Larry Elliott asks a a key question in the Guardian this morning:
Are we content with recovery requiring households to get deeper into debt?
As he puts it, the:
2015 election should not just be about living standards but how to create a lasting, high-productivity, knowledge-based economy
Now I should at this point make clear, as Larry does, that he is writing about the new Green New Deal report, and the he and I are both members of the Green New Deal team that wrote it. But that doesn't, for a moment, change the relevance of what he has to say and that can be summarised in the paradox he notes:
There will be those who say that [current growth] is all an illusion — they are both wrong and right. Wrong, because it is clear from the data that the pickup is for real. Right, because growth is only meaningful if real living standards are rising, which requires wages and salaries to be going up more rapidly than prices.
It's a point that's critical: growth is by itself a meaningless measure if it ha no relevance to most people, as seems likely. Karel Williams makes the same point in the Guardian today, as if to reinforce the message. This is why, according to Larry:
Ed Miliband intends to make the question Ronald Reagan asked Americans in 1980 (Are you better off than you were four years ago?) a pivotal part of his campaign.
That is an excellent question - to which most will unambiguously answer "no".
And that's why the Green New Deal is relevant because once the Reagan question has been asked the follow up is "what can be done about it?". And this is where the Green New Deal comes in because we have offered one of the few coherent alternative narratives to austerity. As Larry says:
The GND project began when a few of us — including the economist Ann Pettifor, the tax expert Richard Murphy and Caroline Lucas, now a Green MP — got together. The sense was that the financial crisis had been long in the making and would be the most profound shock to the global economy since the great depression of the 1930s. In some ways, the situation was even worse because the banking meltdown was the first manifestation of an economy-energy-environment triple crunch that was going to confront policymakers in the coming years. The free-market right had spent years preparing for the collapse of the Keynesian social democratic model in the mid-1970s and was ready with a slate of new policy ideas: cutting taxes, taming the trade unions, controlling the money supply and so on. The left in 2007 was bereft of big ideas.
The GND was an attempt to fill the vacuum. Its basic premise was simple: rein in the financial sector, invest in those part of the economy such as making homes more energy efficient that would provide jobs for construction workers and reduce CO2 emissions.
There was a brief flurry of interest, both domestically and internationally when the global economy cratered in the winter of 2008-09. Gordon Brown called for a global green new deal, as did the United Nations Environment Programme. But the interventionist mood soon passed, to be replaced by deficit reduction and austerity.
But the need for that alternative narrative has not gone away, as events have proved. And as events have also provided - austerity has not worked - despite Osborne's claims. All we have for it is a new housing bubble in London, 2.5 million people unemployed, many more underemployed and millions on zero hour contracts whilst those on benefits face destitution. And we're nearer global warming. We intended to, and did, tackle all those issues. Of course, as Larry notes:
The GND had its critics on both left and right. That was only to be expected because there were many interpretations — from the Marxists to the Austrian school — of what had gone wrong and what needed to be done to put it right. Marxists thought any attempt to repair a broken system was forlorn; social democrats were nervous about the cost; the right disliked meddling with the market and said the GND would end up burdening consumers with higher prices.
And he's fair:
In their various ways, these are all valid points. But the GND was never envisaged as a flawless blueprint. It was intended to stimulate debate about how to make the transition towards a low-carbon economy and as an alternative to austerity. To those involved, the question was not whether it embodied policy perfection (it doesn't) but how it stacked up against the alternatives.
Which brings us to what we're saying now:
The updated 2013 version of the GND has six themes: the need for a green infrastructure programme providing jobs with living wages in every constituency in the UK; tackling tax evasion and avoidance; a programme of green quantitative easing (QE) to ensure that money created by the Bank of England benefits the environment; controls to ensure that the banks bailed out by the taxpayer invest in green projects at low rates of interest; encouragement for pension funds and other institutions to invest in the GND; and buying out the private finance initiative (PFI) debt using green QE and diverting some of the huge repayments into investment in tackling climate change.
