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GMO’s Grantham: We Need a New Marshall Plan

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Jeremy Grantham, the co-founder and chief investment strategist of GMO, says a new Marshall Plan focused on green infrastructure is the key to reviving a sluggish global economy struggling with the short-term impact of a pandemic and long-term impact of climate change and rising inequality. 

Such a plan, modeled on the U.S. program that helped Western Europe recover from the devastation of World War II, would create good-paying jobs and reduce the impact of climate change, which threatens global growth, writes Grantham in his latest Viewpoints note.

It would also challenge “the growing dominance of China and energy and industrial technology of the next century.” An example of that dominance: China has 400,000 electric buses; the U.S. has 400, according to Grantham. 

“Green energy and industry will be not just economically important in the coming decades, but, like oil was before, incredibly geopolitically important,” writes Grantham, who is also the founder of the Foundation for the Protection of the Environment, which funds research at the Imperial College of London focused on climate change. 

In the U.S. a new Marshall Plan would also address “subpar” infrastructure that has been  suffering from delayed maintenance and growing income inequality that has been masked temporarily by the “short-term explosion” of new, disruptive FAANG-type companies, writes Grantham, referring to Facebook, Amazon, Apple, Netflix and Google.

“We need a long, sustained and massive public works program — a second coming of the Marshall Plan — to jolt the U.S. and the global economy into a few decades of accelerated growth,” writes Grantham.

The program will cost “tens of trillions of dollars, over several decades, on a global basis,” but there is no better time to finance such an effort, according to Grantham. Real interest rates, adjusted for inflation, are currently below zero. “It is the commercial bargain of all time.”

In addition, green infrastructure spending “pays a respectable return on investment as far as the eye can see,” Grantham says.

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