Disorder, page 35
Nonetheless, in the first year of Biden’s presidency, there was no evidence of a geopolitical reset on China. That the EU responded to Biden’s imminent arrival by signing an investment deal with China suggested that Merkel, at least, saw the change in power in Washington as, in the final instance, incidental. That the Biden administration could infuriate the French over the Australia-UK-US security pact agreed in September 2021 at least as much as any single act of its predecessor had done led to much the same judgement being made in Paris.
The question of how far American naval power in the Persian Gulf must still be matched by some minimal deployment of land and air power in Iraq is also likely to prove just as difficult to resolve for the Biden administration as its two predecessors, even as Biden promised in July 2021 to end US combat operations by the end of that year. Any subsequent descent of Iraq into instability will force decisions about whether to use the advisory troops that remain and strain relations with Paris, which remains firmly wedded to a military fight against ISIS in the country. It will do so as the debacle of the final American withdrawal from Afghanistan has reinforced the perception in some European capitals that the United States is extremely cavalier about its decision-making over Europe’s neighbourhoods.
On climate, Biden immediately signalled his desire for change by returning the United States to the Paris Accord, revoking the Keystone pipeline’s permit, and making green energy jobs central to the large infrastructure spending bill he sent to Congress. But this energy policy change was also born of the geopolitical fear that, as he told a group of senators, ‘if we don’t get moving, they [the Chinese] are going to eat our lunch2.’
Across the Atlantic, the move to the Recovery Fund and the decision by the German Constitutional Court that pushed the German government to propose it have intensified the pressures that arise inside the EU and Eurozone. They have also escalated the move away from party-structured democratic political conflict in Italy. Absent an actual collapse, the Eurozone states have gone too far monetarily to return to debt denominated in national currencies. Logically, this should propel the Eurozone towards fiscal union with accompanying democratic political institutions to make decisions about debt and taxes. Yet the conflicts around the Recovery Fund suggest that a politics that would drive such a change is still absent. What politically remains of nationhood in European democracies may well be insufficient to support a tax state, and the national-citizen creditor cannot be recovered. But there is no evidence of a belief in, or acquiescence to, an idea of a people that could legitimate Eurozone-level taxes on citizens and no institutions representing a democratic people that could authorize them. To be an EU citizen is to be free of tax obligations; that cannot change without either tangling up the Eurozone further with the wider EU, or radically reforming the EU’s constitutional order and seeking troublesome national democratic legitimation for that change, nowhere more so than in Germany.
Hitting after Britain’s formal departure from the EU but before the transition period that kept the country inside the single market had ended, the pandemic briefly appeared capable of reopening the terms of Brexit. But under new leadership, the Labour opposition withdrew from acting as a fulcrum for those in Parliament who want to keep Britain more closely aligned with the EU. This broader consensus over Brexit has not stabilized British politics. The relatively free internal hand Boris Johnson’s government had to pursue a minimalist trade agreement with the EU only heaped pressure on the Union in relation to Northern Ireland at the same time as the pandemic was exposing just how deep the constitutional difficulties around the Union run and, temporarily at least, increased support in Scotland for independence. If the comparative British vaccine success in early 2021 makes it harder for those who want to realign Britain to the EU, the fault lines in the UK Union and Britain’s future relationship with the EU are inseparable, especially in regard to Northern Ireland. Indeed, under the Biden presidency, the form Brexit has taken makes Northern Ireland a broader geopolitical burden for Britain in a world in which almost all geopolitical predicaments connect.
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The pandemic has been both a catalyst for substantial change and part of a continuum of the older disruption. This is perhaps particularly true around energy, where several Western governments had sought in 2019 to accelerate energy change and the Biden administration, propelled into office by the pandemic and events during it, then joined them. Green ambitions in Western countries appear simultaneously directed at the climate crisis, Made in China 25, weak growth, and democratic stability.
Geopolitically, an energy change will necessarily result in upheaval. If Britain was the power that climbed to dominance during the age of coal and the United States the power that ascended during the age of oil and coal, the spectre haunting Washington is that without a decisive American strategic turn to renewables and electrification, the new energy age that depends on metals and minerals will belong to China. For the EU, there is the hope that green energy will prove an escape from the world of oil and gas that through the twentieth century did so much to weaken the European powers.
Economically, large-scale green investment justifies a turn towards big fiscal stimuluses, after a decade in which relying on monetary policy to boost financial markets, lower government borrowing costs, and alleviate the oil crisis could not restore higher growth. In recreating manufacturing jobs and swelling the construction sector, green-driven growth, in principle, offers the prospect of a higher return to labour. Even if a considerable volume of the investment required in technologies like carbon capture is commercially unviable, this need not matter if it is part state-funded and the necessary government borrowing is supported by central banks.
