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With the pretense of defending free markets, the Republican Party consistently supported big business. When did any Republican presidential candidate — other than Mr. Trump — speak in favor of some antitrust enforcement? When did he campaign for tougher enforcement against white-collar crime? When did anyone call for free trade in pharmaceuticals? Or for more competitive pricing of drugs bought by Medicare?

It is an indication of a country’s institutional corruption when inside a main party the only alternative to the prevailing crony capitalism is a tycoon with a long history of shady deals.

Stocks rise and fall, but the recent sell-off shows the ultimate folly of the president’s fact-free existence. For a year, he took credit for stock market gains that were the continuation of a nine-year bull market

Now, the market is, arguably, beginning to react to Trump’s actual policies — a tax cut that added fuel to an already strong economy, raising fears it will overheat, causing inflation, higher interest rates and recession.

In ways large and small, reality is catching up with Trump.

In the same State of the Union address, Trump boasted that “African American unemployment stands at the lowest rate ever recorded.” (Never mind that this continued an eight-year trend.) Barely 60 hours later, Trump’s Labor Department reported that this boast was no longer true: Black unemployment swelled to 7.7 percent in January from 6.8 percent in December.

Republicans had mocked Nancy Pelosi for saying the cut amounted to “crumbs” for ordinary workers. But on Saturday, House Speaker Paul Ryan tweeted out a message pulled from an Associated Press story: “A secretary at a public high school in Lancaster, PA, said she was pleasantly surprised her pay went up $1.50 a week . . . she said [that] will more than cover her Costco membership for the year.” Amid the social media ridicule that followed — Rep. Joe Kennedy noted that the wealthiest Americans get an extra $3,000 per week — Ryan took down the truth-telling tweet.

It was The Economists’ Hour, as the title of the New York Times editorial writer Binyamin Appelbaum’s debut book has it.

Lemann and Appelbaum contribute to the second wave of post-2008 commentary. The first postmortems focused narrowly on the global financial crisis, dissecting the distorted incentives, regulatory frailty, and groupthink that caused bankers to blow up the world economy

The new round of analysis broadens the lens, searching out larger political and intellectual wrong turns, an expansion that reflects the morphing of the 2008 crash into a general populist surge.

Berle went further. He laid out in detail how shareholders, being so dispersed and numerous, could not hope to restrain bosses—indeed, how nobody could do so. Enormous powers to shape society belonged to company chieftains who answered to no one. Hence Berle’s prescription: The government should regulate them.

“the Treaty of Detroit,” GM’s bosses granted workers regular cost-of-living pay increases, a measure of job security, health insurance, and a pension—benefits that were almost unheard-of. General Motors had “set itself up as a comprehensive welfare state for its workers,” in Lemann’s succinct formulation.

Berle celebrated the Treaty of Detroit by propounding a pro-corporate liberalism. The corporation had become the “conscience-carrier of twentieth-century American society,” he marveled

Anticipating the “end of history” triumphalism of a later era, the sociologist Daniel Bell feted the corporatist order in a book titled The End of Ideology.

the chief threat to Berle’s vision came not from America’s suspicion of concentrated power. It came from economics

Starting in the 1970s, however, economists began to wield extraordinary influence. They persuaded Richard Nixon to abolish the military draft. They brought economics into the courtroom. They took over many of the top posts at regulatory agencies

The rise of economics, Appelbaum writes, “transformed the business of government, the conduct of business, and, as a result, the patterns of everyday life.

Jensen agreed with Berle’s starting point: Corporate managers were unaccountable because shareholders could not restrain them. But rather than seeing a remedy in checks exerted by regulators and organized labor, Jensen proposed to overhaul the firm so that ownership and control were reunited

In sum, Jensen’s prescriptions inverted Berle’s. The market could be made to solve the problem of the firm. Government could pull back from regulation

After decades in which economists’ influence expanded rapidly, the striking thing about the Trump administration and its foreign analogues is that they have largely dispensed with economic advisers

Shortly after the publication of his research, the invention of junk bonds made hostile takeovers the rage. During the ’80s, more than a quarter of the companies on the Fortune 500 list were targeted. Jensen became the scholar who explained why this unprecedented boardroom bloodbath was good news for America.

to a considerable extent, the news was good. Shielded from market discipline, the old corporate heads had deployed capital carelessly

From 1977 to 1988, Jensen calculated, American corporations had increased in value by $500 billion as a result of the new market for corporate control. Reengineered and reinvigorated, American business staved off what might have been an existential threat from Japanese competition.

Yet a large cost eluded Jensen’s calculations. The social contract of the Berle era was gone: the unstated assumption of lifetime employment, the promise of retirement benefits, the sense of community and stability and shared purpose that gave millions of lives their meaning. Berle had viewed the corporation as a social and political institution as much as an economic one, and the dismembering of corporations on purely economic grounds was bound to generate fallout that had not been accounted for

Even before the 2008 crash, Jensen disavowed the transactional culture he had helped to legitimize. Holy shit, Jensen remembers saying to himself. Anything can be corrupted.

Contrary to common presumption, the economics establishment in the 1990s and 2000s did not believe that markets were perfectly efficient. Rather, influential economists took the pragmatic view that markets would discipline financiers more effectively than regulators could

He is happy to state at the outset that market-oriented reforms have lifted billions out of poverty, and to recognize that the deregulation that helped undo Berle-ism was not some kind of right-wing plot. In the late ’70s, it was initiated by Democrats such as President Jimmy Carter and Senator Ted Kennedy.

Inequality has grown to unacceptable extremes in highly developed economies. From 1980 to 2010, life expectancy for poor Americans scandalously declined, even as the rich lived longer.

Meanwhile, the primacy of economics has not generated faster economic growth. From 1990 until the eve of the financial crisis, U.S. real GDP per person grew by a little under 2 percent a year, less than the 2.5 percent a year in the oil-shocked 1970s.

economists have repeatedly made excessive claims for their discipline

In the ’60s, Kennedy’s and Johnson’s advisers thought they had the business cycle tamed. They believed they could prevent recessions by “fine-tuning” tax and spending policies

When this expectation was exposed as hubris, Milton Friedman urged central banks to focus exclusively on the supply of money circulating in the economy. This too was soon discredited. From the ’90s onward, economists oversold the benefits of targeting inflation, forgetting that other perils—the human cost of unemployment, the destabilization wrought by financial bubbles—might well be worse than rising prices

Greenspan and Summers ducked the political challenge of buffering new kinds of financial trading with regulatory safeguards

Michael C. Jensen, an entertainingly impassioned financial economist who reframed attitudes toward the corporation in the mid-’70s.

today’s fierce international competition and disruptive innovation oblige businesses to cut costs or go under. The dilemma is that, even as they compel efficiency, globalization and technological change exacerbate inequality and uncertainty and therefore the need for a compassionate social contract

LinkedIn is not a solution to worker insecurity writ large, still less to inequality. On the contrary, a world in which people compete to gather connections may be even less equal than our current one. A few high-octane networkers will attract large followings, while a long tail of pedestrians will have only a handful of buddies

Rather than buy in to a single grand vision, societies should prefer a robust contest among interest groups—what Lemann calls pluralism. Borrowing from the forgotten early-20th-century political scientist Arthur Bentley, Lemann defines groups broadly. States and cities are “locality groups,” income categories are “wealth groups,” supporters of a particular politician constitute “personality groups.” People inevitably affiliate themselves with such groups; groups naturally compete to influence the government; and the resulting push and pull, not squabbles among intellectuals about organizing concepts, constitutes the proper stuff of politics

Lemann is aware of the risks in this conclusion. He cites the obvious objection: “The flaw in the pluralist heaven is that the heavenly chorus sings with a strong upper-class accent.” In a contest of competing interest groups, the ones with the most money are likely to win

For those who regard inequality as a challenge, an interest-group free-for-all is a perilous prescription.

Appelbaum presents a series of persuasive recommendations, confirming that Lemann is wrong to despair of reasoned, technocratic argument. If policy makers want ordinary Americans to appreciate the benefits of open trade, they must ensure that displaced workers have access to training and health care. Because some interest groups are weaker than others, government should correct the double standard by which the power of labor unions is regarded with antipathy but the power of business monopolies is tolerated

Progressives should look for ways to be pro-competition but anti-inequality

—it isn’t so clear that the economists have departed

throughout Appelbaum’s narrative, many of the knights who slay the dragons of bad economic ideology are economists themselves. The story of the past generation is more about debates among economists than about economists pitted against laypeople. Perhaps, with a bit of humility and retooling, the economists will have their day again. If they do not come up with the next set of good ideas, it is not obvious who will

What, after all, is the main alternative to investing in stocks? Buying bonds. Yet these days bonds offer incredibly low returns. The interest rate on 10-year U.S. government bonds is only 0.6 percent

So buying stock in companies that are still profitable despite the Covid-19 recession looks pretty attractive.

