GMO’s Jeremy Grantham Calls for Marshall Plan to Tackle Climate Change

Jeremy Grantham, the money manager who’s devoting his fortune to fight climate change, called on the next U.S. administration to start a major public works program akin to the Marshall Plan to revive economic growth amid the pandemic and threats caused by global warming.

Infrastructure spending, particularly on green industries, pays
a “respectable return” on investment, the co-founder of Grantham Mayo Van Otterloo said Friday in a note to clients. A public works program would also help address growing inequality, he said.

“If financed at negative real rates, it is the commercial bargain of all time,” he said. “Even if it crowds out some ordinary commercial activities on the margin, it is still a bargain, for little of routine gross domestic product shows a long-term societal return.”

GMO’s Jeremy Grantham Calls for Marshall Plan to Tackle Climate Change

A public works program would not only help revive the economy amid Covid-19, it would also be to the long-term geopolitical advantage of the U.S. because it would help challenge China’s dominance in green energy and industry, Grantham said. He cited the U.S. as having 400 electric buses compared with China’s 400,000.

Democratic nominee Joe Biden has a climate plan that promises to get the country to 100% clean electricity generation by 2035 and to invest $400 billion in clean energy innovation and technology over a decade. President Donald Trump has said the plan would hurt the economy and increase unemployment.

“Green energy and industry will be not just economically important in coming decades, but, like oil was before, incredibly geopolitically important,” Grantham said. “A major new infrastructure program would help the U.S., still the most innovative country in the world, catch up to China’s lead.”

Above all, he added, “it will insure against the staggering costs of a failure to control our climate, which at worst will be incalculable – the disintegration of a reasonably stable global society.”

Grantham co-founded Boston-based GMO in 1977.

The Marshall Plan was a U.S. program enacted in 1948 that provided financial aid to Western European nations to help them reconstruct their economies following World War II.

©2020 Bloomberg L.P.

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