Climate policy’s latest threat to property rights
National Review Online, April 6, 2023
Say what you will about Jamie Dimon, the chairman and CEO of JPMorgan Chase, but when it comes to property rights, he is pretty consistent. He was chairman of the Business Roundtable when, in 2019, in a statement co-signed by a large number of CEOs, it jettisoned its support for shareholder primacy — the idea that the principal purpose of a corporation is to generate return for its shareholders. That was old hat. Now corporations should “deliver value” to all their stakeholders, of which shareholders are only one class.
To some (cynics who turned out to be naïve) this was just a PR stunt. In reality, it was an important moment in the advance of stakeholder capitalism, made more significant still by institutional investors’ rapidly growing take-up of ESG — an investment “discipline” that measures actual or prospective portfolio companies against variably defined environmental, social, and governance standards. Stakeholder capitalism and ESG are two sides of the same coin. And both are expressions of corporatism. Corporatism takes many forms, some more benign than others, but they all feature the belief that private capital should, to a greater or lesser extent, be managed in a way that serves a selection of public objectives. And, to a greater or lesser extent, that represents an assault on the property rights of those whose capital it is.
Fast-forward to 2023 and the section in Dimon’s annual letter to his bank’s shareholders dedicated to climate change, a topic he introduces on a note of high drama:
The window for action to avert the costliest impacts of global climate change is closing.At the same time, the ongoing war in Ukraine is roiling trade relations across Europe and Asia and redefining the way countries and companies plan for energy security. The need to provide energy affordably and reliably for today, as well as make the necessary investments to decarbonize for tomorrow, underscores the inextricable links between economic growth, energy security, and climate change. We need to do more, and we need to do so immediately. . . . Permitting reforms are desperately needed to allow investments to be done in any kind of timely way.
And so:
We may even need to evoke eminent domain — we simply are not getting the adequate investments fast enough for grid, solar, wind and pipeline initiatives.
Ah.
To his credit, Dimon rightly includes pipelines in that list. They add value and are badly needed, as are additions to the grid. To argue that the same is as true of solar and, even more so, wind, is more of a stretch. Neither are ready for the prime-time roles they have been allocated by climate policy-makers, primarily (but not solely) owing to problems related to their intermittency (the sun does not always shine, and the wind does not always blow). Eminent domain — a fancy term for expropriation by the state — can be justified under certain circumstances, but there ought to be a high bar to be overcome before such powers are exercised. Seizing private property to facilitate the installation of energy systems that lack the reliability required by a modern economy ought to fail any basic moral or commonsense test. The law, as we know, can be less demanding, but a banker of Dimon’s stature should not be.
But if that is the tack Dimon wants to take, maybe he could talk to Xi Jinping instead. China is the world’s largest emitter of greenhouse gases, and its ruling party has never had qualms about expropriation. Then again, it’s easier and safer to hector Americans. The Beijing regime can be touchy, and JPMorgan Chase regards China as a major business opportunity.
Dimon’s reference to the costs of climate change was to be expected, but those costs, which exist, should not be exaggerated. Writing for National Review recently, Bjørn Lomborg (who also spoke at the National Review Institute’s Ideas Summit at the end of last month) had this to say:
Global warming is real, but it is not the end of the world. Indeed, the world’s only climate economist to win the Nobel Prize in economics estimates that if we do nothing, the cost of climate change will be equivalent to a loss of about 4 percent of GDP by the end of the century.
This is certainly not nothing. But remember that by the end of the century, the U.N. itself, in its middle-of-the-road scenario, estimates that the average person in the world will be about 450 percent as rich as the average person is today.
As I have shown in my peer-reviewed 2020 article in the journal Technological Forecasting and Social Change, the 4 percent reduction means that by the end of the century, instead of being 450 percent as rich, the average person will be “only” 434 percent as rich because of the effects of climate change. This is less good than it could have been — and it is one of the reasons we should tackle the climate problem. But it is certainly not the end of the world. And if the panic means we end up adopting poor climate policies and spending 5 to 10 percent of our GDP on them, we could very well end up worse off overall.
Indeed, we could.
Lomborg also makes the point that innovation in green energy “has been neglected as campaigners and ‘green’ corporations have rushed to roll out inefficient technology — and get it subsidized by taxpayers.” But subsidies, it seems, are not enough for Dimon. Expropriation has to be thrown into this wasteful and counterproductive mix.
Dimon highlights the importance of both decarbonization and energy security. But Western climate policy-makers have generally prioritized the former over the latter. If the misallocation of resources that has characterized their approach continues (and Dimon’s words suggest that it will) energy insecurity will only grow. The few times that the word “nuclear” appears in his letter, it is in conjunction with nuclear weapons. And yet speedy expansion of nuclear power offers, for now, the best way of reconciling economic growth and energy security with decarbonization.
At its core, the corporatist ideal is of society as an organic whole, with all its elements working harmoniously toward shared goals. Corporatists disdain the sharp divisions that can come with democracy, which is one reason why, if given the chance, they tend to drain it of much of its meaning (and, in the worst cases, dispense with it altogether).
Dimon:
To expedite progress, governments, businesses and non-governmental organizations need to align across a series of practical policy changes that comprehensively address fundamental issues that are holding us back. Massive global investment in clean energy technologies must be done and must continue to grow year-over-year.
Note the reference to (unelected) businesses and (unelected) NGOs. And note too the reference to governments in the plural, implying the involvement of foreign governments (unsurprisingly: Climate change is a global issue) doubtless “aligning” with the help of the U.N. — that haven of democratic values and free-market thinking. And what are the “fundamental issues . . . holding us back”? To speculate, could it be the fear that voters in democracies will start to rebel against the burdens imposed on them in the name of the climate? Or could it be the fact that countries such as China and India take a rather different view of climate-change concerns? If so, how “we” will deal with such obstacles remains mysterious.
Dimon maintains that global investment in “clean technologies” must be “massive” and must grow. The way things are going, that would mean digging — and gilding — an even deeper hole. An infinitely better alternative would be a rejection of command-and-control, a reconnection with reality, a rediscovery of proper cost–benefit analysis, more acceptance of the need for trade-offs, and a rebalancing of spending away from climate policy-makers’ current priorities and toward adaptation and enhanced resilience (for example, through the building of sea defenses for low-lying coastal cities, a project that, like many similar “defensive” measures, will often pay for itself regardless of what the climate does). We should make a major recommitment to nuclear power and, as Lomborg suggests, increase research into developing or improving technologies designed to generate (or support the generation of) cheap, reliable, and clean energy. Such technologies cannot just be conjured up to order, but informed optimism, backed by adequate funding and human ingenuity, is a better choice than accelerating along today’s course, which is nothing more than a faster track to fiasco if we are lucky, or catastrophe if we are not.
Toward the end of that part of his letter devoted to climate change, Dimon writes:
Polarization, paralysis and basic lack of analysis cannot keep us from addressing one of the most complex challenges of our time. Diverse stakeholders need to come together, seeking the best answers through engagement around our common interest.
Once again, some of his words — “diverse stakeholders need to come together” and so on — sound a depressing corporatist note, but his reference to a “basic lack of analysis” did make me laugh. Stones, glass houses, and all that.