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Twinned Transition

On the green mixed economy.
Melanie Brusseler
Mathew Lawrence

A two-part essay — from Melanie Brusseler and Mathew Lawrence — examines the political economy of the energy transition, arguing that the transition from fossil fuels requires transition towards democratic coordination. The second part charts Common Wealth’s upcoming programme of work, towards supporting this twinned transition.

1. Building the Ark

At the end of last year, nearly thirty years of annual international climate negotiations reached a feeble pinnacle: signatories to the UN Framework Convention on Climate Change finally agreed at the annual Conference of the Parties (COP28) to “transition away from fossil fuels.” This phrasing disappointed negotiators and climate activists alike compared to the hoped for commitment to fossil fuel “phase-out”. Such disappointment reveals a misplaced investment in the COP process as the theatre of climate politics: regardless of commitments on paper, COPs are at best incidental and at worst obstructive to the delivery of climate stabilisation. As Alyssa Battistoni wrote after COP26 — the first COP agreement to mention fossil fuels by name — “a steady procession of COPs have produced a great deal of geopolitical drama, but have not yet managed to reduce carbon emissions.” Disappointment in such comparative legalese also avoids how essential building a politics towards a more comprehensive “transition” is to the abolition of the fossil system.  

Invocation of a transition from fossil fuels in the COP28 text mimics the way the meta-concept now looms large in mainstream climate discourse: vague and vulnerable to both blatant greenwashing (“transition fuels”, “transition finance”) and a more pernicious, if increasingly fragile, hegemony that sees the transition as akin to the mythical preservation of Theseus’s ship: we can maintain the social form of our currently fossil-fuelled economic system — our ways of collectively producing and consuming; deciding, living and acting together — while we gradually, but ever so surely, transform to a non-fossil fuelled material basis; the ship, although physically made anew, could remain the same. Yet, transition remains the most apt concept to encapsulate and thus wage effective politics towards deep decarbonisation precisely as a sober repudiation of that view and its politics. Transition rightly names and rightly marries the profound physical and political economic transformations decarbonisation necessitates as a unified process: transition from fossil fuels requires and will entail transitioning to a democratic economy at planetary scale; the process must be a matter of displacing the political power and the architectural economic form of capital by iteratively building the green mixed ownership economy.  

The fossil system — the material system through which we currently individually and collectively maintain ongoing life, from housing to food to electricity — is physically composed of capital and infrastructure stocks: a planetary web of coke-coal burning blast furnaces producing steel, gas-consuming power stations keeping hospitals and homes powered, and petrol-guzzling cars getting workers to their shifts on time. It cannot simply be banned overnight; the abolition of the fossil system requires building its replacement. We must rapidly rebuild our world: eradicating our dependence on this fossil-fuelled productive equipment and infrastructure through retrofitting, demolition and installation or construction at breakneck speed and dazzling planetary scale. But this physical process is not a matter of swapping fossil fuels for clean energy one for one, like pieces of worn for new planks of an ancient ship’s timber. Fixed capital equipment, the complex thickets of interrelated supply chains and production and consumption networks that (re)produce them and the way that fossil fuel-based systems such as electricity systems work, are fundamentally incongruous with that of a renewables-based system.  

The physical process of transition thus poses the problem of economic coordination.  Physically transitioning from a fossil to renewables-based system will require innumerable investment and divestment decisions that must be undertaken rapidly, often out of sync with existing capital depreciation and expenditure cycles, without primary concern for private profitability and with coherent sequencing to ensure there are not socially harmful breakdowns in critical infrastructure and production and consumption networks in the process. Market coordination — premised on private control of investment, private ownership of capital and infrastructure, and the profit imperative to drive decision-making — cannot deliver this. Private investment suffers from the hinderance of profit imperative, the liquidity preference or risk aversion in the face of fundamental uncertainty, constitutive fragmentation and asynchronicity of decision-making, and a more abstract yet still fundamental inability to bear the operation and maintenance of a Frankenstein’s monster of two co-existing incongruous systems.  