And why are interest rates so low? Because the bond market expects the economy to be depressed for years to come, and believes that the Federal Reserve will continue pursuing easy-money policies for the foreseeable future

for a few weeks in March the world teetered on the edge of a 2008-type financial crisis, which caused investors to flee everything with the slightest hint of risk.

That crisis was, however, averted thanks to extremely aggressive actions by the Fed, which stepped in to buy an unprecedented volume and range of assets.

But back to the disconnect between stocks and economic reality. It turns out that this is a long-term phenomenon, dating back at least to the mid-2000s.

Think about all the negative things we’ve learned about the modern economy since, say, 2007. We’ve learned that advanced economies are much less stable, much more subject to periodic crises, than almost anyone believed possible.

Productivity growth has slumped, showing that the information technology-fueled boom of the 1990s and early 2000s was a one-shot affair. Overall economic performance has been much worse than most observers expected around 15 years ago.

Stocks, however, have done very well. On the eve of the Covid crisis, the ratio of market capitalization to G.D.P. — Warren Buffett’s favorite measure — was well above its 2007 level, and a bit higher than its peak during the dot-com bubble. Why?

The main answer, surely, is to consider the alternative. While employment eventually recovered from the Great Recession, that recovery was achieved only thanks to historically low interest rates. The need for low rates was an indication of underlying economic weakness: businesses seemed reluctant to invest despite high profits, often preferring to buy back their own stock. But low rates were good for stock prices.

None of this should be taken as a statement that current market valuations are exactly right. My gut sense is that investors are too eager to seize on good news; but the truth is that I have no idea where the market is headed.

The point, instead, is that the market’s resilience does, in fact, make some sense despite the terrible economic new

The conflict between the images is important because it shows up in alternative visions of the economy and the relationship between the economy and the state.

This republican image runs into sharp conflict with a more received picture, celebrated by right-wing libertarians, according to which the rules of public order regulate the private sphere rather than serving – now in the fashion of one culture, now in the fashion of another – to make it possible

You own something only insofar as it is a matter of accepted convention that given the way you came to hold it — given public recognition of the title you have to the property — you enjoy public protection against those who would take it from you

This view of property, prominent in Rousseau and presupposed in the broader republican tradition, is scarcely questionable in view of the salient diversity in systems of property

These observations, scarcely richer than platitudes, are important for giving us a perspective on the market and the economy, undermining the libertarian image. That picture represents the market as a res privata, a private thing, suggesting that the role of the state is merely to lay low the hills in the way of the market and smooth the paths for its operation. And so it depicts any other interventions of government in the market as dubious on philosophical, not just empirical, grounds.

this image accounts for the continuing attachment to austerity among those on the right. They are philosophically opposed to Keynesianism, not just opposed on empirical grounds, and their ideological stance makes empirically based arguments for Keynesianism invisible to them.

Samuelson did write a best-selling textbook that brought Keynesian economics — the idea that changes in government spending and taxes can be used to manage the economy — to American college classrooms. And his concept of the “neoclassical synthesis” — markets can work, but only with government-created guardrails — in effect provided the intellectual justification for the postwar economy. But it’s clear that for him politics was never more than a peripheral concern.

Still, most economists continued to believe that a more flexible form of monetary policy could keep things under control — that the Federal Reserve could manage the economy without bringing Congress into the act

his magnum opus, “A Monetary History of the United States, 1867-1960” (with Anna Schwartz), while a magisterial work of scholarship, clearly had a major political ax to grind. For its big takeaway was the claim that the Great Depression wouldn’t have happened if the Federal Reserve Board had done its job and stabilized the money supply. That is, simple technocratic measures would have been sufficient — no need for all that Keynesian stuff.

The influence of Friedman’s monetary ideas peaked around 1980, then went into steep decline. Both the United States and Britain tried to implement Friedman’s belief that the authorities could stabilize the economy by ensuring steady, slow growth in the money supply; both efforts failed dismally

Friedman was no mere propagandist: He was a brilliant analytical economist capable of doing pathbreaking academic work when he set his mind to it. His work on monetary policy, in particular, persuaded many economists who disagreed with him about almost everything else.

But a number of economists had looked closely at Friedman’s arguments about the Great Depression, and found them wanting. And the aftermath of the 2008 financial crisis vindicated the doubters. Ben Bernanke, the Fed chair and a huge Friedman admirer, did everything Friedman and Schwartz said the Fed should have done in the 1930s — and it wasn’t enough. Soon Bernanke was pleading for help from fiscal policy — that is, pleading for Keynesianism to come to the rescue.

What about Friedman’s broader faith in free markets? Libertarian policies reached a high-water mark in the 1990s, as industries from power generation to banking were deregulated. But all too many of these deregulatory ventures ended in grief, with incidents like the California power crisis of 2000-1 and, yes, the banking crisis of 2008.

And where are we now? If you look at the Biden administration’s proposals

they sound a lot like what Paul Samuelson was saying decades ago.

So by all means you should read Wapshott’s history of the disputes that roiled economics over much of the second half of the 20th century

you should also ask a question I don’t think the book answers: Was all of this just a grand, ideologically driven detour away from sensible economic theory and policy? And why did that happen?

The company has benefited from booming demand for its new IPhone 13 and other older models as well as subscription services such as Apple Music, Apple TV+, iCloud and its popular App Store.

Sales surged nearly 30% to more than $83 billion in Apple's most recent quarter, which ended in September.

The company has a whopping $191 billion in cash as well.Read More

Apple may have some company in the $3 trillion club. Microsoft (MSFT) is now worth about $2.6 trillion and Google owner Alphabet's (GOOGL) market value is right around $2 trillion.

Still giant but further behind are Amazon (AMZN), which has a market cap of $1.7 trillion, and Elon Musk's Tesla (TSLA), worth $1 trillion.

that’s particularly true on the I.R.A., which has to build all these things in the real world.

we’re trying to do industrial physical transformation at a speed and scale unheralded in American history. This is bigger than anything we have done at this speed ever.

The money is beginning to move out the door now, but we’re on a clock. Climate change is not like some other issues where if you don’t solve it this year, it is exactly the same to solve it next year. This is an issue where every year you don’t solve it, the amount of greenhouse gases in the atmosphere builds, warming builds, the effects compound

Solve, frankly, isn’t the right word there because all we can do is abate, a lot of the problems now baked in. So how is it going, and who can actually walk us through that?

Robinson Meyer is the founding executive editor of heatmap.news

why do all these numbers differ so much? How big is this thing?

in electric vehicles and in the effort, kind of this dual effort in the law, to both encourage Americans to buy and use electric vehicles and then also to build a domestic manufacturing base for electric vehicles.

on both counts, the data’s really good on electric vehicles. And that’s where we’re getting the fastest response from industry and the clearest response from industry to the law.

ROBINSON MEYER: Factories are getting planned. Steel’s going in the ground. The financing for those factories is locked down. It seems like they’re definitely going to happen. They’re permitted. Companies are excited about them. Large Fortune 500 automakers are confidently and with certainty planning for an electric vehicle future, and they’re building the factories to do that in the United States. They’re also building the factories to do that not just in blue states. And so to some degree, we can see the political certainty for electric vehicles going forward.

in other parts of the law, partially due to just vagaries of how the law is being implemented, tax credits where the fine print hasn’t worked out yet, it’s too early to say whether the law is working and how it’s going and whether it’s going to accomplish its goal

EZRA KLEIN: I always find this very funny in a way. The Congressional Budget Office scored it. They thought it would make about $380 billion in climate investments over a decade. So then you have all these other analyses coming out.

But there’s actually this huge range of outcomes in between where the thing passes, and maybe what you wanted to have happen happens. Maybe it doesn’t. Implementation is where all this rubber meets the road

the Rhodium Group, which is a consulting firm, they think it could be as high as $522 billion, which is a big difference. Then there’s this Goldman Sachs estimate, which the administration loves, where they say they’re projecting $1.2 trillion in incentives —

ROBINSON MEYER: All the numbers differ because most of the important incentives, most of the important tax credits and subsidies in the I.R.A., are uncapped. There’s no limit to how much the government might spend on them. All that matters is that some private citizen or firm or organization come to the government and is like, hey, we did this. You said you’d give us money for it. Give us the money.

because of that, different banks have their own energy system models, their own models of the economy. Different research groups have their own models.

we know it’s going to be wrong because the Congressional Budget Office is actually quite constrained in how it can predict how these tax credits are taken up. And it’s constrained by the technology that’s out there in the country right now.

