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The Next Great Transformation

The world’s ability to manage global crises such as climate change depends on our ability to achieve broad-based economic prosperity and stability argues JAMES K. GALBRAITH.

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Two great specters loom over humankind. One is rapid extinction following a full-scale nuclear war, or a poisoned planet following a more limited one – a point made by the great physicist Andrei Sakharov in his day.

The other specter is the slower extinction that would follow from runaway global warming. Getting ahead of that threat requires the largest effort of planning, investment, public education, and social insurance in human history – the mother of all New Deals. And yet efforts to confront it have been frustrated by mainstream economists.

For example, it is fanciful to think that economic processes that will have large and uncertain effects 50 or 100 years in the future can be dealt with through present-day market mechanisms – such as a price or tax on carbon – alone.

And yet a leading economist in US President Barack Obama’s administration (one of the good guys, relatively speaking) relayed this very idea to me some years ago, with the proviso that he was channeling his “inner Hayek.”

In the real world, we need an economics that can integrate resources, social stability, and the environment into one realistic, long-term framework.

Two themes from my recent work bear on this problem. One relates to economic growth in the twenty-first century, particularly after the 2008 financial crisis. The other concerns the measure and meaning of economic inequality. These issues represent enabling and constraining factors, respectively, in our efforts to tackle existential threats. Even as we work to avert nuclear war and mitigate global warming, we also must maintain a functioning system that provides the world’s population with a decent standard of living.

Otherwise, people will resist the great transformation that the climate threat, in particular, has made necessary. Perpetual economic instability will leave our hands perpetually tied.

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