Climate targets, contradictions, and nationalization under the Green Deal

7 May, 2021

Germany accelerates its climate targets
Germany accelerates its climate targets

Germany is raising its climate targets. It changes its Climate Law by committing to a 65% reduction in emissions by 2030. The formal cause, a Constitutional Court ruling. The real cause: competition with the US. The important thing: each push of the Green Deal increases economic contradictions, weighs down production and imposes an increasingly dark horizon on living and working conditions. In the increased competition, the state centralizes and looks for new ways to turn broken private companies into state-owned enterprises. There is nothing progressive about this. We are not closer to socialism, but to a war economy.

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German climate targets and the Constitutional Court

Louise Neubauer led the lawsuit in front of the German Constitutional Court calling for more ambitious climate targets before 2030
Louise Neubauer led the lawsuit in front of the German Constitutional Court calling for more ambitious climate targets before 2030

It all started a year and a half ago. Merkel was then pushing the Youth for Climate, whom she had sponsored, against her critics in German industry and those most reluctant to speed up the Green Deal within the Great Coalition. Louise Neubauer, the German Greta, the chancellor’s true political goddaughter, then brought a lawsuit against the government in the Constitutional Court with a convoluted argument: the climate targets, by leaving most of the reduction of CO2 emissions to be achieved after 2030 and not establishing a clear action program between then and 2050, took away freedoms from the younger generations, who would have to face what the current government had failed to do.

Surprise. The Constitutional Court ruled in favor of Youth for Climate, or in other words, in favor of Merkel against her allies. And also at the precise moment when Biden’s Green New Deal threatens to displace European investments from the capital market.

Climate targets and competition for capital

Tesla Gigafactory in Berlin. Despite the new facilities, the transformation of the sector towards the electric car will mean the loss of 400,000 jobs in Germany alone. The green deal does not look like good news for unemployment.
Tesla Battery Gigafactory in Berlin

The Green Deal is actually a global restructuring of the capital market redirecting investment flows to companies undertaking a specific technological shift: the generation of energy and industrial production with no net CO2 emissions.

These are technologies which are less labor-intensive and have lower physical productivity. This means that the gigantic transfer of income from labor to capital being pursued must occur in absolute terms, i.e., materially impoverishing workers. We are already seeing this in energy prices and in the green unemployment that is beginning to emerge in the industries at the forefront of the shift: energy and automobiles.

The key to ensuring the profitability of the capital invested in them lies in the whole regulatory apparatus which, through bans (mandatory zero emission cars), extra charges (emission rights, CO2 taxes, etc) and tariff barriers (border CO2 adjustments) make it mandatory to consume green products while rewarding the companies with a practical monopoly.

What does this mean? That as soon as the prospect seems certain for the Green Deal to become a global phenomenon, the national capital with the most stringent climate targets and trying to make the transition sooner will get a bigger slice of the capital flow pie. For instance: where will one invest first in a battery factory, in the EU or in Great Britain? Logically wherever electric car sales reach a massive scale sooner. That’s why Boris Johnson amended the legislation to ban the sale of cars and vans with diesel or gasoline engines from 2030, ten years earlier than originally planned.

Thus, the implementation of Biden’s Green Deal has resulted in… the rush to pass the new European Climate Law, with more ambitious climate targets, and now, the new German law, conveniently pushed by the very heart of the German state: its Constitutional Court. It matters little that, as the chancellor’s critics say, there is no way to achieve such goals, the important thing now is to send a signal to the markets… and then we’ll see how this is achieved, by squeezing the workers even more and looking for a way out of the growing contradictions.

The growing contradictions of the Green Deal

A member of Youth for Climate draws a graffiti on the ground, calling for an increase of climate targets in Germany by 2030
A member of Youth for Climate draws a graffiti on the ground, calling for an increase of climate targets in Germany by 2030

The ramping up of climate targets means that Germany and the EU are betting full force on making the green transition the main engine for breathing air into national capital and getting out of the worst of the economic crisis. The problem is that, as it could not be otherwise, instead of overcoming the contradictions of a capitalism with over-accumulated capitals and insufficient markets, it aggravates them.

At the end of the day, they are shrinking the market on the one hand – reducing the purchasing power of workers as a whole and throwing people out on the street – and raising the general price level on the other. In other words they drive inflation with one hand and with the other they put a drag on sales… when production is just beginning to recover.

