A Centuries-Old Idea Could Revolutionize Climate Policy

The Green New Deal’s mastermind is a precocious New Yorker with big ambitions. Sound familiar?

John Trumbull / Caitlin Ochs / Eric Vidall / Reuters / Thanh Do / The Atlantic

The economic thinker who most influenced the Green New Deal isn’t Marx or Lenin. No, if you want to understand Alexandria Ocasio-Cortez’s bid to remake the economy to fight climate change, you need to read Hamilton.

Yes, Alexander Hamilton. Long before he was associated with theatrical hip-hop, former Treasury Secretary Hamilton called for policies that sound familiar to us today. Like Representative Ocasio-Cortez, he wanted massive federal spending on new infrastructure. Like Donald Trump, he believed that very high tariffs can nurture American manufacturing. And like Elizabeth Warren, he was willing to bend the Constitution to reform the financial system.

Hamilton, in short, successfully used the power of the federal government to boost manufacturing, to pick winners and losers, and to shape the fate of the U.S. economy. He is the father of American industrial policy: the set of laws and regulations that say the federal government can guide economic growth without micromanaging it. And the Green New Deal, for all its socialist regalia, only makes sense in light of his capitalistic work.

In the days since Ocasio-Cortez debuted the Green New Deal, consensus has hardened: It is legislation by listicle. “An aspirational climate policy wish list,” writes the democratic socialist Ryan Cooper. “A needlessly long wish list,” says The New York Times’ David Leonhardt. “An untrammeled Dear Santa letter without form, purpose, borders, or basis in reality,” adds National Review’s Charles C. W. Cooke, in Buckleyan reverie.

Even its supporters seem to concede that the Green New Deal is a binder of climate policies duct-taped to an Easter basket of socialist goodies: Its individual parts may be great, but you have to admit that it looks like it might teeter over. Its critics, meanwhile, ominously suggest that it prizes ideology above science—something I have also warned of.

But both views are, on the whole, incorrect. Ocasio-Cortez’s proposal is not only a set of progressive nice-to-haves, nor is it a full-on assault on capitalism. The Green New Deal has a coherent economic philosophy and a compelling theory of change—and pundits don’t have to like them to bother understanding them.

Above all, the Green New Deal is a leftist resurrection of federal industrial policy. It is not an attempt to control the private sector, according to its authors; it is a bid to collaborate with it. And it draws on a set of ideas with a rich American history, extending long before the great World War II mobilization to which the Green New Deal is regularly compared.

“This goes back to Hamilton, the daddy of it all,” says Stephen Cohen, a professor of city and regional planning at UC Berkeley. He argues that industrial policy has birthed the transcontinental railroad, the cookie-cutter suburb, the home appliance, and the computer—nearly every major American economic transition since 1776.

In short, the Green New Deal’s supporters hope that industrial policy can now bring forth another transition—to cheaper energy, faster trains, and an altogether more climate-friendly economy. “The core of the Green New Deal, if you just look at the projects, is just like industrial policy, industrial policy, industrial policy,” says Rhiana Gunn-Wright, a policy researcher at the think tank New Consensus who helped draft Ocasio-Cortez’s proposal. “It’s very, very, very central. The Green New Deal is one of the largest interventions in U.S. industrial policy in a long time.”

Ocasio-Cortez’s love of industrial policy did not come from nowhere. In the past few years, a group of scholars has revived an old school of economic thought that says a strong manufacturing policy is an absolute necessity for large, developed nations. They argue that the United States has neglected its domestic manufacturing sector since the 1980s, a move that risks national failure.

This new school is central to the Green New Deal. Omitting it is like ignoring Milton Friedman when discussing President Ronald Reagan’s policies. And discarding it is throwing out what makes the Green New Deal so interesting. For more than a decade, the biggest progressive ideas about curbing climate change have relied on technical or narrow market mechanisms. They have required regulators to make emitting carbon dioxide costly. By prescribing industrial policy, the Green New Deal goes in a different direction: It throws all of American government and industry behind an attempt to make renewable energy cheap.

This move could revolutionize U.S. climate politics. Ocasio-Cortez has a chance to recast one of Trump’s economic intuitions—that the decline of industry has broken something fundamental in the U.S. economy—as climate policy. She may be squandering it.

