Is Sustainability Stimulus Funding Sustainable?

Yesterday, a mock hip hop battle video was released describing two opposing economic solutions to the recent “great recession.” On one side, we have John Maynard Keynes, who advocates for more stimulus and more deficit spending to get the economy out of recession. On the other side, we have F.A. Hayek, who champions savings and organic growth.  Which path has the government followed as of late?  Considering each of the Keynes and Hayek approaches, what would their takes be on sustainability initiatives?

For some friday fun, watch this:

Round Two

The music video, Fight of the Century, Keynes and Hayek Round Two was created by producer and director John Papola in collaboration with Professor Russ Roberts of George Mason University.  This is their second economic music video collaboration, following on the success of their first video Fear the Boom and Bust released early last year.  They were also recently interviewed on American Public Radio’s Marketplace.

Listening to the Other Side

The great thing about this music video is that it gives, more or less, equal time and equal say to both the Keynes and Hayek economic positions.  One core tenant of sustainability is stakeholder engagement. Part of stakeholder engagement is listening and acknowledging your stakeholders, regardless if you agree with them or not.

From the website, “In ‘Fight of the Century’, Keynes and Hayek weigh in on these central questions. Do we need more government spending or less? What’s the evidence that government spending promotes prosperity in troubled times? Can war or natural disasters paradoxically be good for an economy in a slump? Should more spending come from the top down or from the bottom up? What are the ultimate sources of prosperity?”

I think each side of the story is presented as accurately as possible.  I don’t think a Keynesian would disapprove of what Keynes says in the video.  LIkewise, I don’t think a Hayekian would disagree with Hayek’s digression. This helps us make up our own mind on whether it is better for the recovery to happen top down or bottom up.

Government Stimulus and Sustainability Initiatives

It’s no secret that a government “stimulus” on the economy is part of the Keynes position. Hayek opposed any such interference in the marketplace.

This brings to question the viability and validity of sustainable initiatives funded through the stimulus packages.  Nearly $70 billion was meant to stimulate the energy economy, mainly “green” energy.

According to Keynes, spending is spending [sic], and an economy needs spending to keep it going.  As Keynes in the video puts it, “Where it goes doesn’t matter, just get spending flowing.”  So the stimulus towards “green” energy was a good thing.

Hayek would be against any stimulus from the top down, including “green” energy.  Combining stimulus spending with inflating the money supply gives bad signals to the marketplace, thus leading to another bubble.

However, that does not mean the Hayek position is against “green” energy, per se.  He would rather see “green” energy emerge from the marketplace, from the bottom up.  As Hayek in the music video puts it, “I want plans by the many and not by the few.”

Top Down or Bottom Up?

After watching, what do you think?  Do we need more top down intervention to save the economy?  Or do we need more bottom up emergence, allowing the economy to heal itself?  In terms of sustainability, are sustainability initiatives via stimulus funding sustainable in themselves?  Or would it be better to allow the marketplace for sustainability to grow organically?

Jonathan Mariano is an MBA candidate with the Presidio Graduate School in San Francisco, CA. His interests include the convergence between lean & green and pursuing free-market based sustainable solutions.