This post follows on from the post ‘(Not) A Green New Deal being Proposed in Australia’. In that post I outlined the origins of the original New Deal, gave a brief overview of what the original New Deal was and followed on with a summary of what a Green New Deal is in the USA, it’s intellectual underpinnings and how that informs policy options.
I critiqued The Australian Greens proposals of their version of a GND (Which to date don’t seem to exist so I critiqued their policy page) and how their flawed macroeconomic understandings lead to flawed policy proposals. For example The Greens concept for support for coal workers isn’t specific, there is mention of a future work commission and looking into how technological change will impact jobs. Unlike the GND that outright says;
“Ensure a just transition for communities where the fossil fuel industry holds significant control over the labor market. This includes not only training and wage replacement programs for fossil fuel workers themselves, but also investment in the businesses and workers that previously served them.” [emphasis added]
Reading further about the GND, it draws parallels that the mobilisation required is on a similar scale to WWII.
“In fact, as the U.S. prepared to enter World War II, our economy lacked the capacity to build the ships, tanks, airplanes and other armaments and munitions that would be needed, or to produce needed inputs like steel, aluminum, rubber, concrete, and other essential materials in adequate quantities. Many were skeptical whether the country could “gear up” fast enough to avoid losing a war that it had neither sought nor prepared for.”
And very forthright answers the how will you pay for it question as follows;
“What a nation can do and can build is ultimately limited only by the size, skills, and creative energies of its population; the capacities of its companies, organizations and governments; and its available natural resources.”
There is nothing in the GND that links any of the expenditure required to taxation. Unlike most political parties that say “If everyone paid their fair share of tax, we’d all get a fair go at living a decent life.”
Modern Monetary Theory will tell you limits to spending at the Federal level, by the currency issuer, is constrained by available real resources (including labour) and ecological constraints. All Federal Government spending is new dollars and taxation removes spending power. It is not a proposal for unlimited spending.
Often when we think about ‘the economy’ we define it as an abstraction to our own reality. An entity that we need to serve in order to prosper. Terms like ‘cost’ are applied to public spending. When your mind is buttressed by the analogy ‘a currency issuing government is like a household’ – you think in terms of taxes needing to ‘pay for’ a particular public service.
I prefer to think about a cost in terms of the real resources required to implement a particular policy. The NBN is a good example. All manner of numbers where thrown around in order to justify a reason to roll out an inferior network, and the justification was the government would save dollars and needed make a commercial return.
The cost in rolling out a broadband network isn’t financial, it is the real resources. We need fibre, labour and IT infrastructure. The NBN isn’t a cost, it is a tremendous benefit. It provides employment in the construction phase and gives Australian households and industries huge opportunities.
The ridiculous notion that a government needs to make a commercial return is based on the notion that profit is a means to measure efficiency. The Federal Government is the only entity that never needs to be concerned with insolvency, savings is the act of forgoing current expenditure to spend at a later date. It applies to a user of a currency.
Last week I was listening to a lawyer speak at some training and he was speaking in relation to assisting people with disabilities and he said something along the lines of ‘it is the idea we give up something to help somebody else less fortunate’ the implication is he was referring to taxation. I thought to myself, ‘well we don’t have to give up anything’. Provided we have medical professionals, a system in place to help people, and the ability to build the equipment needed, everyone else doesn’t have to sacrifice anything. I haven’t lost anything as a result of the NDIS being in place. The issue becomes if we didn’t have sufficient physical resources (including labour) and then needed to make choices about who got assistance.
You can apply that thinking to our education system, the energy sector and our healthcare system. The issues facing private healthcare is a good example. It’s being billed as a ‘crisis’ by private insurers. In the story linked to we see a health insurance representative stating:
“Now, my idea is I should be able to opt out of Medicare, take the pressure off the public system and taxation as a funding mechanism and take care of my own lifetime healthcare costs.
I believe I should have that option and I think inevitably, that Medicare, as an insurance scheme, is retained for the vulnerable and those who would otherwise not be able to take out appropriate levels of cover.“
This is a strategy in place to drive more people into the for-profit healthcare industry as customers decline. The industry associates public spending as a cost. Any government committed to public healthcare, would look at the data of declining private health insurance, realise as citizens we’ve made a decision to be covered by a public healthcare system, and use this opportunity to employ the medical professionals made underemployed and unemployed in that sector and boost the resources in the public system.
Orthodox economics is full of language and metaphors that try to convince us that despite having sufficient real resources we can’t deploy them for a public purpose.
Ultimately we do have limited resources and need to make choices, For what purpose do we deploy our labour power, what is the most efficient way to use our real resources to provide the services our society desires? What do we leave for the public sector and what do we allow as an activity in the pursuit of profit? Limits to spending from any source, are inflationary which depends on the nations productive capacity.
The GND proposal for dealing with inflation is;
“Were inflation to return as a threat for the first time in half a century, furthermore, there are time-honored ways of preempting it. These include not only taxes and bond issuances, but also “macroprudential” limits on bank over-lending and financial market speculation.”
Macro-prudential rules are the rules that banks lend under. Like all western countries, Australia has a system that benefits the finance industry and has placed our households amongst the most indebted in the world.