Last fall, a number of activists and policy scholars from the same network of leftist groups as Ocasio-Cortez founded a new think tank. They called it New Consensus. Since then, the group has done little public work beyond helping to formulate the Green New Deal. Its website has only four pages. But it has published a reading list written by Demond Drummer, its founder, that functions as a manifesto of sorts.

The list does not cite a single angry issue of Dissent or postmodern rant by Slavoj Žižek. Instead, it contains a bunch of self-described pragmatists: Vaclav Smil, a scientist who Bill Gates says is his favorite author; Brad DeLong, a UC Berkeley economics professor who served in Bill Clinton’s administration; Carlota Perez, a scholar who calls herself a “radical centrist”; and Mariana Mazzucato, an economist so mainstream that the Financial Times recently profiled her love of swimming.

Drummer says that the books lay out a new and coherent view of “how economic progress really happens.” Many of the books argue that wealthy countries became wealthy in the first place by supporting, protecting, and investing in strategic industries. A nation’s other policies—around trade, infrastructure, even education—were ultimately designed to serve these chosen industries. “A nation must deliberately and constantly invest in its means of making a living,” Drummer writes. “Nations that ‘[let] the free market decide’ what they should do for a living decline to the bottom of the economic food chain.”

No wealthy country developed without going through this process, the books argue—especially not the United States.

“From its very beginning, the United States again and again enacted policies to shift its economy onto a new growth direction—toward a new economic space of opportunity,” argues Concrete Economics, a book by Cohen and DeLong that appears on the reading list. “Yes, there was an ‘invisible hand’ … But the invisible hand was repeatedly lifted at the elbow by the government, and re-placed in a new position from where it could go on to perform its magic.”

Speaking from his office in New York, Cohen walked me through this retelling of American history. Hamilton sought to move the country away from its agrarian economy, so he fought for infrastructure, high tariffs, and a muscular financial system. After he died, his successors emphasized an “American system” of infrastructure projects such as the Erie Canal and the manufacturing of products from standardized parts. During and after the Civil War, the U.S. government freely gave away huge tracts of western land to spur specific types of economic development. In particular, rail companies got land to form the transcontinental railroad.

This industrial fervor extended well into the 20th century. When we think of large-scale industrial policy today, we think of the New Deal and World War II. But President Dwight D. Eisenhower, who built the interstate-highway system, encouraged mass production and suburbanization, and he preserved an enormous defense R&D budget. “Almost all of the technology we think of in terms of Silicon Valley and the like—computers, telecommunications, semiconductors—came directly out of that government R&D budget,” Cohen says.

Cohen and DeLong argue that our industrial pragmatism ceased in most sectors around 1980. They claim that policy makers grew too ideological: They read too much Friedman, deregulated the financial sector, and adopted a gospel of free trade. These actions allowed East Asian countries to overwhelm American manufacturing. In 1979, manufacturing made up 21 percent of U.S. GDP; by 2007, it had fallen to 12 percent.

The Green New Deal’s authors see their proposal as a remedy to this crisis. It is an attempt to bring back both U.S. manufacturing and the commonsense industrial policy that originally made that sector strong. “The economy, as it’s structured right now, is not working … and that’s not just because of the 1 percent, not just because of Wall Street,” Gunn-Wright told me. “We’ve stopped making things. We’ve stopped investing in the real economy.”

Saikat Chakrabarti, Ocasio-Cortez’s 33-year-old chief of staff and former campaign chair, has endorsed both the reading list and the thinking behind it. “Economics is a social system. It is not a science,” he tweeted in January, before linking to the New Consensus page. “To understand ‘basic economics,’ … you need to read economic history.” (Both Chakrabarti and Ocasio-Cortez’s office did not respond to an interview request before publication.)

Some mainstream economists aren’t as convinced that industrial policy could transform the future of the United States. Many of the ideas in the books have not been “closely vetted” theoretically and may lack empirical evidence, according to Michael Greenstone, an economics professor at the University of Chicago who previously worked in Barack Obama’s White House. And he worries that many of the books distract too much from a central lesson of labor economics: that people basically get paid for their skills. While granting that some recent data suggest that workers’ share of GDP is declining in developed countries, compared with that taken by investors and capital owners, he argues that unemployment and wage stagnation have been concentrated among those with fewer skills. In this view, education policy—not industrial policy—is primarily failing Americans.