The C.B.O. can only look at the number of electrolyzers, kind of the existing hydrogen infrastructure in the country, and be like, well, they’re probably all going to use these tax credits. And so I think they said that there would be about $5 billion of take up for the hydrogen tax credits.

But sometimes money gets allocated, and then costs overrun, and there delays, and you can’t get the permits, and so on, and the thing never gets built

the fact that the estimates are going up is to them early evidence that this is going well. There is a lot of applications. People want the tax credits. They want to build these new factories, et cetera.

a huge fallacy that we make in policy all the time is assuming that once money is allocated for something, you get the thing you’re allocating the money for. Noah Smith, the economics writer, likes to call this checkism, that money equals stuff.

EZRA KLEIN: They do not want that, and not wanting that and putting every application through a level of scrutiny high enough to try and make sure you don’t have another one

I don’t think people think a lot about who is cutting these checks, but a lot of it is happening in this very obscure office of the Department of Energy, the Loan Program Office, which has gone from having $40 billion in lending authority, which is already a big boost over it not existing a couple decades ago, to $400 billion in loan authority,

the Loan Program Office as one of the best places we have data on how this is going right now and one of the offices that’s responded fastest to the I.R.A.

the Loan Program Office is basically the Department of Energy’s in-house bank, and it’s kind of the closest thing we have in the US to what exists in other countries, like Germany, which is a State development bank that funds projects that are eventually going to be profitable.

It has existed for some time. I mean, at first, it kind of was first to play after the Recovery Act of 2009. And in fact, early in its life, it gave a very important loan to Tesla. It gave this almost bridge loan to Tesla that helped Tesla build up manufacturing capacity, and it got Tesla to where it is today.

EZRA KLEIN: It’s because one of the questions I have about that office and that you see in some of the coverage of them is they’re very afraid of having another Solyndra.

Now, depending on other numbers, including the D.O.E., it’s potentially as high as $100 billion, but that’s because the whole thing about the I.R.A. is it’s meant to encourage the build-out of this hydrogen infrastructure.

EZRA KLEIN: I’m never that excited when I see a government loans program turning a profit because I think that tends to mean they’re not making risky enough loans. The point of the government should be to bear quite a bit of risk —

And to some degree, Ford now has to compete, and US automakers are trying to catch up with Chinese EV automakers. And its firms have EV battery technology especially, but just have kind of comprehensive understanding of the EV supply chain that no other countries’ companies have

ROBINSON MEYER: You’re absolutely right that this is the key question. They gave this $9.2 billion loan to Ford to build these EV battery plants in Kentucky and Tennessee. It’s the largest loan in the office’s history. It actually means that the investment in these factories is going to be entirely covered by the government, which is great for Ford and great for our build-out of EVs

And to some degree, I should say, one of the roles of L.P.O. and one of the roles of any kind of State development bank, right, is to loan to these big factory projects that, yes, may eventually be profitable, may, in fact, assuredly be profitable, but just aren’t there yet or need financing that the private market can’t provide. That being said, they have moved very slowly, I think.

And they feel like they’re moving quickly. They just got out new guidelines that are supposed to streamline a lot of this. Their core programs, they just redefined and streamlined in the name of speeding them up

However, so far, L.P.O. has been quite slow in getting out new loans

I want to say that the pressure they’re under is very real. Solyndra was a disaster for the Department of Energy. Whether that was fair or not fair, there’s a real fear that if you make a couple bad loans that go bad in a big way, you will destroy the political support for this program, and the money will be clawed back, a future Republican administration will wreck the office, whatever it might be. So this is not an easy call.

when you tell me they just made the biggest loan in their history to Ford, I’m not saying you shouldn’t lend any money to Ford, but when I think of what is the kind of company that cannot raise money on the capital markets, the one that comes to mind is not Ford

They have made loans to a number of more risky companies than Ford, but in addition to speed, do you think they are taking bets on the kinds of companies that need bets? It’s a little bit hard for me to believe that it would have been impossible for Ford to figure out how to finance factorie

ROBINSON MEYER: Now, I guess what I would say about that is that Ford is — let’s go back to why Solyndra failed, right? Solyndra failed because Chinese solar deluged the market. Now, why did Chinese solar deluge the market? Because there’s such support of Chinese financing from the state for massive solar factories and massive scale.

EZRA KLEIN: — the private market can’t. So that’s the meta question I’m asking here. In your view, because you’re tracking this much closer than I am, are they too much under the shadow of Solyndra? Are they being too cautious? Are they getting money out fast enough?

ROBINSON MEYER: I think that’s right; that basically, if we think the US should stay competitive and stay as close as it can and not even stay competitive, but catch up with Chinese companies, it is going to require large-scale state support of manufacturing.

EZRA KLEIN: OK, that’s fair. I will say, in general, there’s a constant thing you find reporting on government that people in government feel like they are moving very quickly

EZRA KLEIN: — given the procedural work they have to go through. And they often are moving very quickly compared to what has been done in that respect before, compared to what they have to get over. They are working weekends, they are working nights, and they are still not actually moving that quickly compared to what a VC firm can do or an investment bank or someone else who doesn’t have the weight of congressional oversight committees potentially calling you in and government procurement rules and all the rest of it.

ROBINSON MEYER: I think that’s a theme across the government’s implementation of the I.R.A. right now, is that generally the government feels like it’s moving as fast as it can. And if you look at the Department of Treasury, they feel like we are publishing — basically, the way that most of the I.R.A. subsidies work is that they will eventually be administered by the I.R.S., but first the Department of the Treasury has to write the guidebook for all these subsidies, right?

the law says there’s a very general kind of “here’s thousands of dollars for EVs under this circumstance.” Someone still has to go in and write all the fine print. The Department of Treasury is doing that right now for each tax credit, and they have to do that before anyone can claim that tax credit to the I.R.S. Treasury feels like it’s moving extremely quickly. It basically feels like it’s completely at capacity with these, and it’s sequenced these so it feels like it’s getting out the most important tax credits first.

Private industry feels like we need certainty. It’s almost a year since the law passed, and you haven’t gotten us the domestic content bonus. You haven’t gotten us the community solar bonus. You haven’t gotten us all these things yet.

a theme across the government right now is that the I.R.A. passed. Agencies have to write the regulations for all these tax credits. They feel like they’re moving very quickly, and yet companies feel like they’re not moving fast enough.

that’s how we get to this point where we’re 311 days out from the I.R.A. passing, and you’re like, well, has it made a big difference? And I’m like, well, frankly, wind and solar developers broadly don’t feel like they have the full understanding of all the subsidies they need yet to begin making the massive investments

I think it’s fair to say maybe the biggest bet on that is green hydrogen, if you’re looking in the bill.

We think it’s going to be an important tool in industry. It may be an important tool for storing energy in the power grid. It may be an important tool for anything that needs combustion.

ROBINSON MEYER: Yeah, absolutely. So green hydrogen — and let’s just actually talk about hydrogen broadly as this potential tool in the decarbonization tool kit.

It’s a molecule. It is a very light element, and you can burn it, but it’s not a fossil fuel. And a lot of the importance of hydrogen kind of comes back to that attribute of it.

So when we look at sectors of the economy that are going to be quite hard to decarbonize — and that’s because there is something about fossil fuels chemically that is essential to how that sector works either because they provide combustion heat and steelmaking or because fossil fuels are actually a chemical feedstock where the molecules in the fossil fuel are going into the product or because fossil fuels are so energy dense that you can carry a lot of energy while actually not carrying that much mass — any of those places, that’s where we look at hydrogen as going.

green hydrogen is something new, and the size of the bet is huge. So can you talk about first just what is green hydrogen? Because my understanding of it is spotty.

The I.R.A. is extremely generous — like extremely, extremely generous — in its hydrogen subsidies

The first is for what’s called blue hydrogen, which is hydrogen made from natural gas, where we then capture the carbon dioxide that was released from that process and pump it back into the ground. That’s one thing that’s subsidized. It’s basically subsidized as part of this broader set of packages targeted at carbon capture

green hydrogen, which is where we take water, use electrolyzers on it, basically zap it apart, take the hydrogen from the water, and then use that as a fue

The I.R.A. subsidies for green hydrogen specifically, which is the one with water and electricity, are so generous that relatively immediately, it’s going to have a negative cost to make green hydrogen. It will cost less than $0 to make green hydrogen. The government’s going to fully cover the cost of producing it.

That is intentional because what needs to happen now is that green hydrogen moves into places where we’re using natural gas, other places in the industrial economy, and it needs to be price competitive with those things, with natural gas, for instance. And so as it kind of is transported, it’s going to cost money

As you make the investment to replace the technology, it’s going to cost money. And so as the hydrogen moves through the system, it’s going to wind up being price competitive with natural gas, but the subsidies in the bill are so generous that hydrogen will cost less than $0 to make a kilogram of it

There seems to be a sense that hydrogen, green hydrogen, is something we sort of know how to make, but we don’t know how to make it cost competitive yet. We don’t know how to infuse it into all the processes that we need to be infused into. And so a place where the I.R.A. is trying to create a reality that does not yet exist is a reality where green hydrogen is widely used, we have to know how to use it, et cetera.

