Economics

Janet Yellen is wrong on carbon taxes

Published by Anonymous (not verified) on Tue, 11/09/2018 - 6:03pm in

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Economics

The FT reports this morning that:

Janet Yellen has spoken out in support of a carbon tax as the most effective and efficient way to reduce US greenhouse gas emissions.

Ms Yellen, who chaired the US Federal Reserve until February, has joined the Climate Leadership Council, a bipartisan group pushing for the US to address the threat of global warming by introducing a carbon tax, with revenues returned to the public in dividend payments.

But you need to know:

The group is backed by large companies including ExxonMobil, BP, General Motors and Johnson & Johnson.

So maybe you might have your doubts. They're confirmed by this comment:

“Climate change is a very critical problem that we need to address,” Ms Yellen told the Financial Times. “When the central problem is the damage caused by greenhouse gas emissions, the cleanest and most efficient way to address it is to tax those emissions.”

That is glaringly obviously not true.  The cleanest and most efficient way to address carbon emissions is to stop them. Tax does not stop them. It just treats them as an economic externality.

And in this case it will create a  supposed dividend stream that people will not want to stop once it starts, meaning that in due course they will have no incentive whatsoever to cut carbon emissions at all, and will instead be aligned with business in a desire to pump pollution into the atmosphere.

I  believe in tax.  But I also know that there are things that tax cannot do. Tax cannot stop carbon emissions by itself. Regulation is far more effective as a way to do that.  And in this case, perverse incentives entirely equivalent to moral hazard would be created by the scheme that Yellen is backing. And that makes her proposal not just wrong. It makes it deeply cynical, and a threat to limiting the impact of climate change.

The Brexit tax dream is undeliverable

Published by Anonymous (not verified) on Tue, 11/09/2018 - 4:50pm in

According to the FT the planned publication of a post Brexit plan by the Tory European Reform Group was about much more than the mere technicalities of border arrangements:

People familiar with the 140-page draft Brexit blueprint overseen by the European Research Group said it included proposals for radical, across-the-board tax cuts to remodel Britain’s economy after leaving the EU.

So the Laffer curve driven fantasy persists.

But as they added:

But these people also said the document was of “dubious quality” and contained a number of eccentric ideas

And the plan has been dropped because they cannot agree what to say.

There would appear to be disunity everywhere. But that might, at least, save us from the tax fools. Their dream is undeliverable. I am at the point where I say thank you for small mercies.

A Green New Deal 2018: the imperative for new energy and new jobs in the UK, and globally

Published by Anonymous (not verified) on Tue, 11/09/2018 - 4:15pm in

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Economics

I share this post from environmentalist and founder of Solar Century, Jeremy Leggett, which is a co-member with me of the Green New Deal group: 

The tenth anniversary of the collapse of Lehman Brothers, and the onset of the financial crisis, is on 15th September. The Green New Deal group, a team of British green economic thinkers of which I am a member, has updated a report it wrote at that time, recommending an investment programme on the scale of the New Deal of the Great Depression in the 1930s, to repair economies and keep people in work. Had this happened, we might have had a chance of staving off the rise of authoritarian and proto-authoritarian populism that has swept the world since. Our arguments (and the same or similar arguments by many others like us) were not acted on then. Many have analysed why, not least of late Jeremy Grantham and Martin Wolf. Now we fear arguments such as ours have to be acted on, or our civilisation will collapse into a collage of police states, ruled by despots desperately trying to dismiss as fake news the environmental disasters that increasingly will be washing away their economies, and any prospects their populations may once have had of a life worth living.

This slideshow is my compilation, from entries in the Future Today chronology, of the energy-and-jobs case. The Green New Deal group’s report is downloadable here.