Getting to the moon required attempting “300 different homework problems,” according to the University College London economist Mariana Mazzucato. (NASA)

Ocasio-Cortez has taken to saying that the Green New Deal is our generation’s moonshot, and this is usually understood as an invocation of John F. Kennedy–esque vigor: When America sets its mind to it, it can do anything. But in the context of New Consensus’ reading list, the moonshot reference reads as an allusion to another economic thinker—Mariana Mazzucato, the director of the University College London Institute for Innovation and Public Purpose.

Mazzucato argues that the private sector cannot innovate without the public sector giving it purpose and direction. In fact, innovation depends on the state. First, the public sector defines a challenge. Then it asks—or demands—that the private sector address itself to that challenge. She cites the Apollo program as a perfect example.

“How to get to the moon was a result of 300 different homework problems that had to be solved, and most of them failed,” Mazzucato told me recently. The sheer difficulty of the Apollo program generated those problems, which ranged widely across sectors, touching even nutrition and fashion. After the challenge was set, the government used the inspirational power of its leadership and the extensive power of its purse to nudge companies, universities, and labs into identifying those problems and solving them.

Mazzucato asserts that the state should yoke the mission of fighting climate change to every aspect of its purchasing power. Whether the government buys a company’s product, offers it a research grant, or loans it money should depend on its willingness to adopt certain Green New Deal goals. “You don’t pick the winners; you pick the willing,” she said. “The question should be: Who’s willing to engage across any sector—big firms, small firms, any size—to engage with Green New Deal strategies?” These strategies might include a renewable-energy requirement or a reduction in the physical amount of material needed to make a product.

Mazzucato’s ideas are all over the Green New Deal. She has met with Ocasio-Cortez in person more than once; their staffs have consulted; they even Skyped together. Mazzucato has a fact page about the Green New Deal on her website. Yet Mazzucato is no radical. When we talked, she had just returned from Davos, and her books are more likely to be feted by the Financial Times than by Jacobin. “Mazzucato is a pretty mainstream, market-failure-correcting economist, in terms of industrial policy,” says Constantine Samaras, a professor of engineering at Carnegie Mellon University. So why has the Green New Deal been cast as such a radical proposal?

Look, and you’ll find Hamiltonian ideas served thickly throughout the Green New Deal resolution—even if they sometimes appear between slabs of progressive talking points. When the proposal lists “several related crises” that endanger the United States, it mentions “deindustrialization” as well as income inequality. It demands a “massive growth in clean manufacturing.” It calls for investment in “local and regional economies.” And it calls for “enacting and enforcing trade rules … and border adjustments” that will “grow domestic manufacturing in the United States.”

The Green New Deal’s wide-ranging vision faces down a politically inconvenient reality: Fighting climate change will mean remaking the economy. In the United States, most climate policies have focused on only the electricity or transportation sector. But those two sectors account for only 56 percent of U.S. greenhouse-gas emissions. Heavy industry accounts for almost a quarter of the country’s carbon pollution, and we still have little idea how to deal with that. There’s still no way to make steel without fossil fuels. The Green New Deal states as a goal—and little more than a goal—the need for “removing pollution and greenhouse gas emissions from manufacturing and industry as much as is technologically feasible.”

In fact, the entire document is just a list of goals. “What the resolution did is outline some challenges,” Samaras told me. “There’s no policy yet. These are just principles. I think that’s getting lost.”

Into that policy vacuum, many commentators have hallucinated an entire regime. “The government would put sector after sector under partial or complete federal control,” asserts David Brooks. He begs, “Exactly which agency would inspect and oversee the renovation of every building in America? Exactly which agency would hire every worker?”

This does not match what Ocasio-Cortez has actually said. Speaking with Chuck Todd earlier this month, she speculated about different ways to get the Green New Deal done. “It could be Tennessee Valley Authority–style public programs, but it could also be public-private partnerships,” she said. “It can work down on a municipal level. There could be some potential contracting involved … It’s not as though the federal government’s going to wave a wand and say, ‘We’re going to do it all ourselves.’ ”

A spike in government contracting? Public-private partnerships? What kind of fiat government takeover is this?

