The Green New Deal is a recurring theme of mine, largely because I have been involved in it from the outset as one of the authors of the original 2008 report proposing a Green New Deal.
The idea may now be popular around the world, and is seen as the platform for creating a sustainable economy by many, but it is by no means a done deal. One of the biggest perceived obstacles is cost. I suspect that investment of at least £100bn a year is required to ensure that we meet climate targets, and quite possibly more when biodiversity issues are considered as well. So the question is how might this sum be funded?
I do, of course, know that the modern money theory answer is by spending that sum into existence, and I am not disputing that. Equally, I see no way at present of gaining full political support for that approach, especially when some Green New Deal Group members, like Ann Pettifor, are vehemently opposed to MMT, even if without being able to explain why. So, I think alternative framing is required. This is what I seek to do in this video.
In it I do, in effect, argue that the government's role as the nation's preferred savings institution should be exploited.
I also argue that paying favourable interest rates on funds deposited with the state has social value.
And I argue that if savings are, as a matter of fact going to happen then it is much better that those with an MMT mindset embrace that fact and seek to engage those who save positively with the economy for great social good.
If the resulting ideas are controversial, so be it. There is a bigger battle to be won here.
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There’s much that is bizarre about how private pensions are organised, regulated and incentivised at present. But one of the most bizarre aspects must be how little attention is given to how they shape long term economic development.
Pension funds are supposed to be able to provide income streams way into the future, yet fund management performance is judged by current annual financial returns. Tax relief does nothing to challenge this financial short-termism. And it does nothing to encourage the investment needed to avoid levels of climate change that would adversely affect living standards in retirement.
Your suggestion that tax relief on pensions contributions should be conditional on a proportion going into funding a Green New Deal makes perfect sense. And it can be sold on the basis that it would meet contributors’ needs for a healthy environment and a good quality of life in retirement.
Thanks
You get it
Ann Pettifor doesn’t have a clue. Among the several blunders she makes in her speech at a recent webinar (link below), she claims 5 minutes into her speech that MMTers believe in deficits without limits. Had she actually studied MMT literature, she’d have discovered that MMT advocates deficits up to the point where inflation looks like getting excessive.
http://www.rogerfarmer.com/rogerfarmerblog/2020/5/14/monetary-finance-in-the-age-of-corona-virus
I am afraid that a great deal that Ann has written and said about MMT is wrong
She seems to equate MMT and Positive Money of old
But she certainly had not read any MMT as far as I can tell, let alone understood it, and is very rude about it and those who have read and written about it
“the original 2008 report proposing a Green New Deal.”
Perhaps original in the UK but the Green Party in the US had already published our Green New Deal proposals in 2006. I see that a lot of our ideas were in your later proposals, which is great.
I know there was a press report in the US referring to the idea in 2007
I am completely unaware now and was in 2008 of any US report on the subject
We worked from scratch
I agree that a type of national savings for GND would be excellent. There are e.g. countless pensioners who would really value being able to get a bit of a return on their savings and would like it to help future generations.
It really can be a win-win.
What’s not to like?
“… I … argue that the government’s role as the nation’s preferred savings institution should be exploited.”
The problem as I see it is that whereas this is a sound technical solution is it a marketable solution? Clearly for many Libertarians and Neoliberals two questions remain firstly, is there a global warming effect and therefore a need for a Green New Deal and, secondly, the perennial one where’s the money going to come from for government to pay interest on the GND bonds, will taxes have to rise. There’s also the scale of the spending required for an effective new deal that’s daunting. The Post Office paying voters small amount of interest on National Savings schemes appears peanuts in comparison.
It’s easy to dismiss individuals of this persuasion as environment and monetary system illiterates or just plain greedy people but then you think about the far from rich voters who support them and put their political representatives in office to run the state.
The central thrust of Keynes’s argument was that because of investment risk uncertainty the usual state of a private market capitalist economy was not to self-equilibrate and therefore required government intervention by way of spending and/or taxation manipulation. This doesn’t seem a hard explanation to assimilate yet here we nearly 85 years after Keynes first introduced this idea and many voters continue to believe that government has no money of its own and must aim to balance its books.
