By Howard Richards*
On February 7, 2019, Representative Alexandria Ocasio-Cortez of New York introduced in the United States House of Representatives a Resolution: Recognizing the Duty of the Federal Government to Create a Green New Deal. It demanded benefits Americans in the twenty first century lack that North West Europeans enjoyed back in the 1960s, and Americans seemed to be on track toward getting during the Roosevelt years. It demanded high wages, paid vacations, increasing life expectancy and universal access to high quality health care. Her Green New Deal put special emphasis on cleaning up pollution and reversing global warming. It called for net-zero greenhouse gas emissions by 2050.
Recently two prominent European movements, T-DEM chaired by Thomas Piketty and DiEM25 chaired by Yanis Varoufakis, have made detailed proposals that are also called Green New Deals. One of the authors of DiEM25, Ulf Clerwall, described it as
‘…basically an investment boom … And yes, the European Deal will be debt-financed, but by a debt to ourselves and that will rapidly pay back with a high rate of return in financial, economic, social and environmental terms.’
The Green New Deal of the Piketty group — similar, but more tax-financed– describes itself as follows:
‘This Budget, if the European Assembly so desires, will be financed by four major European taxes, the tangible markers of this European solidarity. These will apply to the profits of major firms, the top incomes (over 200,000 Euros per annum), the highest wealth owners (over 1 million Euros) and the carbon emissions (with a minimum price of 30 Euros per tonne). If it is fixed at 4% of GDP, as we propose, this budget could finance research, training and the European universities, an ambitious investment programme to transform our model of economic growth, the financing of the reception and integration of migrants and the support of those involved in operating the transformation.’
‘Green New Deal’ has become a rallying cry around the world. Just this month, Neil Coleman, Co-Director of the Institute of Economic Justice of South Africa, unveiled a platform called Let’s Build a New Economy for the Many not Just the Few. Coleman writes: ‘A Green New Deal. The global climate crisis and the challenges in energy are also acute in South Africa. Just as progressive forces in the US and the UK are proposing the need for a Green New Deal, which addresses climate challenges and ensures a just transition to new forms of energy and technology for workers and communities, South Africa urgently needs to have a similar discussion about strategies to manage the transition….’
In the South African version Pillar I is: A macro-economic stimulus and investment package. Macro-economic stimulus is for the Institute of Economic Justice priority Number One, and the prerequisite of everything else. This is so even though its authors doubt out loud whether the South African government has enough borrowing capacity left to raise funds for a stimulus of the size needed. Economic stimulus and investment being Pillar I, in its South African version The Green New Deal comes in as part 4 of Pillar III.
As Ulf Clerwall, one of its authors, writes in so many words regarding DiEM25, and as advocates of the other Green New Deals have also made clear, Green New Deals are about, to use other common phrases, ‘jump-starting’ or ‘pump-priming.’ For Varoufakis, DiEM25 is ‘stabilising.’ What appears to have been the first Green New Deal Group, one in the UK in 2008, was also about public provision of low-cost capital for massive investment designed to create green jobs.
In sum, Green New Deals remain mainly within the same economic common-sense framework where the world’s governments remained when they tried to cope with the crisis of 2008. It is the framework of the economy we already have, where, as John Maynard Keynes once put it, investment is the causa causans of production. In Keynes’s words, ‘… given the psychology of the public, the level of output and employment as a whole depends on the amount of investment. I put it in this way, not because this is the only factor on which aggregate output depends, but because it is usual in a complex system to regard as the causa causans that factor which is most prone to sudden and wide fluctuation.’
The dominant common sense of the economy we already have runs like this: First there is capital formation. Then there is investment. Then purchase of inputs. As Marx put it, ‘purchase of labour-power’ is a subset of purchase of inputs. Then comes production. Then sale of products. Only out of the revenue generated by sales at the end of this chain does the worker receive a pay check (or the investor a profit) with which to satisfy her or his wants and needs.
Investor confidence is the sine qua non of this system. The solution to a crisis is to restore confidence. In the case of Green New Deals confidence is to be restored with public investments specifically targeted at conversion to green technologies. Their novel selling point is that there is a lot of work to be done to green the economy. Therefore, there is a lot of profit to be made greening it, and in the process a lot of employment to be created. So, this time around, the standard public response to insufficient private investment gains an adjective: Green.
There are some silver linings: Ocasio-Cortez calls for ‘community-defined projects and strategies.’ While T-DEM and DiEM25 suggest new ways to capture wealth and move it to where it is needed. Piketty in Capital in the Twenty-First Century calls for ‘…regaining control over the dynamics of capital accumulation…’ (p. 471). But, still, the thinking of people who propose Green New Deals sounds like the common sense of the left-leaning public. It is a common sense that blames the defeat of social democracy on political victories of the right, and on the lobbyists on mega-corporations. (See e.g. Robert Reich, Joseph Stiglitz).