In transatlantic context, an emergent “modern supply-side approach” to economic governance advanced by the Biden administration and trailed by European policymakers and a Labour government in waiting is explicitly concerned with the state attempting to govern fixed investment — as the composition of capital and infrastructure stocks shape the supply side of the economy — with an aim to deliver growth, decarbonisation and resilience. This real shift in the logic of economic statecraft as evidenced by the Inflation Reduction Act — and, less concretely, Labour’s Green Prosperity Plan — reflects the recognition of the limits of market coordination to steer the transition.  Yet, this turn to state-led transition planning remains nascent and incomplete in its continued structural reliance on private investment and private ownership.  

There is a risk that this paradigm will leave undisturbed a strict division of labour between state and capital wherein the state abstains entirely from undertaking direct public investment and socialising ownership, relying instead on attempting to induce private investment through public financing and other “derisking” mechanisms: attempts to bribe private capital formation — more expensive and less effective than direct public investment and undertaking — that are still not guaranteed to deliver deep decarbonisation, let alone in a coordinated and just manner. There is also a risk that this “modern supply-side approach” will leave undisturbed a cognate structure in the context of international economic hierarchy: Global North states refuse to redistribute wealth and power — and with-it economic capacity — to the Global South to decarbonise, offering only the violent illusion that trillions of dollars of private capital investment could be induced by pitiful bribes (politically scarce and paltry public money; privatisation and marketisation of electricity systems). The innumerable investment decisions necessary for decarbonisation would remain vulnerable to private capital strike and the broader organisation of production and consumption still subject to the fundamental anti-democratic domination of the profit-imperative.  

If political power over investment is systemically wielded by capital, which structurally cannot be relied upon to deliver decarbonisation, such power must then be wrested from it. Instead of believing we can preserve Theseus’s ship, as the late Mike Davis wrote “we must start thinking like Noah. Since most of history’s giant trees have already been cut down, a new Ark will have to be constructed out of the materials that a desperate humanity finds at hand...”. Only democratic coordination — premised on socialised ownership, investment, and planning — offers the systemic ability to: divorce investment (and divestment) power from the profit imperative; integrate and coherently plan investments and economic activity; employ collective risk-bearing capacity to restructure, stabilise, or expand production networks; and most importantly of all, make the form of our collective life —  our ways of collectively producing and consuming, living and acting together — itself the subject of democratic politics, through the transition and beyond.  

The transition to democratic coordination is similar to that of the transition from fossil fuels to renewables that this process must drive: complex, contingent and incongruous. Social transformation is politically won and practically realised in iterative pieces through and towards the transformation of existing economic enterprises, institutions, and collective ways of deciding, acting and living together. Abolition of an economic system ruled by capital requires the ongoing creation of its replacement, which is as much a political challenge as it is a technical one. Between our current economic architecture and that of a planetary cooperative commonwealth there are different permutations of economic institutions, capacities, relationships, actions and gradations, forms and scales of socialised ownership through which we can displace capital and fossil fuels. Likewise, there are different permutations of political institutions, capacities, relationships and actions that can — circuitously, against counterattacks by capital and the political right, from the spadework to sudden leaps that are the very stuff of social miracles and political transformation — create a new form of collective life.  Delivering the twinned transition — from fossil fuels, to democratic coordination — requires a reciprocal strategy between the political and the technical, where the project of building, cohering and leveraging coalitions capable of wresting power from capital both nourishes and is nourished by concrete, strategically sequenced interventions and institutional developments that build and functionally operationalise a green mixed ownership economy.  

Our work in the coming year will explore such a transition strategy for a transatlantic context, through and beyond this nascent “modern supply side governance” paradigm, aiming to build a new multi-scaler architecture of transformed ownership that can begin to decommodify, democratise and decarbonise collective life, both as the instrumentalist programme necessary for practically and politically delivering climate stabilisation and as an end in itself.  

