If you believe in the continuing evolution of the economy toward innovation-driven sustainability and economic coexistence with our fragile earth systems, today is a rough day.
So what happened? We can cite a number of likely reasons behind Trump’s victory, but here are the ones that stood out to us.
- First, people are extremely angry about the ever-widening economic and social inequality and inequity they have been experiencing the last couple decades, and they can see that the main beneficiaries of this inequality are never held accountable (only one banker jailed after 2008, for example).
- Second, half of the nation –- or 47 percent of the electorate anyway –- has been convinced that the best way to fight inequality is to pass antigovernment policy. Ironically, these policies actually cause more inequality. Jane Mayer’s book Dark Money does an excellent job of explaining how this happened.
Unfortunately, this ideology has negative implications for the Next Economy. Next Economics at its core reflects the ongoing process of de-risking the global economy of its most serious long-term threats, those being the worst outcomes of climate change, resource scarcity, and widening inequality. Enacted to its fullest extent, libertarian ideology worsens all three. The risk of inequality itself has now driven an election result that will slow progress on managing all real systemic risks.
We’ve always said that U.S. political risk is one of the scariest things about managing for the Next Economy, because so much policy and business is driven by the owners of legacy economy energies, utilities, transportation, and so on. “The next president has questioned the science of climate change, vowed to withdraw from the Paris agreement on global warming and pledging to stimulate production of coal, the dirtiest fossil fuel,” is how Bloomberg put it. Meanwhile, many of the world’s leading institutions (the World Economic Forum at Davos, for one) still cite climate change and the erosion of social cohesion as the most dangerous and pressing economic risks confronting the world. The global economy can, must, and will rise to meet these challenges.
The transition to an economy based on businesses that are more efficient, less risky, and more profitable remains inevitable; and the realities of the global economy’s exposure to climate and social risks remain the same. Much of the world still understands this, and a Trump presidency will set back U.S. technological and political progress behind the rest of the world, at least temporarily. As Michael Liebreich of Bloomberg New Energy Finance tweeted, “So this is interesting. I will continue to inform decision-makers about the world's unstoppable transition to clean energy and transport.” Our economic evolution continues, but which nations and regions benefit first and most by taking advantage of the most incredible advances may now be more of an open question.
Critically as well, the states remain largely independent, and America's most economically powerful states -– led by New York and California –- will continue to support sustainable technology and renewable energies in pursuit of greater economic growth. Indeed, we did see some bright spots last night: Florida solar advocates celebrated a major win as voters rejected a utility-backed amendment to limit solar energy development. It is not likely that wind energy in America will suffer much either: “Seventy percent of U.S. turbines are in low-income rural areas,” according to Bloomberg, saying, “Wind Is the New Corn for Struggling Farmers.” In fact, the five states generating the largest fraction of their electricity from wind all voted for Trump. The economic, health, and other benefits of clean, renewable energies are winning despite political rhetoric.
We need to continue investing in the zero-risk economy, and we still stand to earn outsize returns as the Next Economy gains market share from the legacy economy. The investment decisions affecting climate change we make collectively and globally in the next few years will reverberate for centuries and affect billions of people. A Trump presidency does nothing to change that.
In the long run, economics drive the future and policy follows, not the other way around. Coal isn’t in terminal decline for any reason other than that it is no longer economically competitive; solar isn’t the fastest-growing energy source in the world because of the Paris Accords, but because it is incredibly economically competitive. No administration can change that. They can only make it more or less timely.
We still got this; it's just not going to be as easy. Especially today.
Garvin Jabusch is cofounder and chief investment officer of Green Alpha®Advisors, LLC. He is co-manager of the Shelton Green Alpha Fund (NEXTX), of the Green Alpha Next Economy Index, and of the Sierra Club Green Alpha Portfolio. He also authors the Sierra Club's economics blog, "Green Alpha's Next Economy."