Economic policy — a political matter

Published by Anonymous (not verified) on Mon, 10/09/2018 - 11:33pm in

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Economics

What kind of financial system do we want? What function should it have? What kind of financial activity do we want to permit or even encourage? These are essential questions for the shaping of economic and social policy at a national and global level. If we leave these questions up to the private sector, we […]

Will Hutton on Labour’s lost opportunity

Published by Anonymous (not verified) on Mon, 10/09/2018 - 9:32pm in

At the weekend, I was in the audience for a talk by Will Hutton, formerly of the Guardian and now Principal of Hertford College, Oxford – but, more importantly, for a generation a critical and powerful voice on the centre-left.  The talk was part of the Cardiff Book Festival and was linked to the book Saving Britain, which Hutton has co-written with former Labour Cabinet Minister Andrew Adonis, which considers how Britain must change while remaining within the EU.

Obviously the principal topic was Brexit; Hutton’s arguments would have been familiar to anyone who had read the book.  People had voted for Brexit because they were angry with the failures of the British political and economic model; and they were right to be angry, but the reasons for that anger were nothing to do with the EU, and everything to do with domestic UK politics.  Hutton reminded us of the damning statistics used in the book about life outside the prosperous pockets of metropolitan England; for example how 331 of every thousand people in Blackpool are on antidepressants; how life expectancy in the poorer parts of England was declining for the first time in more than a century.  And these were precisely the areas that had voted for Brexit – which on any credible analysis would make those problems worse, and widen inequality further.

It’s worth pointing out that this was not a dry academic talk;  Will Hutton is clearly angry.  He was passionate and acerbic, saying a couple of times that the only reason why anyone would believe much of the nonsense being spread around by Brexiteer politicians was because they wanted Boris Johnson as Prime Minister.  He ridiculed Theresa May’s view that a referendum on the deal would be a betrayal of democracy – arguing that she knew it was nonsense, and she was desperately trying not to split the Conservative Party.

But the point that I took away from this talk was what Hutton referred to as “the Corbyn problem”.  He argued that the lesson he took from the 2017 General Election was that the ideas that had dominated British political discourse since Margaret Thatcher was in her pomp – the worship of free markets, the denigration of the state – the collection of attitudes often referred to as “neoliberalism” – were no longer election winners.  The IPPR had recently published the findings of its Commission on Economic Justice;   its recommendations for fundamental economic reform based on fairness and justice had been endorsed by, of all newspapers, the Daily Mail.  The intellectual tide was clearly turning.

And Hutton argued that the Corbyn Problem, as he called it, was essentially this: that the debate over Brexit was coinciding with a fundamental intellectual shift, recognising how deeply damaging inequality is and examining seriously ideas about how to deal with the economic and social inequality endemic in Britain.  There was therefore an open door for an imaginative Labour leader to build a new consensus for a modern, fairer, more productive economy and to reverse the little-Englandism of Brexit; and that every Labour leader from Attlee onwards would have had the imagination to grasp it.  But not, in his view, Corbyn; his political background, his support base and his apparent belief that his mission was to build a social movement rather than build consensus for a Government that would effect real, practical change, meant that he was simply the wrong person for the job.  And he called this a tragedy.

I find Hutton’s analysis compelling.  I’ve written in my book about how, deep down, Corbynism is a politics of privileged hobbyism, almost a form of anti-politics.  And it seems to me that history may well judge that at the time when Britain most needs a resurgence of social democratic politics – and has been given a once-in-a-generation opportunity to lead a resurgence of social democratic values – Corbyn is, quite simply, blowing it.

