We need a Green New Deal economic vision for America and the world. It must be compelling and executable in big cities, small towns, and rural communities. And it will have to be deployed quickly and scaled within twenty years or so if we are to meet the deadline of decarbonizing the global economy and reenergizing it with green electricity and accompanying sustainable services. We should step back, then, and ask the question, “How do the great economic paradigm shifts in history emerge?” If we know how they occur, governments everywhere can draw up roadmaps to deliver the Green New Deal.
The major economic transformations in history share a common denominator. They all require three elements, each of which interacts with the others to enable the system to operate as a whole: a communication medium, a power source, and a transportation mechanism. Without communication, we can’t manage economic activity and social life. Without energy, we can’t power economic activity and social life. Without transport and logistics, we can’t move economic activity and social life. Together, these three operating systems make up what economists call a general-purpose technology platform (a society-wide infrastructure). New communication, energy, and mobility infrastructures also change society’s temporal/spatial orientation, business models, governing patterns, built environments, habitats, and narrative identity.
In the nineteenth century, steam-powered printing and the telegraph, abundant coal, and locomotives on national rail systems meshed in a common general-purpose technology platform to manage, power, and move society, giving rise to the First Industrial Revolution. In the twentieth century, centralized electricity, the telephone, radio and television, cheap oil, and internal combustion vehicles on national road systems converged to create an infrastructure for the Second Industrial Revolution.
Now, we are in the midst of a Third Industrial Revolution. The digitalized Communication Internet is converging with a digitized Renewable Energy Internet, powered by solar and wind electricity, and a digitized Mobility and Logistics Internet of autonomous electric and fuel-cell vehicles, powered by green energy, atop an Internet of Things (IoT) platform, embedded in the commercial, residential, and industrial building stock, that will transform society and the economy in the twenty-first century.
Sensors are being attached to every device, appliance, machine, and contrivance, connecting every “thing” with every human being in a digital neural network that extends across the entire global economy. Already, billions of sensors are attached to resource flows, warehouses, road systems, factory production lines, the electricity transmission grid, offices, homes, stores, and vehicles, continually monitoring their status and performance and feeding Big Data back to the emerging Communication Internet, Renewable Energy Internet, and Mobility and Logistics Internet. By 2030, there could be trillions of sensors connecting the human and natural environment in a global distributed intelligent network.1
Connecting everything and everyone via the Internet of Things offers enormous economic benefits. In this expanded digital economy, individuals, families, and enterprises will be able to connect in their homes and workplaces to the IoT and access Big Data flowing across the World Wide Web that affects their supply chains, production and services, and every aspect of their social lives. They can then mine that Big Data with their own analytics and create their own algorithms and apps to increase their aggregate efficiency and productivity, reduce their carbon footprint, and lower the marginal cost of producing, distributing, and consuming goods and services and recycling waste, making their businesses and homes greener and more efficient in an emerging postcarbon global economy. (Marginal cost is the cost of producing an additional unit of a good or service after fixed costs have been absorbed.)
The marginal cost of some goods and services in this green digital economy will even approach zero, forcing a fundamental change in the capitalist system. In economic theory, we are taught that the optimum market is one in which businesses sell at marginal cost. Businesses are encouraged to introduce new technologies and other efficiencies that can reduce the marginal cost of producing and distributing their goods and services, enabling them to sell at a cheaper price, win over market share, and bring back sufficient profit to their investors.
However, it never occurred to economists that one day there might exist a general-purpose technology platform so hyperefficient in the production and delivery of goods and services that it plunges the marginal cost of economic activity so low that profit margins shrink dramatically, undermining the capitalist business model. At extremely low marginal costs, markets become too slow and eventually irrelevant as business mechanisms. This is what the green digital Third Industrial Revolution does.
Markets are transactional and start/stop mechanisms. Sellers and buyers come together at a moment in time and fix on a transaction price, the good is delivered or the service rendered, and the two parties walk away. The downtime between transactions is lost time against fixed overhead and other expenses, where the seller is in limbo. Aside from lost production costs, consider the time and expense in bringing the seller and buyer together again—think advertising costs, marketing, the cost of storing goods, downtime across the logistics and supply chain, and other overhead expenses that still have to be paid out. This phenomenon of shrinking marginal cost and shrinking profits playing out against the slow transaction of one-off sales of goods and services between sellers and buyers makes traditional markets all but useless in a digitally enhanced high-speed infrastructure. In the Third Industrial Revolution, the “transaction” of goods gives way to a continuous “flow” of 24/7 services.
In the new economic system now emerging, ownership gives way to access, and sellers and buyers in markets are replaced, in part, by providers and users in networks.
In provider/user networks, industries and sectors are replaced by “specialized competencies” that come together on platforms to manage the uninterrupted flow of goods and services in smart networks, returning sufficient profit, even at low margins, by the 24/7 continuous traffic across the system.
Margins for some goods and services, however, shrink so low “toward zero” that profits are no longer viable even in capitalist networks because the goods and services produced and distributed are nearly free. This is already occurring and giving rise to a new phenomenon—the Sharing Economy. At any given time of the day, hundreds of millions of people around the world are producing and sharing their own music, YouTube videos, social media, and research. Some are taking massive open online courses (MOOCs), taught by professors at the best universities, and often receiving college credit, for free. All one needs is a smartphone, a service provider, and an electrical outlet to power up.