A GND in regards to finance would mean understanding loans create deposits, giving private financial institutions the ability to create credit gives bank an incomparable power over the rest of the economy. Banks should be publicly owned an democratically controlled. The public banking sector should not replicate the profit seeking model of the private sector. The only functions a bank should perform is to facilitate payments and provide loans to credit worthy customers. A strong public banking sector needs to be instated that adheres to the below mentioned rules:
- Financial Institutions should only be permitted to lend directly to borrowers. All loans would have to be shown and kept on their balance sheets. This would stop all third-party commission deals which might involve banks acting as “brokers” and on-selling loans or other financial assets for profit. They should not be permitted to speculate as counter-parties with other banks.
- Banks should not be allowed to accept any financial asset as collateral to support loans. The collateral should be the estimated value of the income stream on the asset for which the loan is being advanced. This will force banks to appraise the credit risk more fully.
- Banks should be prevented from having “off-balance sheet” assets, such as finance company arms which can evade regulation.
- Banks should never be allowed to trade in credit default insurance. This is related to whom should price risk.
- Banks should be restricted to the facilitation of loans and not engage in any other commercial activity.
- Banks should not be allowed to contract in foreign interest rates nor issue foreign-currency denominated loans.There is no public sense achieved in allowing them to do this.
- Social, labour and environmental criteria should be introduced to determine how the banking system allocates credit.
I would go further and advocate “All Australian deposits should be guaranteed and private banks should NEVER be bailed out through public expenditure but instead have assets taken over by the Federal Government and nationalised.” Credit issuance should be seen as a public good.
A Green New Deal in the USA also recognises;
Where the original New Deal kept people of color — particularly Black people — subordinated as a servant class vulnerable to economic exploitation and instability, the Green New Deal will bring the employment, business ownership, and wealth- generating opportunities that these communities need in order finally to have full and unfettered access to our economy and our political processes.
The civil rights movement in the USA fought for Guaranteed Jobs. Martin Luther King’s infamous ‘I have a dream speech’ was at “The March on Washington for Jobs and Freedom”
This article about Coretta Scott King outlines why she fought for a system of guaranteed employment.
“Four days after her husband’s murder on April 4, 1968, Scott King returned to Memphis to support the city’s striking sanitation workers. She marched with an estimated 50,000 people before concluding at a rally at the Memphis city hall. Amidst drizzling rain, she reminded her audience of the terrain they had traversed and the journey ahead: “We moved through . . . the period of desegregating public accommodations and on through voting rights, so that we could have political power. And now we are at the point where we must have economic power.”
“In 1974 Scott King co-founded the National Committee for Full Employment/Full Employment Action Council (NCFE/FEAC) to fight for legislation that guaranteed jobs for all Americans. Guaranteed jobs for all who wanted them—regardless of race or gender—had long been a goal of Scott King’s and the black freedom movement.”
The GND looks at indigenous rights issues;
Where indigenous rights have been previously neglected or pushed aside, the Green New Deal will affirm treaty rights and respect the claims that Native Americans have to tribal lands as sovereign peoples.
This is an opportunity for an Australian framework to recognise the rights of its Indigenous peoples. Which not only includes recognition of their voices but active participation and an ability of self-determination.
“…we believe that Aboriginal people and Torres Straight Islanders will be able to refocus their energies on the everyday requirements for self determination. Importantly this will include participation in the labour market and, for many, forms of employment that occur on Country in ways that strengthen and add contemporary value to Indigenous forms of knowledge.”Flea, J et al. The Uluru Statement: A First Nation’s perspective of the
implications for social reconstructive race relations in Australia, International Journal of
Critical Indigenous Studies, Vol 12. No. #1, 2019
The GND in the USA also recognises;
Where the New Deal often excluded or underpaid women in ways that kept them financially dependent, the Green New Deal will expand economic security and opportunity for women, so that they have the means to support themselves and their families, even into retirement.
This within an Australian context requires to look at enhancing maternity leave provisions, include stay at home parenting with a paid salary, and reviewing our superannuation system. A system that has skewed wealth to a relative few, has not provided for many Australian retirees (We have the highest rates of pensioners living in poverty in the OECD) and set up under the non-sensical notion that a currency issuer needs to save when it can always spend.
It is why we should look at enhancing the aged pension and scrapping our system of superannuation.
“It fails to meet the standards of a retirement income system. It is costly and inefficient, unnecessary, and incredibly unfair. The age pension system is by far the most economically efficient retirement income system. Scrap superannuation. Expand the age pension. Boost the economy.“
The Green New Deal (or whatever else you choose to call it) is a mammoth undertaking that within the USA is not only about a transition to a zero emission renewable energy sector. It is about a redistributive agenda that brings power to the most marginalised within their society.
I’ll close with a quote from Noam Chomsky in the book Understanding Power.
“Look, part of the whole technique of disempowering people is to make sure that the real agents of change fall out of history, and are never recognized in the culture for what they are. So it’s necessary to distort history and make it look as if Great Men did everything – that’s part of how you teach people they can’t do anything, they’re helpless, they just have to wait for some Great Man to come along and do it for them.”
Any political and economic transformation is going to require a movement willing to take action to bring in that change. That means political demonstrations, strikes, being able to refute ‘junk economics’