“Just Energy Partnerships” Are Failing / by Sean Sweeney

_{^{Wind turbines operate next to an informal squatter camp on June 6, 2023, in Gouda, South Africa. (Per-Anders Pettersson / Getty Images)}}

The recent post-COP26 rollout of “just energy partnerships” to finance poor countries’ turn away from fossil fuels has been widely touted as a way for wealthy countries to fund the green transition. The only problem: they aren’t working.

_{Reposted from Jacobin}

In the complicated world of “climate finance,” the Just Energy Transition Partnerships (JETPs) have been presented as the best thing since beluga caviar. The designers and advocates of the JETPs say that they represent a “new financing paradigm,” and “a template on how to support just transition around the world.”

It all started (ostensibly) at the United Nations (UN) climate talks (COP26) in Glasgow in November 2021, when the first JETP between rich countries (represented by “International Partners Group,” or IPG) and South Africa was unveiled. Six months later, in June 2022, G7 leaders stated that more JETPs were in the pipeline, involving Indonesia and Vietnam. In November 2022, Egypt joined the JETP group, and Senegal signed on in June 2023. JETPs involving Côte d’Ivoire, Colombia, India, Kenya, Morocco, Nigeria, Thailand, Kazakhstan, Mongolia, and the Philippines are apparently under discussion.

In each instance, the goal of the JETP is to “mobilize” finance in the form of both concessional and commercial loans (explained below) to help Global South countries either move away from coal and/or accelerate the deployment of renewable energy in ways that are socially just. For some, the finance committed under the first JETPs — $8.5 billion to South Africa, $15.5 billion to Vietnam, and $20 billion to Indonesia — indicates that rich countries are, after years of vague promises, finally beginning to meet their obligation under the UN’s Framework Convention on Climate Change (UNFCCC) to “provide financial resources to assist developing country Parties in implementing the objectives of the UNFCCC.”

The fact that private financial interests have pledged to partner with governments on developing and implementing the JETPs has added political weight to the effort to present the JETPs as a model for financing the transition. At COP26, the Glasgow Financial Alliance for Net Zero (GFANZ), a coalition of 550 corporations worth $130 trillion, declared its readiness to assist the JETPs with financing and expertise as part of “the transformation of the global economy for net zero.”

Don’t Criticize It

JETPs have been generally well received by North-based environmental nongovernmental organizations (NGOs), liberal policy groups, and some unions. In 2022, at COP27 in Sharm El-Sheikh, Egypt, then International Trade Union Confederation (ITUC) general secretary Sharan Burrow praised South Africa’s JETP deliberations as “a model that should be emulated everywhere” because unions had been given “a seat at the table.”⁹ The Overseas Development Institute stated, “There is currently no other mechanism which would unlock the scale of international [development] finance needed to retire South Africa’s multiple coal-fired power plants, reskill fossil fuel workers and support local economic development in coal mining regions.”

But support for JETPs, while frequently tentative and provisional, is misplaced, for several reasons.

First, while JETPs are expected to lead to an “accelerated decarbonization of large emissions-intensive middle-income countries,” they are unlikely to reduce coal use significantly. Global coal use is today at its highest point in history and is the largest single source of CO2 emissions. Reducing coal use would likely yield climate benefits, but the three main JETP countries — South Africa, Indonesia, and Vietnam — together account for just 4.3 percent of global annual coal consumption, whereas just two of the IPG countries, Germany and the United States, together account for 11.5 percent. If the rich countries really want to reduce global coal use, they should stop shipping it abroad. Australia exports 80 percent of its coal, mostly to India, Japan, and Korea. The United States, too, is a major exporter. In 2022, the United States exported about 80 million metric tons of coal — equal to about 14 percent of US coal production. The United States is ranked fourth-largest exporter behind Indonesia, Australia, and Russia.