Democratically, the possible political pay-offs include a new version of economic nationhood. Joe Biden began his presidency talking about green energy as a national project in the same way that Nixon and Carter framed energy independence in the 1970s. The president he obviously wanted to emulate was Franklin Roosevelt. In Britain, one apparent objective of Boris Johnson’s frequently expressed ambition to turn Britain into the ‘Saudi Arabia’ of offshore wind power is to reintegrate the east coast Scotland with the east coast of England: it was, of course, North Sea oil that fuelled the rise of Scottish nationalism. For the EU, the energy union in place since 2015 is supposed to serve as a collective project of economic modernization, starting from the premise that for energy there can be a singular European economy.3
It is the present monetary environment that has established the conditions for the attempted energy revolution. Compared to the aftermaths of both the 2007–8 crash and the 2015 Paris Climate Accord, Western governments—most consequentially those in Washington and Berlin—are much more confident than they were about the latitude for sovereign borrowing, albeit the politicians in the two capitals are operating on rather different fiscal scales. The Fed’s de facto return to QE in September 2019 proved a decisive turning point for the whole world economy; that repudiation of any path back to monetary normalcy was buttressed six months later by QE Infinity. Meanwhile, the German Constitutional Court’s attempt in May 2020 to constrain the ECB’s return to QE shifted the German government’s perspective to allow the EU, albeit modestly and without a tax base, to act as a sovereign debtor. Strikingly, the terms enshrined in the EU Recovery Fund tied a quarter of all the money available to member states to green transition projects.
Nonetheless, the predicaments that shaped the first two decades of the twenty-first century remain in all respects extant. The very geopolitical motivation for accelerating green energy investment will intensify the Sino-American rivalry. Most obviously, the more the United States succeeds in breaking its dependency on Chinese manufacturing supply chains, the more it will elicit a reaction from Beijing. As China expands its domestic markets to compensate, there will be little left of the world economy that is not permeated by the Sino-American geopolitical rivalry. All states caught in it will have to treat maritime transportation as a matter of economic security. In Eurasia, this will politicize further the rail routes China has pursued as part of its transcontinental land Belt. Around climate, China’s implicit weapon in this emerging world will be its capacity to burn coal, despite the huge domestic incentives it has created around pollution alone to move away from doing so.
The geopolitical dynamics that green energy creates will coexist with those long generated by oil and gas. Since China will continue to be reliant on oil from the Middle East, and since the Pakistani part of China’s Eurasian Belt can be only a partial hedge against China’s vulnerability in the Strait of Malacca, China still has energy reasons to fear American military and financial power. China’s Middle Eastern dependency also will make it hard for the United States to withdraw from the Persian Gulf. The geopolitical ramifications of this old energy reality could not have been made clearer when, in March 2021, China and Iran struck a twenty-five-year economic partnership, including a Chinese commitment to large-scale investment in Iran’s oil and gas sectors. Just as Iran was pivotal to Britain’s ability to win the European imperial competition over the Middle East, so it will still continue to be of crucial importance as governments face up to the difficulties of relying on oil and gas while trying to leave them behind.
For the EU, expediting green energy is unlikely to be unifying. As three decades of ongoing conflict over gas supply and transportation have demonstrated, the EU’s authority in energy policy is weak and the member states are unlikely to make common judgement about where national interests lie. Again, German politics, this time around nuclear power, makes unity difficult.4 Given its anti-nuclear position alone, Germany cannot unwind its gas dependency on Russia with any alacrity. The Russian–German gas relationship ensures that the long-standing energy incoherencies around NATO will persist: they will do so as Russia continues its bid to cut Ukraine loose from its gas transit system. In suddenly moving in May 2021 to rescind sanctions on Nord Stream 2, Biden decided to accept German defiance on Russian gas as a means of leveraging concessions about China, at the cost of deeply angering NATO’s Eastern European members. But Germany’s trade and investment relationship with China and de facto participation in China’s land Belt now runs too deep to be readily reversed, even if there were a German government willing to depart from its predecessors’ insistence that German energy and commercial interests come before geopolitical alignments. This German commitment is a significant constraint on France’s capacity to pursue a strategic role in the Indo-Pacific, a reality indirectly made clear by France’s humiliation over the Australia-UK-US defence alliance.
Where Turkey is concerned, there are no available options that will not aggravate at least some of the multiple problems the EU and NATO face. Turkey’s economic development through the 2010s was coal-centric. It has not ratified the Paris Climate Accord and did not join the flurry of governments making a commitment to carbon neutrality during 2019 or 2020. In reorienting Turkey back towards the country’s geopolitical foundations in the Lausanne Treaty, Erdogan has increasingly deployed extraordinarily aggressive revanchist language about oil and gas.5
The dysfunctional dynamics generated by the geographical and financial conditions around oil production cannot be undone. Where supply is concerned, shale oil was always only a medium-term remedy to the stagnation in conventional output. If investment in the oil sector in pursuit of higher-cost supply is not resurrected, the world economy will, for the next few decades, be as dependent on expensive oil from the Middle East and Russia as it became in the 2000s. The return of high prices will in principle incentivize investment, but only if there is also a less critical attitude from investors to fossil fuels. Higher prices will, meanwhile, seriously constrain economic growth and once again destroy demand, causing instability in oil–producing countries, not least Iraq. The old problems that reliance on OPEC Plus will reinvigorate will play out at the same time as the cartel’s members need to adjust to the huge medium- to long-term changes that competition for oil from electricity in the transportation sector will bring.
