By Arab News
By Yossi Mekelberg*
A sign of a good policy is that it is remembered with nostalgia many years after its introduction, and the leader who introduced it is revered long after his or her demise. An even better accolade comes when successive generations of politicians aspire to emulate it, whether with more or less success. The name of Franklin D. Roosevelt, US president during the Great Depression of the 1930s, is associated with a brilliant stroke of ingenuity — his New Deal — that saved an economy and society on the brink of meltdown. Predictably, whenever economies are facing an existential crisis, such as that resulting from the spread of the coronavirus disease (COVID-19), Roosevelt’s New Deal is dusted off, as if one has found the magic spell to stop and reverse the rot.
Most recently, it was British Prime Minister Boris Johnson who, in the face of the economic and social trail of devastation left by COVID-19, claimed that his proposed reforms to the British economy merited comparisons with Roosevelt’s New Deal. Time will tell if there are enough concrete ideas and policies, beyond the customary Johnson hyperbole, to merit giving a rather random collection of initiatives the title “New Deal.” Nevertheless, if there has ever been a time since that of the original New Deal when the global economy has needed a repeat, it is right now, and the emphasis should be on a worldwide effort: One that prioritizes a radical reduction of the damaging and immoral inequalities in the global economy, and one that is environmentally sustainable.
Only a new deal on a global scale could also serve individual countries and people. Roosevelt’s vision was not only about macroeconomics, but about making American society more equal and more just. In his words: “I see one third of a nation ill-housed, ill-clad, ill-nourished. The test of our progress is not whether we add more to the abundance of those who have much; it is whether we provide enough for those who have too little.”
The New Deal was not only about economic recovery per se. It had strong ideological underpinnings mixed with realism and pragmatism, which was the secret of its tremendous success. Initially, it was associated with big government spending programs under the Public Works Administration, investing in traditional infrastructure projects such as roads, bridges, schools, hospitals and water supply systems. But its social aspect was also demonstrated by the construction of museums, parks, community centers, gyms and auditoriums. It had an air of social inclusion at a time when the US was far from being inclusive of all its citizens.
One of the myths of the New Deal was that it was a textbook example of Keynesian economics. This myth was enhanced by a detailed letter that the renowned British economist John Maynard Keynes sent to Roosevelt in 1933, in which he advised the US president that a revival of the economy depended on either individuals spending or the business world being given increased confidence so that it would reward its employees more generously. However, in times of deep economic depression, neither is possible, hence it is left to the government to increase its expenditure in order to create the initial impulse. There is no evidence that Roosevelt ever read this letter. However, the events of recent months have illustrated that what Keynes observed regarding government intervention rings true when a crisis reaches a certain level, where Adam Smith’s “invisible hand” of market forces cannot help. Consequently, we are now seeing governments with strong free market inclinations adopting fiscal policies that have previously only been associated with socialist parties.
The collapse of many well-established businesses that, until now, had seemed invincible, while the future of others hangs by a thread — or, more accurately, depends on governments bailing them out and paying their employees’ salaries — has exposed the vulnerability of the current capitalist system and its lack of preparedness for a major catastrophe. However, this should not exclude businesses from a modern-style New Deal. On the contrary, the other side of the 1930s New Deal equation was partnership with and encouragement of the private sector, through the Reconstruction Finance Corporation, in financing the revival of the economy with the help of private capital, albeit with strict public regulation.
Johnson’s alleged “New Deal” is, for now, merely aspirational. The opposition Labour leader Keir Starmer dismissively described it by saying: “There’s not much that’s new and it’s not much of a deal.” Considering that the UK’s gross domestic product (GDP) fell by 20 percent in April, it is definitely not aspirational enough, it does not reform the planning system to make it more conducive to a rapid restart of economic activity and, equally important, it is not friendly enough to the development of a cleaner and greener economy as befitting a 21st-century New Deal.
Surely, when figures indicate that, for instance, Latin America is expecting its per capita GDP to drop by 9.9 percent this year, taking the region back to the levels of a decade ago, the EU’s GDP is expected to contract by 8.3 percent and the US is forecasting a drop of 5.6 percent, the response has to be a global one. No country has the capacity to single-handedly dig itself out of the economic hole created by the current pandemic, and therefore there is an urgent and existential need to mobilize the international community to reframe the socioeconomic system, not only by introducing a deal that is new, but one that lifts people above the poverty line while also protecting the environment.
When COVID-19 hit us all out of the blue, the cause of protecting the environment had been making steady, if insufficient, progress in terms of increasing awareness and bringing it close to the center of international attention. For obvious reasons, the pandemic diverted all attention toward containing it and its impact on the economy and society; although the environment did enjoy a temporary reprieve and we saw what a greener world could be like, with fewer planes in the sky and cars on the road, and consequently less pollution.
In a terrifying coincidence, we are witnessing the sudden impact of a combination of anthropogenic and nature-inflicted catastrophes. Both are on a global scale and, to save humanity, both require an urgent, coordinated and unselfish response. A new global and greener deal that addresses both the health and environmental pandemics could be the silver lining to some very dark clouds out there.
- Yossi Mekelberg is professor of international relations at Regent’s University London, where he is head of the International Relations and Social Sciences Program. He is also an associate fellow of the MENA Program at Chatham House. He is a regular contributor to the international written and electronic media. Twitter: @YMekelberg