Is this relevant still? Larry says:
In one sense, the timing could hardly have been worse for the new GND report. The economy is growing again. Memories are short. But ask the following questions. Do you think a recovery that currently requires households to get deeper into debt is for real? If it isn't, how long before the age-old problems of the UK economy reassert themselves? Are we any closer to grappling with the triple crunch than we were five years ago? If the solution is not a GND then what is it?
Answers please. Discussion is open.
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I’d say a recovery was an even more ripe time for a GND – during the downturn there has been a sense in many areas of business that tackling climate change would need to wait until a non-state-driven upturn began; while families worried about the next month’s paycheck aren’t so worried about an ecological disaster years down the line.
The driving idea is less that the green deal is needed to rescue the economy, and more to ensure that both a) economic growth does not create further damage to the environment, indeed that it can do the reverse and b) that a short-term debt-jump-started upturn can be turned into something sustainable and lasting.
No-one wants another crisis in five years: environmental or economic.
I was flicking through the Telegraph on Saturday and there was an article about shipping. The cost of shipping is so low that it is cheaper to catch cod in Scotland, freeze them, ship them to China for filleting, re-freeze them, ship them back to the UK and sell them than it is to fillet the fish in the UK (or even, God forbid, the UK punter be required to fillet a cod themselves). And I did think the world has gone mad.
It all depends how you measure cost, of course, and if you measure it in terms of damage to the environment then the difference is enormous.
Indeed-we need to take more responsibility for our food supply.
Well, Mr. M., the Australian people have now spoken on ‘Green Economics’ – they’ve binned them. The first major economy where the political leadership has realised that the voters demand and need cheaper energy.
The cost of energy really has a direct impact on living standards, competitiveness and jobs. The Australians have now said, “No thanks to the Green tax scam, all such levies do is make energy more expensive and ship jobs to areas that don’t give a damn about carbon producing activities. We want those jobs back….”
Perhaps the result of the vote in Australia where the Red Mob were booted out for the Blue Mob ought to make Red Ed think about what is truly popular. I wonder if any advisors or those close to Red Mob MPs will point that out.
If you really think that’s the case then you’re wasting time here
Selling out the long term well being of the planet and the future of our children for a quick buck in the short term – lovely stuff. Let’s just burn our way into oblivion and be done with it, eh? Who needs a habitable planet when we can save a few pennies on our electricity bills?
No one else has a sensible coherent narrative, they’re all flapping around like wet fish…
Minsky had a sensible coherent narrative, and set of solutions, more than 40 years ago.
http://fraser.stlouisfed.org/docs/historical/federal%20reserve%20history/discountmech/fininst_minsky.pdf
Agreed
Great, because I see a good fit with Minsky’s proposals for use of the central bank discount window.
End QE, but instead use the BoE to assist banking sector liquidity problems through the discount window. Basically this would follow Bagehot’s dictum of getting through a crisis by lending freely to solvent firms with good collateral at a high rate of interest. With a liquidity crisis refinancing mechanism in place, there’s far less reason to be concerned about levels of cash reserves so these can be relaxed. We also gain a mechanism for guiding banks’ investment to the private sector by deciding what constitutes a suitable asset for the discount collateral. If the refinancing was available for collateral of green pension bonds and securitized loans to small businesses that would greatly influence bank investment.
Is that before or after they’ve been to China and back? Or was it St Petersberg, I forget.
The trouble with QE is still that the credit that’s issued carries interest. We need credits that don’t carry interest. That’s money of a different, more sustainable kind.
it will only be a coherent alternative narrative when the man in the street can understand it, and only then if he feels there’s something in it for him. Personally I agree with the sentiment but really for a narrative to be engaging it has to be simple and it has to draw the reader into the story.
I don’t think politics is the best way to achieve your objectives but do believe your objectives deserve delivering.