More and more people around the world are also generating their own solar and wind electricity for use off-grid and/or for sale back to the grid, again at near-zero marginal cost. The sun and wind have yet to send a bill. Increasing numbers of millennials are sharing homes, rides, clothes, tools, sporting equipment, and an array of other goods and services. Some of the sharing networks like Uber are capitalist provider/user networks where the marginal cost of connecting riders and drivers is nearly zero, but the providers command a price for temporary access to the service. Other sharing networks are nonprofits or cooperatives where members freely share knowledge, goods, and services with one another. Millions of individuals are constructing the knowledge of the world and sharing it on Wikipedia, a nonprofit website that is the fifth-most-trafficked website, all for free.2
The sharing of a range of virtual and physical goods is the cornerstone of an emerging circular economy, allowing the human race to use far less of the resources of the Earth while passing on what they no longer use to others and, by doing so, dramatically reducing carbon emissions. The Sharing Economy is a core feature of the Green New Deal era.
The Sharing Economy is now in its infancy and is going to evolve in many directions. But this much is assured: The Sharing Economy is a new economic phenomenon made possible by the digital infrastructure of communication, energy, and mobility that is changing economic life. To this extent, the Sharing Economy is the first new economic system to enter onto the world stage since capitalism and socialism in the eighteenth and nineteenth centuries.
Already, a younger generation of digital natives—under the age of forty—are ensconced in this new hybrid economic system. Part of the day, they are sharing all sorts of goods and services for nearly free in open-source commons around the world, much of which is not measured in the GDP or standard economic accounting. The rest of the day, they are increasingly intertwined in capitalist provider/user networks, paying for access to goods and services. This hybrid economic system is the playing field on which a Green New Deal will emerge in the years ahead.
The build-out of the Green New Deal smart infrastructure will involve every competency: the ICT sector, including telecommunication, cable companies, internet companies, and the electronics industry; power and electric utilities; transportation and logistics; the construction and real estate industries; the manufacturing sector; retail trade; the food, agriculture, and life sciences sectors; and the travel and tourism industry. The new smart sustainable infrastructure, in turn, makes possible the new business models and new kinds of mass employment that characterize the shift to a green economy.
The transition from a Second Industrial Revolution to a Third Industrial Revolution will be formidable—comparable to the shift from agriculture to an industrial society—and will require the collective talents and skills of two generations of Americans. To make this happen, we will need to train millions of people and put them to work, or back to work.
We will have to decommission and disassemble the entire stranded fossil fuel and nuclear energy infrastructure—the pipelines, power plants, storage facilities, etc. Robots and AI won’t do that. It will necessitate a far more agile semiskilled, skilled, and professional workforce.
The communication network will have to be upgraded, with the inclusion of universal broadband. Human beings will have to lay the cable and make the connections.
The energy infrastructure will need to be transformed to accommodate solar, wind, and other renewable energies. Robots and AI will not install solar panels and assemble wind turbines. The dumb centralized electricity grid will have to be reconfigured into a smart distributed digital Renewable Energy Internet to accommodate the flow of renewable electricity produced by countless green micro power plants. Again, this is complex work that can only be done by semiskilled and skilled professionals.
The antiquated twentieth-century nationwide electricity transmission grid will need to be replaced by a twenty-first-century high-voltage smart national power grid. This will marshal the employment of a huge workforce over a twenty-year transformation.
The transportation and logistics sector will have to be digitized and transformed into a GPS-guided and autonomous Mobility Internet made up of smart electric and fuel-cell vehicles powered by renewable energy and running on intelligent road, rail, and water systems. Here, too, low-tech and high-tech skilled employees will be put to the task. The introduction of electric and fuel-cell transportation will require millions of charging stations and thousands of hydrogen fueling stations. Smart roads, equipped with ubiquitous sensors, feeding real-time information on traffic flows and the movement of freight, will also have to be installed. Again, more jobs.
Buildings will need to be retrofitted to increase their energy efficiency and be equipped with renewable-energy-harvesting installations and converted into micro power-generating plants. Skilled laborers will have to install insulation and new windows and doors. Energy-storage technologies will have to be built into every layer of the infrastructure to secure intermittent renewable energy. Again, this is going to provide ample employment.
The digital economy also raises risks and challenges, not the least of which is guaranteeing network neutrality to ensure everyone has equal access to the networks, protecting privacy, ensuring data security, and thwarting cybercrime and cyberterrorism. How do we prevent nation-states from hacking into other countries’ social media and spreading misinformation to influence the outcome of their elections? How do we push back against giant internet companies becoming monopolies and commodifying our personal online data for sale to third parties for commercial uses?
The dark side of the internet will require vigilant regulatory oversight at the local, state, and national levels, backed up by layers of redundancy built into the system to ensure that any disruption on the smart digital Internet of Things infrastructure can be counteracted by disaggregating, decentralizing, and reorganizing into new networks at the neighborhood or community level at a moment’s notice to absorb the shocks.
The transition to a fully digital economy and the Third Industrial Revolution results in a leap in aggregate efficiency far beyond the gains achieved by the Second Industrial Revolution in the twentieth century. During the period from 1900 to 1980 in the United States, aggregate energy efficiency—the ratio of useful to potential physical work that can be extracted from energy and materials—steadily rose, along with the development of the nation’s infrastructure, from 2.48 percent to 12.3 percent. Aggregate energy efficiency began to level off in the late 1990s at around 13 percent and then peaked at 14 percent in 2010 with the completion of the Second Industrial Revolution infrastructure. Despite a sizable increase in aggregate efficiency, which gave the United States unparalleled productivity and growth, 86 percent of the energy the country used in the Second Industrial Revolution was wasted during transmission.3 Other industrializing nations experienced similar aggregate efficiency curves.