The divide between mainstream macro and MMT is irreconcilable – Part 1

Published by Anonymous (not verified) on Mon, 10/09/2018 - 7:05pm in

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Economics

My office was subject to a random power failure for most of today because some greedy developer broke power lines in our area. So I am way behind and what was to be a two-part blog series will now have to extend into Wednesday (as a three-part series). That allows me more time today to catch up on other writing commitments. The three-part series will consider a recent intervention that was posted on the iNET site (September 6, 2018) – Mainstream Macroeconomics and Modern Monetary Theory: What Really Divides Them?. At the outset, the iNET project has been very disappointing. Very little ‘new’ economic thinking comes from it – its offerings are virtually indistinguishable from the New Keynesian consensus that dominates my profession. The GFC revealed how impoverished that consensus is. It has also given space for Modern Monetary Theory (MMT) to establish itself as a credible alternative body of theory (and practice). The problem is that the iNET initiative has been captured by the mainstream. And so the Groupthink continues. The article I refer to above is very disappointing. It claims to offer a synthesis between Modern Monetary Theory (MMT) and mainstream macroeconomics by way of highlighting “what really divides” the two schools of thought. You might be surprised to know that according to these authors there is not much difference – only that mainstream economists think that monetary policy should be privileged to look after full employment and price stability and MMT economists (apparently) think fiscal policy should have that role. The authors claim that for the on-looker these minor differences are opaque in terms of outcomes (if the policies are applied properly) and suggest that there is really no reason for any debate at all. Accordingly, the New Keynesian consensus is just fine and the mainstream economists knew all the MMT stuff all along. It is an extraordinary exercise in sleight of hand engineered by constructing the comparison in terms of two ‘approaches’ that cull the main aspects of each. The real issue is why would they waste their time. Degenerative paradigms (or research programs in Imre Lakatos’ terminology) typically try to absorb challenging paradigms that, increasingly have more credibility and appeal, back into the mainstream through various dodges – ‘special case’, ‘we knew it all before’, ‘really nothing new’, etc. This is Part 1 of my response. It won’t be an easy three-part series but stick with it and I hope it gives you a lot of insights into the abysmal state of the mainstream macroeconomics profession.

I wasn’t surprised by the discussion. Resistance from the dominant paradigm is part of the evolution of a new idea.

There is the famous construction (sometimes attributed to German philosopher Arthur Schopenhauer, sometimes to Gandhi) that “All truth passes through three stages: First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident.”

I actually think there are four stages – the first being that new ideas tend to be ignored initially.

In terms of what I might call the intrusion (or challenge) of MMT to the mainstream orthodoxy in macroeconomics, we are now well into the ridicule, opposition phase, which means we are making progress.

And a derivative of the ridicule/opposition phase is what I call the ‘absorption’ phase or the ‘we knew it all before’.

It goes like this – okay guys this MMT thing, there really isn’t much about it, nothing new, and …. and when we apply some of the policies we get inflation, rising interest rates, transfers of tax burdens to the future generations, insolvency, etc

These predictions come straight out of the mainstream macroeconomics model (see below). To compare MMT with the mainstream macroeconomics we have to consider the building blocks of each. Otherwise, the comparison will be fraught.

I considered this issue, in part, in this suite of blog posts:

1. Modern Monetary Theory – what is new about it? (August 22, 2016).

2. Modern Monetary Theory – what is new about it? – Part 2 (long) (August 23, 2016).

3. Modern Monetary Theory – what is new about it? – Part 3 (long) (August 25, 2016).

Over the 24 or so years that we have been working on the MMT project together (the core team, that is) – I have observed the process through which MMT ideas have entered the economic debate, first at conferences and in the scholastic literature, and more recently, through various Op Ed, Social Media type avenues.

At first, there was no engagement from the mainstream economists, apart from some isolated hostility, usually the manifestation of previous personal disputes anyway.

Then, over the last several years, after that even longer period of being ignored, MMT ideas have entered the popular discourse.

While many commentators are increasingly viewing the core MMT ideas as a progressive answer to fill the void created by a discredited mainstream macroeconomics, an increasing number of economists have attempted to disabuse people of the validity of MMT ideas.

Interestingly, the economists seeking to discredit MMT have not been confined to those working within the mainstream tradition (New Keynesian or otherwise). Indeed, considerable hostility has emerged from those who identify as working within the so-called Post Keynesian tradition, even if that cohort is difficult to define clearly.

Earlier criticisms by so-called Post Keynesian economists were specifically targetted at their disdain for the Job Guarantee concept and open economy issues.

Randy Wray and I wrote an article in 2005 addressing those criticisms.

[Reference: Mitchell, W.F. and Wray, L.R. (2005) ‘In Defense of Employer of Last Resort: a response to Malcolm Sawyer’, Journal of Economic Issues, XXXIX(1), 235-244].

At the outset, we consider mainstream macroeconomics to be the type of economics that is almost universally taught in undergraduate courses in universities around the world and represents the usual dialogue in the financial press.

