Jeremy Grantham: US should focus on “green” infrastructure spending

If the US is serious about tackling the biggest challenges facing the country right now, it needs to embark on a new “green” Marshall Plan, says Jeremy Grantham.

Jeremy Grantham, who co-founded US asset manager GMO in 1977, believes the US government should take advantage of historically low interest rates to finance “a long, sustained and massive public works programme”, similar to the scheme that helped to rebuild Europe in the wake of World War II, “at negative real rates”.

While Covid-19 is today’s obvious concern, Grantham is more worried about long-term issues. “I believe income inequality is eating away at the economy from the inside with the lack of economic progress for workers reducing demand.”

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This problem goes back to the financial crisis, if not beyond. “The great waste in 2009 and 2010... was the use of precious resources to bail out banks,” says Grantham. The decision “was both unjust and economically inefficient: it was a violation of the spirit of capitalism”.

A new Marshall Plan should focus on “green” infrastructure spending: “It is absolutely imperative that the entire economy be greened if we want any hope to maintain a stable global civilisation in coming centuries.” Infrastructure in the US is already “unusually behind schedule on maintenance and subpar quality”, and many of the jobs created would be “industrial and labour-intensive”, helping to address growing inequality. The move would also help challenge China’s “growing dominance” in green tech.