Even if we were to upgrade the carbon-based Second Industrial Revolution infrastructure, it would be unlikely to have any measurable effect on aggregate efficiency and productivity. Fossil fuel energies have matured. And the technologies designed and engineered to run on these energies, like the internal combustion engine and centralized electricity grids, have exhausted their productivity, with little potential left to exploit.
New studies, however, show that with the shift to an Internet of Things platform and a Third Industrial Revolution, it is conceivable to increase aggregate energy efficiency to as high as 60 percent over the next twenty years, amounting to a dramatic increase in productivity while transitioning into a nearly 100 percent postcarbon renewable energy society and a highly resilient circular economy.4
I regularly meet with heads of state, provincial governors, and mayors around the world; during our discussions I describe the smart green infrastructure shift into a zero-carbon Third Industrial Revolution economy that is the very centerpiece of a Green New Deal, then ask them if they have a better plan for mitigating climate change and creating the new businesses and employment opportunities that come with it. The response I often get is silence, because the only other alternative is to remain trapped in a dying, carbon-based Second Industrial Revolution economy, whose aggregate efficiencies and productivity peaked decades ago and which is now taking the world into the sixth extinction event. What, then, is holding us up?
Over 9,000 cities and local governments have come together in the Global Covenant of Mayors for Climate & Energy to create sustainable communities and address climate change.5 These cities can boast of introducing scores of high-visibility green “pilot projects,” including solar and wind installations, electric vehicles and hydrogen fuel-cell buses, LEED-certified buildings, recycling programs, etc. But what communities often end up with is disconnected siloed initiatives and little else.
Missing is the green Third Industrial Revolution infrastructure, which is the “nervous system” that would connect all these isolated projects. Infrastructure, at the deepest level, is not just an incidental appendage to commerce and social life, as popular lore would have it. It is always new infrastructure that is the indispensable “extended body” of a new body politic.
Infrastructure, at the deepest level, is a techno-socio bond that brings together new communications technologies, new energy sources, new modes of mobility and logistics, and new built environments, enabling communities to more efficiently manage, power, and move their economic activity, social life, and governance. Communication technology is the brain that oversees, coordinates, and manages the economic organism. Energy is the blood that circulates through the body politic, providing the nourishment to convert nature’s endowment into goods and services to keep the economy alive and growing. Mobility and logistics are extensions of our limbs, allowing communities to interact physically across temporal and spatial domains to facilitate the movement of goods, services, and people. Buildings are the skin—the semipermeable membranes that allow our species to survive the elements, store the energies and other resources we need to maintain our physical well-being, provide secure and safe places to produce and consume the goods and services we require to enhance our existence, and serve as a congregating place to raise our families and conduct social life. Infrastructure is akin to an immense technological organism that brings large numbers of people together as an extended figurative family collectively engaging in more complex economic, social, and political relationships.
For example, think of the Second Industrial Revolution of the twentieth century as a technological nervous system to manage the affairs of a new economic paradigm. Urban America was electrified between 1900 and the onset of the Great Depression in 1929, and rural America followed suit between 1936 and 1949.6 The electrification of factories made way for the era of mass-produced goods, with the automobile as the kingpin. Without electricity, Henry Ford would not have had available electric power tools to bring the work to the workers and manufacture an affordable automobile for millions of Americans. The mass production of the gasoline-powered Model T car altered the temporal and spatial orientation of society. Millions of people began to trade in their horses and buggies for automobiles. To meet the increased demand for fuel, the nascent oil industry revved up exploration and drilling, built oil pipelines across the country, and set up thousands of gasoline stations to power the millions of automobiles coming off the assembly lines. Concrete highways were laid out over vast stretches of America, culminating in the US Interstate Highway System—the largest public works project in world history—creating a seamless coast-to-coast road system. The interstate highways were the impetus for a mass exodus of millions of families from urban areas to the newly emerging suburbs popping up off the highway exits. Thousands of miles of telephone lines were installed, and later radio and television were introduced, recasting social life and creating a communication grid to manage and market the far-flung activities of the oil economy and auto age.
That was then, this is now. The United States is the clear outlier today among the highly developed industrial nations and even among many developing countries. In the World Economic Forum’s 2017 report ranking the quality of nations’ infrastructures, the United States ranked a dismal ninth, behind countries like the Netherlands, Japan, France, Switzerland, and Korea.7 A report by McKinsey Consulting projected that the United States will have to increase its current overall infrastructure investment by 0.5 percent of GDP between 2017 and 2035 just to keep pace with the conventional infrastructure needs of the country.8
Unfortunately, in relation to a key measure of the new digital infrastructure of the emerging Third Industrial Revolution, the United States ranks even worse, an abysmal nineteenth among the nations of the world in fixed-broadband internet subscriptions, with slower internet speeds.9 When it comes to the formation of a digital Renewable Energy Internet and an autonomous Mobility Internet, the United States is not even at the table.
It’s sad when we reflect that in the First and Second Industrial Revolutions, the United States was unmatched by any other country in the world in its commitment to bring the full force of the national government, states, localities, and economy to bear on building world-class infrastructure. It is becoming self-evident that the United States is long past due for a blunt reassessment of its economic priorities in a world that is fast leaving it behind in the twenty-first century.