As you will see, the iNET article has a rather bizarre redefinition of mainstream macroeconomics, which in no small part, they require to blur the differences between what they call ‘mainstream’ macroeconomics and what they, in turn, call MMT.

Neither version they present is particularly credible.

In the first blog post cited above (August 22, 2018) I document the evolution of the more recent criticisms.

They fall into two broad camps:

1. The ‘we knew it all along’, ‘there is nothing new’ in MMT camp – this is tied in with the mainstream macroeconomists trying to regain credibility after their core analytical framework (New Keynesian approach) failed dramatically in the wake of the GFC.

So, while MMT is now seen as a major challenger to the mainstream macroeconomics narrative, the ‘we knew it all along’ gang try to claim that MMT only presents, in the words of Simon Wren-Lewis what “I thought were standard bits of macroeconomics” (Source and (Source)).

2. The ‘MMT presents a fictional world’ camp – this is a more nuanced argument about whether central banks and treasuries work closely together and whether ‘taxes and bond issuance’ fund government spending.

The pedants in the second camp ignore the fact that long before they entered the fray I (for one) had written that that governments create institutional structures that impose voluntary constraints on their operational freedom and obscure the intrinsic capacities that the monopoly issuer of the fiat currency possesses.

In the same way that Marx considered the exchange relations to be an ideological veil obscuring the intrinsic value relations in capitalist production and the creation of surplus value, MMT identifies two levels of reality.

The first level defines the intrinsic characteristics of the the monopoly fiat currency issuer which clearly lead us to understand that such a government can never run out of the currency it issues and has to first spend that currency into existence before it can ever raise taxes or sell bonds to the users of the currency – the non-government sector.

There should be no question about that.

Once that level of understanding is achieved then MMT recognises the second level of reality – the voluntary institutional framework that governments have put in place to regulate their own behaviour.

These accounting frameworks and fiscal rules are designed to give the (false) impression that the government is financially constrained like a household – that is, in context, has to either raise taxes to spend or issue debt to spend more than it raises in taxes.

MMT strips way these veils of neo-liberal ideology that mainstream macroeconomists use to restrict government spending.

We learn that these constraints are purely voluntary and have no intrinsic status. This allows us to understand that governments lie when they claim they have run out of money and therefore are justified in cutting programs that advance the well-being of the general population.

By exposing the voluntary nature of these constraints, MMT pushes these austerity-type statements back into the ideological and political level and rejects them as financial verities.

Mainstream macroeconomics does no such thing. It holds these voluntary institutional structures out as intrinsic financial constraints.

The whole ‘government budget constraint’ literature which emerged in the 1960s (beginning with Carl Christ etc) was tied up in the mainstream view that macroeconomics had to recognise that just as an individual consumer makes spending choices to maximise utility (in their theory) subject to budget constraints (income and other endowments), the government must be considered to face the same spending environment.

The iNET article claims that:

Functional finance is widely understood, by both supporters and opponents, as a departure from orthodox macroeconomics. We argue that this perception is mistaken: While MMT’s policy proposals are unorthodox, the analysis underlying them is entirely orthodox. A central bank able to control domestic interest rates is a sufficient condition to allow a government to freely pursue countercyclical fiscal policy with no danger of a runaway increase in the debt ratio. The difference between MMT and orthodox policy can be thought of as a different assignment of the two instruments of fiscal position and interest rate to the two targets of price stability and debt stability. As such, the debate between them hinges not on any fundamental difference of analysis, but rather on different practical judgements—in particular what kinds of errors are most likely from policymakers.

So, this is more or less the ‘we knew it all along’ defense of mainstream macroeconomics.

To which I respond, no you didn’t know it all along. And, you still don’t know it. And, you still teach ‘fake’ knowledge – it is in your textbooks, your PowerPoint slide shows that you use to indoctrinate your students, your academic papers, your Op Ed articles and your media interviews.

