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Ira Magaziner On ‘Creative Destruction’: From Buggy Whips To The Global Warming Imperative

By Brad Johnson on September 27, 2009 at 12:40 pm

"Ira Magaziner On ‘Creative Destruction’: From Buggy Whips To The Global Warming Imperative"

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Editor’s note: The Wonk Room is reporting from the Clinton Global Initiative conference this week. This is our sixth post.

On the final day of the Clinton Global Initiative, the Wonk Room caught up with Ira Magaziner, the senior advisor for policy development in the Clinton White House and now the chairman of the William J. Clinton Foundation’s Climate Initiative. We discussed the Clinton Climate Initiative‘s approach to the challenge of global warming, including its work to advance energy efficiency projects in the world’s cities from the Empire State Building to Lagos, Nigeria. Magaziner also directly addressed why critics argue that advocacy of clean energy is a socialistic economy killer, citing Adam Smith’s recognition of the need for governmental action to address market externalities. As we neared the conclusion of the interview, Magaziner tied all the threads of the conversation together into one impressive discourse on building a clean-energy economy.

Watch it:

CREATIVE DESTRUCTION — PAST VS. THE FUTURE

MAGAZINER: Schumpeter — yet another capitalist economist — talked about creative destruction. Periodically, as new technologies develop and new needs arise, business systems and economic systems need to be remade — creatively destroyed and remade. We don’t need a buggy whip industry any more. We’ve got automobiles. And the buggy whip guys may not like it, but they ought to switch to making automobiles if they’re going to have a future.

What always happens in those periods of transformation is that some people oppose and some people see the future. We went from mainframe computers to minicomputers to PCs. And as we went through those transformations, different companies succeeded. DEC and Wang and companies that were the minicomputer companies didn’t understand the potential of the PC. So you had the Dells and others who developed them. In some cases, companies do make the transformation and they go with the future instead of the past.

We have a similar situation with clean energy and energy efficiency. You have some companies now, like GE, and there’s a bunch of others, who are saying, “I want to go with the future, and I’m going to invest in wind, I’m going to invest in solar. I’m going to invest in these things that I know are going to eventually be the future.” And you’ve got others who say, “I’m going to defend the past and stick with what I’ve got,” and fight Congress to prevent the future from coming.

BRINGING THE FUTURE FASTER

MAGAZINER: I think, in this case, in the case of clean energy, we have a public interest in bringing the future faster, because of global warming. We know that if we don’t bring the future faster with clean energy and with energy efficiency, that it’s going to have a tremendous economic and social cost. Therefore, we have to accelerate the process of that future coming.

That’s why government has to especially play a role in this revolution. I mean, it played a stimulative role in the Internet revolution, but in this revolution it has to play a much more active role. Because the negative consequences of not doing so are going to cause governments and people and economies tremendous unhappiness.

There have been so many reports written. The thousands of scientists in the International Panel on Climate Change established that the world is warming, they’ve established what the impacts can be, and there’s only now a few dissident scientists left. The overwhelming 99.9 percent opinion is very clear on this.

Economists like Nicholas Stern who have done serious work on this have said we can lose 5 to 10 percent of GDP in the next ten years, fifteen years if we don’t act, because of all the major dislocations. And if we spend one percent of our GDP to bring the transformation faster, we’ll save ten percent or 15 percent of our GDP. So there are enough studies out there.

THE CLINTON CLIMATE INITIATIVE

MAGAZINER: What we’re trying to do with the Clinton Climate Initiative is to make it real.

It’s very important that global leaders, the political leaders agree to set targets to reduce greenhouse gas emissions. It’s very important they pass legislation to put a price on carbon — because it does have a price for society — to help speed the transformation.

What we’ve said, what we’re doing, is say, even after that’s done, what you’re going to still need projects that demonstrate in large scale how to do this, what the business models are what the government models should be, so that government money gets spent well, carbon credit money gets spent well, and ultimately businesses can move into this in an accelerated way to make this happen. And so that’s why we’ve focused on these projects.

We’ve worked on energy efficiency, clean energy, and the third area we’re working on is forests, preserving forests around the world. What we as a human race have been doing is at the same time we’re putting all this CO2 into the air — which is poisoning the atmosphere — we’re cutting down the forests — which are nature’s way of taking carbon dioxide out of the air. We’re making the problem worse on both ends.

So we have major projects that we’re doing in Indonesia, and Cambodia, Guyana — Africa and the tropical countries — to help preserve forests and create economic value in preserving forests.

So that’s what we’re up to and we’re trying to make our contribution. That’s going to require a lot of different groups working in a lot of different ways to make a contribution.

THE MULTIPLIER EFFECT

MAGAZINER: What we do is: we do these projects and can measure the direct impact, and say there’s this many millions of tons less of CO2 going into the air because of the projects we have done. And then we’re creating these models which we can spread to others, so that we can have a multiplier effect that multiplies the impact of what the direct projects we’re doing can accomplish.

That’s why when we show that we can do an integrated waste management project in Delhi — in a very complicated, large city that’s never had integrated waste management — what we did in Delhi is the first integrated waste management project in the whole of southern Asia. We showed that it can work, it’s actually returning a profit to the commercial developers, it’s saving the city money, and it’s working in terms of making Delhi a cleaner place.

And now there are ten other cities that are ready to do it. As soon as we finish the project in Lagos — Lagos, Nigeria is a place with 21 million people in that city, growing a million and a half people per year — and they had no waste system. We’re putting the first integrated waste system there. We’re now doing it in Dar Es Salaam and Tanzania. We have requests from a number of other African cities. So our goal is to create these models and then spread them, because that’s really where we’re going to get at the problem.

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