The Third Industrial Revolution is already scaling up in both the European Union and the People’s Republic of China. My offices in Brussels and Washington, DC, have worked closely with the EU over the past twenty years on the conception and deployment of a Third Industrial Revolution infrastructure. Since 2013, our office in Beijing has also worked alongside the leadership of the People’s Republic of China on a similar Third Industrial Revolution roadmap and deployment currently operationalizing in the thirteenth Five-Year Plan.
I’m often asked the question, “Why has the US lagged so far behind the European Union and China?” To answer, I would like to take you back to President Barack Obama’s reelection campaign in 2012, and an incident that captures America’s recalcitrance on the question of infrastructure. President Obama, speaking to supporters in Roanoke, Virginia, on July 13 of that year, strayed from conventional campaign rhetoric to reflect on what policies in the course of American history made the United States a beacon for the rest of the world. The president mused on how the success of private enterprises in the nineteenth and twentieth centuries depended, to a great extent, on government involvement in “big-picture infrastructure shifts.” He told the crowd:
If you were successful, somebody along the line gave you some help. There was a great teacher somewhere in your life. Somebody helped to create this unbelievable American system that we have that allowed you to thrive. Somebody invested in roads and bridges. If you’ve got a business—you didn’t build that. Somebody else made that happen. The Internet didn’t get invented on its own. Government research created the Internet so that all the companies could make money off the Internet.10
President Obama went on to cite the federal government’s funding of various infrastructure projects and government research that allowed businesses to function and flourish. His Republican opponent, Mitt Romney, pounced on the phrase “you didn’t build that,” claiming that President Obama was undermining the role that small businesses play in making a strong American economy. But the president was merely trying to explain the contribution that federal, state, and local governments make in providing the infrastructure and public services that every citizen relies on and that are indispensable to both the success of the business community and the general well-being of the public.
Obama’s “you didn’t build that” moment instantly went viral on social media, creating a national controversy over the role small businesses play in America’s economic success story. Within days, Republican talking heads spread a counternarrative with the phrase “we built it,” suggesting that small businesses, not government, are primarily responsible for America’s preeminence. “We built it” became so popular with the Republican base that the Republican National Convention in Tampa incorporated the theme into the proceedings.11
The “you didn’t build that” remark struck a nerve in a country where small business owners feel overtaxed, overregulated, underrepresented, and underappreciated for their contribution to the building of the American economy on Main Streets across the country. All justified! Still, “you didn’t build that” speaks to a more unsettling reality—that is, a feeling on the part of many Americans that Big Government is constantly encroaching on their lives in ways that undermine their personal freedoms and the workings of the free market. President Ronald Reagan had popularized this theme in his 1980 run for the presidency with the one-liner “Get the government off the backs of the people.”12
To be fair, most Americans know that many of the things they depend on day to day come from taxpayer dollars and local, state, and federal government programs: the public schools our children attend, the roads we drive on, the air traffic controllers that guide our flights, the National Weather Service that keeps us abreast of local conditions, the public hospitals that minister to the sick, the motor vehicle departments that register our cars, the US Postal Service that delivers our packages and mail, the fire departments and police departments that protect our safety, the prisons that guard convicted felons, the systems that flow water into our businesses and homes, the sanitation departments that recycle our waste, etc.
Public opinion polls show that, in theory at least, Americans support spending more federal, state, and local funds to improve infrastructure.13 As to the particulars of how much, on what, and whether the deployment of that infrastructure should remain the responsibility of the government or be put in the hands of the marketplace, the reaction is far more divided and acrimonious.
In the European Union, EU citizens recognize the importance of maintaining a balanced partnership between government and commerce, and there is a deep appreciation for the role that the government plays in providing public infrastructure and services from which both the business community and the public benefit in their day-to-day lives. For this reason, taxpayers in Europe are willing to shoulder higher taxes in return for the advantages they secure with public services, from universal healthcare to high-speed rail systems.
By contrast, everywhere we look across America today, the public infrastructure is in dire straits and disrepair: roads, bridges, dams, public schools, hospitals, public transit, etc. Every four years, the American Society of Civil Engineers (ASCE) issues a report card on the condition of the country’s infrastructure, including its rail transit, inland waterways, levees, ports, schools, wastewater and solid waste treatment, hazardous waste disposal, parks, aviation, and energy. In its 2017 report card, the ASCE gave the nation’s public infrastructure an embarrassingly low score of D+. Noting that the deteriorating public infrastructure is becoming a drag on the American economy and a growing threat to the health, well-being, and security of the nation, the ASCE report warns that the country is only paying half of America’s infrastructure bill, leaving an investment funding gap that hurts businesses, workers, and families.14
This means poor roads and more travel time, collapsed bridges, airport delays, aging electricity grids and power shortages, unreliable water distribution systems, the breakdown of sewer systems and a host of other public services, all of which “translate into higher costs for businesses to manufacture and distribute goods and services.” According to the ASCE, “these higher costs, in turn, get passed along to workers and families.” The ASCE estimates that the continued deterioration of the nation’s infrastructure will cost the US GDP $3.9 trillion and result in $7 trillion in lost sales and a loss of 2.5 million jobs by 2025. Lest there be any doubt about the magnitude of the losses and the impact they are already having on American families, the ASCE estimates that because “the cost of deteriorating infrastructure takes a toll on families’ disposable household income and impacts the quality and quantity of jobs in the U.S. economy … from 2016 to 2025, each household will lose $3,400 each year in disposable income.”15
The ASCE concludes that the United States will need to invest an additional $206 billion annually over ten years (2016–2025) on infrastructure just to achieve a B grade—and overall will need to come up with $4.59 trillion by 2025. This is $2 trillion more than the United States currently invests in infrastructure.16
History tells us that the vitality of a nation is measured by the willingness of its citizens to sacrifice a portion of their income and wealth to secure the public infrastructure and services that advance the productivity, health, and general well-being of its people. When that commitment wanes, it’s a clear signal of the nation’s decline and fall. To a large extent, the rhetorical phrase “Make America Great Again” rings hollow at a time when a sizable segment of the population is no longer willing to commit to America’s future by supporting a rebuilding and transformation of the nation’s infrastructure in anticipation of the needs of not only the present generation but also generations yet to come.
