President Joseph R. Biden discusses his plans for investing in labor and green energy during a tour of Philly Shipyard in Philadelphia, Pennsylvania (July 20th, 2023) | Ooglemages / Shutterstock
Domestic economic commentators tend to describe Biden’s Inflation Reduction Act (IRA) and the rise of American green industrial policy along three lines. Lawrence Summers, former United States secretary of the treasury under Clinton, has criticized Biden’s protectionist policies as a “manufacturing-centered economic nationalism.” Nobel laureate Paul Krugman has supported Biden’s “very tough line on trade” and characterized it as a sophisticated form of economic nationalism that takes China to task. (In the same Times op-ed, Krugman also noted that the IRA directly jeopardizes cooperative free trade and could lead to a swing toward protectionism globally.) And Robert Reich, former Secretary of Labor under the Clinton Administration, welcomed Biden’s “break with decades of free-trade deals” as labor-friendly.
These three approaches are typical of mainstream discourse around the rise of green protectionism in the United States. In their approach to the concept of trade regimes, they either ignore or flatten domestic class interests or abstract from the real processes of competition that produce uneven development in the first place. In failing to acknowledge the driving force of capitalism itself, what are they missing?
Core capitalist economies, including the United States, have faced low levels of real GDP growth (Graph 1) and anemic productivity increases (Graph 2) in recent years. Furthermore, military escalations and the turbulence of war in Ukraine have caused significant increases in energy prices, as well as major disruptions in global value chains.
China is now openly contesting world hegemony. This contestation has brought major tensions to US–China relations around economic, political, military, and ideological issues. And the Chinese economy has risen with the country’s emergence as a strong international competitor in the production of net-zero technologies. China, which processes the dominant share of the raw materials essential for green transition, is now a leader in the deployment of renewables.
Energy lies at the core of the wider geopolitical struggle between the United States and China, and the United States considers China’s prominence in the energy sector a major security concern. As the transition to renewables in the United States phases out conventional energy sources, the inadequate existing infrastructure may cause significant disruptions in energy production and distribution. China, on the other hand, could face less severe disruptions, due to the quick upgrade of its grid infrastructure and the continuation of coal-powered energy production. This vulnerability is compounded by US reliance on Chinese producers for imports of renewable equipment.
This context is crucial to understanding the motivations behind Biden’s Inflation Reduction Act (IRA). His administration touts the bill as “the most significant action in US history to tackle the climate crisis and strengthen US energy security.” The $300 billion act aims to accelerate the transition to a clean energy economy and boost domestic green manufacturing industry and employment. At the same time, it seeks to decrease dependence on foreign countries for critical components of supply chains through significant tax incentives, grants, and loans. For example, electric vehicle (EV) subsidies will only be available for domestically manufactured EVs that do not include battery minerals sourced in China.
Energy, besides its geopolitical significance at the level of national economies, constitutes a crucial aspect of the competitive struggle between different firms. The advantages of cheaper energy production from renewable sources and uninterrupted supply chains compel capital in core countries to seek ways to command not only the production of green energy per se but also the manufacturing of the means of production of green energy.
The decrease in levelized costs of renewable energy is led by China. Purely from the perspective of green transition, the continuation of cheaper Chinese imports of solar panels, wind turbines, EVs, and batteries should be welcomed. The rationale behind this is simple. More capitalists are likely to invest in a sector if the return on investment relative to the cost is higher. For example, capitalists interested in investing in solar energy production would benefit from importing cheaper Chinese solar panels since their investment costs would be lower and thus their relative return higher.
Instead, the United States has accused China of unfair competition practices, including significant state subsidization of net-zero technologies. Why is there such resistance from core capitalist nations toward the continuation of cheap imports of renewables? The answer lies in capitalism’s fundamental imperatives and processes—profit and competition.
The manufacturing of net-zero technologies is a promising field of profitability—and the United States wants in. According to the International Agency of Energy, the global market for key mass-manufactured clean energy technologies will be worth $650 billion a year by 2030, while value added per $ invested in the clean energy industry will largely surpass the fossil fuels industry and traditional manufacturing sector.
The competitive superiority of China in the manufacturing of net-zero technologies challenges the dominance of core capitalist nations in the sector, and estimations show that Chinese producers are likely to further increase their market shares. Biden’s IRA tilts the terms of competition to secure US shares in the green manufacturing sector—and a larger “cut” for capitalists in the pie of estimated profits.
Yet the rhetorical emphasis of the IRA hardly touches upon the question of profits and market shares. Instead, it centers around the combination of green transition and new employment opportunities. The overwhelming consensus for mitigating the climate crisis and popular pressure for new and well-paid jobs in green industries do play a role in the adoption of the IRA. But although rhetoric might be good enough for communication strategies and electoral campaigns, these concerns are largely in contradiction with (and secondary to) the capitalist logic that directly shapes US government policy. This is the primary concern of the “green” protectionist turn: higher profitability and further accumulation in the face of strong international competition, and maintenance of US world hegemony amid stronger contestation from rising powers.
This protectionist policy sharpens the competitive struggle and will have important repercussions that, in my estimation, will extend not only to the domestic economy but to the international field.
Firstly, the protectionist approach is slowing down progress toward green transition in the US, historically the biggest CO2 emitter, since its block on cheap imports increases the costs of renewables. Secondly, even if some jobs are created, workers in the green manufacturing sector are still going to experience the pressure of capitalist competition, especially in manufacturing relatively cheap green energy technologies. Biden might declare himself “the most pro-union president in American history,” but that’s no guarantee of a “labor-friendly” field. State intervention responds to the oscillations of class struggle and intra-capital competition only in a way that does not directly risk the general reproduction of capitalist relations of production. The necessity of out-competing foreign producers and conquering third markets will increase the downward pressure on green manufacturing wages and employment for the sake of profitability.
Finally, US green protectionism has already sparked the protectionist responses of other core capitalist economies. This is likely to further undermine the efforts for global reduction of CO2 emissions. Another related question is what remains for the rest of the developing world and its capacity to establish a green industrial base. The international division of labor around green technologies is crystallizing into an intensified protectionism for a core specializing in research, development, and manufacturing, and continued trade liberalization and deregulation for a periphery plundered for the supply of critical raw materials.
Trade and climate change policies are still heavily contested in the ongoing electoral battle between Harris and Trump. Focusing on the capitalist underpinnings of the rise in US green protectionism helps us understand its profit-driven considerations, class-biased nature, contradictory implications for rapid green transition, and detrimental effects on the development prospects of peripheral economies. The true dilemma is not between more protectionism or more free trade (and the prioritization of certain nations over others or the laboring classes as a whole), as the commentators tend to frame it, but between reconfigurations within a system that reproduces inequalities and ecological degradation within and between countries. The protectionist turn of the core will serve the profits of dominant capitalists while failing to avert the basic tendencies of capitalism, such as the deepening of the environmental crisis, the downward pressure against the working classes, and the further entrenchment of an uneven and unfairly constructed global division of labor.