Legitimize to Privatize

Second, the just transition dimension of the JETPs lacks substance. International labor had helped ensure that the principle of just transition was in the Paris Agreement, and in South Africa and Indonesia, unions and civil society groups were invited to participate in discussions on their implementation. However, a seat at the table could hardly stop the push toward energy privatization. In South Africa, for instance, in early February 2019, almost three years before the JETP was announced, President Cyril Ramaphosa declared that his government would “lead a process with labor, Eskom [the public electricity utility] and other stakeholders to work out the details of a just transition.” However, in the very same speech, Ramaphosa announced the breakup, or “unbundling,” of Eskom, “to raise funding for its various operations much easily [sic] from funders and the market.”

Aware that unbundling is normally step one in the process of World Bank–driven privatization, unions opposed the government’s decision, and continue to do so. The National Union of Mineworkers (NUM) called for the cancelation of power purchase agreements with private wind and solar companies that, they said, were costing Eskom ZAR93 million (roughly $5.2 million) a day. South Africa’s labor movement has urged Ramaphosa to consider an alternative approach, one that allows Eskom to become a renewable energy producer.

But union objections were brushed aside. Keen to support Ramaphosa, the IPG made the $8.5 billion in the JETP, contingent upon the creation of “an enabling environment through policy reform of the electricity sector, such as unbundling [of the public utility, Eskom].”

In Indonesia, in a similar union-led battle against privatization, energy unions successfully appealed to the country’s Constitutional Court in 2016 to halt the expansion of privately owned electricity companies (independent power producers, or IPPs) in the country’s electricity sector. Unions argued that the expansion of the IPPs violated Article 33 of the country’s constitution, which ensured that energy and other vital services would remain controlled by the Indonesian state. The court agreed, but the government was not about to give up. A 2020 omnibus law endorsed the presence of private and cooperative energy producers alongside the state-owned power utility, PLN (Perusahaan Listrik Negara). The language in the law was innocuous enough, but the implications of the law were anything but.

Following the announcement of the IPG-GFANZ JETP deal with Indonesia, unions were invited to provide input. As with South Africa, the JETP itself was not on the table for discussion and neither was the push for energy privatization; rather, the labor movement was described as the “stakeholder” that “monitors and ensures that the JETP implementation abides by the principles of just transition.”

All Dressed Up

Athird reason for being skeptical about the JETPs concerns the actual status of financing. Despite the hype, financing for the first tranche of JETPs is still nowhere to be seen.

Several reports have attempted to explain this. One pointed to the “lack of follow through” from both IPG and “host countries” which “risks souring the spirit of cooperation.” The Financial Times cites “a lack of consistent support from multilateral development banks (MDBs) and the premature announcement of deals by political leaders before funding had been secured.”

It is therefore tempting to dismiss the JETPs as another sign of rich-country indifference and stinginess. Alternatively, a Brookings Institute paper describes it as “forces within both labor and business who are attached to the old carbon economy.” Either way, JETPs have been all dressed up but, in the end, might have nowhere to go.

In the Blender

But neither of these explanations fully account for what is happening (or not) with the JETPs. For this, a deeper analysis of climate finance is required.

Under the principle of “common but differentiated responsibilities and respective capabilities” adopted in the early 1990s negotiations around the UNFCCC, rich countries accepted “the urgent need to enhance the provision of finance, technology and capacity-building support” from the North to the developing South. This clear obligation was subsequently reworded, although not officially. Instead of providing finance, rich countries began to talk about providing access to finance — which is a different proposition altogether. This not-so-subtle shift became visible in late 2009 at COP15 in Copenhagen, when US secretary of state Hillary Clinton announced that rich countries were going to jointly “mobilize” $100 billion a year by 2020 from “a wide variety of sources, public and private.” In other words, rich countries did not want climate finance to become an extension of “overseas development assistance” (with a heavy emphasis on grants); they wanted it to take the form of loans.

By the time the Paris Agreement was adopted in 2015, it was clear that climate finance flowing from North to South was so minimal that it was becoming a diplomatic embarrassment for the rich countries. The World Bank pivoted toward using development loans to spur additional private investment — so-called blended finance — to reach both climate and sustainable development goals. Billions of dollars of development finance would, the Bank believed, “unlock” trillions of dollars from private investors.

