(Not) A Green New Deal being proposed in Australia.

A new Greens Party leader in Australia was elected, and the party has run with the theme being used in the USA that we need a Green New Deal (GND). This is the new leaders article in the Guardian on a GND.

As well as an education in what the GND actually is, the economic framework that underpins a GND, the leader could also use some grammar lessons.

“Study hard and do Tafe or university and you get underemployed in an insecure job with low pay.”

The Greens party framework for a GND looks like existing Green policy badged under a new label. There isn’t much substantive change to existing policy, and the economics is still within a neoliberal framework. Which I’ll explain more about below.

I want to first start by explaining what the concept of the original New Deal was, the framework of a GND in the USA and its economic underpinnings and finally how the Greens proposals to date, do not amount to a concept in anyway similar to what is being proposed in the USA.


The original New Deal was introduced by Franklin D. Roosevelt in two stages. The first between 1933-34 which was about financial reform. E.g. the emergency banking act and the 1933 Banking Act. The second New Deal included the National Labor Relations Act – which allowed private sector employees to organise, collectively bargain and take collective action. The Works Progress Administration employed job-seekers to carry out public works. This included musicians, artist, writers and actors. It also employed people to build streets, bridges, dams etc…the initial appropriation in 1935 was equivalent to 6.7 per cent of GDP. (Smith, Jason Scott (2006). Building New Deal Liberalism: The Political Economy of Public Works, 1933–1956. New York: Cambridge University Press) It also included the Social Security Act, US Housing Authority, and the Fair Labor Standards Act. A lot of the WPA employment was temporary and designed to alleviate unemployment not eliminate involuntary unemployment.

The term ‘A New Deal’ was coined by economist Stuart Chase in a book of the same name. He used that book to articulate what he envisioned as ‘Goals for America’ which he summarised as the ‘Guarantee of the five essentials to every citizen – food, housing, clothing, health services, and education …’

He also had a book titled behind the dollars; Where he posed the question ‘Where will the money come from?’ and poses the questions of where Italy, Germany and Japan obtained money after having experienced depressions. You can read about Stuart Chase and a review of that literature here. The idea that ‘money’ was not an issue but the constraint was real resources was gaining recognition during the 1940s. Beardsley Ruml, the Chairman of the NY Federal Reserve in 1946 gave a speech ‘Taxes for Revenue are Obsolete’ In that speech Ruml outlines the purposes of taxation is to “stabilize the purchasing power of the dollar”, to “express public policy in the distribution of wealth and of income” and “in subsidizing or in penalizing various industries and economic groups”


The GND being proposed in the USA is advocated for by grassroots movements such as sunrise, that campaign for electing justice democrats that adhere to a new consensus.

The sunrise website states;

“The Green New Deal is a 10-year plan to mobilize every aspect of American society to 100% clean and renewable energy by 2030, a guaranteed living-wage job for anyone who needs one, and a just transition for both workers and frontline communities.”

Under paying for a GND new consensus says the following;

“The Green New Deal will be funded as all other ambitious American projects – including public works, bank bailouts, wars, and tax cuts –have been: through carefully targeted, Congressionally authorized spending. As the post-2008 consensus among serious economists and financiers affirms, this does not require “new taxes” unless inflation emerges. And since (a) well over $5 trillion in tax cuts and war expenditures in recent years have not triggered inflation, (b) the Fed is still struggling to get inflation consistently up to its 2% target, and (c) the Green New Deal will produce new goods and services to keep pace with and absorb new expenditures, there is no more reason to let fear about financing halt progress here than there was to let it halt wars or tax cuts.”

That style of thinking is straight from the school of thought known as modern monetary theory. ‘Paying for’ a GND is articulated in this paper. This article in the Huffington Post ‘Paying for a Green New Deal’ says;

“The federal government can spend money on public priorities without raising revenue, and it won’t wreck the nation’s economy to do so. That may sound radical, but it’s not. It’s how the U.S. economy has been functioning for nearly half a century. That’s the power of the public purse.”

If you don’t understand the economics, the framing of the programs that are included are based on a neoliberal economic framework that undermine the ambition within the framework.

The economy isn’t a seperate entity to society. The fiscal position of a government is merely an irrelevant statistical artefact. A currency issuer is never financially constrained, it spends by crediting a bank account. What matters is whether we have the real resources (raw materials, labour power, skills) to implement a desired agenda. The below quote is from the text book macroeconomics by modern monetary theorists, Bill Mitchell, Martin Watts, and Randy Wray.

“While we may think it is useful to separate ‘the economy’ from the rest of social life, and to apply ‘economics’ to the study of that area of life, we recognise that the division is necessarily arbitrary. In truth, there is no completely separate sphere of ‘economic life’, meaning that economics is linked to, and incorporates findings from, the other social science disciplines.”

The GND has it’s intellectual underpinnings as a new way of thinking about economics and uses that as a lens to advocate for Medicare for all and the elimination of all medical debt, transition to 100 percent renewable energy and create 20 million jobs, ensure a just transition for fossil fuel workers, invest in conservation, free colleges and the cancelation of all student debt, a series of pro union laws with a goal of doubling union membership in a Sanders presidency first term, housing for all with a huge reinvestment in social housing and a goal to end homelessness and ensure fair housing for all. I’ve taken that information from Bernie Sanders campaign issues.