If there was ever a case to be made for America being “penny-wise and pound-foolish,” it’s our general disregard for the importance of infrastructure. And while in the short run this just means bad roads, rickety bridges, unreliable public transportation, and slow mobile phones, in the long run, if we fail to make the investment in Third Industrial Revolution infrastructure, it could pose a more existential threat for us and the planet. Perhaps if we better understood the payoff of such investments, it would become easier to commit tax revenue to infrastructure. A comprehensive 2014 study by the University of Maryland for the National Association of Manufacturers says it all. The study found that infrastructure improvements add $3 to the country’s GDP for every dollar invested.17 To add icing on the cake, McKinsey estimates that increasing infrastructure spending by just 1 percent of GDP would add 1.5 million jobs to the US economy.18 What more is there to say except “woe is us”?
The Green New Deal is a powerful plea by the younger generations—the millennials and Gen Z, now the dominant cohorts in the United States—to turn America around and move forward, this time with a far more important agenda: not just to improve the social prospects and economic well-being of every American but also to position America and its people at the forefront in mitigating climate change and saving life on Earth. The transformation from a dying fossil-fuel-weighted Second Industrial Revolution infrastructure to a smart green zero-emission Third Industrial Revolution infrastructure is the very nucleus of the Green New Deal.
Infrastructure revolutions require a healthy social-market economy that brings together government, industry, and civil society at every level with the appropriate mix of public capital, private capital, and social capital. In the United States, both the First Industrial Revolution of the nineteenth century and the Second Industrial Revolution of the twentieth century relied on a strong and robust public-private partnership in the build-out and scale-up of the new infrastructures that transformed American life.
The American public may be aware of the New Deal that accompanied the Second Industrial Revolution. They may not know that a New Deal accompanied the First Industrial Revolution as well, although it wasn’t called that. The federal government’s Morrill Land-Grant Acts of 1862 and 1890 established land-grant public colleges and universities across the country, providing the education and skills necessary to transform American agriculture and industry. Millions of Americans have attended these schools over the past 150 years. If you went to Penn State, Ohio State, the University of Georgia, Texas A&M, the University of Arizona, the University of California, or any of the other land-grant institutions in every state of the country, you have the federal government’s Morrill Land-Grant Acts to thank. The federal government financed the first telegraph installation, which stretched from the Capitol Building to Baltimore.19 The federal government’s Homestead Acts ceded over 270 million acres of federal public lands—10 percent of the total US land area—for free to 1.6 million homesteaders.20 The federal government’s Pacific Railroad Acts authorized the issuance of government bonds and land grants to railroad companies, hastening the build-out of a transcontinental rail infrastructure.
President Franklin Delano Roosevelt’s New Deal in the 1930s included not only new financial reforms but also large-scale federal programs, including the Public Works Administration (PWA), to promote the infrastructure transition to a Second Industrial Revolution.21 The Work Projects Administration (WPA) hired millions of unemployed people to carry out public works projects, including the construction of buildings and roads and the stewardship of public lands.22 The Roosevelt administration also introduced a mammoth electricity-generation project—the Tennessee Valley Authority—that built giant dams to produce cheap subsidized hydroelectricity for rural communities that had not yet become electrified.23 The government then assisted the rural regions in establishing electric cooperatives to bring that electricity to millions of Americans living in remote areas of the country. As mentioned, the federal government’s National Interstate and Defense Highways Act of 1956 connected the country with a single road system, spawning the development of suburban America.24 The federal government’s GI Bill offered free higher education for nearly 8 million veterans after World War II and the Korean War, providing the knowledge needed to promote a high-quality workforce to both complete the build-out of the Second Industrial Revolution infrastructure and manage the new business opportunities that plugged into it.25 The Federal Housing Administration (FHA)—created in 1934—helped millions of Americans afford home ownership after the war in the burgeoning suburbs just off the interstate highway exits (although it should be noted that minorities were often discriminated against by the FHA in securing mortgages). The Green New Deal, in turn, will require a similar effort if it is to succeed.
The First and Second Industrial Revolution infrastructures were engineered to be centralized, top-down, and proprietary, and they needed to be vertically integrated to create economies of scale and return profits to investors. The result is that at the end of the Second Industrial Revolution, the global Fortune 500 companies, most of them US-based, account for $30 trillion in revenue, or around 37 percent of global GDP, with only 67.7 million employees out of a global workforce of nearly 3.5 billion people.26 This statistic tells us everything we need to know about how the benefits of the industrial era have been shared.