Crunched by Numbers

It is this “billions to trillions” blended finance model that lies at the heart of the JETPs. It mixes commercial loans (issued at market rate), “concessional” financing, and grants. Concessional loans offer below-market interest rates, and sometimes grace periods where the borrower is not required to make debt payments for several years — a form of “JETP discount.” Mix these two forms of financing together and, voilà — stand by for the great unlocking of private investment. The local elites in South Africa and Indonesia believe in this model and have embraced the JETPs with as much enthusiasm as the rich countries.

But at COP26 in Glasgow, six years after Billons to Trillions was launched, a UN-commissioned study revealed that the flow of money was considerably below $100 billion per year and — revealingly — for every $4 committed by development banks, less than $1 was added by the private investors.³¹

In 2021, the International Energy Agency (IEA) calculated that “emerging and developing economies” (EMDEs) account for “two-thirds of the world’s population but only one-fifth of investment in clean energy” due to “persistent challenges in mobilizing finance.” But these “persistent challenges” boil down to one thing: not enough profit. In the words of one analyst, “For any private sector actor, the investment climate is critical. . . . Often, as we know, in low-income countries the risk profiles versus the returns just aren’t there.”

This explains why the JETPs are languishing. From the perspective of private investors, on a project-by-project basis, the levels of profit must be comparable to returns on investments that they make in the Global North. Why incur more project risk when there are less risky investment opportunities in the rich countries?

The World Bank, and now the IPG and GFANZ, hope that concessional loans might make clean energy projects more “bankable,” but the evidence suggests that the gap between profit levels in the North and those in the South is frequently far too wide. In other words, the “enabling environment” is unlikely be enabling enough. This likely explains why the MDBs have also been reluctant to turn pledges into cash, because without the private sector stepping up, the MDBs know that already indebted developing countries will struggle to carry the financial burden of the transition on their own balance sheets.

Catalyze How?

As originally conceived, climate finance was intended to help settle the North’s ecological debt to the South, not add more financial debt to their balance sheets. In Indonesia’s case, roughly 20 percent of the $20 billion financing is expected to take the form of commercial loans and around 70 percent in concessional loans. But even cheap loans must be paid back, with interest. Commenting on the JETP with Indonesia at COP28 in Dubai, Jakarta-based Tiza Mafira from the Climate Policy Initiative (CPI) noted, “Concessional loans will need to be channeled via MDBs, and MDBs will require sovereign guarantees, and so Indonesia may have to set aside $8.4 billion in sovereign guarantees in order to access those concessional loans [in the JETP].”

However, in South Africa’s case, no less than 80 percent of the proposed JETP finance will take the form of commercial loans, thus imposing considerably more debt on a country whose government is pursuing a full-on austerity agenda when the unemployment rate, in February 2024, stood above 32 percent. Vietnam fares little better. Close to 70 percent of IPG financing is in the form of commercial loans, and concessional loans account for less than a quarter of the IPG package.

Faced with these realities, it is wrong to blame (as some progressives do) developing country governments for the fact that the JETPs are currently in trouble. Any policy that requires developing countries to incur more debt is not “just,” especially when the result is intended to produce a “global public good” in the form of lower emissions. If reducing coal use is indeed a global public good, then why must South Africa, Indonesia, and Vietnam be financially responsible for its delivery?

But the crisis of climate finance — whether blended or not — has global implications. As the prophet of “green growth” Lord Nicholas Stern and his cothinkers highlighted in a 2022 study, Secretary Clinton’s $100 billion per year finance target was negotiated by politicians and diplomats; “it was not deduced from analyses of what is necessary.” In other words, a lot more money will need to be “unlocked” if energy transition targets are going to be reached. The study pointed out that “developing countries other than China will need to spend around $1 trillion per year by 2025 (4.1 percent of gross domestic product [GDP] compared with 2.2 percent in 2019) and around $2.4 trillion per year by 2030 (6.5 percent of GDP).” Furthermore, “Around half of the required the financing can be reasonably expected to come from local sources” but “around $1 trillion per year of external finance will be required by 2030 to meet the scale of the investment needs.”