And they just seem to think we don’t. And so you need all these factories. You need all this innovation. Like, they have to create a whole innovation and supply chain almost from scratch. Is that right?

ROBINSON MEYER: That’s exactly right. There’s a great Department of Energy report that I would actually recommend anyone interested in this read called “The Liftoff Report for Clean Hydrogen.” They made it for a few other technologies. It’s a hundred-page book that’s basically how the D.O.E. believes we’re going to build out a clean hydrogen economy.

And, of course, that is policy in its own right because the D.O.E. is saying, here is the years we’re going to invest to have certain infrastructure come online. Here’s what we think we need. That’s kind of a signal to industry that everyone should plan around those years as well.

It’s a great book. It’s like the best piece of industrial policy I’ve actually seen from the government at all. But one of the points it makes is that you’re going to make green hydrogen. You’re then going to need to move it. You’re going to need to move it in a pipeline or maybe a truck or maybe in storage tanks that you then cart around.

Once it gets to a facility that uses green hydrogen, you’re going to need to store some green hydrogen there in storage tanks on site because you basically need kind of a backup supply in case your main supply fails. All of those things are going to add cost to hydrogen. And not only are they going to add cost, we don’t really know how to do them. We have very few pipelines that are hydrogen ready.

All of that investment needs to happen as a result to make the green hydrogen economy come alive. And why it’s so lavishly subsidized is to kind of fund all that downstream investment that’s eventually going to make the economy come true.

But a lot of what has to happen here, including once the money is given out, is that things we do know how to build get built, and they get built really fast, and they get built at this crazy scale.

So I’ve been reading this paper on what they call “The Greens’ Dilemma” by J.B. Ruhl and James Salzman, who also wrote this paper called “Old Green Laws, New Green Deal,” or something like that. And I think they get at the scale problem here really well.

“The largest solar facility currently online in the US is capable of generating 585 megawatts. To meet even a middle-road renewable energy scenario would require bringing online two new 400-megawatt solar power facilities, each taking up at least 2,000 acres of land every week for the next 30 years.”

And that’s just solar. We’re not talking wind there. We’re not talking any of the other stuff we’ve discussed here, transmission lines. Can we do that? Do we have that capacity?

ROBINSON MEYER: No, we do not. We absolutely do not. I think we’re going to build a ton of wind and solar. We do not right now have the system set up to use that much land to build that much new solar and wind by the time that we need to build it. I think it is partially because of permitting laws, and I think it’s also partially because right now there is no master plan

There’s no overarching strategic entity in the government that’s saying, how do we get from all these subsidies in the I.R.A. to net zero? What is our actual plan to get from where we are right now to where we’re emitting zero carbon as an economy? And without that function, no project is essential. No activity that we do absolutely needs to happen, and so therefore everything just kind of proceeds along at a convenient pace.

given the scale of what’s being attempted here, you might think that something the I.R.A. does is to have some entity in the government, as you’re saying, say, OK, we need this many solar farms. This is where we think we should put them. Let’s find some people to build them, or let’s build them ourselves.

what it actually does is there’s an office somewhere waiting for private companies to send in an application for a tax credit for solar that they say they’re going to build, and then we hope they build it

it’s an almost entirely passive process on the part of the government. Entirely would be going too far because I do think they talk to people, and they’re having conversations

the builder applies, not the government plans. Is that accurate?

ROBINSON MEYER: That’s correct. Yes.

ROBINSON MEYER: I think here’s what I would say, and this gets back to what do we want the I.R.A. to do and what are our expectations for the I.R.A

If the I.R.A. exists to build out a ton of green capacity and shift the political economy of the country toward being less dominated by fossil fuels and more dominated by the clean energy industry, frankly, then it is working

If the I.R.A. is meant to get us all the way to net zero, then it is not capable of that.

in 2022, right, we had no way to see how we were going to reduce emissions. We did not know if we were going to get a climate bill at all. Now, we have this really aggressive climate bill, and we’re like, oh, is this going to get us to net zero?

But getting to net zero was not even a possibility in 2022.

The issue is that the I.R.A. requires, ultimately, private actors to come forward and do these things. And as more and more renewables get onto the grid, almost mechanically, there’s going to be less interest in bringing the final pieces of decarbonized electricity infrastructure onto the grid as well.

EZRA KLEIN: Because the first things that get applied for are the ones that are more obviously profitable

The issue is when you talk to solar developers, they don’t see it like, “Am I going to make a ton of money, yes or no?” They see it like they have a capital stack, and they have certain incentives and certain ways to make money based off certain things they can do. And as more and more solar gets on the grid, building solar at all becomes less profitable

also, just generally, there’s less people willing to buy the solar.

as we get closer to a zero-carbon grid, there is this risk that basically less and less gets built because it will become less and less profitable

EZRA KLEIN: Let’s call that the last 20 percent risk

EZRA KLEIN: — or the last 40 percent. I mean, you can probably attach different numbers to that

ROBINSON MEYER: Permitting is the primary thing that is going to hold back any construction basically, especially out West,

right now permitting fights, the process under the National Environmental Policy Act just at the federal level, can take 4.5 years

let’s say every single project we need to do was applied for today, which is not true — those projects have not yet been applied for — they would be approved under the current permitting schedule in 2027.

ROBINSON MEYER: That’s before they get built.

Basically nobody on the left talked about permitting five years ago. I don’t want to say literally nobody, but you weren’t hearing it, including in the climate discussion.

people have moved to saying we do not have the laws, right, the permitting laws, the procurement laws to do this at the speed we’re promising, and we need to fix that. And then what you’re seeing them propose is kind of tweak oriented,

Permitting reform could mean a lot of different things, and Democrats and Republicans have different ideas about what it could mean. Environmental groups, within themselves, have different ideas about what it could mean.

for many environmental groups, the permitting process is their main tool. It is how they do the good that they see themselves doing in the world. They use the permitting process to slow down fossil fuel projects, to slow down projects that they see as harming local communities or the local environment.

ROBINSON MEYER: So we talk about the National Environmental Policy Act or NEPA. Let’s just start calling it NEPA. We talk about the NEPA process

NEPA requires the government basically study any environmental impact from a project or from a decision or from a big rule that could occur.

Any giant project in the United States goes through this NEPA process. The federal government studies what the environmental impact of the project will be. Then it makes a decision about whether to approve the project. That decision has nothing to do with the study. Now, notionally, the study is supposed to inform the project.

the decision the federal government makes, the actual “can you build this, yes or no,” legally has no connection to the study. But it must conduct the study in order to make that decision.

that permitting reform is so tough for the Democratic coalition specifically is that this process of forcing the government to amend its studies of the environmental impact of various decisions is the main tool that environmental litigation groups like Earthjustice use to slow down fossil fuel projects and use to slow down large-scale chemical or industrial projects that they don’t think should happen.

when we talk about making this program faster, and when we talk about making it more immune to litigation, they see it as we’re going to take away their main tools to fight fossil fuel infrastructure

why there’s this gap between rhetoric and what’s actually being proposed is that the same tool that is slowing down the green build-out is also what’s slowing down the fossil fuel build-out

ROBINSON MEYER: They’re the classic conflict here between the environmental movement classic, let’s call it, which was “think globally, act locally,” which said “we’re going to do everything we can to preserve the local environment,” and what the environmental movement and the climate movement, let’s say, needs to do today, which is think globally, act with an eye to what we need globally as well, which is, in some cases, maybe welcome projects that may slightly reduce local environmental quality or may seem to reduce local environmental quality in the name of a decarbonized world.

Because if we fill the atmosphere with carbon, nobody’s going to get a good environment.