Within that literature and then, later, in the textbook treatment of it, students learn the following:

1. Governments are financially constrained.

2. That means to spend the government must tax, which have negative consequences on work and investment incentives.

3. Spending more than it taxes (deficits) leads to a new ‘funding’ decision.

4. They recognise that the deficit could be funded by ‘money printing’ but claim this would be inflationary.

5. So the best option (among the two evils) is to issue debt, which pushes up interest rates and crowds out private spending.

6. There is a very real possibility that any stimulus from the deficit spending will be wiped out by the crowding out.

That is mainstream macroeconomics and it is not possible to spin it any other way.

To give you are guide, the best-selling macroeconomics textbook is Macroeconomics (currently 9th edition) by Greg Mankiw.

It is hard to argue that the body of theory and policy practice that is laid out in that book does not represent what we consider to be mainstream thinking and pedagogy.

Here are some core quotes (from the 7th Edition):

1. “When a government spends more than it collects in taxes, it has a budget deficit, which it finances by borrowing from the private sector. The accumulation of past borrowing is the government debt.”

2. “government borrowing reduces national saving and crowds out capital accumulation. This view is held by most economists and has been implicit in the discussion of fiscal policy throughout this book.”

3. “When these economists conduct long-term projections of U.S. fiscal policy, they paint a troubling picture … One reason is demographic … A second, related reason for the troubling fiscal picture is the rising cost of health care … Simply increasing the budget deficit is not feasible. A budget deficit just pushes the cost of government spending onto a future generation of taxpayers. In the long run, the government needs to raise tax revenue to pay for the benefits it provides.”

4. “Some economists believe that to pay for these commitments, we will need to raise taxes substantially as a percentage of GDP … Other economists believe that such high tax rates would impose too great a cost on younger workers. They believe that policymakers should reduce the promises now being made to the elderly of the future and that, at the same time, people should be encouraged to take a greater role in providing for themselves as they age.”

5. “In this case, the “good” is loanable funds, and its ‘price’ is the interest rate. Saving is the supply of loanable funds – households lend their saving to investors or deposit their saving in a bank that then loans the funds out. Investment is the demand for loanable funds – investors borrow from the public directly by selling bonds or indirectly by borrowing from banks … The interest rate adjusts until the amount that firms want to invest equals the amount that households want to save.”

6. “Consider first the effects of an increase in government purchases … the increase in government purchases must be met by an equal decrease in investment … To induce investment to fall, the interest rate must rise. Hence, the increase in government purchases causes the interest rate to increase and investment to decrease. Government purchases are said to crowd out investment.”

7. “The government’s control over the money supply is called monetary policy … The primary way in which the Fed controls the supply of money is through open-market operations—the purchase and sale of government bonds.”

8. “the quantity theory of money states that the central bank, which controls the money supply, has ultimate control over the rate of inflation. If the central bank keeps the money supply stable, the price level will be stable. If the central bank increases the money supply rapidly, the price level will rise rapidly.”

9. “When the government prints money to finance expenditure, it increases the money supply. The increase in the money supply, in turn, causes inflation. Printing money to raise revenue is like imposing an inflation tax.”

10. “unemployment results when the real wage remains above the level that equilibrates labor supply and labor demand. Minimum-wage legislation is one cause of wage rigidity. Unions and the threat of unionization are another.”

11. “Over long periods of time, prices are flexible, the aggregate supply curve is vertical, and changes in aggregate demand affect the price level but not output. Over short periods of time, prices are sticky, the aggregate supply curve is flat, and changes in aggregate demand do affect the economy’s output of goods and services.”

12. “Large government debt or budget deficits may encourage excessive monetary expansion and, therefore, lead to greater inflation. The possibility of running budget deficits may encourage politicians to unduly burden future generations when setting government spending and taxes. A high level of government debt may increase the risk of capital flight and diminish a nation’s influence around the world.”

13. “Each dollar of the monetary base produces m dollars of money. Because the monetary base has a multiplied effect on the money supply, the monetary base is sometimes called high-powered money.”

And so on.

This is core mainstream macroeconomics and is fed into the policy-making process on a daily basis.