The trillion-dollar question, therefore, is this: If blended finance has until now not been able to mobilize private investment in the Global South, how can it be expected to do better in the future?

Hosting Debt, Surrendering Sovereignty

This brings us to the issue of privatization and the “conditionalities” associated with the JETPs.

One of the misconceptions that have accompanied the JETPs is the idea that the money from the rich countries is, as it were, on the table, and that host countries would be foolish not to use it to accelerate their respective energy transitions. But the JETP agreements are clear: host countries must first develop an investment and implementation plan before the finance, which is based on donor pledges, can be accessed.

South Africa, Indonesia, and Vietnam have already complied with this IPG requirement, and the contents of each of the implementation plans are revealing. First, in each case, JETP financing amounts to a fraction of what’s needed. According to the respective plans, South Africa will, by 2030, need $65 billion in investment for the power sector alone. In the case of Indonesia, “approximately $97.1 billion of cumulative power sector investments are required by 2030 under the JETP scenario.” Vietnam’s plan estimates that the country will require $134.7 billion from domestic and international sources by 2030.

Second, host country elites, contrary to the evidence, seem to believe that JETP financing can “catalyze” private sector investment. According to Daniel Mminele, head of the Presidential Climate Finance Task Team, the JETP package “is insufficient to fund our [South Africa’s] transition” but JETP dollars will be “dwarfed by what is available in the private capital markets — we need to develop mechanisms to mobilize these forms of finance to invest in South Africa’s just transition.”

But what are the “mechanisms” (beyond prayer) that will allow $8.5 billion in mostly commercial loans to “unlock” more than ten times that amount to cover the costs of the transition to 2030? Similarly, Indonesia’s implementation plan sees the US$20 billion JETP as “an important catalyst.” But how will $20 billion in loans “crowd in” almost five times as much investment?

Third, the IPG-GFANZ axis has made it clear that access to JETP finance is contingent upon the host country being able to create an “enabling environment for the private sector,” and pursue a “policy reform strategy in both the energy and financial sectors to catalyze investment” in a “market-driven manner.” As noted above, in South Africa’s case, the JETP agreement calls for the unbundling of the public utility (Eskom) — a clear precursor to privatization. But similar language is used in the agreements with Indonesia and Vietnam. Getting in on the act, the GFANZ group sees private sector finance as contingent on “continued policy reform” and “a robust pipeline of competitively tendered projects.” Then, and only then, will the $7.75 billion become real. Rather than being a “game changer,” the JETPs extend the existing climate financing game deep into overtime.

It is therefore unfortunate that progressive opinion has been critical of unions for opposing the JETPs. For example, Adam Tooze turned on the South Africa’s NUM for not thinking of the greater good. The union, wrote Tooze,

represents 50,000 workers with a strong voice and a stranglehold on the existing, derelict system. There are 2.5 million people living in communities closely tied to coal mining. But South Africa is a nation of almost 60 million desperate for [electrical] power. Renewables are the cheap future.

JETP financing invites poor countries to borrow money to finance an energy transition and thus incur more debt than they would have if they had done nothing at all. Meanwhile, the MDBs, private investors, and rich country governments are making financing contingent on poor countries creating an “enabling environment” for the private sector, including commitments to privatize their energy systems. But what if the enabling environment isn’t enabling enough? What happens if, as seems likely, the private sector does not show up?

These questions have yet to be answered because there are simply no convincing answers available. The evidence strongly suggests that the JETPs will not pass the “mobilize” test; they will not “catalyze” anything significant. The sad story of climate finance — blended or not — will continue. For developing countries, the risks to both energy sovereignty and energy security are considerable. For the world, the risks may be even greater.

