Jackson Hole Economics is an opinion forum for the political economy. The hundreds of contributors who share their views here do so with the courage not only to identify many of the pressing challenges of our time, but also to publicly offer sometimes controversial views and solutions. As 2021 winds down, we thought it was a good time for us to do the same with reflections on five important dynamics for 2022.
These are not forecasts, but rather opportunities to engage on what lies ahead, what could change our world for better or worse, and how we might take small steps in the right direction. Many may disagree with our thinking, which is the point of this free social good – to share different perspectives and encourage all of us to consider other points of view.
The Scales of Justice
We begin with the deeply controversial topic of the US Supreme Court. In June 2022, the Court is expected to deliver one of its most consequential rulings in a half century, when it decides ‘Dobbs versus Jackson’s Women’s Health Organization’, colloquially known as the ‘Mississippi abortion case’.
Forecasting Supreme Court decisions is a bit like forecasting inflation – usually a losing game, even for the experts. We won’t try. But this case matters on many levels because the consequences of the ruling go far beyond abortion and fetal rights. The decision could fundamentally destabilize the Supreme Court and the sole source of its authority, namely the belief that the court delivers impartial justice.
In the eyes of many, the Supreme Court is in the midst of putting its very credibility in play because the Robert’s Court (named in deference to Chief Justice John Roberts) is marked by a history of landmark decisions decided along partisan lines.
In 2008, by a 5-4 majority, the Roberts Court, for the first time in the history of the United States, explicitly declared that individual gun ownership rights exist outside of membership in a state militia. The majority opinion, written by the late Justice Scalia, went so far as to declare second amendment rights ‘fundamental’, placing them on the same level as freedom of speech, freedom of association and freedom of religion.
In 2010, in ‘Citizen’s United,’ the Robert’s Court ruled in another 5-4 vote that a corporation has the same free speech rights as individuals, including as regards private campaign finance. The majority decided that political donations by entities are an expression of free speech. In doing so, the majority put aside concerns about corruption and disregarded the potential plutocratic implications of its decision.
In 2013, the Robert’s Court, again by a 5-4 majority, ruled in ‘Shelby County versus Holder’, that section 4(b) of the Voting Rights Act of 1965, because it was more than 40 years old and therefore used antiquated measuring techniques, was unconstitutional as it imposed an undue burden on state and local governments in determining discriminatory voting circumstances. The effect of ‘Shelby’, most voting scholars agree, was to make US voting by ethnic minorities more difficult.
Undoubtedly there have been numerous wise rulings from the Supreme Court over the past 15 years. But the legacy of the Robert’s Court risks now being defined as one of partisanship. Under Roberts, the court has issued highly controversial decisions on the issues that get at the heart of whether our divided country will move more towards unity or fracture. If the Robert’s Court now extends its legacy from guns and gun regulation, money and politics, and voting rights by a narrow, partisan vote in ‘Dobbs’ – one that exceptionally in the court’s long history would restrict rights granted to citizens – it risks cementing the impression of ‘partial’ rather than impartial justice. This will weaken, and might even undermine, the very legitimacy of the one institution in the US government designed to ensure that the rule of law, not men, governs.
You may wonder, where might this lead? We do.
Let’s imagine for a moment that the 2024 Presidential Election is not only contested at the ballot box, but subsequently in the courts and state legislatures. If the outcome rests, as it did in 2000 in ‘Bush vs Gore,’ on a Supreme Court decision, do we have confidence that a repeat outcome of a contested election will be followed by a peaceful transfer of power? Or will this Court be seen to have moved the scales of justice based on partisanship, at a time when our country is far more divided than it was in 2000? And if so, what tinder will this match set to fire?
The Age of Electric
The recent COP-26 gathering in Glasgow was viewed by most observers as disappointing, full of empty promises and hollow statements.
It is worth considering that this is how things usually work. Secular change rarely comes from the mouths of politicians and statesmen, nor from the angry mobs protesting in the streets.