Economically, overall energy costs will rise and, once again, act as an inflationary pressure. Gas prices in Europe are particularly vulnerable to issues with Russian supply and transit, whether technical or generated by Putin’s willingness to use gas as a blunt strategic instrument. Without major breakthroughs on battery storage, there is no guarantee that electricity powered by renewables can escape an inflationary dynamic. Whatever the low unit costs of producing solar- or wind-powered electricity, at the system level—especially in those places, like Germany, where renewables are a significant proportion of the sector but the weather is unpropitious—the inefficiencies of intermittent renewable capacity have thus far often yielded higher electricity prices for consumers.
It is likely that this energy-driven inflation will eventually unsettle the bond markets and make borrowing more expensive for governments. Already in February 2021, investors sold off US Treasury bonds on the expectation of an inflation spike as the American economy reopened. Investor doubts were nowhere near sizeable enough to change the super-benign monetary and financial environment that makes massive government borrowing possible. Nonetheless, the fact that the Biden administration’s $2 trillion infrastructure bill published a month later included substantial tax increases suggests that even in Washington a belief prevails that sovereign borrowing still requires some kind of tax base. Whether the 2020 financial crash will be a warning that there are still limits in the world of QE-backed bond markets, or suggests that central banks still have considerable policy arsenal left before a debt reckoning arrives, remains to be seen.
Politically, energy consumption will invariably cause fierce new distributional conflicts that will reinforce the old ones. This is in part an issue of how the shift to green energy and electrification will be financed and incentivized: in France, the Gilets Jaunes’ response to the diesel tax showed dramatically that the problem of losers’ consent is not confined to elections. It is also a matter of the substantive shape of the energy future. As electricity is decarbonized and the energy presently provided directly by oil and gas is replaced with electricity, there is no a priori reason to think that energy can be consumed at the same aggregate rate. As Angela Merkel acknowledged in a speech in January 2020, energy change ‘means turning our backs on our entire way of doing business and our entire way of life’.6
Personal transportation, in particular, will become a site of political conflict. Electric vehicles are some distance away from being the equivalent of Henry Ford’s Model T. The future could well entail a return to the pre-Fordist world where car ownership was a luxury good and a source of class resentment.7 At some point, the difficulties around oil and the difficulties of electrifying the transportation sector will meet. As the distributional implications for personal energy consumption become clearer, how carbon neutrality should be achieved—not least how much carbon can be offset rather than eliminated—will move beyond governments announcing targets into the realm of electoral contest. In those Eurozone democracies that struggle to structure much economic conflict in the electoral contests between parties, there will be pressures that pull in the opposite direction from the need to minimize macro-economic dissensus.
Here, there is considerable potential for geopolitics to continue to fuel democratic disruption. Since winning a competition with China over electric vehicles has become a matter of technological prowess, governments and investors appear to be pushing the sector regardless of the democratic political risks attached to minority car ownership. Economically, green energy and electrification also are not panaceas that will curtail the wider predicaments of the last few decades. Where they are pursued as growth strategies in economies in which manufacturing has been particularly hollowed out, as in Britain, or in democracies, as in the United States, riddled with aristocratic excess from the relationship between politicians and corporate lobbying and campaign donations, they may well reinforce old problems. If past national economic weaknesses mean foreign companies dominate markets, it is far from clear how many domestic jobs will be generated: in Scotland, where, thanks to the volume of wind, the proportion of electricity generated by renewables is extremely high, many fewer jobs have been created by the transition than was hoped.8 Meanwhile, large-scale infrastructure projects are open invitations to cronyism when contracts are awarded: the Obama administration’s provision of funds to a huge construction project to give California a high-speed railway produced not a new public transport system for the state but a bonanza for consulting firms.9
In approaching the energy revolution, politicians in Western democracies, and the investors who started in 2019 to abandon fossil fuels, have made a wager that yet to be invented technology will allow much about present material conditions to be replicated with different energy sources. To succeed, this technology will have to facilitate an energy revolution, leaving nuclear power aside, in which lower-density primary energy supplants higher-density energy.10 Thus far, renewable energy has increased overall energy consumption rather than replacing fossil fuel energy consumption. Indeed, since 1995—the year of the first United Nations climate summit—primary coal consumption has risen by more than two-thirds, oil consumption by more than a third, and gas by more than four-fifths.11 While most Western countries have seen falls in oil consumption and some also large drops in coal consumption, this is in part the consequence of offshoring significant amounts of industrial production to Asia. For the moment at least, the attempted energy revolution is also entirely reliant on the fossil fuel energy inputs it seeks to replace, as well as potentially scarce materials like rare earth metals. It is more likely that there will be a long energy transition than a rapid one. In one sense perhaps, this outlook is nothing new: uncertainty, hoping for the best, and investing with a ‘can-do’ mindset have always been the basis of capitalist economies. But, since energy is the foundation of all economic activity, including the production of food, and is subject to the laws of physics, needing technological innovation in energy is quite a different requirement. There is already a considerable history going back to the 2000s of governments and corporations unveiling plans for fossil fuel–free energy that have proved near entirely fanciful.12
