Let's make 2019 the year of a green new deal
The counter to Larry Elliott's gloomy economic projections for 2019 (For those inclined to pessimism, the new year offers plenty to be worried about, 31 December) is to be found in his earlier article making the case for countries to put their economies on an “environmental war footing” (We're back to 1930s politics: anger and, yes, appeasement, 20 December).
To deliver this will, however, require that people be convinced that they will benefit and that there is the money to pay for such a transformation.
This funding can be raised in a number of ways. One way is to make clear that this is an emergency and to tap private savings via “green war bonds”. Another mechanism would be to improve tax collection: the UK still has a tax gap of many tens of billions a year.
We could also increase taxes on the wealthy, with this having the added benefit of tackling increasing inequality, which is fuelling the rise of populism. And we could also use quantitative easing to fund the transition to a sustainable economy.
We proposed just such a green quantitative easing in 2010. The Bank of England might well be sympathetic to this form of QE. Mark Carney is on record as saying that if the government agreed then it could expand the range of assets it purchases.
The Bank could then purchase new debt issued in the form of green bonds by a national investment bank to fund energy efficiency in all buildings, renewables and local transport systems. This green new deal would provide jobs in every constituency and dramatically reduce carbon emissions.
Richard Murphy
Professor of practice in international political economy, City, University of London
Colin Hines
Convenor, Green New Deal Group
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Richard, it is disappointing to see you say that funding could be raised by tax collection. As you know, tax does not fund public expenditure. I am concerned that your letter is undoing some of the good work that many in the MMT community are engaged with.
I think you need to read what I wrote with care
The original – pore Guardian edit – was even more careful
My argument is improved tax collection does make greater spending possible by preventing the inflation that might otherwise arise
Please do not fall into the silly MMT trap explored on this blog this morning that tax does not matter. It is vital to MMT working – but it does not fund government, and I dod not actually say it did
I am precise and clear on this – and your implication that tax and funding is unrelated is simply wrong unless you wish for inflation
“The MMT Community”, or elements thereof would probably fare better if it they were less inclined to behave like like a theological sect.
Lighten up, Klaus. A broader perspective never harmed anyone.
It seems to me that there are two arguments being made
1- that collecting more tax increases the power of tax as a tool to quell inflation
2- government having more powers to control inflation increases their options to increase spending, if they wish to
By how much can spending be increased without affecting the power of tax as an inflation-controlling tool? It would be interesting if it was within a few % of the amount of additional tax being collected, or if it was outside that range.
I’m a doctor not an economist Captain.
In the UK we collect around 34% of GDP as tax
In a quarter of EU states the ratio is well over 40%
The margin for change is large in that case
My question was by about how much collecting more tax in the UK allowed more spending by the UK government without the power to control inflation being affected – it didn’t mention the EU
Then again I’m a doctor not a EUrophobe Captain.
In most things in life we learn by comparison
So I offered one
Spot on letter. One hopes that MacDonell etc have seen it (fingers crossed – but not holding breath).
been analysing the cost of in-depth energy rennovation of houses.
There is a very large gap between energy savings (as a result of an energy rennovation) and the amount invested which leads to the savings.
Large-scale interventions will reduce costs (renovate 100k houses, not 1000) – but there will still be a big gap – think 50% on monthly savings vs monthly repayments.
Of course the above ignores societal benefits from having large-scale well paid employment and a reduction in energy imports.
Time for an industrial strategy focused on an energy transition.
While I wouldn’t argue against de-growth generally I have one major reservation about the estimates used in the de-growth article that is linked above.
The authors seem to be basing their estimates on the current rate of technological advancement, which, outside of the IT sector, has been slower than mud for decades. However, If one takes an historical view of what can be done and considers the rate of advancement between the horse-drawn, gas-lit end of the nineteenth century the start of the electric, jet-engine, sattelite launching 1950’s – lets say the state of technology before WW1and after WW2 – we get a differrent view of how quickly industry and lifestyles can change.
Lately things have been advancing quite rapidly in renewable energy and the one thing that it has in common with the IT sector is that they both involve production technologies that have virtually no variable costs (except labour). That revolutionary cost saving throws our usual assumptions about diminishing marginal returns out the window and it has the power to drive a rapid uptake.
I think the authors might have their assessment the wrong way round in that respect. The potential for rapidly adopting new technologies is less challenging than the idea of getting this capitalist world off its addiction to growth. If we consider, for example, that compound interest cannot be sustained indefinitely in the absence of growth we have just one insight into how radical a de-growth transition would be.
That said, this is a finite world and it cannot support economic growth indefinitely. I would nonetheless suggest that adapting to that reality maybe a little more difficult that adopting new technologies.
Damn, I’ve put that comment under the wrong post.
The ‘de-growth’ article is linked to the ‘Data for a Green New Deal’ post. Oh Well.