Rather, fundamental, durable, and promising change is usually delivered by the middle—the shifting fortunes of businesses and the changing tastes of consumers. Change arises from crass profit motive and selfish consumption decisions more often than from altruistic attitudes. Change also usually comes from within the system, admittedly sometimes hastened by helpful policy nudges.
Such is the case with electricity. When the history of 21st century climate change is written, we suspect a chapter will be devoted to 2022 as the tipping point year.
Consider the following metric. In 2021, industry estimates put global electronic vehicle (EV) sales at 5.8 million. At their current rate of growth, that means that global EV sales next year will surpass combustion engine vehicle sales of General Motors, at circa 7 million. EV sales are on pace to top total non-EV vehicle sales of the world’s largest car manufacturer, Toyota, within the next 24 months.
Why are EV sales surging?
For one, in many countries going electric is now a good economic decision, given substantial tax credits to buyers. Policy nudging, not mandating, works when it comes to EV.
Innovation is also vital. Today, car batteries enable single-charge trips of more than 350 miles on some models. And these are no longer souped-up golf carts. In 0 to 60 driving comparisons, even pedestrian EV’s leave their internal combustion counterparts in the dust.
EV is also becoming macho. A range of US pickup truck makers are rolling out 2022 EV models, which offer more power and more acceleration than today’s gas guzzlers. We wouldn’t bet against them, given lots of consumers love power and speed.
Of course, EV’s alone will not save the planet from cooking. Mostly, that’s because the source for their electricity remains carbon. But across the world, government subsidies have changed the profit equation for wind and solar. From a residential perspective, solar panels are likely to follow EV’s, dotting our homes in the coming years. Finally, infrastructure spending will have big chunks of money devoted to improved local energy networks, auto re-charging and transmission.
In the years ahead, all the major sectors in the advanced economies that contribute to greenhouse gasses must accelerate their energy shifts. In the US, the top five are electricity generation and heat production (largely coal) at 28% of total national emissions, transportation (cars, buses, trains, planes, etc.) also at about 28%, the industrial sector (manufacturing) at 22%, households and businesses (cooking, heating, air conditioning, waste processing) at 11%, and agriculture at 9%.
Shifting the energy infrastructure of 8 billion people is humanity’s greatest challenge. Let’s hope that 2022 is the tipping year.
Stacy Takes on the ‘dinos’
Most political observers are familiar with the acronym ‘Rinos,’ which stands for Republicans in Name Only. Some may recognize ‘Dinos’—Democrats in Name Only. For a party in the grip of Trump, Liz Cheny is a Rino. For many Democrats, Senators Manchin and Sinema are ‘Dinos’.
Yet few readers will likely have encountered ‘dinos’, written with a lower-case ‘d’. Lower-case ‘dinos’ are ‘democrats in name only’. We may not be as familiar with that usage, but we know it when we see it. Dictators who hold elections in countries such as Russia, Myanmar or Venezuela are ‘dinos’.
Counter-intuitively, some of the most prevalent and dangerous ‘dinos’ reside in the United States – those legislators and governors that gerrymander districts along racial lines or restrict voting rights. Sadly, many of the Republicans in the US Senate, as well as a number of their Democratic colleagues, could be considered ‘dinos’, given their opposition to a vote on the John Lewis Voting Rights Act or any of its facsimiles that would re-enshrine voting rights in federal law. And those Justices on the Supreme Court who voted in the majority on ‘Citizens United’ and ‘Shelby’ are surely part ‘dino’ as well, given that their decisions have predictably eroded the voting power of some US citizens relative to others.
Little ‘d’ dinos are a threat to democracy and liberty. In other circumstances, this might be waived away as philosophical. Ahead of the 2022 mid-term elections and the 2024 Presidential elections, such threats at the local, state, federal and judicial level cannot be ignored.
