The here was an audible sigh of relief in many quarters when Joe Biden defeated Donald Trump in the 2020 US presidential election. The Democrat’s decisive defeat of Trump – and of the America First policy that the incumbent championed – is no small matter. It will fundamentally shift the geopolitical and diplomatic global calculus for the US’s allies, competitors and enemies on multiple levels and in many different dimensions.

Ambitious green goals will require big investment. The incoming administration wants a $2tn spending programme to rebuild infrastructure and speed the rate of green transition. That green investment would be 20 times larger than that under the Obama administration. And the aim goes beyond reaching net zero. The administration also wants to jumpstart the economy renewably and to innovate, lead and prosper in this, the next, industrial revolution.

The goal is to use this massive green investment to drive broader-based growth, better-paid jobs – real multipliers across the economy – without sparking inflation. There are reasons to be optimistic about this. Past massive national endeavours of this sort – seen in wartime, and immediately post-war under President Eisenhower – drove decades of growth in living standards. They enlarged the workforce, reduced income inequality and extended the reach of US prosperity. Retooling across all sectors for the green net-zero future may exhibit similar positive dynamics, increasing the potential growth rate rather than overheating the economy.

Can the US afford it? Certainly. With interest rates low for a long time, the cost of such investment is manageable. That is especially the case given reasonable expectations of accelerated growth. Indeed, the green revolution is a possible answer to the economic historian Robert Gordon’s death of productivity puzzle and economist Larry Summers’ secular stagnation story. We know, as Janet Yellen, former Fed governor and now Biden’s Treasury secretary, and her economist husband, George Akerlof, have shown (in what they called the wage inequity theorem) that workers who are paid too little tend to work less hard. That makes productivity suffer. It is the reverse of what happens when they are paid properly, treated well and are committed to their task. This feels intuitively correct for, if you are consistently underpaid, you will still come to work but will not give it your all. It is what we used to say about factories in the Soviet Union.

Not all US politicians welcome a green revolution. Some Republican leaders would like to stall green industrial innovation, or at least downsize it and restrict its impact. But, even if green fiscal policy is constrained, incentives will be altered, regulations will redirect effort and markets and companies understand as much.