You see similar thinking during the post WWII era where under a different way of thinking about ‘the economy’ (Keynesianism) the British Labour Party under Attlee in their 1945 ‘Let Us Face the Future’ manifesto listed things such as ‘Jobs for All’, ‘Agriculture and The People’s Food’, ‘Houses and the Building Programme’, ‘Health of the Nation and its Children’ ‘Social Insurance against the Rainy Day’


Now let us look at what The Greens Party in Australia is calling a Green New Deal. They haven’t specified what they mean by a GND so I’ve read the policy pages of their website. Adam Bandt in the article linked to in The Guardian has said;

With a Green New Deal, we can deliver a manufacturing renaissance, turning Australia into a renewable energy superpower exporting our clean energy to the world. At the same time, as Ross Garnaut has proposed, we can process our resources and minerals in Australia and attract new business investment because of our abundance of solar energy.

Whoever said an export led strategy was part of a GND? At the macro level an export is a loss. It is a real good or service a nation does not use because it ships it away. How do we ship the renewable energy overseas? Turning it into Hydrogen requires tremendous amounts of water on one of the driest continents on earth. Isn’t it far more efficient that foreign nations can produce renewable energy without relying on others?

Ultimately the wealth of a nation is its labour force and what it is able to produce. What it can’t produce, it has to import. That’s just simple logic. A currency issuer can always employ labour and afford whatever is technically feasible. A monetarily sovereign country can always afford full employment though that may not necessarily mean the country is materially prosperous.

The Greens policy on Renewable Economy and Climate Change is to:

“Phase out coal, move to 100% renewables and deliver cheap, clean and reliable energy for homes, businesses and industry” an amicable goal. Their policy on electricity is to Create Power Australia, a not-for-profit, public energy retailer for renewables” That is a market based mechanism under the idea that ‘a market’ can deliver resources efficiently’. You read the website in further detail and they say they will Buy back essential electricity infrastructure…That’s why the Greens will establish a Grid Transformation Fund – to restore public ownership to those critical interconnectors between states.”

They’re still stuck within a neoclassical economic framework. The Federal Government issues Australian dollars, it doesn’t need a fund to be able to purchase anything. It can always make a payment denominated in Australian dollars, and purchase anything for sale in that currency. Who said we should have to buy back what the public sector built and sold off cheaply, and allowed corporations to profit off. The Greens website goes onto say “Under our plan, energy bills will be reduced by an estimated $200 a year for an average customer, we’ll increase competition in the existing retail market and end the profit-at-all-costs business model.” I think that’s really lousy goal.

Here is an actual progressive policy. Create a situation where any private infrastructure is financially unviable for a private entity and take it back. We need massive investment in leaving fossil fuels and transitioning to renewables. Build it using public funding and have a policy of delivering a quota of free electricity to every household. Guarantee free electricity, water and broadband to every Australian household. This is entirely possible when you understand the federal government is not a household and can always deploy resources for a public purpose. It is not a question of ‘how do you pay for it?’ rather it is ‘how do you resource it?’

Continuing under the heading of ‘Renewable Economy and Climate Change’ The Greens state they wish to Provide support for coal workers and communities as we phase out coal’. Delving into further detail they go on to say “Under our plan, we will establish a specialised, independent Future of Work Commission. The Commission will examine the impacts of technological innovation and develop long-term strategies for jobs.”

That isn’t anything like a just transition being proposed in the USA that says they want “a guaranteed living-wage job for anyone who needs one, and a just transition for both workers and frontline communities.” A just transition would mean looking at the skill set within fossil fuel industries and the towns that are impacted and using that skill set (electricians, engineers etc…) in industries that aren’t based on fossil fuels. It means guaranteeing work without loss of pay as those workers transition into other industries.

Under World-class health, education and social services and ‘Support Payments‘ we have a policy that says “We will immediately raise Newstart and Youth Allowance by $75 per week”. The current rate of Newstart for a single with no dependants is $489.70 a fortnight or $244.85 per week. A $75 a week increase will have the rate at $319.85. The Henderson Poverty Line for the June quarter 2019 was $429.60 a week for a single person with no dependant children. That leaves an unemployed person $109.75 below the poverty line.

Furthermore unemployment is always a political choice. The Government can always purchase whatever is for sale in Australian dollars, including idle labour. The Government of the day chooses the unemployment rate it wants. When you look at what is being proposed in the USA around a Job Guarantee, and the academic literature around what it is, it is buffer stock mechanism, designed to eliminate involuntary unemployment and act as a price anchor.

A measly raise to the rate of Newstart and a Future Work Commission is admission of defeat that full employment would be nice to have but no longer possible. It takes a limited view of what we consider to be productive employment. Reading broader literature around a Job Guarantee we learn that it aims to redefine what we consider productive work.

“Many other people claimed that there are social services that are not considered ‘productive’ in the sense of profit-generating activities that, nonetheless, needed to be done—things like caring for the young, old and the frail, cleaning and fixing up the neighborhoods, running soup kitchen, and so on.”

Conclusion

Any ‘Green New Deal’ needs an understanding of the differences between a currency issuer and a currency user. It needs to understand that to tackle the climate crisis the currency issuing government needs to take a major role in transitioning away from fossil fuels and building renewables as well as using that transition to create a more equitable society. You won’t get that more equitable society or be able to invest in greater public spending unless you understand that it is never a question of whether a currency issuing government can afford to ‘pay for’ something, it is a question of whether the real resources are available. If they are, federal government spending is unconstrained. If they aren’t, how do you stop the private sector using those real resources in a way that is non-inflationary.

1 Response

  1. An important contribution Jengis.

    One should not build upon poor foundations. A good understanding of macroeconomics can enable the Green New Deal to be attained. Complying with the self imposed and false mainstream neoliberal macroeconomic constraints will prevent the implementation of a Green New Deal that will deliver the necessary environmental and social outcomes. The Greens need to replace their economic advisers. The duopoly are too corrupt to make this move.

    Like

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s