After the Paris exit, a call for citizen investors
At the dawn of the Second World War, while Hitler’s forces consolidated in Europe and Imperial Japan expanded into China and prepared its assault on the Pacific, the United States sat relatively idle. Both Congress and the military leadership refused to accept the reality of what was happening and, as a result, the United States was woefully unprepared for the global test it would soon face.
Fortunately, President Franklin Roosevelt figured out a way to bypass the political lethargy on Capitol Hill. He tapped the private sector to figure out how to build the industrial capacity the nation would need to fight the war and how the nation would pay for it. Enter private sector leaders such as Bill Knudsen, president of General Motors, and Wall Street financier Bernard Baruch.
FDR called on them, among others, to create a new industrial ecosystem that ultimately became the "Arsenal of Democracy"; an industrial juggernaut that, by war’s end, was producing 70 percent of all allied war materials. It was this economic engine that equipped, fed and fueled America’s "citizen soldiers" to go "over there" and march to victory.
Now, following President Donald Trump’s decision to pull out of the Paris Agreement on climate change, we face a similar situation.
Washington is sitting idle as our president disengages from an international effort to save the world from the single greatest threat facing humankind (a problem that we, notably, have had a significant part in creating). The decision is basically a doubling down on the moribund high-carbon economy of the 20th century that is both incentive-dependent and market-distorting. Attempting to resuscitate this 20th-century corpse is not a recipe for success, let alone a recipe for greatness.
We can do better than that.
The first piece of good news is this: Similar to the private sector at the dawn of WWII, the leadership we need to bypass and move around the dysfunctional and absurd obstacle that is now Washington, D.C. is already beginning to emerge around the country. (Note the effort being organized by Michael Bloomberg along with mayors, governors, university presidents and businesses). That kind of leadership reminds us that the very first words of our Constitution are "We the People of the United States." They’re not "Waiting On Washington."
It should also remind us that we, as a nation, still have the capacity, the wherewithal and the grit to positively shape the future not just for ourselves, but also for our posterity.
The second piece of good news is that the opportunity to build that future is within our reach. Regardless of Trump’s decision, we’re sitting on a trillion-dollar-plus investment opportunity that can fundamentally rewire the U.S. economy to put us in a position to lead a global transition to a more sustainable, profitable and thriving system. By creating a new industrial ecosystem we will not only meet the marks required to counter the effects of climate change, we’ll also create opportunities for and meet the aspirations of a burgeoning middle class both at home and abroad.
And it all can be done with or without Washington’s help.
Interlocking pools of demand
In our book "The New Grand Strategy: Restoring America’s Prosperity, Security, and Sustainability in the 21st Century," my co-authors, Joel Makower and Patrick Doherty, and I lay out a blueprint to do just that: a plan for action that taps into three major pools of interlocking demand that are deep enough and powerful enough to fundamentally recalibrate the American economy to our 21st-century reality. Those pools of demand are:
- Walkable Communities. 60 percent of Americans want a walkable lifestyle but only 1 percent of the American urban landscape is considered walkable — a condition perpetuated by legacy federal policies and incentives that incentivize suburban sprawl. It’s time to start building the places Americans want and build them to carbon-free standards.
- Regenerative Agriculture. We need to increase the global food supply by about 70 percent by 2050, and 100 percent of that increase has to be regenerative in nature to remain within planetary boundaries. Given that regenerative ag techniques can be up to three times more profitable than conventional methods (when full externalities are considered) and capture carbon in the process of soil generation, it makes sense to transition our national agriculture system to a regenerative standard. We’ll not only capture the global market opportunity, we’ll also take a long stride toward addressing climate change.
- Resource Productivity. Today, we have the technologies, products and processes to fundamentally reduce our economic resource intensity while at the same time building the structures and systems our cities, towns, communities and families need for a sustainable, prosperous and secure future. By taking things such as advanced manufacturing, advanced materials and renewable energy to a national scale, we can fundamentally redesign our manufacturing base and once again be the global leader in productivity.
Together, we calculate that these interlocking demand signals equate to about $1.3 trillion of annual economic opportunity.
Given the combination of this immense challenge and an equally immense opportunity, it’s time to answer our nation’s call. Just as "citizen soldiers" traditionally answered the nation’s call during wartime, we need "citizen investors" to answer our nation’s call today and pursue this economic opportunity by pushing capital toward a new investment category: Strategic impact investments.
Strategic impact investments are core 30-year investments in financial products and the functional systems (transportation, water, renewable energy, connectivity, manufacturing, regional regenerative food networks, etc.) that we need for a prosperous, secure and sustainable America. It should be noted that the federal government used to invest in these sectors, which have long formed the foundation of our national economy, as President Dwight Eisenhower so ably recognized.
That’s not the case anymore. Now, we need private-sector long-term investors to dedicate portions of their funds to this new category so we can rebuild the bedrock of a new 21st-century American economy.
By unlocking these three pools of demand through strategic impact investments, citizen investors can put capital back to work and begin building a sustainable future. In the process, we’ll demonstrate American leadership to the world — and maybe even earn some of our credibility back.
Best of all, we don’t need Washington’s permission to do it.