2. Towards a Transatlantic Programme

Moving from fossil capital to an energy democracy

The energetic basis of a society fundamentally shapes its political economy. The doubly extractive system at the heart of Anglo-American capitalism — taking from the Earth, and transferring and concentrating wealth from ordinary households toward private investors — is the foundation on which our unequal and unsustainable economies operate. Building the democratic economy therefore requires scaling its alternative: an energy democracy, decarbonised, decommodified, and under public control.

Towards that vision, our work will map the failures of the existing architecture of the power sector — privatised, marketised, and fragmented — in both the US and UK and its inability to deliver decarbonisation fairly or effectively. By contrast, we will set out the superior financial, operational, and coordination benefits of democratic public ownership of a systemic node in the production and consumption apparatus and how the institutional foundations of an energy democracy can be delivered.  

Towards green public coordination

The nascent turn toward state-led green planning remains incomplete. Fundamental to the politics of decarbonisation is a recognition of the limits of market coordination, that must translate into an agenda for genuine public coordination of the transition, otherwise industrial strategy will fail by settling on derisking private investment and private ownership. To succeed, socialisation of planning, investment and of risk-bearing is essential to technically restructuring, stabilising, expanding and operating production networks, sectors, infrastructures and systems that are systemically significant to both decarbonisation and broader economic functioning and forward development. And, it is essential to politically democratise the organisation of society’s collective wealth and productive capacities.  

Towards both the technical and political ends, such socialisation entails inaugurating planetary cooperativism, to democratise and decarbonise a productive apparatus and society that already exceeds bounds of the nation-state. In pursuit of this, we will articulate both the case for more ambitious green public coordination — expanding beyond the limits of the IRA and Green Prosperity Plan — and set out sector-specific interventions on how public coordination — democratic planning over private control — can most securely and effectively deliver green prosperity.  

A new macrofinancial regime

Decarbonisation and building socioeconomic resilience to climate-induced supply shocks necessitate a new paradigm of public macroeconomic and macrofinancial management at both national and international levels.

Current macrofinancial arrangements in the US and UK are characterised by monetary dominance: fiscal and broader public macroeconomic policy are subordinate to central banks; central banks are mandated to pursue price stability, with a low-inflation bias; when faced with real or prospective inflation, central banks near exclusively wield interest rate hikes. Precisely because interest rate hikes only work by inflicting a macroeconomic contraction, instead of targeting the supply or demand of disaggregated commodities or services, they are inherently blunt tools. Moving away from a paradigm of macro-deflation to address inflation is critical both for decarbonisation and building socioeconomic resilience to climate change.  

While maintaining expansionary macroeconomic conditions and green investment is imperative, this raises the broader question of how to manage the real frictions that a rapid change in the structural composition of supply and demand will entail. This is a question of what alternative public macroeconomic planning and coordination arrangements can ensure and harmonise the investment and disinvestment needed for green capital stock and infrastructure transformation, in a discerning manner shape demand and consumption, stabilise critical or strategic prices, as well as govern the supply and allocation of key goods and inputs subject to shocks — which necessitates capacity monitoring, investment coordination and targeting, price policies, public investment and provision to firms and people and other supply chain governance processes.

Our work in the coming year will chart a macro-coordination and stabilisation policy paradigm for unlocking much higher levels of public investment and providing price and broader economic stability. Central here is how the decommodification of the means of individual and collective life — energy, housing, utilities, transportation, care — can build the foundations of shared security and abundance, while in cold technical terms serve as a green macro-economic stabilisation regime: securing demand, employment, stable pricing, and supply chain resilience for the key sectors and inputs on which all other aspects of the economy rely.  

