Socialization of Investment and Climate Crises: What Role for Public Development Banks?

This paper revisits Keynes's socialization of investment and asks what institutional form it might take in the face of the climate crisis. We argue that the socialization of investment is best understood as concerning not only the volume but also public control over its direction, grounded in the distinction between the creation of resources and their mere allocation. Public development banks (PDBs) emerge as main institutional embodiments: bodies that direct long-term investment toward ends that private calculation cannot be expected to deliver. We propose a criterion distinguishing the public direction of investment from the provision of long-term credit and from the de-risking of private finance, and apply it to three institutions: the KfW, the BNDES, and the China Development Bank. The cases qualify rather than demonstrate the hypothesis: the directing function is real, unevenly realized, and under pressure from the Wall Street Consensus. We conclude that the climate transition strengthens the rationale for socializing investment even as it exposes the directing function to the logic of de-risking, and that PDBs will discharge their role only to the extent that they are designed, capitalized, and mandated to direct investment rather than to underwrite returns that would otherwise flow to private capital.