There have been far too many comparisons of the current recession with the one of 1929 and the reading of wrong lessons from that episode. But there is one aspect of what happened in that period which could prove quite useful this time around too. The Great Depression was cured to a significant extent by the onset of the Second World War that pulled massive number of industries in the US and Europe from out of their downward spiral.
This time that role would be played not by a conventional war, but the agenda for climate change. This has not happened yet but one is inclined to believe that this is going to happen sooner rather than later.
At present the governments of all countries working on fiscal stimuli are pouring it down on industries to produce cars that no one wants, flat screen TVs that are pass? and water guzzling washing machines that are just not catching the attention of the consumers any more.
What we need instead is for spending to adapt to, and in fact create, the need for climate changing technology that can create a massive spin off in employment, establish new industry and create global enthusiasm to redefine lifestyles for this century. But that does not mean pandering to the Luddite back-to-basics environmental agenda. It has nothing in common with the green lobby that has often gone haywire. Instead it is a plan to invest massively in technologies many of which may be very far out, but because of the downturn have offered a wonderful chance to experiment at very competitive costs. Like any given set of investments, these would produce returns on a global scale and will create huge employment opportunities. Unfortunately, the investment on climate change technology has rapidly gone down by as much as 30% from the levels of 2007 after the global crisis began.
Still, the harbingers are there. This year the Delhi government has banned all plastic bags that cannot be recycled. It was a very big change as markets across Delhi have actually struggled but put in place an alternative system of carry bags. Since Delhi, like other Indian cities, sees more people take away food rather than eat in shops, the impact of the change was drastic. But the initiative is holding up, and a key component of that has been the impetus that climate friendly bags got. In a quick span of couple of months the demand for these bags has soared and as a bulk of their manufacturers are in the small sector, the growth potential has become substantial. Remember we are talking about high growth and rising employment at a time when these have almost vanished from most sectors.
At a more national level the Central Electricity Regulatory Commission is planning to release draft guidelines next month to make viable, solar energy as a source of electricity. At present the cost of generating per unit of solar energy is Rs 17. To bring the tariff to a comparable band of Rs 2 or Rs 3 per unit, some level of government support is necessary. It costs about Rs 5 crore to develop a megawatt of solar energy and given the projection of generating about 2500 mw from here means an investment of about Rs 12,500 crore by the private sector. Incidentally solar energy will also need the development of semi conductor chips as the backbone of the transmission network.
Attempts like these now need replication on massive scales and adaptation of rules in economies to make them commercially viable. Just as the Second World War was projected by the allied powers as a cause worth fighting for and therefore spending billions over, climate change technologies will hold a similar attraction at this stage. The sense of d?j? vu that will accompany a fiscal programme that simply attempts to recreate the past models of success can be effectively countered through a global level of investment in the climate agenda.
It is complex though. For instance, where does one draw the line between helping out a company that is manufacturing products which are not very exciting from the climate agenda but have a massive employment spin off versus channelling investment into so far unproven technology. This will confront the decision making ability of the best governments. But so did the challenge of the last war. In fact it was the agenda of that war that spurred developments in nuclear energy, computers, radars and the jet planes among so many things.
What will this mean for countries like India? After the onset of the global crisis, the rancour between India and China on the one hand against the EU on the topic of global warming has eased substantially. This means the incessant battle to justify our growth rate against a supposedly global necessity to counter global warming has abated. So, now is the time for India to develop a consciously thought out set of policies that will give a big fillip to entrepreneurship to develop environmentally sustainable products at the mass level. The expanding production of carry bags or the fillip to solar energy are just two of many. The global justification and the timing are both there.
subhomoy.bhattacharjee@expressindia.com