My co-authors and I suggest, on the contrary, that social democracy (in the USA called ‘liberalism’) was never sustainable. We suggest that yesterday’s progressive change strategies could not possibly work. They were defeated by the causal powers of structural mechanisms working against them. They were and are powers inherent in modern society’s constitutive rules. Today’s Green New Deals may appear to be destined to be defeated for the same reasons inherent in the rules of the economic game that defeated yesterday’s social democracies. They were, notably: capital flight (what Sam Bowles and Herb Gintis call the ‘exit power of capital’), chronic weakness of effective demand, and the fiscal crisis of the state (a combination of too many obligations and too few resources). These mechanisms are, in turn inherent in the structures of private law and their projections in the structures of international trade. (For more details see http://unboundedorganization.org/the-swedish-model-as-programmed-for-failure/)
For some people it may be so obvious that whoever you are –liberal, conservative, or left-leaning—there is only one way to create employment. It is to crank up the old profit machine. For them, if I am going to say there is an alternative, I should say what it is. Since there is no space here to outline an alternative, let me say only that I subscribe to an unbounded, post-colonial and critical realist school of thought. We hold that the number of alternatives, far from being zero, is unlimited.
Indeed, some alternatives are suggested in today’s Green New Deals. I have been looking at them pessimistically as a re-match of social democracy vs. liberalism that social democracy is destined to lose. Now I would like to make a more optimistic historical comparison. We may be seeing a re-match of a confrontation that in Europe happened much earlier. It happened in the 17th and 18th centuries with prior antecedents and later consolidations. It expanded at various times as Europe conquered the rest of the world.
I refer to tendencies in the Green New Deals to contest and to attempt to reverse the establishment of what Joseph Schumpeter called the Steuerstaat (the tax state). The Steuerstaat is part and parcel of modernity’s construction of the rule of law and limited government. Since time immemorial, kings and emperors had seized gold and silver booty in war, minted it and kept it. Coins, Jesus says in the Bible, are to be rendered unto Caesar because they are Caesar’s. Sovereigns had many other ways of extracting surplus and seizing assets. Some are catalogued by Adam Smith in his historical account of how earlier sovereigns had financed themselves in The Wealth of Nations. The past ended and the present began in England in 1689 when William and Mary ascended the throne on terms dictated by Parliament, and in 1694 when the Bank of England was chartered as a private bank authorized to create money. In other places traditional financial privileges of rulers ended at various dates, usually gradually and incompletely.
A modern state is a state that has lost control over money. It lives on taxes granted by its parliaments. Nowadays it competes with 195 other states to attract investments by lowering taxes. As Jürgen Habermas showed in The Legitimation Crisis, the Steuerstaat of late capitalism inevitably loses legitimacy. Its obligations include steering the economy to profitability. They include serving the welfare of the people. Now they include obligations to save the biosphere. The expenses of doing its duties properly far exceed its resources.
Green New Deals include intelligent ideas for making it possible for governments to do their duties, including complying with social human rights like those Ocasio-Cortez invokes in her resolution. In this respect they propose to transform at least some of the causal powers of structural mechanisms inherent in modern society’s constitutive rules that made social democracy unrealizable.
Consider: The European New Deal declares the principle of sharing the returns of capital and wealth. It proposes a public digital payments platform, undermining private monopolies on important banking functions. It declares a right of ‘seigniorage’ on central bank profits. Even the name suggests recovering for democracies rights feudal lords lost at the beginning of modernity. It establishes an entity to be called the European Equity Depositary to receive several kinds of unearned and/or surplus income. Like the Piketty T-DEM proposals it calls for inheritance taxes and for sharing of income derived from intellectual property and other knowledge monopolies. Piketty and his colleagues, for their part, have elaborated proposals to replace tax rate competition among nations with tax collection cooperation. Also, for example doing studies of astronomical executive salaries, they have shown how to identify flows of income that can be transferred to fund meeting social objectives (via the public purse or via other routes) with no economic loss.
On the other side of the Atlantic, it is known that Stephanie Skelton and other advocates of restoring public control over money and banking have been talking with Ocasio-Cortez, Bernie Sanders, and other legislators identified with Green New Deals.
It is possible that we are nearing a point in history when Schumpeter’s forecast that the Steuerstaat would prove to be unworkable and collapse, and Habermas’s forecast that it would cease to appear as legitimate in the eyes of the public, are coming true. And it appears that among the advocates of Green New Deals –among at least some of them—there are scholars and activists designing the technical details of viable ways to achieve the common good post-crash.
Green New Deals can be thought of as bearing new wine in old bottles. The old bottles are demands for social justice. Now they include shock and dismay at threats to the survival of our fragile biosphere. They can easily become just another rationale for tax benefits for investors and for massive public investment financed by public debt even more massive than it already is. The new wine is the creative thinking that is seeking ways to achieve structural changes that will make it possible to succeed where social democracy failed.
*Prof. Howard Richards is a member of the TRANSCEND Network for Peace Development Environment. He was born in Pasadena, California but since 1966 has lived in Chile when not teaching in other places. Professor of Peace and Global Studies Emeritus, Earlham College, a school in Richmond Indiana affiliated with the Society of Friends (Quakers) known for its peace and social justice commitments. Stanford Law School, MA and PhD in Philosophy from UC Santa Barbara, Advanced Certificate in Education-Oxford, PhD in Educational Planning from University of Toronto. Books: Dilemmas of Social Democracies with Joanna Swanger, Gandhi and the Future of Economics with Joanna Swanger, The Nurturing of Time Future, Understanding the Global Economy (available as e-books), The Evaluation of Cultural Action (not an e book). Hacia otras Economias with Raul Gonzalez, free download available at www.repensar.cl. Solidaridad, Participacion, Transparencia: conversaciones sobre el socialismo en Rosario, Argentina. Available free on the blogspot lahoradelaetica.