The Way Forward

The Way Forward

The New Deal demonstrated the power of government to address failures of the market, and to retreat once it was no longer needed


Editor’s Note:

This essay was one of four finalists in a student essay contest on the New Deal and today sponsored by the Roosevelt Institution and The Nation. Visit StudentNation to read the winning essays and the other finalists.

It is government which gives form to the market’s invisible hands. The government builds infrastructure, creates markets, manages currency, grants corporations rights, and negotiates trade policy. So the suggestion of some that the markets do eventually solve problems is, by definition, false. As President Franklin D. Roosevelt said, “while they prate of economic laws, men and women are starving. We must lay hold of the fact that economic laws are not made by nature. They are made by human beings.”

The New Deal demonstrated the power of government to address failures of the market, and to retreat once it was no longer needed. Though political opponents paint New Deal programs as heavy-handed government intervention, they were, in fact, far more complicated. The solutions to the climate crisis we face are inextricably linked to the complications of globalization; addressing one will affect the other. In doing so, the government should mirror the spirit of New Deal programs.

In dealing with climate change, new programs need to be as nimble as markets. Just as New Deal projects were scaled back when the need they addressed diminished, so too should efforts to address climate change. The Apollo Alliance has led the call for a new Apollo Project to address climate change. Mirroring the swift success of the American space program, such a project would create new industries devoted to green energy production. In creating and nurturing these industries however, the government must be sure to have an exit strategy for subsidies and support. Otherwise, these efforts will be examples of the old development saying: infant industries never grow up. And during the transition to renewable energy, subsidies of alternative energy sources, like ethanol, should be tied to the price of the feedstock to ensure the most efficient processes are developed and used.

Government must structure markets so that the “invisible hands” described by Adam Smith operate in an equitable manner. In creating credits for carbon trading or congestion pricing for urban areas, steps must be taken to ensure that these programs are not regressive. The Kuznets Curve posits that those with the least money pollute the most, despite their aversion to doing so. For an example, simply look to someone who has to buy an inefficient, used vehicle due to budget limitations. On a more holistic level, any New Deal must include new methods of evaluating the strength of the economy and the soundness of economic policy. Implementing a Green GDP, which assigns monetary values to natural resources, would be a step in the right direction. The billions of dollars needed to clean up hazardous waste spills should not count towards the GDP unless the damage caused by the spills is deducted as well. Such a policy would lead to an economy which gives value to future resources, resources needed for prolonged growth.

Finally, any New Deal must not end at our border because not all markets were created equal. Rather than railing in a protectionist manner against the changing nature of global markets, a New Deal today should take advantage of these realities. Manufacturing jobs are a valued part of America’s history, but it is research and design and the services which will propel America forward. Strengthening existing job training programs, such as those in our community colleges will be necessary for the United States to compete. And we should target our development aid for countries which value their people as much as we do ours. Accountability in foreign aid can shape the international labor market where accusatory rhetoric might slow change.

FDR’s New Deal harnessed the power of government and put people to work in order to rectify the inadequacies of the market. Today’s New Deal will have to go further. It will have to examine the market which it created because that market is the root cause of the inequities exacerbated by globalization and the inaction regarding climate change. The challenge of a New Deal will be for government to structure the market in a way that makes socially conscious goals profitable. Only then will the invisible hands of the market reach the people and sectors we need them to most.

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