Biden’s lead.

But such issues miss the forest by obsessing about some (important) trees. In particular, the discussion pays almost no attention to the more profound changes in the U.S. economy’s structure that have both produced Trump and will continue to make Trumpism part of the fabric of U.S. politics for years to come. It’s time to recognize that Trump is a symptom, not a cause, of our discomfort. And to understand that, we need to clear out the broader theoretical models that shape how we think about politics.


The stickiest of these bad models goes by the name of the “median voter theorem” (MVT). Derived from the observation that, back in the 1930s, all the shoe shops in U.S. towns and cities were apparently located close to one another, analysts decided to treat political parties as shoe shops and voters as shoe buyers. The most successful shoe shops were the ones closest to the middle of the shoe district with the broadest offering of shoes. They were, in effect, trying to capture the median shoe buyer. Now, rinse and repeat for politics. Parties compete for the voter in the middle and win by drifting closer to that center opinion.

MVT has been under attack for years over the simple fact that political parties in the United States and around the world have become less centrist over time and yet keep winning. They also seem to cater mainly to the interests of voters in the 80th percentile and above for income distribution.

But the MVT’s most significant flaw is that it operates nearly independently from the economy. Consider that, according to the Brookings Institution, Biden won 509 counties to Trump’s 2,547—that’s over five times as many going to Trump. But here’s the kicker. Biden’s counties constitute 71 percent of the country’s GDP. Trump’s is less than 30 percent. Surely we must somehow factor this into how we think about why people vote the way they do? How does growth, or the lack thereof, determine elections?

Our answer is simple. The underlying model of growth that made the politics of the MVT seem reasonable is decades past broken. What we see in U.S. politics today is the death and dissolution of a particular social coalition that dominated politics and economics and underwrote social peace for three generations; call it the carbon coalition.


The carbon coalition was an encompassing political coalition, built on a set of agreements negotiated between 1932 and 1950, that distributed the income generated by the industrial economy among groups within society. In the auto and steel industries, the most dynamic of that era, United Auto Workers (UAW) and General Motors (GM) signed the 1950 Treaty of Detroit, which tied pay to productivity. This created a path to prosperity for two generations of workers in manufacturing.

Meanwhile, to bring rural areas into the coalition, the urban middle class paid higher prices for food and accepted permanent agricultural subsidies so that farmers could enjoy higher incomes. These agreements drew together labor, business, and farmers; the North and the South; the Great Plains and the Great Lakes into one settlement. This broadly inclusive distributive coalition in turn softened the sectional and partisan divisions that had roiled U.S. politics almost continuously since the 1890s.

All this is well known, but what is not recognized is how this political coalition was in fact entirely dependent on a particular growth model: an extremely fossil fuel-intensive agro-industrial economy.

It is only a slight exaggeration to suggest that the United States’ postwar economy was a massive machine that transformed oil, coal, and natural gas into income and food. Consider the following: In 1971, automobile production directly and indirectly provided 1 of every 6 jobs in the U.S. economy. Most of these jobs were unionized, or, if not, most workers enjoyed wages and benefits that spilled over from union agreements. Then add to these jobs others created by the interstate highway program, by the oil and gas industry, and by the retail sale of gasoline and the repair and maintenance of automobiles. And then throw in jobs in aviation, shipping, and agriculture, which became increasingly energy intensive due to the use of diesel-fueled equipment and through the use of natural gas to manufacture artificial fertilizer. Finally come jobs in plastics and petrochemicals.

The carbon coalition distributed the income generated by the carbon economy. Elections determined those distributions. That model is now dying and indeed, given climate change, must die. The politics it made possible are dying too.

The carbon economy has been in decline for decades, but the knock-on effects in politics are only now becoming visible.

The carbon economy has been in decline for decades, but the knock-on effects in politics are only now becoming visible.

 The center of economic dynamism and wealth generation in the United States now lies in knowledge-intensive (or at least high-value-added) industries, some of which, like pharmaceuticals, are research intensive and some of which, like various forms of media, are creative.