Michael Gerrard, who is professor at Columbia Law School. He’s a founder of the Sabin Center for Climate Change Law there. It’s called “A Time for Triage,” and he has this sort of interesting argument that the environmental movement in general, in his view, is engaged in something he calls trade-off denial.

his view and the view of some people is that, look, the climate crisis is so bad that we just have to make those choices. We have to do things we would not have wanted to do to preserve something like the climate in which not just human civilization, but this sort of animal ecosystem, has emerged. But that’s hard, and who gets to decide which trade-offs to make?

what you’re not really seeing — not really, I would say, from the administration, even though they have some principles now; not really from California, though Gavin Newsom has a set of early things — is “this is what we think we need to make the I.R.A. happen on time, and this is how we’re going to decide what is a kind of project that gets this speedway through,” w

there’s a failure on the part of, let’s say, the environmental coalition writ large to have the courage to have this conversation and to sit down at a table and be like, “OK, we know that certain projects aren’t happening fast enough. We know that we need to build out faster. What could we actually do to the laws to be able to construct things faster and to meet our net-zero targets and to let the I.R.A. kind achieve what it could achieve?”

part of the issue is that we’re in this environment where Democrats control the Senate, Republicans control the House, and it feels very unlikely that you could just get “we are going to accelerate projects, but only those that are good for climate change,” into the law given that Republicans control the House.

part of the progressive fear here is that the right solutions must recognize climate change. Progressives are very skeptical that there are reforms that are neutral on the existence of climate change and whether we need to build faster to meet those demands that can pass through a Republican-controlled House.

one of the implications of that piece was it was maybe a huge mistake for progressives not to have figured out what they wanted here and could accept here, back when the negotiating partner was Joe Manchin.

Manchin’s bill is basically a set of moderate NEPA reforms and transmission reforms. Democrats, progressives refuse to move on it. Now, I do want to be fair here because I think Democrats absolutely should have seized on that opportunity, because it was the only moment when — we could tell already that Democrats — I mean, Democrats actually, by that moment, had lost the House.

I do want to be fair here that Manchin’s own account of what happened with this bill is that Senate Republicans killed it and that once McConnell failed to negotiate on the bill in December, Manchin’s bill was dead.

EZRA KLEIN: It died in both places.ROBINSON MEYER: It died in both places. I think that’s right.

Republicans already knew they were going to get the House, too, so they had less incentive to play along. Probably the time for this was October.

EZRA KLEIN: But it wasn’t like Democrats were trying to get this one done.

EZRA KLEIN: To your point about this was all coming down to the wire, Manchin could have let the I.R.A. pass many months before this, and they would have had more time to negotiate together, right? The fact that it was associated with Manchin in the way it was was also what made it toxic to progressives, who didn’t want to be held up by him anymore.

What becomes clear by the winter of this year, February, March of this year, is that as Democrats and Republicans begin to talk through this debt-ceiling process where, again, permitting was not the main focus. It was the federal budget. It was an entirely separate political process, basically.

EZRA KLEIN: I would say the core weirdness of the debt-ceiling fight was there was no main focus to it.

EZRA KLEIN: It wasn’t like past ones where it was about the debt. Republicans did some stuff to cut spending. They also wanted to cut spending on the I.R.S., which would increase the debt, right? It was a total mishmash of stuff happening in there.

That alchemy goes into the final debt-ceiling negotiations, which are between principals in Congress and the White House, and what we get is a set of basically the NEPA reforms in Joe Manchin’s bill from last year and the Mountain Valley pipeline, the thing that environmentalists were focused on blocking, and effectively no transmission reforms.

the set of NEPA reforms that were just enacted, that are now in the law, include — basically, the word reasonable has been inserted many times into NEPA. [LAUGHS] So the law, instead of saying the government has to study all environmental impacts, now it has to study reasonable environmental impacts.

this is a kind of climate win — has to study the environmental impacts that could result from not doing a project. The kind of average NEPA environmental impact study today is 500 pages and takes 4.5 years to produce. Under the law now, the government is supposed to hit a page limit of 150 to 300 pages.

there’s a study that’s very well cited by progressives from three professors in Utah who basically say, well, when you look at the National Forest Service, and you look at this 40,000 NEPA decisions, what mostly holds up these NEPA decisions is not like, oh, there’s too many requirements or they had to study too many things that don’t matter. It’s just there wasn’t enough staff and that staffing is primarily the big impediment. And so on the one hand, I think that’s probably accurate in that these are, in some cases — the beast has been starved, and these are very poorly staffed departments

The main progressive demand was just “we must staff it better.”

But if it’s taking you this much staffing and that much time to say something doesn’t apply to you, maybe you have a process problem —ROBINSON MEYER: Yes.EZRA KLEIN: — and you shouldn’t just throw endless resources at a broken process, which brings me — because, again, you can fall into this and never get out — I think, to the bigger critique her

these bills are almost symbolic because there’s so much else happening, and it’s really the way all this interlocks and the number of possible choke points, that if you touch one of them or even you streamline one of them, it doesn’t necessarily get you that f

“All told, over 60 federal permitting programs operate in the infrastructure approval regime, and that is just the federal system. State and local approvals and impact assessments could also apply to any project.”

their view is that under this system, it’s simply not possible to build the amount of decarbonization infrastructure we need at the pace we need it; that no amount of streamlining NEPA or streamlining, in California, CEQA will get you there; that we basically have been operating under what they call an environmental grand bargain dating back to the ’70s, where we built all of these processes to slow things down and to clean up the air and clean up the water.

we accepted this trade-off of slower building, quite a bit slower building, for a cleaner environment. And that was a good trade. It was addressing the problems of that era

now we have the problems of this era, which is we need to unbelievably, rapidly build out decarbonization infrastructure to keep the climate from warming more than we can handle and that we just don’t have a legal regime or anything.

You would need to do a whole new grand bargain for this era. And I’ve not seen that many people say that, but it seems true to me

the role that America had played in the global economy in the ’50s and ’60s where we had a ton of manufacturing, where we were kind of the factory to a world rebuilding from World War II, was no longer tenable and that, also, we wanted to focus on more of these kind of high-wage, what we would now call knowledge economy jobs.That was a large economic transition happening in the ’70s and ’80s, and it dovetailed really nicely with the environmental grand bargain.

At some point, the I.R.A. recognizes that that environmental grand bargain is no longer operative, right, because it says, we’re going to build all this big fiscal fixed infrastructure in the United States, we’re going to become a manufacturing giant again, but there has not been a recognition among either party of what exactly that will mean and what will be required to have it take hold.

It must require a form of on-the-ground, inside-the-fenceline, “at the site of the power plant” pollution control technology. The only way to do that, really, is by requiring carbon capture and requiring the large construction of major industrial infrastructure at many, many coal plants and natural gas plants around the country in order to capture carbon so it doesn’t enter the atmosphere, and so we don’t contribute to climate change. That is what the Supreme Court has ruled. Until that body changes, that is going to be the law.

So the E.P.A. has now, last month, proposed a new rule under the Clean Air Act that is going to require coal plants and some natural gas plants to install carbon capture technology to do basically what the Supreme Court has all but kind of required the E.P.A. to do

the E.P.A. has to demonstrate, in order to kind of make this rule the law and in order to make this rule pass muster with the Supreme Court, that this is tenable, that this is the best available and technologically feasible option

that means you actually have to allow carbon capture facilities to get built and you have to create a legal process that will allow carbon capture facilities to get built. And that means you need to be able to tell a power plant operator that if they capture carbon, there’s a way they can inject it back into the ground, the thing that they’re supposed to do with it.

Well, E.P.A. simultaneously has only approved the kind of well that you need to inject carbon that you’ve captured from a coal factory or a natural gas line back into the ground. It’s called a Class 6 well. The E.P.A. has only ever approved two Class 6 wells. It takes years for the E.P.A. to approve a Class 6 well.

And environmental justice groups really, really oppose these Class 6 wells because they see any carbon capture as an effort to extend the life of the fossil fuel infrastructure

The issue here is that it seems like C.C.S., carbon capture, is going to be essential to how the U.S. decarbonizes. Legally, we have no other choice because of the constraints the Supreme Court has placed on the E.P.A.. At the same time, environmental justice groups, and big green groups to some extent, oppose building out any C.C.S.

to be fair to them, right, they would say there are other ways to decarbonize. That may not be the way we’ve chosen because the politics weren’t there for it, but there are a lot of these groups that believe you could have 100 percent renewables, do not use all that much carbon capture, right? They would have liked to see a different decarbonization path taken too. I’m not sure that path is realistic.

what you do see are environmental groups opposing making it possible to build C.C.S. anywhere in the country at all.

EZRA KLEIN: The only point I’m making here is I think this is where you see a compromise a lot of them didn’t want to make —ROBINSON MEYER: Exactly, yeah.EZRA KLEIN: — which is a decarbonization strategy that actually does extend the life cycle of a lot of fossil fuel infrastructure using carbon capture. And because they never bought onto it, they’re still using the pathway they have to try to block it. The problem is that’s part of the path that’s now been chosen. So if you block it, you just don’t decarbonize. It’s not like you get the 100 percent renewable strategy.

ROBINSON MEYER: Exactly. The bargain that will emerge from that set of actions and that set of coalitional trade-offs is we will simply keep running this, and we will not cap it.

