1/n
Time for an unusual thread. We often hear of the "fight against" climate change. But how does what we need to do against climate change compare with what economies are capable of achieving in a time of war?
To be clear: I do NOT think the war metaphor is appropriate.
Time for an unusual thread. We often hear of the "fight against" climate change. But how does what we need to do against climate change compare with what economies are capable of achieving in a time of war?
To be clear: I do NOT think the war metaphor is appropriate.
2/n
But the longer we wait the more extreme the changes we will need to make.
And we're often told that the relatively small reallocation of production and investment will tank the economy. But what actually happens when there are massive, rapid reallocations in times of war?
But the longer we wait the more extreme the changes we will need to make.
And we're often told that the relatively small reallocation of production and investment will tank the economy. But what actually happens when there are massive, rapid reallocations in times of war?
3/n
At the peak of WWII, the major powers were allocating a huge share of GDP to war production, between 23-76% 👇.
This was ramped up extremely rapidly: the peak annual increase in war production as a share of GDP was in the order of 11-33 percentage points in one year👇.
At the peak of WWII, the major powers were allocating a huge share of GDP to war production, between 23-76% 👇.
This was ramped up extremely rapidly: the peak annual increase in war production as a share of GDP was in the order of 11-33 percentage points in one year👇.
4/n
How was this funded? In numerous ways:
Firstly, large and highly progressive increases in national rates of taxation. Both WWI and WWII has major impacts on countries' fiscal and, because no taxation without representation, on suffrage policies.👇
How was this funded? In numerous ways:
Firstly, large and highly progressive increases in national rates of taxation. Both WWI and WWII has major impacts on countries' fiscal and, because no taxation without representation, on suffrage policies.👇
5/n
Secondly, through large compressions in national consumption, implemented through rationing and constraints on consumer supply 👇.
Third, through large increases in national debt, funded partly through financial repression (enforced savings allocated to government debt)
Secondly, through large compressions in national consumption, implemented through rationing and constraints on consumer supply 👇.
Third, through large increases in national debt, funded partly through financial repression (enforced savings allocated to government debt)
6/n
Fourth, through increased external resource flows (imperial appropriations, lend-lease, and the colonial exploitation of captured territories).
Fifth, through increased monetary financing 👇, whose inflationary impacts were only partially contained through price controls.
Fourth, through increased external resource flows (imperial appropriations, lend-lease, and the colonial exploitation of captured territories).
Fifth, through increased monetary financing 👇, whose inflationary impacts were only partially contained through price controls.
7/n
Finally, it's worth noting that WWII had significant and lasting impacts on technological change and growth. This great paper bit.ly/32ndVGf shows that the massive increases in production has massive impacts in technology learning on a huge range of products 👇
Finally, it's worth noting that WWII had significant and lasting impacts on technological change and growth. This great paper bit.ly/32ndVGf shows that the massive increases in production has massive impacts in technology learning on a huge range of products 👇
8/n
We can see the impacts of this war time surge in learning in the post WWII growth rates, which despite the massive destruction of human and physical capital, was faster in all combattants, apart from the USSR, compared to the pre-war rate.
We can see the impacts of this war time surge in learning in the post WWII growth rates, which despite the massive destruction of human and physical capital, was faster in all combattants, apart from the USSR, compared to the pre-war rate.
9/n
Concluding:
1. The war metaphor is not appropriate, hopefully we can have a smoother transition.
2. Nonetheless, all evidence is that economies can engineer huge reallocations of resources, orders of magnitude above what we would need for climate change.
Concluding:
1. The war metaphor is not appropriate, hopefully we can have a smoother transition.
2. Nonetheless, all evidence is that economies can engineer huge reallocations of resources, orders of magnitude above what we would need for climate change.
10/n
3. These large reallocations came at a large cost, and necessitated wholesale government control of the economy. Again, hopefully we can act soon and smart enough to do it through smarter incentives: smaller reallocations would have smaller transition costs.
3. These large reallocations came at a large cost, and necessitated wholesale government control of the economy. Again, hopefully we can act soon and smart enough to do it through smarter incentives: smaller reallocations would have smaller transition costs.
11/n
4. There is a huge evidence that large production increases led to massive benefits in terms of technological and institutional learning, which had impacts on post-war growth. There is every reason to think that we would see similar benefits in green tech.
5. Yes we can.
4. There is a huge evidence that large production increases led to massive benefits in terms of technological and institutional learning, which had impacts on post-war growth. There is every reason to think that we would see similar benefits in green tech.
5. Yes we can.
