Changing everything – and how to

With the battle of ideas in full swing on how to try to spend our way out of the Covid19-induced economic meltdown, the question arises what kind of economy we actually want, and how to get there. The British economist Ann Pettifor’s ‘The Case for the Green New Deal‘, even though published half a year before the new crisis hit, takes a radical stance that seems even more urgent now than upon release.

The globalisation of the financial world and its destructive consequences on society and nature has been Pettifor’s domain for decades. She enjoys the dubious honour of having been one of the few economists to foresee the 2008 collapse of the financial system in her 2006 book ‘The Coming First World Debt Crisis‘.

The crisis that took off in 2008 was also the breeding ground for the Green New Deal – almost a decade before the idea was taken up by US Representative Alexandria Ocasio-Cortez and long before it resurfaced, Europeanised but somewhat truncated of its radical and social implications, as the European Green Deal of the European Commission (EC).

While the stock markets went red all over the world in the late noughties, Pettifor organised a series of meetings of economists and environmentalists in her living room. The challenge was to imagine, out of the rubble of a financial meltdown, how to build an economy in which ecosystems and human dignity are not external factors, but the very foundation. The result: the first draft of the Green New Deal – an obvious tribute to US President Franklin D. Roosevelt’s ‘New Deal’ which is one of the major sources of inspiration.

The question whether the economy needs a green transformation should not deserve much debate. It has been repeated over and over: according to the UN’s Intergovernmental Panel on Climate Change, we have about a decade left to limit global warming to 1.5 degrees Celsius.

However, the steady flow of scientific studies pointing to the looming catastrophe shows we’re everything but on track: 2019 was Europe’s hottest year ever measured. Climate change continues unabated: 2020 is already on course to be hottest year since records began.

If we go beyond the 1,5°-limit, every additional half degree will significantly worsen the risks of drought, floods, extreme heat and poverty for hundreds of millions of people. Sea levels rise more dramatically than expected and could reach an additional meter by the end of the century. One billion (!) people are likely to live in insufferable heat within 50 years, and the World Bank counts on over 140 million climate migrants by 2050.

‘We’re facing extinction‘, resumes Pettifor. And it’s not only climate change: in the wake of the Covid19 crisis, the link between wildlife habitat destruction and an increasing spread of viruses has become clear. The staggering evidence is that the unfolding environmental crisis will dwarf any other global challenge experienced by mankind – including the current one.

Pettifor is fully aware that it might be too late to avert it. Surrendering however would be nihilism.

To conceptualise the economy in another way, we need to understand, she argues with a reference to the pioneer of ecological economics Herman Daly, that ‘human economy is a subsystem contained by a delicately balanced global ecosphere‘. An alternative could be to abandon the Holy Grail of growth and to adopt, instead, an economic and ecologic equivalent of the ‘Plimsoll line‘ – the white line that is painted on vessels to show the most they can carry before compromising their seaworthiness. The defining point would thus be: how much economy can the ecosystem Earth carry?

But where environmental groups and parties have long concentrated on behavioural change, where lately the idea of taxing CO2 emissions had gained traction, and where the current debate on post-Covid19 recovery plans focusses on whether or not to sprinkle bail-outs with some green conditions, Pettifor begs to differ, and radically so: ‘if you want to change the world, you have to control the money flow.’

‘Credit‘, she writes, ‘is the main driver of economic expansion and consumption. It has stimulated the extraction of fossil fuels through industrialisation, urbanisation, motorisation and the growth of (…) consumerism by the affluent classes.’ It is easy credit that drives the economy above the ecological ‘Plimsoll line’. Instead of mere tinkering at the margins by easting vegetarian, cycling or even taxing carbon emissions, the solution would be to stamp out that easy access, and today’s convoluted cross-border supply chains it creates, which are fuelling our consumption binge that pushes the planet to the brink.

Credit is also, she adds with a reference to James K. Galbraith, what fuels our ‘psychologically grounded desires: ‘wants’ that do not originate in the person of the consumer‘ but are ‘contrived by the process of production‘. Doing away with many of those could be more liberation than privation.