I will see if I can help you down the line.
Communications help appreciated
The answer of course is that no one knows what the answer is. The economy is a complex system and individual minds cannot process the information to know what needs to be done. What needs to be done will be the result of lots of decisions by lots of people in a bottom up way based on local knowledge. You can’t achieve that with easy solutions. I very much doubt that a simple mass plan to insulate lots of homes is going to cut the mustard. At best it is robbing peter to pay paul. It is like dropping a big bomb on a problem when what we need is millions of sniper rifles in the right hands. The macro in economics is an illusion which flatters our sense of self importance and our bias for aggregation.
I see no logic in that at all
Why doesn’t it cut the mustard?
If I said the answer was to start a nationwide Spacehopper building programme I think most people would recognise that that would not be a hugely effective solution. But I could argue that it would create jobs, make people happier, fitter etc. I could even pull together some numbers to justify it logically. In fact, I could get a class of seven year olds to agree it was a really great plan with no drawbacks. My point is that all such plans that we can come up with are not much better than the spacehopper idea. Because when faced with the complexity of the economy (which is just shorthand for the almost infinite options and desires all of us have and could potentially achieve collectively) we really are not much more clever at knowing what would be for the best than the seven year olds, and our solutions just represent slightly more sophisticated plans along the same lines.
Candidly, if that’s the level of honking you can offer I can’t be bothered to engage
We can start by ridding ourselves of the banking system which only creates money as debt. Positive Money are saying we’re paying the banks interest on this debt at the rate of £192m daily, here in this country. I can’t confirm their figures but I have no reason to disbelieve them. This has to stop as a priority.
Confusion in terms, banks create credit, and debt at the same time (notes and coins are only created by the BoE, part of the government), but there’s no magic – anyone can do it!
If I lend you £20 from my pocket, the £20 note passes between us, but I ‘make out of thin air’ the asset of the fact that you owe me 20 quid (a brand new asset, created from nowhere – as an asset it didn’t exist anywhere in the world before), while you, sadly, get lumped with the liability, also made out of thin air, of owing me 20 quid. The fact that we’re not in the habit of making these kind of notes on balance sheets but just hold them in our head makes no difference. In double entry bookkeeping terms, we’ve just created money.
If you have a credit card, money is created every time you use it. Who then is doing the creating? I’d say it was you, as you’re the one making the decision to do it. There are no evil gnomes of visa doing awful things hidden from sight (well, I can’t prove that..) but new loans create brand new asset and liability entries in double entry bookkeeping. That’s not a feature of banking, just a feature of bookkeeping, so if creating money out of thin air is bad isn’t it double entry bookkeeping we need to do away with?
If you’re suggesting we have a disfunctional banking system, I completely agree, but it’s my opinion that we have a disfunctional banking system because we have a disfunctional political system. Our politicians have been so woeful that they’ve allowed and encouraged banking to move away from its socialy beneficial role into a instrument of widespread social destruction. Personally I believe it’s a far easier proposition to fix banking than it is to fix politics, which is why I find poitivemoney’s suggestion that it all be handed over to the politicians is terrifying.
Have you seen Bill Still’s movie the Secrets of Oz? Double-entry bookkeeping features.
I’m reading Andrew Simms’ book Cancel the Apocalypse (on your recommendation Richard 🙂 )and frankly there is no other alternative. Economic growth as we have known it cannot continue. We have to be better stewards (not masters) of our planet and better people to our fellow brothers and sisters. I cannot think of a better project for not just the U.K. but the West as a whole (indeed all humanity). For me it satisfies all elements of healthy human life – the physical, emotional, mental and spiritual.
It’s a good book
Maybe a bit long
But you are right – there is no alternative
I think before you put down James Goodier’s argument that you build practical counter arguments as to why a GND would be effective.Like Motherhood and Apple Pie most of us I think like to believe in a GND. But let’s have some pilot projects-and if they go wrong – admit the faults. At present GND is advocated by theorists,I don’t trust some of its advocates, and such Green schemes as there are appear to be bureaucratic and not efficient.
