Excuse us but we need to talk about the Green New Deal. - The Gower Initiative for Modern Money Studies

Color image of the Earth, dubbed 'Pale Blue Dot', taken by Voyager 1 — Image: NASA

“We stand now where two roads diverge. But unlike the roads in Robert Frost’s familiar poem, they are not equally fair. The road we have long been traveling is deceptively easy, a smooth superhighway on which we progress with great speed, but at its end lies disaster. The other fork of the road — the one less traveled by — offers our last, our only chance to reach a destination that assures the preservation of the earth.”

Rachel Carson, Silent Spring

In 1962 Rachel Carson, an ecologist and social revolutionary, published ‘Silent Spring’ in which she identified hubris and financial self-interest as being at the core of the environmental tragedy that was beginning to play out. She called on humans to act as stewards of the living planet instead of behaving as if they were its masters rather than an equal part of it. She was vilified by the chemical industry and its allies inside and out of government. She was a lone but prophetic voice in the wilderness and despite her untimely death in 1964 her legacy was the modern environmental movement which began a decade later.

Well over half a century later in October last year, the United Nation’s Intergovernmental Panel on Climate Change released its comprehensive report on the state of the climate in which climate scientists warned that we only have 12 years left to halt the worst effects of climate change. It reflects almost 60 years of inertia, indifference and half-hearted action by politicians, big business and even consumers themselves. The clock is ticking on the capacity of our natural world to support life and climate change has already meant chaos for many countries and communities around the world.

While the rich profit out of unbridled consumption which is decimating finite resources, polluting and destroying wildlife habitat and wreaking havoc through the exploitation of human labour the global political response to the climate emergency has been mediocre. Alexandria Ocasio-Cortez in challenging it has called it a problem of ‘market failure’. Even as it increasingly becomes clear that climate change is a reality the ‘free-market’ response has been to give it a fair chance and let the market do its ‘magic’ It has failed big-time to do so and so the consumption circus continues to cause untold damage to our environment.

Readers of the MMT Lens may have noticed that the environment has been the subject of a number of blogs and in just over six months since GIMMS’ launch it has been increasingly in the public eye. We make no excuse for raising it again. Greta Thunberg, the young Swedish environmental activist’s stand has inspired a huge response across the world as young people rally to the cause of addressing climate change to protect their future and the future of the planet. Activist organisations in the US – the Sunrise Movement – and politicians such as Alexandria Ocasio-Cortez have struck a chord in the public consciousness with their campaign for a Green New Deal. And now we are seeing the seeds of similar movements here in the UK. Extinction Rebellion who have been working together since 2016 as part of a group called Rising UP has recently initiated direct responses to the global emergency we are facing and now have a country-wide network of members. Their activism proposes direct action and civil disobedience. Only this week some of its members made a very cheeky and brave demonstration in the House of Commons during a Brexit Debate. The School Strike Movement has seen thousands of young people take to the streets to demonstrate and earlier this month a new Labour grass roots group launched its campaign for a Green New Deal. According to the Labour MP Rebecca Long-Bailey, it would aim to use the ‘full power of the state’ to decarbonise the economy and expressly make the link between environmental and social justice. However, it has to be said that the devil will be in the detail and that is as yet unclear and without a complementary Job Guarantee programme will not deliver on its social and economic agenda.

We are living through challenging times – if not at a crossroads where in the words of the political activist Antonio Gramsci ‘the old world is dying and the new world struggles to be born’. As with those orthodox economists who are currently working hard to discredit MMT, there will always be the ecological naysayers and those who want to discredit any such movements for radical change. They have become stultified in market orthodoxy from which they have done very well. Tony Blair has called the Green New Deal ‘the politics of protest’ and raised concerns that ‘market mechanisms’ are not seen as the way forward. In the US the GND package was blocked by the Senate from moving forward with Senator John Barrasso (Republican) remarking prior to the vote that ‘The Green New Deal is not the solution for America, it is a big green bomb that will blow a hole in our strong, healthy and growing economy.’ Senator Feinstein, a Democrat, lectured a group of young people who went to her office with their parents to ask her to support the Green New Deal saying “I’ve been doing this for 30 years. I know what I am doing.” The Sunrise movement was accused on Twitter of being ‘comprised of fringe lunatics that look to use kids to further their far-left policies’.

These are pathetic and hubristic responses to a fight for these young people’s survival and the health of the planet. But they are an indication that there is push-back from those that seek to keep the status quo in place and who fear the sort of radical change being proposed.

But change is coming. The Green New Deal is catching on and inspiring many people to think big. To think differently. However, inspiring as it is one of the perennial questions for any such programme is ‘how will you pay for it’ trotted out by politicians and the media alike despite the urgency of the earth-threatening challenge. In a recent article published on the New Economics Foundation’s website David Powell wrote passionately about how we can ensure that money flows away from the current destabilising brown economy and into the green economy. A good start. However, disappointingly but not unsurprisingly the solutions were still stuck in the same old ‘household budget’ groove. As an example, it proposed a ‘frequent flyer levy’ a hypothecated tax which would be specifically earmarked for ‘visible, socially progressive investments’, and ‘borrowing to invest’. Once again household budget economics trumps human and planetary survival.

On Carl Sagan’s Blue Dot we humans need, as a matter of urgency, to turn these false and misleading arguments on their head and challenge their primacy. As the economist and research director of the Global Institute for Sustainable Prosperity Matthew Forstater notes we need to:

‘evaluate budgetary policies by their ability to attain the goals they were designed to achieve and not on any particular relationship between government revenues, expenditure or the size of the national debt’.

This is fundamental.

We must leave behind the premise that governments must tax or borrow to spend. It’s worth repeating – they don’t. Where the government is the monopoly issuer of the currency and the exchange rate is not fixed to another commodity or currency, taxes drive the currency and are not a source of government income to spend. David Powell in his NEF article points out quite rightly that we need to direct money to the right things and more importantly that provided we actually want to spend on a Green New Deal we could do so tomorrow. But it is a question of political will not tax saved pounds that enables a sovereign currency issuing government like the UK’s to spend.

As Mathew Forstater also noted in a recent broadcast from the Global Institute for Sustainable Prosperity, tax apart from its role in driving the currency has a vital part to play in achieving the radical transformation we need to make towards ecological sustainability and as such the way we tax needs fundamental reform. Put simply we need to ‘tax behaviours we want to discourage and not those we want to encourage.’

He suggests that ecological tax reform and an understanding of functional finance have a critical role to play in contributing to creating a sustainable global economy.

‘The Green New Deal can begin by eliminating tax on income and employment that falls hardest on lower to middle class income groups and taxing more heavily emissions and finite resource depletion. [To achieve this] we need to make a distinction between money as accounting information and real resources, subject to the laws of physics. We should not confuse the unit of measurement with the thing it is measuring. We can run out of land (goods) but not acres (dollars).’ (or in the UK’s case pounds).

In conclusion, the progressive left with an admirable ecologically driven political agenda must make an understanding of how modern money functions central to its plans. It is the lens through which it will be able to view the policies needed to deliver a green new deal.

The magic money tree in the Cayman Islands is a figment of the Left wing’s imagination in terms of paying for such a programme as is the mantra of ‘borrowing to invest’. The Overton Window is shifting, and the left wing can only exploit it to deliver the necessary transition to a sustainable planet and a broader social agenda through rejection of the orthodox narratives of taxing and borrowing to spend. Human survival depends on it.