This article was first published in the Spring 2024 issue of New Labor Forum, a journal from the Murphy Institute at the City University of New York’s School of Labor and Urban Studies.

_{Sean Sweeney is the director of the International Program on Labor, Climate & Environment at the School of Labor and Urban Studies, City University of New York. He also coordinates Trade Unions for Energy Democracy (TUED) a global network of 64 unions from 22 countries. TUED advocates for democratic control and social ownership of energy resources, infrastructure, and options.}

Bidenomics Puts Business, Not Workers, First / by Doug Henwood

_{^{US president Joe Biden speaks about Bidenomics on November 29, 2023, in Pueblo, Colorado. (Michael Ciaglo / Getty Images)}}

_{Reposted from Jacobin}

The Biden economy’s defenders claim it is delivering big gains to workers. But people are still feeling pain in their wallets and the rich are the ones benefiting the most.

Before the war in Gaza — before Joe Biden sank his reputation by enabling Israeli brutality — there was a debate about something called “Bidenomics.” Despite everything that’s upstaged it, it’s still worth a look.

Bidenomics never got much love. Interest peaked in July, according to Google Trends, and is down three-quarters since. It probably would be hard to find someone who could define it. For the Right, it’s practically Bolshevism. The president himself defines it as “building the economy from the middle out and bottom up — not the top down.” It rests, as things so often do, on three pillars: “First, making smart investments in America. Second, educating and empowering American workers to grow the middle class. And third, promoting competition to lower costs and help small businesses.”

How’s all that stand up to reality?

The Biden Economy

By the conventional indicators, especially measures of the labor market, the economy is strong, though perhaps a little past its peak. Reported evaluations are far less sunny than the official stats, however. Most people tell pollsters the economy stinks.

After extraordinary rates of growth in 2021 and 2022 as the economy recovered from the COVID shock, job growth is now slightly below its long-term average. The unemployment rate in October was 3.9 percent, very low by historical standards, though up 0.4 from April’s trough (which was the lowest rate since 1969). That’s the official rate, aka U-3, which has a fairly restrictive definition of unemployment. By the broader measure, U-6, which captures more people at the margins of the labor force, it was 7.2 percent. That’s up from December’s 2022 low of 6.5 percent, which was the lowest in that measure’s history.

Workers look strong in the labor market — the official count of unfilled job openings, a measure of employer frustration, though off its highs of spring 2022, is still high by historical standards, and similar could be said of the quit rate, a measure of worker confidence. Here too it looks like the worker’s labor market power has peaked but isn’t collapsing.

Add to this big union victories, from riveters to writers, and the US working class looks to be in its best shape in decades — which isn’t saying much given the standards of our history, but still, it’s better than nothing. Strike activity, which was more discursive than actual over the last couple of years, is finally showing up in the stats — though it’s got lots of ground to recover.

Tight labor markets have pushed up wages for the low paid, resulting in some decline in inequality, though just how much depends on the source. At the upbeat end, David Autor, Arindrajit Dube, and Annie McGrew find, to use the economic jargon, “compression” in the ratio of wages at the ninetieth percentile (those paid better than 90 percent of the population) to the tenth percentile (those with only 10 percent of the workforce paid less) since 2020. The worker shortage — “nobody wants to work anymore” — forced employers to boost wages among the lower paid faster than inflation, while the highest paid, many of them working remotely from their rural perches, had to cope with real wage declines. For the full period, January 2020–May 2023, Autor & Co. found the bottom 60 percent saw real wage increases — though if you start the clock in May 2021, only the bottom 40 percent did.

It may be that focusing on the very top and bottom — ninety and ten — gives a misleading impression of what’s going on with the masses. Other data sources paint a much less satisfying picture than Autor and his coauthors.

