MO*lezing Ann Pettifor Green New Deal

The case for the Green New Deal Green New Deal Group

The Green New Deal

Published on July 21, 2008

Inspired by Franklin D. Roosevelt’s New Deal programme launched in the wake of the Great Crash of 1929, the Green New Deal Group propose a modernised version is designed to tackle our current crash: the interlinked crises of climate change, recession and energy depletion.

The Green New Deal Group combine expertise from the City, to the oil industry and the labour and environmental movements.

A Green New World?

A Green New World? “ Together, we face two crises: climate change and the global economy. But these crises present us with a great opportunity - an opportunity to address both challenges simultaneously. Managing the global financial crisis requires massive global stimulus. A big part of that spending should be an investment- an investment in a green future. An investment that fights climate change, creates millions of green jobs and spurs green growth. We need a Green New Deal .” – Ban Ki-moon, UN Secretary General, December 2008 “ We hereby propose the Green New Deal to help create more jobs, while at the same time realizing an eco-friendly economic growth ” – Han Seung-soo, Prime Minister, South Korea, January 2009 “ I received orders from the Prime Minister to draft a Green New Deal plan. The orders were to create something that would create jobs by the millions and will fundamentally change Japanese society.” – Tetsuo Saito, Environment Minister, Japan, January 2009

What informed the development of the Green New Deal?

The need to address triple crunch –

financial crisis;

peak oil and

climate change.

The need to build an alliance between

industry,

labour and

the green movement –

to challenge the dominance of the finance sector over the real economy and the ecosystem

The rise in UK Corp. consumer & mortgage debt 1945-1971 “The Golden Age” Bretton Woods era 1971 Nixon dismantles BW 1971-2008 Deregulation/ Liberalisation/ Globalisation

US total domestic debt as % of GDP

UK Inflation Retail Price Index (RPI) Source: Office for National Statistics, Table RP04, Retail Price Index (RPI) all items, annual percent change 1945-1971 “The Golden Age” Bretton Woods era 1971 Nixon dismantles BW 1971-2008 Deregulation/ Liberalisation/ Globalisation

Source: World Resources Institute, http://cait.wri.org

The need to adequately finance a response to these crises

$7,000,000,000,000

$ 10,000 ½ inch thick

$ 1,000,000 (100 packets of $10k.)

$100,000,000 (100 million)

$1,000,000,000 ($1bn)

$1,000,000,000,000 ($1 trill)

Asked if it's tax money the Fed is spending, Bernanke said, " It's not tax money. The banks have accounts with the Fed, much the same way that you have an account in a commercial bank. So, to lend to a bank, we simply use the computer to mark up the size of the account that they have with the Fed.” Ben Bernanke: CBS Interview 15 th March, 2009.

Money is not a commodity. It is not like oil, or gold or Dutch Tulips.

“ The process by which banks create money is so simple that the mind is repelled. With something so important, a deeper mystery seems only decent”. ( JK Galbraith, Money , p. 29 )

Bank Money Not tangible

This is still the strangest aspect of money. That the vast majority of it does not exist, or at least has no tangible form. In other words modern money is an abstract concept.

Trust

Notes and coins – tangible

Cash/Money Stock (BoE) Only 2% of total money is cash

“ Human effort and human consumption are the ultimate matters from which alone economic transactions are capable of deriving any significance”. John Maynard Keynes. ( Treatise on Money, Vol. I, CW V, p. 120).

The classical theory holds that money in the economy corresponds to production. According to this theory, money does not create economic activity, it is a consequence of the level of production.

$7,000,000,000,000? A consequence of economic activity?

If money is not a commodity - like, oil, gold or Dutch tulips …. If the cost to the banks of creating money is very low, or nil, why should the price of money – the rate of interest – ever be high?

High, real rates of interest

Bank of England Base Rate 1945 – 2009 (not adjusted for inflation). 1945-1971 “The Golden Age” Bretton Woods era 1971 Nixon dismantles BW 1971-2008 Deregulation/ Liberalisation/ Globalisation 1945-1952 Adherence to Keynes

Source: Graham Turner GFC Economics. www.gfceconomics.com .

Letter from Warren Buffet, CEO, Berkshire Hathaway, 27 February, 2009 “ Though Berkshire’s credit is pristine – we are one of only seven AAA corporations in the country – our cost of borrowing is now far higher than competitors with shaky balance sheets but government backing.”

Source: Graham Turner GFC Economics www.gfceconomics.com

What is the Green New Deal?

It’s about

Policy autonomy for govts

It’s about

Re-regulation and restriction of the finance sector

Finance to return to role of dealing prudently with savings

Providing low-cost capital for productive and sustainable investment.

What is the Green New Deal? It’s about New checks, balances and directions for a banking system that has become unfit for purpose Everyone agrees that new rules are needed to prevent a repeat of the banks’ catastrophic errors, but there’s also a new opportunity for change. With the taxpayer now owning several banks we can make sure that they invest and lend at low, affordable interest rates to support the economy’s environmental transformation.

What is the Green New Deal? Its about Regulation and control over credit creation & low, low rates of interest – short and long, safe and risky Based on Keynes’ monetary policies (‘liquidity preference’) for maintaining low rates of interest rates. This implies low mobility of capital and an end to the privatisation of interest rates.

What is the Green New Deal? It’s about Transforming our tax system to tackle the current recession and investment for the future … so that we tax more what we want less of (like pollution and reckless speculation) and less what we want more of (like green goods and services). Shutting tax havens and ensuring that corporate tax reporting accurately reflects profits made in a country , would raise billions more for public investment in both rich and poor countries.

What is the Green New Deal? It’s about greater Security for our pensions and savings Many people’s pensions have taken a battering, but now there’s a chance to create new, low risk steady return vehicles for saving . New bonds and pensions targeted at the green renewal of the nation’s infrastructure could help bring mutual long-term benefits to both savers and the nation as a whole. However, vital that rates on these bonds remain low.

What is the Green New Deal? It’s about Jobs, more jobs and secure jobs. And it’s about the skills and training to create and sustain them In a time of recession, with unemployment already rocketing in the US, and growing here, shifting to green energy will produce countless new jobs, and create many more pound-for-pound of investment, than propping up the current system.

What is the Green New Deal? It’s about Warm homes in winter protecting us from high and volatile energy prices and ending fuel poverty Too many people can’t afford to keep warm in winter. Whatever the international price of fuel, homeowners seem to have to pay ever higher prices. A Green New Deal will begin by improving insulation and energy efficiency in UK households and start to break our dependence on volatile, expensive and ultimately declining fossil fuels.

What is the Green New Deal? It’s about A secure and sustainable future – for humanity and the planet.

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