Beyond the nation state, our global financial, monetary and economic systems are inherently hierarchical. Certain states have a relative monopoly of economic and financial capacity, expressed in their existing ownership of and ability to create and allocate both financial and physical capital. Structurally, this means such states must redistribute capital to states lower on the hierarchy to mitigate and withstand climate destabilisation. Such redistribution can take many forms. These include: fiscal or capital equipment transfers; monetary, financial and trade system restructuring; and globally cooperative industrial or supply chain planning. Our work in the coming year will consider the international macrofinancial architecture necessary to enable democratic and green developmentalist transition pathways for the Global South.  

Decent homes for all

Housing is a fundamental human right. However, too many are denied the peace of mind a warm, secure comfortable home provides. Deeply personal, the housing crisis is also inseparable from some of the most daunting challenges facing our societies, from stark inequality to the threat of financial instability, from the decarbonisation imperative to intergenerational conflict. Addressing this requires breaking from — not doubling down on — market coordination as the route to delivering decent and green homes for all. Building from a detailed analysis of the growing role of institutional investors in real estate markets in the US and UK, our programme of work will chart a course to ensure regardless of tenure type, everyone can access a secure, affordable home — and set out steps to ensure that the public captures the value uplift of the most fundamental free gift of nature: land.  

Building a digital commons

The rapid growth in artificial intelligence capability is built on deeply concentrated and private control of the technology “stack”. Monopoly power is, in turn, creating technological dependency and economic rentierism that are already observable across the AI supply chain. Challenging concentrations of corporate power is the precondition for a more pluralistic, innovative and inclusive future. Toward an agenda of collective intelligence we will explore three interlocking strategies with allies on both side of the Atlantic to scale a technological commons: the case for and means by which transformative public compute infrastructure can be delivered; how to end the expropriation of society’s collective data and instead common the digital expression and employment of our general intellect; and the anti-trust agenda that can challenge and open up the intellectual monopolies that now dominate innovation and technological regimes.

Institutions for the democratic economy

The imperative to decarbonise is a lever to democratise the economy. That will require a double movement: scaling a wave of democratic enterprise forms and rewiring the rules of the corporation — commoning the company — to turn what is currently a vehicle for wealth extraction into a generative and inclusive institution. To that end, we will thicken out our agenda for multiscaler forms of cooperative enterprise and shared abundance from public banks to worker cooperativism to community ownership, while setting out a robust but thoroughgoing programme for corporate governance reform.

Green Planning Commission

Last but not least, we will be launching our Green Planning Commission in the summer. As this essay has argued, decarbonisation at the pace and scale the climate emergency demands necessitates state-led macroeconomic planning: setting cross-sectoral plans; undertaking critical public projects, investments, and economic activities without the hinderance of the profit imperative; steering and coordinating private investment; and managing macroeconomic and macrofinancial conditions, including energy system stability and monetary-fiscal coordination. This encompasses global economic coordination, supply chain governance, and global redistributive measures. A just and effective transition therefore fundamentally depends upon the extent to which democratic coordination displaces market rule.  

As debate turns to question of “how” as opposed to “yes/no” concerning the role of coordination and planning, ambitious progressive vision-setting on transformative policy interventions and institutional or administrative developments is crucial. So too is rigorous technical and political economic analysis of production and social coordinating systems. And so too is a transatlantic lens: to support coordination within transatlantic policy development ecosystems; to leverage potential for mimetic policy developments; and to articulate a globally cooperative green planning vision against geoeconomic rivalry.

To that end, Common Wealth will be establishing a multi-year Transatlantic Green Planning Commission to examine the need for and challenges posed by green planning or non-market coordination of the energy transition and to recommend policy and political action in transatlantic context. Modelled on IPPR’s acclaimed Economic Justice Commission and now Centre for Economic Justice, which convened a cross-party, broad ranging coalition behind a post-neoliberal economic policy agenda for Britain that influenced policymaking across the spectrum, the Commission will convene thought leaders across the economy and society to produce two landmark reports; commission policy and discussion papers from sectoral and country experts; organise public and private events and convenings to build connective tissue, as part of a coherent programme of work to deepen and extend the momentum for planning for a planetary cooperative commonwealth.