It drives narratives, policy choices, how government departments and central banks are run (at least at the political level) and it is fed continuously, albeit in different (more simpler) language to the general population on a daily basis.

A journey through my 14 years of blog posts will leave you with no doubt that MMT as a body of work doesn’t accept any of those propositions that are fed into the minds of economics students around the world every day.

I won’t critique each one. Go back to the – Debriefing 101 – category and trace through the blog posts there.

You will see that:

1. MMT rejects the claim that currency-issuing governments fund their spending via taxation and bond-issuance.

2. MMT rejects the claim that deficits reduce national saving – it makes no sense to think of a fiscal surplus as ‘saving’. Saving is the act of foregoing current spending to increase future spending. A currency-issuing government never needs to do that. Fiscal surpluses are better seen as destroying non-government wealth.

3. The intergenerational challenge (ageing society) is not a financial one but, rather, a productivity challenge. The government will always be able to fund pensions and first-class health care providing there are adequate real resources available.

4. Current deficits carry no implications for future taxes. Every generation chooses, through the political process, the tax structure that is in place.

5. The ‘loanable funds doctrine’ has no application to a modern monetary and banking system. Investment brings forth its own saving. There is no finite level of saving that constrains investment. Banks will extend loans to any credit-worthy customer.

6. Increased government deficits do not put upward pressure on interest rates and do not starve the non-government of funds. There is no financial crowding out arising from fiscal policy in a modern monetary economy.

7. The central bank cannot control the money supply.

8. Government spending is not facilitate by ‘printing money’. And expanding the monetary base (say via QE) does not induce inflation as a matter of course.

9. Unemployment is not due to real wage rigidity but rather arises from a systemic failure to provide enough jobs. That failure arises due to inadequate spending in the economy. When the non-government sector’s spending and saving decisions are made and executed, if there is a deficiency then it means the fiscal deficit is too low. Entrenched mass unemployment is a political choice made by governments.

10. There is no short-run/long-run dichotomy. The long-run is just a series of linked short-run situations and fiscal policy is effective in each.

11. Issuing government debt does not reduce the inflation risk of spending. All spending (government or non-government) carries that risk. Issuing debt just alters the wealth portfolio of the non-government sector.

12. There is no money multiplier.

So you see that the core mainstream concepts are rejected outright by MMT.

How then could someone conclude that there is really no difference between mainstream macroeconomics and MMT?

Answer: by conducting a false comparison.

Conclusion

We will continue exploring that by analysing the iNET argument specifically in Part 2 tomorrow.

That is enough for today!

(c) Copyright 2018 William Mitchell. All Rights Reserved.

Cross party support for the Green New Deal

Published by Anonymous (not verified) on Mon, 10/09/2018 - 3:38pm in

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Economics

This letter was in the Guardian this morning, referring to the new Green New Deal report:

Ten years ago this week the Lehman Brothers collapse heralded the worst global economic crisis since the 30s, the political, economic and social effects of which are still being felt today. To help ensure that these adverse trends are reversed it is crucial to return a sense of hope for the future, including through economic security for all, while fully protecting the environment.

A key part of this should be the urgent consideration and adoption by political parties and local campaigners of a “jobs in every constituency” green infrastructure programme. This would involve making the UK’s 30m buildings super-energy-efficient, accelerating the shift to renewable electricity supplies and storage, and tackling the housing crisis by building affordable, properly insulated new homes. A transport policy would need to rebuild local public transport links, properly maintain the UK’s road and rail system, and encourage a shift to electric vehicles. This approach is labour-intensive, takes place in every locality and consists of work that is difficult to automate – and so could provide a secure career structure for decades.

The tens of billions required annually to fund this massive infrastructure programme will require traditional government borrowing at the current low interest rate to help rebuild local economies. Additional finance could come, for example, from fairer taxes and the creation of savings opportunities in local authority bonds and green Isas.

Such diverse economic activity would not only improve social cohesion and environmental sustainability but should also make our economy more resilient in the face of any repeat of the economic crisis of a decade ago.