That is not to say that the fruits of the first two industrial revolutions in the nineteenth and twentieth centuries weren’t a boon for large numbers of people, especially in the Western world. Arguably, most of us in the highly developed nations are far better off than our ancestors were before we began the industrial age. However, it’s also fair to say that nearly half of the population of the world (46 percent), living on less than $5.50 per day, the dividing line that defines poverty, is at best only marginally better off than their ancestors, and perhaps no better off.27 Meanwhile, the wealthiest human beings have triumphed. Currently, the accumulated wealth of the eight richest individuals in the world equals the total wealth of half of the human beings living on the planet—3.5 billion people.28
Conversely, the Third Industrial Revolution infrastructure is engineered to be distributed, open, and transparent, to achieve network effects, and it scales laterally, allowing billions of people to engage directly with each other both virtually and physically at very low fixed costs and near-zero marginal cost in localities and regions that stretch around the world. All they need is a smartphone and an internet connection to give them instant access to Big Data and a global network of millions of other businesses and their websites.
This more intimate and inclusive engagement in commerce, trade, and social life, made possible by a distributed and smart postcarbon Third Industrial Revolution platform, is being accompanied by a shift from globalization to “glocalization” as individuals, businesses, and communities engage each other directly, bypassing many of the global companies that mediated commerce and trade in the twentieth century. Glocalization makes possible a vast expansion in social entrepreneurship with the proliferation of smart high-tech small and medium-sized enterprises (SMEs) blockchained into laterally extended cooperatives operating in networks circling the world. In short, the Third Industrial Revolution brings with it the prospect of a democratization of commerce and trade on a scale unprecedented in history.
The shift from globalization to glocalization is transforming the relationship between national governments and local communities, in a sense, reversing the locus of responsibility for the workings of the economy and the affairs of governance from the nation-state to the regions. This change in governance presages a revolution in the way humanity organizes its economic and social life.
So what role does this leave for the federal government? While the federal government will be a key player in some of the infrastructure build-out in the country, its primary responsibility will be to establish the new codes, regulations, standards, tax incentives, and other financial incentives for the transition into a Third Industrial Revolution infrastructure and zero-carbon economy. Cities, counties, and states, in turn, will be tasked with developing their own customized goals and deliverables, Green New Deal roadmaps, construction sites, and deployment initiatives for transitioning into a Third Industrial Revolution paradigm. They will then cross-border and create an integrated national infrastructure network composed of the Communication Internet, the Renewable Energy Internet, and the Mobility Internet atop the Internet of Things platform, stretching across the building stock and built environment. The new Third Industrial Revolution infrastructure will be accompanied by new business models that plug into the platforms and take advantage of the new potential aggregate efficiencies across their value chains and supply chains.
The partial shift in political power from nations to local regions will change the nature of governance. Although all politics is local, in the glocal era economic development will also be increasingly distributed between localities connected all over the world. “Regional empowerment” will be the battle cry of the coming glocal era.
Some market proponents acknowledge that the rotting infrastructure across the United States needs to be addressed, and they even support the build-out of parts of the smart digital Third Industrial Revolution infrastructure, but they are opposed to a Green New Deal, which they say would mean more Big Government encroachment in the day-to-day affairs of the American public and American businesses. They prefer that the federal, state, and local governments incentivize the private sector with generous tax credits and subsidies. With these incentives in hand, private developers will come forward and finance the shoring up of the existing Second Industrial Revolution infrastructure and the build-out of the Third.
The privatization of the nation’s infrastructure has been picking up speed for several decades but is now on the verge of exploding as America transitions from a Second to a Third Industrial Revolution. Many businesses are hoping to use the current debate over America’s disintegrating infrastructure to make the case for privatizing much of it in one fell swoop over the course of the next several decades.
The specter of the privatization of all the public infrastructure that every American relies on to survive and flourish seems misguided and politically unwise. Putting every citizen’s daily life in the hands of a disparate array of unaccountable commercial interests over whom the public has little or no control, and even less ability to access and sway regarding the services that maintain everyone’s daily existence, is little more than a capitulation of democratic governance and oversight. Yet that is already happening—unfortunately, not only in the United States but, to a lesser extent, in other countries as well.
More ominous still, consider the prospect of privatizing the entire smart digital infrastructure that makes up the Third Industrial Revolution. On the one hand, the opportunity to connect the human race in a global nervous system, enabling every person, if they so choose, to access every other as part of a diverse and globally connected figurative family—and at near-zero marginal cost—is appealing, especially to a younger generation who think of the planet as their extended home and playing field. On the other hand, what if the smart digital Third Industrial Revolution infrastructure were to be exclusively in the private hands of global companies with little or no accountability to the communities they serve, giving them free license to surveil the lives of every citizen and sell the data they collect to third parties for marketing and advertising, or to political parties and lobbyists to advance their agendas?
I love Google. It’s the magic box. Whenever I have a query to search, I ask Google. But what if Google were the only search engine and everyone in the world had to turn to it for their inquiries? Facebook is a tremendous service. It has brought together 2.32 billion human beings in a global embrace, creating the largest extended virtual cohort in history.29 But if Facebook were the only forum where we could “meet up” on a global scale, we would each be subject to its access criteria, 24/7 surveillance, and algorithm governance. The same with Amazon. The company’s global logistics network is impressive. But if Amazon were to become the only carrier through which we could send items to one another, we would all be subject to its dictates and the continued surveillance of our comings and goings in our daily lives. How likely is this grand new scenario? Look no further.
