Economic Coordination and the Barriers Private Market Coordination Poses to Realizing a Progressive Agenda

Introduction

Economic coordination is how societies organize and undertake interconnected investment, production, distribution, and provisioning activities. It is the central question of progressive economic policy but is rarely interrogated. The two central planks of a progressive agenda — achieving decarbonization and ensuring the universal affordable provision of essentials — are best understood as challenges of economic coordination.  

There is a consensus that physical green economic transformation is the goal of decarbonization policy, but the question of how to organize and undertake this transformation is seldom discussed. Realizing these ambitious goals, therefore, requires developing thinking which sets out what needs to be done, by whom, and through what means to achieve them. This means moving from a policy approach with private market coordination as the default option for delivering political goals, to a new model of economic coordination specifically designed to ensure decarbonization and the affordable universal provision of essentials.

The currently dominant mode of economic coordination — private market coordination — is characterized by the primacy of private capital as decision-maker and market exchange as the coordination mechanism.  

Four features of private market coordination obstruct the investment, divestment, and provision that a progressive policy agenda to achieve decarbonization and addressing the affordability crisis demand:  

1. The profit imperative, which channels capital and structures provision of essential goods and services towards what is profitable above all else.  
2. The liquidity preference, which generates a structural bias against long-term, large-scale fixed investment.
3. The fragmentation of decision-making across uncoordinated private actors, which makes sequenced, system-wide transformation exceptionally difficult.
4. The lock-in of sunk capital, which creates powerful incentives to resist the managed retirement of fossil assets.

The most ambitious decarbonization policy regimes so far in the US and UK have been premised on a model of limited state intervention in private market coordination, where the state attempts to make green investment attractive to private capital rather than doing it itself. This approach has fallen short in pace, in the character of transformation achieved, and in political durability — leaving the economic insecurity of working people unaddressed, and the decarbonization project, therefore, exposed to political backlash. Many contemporary proposals for addressing the affordability crisis also adopt this unnecessarily narrow approach, such as attempting to incentivize housing construction through deregulation or health insurance provision through public subsidy.  

As we approach building the next progressive agenda, we must make different policy design choices to organize the economic activity needed so that we can address decarbonization and the affordability crisis.  

Public coordination through the state as an actor directly engaging in investment, provision, and coordination of and between key sectors offers a transformatively different set of capacities, it can:  

1. Decouple investment and divestment decisions from the logic of private profitability.
2. Bring coherence and sequencing to economic activity that fragmented private actors cannot achieve.
3. Bear risk collectively and more equally.
4. Ensure provisioning of essentials outside of the market and actively decide on the distribution of goods, resources, and wealth rather than leaving it to market pricing and allocation.  

A foundational premise of the Green Planning Commission is that policy design towards these key progressive goals must begin from public coordination rather than basing all policy on attempting to coax private actors to undertake and organize transformation within and across key sectors. Public investment, provision, and coordination can build a new green mixed ownership economy — one in which public institutions set the terms in key sectors, even as private market coordination prevails in much of the economy. With a green democratic planning agenda, we can transform the terms of our collective economic life, decreasing the extent to which critical activity and the foundations of dignified life are dependent on the action of capital and for-profit exchange.  

This report provides the analytical framework for this shift in policy thinking; laying the groundwork for the GPC’s broader program of work on the institutions, instruments, and political conditions for green democratic economic planning.

This report is divided into three sections. First, we introduce the key goals of decarbonization and affordability as economic coordination challenges, returning to first principles of what the economy is and how and why planning economic activity is essential to consider for progressive policy design.  

Second, we define private market coordination and dissect the barriers it poses for delivering the necessary economic transformation, and why it is a problem that policy in transatlantic context tends to rely on private market coordination.  

Third, we conclude with a consideration of the possibilities of reorganizing economic coordination through policy, clearing the way for the Green Planning Commission’s future comprehensive consideration of the potential, practice, and politics of planning and democratic coordination.

The author would like to thank the Commissioners, Amelia Horgan, Sophie Monk, Mathew Lawrence, Sarah Nankivell, Alex Williams, and Vivian Higgins for their contributions and cooperation.

Download the full briefing as a PDF here.