Thinking About A Green New Deal

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:

  1. 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.
  2. 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.
  3. Banks should be prevented from having “off-balance sheet” assets, such as finance company arms which can evade regulation.
  4. Banks should never be allowed to trade in credit default insurance. This is related to whom should price risk.
  5. Banks should be restricted to the facilitation of loans and not engage in any other commercial activity.
  6. 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.
  7. 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’

and movements that use a coherent framework to bring about a working class, unified agenda.

(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.”


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.