In October 2017, Prime Minister Justin Trudeau of Canada held a high-profile press conference in Toronto. Appearing alongside him were Eric Schmidt, then the executive chairman of Alphabet Inc., the parent company of Google; Kathleen Wynne, premier of the Province of Ontario; and John Tory, the mayor of Toronto. Together they announced a public-private partnership between Sidewalk Labs, an urban design and development company owned by Alphabet, and the city of Toronto to develop a mixed-use neighborhood on the Toronto waterfront.30
The plan is to build out Canada’s first smart, digitally connected urban neighborhood, replete with state-of-the-art sensors across a seamless Internet of Things neural system. Ubiquitous sensors will provide surveillance, collecting data on activity taking place in the homes, the shops, and the streets, with the goal of helping speed efficiencies and conveniences in commerce, social life, and governance. If the prototype neighborhood is successful, the next step might be to expand outward, eventually transforming the entire infrastructure of the metropolitan region of Toronto into a showcase smart city. The catch is that Google’s smart city experiment gives the internet giant its first foray into algorithmic governance over entire cities.
In 2007, humanity reached a milestone, with a majority of human beings living in urban areas, many in megacities and suburban extensions with populations of 10 million or more.31 This was the year we became “Homo urbanus.” Jump a decade to today. Billions of human beings use Google’s search engine, Google Maps and Waze for location identification and navigation, YouTube videos, and countless other Google data-driven services, primarily in dense metropolitan regions. For Google, the next frontier is the privatization of entire cities under the watchful eyes of the company’s sensor networks.
At the press conference announcing the new partnership between Sidewalk Labs and Toronto, Schmidt thanked Canada for allowing Google in, saying that his company’s long-held dream had come true: for “someone to give us a city and put us in charge.”32
Writing in the Globe and Mail a year later, Jim Balsillie, the former chairman and co-CEO of Research In Motion, a company that commercializes intellectual property in more than 150 countries, summed up the significance of this first trial run in creating a privatized smart city that so excited Schmidt. Balsillie pointed out that “‘smart cities’ are the new battlefront for big tech because they serve as the most promising hotbed for additional intangible assets that hold the next trillion dollars to add to their market capitalizations.” The real commercial value, according to Balsillie, is that “‘smart cities’ rely on IP and data to make the vast array of city sensors more functionally valuable, and when under the control of private interests, an enormous new profit pool.”33
In the year since the official announcement, it has become even clearer that Sidewalk Labs wants Toronto’s blessing, but it does not relish the city’s active involvement and oversight in the build-out and management of the smart neighborhood on the waterfront.
Meanwhile, the ongoing negotiations between Sidewalk Labs and Waterfront Toronto, the development body for the site, have been steeped in secrecy. As Balsillie points out, Waterfront Toronto is an “unelected, publicly funded corporation with no expertise in IP, data or even basic digital rights … in charge of navigating forces of urban privatization, algorithmic control and rule by corporate contract.”34 By the closing days of 2018, the outlook for Sidewalk Labs’ smart city project seemed bleak, at least in its present articulation. The great fanfare that surrounded the initial announcement a year earlier had faded as doubts began to pile up among government officials and the general public.
What had begun as a public relations coup for Prime Minister Trudeau, Canada, and Toronto had devolved into a public nightmare, exposing Waterfront Toronto to ridicule. The vision of a Google-inspired smart futuristic city had become lost amid the growing fear of “Big Brother”—Alphabet—taking over a small segment of Toronto’s waterfront and transforming it with smart technology into a 24/7 surveillance cloud for the purpose of collecting data on the daily activity of its citizens, which Sidewalk Labs could exploit by selling it to third parties for commercial use.
In July 2018, Will Fleissig, the chief executive of Waterfront Toronto and an early supporter of Sidewalk Labs, resigned abruptly. Shortly thereafter, Julie Di Lorenzo, a prominent local real estate developer, departed the board of directors of Waterfront Toronto, saying she was uncomfortable with Alphabet as a partner. She questioned what might happen if future residents of the smart development didn’t agree to sharing their data, asking, “Would you segregate them and tell them ‘you can’t live here’?”35
Bianca Wylie, a technology policy advisor and cofounder of Tech Reset Canada, expressed the sentiment of many fellow Torontonians when she said that “we need to have these issues decided by organizations that are accountable to the people, not by private vendors.” Wylie made clear that she was not opposed to a smart infrastructure incorporating “plausible surveillance” of use to residents, businesses, and the community, but, she added, “we need to state clearly and unambiguously that this infrastructure is public.”36 In October, Ann Cavoukian, the former information and privacy commissioner of Ontario, resigned from the venture. What made her resignation particularly meaningful is that she was commissioned by Sidewalk Labs to help establish a “privacy by design” protocol for the development, only to find out later that third parties might enjoy access to “identifiable data.” In her resignation letter, Cavoukian said, “I imagined us creating a smart city of privacy as opposed to a smart city of surveillance.”37
The problem does not lie with Sidewalk Labs’ expertise. The company boasts some of the best talent available for establishing digitally connected, efficient, and environmentally sustainable smart cities. All to the good. Rather, it is the business model that is at fault, as is the case with any public-private partnership in which the commercial interest of the developer is primarily in securing lucrative revenue streams and profit over time; more often than not, this compromises the notion that infrastructure should be treated as a public good and a service everyone relies on and therefore best belongs in the hands of local governments that represent the will of all the citizenry. (In chapter 6, we will describe a public-private business model—energy service companies—that enables private businesses to finance, build out, and manage infrastructure for governments and secure appropriate revenue streams, while local governments maintain control over the nature of the deployment and management, with the citizenry benefiting from the public services rendered.)
