Despite Wall Street's recklessness, we still seem more comfortable with the financial sector than with manufacturing. After all, manufacturing has a two hundred year history of occupational disease and environmental destruction. It produces poisons we don't want, consumer goods we don't need, and it uses more energy than we can afford to burn. For many, the industrial revolution looks like an unmitigated environmental disaster. So if manufacturing runs away to far off lands, few are likely to shed tears -- unless we work in these industries.
In contrast, financial products are relatively clean. Yes, its offices are too large and they use too much paper. And certainly the sector pays its executives far too much. But it's a lot cleaner than a steel mill and leaves a much smaller carbon footprint. Also, venture capitalists are moving money into renewable energy, green chemistry and a wide variety of green manufacturing that might actually help us develop a more sustainable economy.
A sizable portion of our financial leaders are conservationists. They donate to environmental groups to help preserve our watersheds and streams. They own large tracts of land near national parks and forests that help protect our land, water and wildlife. Many of the wealthiest Wall Street elites would claim to share our deepest concerns about global warming and sustainability.
Industrial workers, however, can get really nasty when environmental regulations threaten their livelihoods. Although they like to hunt and fish, workers who see their jobs threatened seem more than ready to chop down virgin trees, knock off the tops of mountains, and pump CO2 all over the globe.
Sure, we don't like the fact that Wall Street's fantasy finance casino crashed the economy, but even that has a positive environmental angle. The collapse has slowed down the world economy, slowed down production and transportation, and therefore has slowed down the output of carbon.
And besides, the manufacturing sector accounts for fewer and fewer jobs each year, so why should we give a damn about it?
Because no society can endure for long if it fails to create decent jobs for all its people. Right now, more than 29 million Americans are unemployed or forced into part-time work. They need jobs that are at harmony with nature. Creating that kind of work, I believe, will require a monumental commitment, just like the Manhattan Project, the Marshall Plan or the moon shot.
But first we need to understand how we got into this fix. Over the past thirty years we've engaged in a gigantic experiment with three major components -- the deregulation of financial markets, the globalization of production, and "tax reforms" which allowed wealth to accumulate in the top fraction of one percent. This was supposed to unleash entrepreneurial initiative and raise all boats. But it didn't work according to plan. Industry began relocating all over the world. The financial sector grew rapidly, and an enormous pot of wealth accumulated in the hands of a few. Meanwhile average wages (after adjusting for inflation) declined by 18 percent while our industrial core was shipped overseas.
The super-rich actually had so much capital that they ran out of real-world investments. That's when their money flowed into the newly deregulated fantasy finance casino. Bubbles inflated -- from the savings and loan fiasco to the dot.com crash to the housing hurricane. This grand experiment in deregulated capitalism failed miserably. We were moments away from the Great Depression II only one year ago. (For a full description see The Looting of America.)
To stop a full scale depression we poured trillions into Wall Street, but little has changed as our financial powerhouses, pumped up with taxpayer largess, are doing all they can to stop regulations on fantasy derivatives and caps on outrageous salaries. Nothing is preventing Wall Street from doing what it does best: seek out and over-inflate financial bubbles, skimming billions of dollars in fees all along the way. (See One Year After Lehman: Another Crash Coming?)
In short we face both an economic and an environmental crisis. What do we do? Obviously, we have to learn to live within the constraints of our natural environment. But we also must fulfill the most fundamental employment needs of our social environment.
That is why we should embark on a modern day moon shot to lead the world forward in renewable energy and other green technologies. This would require massive public investments in research and development, and in ensuring the adoption of the best technologies -- not because the private system can't, in principle, do those things, but because in reality it can't do them as fast as they need to be done. We're talking several hundred billion a year for at least twenty years. And if we funded it by taxing Wall Street and the super-rich we could tackle two problems at once: make real progress on global warming and prevent the financial sector from wrecking the economy again.
I believe the fairest ways to secure funding is through windfall profits taxes on Wall Street profits, a small transaction tax on large and speculative financial transactions, and a very steep progressive income tax on the super-rich. (I'm an Eisenhower radical. In those days the marginal tax rate on millionaires was 90 percent.) This would move the money from the fantasy finance casino to the real economy and it could lead to a rejuvenated economy based on renewable energy and pollution prevention.
Such a massive commitment also would require border adjustment taxes on carbon to make sure the new green industries don't flee to nations with lower standards. It makes no sense to import windmills from countries whose steel plants put out three times the carbon as ours. It makes no sense to use up fossil fuels to ship green goods all over the globe, when those goods could be made much closer to their point of final use.
I know it's a very tall order to revamp Wall Street and to invent a green economy at the same time. But both the employment and environmental problems pose immanent threats. No free-market magic will make them disappear. It requires our human intervention. Let's hope we have the wisdom and will to get going -- now.
Les Leopold is the author of The Looting of America: How Wall Street's Game of Fantasy Finance destroyed our Jobs, Pensions and Prosperity, and What We Can Do About It, Chelsea Green Publishing, June 2009.