Vince Cable MP, David Drew MP, Angus MacNeil MP, Caroline Lucas MP, Craig Bennett CEO, Friends of the Earth, Jonathon Porritt Green party, Colin Hines Convener, UK Green New Deal Group, Prof Richard Murphy City, University of London, Jeremy Leggett Founder, Solar Century, Ann Pettifor Progressive Economy Forum, Tony Juniper Environmentalist, Charles Secrett Sustainability adviser, former director of Friends of the Earth, Tom Burke Chairman of E3G, Prof Tim Lang City, University of London, Neal Lawson Director, Compass, Robin McAlpine Director, Common Weal

Jobs in Every Constituency – the promise of the Green New Deal

Published by Anonymous (not verified) on Mon, 10/09/2018 - 3:30pm in

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Economics

The Green New Deal Group has launched a new report this morning. This is a summary:

Jobs in Every Constituency

A Green New Deal Election Manifesto

Background

To return a sense of hope for the future and economic security for all, the government and all political parties need urgently to consider embracing a ‘jobs in every constituency’ Green New Deal infrastructure programme. The Green New Deal group came together in 2007 because as economists and environmentalists we were all convinced that a huge economic downturn was imminent and that one answer to it would be a Green New Deal to fund infrastructure that could help tackle climate change and generate large numbers of jobs and business and savings opportunities in every constituency. How to achieve this was detailed in our first report in 2008.[i]

Much has changed since then to improve the potential for a Green New Deal. The impacts of climate change are now ominously clearer, and the political response globally has mostly become more positive, despite Donald Trump. The Paris Agreement of November 2016 has resulted in all 197 signatories of the treaty taking action, with more than 1,500 climate laws and policies in place.[ii] The agreement commits governments to ratchet up targets in the years ahead. To assist this, there have been huge cost reductions and increases in availability of renewables, particularly solar, battery storage and off shore wind in recent years. All China’s new electricity demand in 2015 was met with wind and solar.[iii] In 2016, almost 90 per cent of such new power in Europe came from renewables.[iv] More than 10 million people now work in renewables for the first time, 3.4 million in solar alone.[v]

However the world still produces some 80% of its energy from fossil fuels. To speed a UK shift away from this, the Green New Deal group has tended to emphasise the ‘Jobs in every constituency’ approach, in the expectation that that it will widen general public support for the shift to a jobs rich decarbonisation future. This is also timely given that the Brexit vote has begun to force politicians to at least talk about policies that could help the ‘left behind’. There is now much more discussion of the state’s role in improving the UK’s infrastructure. The most radical and potentially helpful change has been the use of quantitative easing (QE) by the government to bail out the financial services sector. If QE was instead used to help fund a Green New Deal it could provide part of the answer to the first question always raised about any proposal for large scale change, which is ‘how are we going to pay for it?’

The Green New Deal

The Green New Deal would result in a nation-wide carbon emissions reducing infrastructure programme focusing on:

  • Making the UK’s 30 million buildings super-energy-efficient to dramatically reduce energy bills, fuel poverty and greenhouse gas emissions;
  • Accelerating the shift to renewable electricity supplies and storage, given their dramatic drop in price worldwide and increased  availability;
  • Tackling the housing crisis by building affordable, highly insulated new homes, predominantly on brown field sites;
  • Transport policy that concentrates on rebuilding local public transport links;
  • Properly maintaining the UK’s road and rail system;
  • Encouraging electric vehicles for business and personal use and sharing.

This is labour intensive, takes place in every locality and consists of work that is difficult to automate. It also contributes to improving social cohesion and environmental sustainability.

This massive work programme in energy and transport would tackle many existing problems in our society. It would provide a secure career structure for decades. This would require a significant numbers of apprenticeships and the range of long-term jobs provide increased opportunities for the self-employed and local small businesses. This growth in local economic activity would in turn create other jobs to service this increased spending.

In terms of funding, the up front cost of this massive infrastructure programme is likely to eventually run into more than £50 billion a year.[vi] This could be met by traditional government borrowing at present low interest rate, plus the use of ‘Green Quantitative Easing’ to help rebuild local economies. (This would exploit the ability of the government to create new money without any cost to taxpayers, which has only so far been used to save the financial services sector.) Additional finance could come from fairer taxes and the creation of savings opportunities in local authority bonds and green ISAs, not least to create intergenerational solidarity between savers (who tend to be from older generations) and younger people who would benefit from the jobs created.