Shortly after the Trudeau/Sidewalk Labs press conference, I was in Ottawa meeting with federal ministers on the prospect of transforming the federal government building stock into a smart digital, zero-carbon Internet of Things built environment. In one of the meetings, a deputy minister asked my opinion of the Toronto announcement. I said that I was not surprised: In all of the seven regions our global team has worked with to scale smart Third Industrial Revolution infrastructure, the public voice of the people has been clear. While the citizenry would welcome the help of businesses in laying out smart neighborhoods, and even their involvement in helping to scale and manage the platforms, the oversight and decision-making power had to remain with the governing authorities and the public. And even then, there was a consensus that the Third Industrial Revolution digital infrastructure needed to be governed and accessed as public open-source commons. Further, that oversight and regulation, in every instance, would need to ensure that every citizen enjoys the unequivocal right to participate in or opt out from any of the smart services at any time.
The way to ensure public engagement at every step along the way to transitioning into a green smart city or region is to embed “deep public participation” and involvement at every stage of development, from conception to ongoing deployment. This is the takeaway issue in the Google-Toronto smart city debacle.
Our team’s experience in the European Union might be helpful here. We have three current green test regions in Europe that have developed comprehensive Third Industrial Revolution roadmaps and transformed their jurisdictions into twenty-year construction sites where they are deploying infrastructure projects. Our prior work in four other regions convinced us that the traditional model that we were using to engage these governments was inadequate to the task. We came to the realization that the decision-making process and governance needed to be compatible with the distributed, open, and laterally scaled infrastructure being deployed.
When Hauts-de-France (formerly Nord-Pas-de-Calais), the first of these lighthouse regions, asked our consulting consortium, TIR Consulting Group LLC, to develop a green zero-emission Third Industrial Revolution deployment plan, we initially declined. Hauts-de-France is the industrial rust belt of France and a former coal-mining region, holding more than 9 percent of the mainland’s population. I suggested to the president of the region that the government abandon its traditional role of “decider-in-chief” and instead become a “facilitator” of a more laterally distributed and shared governance made up of hundreds of individuals in primary committees and several thousand individuals in secondary informal networks from the public sector, the business sector, civil society, and academia working together in a “peer assembly,” reflecting the more distributed, laterally scaled infrastructure they were being asked to envision and deploy.
We wanted to be unequivocal that we were not simply talking about soliciting ideas, suggestions, and approvals from focus groups and stakeholder groups. Rather, we were talking about ongoing peer assemblies crossing all the generational cohorts that would continue the work on the construction site over twenty years, irrespective of which political party might be governing at any moment, in order to maintain both continuity and solidarity to ensure the long-term success of the infrastructure transition. Hauts-de-France agreed to this radically new governing arrangement, and we began the collaboration.
The region, which subsequently received the coveted European Entrepreneurial Region Award from the EU Committee of the Regions, representing all 350 regions across the twenty-eight member states, is in its sixth year of TIR deployment and is currently involved in over 1,000 projects employing several thousands of its citizens.38 It has become the poster child of the new peer-assembly approach to economic and political empowerment.
Similar peer assemblies were established in our other two test regions: the twenty-three cities in the Metropolitan Region of Rotterdam and the Hague, which is the petrochemical complex of Europe, and Luxembourg, a key financial and political capital of the European Union.
These peer-assembly governing models allow regions to move more quickly to deploy infrastructure rollouts while maintaining a cohesive approach to developing their construction sites over time, with little citizen backlash. Although other localities and regions around the world have experimented with small-scale peer assemblies that are narrowly circumscribed by very specific projects with limited time spans, the three lighthouse test regions mentioned above are, to our knowledge, the only large-scale peer assemblies currently in deployment.
When Angela Merkel became chancellor of Germany, she invited me to Berlin in the opening weeks of her administration to address the question of how to incentivize new business opportunities and create new employment in Germany. I described the distributed, open, and laterally scaled architecture of the Third Industrial Revolution infrastructure and how its design features are best taken up and deployed by localities and regions who then customize it to their own unique circumstances, after which they digitally connect up with other regions. The chancellor commented that she liked this distributed, laterally scaled Third Industrial Revolution infrastructure for Germany. I asked the chancellor why, and she said, “Jeremy, you need to know a little more about the history of Germany. Our country is a federation of states, and these states exercise a great deal of independence in managing their economic affairs and governance. The Third Industrial Revolution governance model fits Germany, assuring that the economic decision-making process and government oversight is lodged at the local and regional level.”
Similarly, municipalities, counties, and states across the United States are also uniquely suited to adopt the peer-assembly model in the scale-up of customized Third Industrial Revolution infrastructures. Like Germany, the United States is conceived as a federal republic in which political power and economic development traditionally rest largely in the hands of governing jurisdictions at the state, municipal, and county levels. The federal government, for its part, is expected to represent and uphold shared national narratives, provide a sense of national identity, ensure the nation’s security, and create the laws, statutes, regulations, codes, and incentives that allow localities and states to be in alignment across the country.
While the federal government will be important in framing the Green New Deal transformation, much of the heavy lifting in the deployment of the green infrastructure revolution will fall to the states, municipalities, and counties, as it should in an emerging laterally distributed glocal era.