Hence the panic that the US, suffering the same inflationary pressures, will raise interest rates to rein in prices. If the ECB responds by raising rates as well, the supposed recovery may drag on for years until it recovers to 2019 levels. If they don’t… the capital flows they compete for will fly to the U.S.

A new state ownership strategy

Annalena Baerbock, candidate for chancellor of the Greens and Robert Habeck, party vice-president and shadow economy minister
Annalena Baerbock, candidate for chancellor of the Greens and Robert Habeck, party vice-president and shadow economy minister.

As if the situation of large industry were not difficult enough, Germany has a fabric of medium industrial exporting companies – which would be considered large in virtually all of Europe – that is increasingly threatened with the new acceleration of the crisis… a problem for the financial sector. So what started in 2019 as a debate on the nationalization of some large industries became in 2020, in the first economic rescue package of the pandemic, an open door to generalized nationalizations.

The German state, like any large investment fund, is however reluctant to participate in the capital of these companies… even to save them. The main reason is that entering into the management of thousands of companies has a cost that would not be justified in the amounts required for each one. The traditional forms of state ownership would not be profitable in the long run for the national capital and would produce distortions in the orientation and relationship between the state and the German bourgeoisie.

In the end they were saved by credits and guarantees which led the German state to undertake successive debt issues in order to finance the difficulties of these export-oriented industries with large workforces and billings… but in general outside the stock exchanges and the large capital markets. It must be said that they are considered outside the group of large companies partly because many of them are still family-owned companies or have highly concentrated shareholdings. In other words, their financing capacity already made it difficult for them to invest in adapting to climate targets, but with the restriction of external markets the situation became stifling.

The fact is that many of these companies wanted to be partially nationalized because, in the end, the cost of credits and refinancing is higher for them than taking the state as a partner. And being industrialists, with every increase in climate targets, the greater the need for investment. So faced with the prospect of ending up as zombies chronically dependent on credit lines, many of the owners of these factories and businesses, some of them strategic, opted to sell to investors from China and the US.

New problem: not having nationalized became a matter of defending the internal market and controlling national capital. Big words.

So the German election campaign, which has already begun even though the elections will not be held until autumn, is staging a curious debate between parties and companies. The excuse: the creation of a new business form, linked ownership companies.

The idea: allow this small industrial bourgeoisie to sell their companies… to themselves through some kind of public aid system. The companies would legally become self-owned and could not be sold. They would be governed by a social charter in which they commit to reinvest all dividends and submit management to a series of guidelines, for the time being, climate targets. And, above certain sizes, they would have some kind of social council made up of trade unions, NGOs and state institutions. A board of trustees.

The striking point: the most rancorous businessmen in the Ruhr and Bavaria close ranks with Greens and Social Democrats eager to embrace this figure as an alternative to complex share-sale processes, while the CDU and Liberals dole out promises of alternative means to avoid being bought by a plague of American or Chinese state capitalist locusts.

This status would give access to tax credits and other preferential treatment and grant veto power to labor unions and environmental NGOs and institutions if they believe climate targets or social policy could be called into question. These companies would also be given preference in the awarding of public contracts, for which they would score, the Greens promise, ecological and social (gender) standards.

The hope of the Greens’ vice president and shadow economy minister, Robert Habeck, is that it will also serve to make workers more productive and contribute more to national capital without raising wages.

If you work for a company that is owned by itself instead of by the return expectations of someone else who owns the company, it can be assumed that the workforce, the co-workers will invest more, will be more committed and therefore the performance of the company will increase, i.e. the company will prepare and present new products, new added value for the market.

The world emerging from the Green Deal

Equity-linked companies are just one option we will see developing in the coming years. The goal, thinly disguised, is the dissolution of the industrial petty bourgeoisie into the state and its guidelines. Now these are climate targets, tomorrow they may well be others – war for example – and take a different form.

What is clear is that the need to discipline the whole of industry around the big bets of national capital leads to the emergence of legal forms of state capitalist property, whose goal is to further develop state capitalism because national capital feels the current crisis and the competition for capital from the Green Deal as an opportunity, yes, but also as an existential risk.

And they are right. The world ushered in by the Green Deal is not more peaceful or social, it does not come with quality jobs or a new welfare state. On the contrary, it is a world of accelerated competition, widespread impoverishment of workers and even more centralization and concentration of power around the state. There is nothing progressive here. Like all advances in state capitalism, it does not bring us one millimeter closer to socialism, but rather shortens the distance to the war economy.