What could be possible is that progressives and Democrats and the E.P.A. turns around and says, “Oh, that’s fine. You can do C.C.S. You just have to cap every single stationary source in the country.” Like, “You want to do C.C.S.? We totally agree. Essential. You must put CSS infrastructure on every power plant, on every factory that burns fossil fuels, on everything.”

If progressives were to do that and were to get it into the law — and there’s nothing the Supreme Court has said, by the way, that would limit progressives from doing that — the upshot would be we shut down a ton more stationary sources and a ton more petrochemical refineries and these bad facilities that groups don’t want than we would under the current plan.

what is effectively going to happen is that way more factories and power plants stay open and uncapped than would be otherwise.

EZRA KLEIN: So Republican-controlled states are just on track to get a lot more of it. So the Rocky Mountain Institute estimates that red states will get $623 billion in investments by 2030 compared to $354 billion for blue states.

why are red states getting so much more of this money?

ROBINSON MEYER: I think there’s two reasons. I think, first of all, red states have been more enthusiastic about getting the money. They’re the ones giving away the tax credits. They have a business-friendly environment. And ultimately, the way many, many of these red-state governors see it is that these are just businesses.

I think the other thing is that these states, many of them, are right-to-work states. And so they might pay their workers less. They certainly face much less risk financially from a unionization campaign in their state.

regardless of the I.R.A., that’s where manufacturing and industrial investment goes in the first place. And that’s where it’s been going for 20 years because of the set of business-friendly and local subsidies and right-to-work policies.

I think the administration would say, we want this to be a big union-led effort. We want it to go to the Great Lakes states that are our political firewall.

and it would go to red states, because that’s where private industry has been locating since the ’70s and ’80s, and it would go to the Southeast, right, and the Sunbelt, and that that wouldn’t be so bad because then you would get a dynamic where red-state senators, red-state representatives, red-state governors would want to support the transition further and would certainly not support the repeal of the I.R.A. provisions and the repeal of climate provisions, and that you’d get this kind of nice vortex of the investment goes to red states, red states feel less antagonistic toward climate policies, more investment goes to red states. Red-state governors might even begin to support environmental regulation because that basically locks in benefits and advantages to the companies located in their states already.

I think what you see is that Republicans are increasingly warming to EV investment, and it’s actually building out renewables and actually building out clean electricity generation, where you see them fighting harder.

The other way that permitting matters — and this gets into the broader reason why private investment was generally going to red states and generally going to the Sunbelt — is that the Sunbelt states — Georgia, Texas — it’s easier to be there as a company because housing costs are lower and because the cost of living is lower in those states.

it’s also partially because the Sunbelt and the Southeast, it was like the last part of the country to develop, frankly, and there’s just a ton more land around all the cities, and so you can get away with the sprawling suburban growth model in those citie

It’s just cheaper to keep building suburbs there.

EZRA KLEIN: So how are you seeing the fights over these rare-earth metals and the effort to build a safe and, if not domestic, kind of friend-shored supply chain there?

Are we going to be able to source some of these minerals from the U.S.? That process seems to be proceeding but going slowly. There are some minerals we’re not going to be able to get from the United States at all and are going to have to get from our allies and partners across the world.

The kind of open question there is what exactly is the bargain we’re going to strike with countries that have these critical minerals, and will it be fair to those countries?

it isn’t to say that I think the I.R.A. on net is going to be bad for other countries. I just think we haven’t really figured out what deal and even what mechanisms we can use across the government to strike deals with other countries to mine the minerals in those countries while being fair and just and creating the kind of economic arrangement that those countries want.

, let’s say we get the minerals. Let’s say we learn how to refine them. There is many parts of the battery and many parts of EVs and many, many subcomponents in these green systems that there’s not as strong incentive to produce in the U.S.

at the same time, there’s a ton of technology. One answer to that might be to say, OK, well, what the federal government should do is just make it illegal for any of these battery makers or any of these EV companies to work with Chinese companies, so then we’ll definitely establish this parallel supply chain. We’ll learn how to make cathodes and anodes. We’ll figure it out

The issue is that there’s technology on the frontier that only Chinese companies have, and U.S. automakers need to work with those companies in order to be able to compete with them eventually.

EZRA KLEIN: How much easier would it be to achieve the I.R.A.’s goals if America’s relationship with China was more like its relationship with Germany?

ROBINSON MEYER: It would be significantly easier, and I think we’d view this entire challenge very differently, because China, as you said, not only is a leader in renewable energy. It actually made a lot of the important technological gains over the past 15 years to reducing the cost of solar and wind. It really did play a huge role on the supply side of reducing the cost of these technologies.

If we could approach that, if China were like Germany, if China were like Japan, and we could say, “Oh, this is great. China’s just going to make all these things. Our friend, China, is just going to make all these technologies, and we’re going to import them.

So it refines 75 percent of the polysilicon that you need for solar, but the machines that do the refining, 99 percent of them are made in China. I think it would be reckless for the U.S. to kind of rely on a single country and for the world to rely on a single country to produce the technologies that we need for decarbonization and unwise, regardless of our relationship with that country.

We want to geographically diversify the supply chain more, but it would be significantly easier if we did not have to also factor into this the possibility that the US is going to need to have an entirely separate supply chain to make use of for EVs, solar panels, wind turbines, batteries potentially in the near-term future.

, what are three other books they should read?

The first book is called “The End of the World” by Peter Brannen. It’s a book that’s a history of mass extinctions, the Earth’s five mass extinctions, and, actually, why he doesn’t think we’re currently in a mass extinction or why, at least, things would need to go just as bad as they are right now for thousands and thousands of years for us to be in basically the sixth extinction.

The book’s amazing for two reasons. The first is that it is the first that really got me to understand deep time.

he explains how one kind of triggered the next one. It is also an amazing book for understanding the centrality of carbon to Earth’s geological history going as far back as, basically, we can track.

“Climate Shock” by Gernot Wagner and Marty Weitzman. It’s about the economics of climate change

Marty Weitzman, who I think, until recently, was kind of the also-ran important economist of climate change. Nordhaus was the famous economist. He was the one who got all attention. He’s the one who won the Nobel.

He focuses on risk and that climate change is specifically bad because it will damage the environment, because it will make our lives worse, but it’s really specifically bad because we don’t know how bad it will be

it imposes all these huge, high end-tail risks and that blocking those tail risks is actually the main thing we want to do with climate policy.

That is I think, in some ways, what has become the U.S. approach to climate change and, to some degree, to the underlying economic thinking that drives even the I.R.A., where we want to just cut off these high-end mega warming scenarios. And this is a fantastic explanation of that particular way of thinking and of how to apply that way of thinking to climate change and also to geoengineerin

The third book, a little controversial, is called “Shorting the Grid” by Meredith Angwin

her argument is basically that electricity markets are not the right structure to organize our electricity system, and because we have chosen markets as a structured, organized electricity system in many states, we’re giving preferential treatment to natural gas and renewables, two fuels that I think climate activists may feel very different ways about, instead of coal, which she does think we should phase out, and, really, nuclear

By making it easier for renewables and natural gas to kind of accept these side payments, we made them much more profitable and therefore encouraged people to build more of them and therefore underinvested in the forms of generation, such as nuclear, that actually make most of their money by selling electrons to the grid, where they go to people’s homes.

The third factor is the speed with which higher interest rates pass through to homeowners. The biggest risk is to borrowers on floating-rate mortgages

not all fixed-term loans are alike. In America the bulk of them are fixed for two or three decades. In other countries, even fixed-rate borrowers will face soaring mortgage costs soon enough

all the ingredients for a deep housing slump are in place. This time, though, it is likely to be led not by America, but by Canada, the Netherlands, Australia, New Zealand and Norway

First-time buyers and recent borrowers are especially vulnerable. Many stretched their finances to buy a home, leaving less spare cash to cover a jump in mortgage costs

First-time buyers have also had less time to accumulate equity. Oxford Economics estimates that a 15% drop in house prices in America over a year would cancel out two-thirds of the housing equity they have accumulated since the start of the pandemic

the housing squeeze will have profound consequences. “The housing cycle IS the business cycle”, wrote Edward Leamer of the University of California, Los Angeles, in a paper published in 2007

It noted that housing slowdowns had preceded eight of the past ten recessions in America

The link between the two cycles arises because housing confers “wealth effects” on owner occupiers. When house prices rise, people feel good about their financial situation, so borrow and spend more.

2019 research by the Bank of England found that a 10% increase in house prices raises consumption by 0.35–0.5%

Another important channel between the housing market and the rest of the economy is investment. Capital spending associated with housing, especially house building, can be extremely volatile—and is often the difference between a growing or shrinking economy.