“Ocasio-Cortez is a socialist, and she wants worker collectives. But that distracts us from the core of the plan,” says Daniel Aldana Cohen, a sociologist at the University of Pennsylvania who helped edit coverage of the Green New Deal for Jacobin, a leftist magazine. “The original New Deal, when you read about it, is super practical. The biggest mistake is to see activist government … as ideological. It’s just a super practical approach to problem-solving. If you want to solve problems on a huge scale, then let’s actually put some public institutions to work.”

And arguments for the Green New Deal can even feel a little … Trumpy. When Gunn-Wright talks to people about the Green New Deal, “they get really excited about the thought of making stuff again,” she says. “That they’ll not just be a cashier, but that they’ll make wind turbines.” Gunn-Wright also riffed on the need to make wind turbines domestically (they’re too big to ship overseas), and why border adjustments may be required to protect some nascent U.S. green industries. (Trump actually imposed a tariff on solar panels in 2017.)

Viewed in a certain light, you can start to see the potential for a certain kind of play here: an attempt to integrate Trump’s working-class nostalgia with the urgency of remaking the economy to fight climate change. “Skilled crafts­men, and trades­people, and fac­to­ry work­ers have seen the jobs they loved shipped thou­sands of miles away,” the president has said. “This wave of glob­al­i­za­tion has wiped out our mid­dle class. It doesn’t have to be this way. We can turn it all around—and we can turn it around fast.” Would Green New Dealers really disagree with any of this?

Yet Ocasio-Cortez only ever approaches that rhetoric at a slant. “Today is a big day for people who have been left behind,” she said when announcing the Green New Deal. “Today is a big day for workers in Appalachia. Today is a big day for children that have been breathing dirty air in the South Bronx.” She referred to her proposal not as a plan to resuscitate American industry, but as a “comprehensive agenda of economic, social, and racial justice.”

“This is an investment,” she said. “For every dollar we spend on infrastructure, we get more than a dollar back for that investment.”

That’s weak, compared with the ambition wound up inside her own proposal. Investment and infrastructure are such Normal Democrat Words that they lose the special nostalgic charge of industrial policy. No wonder the Green New Deal was understood as a wish list, even by its supporters. Not that Ocasio-Cortez helped her case here either: On the day of the announcement, her office published, then retracted, a sometimes juvenile FAQ document that talked about farting cows and supporting people “unwilling to work.”

Gunn-Wright told me that her team doesn’t talk about the Green New Deal as industrial policy first, because people misunderstand it. Trump’s economic message is linked to his racist rhetoric, perhaps irretrievably so. Say the word manufacturing, and people hear a paean to the white working class. “We haven’t talked about the decline of manufacturing outside of cultural terms,” she said. “It’s really weaponized in terms of race. That also makes people back away from it.”

And it is legitimately tricky to talk about the history of U.S. industrial policy, especially on the left. Sure, the government has guided the invisible hand throughout American economic history—but it has also guided the bayonet and the lash. In the 1790s, Hamilton’s prized financial system counted enslaved bodies as a type of commodity, alongside cotton and wheat. In the 1860s, the government had western land to “freely” give away because it violently seized it from indigenous people first. In the 1950s, suburbanization enriched America, but it did not enrich black Americans, who were systematically prevented from obtaining federal-backed mortgages. Much of the Green New Deal’s racial-justice agenda reads as an attempt to deal with this legacy—and to ensure that people of color are not left out of the next great redirection of the American economy. Hence the policies aimed at spreading the wealth: the paid medical leave, the job guarantee, the promise to honor tribal treaties.

But the sum effect has been that Ocasio-Cortez and her team shout about equity while whispering about the economy. If the word manufacturing is now a racial dog whistle, who better than a popular leftist congresswoman to reclaim its whine? It may be too much to hope for a cross-partisan climate policy in the United States, but every climate policy must have some kind of crossover appeal. The U.S. economy will eventually be remade to fight climate change. Ocasio-Cortez and her team must decide whether they will lean into their policy’s promise or make it seem like more of the same.