I can agree with that – of course
But what we are proposing – insulation, double glazing, solar and much more – have, for example, all been proven and the pay back is very clear
Which makes the spacehopper analogy absurd
Repairing infrastructure also very clearly creates jobs
And the debate on transport is a real one
Whilst the need for new housing and schools is acute
What needs trialling, I wonder?
Richard, in addition to ‘Green’, have you considered the other big area where demand for change could quickly be unlocked – ‘society’?
Not only do we need to give people credit (ok, incentives) for doing things to help protect and sustain the environment, but we need to give people for doing things that help protect and sustain our communities.
The common denominator here is ‘behaviour change’. By linking together existing networks that are on and off line, it would be possible to develop a community of like-minded people that could give credit to each other for doing stuff that adds value to it.
Then you would have a credits-based system that linked contribution to entitlement – something i think the majority of people, organisations and brands would love to see happen.
This credits-based system would of course be better than Bitcoin!!!
I have sympathy with that
I’m not quite sure how to make it work
Except I note it does in schools – my sons love rewards
And hate demerits – or whatever they are called
If memory serves me, Andrew Simms refers to such schemes in his chapter on alternative currencies (Cancel The Apocalypse). I think it could work. What is often the problem in our sick economies is that demand for goods and services is there, but the cash isn’t. People working around the community will be performing services and work that IS needed, but at the same time be compensated for it. It’s an excellent way for communities to build up social capital in economic environments which typically can drain community good-will (i.e. Austerity programmes).
Issue the credits through community centres to people who undertake activities that make a contribution (green/social/charitable) to the common good. Base the issuance on an hours activity so that other actions that aren’t time-based can be weighted accordingly.
Credits would act as a personal cv of good and could be exchanged in an ethical marketplace for exclusive discounts from public sector organisations that have a need for green or pro-social behaviour or discounts from brands that have spare capacity (like cinemas, football clubs or bus operators) or excess inventory (like most non-food retailers) and that want to evidence their own contribution to the common good.
You should read People Money if you haven’t already.
I have thanks Bill – John Rogers is a friend of mine (was a co-author)!
“Issue the credits through community centres to people who undertake activities that make a contribution (green/social/charitable) to the common good.”
I – through the job I do – personally create prime engineering scrap that is then recycled, The chaps I work with do the same – we recycle tonnes of scrap metal a week…..so how many credits would that be worth?
Allan, it would depend on the amount of time spent doing it (credits are based on the time spent on the activity).
Another key advantage of non-cash based economies, and why they may become the main difference between a thriving society and a collapsing one, is the steady decline in western economies due to automation and technology, not to mention outsourcing.
(a good backgrounder for the US here – http://www.technologyreview.com/featuredstory/515926/how-technology-is-destroying-jobs/ ).
As that brings down the number of jobs and pay with it, we will have irreversible crisis without the emergence of non-market economies and networks. There are already countless such networks, so it’s important not to be blinkered into thinking this only exist within a specific local currency or credit system.. Open source communities, volunteering, the co-op and social-enterprise space, the ‘freeconomy’, a huge amount of indie music, film, art, writing – created for love not money – and the social communities where the hours expended on Twitter or Facebook, Flickr or YouTube, Minecraft or Tumblr have almost no cash value but massive personal investment. Arguably this non-market, non cash-based space is as big if not bigger than the traditional economy, it’s just so decentralised that no-one really notices or tracks it.
So surely a major part of the answer to all of this, ie a sustainable good life for all, is finding ways – through credits, talents, social status, klout, woofie, or whatever – to support and help network and grow this non-market economy while the realworld economy declines for 99% of us, so that productivity, well-being and communities doesn’t decline with it.