Some people see an upside to a housing crash. They hope lower prices will allow young folk to buy their first houses. These hopes are almost certain to be dashed. In housing corrections, and sometimes for years after, home ownership rates tend to fall, rather than rise

Economic conditions that cause house prices to fall simultaneously imperil the chances of would-be homeowners. Unemployment rises and wages decline. If interest rates jump, people are able to borrow less and mortgage lenders tend to become more skittish about lending

The biggest effect of a housing downturn may be in politics

In countries where home ownership is seen as a rite of passage, lower prices without any increase in affordability will rub salt in already sore wounds. “Falling to what? Falling to absurdly grotesque prices instead of just unthinkable?”

For years more established homeowners took comfort in the thought that, even if real-wage growth was terrible, at least the price of their house was rising. Those days are over. Even baby-boomers, the great winners from a decade of price growth, now face the prospect of living off a smaller nest-egg in retirement, as downsizing becomes less lucrative

All this means rising interest rates will have unpredictable political repurcussions, as people who once benefited from the status quo discover what it feels like to lose out.

Do not be surprised, then, if policymakers launch enormous rescue operations

"China has really been at the forefront of success in conversion of all vehicles to electric vehicles, especially buses," says Heather Thompson, chief executive officer of the Institute for Transportation and Development Policy (ITDP), a non-profit focusing on sustainable transport solutions. "The rest of the world is trying to do the same, but I think China is really out ahead."

At the time of China's 2001 entry into the World Trade Organisation, the international automotive industry was dominated by European, US and Japanese brands. These companies had spent decades perfecting internal combustion engine technology. To compete, Beijing decided to find a new track for its auto industry: making cars that did not use conventional engines.

That same year, the central government launched the so-called "863 plan" for EV research and development. There were numerous practical challenges, however, in the way of mass electrification. Not many manufacturers were making new energy vehicles, buyers were few and there was a lack of charging infrastructure in existence. The answer? Buses.

"The Chinese government adopted a very smart strategy," says Liu Daizong, ITDP's East Asia director. "They realised quite early on that they should drive [the EV industry] through electric buses," he notes, since their public service status meant Beijing "could have a strong hand on their electrification".

"Bus routes were fixed. This means when an electric bus finished a round, it could return to the depot to recharge," explains Xue Lulu, a mobility manager at the World Resources Institute (WRI) China. The typical daily mileage of a Chinese bus ­– 200km (120 miles) – was a realistic range for battery makers to meet.

The following year, the country began its large-scale rollout of new energy buses, with the "Ten Cities and Thousand Vehicles" programme. Over three years, the programme aimed to provide 10 cities with financial subsidies to promote 1,000 public-sector new energy vehicles in each, annually. Its goal was to have 10% new energy vehicles in the country by the end of 2012.

Strong policy support from both central and regional governments "gave manufacturers confidence in setting up production lines and stepping up research efforts," says Liu.

Together, these strong and consistent government signals encouraged Chinese manufacturers to expand their EV production capacity, bring down costs and improve their technologies. One such company was Build Your Dream, better known as BYD. The Shenzhen-based firm, the world's largest EV maker in 2022, ballooned its business a decade before by supplying electric buses and taxis for China's EV pilot cities.

"Back then, most buses used diesel, which was a main source of nitrogen oxides (NOx) emissions," says Xue, referring to the air pollution that smothered Beijing and other Chinese cities in the early 2010s. Yet in 2013, a new plan from central government cited tackling air pollution as one of the reasons for rolling out EVs.

This addition proved to be critical: it not only connected EV uptake with people's health, it also indirectly tied the e-bus campaign to local officials' political performance, as the central government would soon hand air-quality targets to all provinces.

The years 2013 and 2014 proved to be important for China's EV push. For the first time, the central government made EV purchase subsidies available to individual consumers, not just the public sector, opening the floodgate to private ownership. Additionally, it offered discounted electricity tariffs to bus operators to make sure the cost of running electric buses would be "significantly lower than" that of their oil or gas-powered equivalents.

The new economic push, plus local government's determination to battle air pollution, generated great enthusiasm for e-buses. By the end of 2015, the number of EV pilot cities rocketed from 25 to 88. In the same year, the central government set a target of 200,000 new energy buses on the road by 2020 and announced a plan to phase out its subsidies for fossil-fuel-powered buses.

To further stimulate the market, many cities devised various local policies on top of national incentives. For example, Shenzhen, a southern city with a population of more than 17 million, encouraged government agencies to work with private companies to create a full range of renting mechanisms for bus operators

Different cities' bus operators also designed different charging strategies. "Buses in Shenzhen had bigger batteries, so they normally charged overnight," says Xue, of WRI China. Between 2016 and 2020, Shanghai, another electric bus hub, subsidised the electricity e-buses used -- regardless of the hours of the day -- to give them more flexibility in charging.

Generous financial support did lead to problems. In 2016, an EV subsidy fraud shook China, with some bus operators found to have exaggerated the number of e-buses they had purchased. So that same year Beijing shifted its EV subsidy rules so bus operators could only receive financial support when a bus's mileage reached 30,000km (19,000 miles).

one year later, the government announced the so-called "dual-credit" policy. This allowed new energy vehicle makers to rake up credits which they could sell for cash to those needing to offset "negative credits" generated from making conventional cars.

it wasn't only China's buses that had benefitted.China's e-bus campaign helped create a big and stable market for its wider EV industry, brought down the costs and created economies of scale. In 2009, the year the e-bus campaign was rolled out, the total number of new energy vehicles sold stood at 2,300; by 2022, it was 6.9 million, analysis by Huang Zheng,

By 2022, the country had also built the world's largest EV charging network, with 1.8 million public charging stations – or two-thirds of the global total – and 3.4 million private equivalents. This means that on average, there is one charging pillar for every 2.5 of China's 13.1 million new energy vehicles.

Cold weather is a problem, too, as it can make a battery's charging time longer and its range shorter. The reason China has not achieved 100% electrification for its buses is its northern regions, which have harsh winters, says Xue.

To make e-buses truly "green", they should also be charged with renewable power, Wang says. But last year coal power still accounted for 58.4% of China's energy mix, according to the China Electricity Council, a trade body..

Globally, however, China is now in a league of its own in uptake of e-buses. By 2018, about 421,000 of the world's 425,000 electric buses were located in China; Europe had about 2,250 and the US owned around 300. A

But earlier this year, the European Commission announced a zero-emission target for all new city buses by 2030. And some countries are increasing their overall funding for the transition.

In 2020, the European Commission approved Germany's plan to double its aid for e-buses to €650m (£558m/$707m), then again in 2021 to €1.25 billion euros (£1.07m/$1.3bn). And the UK, which last year had the largest electric bus fleet in Europe with 2,226 pure electric and hybrid buses, has announced another £129m ($164m) to help bus operators buy zero-emissions fleets.

Countries have thus responded to China's manufacturing lead in divergent ways. "While the US has opted for a more competitive angle by fostering its own e-bus production, regions like Latin America are more open to trade with China due to a more friendly trading setup through [China's] Belt and Road Initiative,"

In order to avoid direct competition from Chinese manufacturers, the US has come up with a "school-bus strategy", says Liu. The Chinese don't make the iconic yellow vehicles, so this could ignite American e-bus manufacturing and create a local industry chain, he suggests. Backed by the US Environmental Protection Agency's $5bn (£3.9bn) Clean School Bus Programme, the national effort has so far committed to providing 5,982 buses.

In contrast, many Latin American cities, such as the Colombian capital of Bogota and the Chilean capital of Santiago, are greening their traditional bus sectors with the help of Chinese manufacturers, who are the largest providers to the region. In 2020, Chile became the country that had the most Chinese e-buses outside of China, and this year Santiago's public transport operator announced it has ordered 1,022 e-buses from Beijing-based Foton Motor, the biggest overseas deal the firm had received.

Chinese manufacturers are likely to receive a lot more orders from Chile and its neighbours in this decade. According to latest research by the global C40 Cities network, the number of electric buses in 32 Latin American cities is expected to increase by more than seven times by 2030, representing an investment opportunity of over $11.3bn (£8.9bn)

In June 2023, BloombergNEF forecast half of the world's buses to be entirely battery-powered by 2032, a decade ahead of cars. And by 2026, 36% and 24% of municipal bus sales in Europe and the US, respectively, are expected to be EVs as they begin to catch up with China

To meet the global climate goals set by the Paris Agreement, simply switching the world's existing bus fleets might not be enough. According to ITDP, the cumulative greenhouse gas emissions from urban passenger transport globally must stay below the equivalent of 66 gigatonnes CO2 between 2020 and 2050 for the world to meet the 1.5C temperature goal. This emissions limit will only be possible when the world not only adopts electric buses, but goes through a broader shift away from private transport

"We can't just focus on [replacing] the buses that exist, we need to actually get many, many more buses on the streets," Thompson adds. She and her team estimate that the world would need about 10 million more buses through 2030, and 46 million more buses cumulatively through 2050, to make public transport good enough to have a shot at achieving the Paris Agreement. And all those buses will need to be electric.