Although this knowledge economy is diverse, these activities share one overarching commonality: None require (much less depend on) fossil fuels. Indeed, their survival over the long haul depends on successfully switching out of carbon completely. Productivity in these activities doesn’t come from more energy and bigger machines applied to faster assembly lines but from improvements in our ability to manipulate, analyze, and monetize information.


The economy that drives U.S. GDP growth today is already post-carbon. And though many of its activities are energy intensive (server farms consume more than more than 2 percent of the world’s electricity use; financial services consume more electricity than any other industry in New York City), the energy they consume can come as readily from wind and solar as from coal and natural gas. This isn’t the case for the internal combustion engine, for the steel from which its constructed, and for the oil extraction, refining, and distribution systems that support it. Nor is it true for an ammonia plant or for cement or aviation. Farmers cannot substitute solar energy for artificial fertilizer.

The U.S. economy is thus now divided in two: a growing and potentially sustainable post-carbon economy that can adapt to the realities of climate change and a carbon economy in decline that is unsustainable.

The carbon coalition has fractured as a result of this economic bifurcation in two ways. First, the institutions through which the United States distributed income in the carbon economy have shrunk along with it. The UAW and GM continue to negotiate, but the bargains they strike apply to fewer and fewer workers and to a smaller and smaller share of the U.S. workforce. More broadly, the country has moved away from an economy in which a corporation such as Ford brought physical capital and labor together under a single roof to create an economic surplus that workers and owners divided.

In the old system’s place, the United States has created a new one in which highly skilled, or at least high-credentialed, individuals earn high incomes at Google, Apple, Merck, and Goldman Sachs while low-skilled workers earn minimum wage without benefits at Walmart and the Dollar General through, in many cases, baroque global value chains. The industrial separation between highly valued human capital and low-skilled labor is reinforced increasingly by geographic distance. The rich and the poor once lived in different parts of town. Today, they live in different parts of the country.

As such, the carbon coalition has also broken down along a second and somewhat more fundamental dimension. Americans no longer live in the same economy.

Americans no longer live in the same economy.

 Rather, they live in two incompatible models of economic growth. Those who remain embedded in the carbon economy quite rationally want to defend and rejuvenate that model. In contrast, those who have found a spot in the post-carbon economy largely embrace the future. Indeed, the urgency of the climate crisis makes many of these people in the post-carbon growth model very hostile to the idea that we should save (much less expand) the carbon economy. As a direct consequence, both the carbon coalition and the underlying growth model that made it possible and that structured U.S. politics through most of the postwar era are dead.

In terms of electoral politics, you cannot capture the median voter when you have a quadratic distribution.


Today, the firms and sectors that make up each of the two growth models fund elections and determine the strategy of their parties.

The post-carbon coalition dominates the Democratic Party and supports Biden. This coalition brings together a West Coast variant composed of high-margin agriculture (think wine), Big Tech, entertainment, and digital and high-end services and an East Coast variant based largely on financial services. These post-carbonites embrace some variant of the Green New Deal, which identifies the climate crisis as the most critical issue the country faces and offers a coherent policy response.

The carbon economy coalition that dominates the Republican Party and supports Trump includes export agriculture, carbon extraction, refinement and production, steel and other declining traditional industrial sectors, as well as low-wage and low productivity services (think Walmart over Accenture). This fragment of the original carbon coalition remains committed to defending and rebooting the carbon economy; this is what “Make America Great Again” means. And given their assets and the incomes that depend on them, such an attitude is entirely rational.