According to the Federal Reserve Bank of Atlanta, workers in the bottom half of the pay distribution saw nineteen consecutive months of yearly real wage declines in 2021 and 2022, and workers in the top half, twenty-three. According to another set of Atlanta Fed numbers, which adjust for changes in workforce composition — low-wage workers exited in large numbers in 2020, artificially boosting the average wage, and their return artificially depressed it in 2021 — average real hourly wages have fallen an average of 0.4 percent a year under Biden; under Trump, they rose 1.4 percent a year (which was three times Obama’s rate, by the way).

Another measure, the Federal Reserve Bank of New York’s estimates by demographic, show real weekly wages down 5.1 percent in the Biden years. Traditionally worse-off demographics are doing generally better than the more historically fortunate: younger doing better than older, those without college degrees doing better than those with, black and Latino doing better than white. But in most cases, those doing better are generally less negative than those doing worse. Real wages have turned positive in recent months as inflation has declined, but there’s lots to make up for.

Rising Prices, Declining Approval

Despite the easing of inflation — it was running at almost 8 percent a year in October 2022, and it was just over 3 percent this October — there’s been little change in the reported strain on household finances. The share of the population telling the Census Bureau’s Household Pulse Survey they were finding it very or somewhat difficult to pay their bills was 26 percent in April 2021, as the COVID relief money was flowing. That began rising, breaking 30 percent at the year’s end, and 40 percent in July 2022, where it’s stayed. It was 41 percent — 94 million adults — in October 2023.

The share reporting stress from price increases has fallen modestly, from 65 percent in October 2022 to 61 percent in June 2023. It’s stayed there since. Price stress most affects those on low incomes, of course — around 80 percent of those under $50,000 felt it. But almost half of those earning between $100,000 and $150,000 report price stress. The share of the population saying that they could get all the food they wanted was 72 percent before the pandemic; it’s now 54 percent.

Broader evaluations of the economy are no better. The University of Michigan’s monthly consumer sentiment survey, which goes back to 1952, has people rating the current economy below the average recorded in recessions, lower than 95 percent of the months since its inception.

According to a Financial Times–Michigan Ross Business School poll, people view the economy as miserable and Biden of little help. Just 43 percent of respondents report themselves as “thriving,” with the rest, 57 percent, “surviving” (the pollsters’ summary words). Three-quarters said the economy was not so good or poor. Over half, 55 percent, report themselves to be “worse off” since Biden became president, 14 percent more than those saying they were “better off.”

People haven’t heard much about Biden’s economic policies, but only a quarter think they’ve helped. They’ve probably forgotten all the pandemic relief — stimmy checks, expanded unemployment, child allowances. Instead, now they complain overwhelmingly about price increases — 82 percent of them. Erik Gordon, a professor at Ross, told the Financial Times: “Every group — Democrats, Republicans and independents — list rising prices as by far the biggest economic threat . . . and the biggest source of financial stress.” Aside from inflation, other prominent complaints include “your income level,” rent, credit cards, and medical expenses.

The alleged decline in inequality is also not reflected in data compiled by the Real Time Inequality project out of the University of California at Berkeley. As the graph shows, the higher you are in the income distribution, the better you’ve done under Joe from Scranton. The top 0.1 percent has gained well over three times as much as the bottom half.

Critics and Defenders

Biden’s defenders say all these evaluations are wrong. As I asked in my piece on inflation for Jacobin last September, do these people ever go shopping for groceries?

These are the realities of living in the Biden economy. What’s his administration trying to do about them? The COVID-relief measures — the income supports, the student and mortgage debt moratoria — were immensely helpful to millions of people, but temporary. If made permanent, they could have been the cornerstone of a civilized welfare state. Yes, this would have been a difficult fight, but Biden could have made an issue of it. He didn’t.

What he has made an issue of, though not in a very arresting way, are those “smart investments in America.” The argument for spending for investment has not been advocated so strongly by a US president for decades, according to tax historian Joseph Thorndike. “Biden and his people were channeling Franklin Roosevelt in his purest form and unapologetically so,” he recently wrote in the Financial Times. “No one has made this argument with such freedom and such conviction since Roosevelt.”