In China therefore, even though EVs are being sold faster than ever, its central government has instructed cities to encourage public transport use, as well as walking and riding bikes.

In Wang's hometown, meanwhile, which has just over three million residents, the local government has gone one step further and made all bus rides free. All citizens need to do is to swipe an app, with no charge, to get onto the bus. "My aunt loves taking buses now," says Wang. "She says it is so convenient."

New listings this week were up 4% from the previous year, a factor that may tip the balance of what has recently been a white hot seller’s market.

Washington and Colorado have set out to invent a whole industry from scratch and, in theory, to avoid the shortcomings of other markets in legal vices — tobacco, alcohol, gambling — that lurched into being without much forethought, and have supplied, along with much pleasure, much misery.

the complexities of turning an illicit herb into a regulated, safe, consumer-friendly business. Among the things on the to-do list: certifying labs to test for potency and contamination. (Pot can contain, among other nasty things, pesticides, molds and salmonella.) Devising rules on labeling, so users know what they’re getting. Hiring inspectors, to make sure the sellers comply. Establishing limits on advertising, because you don’t want allowing to become promoting.

One practical challenge facing the legalization pioneers is how to keep the marijuana market from being swallowed by a few big profiteers — the pot equivalent of Big Tobacco, or even the actual tobacco industry — a powerful oligopoly with every incentive to turn us into a nation of stoners.

the likely best model is something resembling the wine industry — a fragmented market, many producers, none dominant. This could be done by limiting the size of licensed purveyors. It would help, too, to let individuals grow a few plants at home

there is evidence that pot dealers, like purveyors of alcohol, get the bulk of their profit from those who use the product to excess. “When you get a for-profit producer or distributor industry going, their incentives are to increase sales,

states can take a cut of what will be, according to estimates, a $35 billion to $45 billion industry and earmark some of these new tax revenues for good causes. It’s the same tactic used to win public approval of lotteries — and with the same danger: that some worthy government function comes to depend on creating more addicts. And how do you divvy up the revenues? How much goes to offset health consequences? How much goes to enforcement? How do you calibrate taxes so the price of pot is high enough to discourage excessive use, but not so high that a cheap black market arises?

no one has come up with a pot version of the breathalyzer to determine quickly whether a driver is impaired.

California demonstrates a different kind of unintended consequences. The state’s medical marijuana law is such a free-for-all that in Los Angeles there are now said to be more pot dispensaries than Starbucks outlets.

Favoritism is almost universal in today’s job market. In interviews with hundreds of people on this topic, I found that all but a handful used the help of family and friends to find 70 percent of the jobs they held over their lifetimes; they all used personal networks and insider information if it was available to them.

the idea that there is a job “market” based solely on skills, qualifications and merit is false. Whenever possible, Americans seeking jobs try to avoid market competition: they look for unequal rather than equal opportunity

just as opportunities are unequally distributed, they are also unequally redistributed.

Inequality reproduces itself because help is typically reserved for people who are “like me”: the people who live in my neighborhood, those who attend my church or school or those with whom I have worked in the past

Seeing contemporary labor-market politics through the lens of favoritism, rather than discrimination alone, is revealing. It explains, for example, why even though the majority of all Americans, including whites, support civil rights in principle, there is widespread opposition on the part of many whites to affirmative action policies

my research demonstrated that the real complaint is that affirmative action undermines long-established patterns of favoritism.

The interviewees in my study who were most angry about affirmative action were those who had relatively fewer marketable skills — and were therefore most dependent on getting an inside edge for the best jobs.

whites helping other whites is not the same as discrimination, and it is not illegal. Yet it may have a powerful effect on the access that African-Americans and other minorities have to good jobs, or even to the job market itself.

May says voters who supported "Brexit" want the government to reassert control over its borders.

in the long run, “when pay setters set their own pay, there’s no limit,” unless “confiscatory tax rates” are imposed.

suggests that traditional liberal government policies on spending, taxation and regulation will fail to diminish inequality.

Conservative readers will find that Piketty’s book disputes the view that the free market, liberated from the distorting effects of government intervention, “distributes,” as Milton Friedman famously put it, “the fruits of economic progress among all people.

Piketty proposes instead that the rise in inequality reflects markets working precisely as they should: “This has nothing to do with a market imperfection: the more perfect the capital market, the higher” the rate of return on capital is in comparison to the rate of growth of the economy. The higher this ratio is, the greater inequality is.

we are in the presence of one of the watershed books in economic thinking.”

There are a number of key arguments in Piketty’s book.

One is that the six-decade period of growing equality in western nations – starting roughly with the onset of World War I and extending into the early 1970s – was unique and highly unlikely to be repeated. That period, Piketty suggests, represented an exception to the more deeply rooted pattern of growing inequality.

According to Piketty, those halcyon six decades were the result of two world wars and the Great Depression. The owners of capital – those at the top of the pyramid of wealth and income – absorbed a series of devastating blows. These included the loss of credibility and authority as markets crashed; physical destruction of capital throughout Europe in both World War I and World War II; the raising of tax rates, especially on high incomes, to finance the wars; high rates of inflation that eroded the assets of creditors; the nationalization of major industries in both England and France;

The six decades between 1914 and 1973 stand out from the past and future, according to Piketty, because the rate of economic growth exceeded the after-tax rate of return on capital. Since then, the rate of growth of the economy has declined, while the return on capital is rising to its pre-World War I levels.

“If the rate of return on capital remains permanently above the rate of growth of the economy – this is Piketty’s key inequality relationship,” Milanovic writes in his review, it “generates a changing functional distribution of income in favor of capital and, if capital incomes are more concentrated than incomes from labor (a rather uncontroversial fact), personal income distribution will also get more unequal — which indeed is what we have witnessed in the past 30 years.”

The Piketty diagnosis helps explain the recent drop in the share of national income going to labor (see Figure 2) and a parallel increase in the share going to capital.

Piketty’s analysis also sheds light on the worldwide growth in the number of the unemployed. The International Labor Organization, an agency of the United Nations, reported recently that the number of unemployed grew by 5 million from 2012 to 2013, reaching nearly 202 million by the end of last year. It is projected to grow to 215 million by 2018.

Piketty’s wealth tax solution runs directly counter to the principles of contemporary American conservatives who advocate antithetical public policies: cutting top rates and eliminating the estate tax.

as has happened before with other forms of property, the most politically influential owners of the new property are doing their utmost to increase their profits by creating monopolies

The most valuable intellectual properties are platforms so widely used that everyone else has to use them, too. Think of standard operating systems like Microsoft’s Windows or Google’s Android; Google’s search engine; Amazon’s shopping system; and Facebook’s communication network

Despite an explosion in the number of websites over the last decade, page views are becoming more concentrated. While in 2001, the top 10 websites accounted for 31 percent of all page views in America, by 2010 the top 10 accounted for 75 percent

Amazon is now the first stop for almost a third of all American consumers seeking to buy anything

Google and Facebook are now the first stops for many Americans seeking news — while Internet traffic to much of the nation’s newspapers, network television and other news gathering agencies has fallen well below 50 percent of all traffic.

almost all of the profits go to the platforms’ owners, who have all of the bargaining power

The rate at which new businesses have formed in the United States has slowed markedly since the late 1970s. Big Tech’s sweeping patents, standard platforms, fleets of lawyers to litigate against potential rivals and armies of lobbyists have created formidable barriers to new entrants

The law gives 20 years of patent protection to inventions that are “new and useful,” as decided by the Patent and Trademark Office. But the winners are big enough to game the system. They make small improvements warranting new patents, effectively making their intellectual property semipermanent.

They also lay claim to whole terrains of potential innovation including ideas barely on drawing boards and flood the system with so many applications that lone inventors have to wait years.

Big Tech has been almost immune to serious antitrust scrutiny, even though the largest tech companies have more market power than ever. Maybe that’s because they’ve accumulated so much political power.

Economic and political power can’t be separated because dominant corporations gain political influence over how markets are maintained and enforced, which enlarges their economic power further. One of the original goals of antitrust law was to prevent this.

We are now in a new gilded age similar to the first Gilded Age, when the nation’s antitrust laws were enacted. As then, those with great power and resources are making the “free market” function on their behalf. Big Tech — along with the drug, insurance, agriculture and financial giants — dominates both our economy and our politics.

The real question is how government organizes the market, and who has the most influence over its decisions

Yet as long as we remain obsessed by the debate over the relative merits of the “free market” and “government,” we have little hope of seeing what’s occurring and taking the action that’s needed to make our economy work for the many, not the few.