This all appears absolutely unbelievable to MMTer’s, including me, but when I think about it how long did serfdom last. How long were the bulk of the population willing to stick with the deal inherent in serfdom? When I think further I can see that the move to a monetary economy because of technological development was the catalyst that undermined the serfdom “bargain” especially as the mechanisation of farming pushed people off the land.
This all brings me to my point that MMTer’s over-estimate the ability of many voters to understand the complex technical issues that lie behind Keynes’s simply pointing out the self-equilibration issue and that it’s better that government partners with people’s private sector banks and other private sector entities like pension funds to disguise or simplify this complexity yet achieve the objectives of economy and planetary self-equilibration.
It’s precisely because I agree with you that selling this as a savings scheme makes sense to me
I think £70bn of ISA money would come in for little more than 1%
Good we seem to be on the same page.
I’ve been thinking that what is really required in the UK is what I’d call an Economy Optimisation Partnership (EOP) in which government and private sector banks and other financial sector entities, like pension funds, work on an agreed basic formula for optimising the UK economy and then elaborate the detailed devices necessary to do this like for example your use of ISA’s for a Green New Deal.
Lying at the heart of this partnership idea is a sort of final recognition that macroeconomics is too complex for the average lay person to understand and it’s this complexity that makes it vulnerable to politicisation resulting in a lot of hot air with politicians and the mainstream media taking up bombastic and unhelpful positions.
It’s also the recognition that ultimately it’s the effect on the economy of a macroeconomic recipe and ordinary people’s lives together with tackling specific problems which crop up in society that determines continuing voter support. Greater pragmatism to resolve the UK’s problems would happen if all the bombastic politicised noise was quietened down by the simple acknowledgement the EOP was working on it.
So clearly the critical thing is the recipe. Keynes did in fact lay the majority of this out in what Keynes called an open letter to president Roosevelt at the end of 1933 published in the New York Times. Note this was prior to the publication of his “General Theory…” book in 1936 and it also makes clear that part of his recipe included the option of using Functional Finance by government direct creation of money, he called this printing money since computers hadn’t been invented. He also had as part of his recipe the option of borrowing money from the private sector.
What he didn’t include in his recipe was the use of taxation manipulation (either up or down). I think this was because he saw the other two options I’ve mentioned as more effective as stimulus because they created more jobs that automatically delivered an income stream to those most likely to spend the bulk of that stream.
Cryptically he talked about comparing the “quantity” of money with the “volume” of money which I think was really about the multiplier effect of incomes being spent into the economy through a stimulus recipe.
Here’s the relevant part of the open letter text in regard to his recipe which is concentrating how to deal with the extreme of a depression in the United States but is also relevant for more normal economy optimising:-
“Individuals must be induced to spend more out of their existing incomes; or the business world must be induced, either by increased confidence in the prospects or by a lower rate of interest, to create additional current incomes in the hands of their employees…; or public authority must be called in aid to create additional current incomes through the expenditure of borrowed or printed money. In bad times the first factor cannot be expected to work on a sufficient scale. The second factor will come in as the second wave of attack on the slump after the tide has been turned by the expenditures of public authority. It is, therefore, only from the third factor that we can expect the initial major impulse.”
https://economistsview.typepad.com/economistsview/2008/11/keynes-open-let.html
He got to tax in ‘How to pay for the war’ which seemed to change his thinking o9in the rile of tax in demand management
Thanks for your comments right now – which are stimulating
I know there is one to post – I am still musing on it…..and read tha papers last night
Aren’t we mixing up the issue of directed economic investment ie the Green new deal with its financing .
We agree on the former and the latter can come in a variety of guises: incentives for private wealth holders; incentives for banks to lend; incentives to consumers to use green products; direct government investment etc.
the accusation could be that green investment funds may crowd out others competing for the same funds – but thats the point isn’t it: In the end priority has to be given to green investment- except that if there is no inflation there is scope for new credit creation to finance the investment.
Where does this idea of crowding out come from?
Where is the shortfall in funds for investment?
What is this logic that funding comes from a finite and limited supply?
Money is limitless in supply is a return is offered