The competing coalitions, organized around different growth models, are easy to see in the U.S. electorate. The graph above compares Trump’s share of the 2020 vote in counties that remain dependent on the carbon economy with his share of the vote in knowledge economy counties. In counties with significant oil production and coal-fired electricity generation, Trump captured 65 percent of the vote. In contrast, Trump attracted only 45 percent in counties that did not produce oil or use coal to generate electricity. The same pattern characterizes county dependence on other carbon-intensive industries, which we represent with skill level. Here, it shows that Trump captured two-thirds of the vote in counties that rely relatively heavily on low-skilled employment in traditional carbon-intensive manufacturing while he attracted less than one-third of the vote in counties that rely relatively heavily on high-skilled jobs in knowledge-intensive industries. These same contrasts were evident in the 2016 election as well with Trump capturing large majorities in carbon economy counties and Democratic presidential candidate Hillary Clinton earning a majority in knowledge economy counties. And moreover, the relationships in both elections persist even once we control for the important role that race played in the 2020 and 2016 elections.


The United States’ two coalitions cannot be brought together. Indeed, they are existential threats to each other. And on a population scale, each electoral coalition has more or less the same number of potential voters. As a result, elections are decided by thin margins in a race to the death. And where the MVT encourages us to expect parties to move to the median to win, that strategy cannot hope to succeed in the current U.S. electoral landscape. To see why, consider a contrast with Germany, a country with a single growth model.

Germany has a single export-oriented growth model that powers its economy. Cars, machinery, pharma, high-end engineering, and metallurgy make the country grow. But those sectors employ fewer workers over time due to automation and globalization, and other sectors must be brought into that coalition to win elections. That creates a problem. Exporters like Germany rely on the suppression of wage growth to stay competitive. Export firms can pay their workers more, but if they have to pay everyone more as they expand the coalition to win elections, then exports and the growth model they support will fail.

To deal with this, during the 1990s, Germany embarked on two major reforms that were embraced by both major parties, the Christian Democratic Union and the Social Democratic Party.

First, Germany liberalized labor markets to grow a low-wage service sector that would increase overall employment while keeping down wages. Second, the elite embraced the euro, at the risk of around 70 years of hard-earned price stability, to drown what would otherwise have been a disadvantageously high real exchange rate in a pool of low productivity neighbors. The result was that after the 2010 to 2013 euro crisis, Germany was poised for export-led growth.

That growth may be parasitic on its neighbors and can probably not be generalized as a model elsewhere. (For Germany to have an export surplus, someone else must have a deficit.) But it does work as an encompassing national growth model, and all the major German parties take it as their mission to support it. Despite all their differences, no one questions the export surplus, and politicians compete with one another to find different winning electoral coalitions within these parameters.


Democrats and Republicans can’t do this because their models are antithetical to each other and the middle means death. For almost half of U.S. states, the Green New Deal, which is—sotto voce—at the center of Biden’s platform, spells the end of their existing strategies—think fracking, refining, plastics, mining, logging, and so on. And for the other half of the states that support the deal, scaling back its objectives to attract support from the carbon coalition threatens the post-carbon coastal communities. Will Silicon Valley and Wall Street remain above water at 2 degrees Celsius global warming? There is simply no way to build a centrist coalition across this divide.

There is only one way to fix this mess. The post-carbon coalition has to bribe what’s left of it to make the carbon transition. Non-coastal, largely Republican states must be the epicenter of the green transition and be the recipients of most of the investment. After all, they have the most assets to turn around and the most to lose if they are not compensated. If all they are offered is “you decarbonize/we keep the money,” then all they will give back is more Trumpism.

There are clear parallels in U.S. history, such as the massive bribe that the urban sector began paying to farmers in 1933 with the Agricultural Adjustment Act and two generations of generous farm bills thereafter. Yet the bribe this time must involve more than a subsidy; it requires exiting the carbon economy. For it to work, green investment must extend well beyond energy capture (solar and wind farms) and downstream into industries that are powered by alternatives. Massive investments in electric vehicle production, for instance, to support a rapid turnover of the U.S. motor vehicle fleet with U.S.-built cars and trucks, are required.

There are many proposals on the table to ameliorate polarization. But perhaps the most fundamental, and hardest to do, is to change the way we think about politics. Elections in the United States are not being fought over rival principles and certainly not over median voters. They are contested over which parts of the country will grow and how and who will pay for it. Recognizing this is the first step to fixing the deeper problem of the carbon transition for the good of all Americans.

 

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