Above all, one person today epitomizes the battle against ‘dinos’—Stacy Abrams. Next year, her campaign for Georgia governor will say a lot about the power balance between ‘dinos’ and democrats. Hers could prove to be the most consequential gubernatorial election since the founding of the republic.
A New Dawn in Europe
The end of 2021 brings down the curtain on Angela Merkel’s 16-year run as Chancellor of Germany. In many ways, her leadership has been exemplary. And yet, a new beginning is welcome.
Brexit shook Europe at its very foundations, with Trump a close second. Europe’s hopes for a tranquil and historic glidepath to political, economic, and social unity have been shattered. Europe’s fantasy that it could always count on the Unites States is gone.
To be sure, neither Brexit nor America First should have been total surprises. Britain’s ambivalence about the old world is legendary. The Suez Canal crisis of 1957 ought to have sent a clear message about US primacy. DeGaulle got it, but few other Europeans understood.
The coming year offers Europe a chance to start afresh, unencumbered by the leaders of the past and cognizant of its new realities.
The new realities include a growing sense that Europe must determine its own future and its own place among nations. For that, Europe needs new leadership. Whether Olaf Scholz and his motley coalition can provide it remains to be seen, but opportunity often arises from the least likely sources.
Europe’s new dawn has strong foundations. Europe has vast resources—material, financial, engineering, scientific and cultural—to forge its own way forward. Europe has almost 750 million citizens and a GDP greater than $15 trillion. It has history, a resource vastly underrated. Its knowledge of two millennia of civil war creates a peacetime continental bond that few in London or Washington appreciate for its durability and strength. Indeed, as the US splinters into ever deeper partisan divides around ‘culture wars’, Europe represents an attractive alternative source of ‘soft power’ in literature, the arts, and diplomacy.
Europe has much to offer and that offering looks more attractive as the US becomes further politically dysfunctional and removed from leadership in global affairs.
As Merkel gracefully exits, many question whether her experience can be replaced. We believe that is the wrong way to look at it. What Europe needs most now is the flowering of its age. It needs to move forward, and 2022 holds the hope to be the year it does.
Unleash our Better Benjamin Franklins
At the signing of the Declaration of Independence, Benjamin Franklin famously said, ‘We must all hang together, or, most assuredly, we shall all hang separately.’
Franklin was speaking, of course, about political revolution and the forces opposed to it that would surely hang any revolutionaries caught alive.
But his words resonate across the ages because they speak of the need for individuals to rely on one another. While Americans grow up on a steady diet of myths dedicated to the exploits of individuals, the truth about success in most endeavors is more evocative of Ben Franklin. Whether fighting distant wars or climate change, building buildings or businesses, caring for family or for the community, in almost all facets of life the libertarian ideal of each individual for herself is a fantasy.
We are interdependent much more than we are independent. To be human is to make connections, not to push them away. But with connections come responsibilities. Kindness, generosity and trust are virtues and responsibilities that make group living possible and desirable. Few can survive without them.
Economists, ever ready to spoil a good discussion with tortured English, prefer the term ‘externality’. They recognize that humans typically don’t ‘internalize’ their ‘externalities’. That is, individuals don’t take full account of the impacts their actions have on others.
At the macro level, we experience this in pollution and overfishing. At the micro level through not wearing masks during a pandemic. And in both, our individual health depends on what we and our neighbors do.
Yet an awakening seems to be taking place. Climate change is increasingly accepted and behaviors are changing for the better. All tragedy of the commons requires we come together across the division. The EV revolution is part of that change. In other areas, we can do better. Mask wearing and vaccinations protect us all, yet too often free will is stronger than the desire to make sacrifices for the greater good.
The pandemic has taken an enormous toll. Humanity has lost more than five million around the world, and in the US, over 800,000 of our neighbors. We have seen too many lives disrupted in tragic ways.
Above all, we hope that 2022 will be the year when more of us, in small ways, start our days with Benjamin Franklin in mind, thinking more of others and less of self.