When seen as a whole, our communities are full of underused resources – unemployed or underemployed people with skills and talents they could give; empty shops and shopping centres that need filling; empty seats on buses and so on. These assets simply aren’t producing any value, and this spare capacity is simply wasted. But what if it could be ‘liquidated’ and used to ‘give credit’ to people that chose to make their communities better and more sustainable – according to the amount of time they contribute to the process?
An ethical marketplace that traded in both social credits and £cash would allow brands with excess inventory or spare capacity to disguise the amount of discount simply by accepting social credits in part payment for their goods or services. Social credits accepted by the brand might then be regarded by consumers as evidence of their support for communities that set out to fix their own problems (CSR), and of course it moves the stock quicker without damaging the brand value.
Would a marketplace that linked contribution to entitlement be a go-er, Nick?
It sounds brilliant in principle, of course, something that’s more easily enabled by the web, linking abilities to needs directly. Coupled with a cash injection into a green new deal the increased cash on the one hand could free-up more social resources on the other.
The challenge, of course, is how something like this would take off – as there have been a number of attempts. Pushed by the government and it falls into the ‘big society’ area and unless the council is offering genuine council tax discounts to those who, say, pre-sort their neighbors’ recycling, or who redesign and improve their local bus timetables, seems challenging (not least because of the speed at which govt decisions work)
There are, of course, existing community & virtual currencies -so perhaps one method is making some sort of currency-exchange so that these can inter-operate more easily – and at least it means it builds on what’s already there.
Or perhaps it needs a specific targeted big test case in a community with lots of spare capacity – ie an area with high unemployment, spare space for growing, empty buildings and so on – to try and get an integrated parallel social-economy working while figuring out the problems and issues, and software and so on. Obviously these things already exist in the successful communes like Lauriston, and the odd European village – so it would be more about trying to scale it up (it sounds like a Channel 4 show!).
Or a country-wide service built specifically, initially, around one specific area of spare capacity. Taking your example of public transport, if one train operator, say, declared, ‘we have 50,000 free tickets available each month’, here are the different voluntary orgs you can go and work for to earn credits to get some. Of course, they would probably be anxious that people who would have bought a ticket no longer would – there’s little benefit for the train company other than good PR/CSR. Perhaps some of those voluntary groups can help with station art or clearing up railway sidings – but ultimately it runs into the problem that for a social economy to work it needs a sufficient scale for reciprocity to take-place.
What about tying it more closer to labour? It’s a resource we all have access to, and most people would love more autonomy, purpose and fulfilmment around their work – and many would take a salary cut to achieve that. I’d like to tell a website about the work I’m good at (eg web design, chopping wood) and the work I love to do (eg writing, making things) and then get offered a working week where half my time was spent doing the work I was good at, freeing up the other half for whatever which I loved doing (or if there’s more demand even more time). It fits with the idea of universal income ( http://www.washingtonpost.com/blogs/wonkblog/wp/2013/05/11/thinking-utopian-how-about-a-universal-basic-income/ ), but in the near term it could perhaps also operate as a kind of employment agency that can convert cash into social capital. So it (perhaps operating as a coop of some kind) could sell skilled labour to the market for money, and use some of that to pay people a living wage, and the rest to try and build a more supporting infrastructure for them and their social, non-market activities (ie setting up allotment space, converting warehouses to workspace, getting equipment, etc). People in the employment agency may be spending those three days a week doing book-keeping or nursing, or whatever they’re skilled at – but the rest of the time are supported in community building & personally enriching activities, whatever they ensure.
Perhaps this is running away from the original article – really we need this and a GND. Tho in many ways creating a functioning social economy/marketplace is something that we shouldn’t need to wait for governments to figure out – while a green new deal (or universal income) is dependent on government intervention, the right government, money being available, the legislation not ending up like Ed Davey’s Green Deal. A functioning social marketplace, however, just needs us to figure out how to make it work, scale and take-off – no mean task, but something we have more power over..