That says as much about the last seven decades of Democratic presidents as it does about Biden. It’s hard to imagine anyone since FDR, except maybe Lyndon Johnson, who’s made such arguments.

Same with pro-union sentiments. Biden said in his Labor Day speech, “I’m proud to be the most pro-union president.” Contrast that with Robert Reich, freshly installed as Bill Clinton’s secretary of labor, who said in 1993 “The jury is still out on whether the traditional union is necessary for the new workplace.” Reich has since changed his tune, but that was his party’s view in those days. Tech and globalization were changing everything. Unions, by weakly trying to resist, were brakes on progress.

Obama wasn’t as fervent as Clinton’s crew, but never seemed very partial to organized labor. An economic crisis, rising popular disgust with the state of things, and the emergence of something like a left inside and outside the Democratic Party smashed that consensus.

And so, we got the three major investment bills: the Bipartisan Infrastructure Law (BIL, whose name conjures the elusive centrist dream of across-the-aisle partnership), the CHIPS Act, and the Inflation Reduction Act (IRA). The BIL is slated to invest $400 billion in infrastructure projects, about three-quarters of it in roads and bridges — many of which, as anyone who drives around this great land knows, are wrecks. But roads and bridges aren’t the conduits of the future, even if the law subsidizes electric car chargers. Ports, public transit, water projects, and the power grid also get some cash. According to a White House spreadsheet, $132 billion in funding has been announced so far — and just 4% of it is for public transit.

The CHIPS Act is meant to stimulate domestic electronics production. It’s doing some of that, but as I noted in an earlier piece on the law, its corporate subsidies are effectively a reimbursement for massive stock buyback programs by the big semiconductor firms over the last decade. Subsidies and tax breaks have spurred capital spending in the sector — though, as the graph below shows, the rest of manufacturing looks moribund. (Despite all the attention the sector gets, computers and electronics account for just 1.2 percent of GDP.)

That construction boomlet is at the mercy of corporate priorities. Chip demand is weakening, and over the summer, firms like Intel and Micron announced capital spending cuts despite their promises to boost investment. And though the government is picking up the tab for the investment spending, any profits will accrue to the companies and their shareholders. Something a pro-union president should be paying attention to — labor conditions at the Taiwan Semiconductor Manufacturing Company construction site in Arizona, a $40 billion project, the biggest announced so far — is hardly a worker’s dream. As the American Prospect’s Lee Harris found, the jobs are dangerous and largely nonunion, and embedded in an opaque web of subcontractors.

The IRA was a watered-down version of the Build Back Better bill, which was introduced in July 2021. Original schemes included ambitious spending on social programs (universal pre-K, child credits), clean energy, housing, education, health care, labor law reform, and high-speed rail, funded by higher taxes on corporations and rich people. Its original price tag was cut from $3.5 trillion to $2.2 trillion. But even the pared-down bill was too much for the Senate, particularly Joe Manchin, so the IRA was the compromise that got through.

The law aims to invest $891 billion, most of it on energy and climate, with some allocation to Obamacare subsidies. To raise revenue, the IRA features modest business tax hikes and $80 billion for “modernizing” the IRS, which is supposed to boost collections by much more than that $80 billion by cracking down on evaders, rather than formally increasing tax rates.

An early analysis of the IRA by the Rhodium Group, a consulting outfit, estimates that US greenhouse gas emissions will be 40 percent lower in 2030 than now, 10 percentage points less than in a non-IRA world. (An updated analysis from Rhodium and multiple other authors tweaked those figures, but left them substantially intact.) Ten percentage points is something, but “transformative” isn’t the first word that comes to mind.

The main mechanism of the reduction is making electricity generation cleaner and using more of it (especially by electric vehicles charged with the cleaner juice). Much of that decarbonization will come from tax credits (including for EVs), not direct public spending. A ledger kept by Rhodium and MIT’s Center for Energy and Environmental Policy Research shows that clean energy investment by the private sector, which was already rising briskly before the IRA, has been rising much more briskly since.