Shorter supply chains are certainly something that resonates today, after not only European have been rubbing their eyes when discovering their incapacity to quickly produce a simple artefact as a face mask. The debate about opposing ‘localisation‘ to globalisation however is around since the early 2000s – but Pettifor digs out a less well-known essay of the economist John Maynard Keynes – on whom much of her work builds – from as early as 1933, where he argues for minimisingrather than maximisingthe ‘economic entanglement among nations. Ideas, knowledge, science, hospitality, travel – these are the things which should (…) be international. But let goods be homespun whenever it is reasonably and conveniently possible, and, above all, let finance be primarily national.’

Nationalised finance and ‘homespun goods‘ are a leitmotiv for Pettifor’s vison of a more sober, more humble and self-sufficient economy: ‘countries like Britain should cultivate their own green beans and sew their own clothes.’ And what might help squeezing the economy into the limits of the ecological Plimsoll-line is also a way to free the Global South from its subjection to the Global North: ‘they should not rely on poor countries draining (their) water tables in order to grow green beans/ red roses/ tropical fruit for richer countries.’

The upside of that self-sufficient Plimsoll-line economy is the opportunity to steer capital flows towards the investments in people, in green social, health and education infrastructure and in the creation of millions of jobs – for example in renewable energy, zero-carbon public transport, upgrading buildings for energy efficiency, building ‘smart’ distributed power grids to provide affordable clean electricity to all and reorganising the food system.

Opposing the current trend towards increasing automatisation, she argues ‘the Green Deal economy will be labour intense.’ The point however are qualified jobs – jobs that provide a decent income, meaning and community involvement. Jobs after all, to throw in a bit of philosophy, that break with what Karl Marx described as alienated labour, and which adhere to Immanuel Kant’s imperative that a person should be treated ‘never merely as a means to an end, but always as an end.’

‘We have to change everything,’ Pettifor writes.

In order to make finance work for the people and the planet however, it needs to be understood as a ‘public utility, the same way as a sewage system‘, one that would be nothing without states’ backing, ergo that of tax-payers, and one that needs to be dragged out of the shadows of the ‘invisible hand’ of private interests, back into the bright light of democratic oversight.

It is, after all, about taking back control. But taking back control from the real superpower – the financial markets – not from an imagined superpower in Brussels.

The towering question of course is: can it be done? Can the capital flows be wrestled from the control of private interest, back to democratic oversight and tamed in a way that they serve the people and the planet?

It has already been done before, Pettifor answers: when President Roosevelt, in the very Saturday night of his inauguration, began the process of taking the US off the gold standard. ‘By Monday morning (…), he was well into the dismantling and transformation of the ‘barbaric relic’ that was the globalised financial system.’ By doing so, the Roosevelt administration subordinated global market force to a democratically elected government – hence: the people.

Pettifor does not conceal that Roosevelt’s landslide victory gave him practically a free hand, that global markets did not concede defeat without a fight and that eventually they managed to back in charge. Her point however is precisely that overwhelming market power is no fatality, and that it can be domesticated with – lots of – political will.

That is where we stand today. Again, the rubble of another economic meltdown is piling up. The temporary fall in air pollution and CO2 emissions because of global lockdowns is by no means a structural reduction and the looming ecological disaster has not receded a single inch. But there is some political will. Vast majorities in most industrialised countries back prioritising climate change in the economic recovery from the Covid19 crisis (table 2) and in many countries, despite the crisis, citizens are against recovery actions that might harm the environment (table 3).

And the good news is, as Pettifor said in a recent interview: ‘there is a plan now‘ – a green and social transition canbe done and it canbe financed. The bad news: it needs to be done– it will not come about by itself. And for it to be done, an unprecedented mobilisation will be required to transform people’s leanings into political action. The Green New Deal, post-Covid19, is about fighting the easy-looking fall-back solutions like throwing unconditional bailout money at the aviation or the automotive industry. It is about using the bailout money for gaining democratic oversight on industrial decisions.

But as Pettifor closes: ‘where there is no struggle, there is no progress.’