It has been estimated that at least £500bn of investment in new low-carbon infrastructure is required over the next 10 years to transform the UK economy, of which £230bn will be required for energy efficiency alone.[vii] Transport for the North (TfN) has stated that investing between £60bn and £70bn in the north of England’s antiquated road and rail network between 2020 and 2050 could add almost £100bn in real terms of economic benefit to the UK, along with 850,000 new jobs. Across the country small and relatively cheap transport improvement measures would include improving stations and bus services, park and ride facilities, through to bus priority and cycle lanes, traffic calming schemes, car clubs and bike hire schemes [viii]

These enormous sums would need to be used judiciously to ensure a realistically timetabled, carefully costed, and hence non-inflationary, nationwide initiative to train and employ a fairly paid ‘carbon army’ to work on this nationwide infrastructure programme.

A Manifesto for Jobs in Every Constituency

The government should commit to a detailed programme explaining how to generate jobs in every constituency, using for example the energy and transport proposals in the Green New Deal. This would require extensive consultation with local government, businesses and communities to establish what such a programme should look like on the ground.

The government should commit to a massive training programme resulting in a huge range of skills to provide the ‘carbon army’ of workers needed to bring about a low-carbon future. A carbon finance sector would also be needed to publicise, advice and put into practice the range of large funding packages necessary.

The government must then explain how this approach would both mitigate the effects of any future global economic downturn and help compensate for the expected trends in automation. It must also make clear that a key advantage to such an approach would be to help meet the UK’s obligations under the Paris Agreement to curb carbon emissions.

The full report

The report on which this manifesto is based is available at https://www.greennewdealgroup.org/wp-content/uploads/2018/09/GNDJobsReport9-18.pdf

Signing this manifesto

If you would like to support this manifesto by becoming a signatory to it email hinescolin@gmail.com  and please circulate it to anyone you think might be interested.

Endnotes

[i] https://s.bsd.net/nefoundation/default/page/-/files/A_Green_New_Deal_1.pdf .

[ii] https://www.businessgreen.com/bg/news/3031265/paris-agreement-all-197-signatories-now-taking-national-climate-action?utm_source=Greenhouse+Morning+News&utm_campaign=63f4d809db-Greenhouse_Morning_News_April_30th_2018&utm_medium=email&utm_term=0_990f8eae78-63f4d809db-123979689

[iii] https://data.worldbank.org/indicator/eg.use.comm.fo.zs?end=2015&start=1960

[iv] https://www.theguardian.com/environment/2017/feb/09/new-energy-europe-renewable-sources-2016

[v] http://www.rechargenews.com/wind/1486824/more-than-10-million-people-now-work-in-renewables-irena

[vi] https://www.greennewdealgroup.org/wp-content/uploads/2013/09/Green-New-Deal-5th-Anniversary.pdf

[vii] https://www.e3g.org/docs/Accelerating_the_transition_to_a_low_carbon_economy_The_case_for_a_Green_Infrastructure_Bank.pdf

[viii] https://bettertransport.org.uk/sites/default/files/research-files/Improving%20local%20transport%20helps%20the%20economy%20-%20experience%20from%20the%20LSTF.pdf

 

The impossiblities of democracy

Published by Anonymous (not verified) on Mon, 10/09/2018 - 8:07am in

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Economics

The call on whether to cut corporate taxes, versus spending our tax dollar on schools and hospitals is an issue of importance to all of us.

The euro — more pain, more suffering, and more unemployment

Published by Anonymous (not verified) on Mon, 10/09/2018 - 12:08am in

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Economics

The euro was supposed to bring shared prosperity, which would enhance solidarity and advance the goal of European integration. In fact, it has done just the opposite, slowing growth and sowing discord … The central problem in a currency area is how to correct exchange-rate misalignments like the one now affecting Italy. Germany’s answer is […]

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