“A Business-First Approach”

This points to a problem with much of the Biden policy trio: private investment, not public investment, will be the principal lever. As a the White House put it in an IRA explainer, it’s an effort to “mobilize financing and leverage private capital.” That was describing one program, but it’s applicable to the entire assemblage. Incentives are supposed to trigger private investments that are many multiples of public spending — $3 trillion, on Goldman Sachs’s projections. As tech pundit David Kirkpatrick told Worth magazine, “This is a business-first approach to government climate action.”

Giddy celebrations of the package as a new New Deal overlook how firmly embedded Biden is in the ongoing preeminence of private capital. Ronald Reagan and his “magic of the marketplace” is still casting a long shadow. FDR was no socialist — quite the contrary — but his administration did show an interest in public investment that’s utterly lacking in Biden’s. (For evidence, check out some of the Living New Deal’s maps. We’re still using that infrastructure, constructed almost a century ago.) And, as the Right constantly laments, “In making the case [for higher taxes on the rich, FDR] unleashed moralistic rhetoric on fairness and fiscal citizenship that reshaped American taxation for decades to come.” Those decades, however, are long past.

Nor is Biden doing much to kill fossil capital, an urgent task. US domestic oil production since Biden took office is higher than it was during the Trump years (and more than twice as high as during the George W. Bush years, as you can see in the graph below). Rhodium projects that the IRA will have no impact on US oil production and promote only a modest decline in natural gas.

The approach seems to be to continue pumping to facilitate the energy transition, which is reminiscent of Ronald Reagan’s early 1980s “build down” approach to arms control — building more nuclear weapons now to pare them down at some unspecified later date.

Finally, although the Biden programs are pitched as measures to improve the lot of American workers, a central animating motivation is fighting a new Cold War with China, as the country becomes a tech power in its own right and not just a low-cost assembler of components designed elsewhere. Ruling elements, as we used to say on the old left, are not happy about having a country they see as an enemy, potential or actual, providing so many components for both consumer gadgets and weapons.

Always the “But”

Joe Biden hasn’t been Obama 2.0. His administration’s policies have prompted rumblings of a break with neoliberalism and attracted defenders with bona fide progressive credentials. Gone is the decades-long allergy to full employment or talk of industrial policy.

But, with Biden — to steal a line from Gore Vidal, who said it about America — there is always the “but.” Pro-union, but he busted a rail strike. Pro–public investment, but mostly stimulating private investment. Pro-climate but doing little to subdue oil and gas (though, yes, there is a Congress that loves oil and gas). Supposedly the biggest agenda in decades, but promoted with so little political skill or energy.

As Bloomberg News put it in August, “‘If you even gave a small summary of what is in the Biden legislative packages, all of those things are incredibly popular,’ Biden pollster John Anzalone said. ‘It’s the awareness level that’s really low.’” Or, as a Washington Post–University of Maryland poll found, most Americans (57 percent) oppose Biden’s climate policies but only a quarter or a third know anything about them. You can blame the media for that, in part — capital spending doesn’t bring in the clicks, and all these technical and financial details bore mainstream political journalists.

But it’s also Biden, who is dull and doesn’t always seem oriented in time and space. Trump had little positive to sell, but he never stopped selling it. As crass as that is, the strategy does pay political dividends. Biden has barely started selling. Lacking any visible economic message — a “vision” seems beyond his capabilities — bad feelings about inflation will continue to dominate whatever the long-term payoff of the Inflation Reduction Act.

If Biden wants to get reelected, he’s got to hope that people’s experience of inflation catches up with the official statistics — prices may be rising more slowly than they were, but they’re still rising rather than receding. And he’s got to convince people not merely that he has a long-term economic agenda, but that it might have some positive effect on their lives. Doing that would require evoking some common notion of a better future. But that would be very difficult for someone who mostly gives the impression of being tired and distracted.

_{Doug Henwood edits Left Business Observer and is the host of Behind the News. His latest book is My Turn}.