Ann Pettifor

The Green New Deal – Chatham House interview

 

What is at the core of the Green New Deal? What is it trying to do?

The Green New Deal as developed in Britain in 2008 is based on the understanding that finance, the economy and the ecosystem are all tightly bound together. Protecting and restoring the ecosystem to a balanced state cannot be tackled effectively, we argued, without the transformation of the other sectors. Joined-up policies are needed. Financing the hugely costly transformation of the economy away from its dependence on fossil fuels cannot be achieved without the subordination of the finance sector to the interests of society and the ecosystem.

So, the Green New Deal demands major system change, both economic and ecological. It demands structural (governmental and inter-governmental) changes (not just behavioural or technological change) in our approach to the financialized, globalized economy and ecosystem. As under Roosevelt’s New Deal, which dismantled the international financial system known as the gold standard in the 1930s, such change must be driven by radical structural transformation of the finance sector and the economy.

How did the Green New Deal begin? How was it formulated?

While we in Britain were early adopters in 2008, we were not the first to call for a Green New Deal. That call had been made on January 19, 2007 by Thomas Friedman, a New York Times journalist, in a column entitled: A Warning from the Garden. ‘The right rallying call is for a Green New Deal,’ he wrote. ‘The New Deal was not built on a magic bullet, but on a broad range of programmes and industrial projects to revitalize America…If we are to turn the tide on climate change and end our oil addiction, we need more of everything: solar, wind, hydro, ethanol, biodiesel, clean coal and nuclear power – and conservation.’ The call was taken up fi rst by President Barack Obama who included the Green New Deal in his platform.

What was it like writing the Green New Deal?

Colin Hines, our convenor and a veteran of Greenpeace, is a thoroughly convivial chap with a naughty sense of humour. He pulled together a group of economists and environmentalists, including the future Green MP, Caroline Lucas. We decided to meet regularly in my flat in London for more than a year. I would provide a big pot of pasta or risotto with sauces and salads, and others brought drinks. We differed in our approaches, so the camaraderie enabled us to argue ferociously but to also resolve our differences in a friendly way.

Why do you think the Green New Deal has struck such a chord in America?

It has struck a chord, I think, both because of the resonance with President Roosevelt’s hugely popular New Deal of the 1930s, but also because it serves as an umbrella to unite the disparate forces concerned about the collapse of the Earth’s and humanity’s life support systems with those angry at the way the economy is managed.

Where will the money come from to fund the deal?

To understand that, we must get back to basics. All money originates not as a commodity – gold or silver – or as somebody’s piggy bank savings, but as a very human, or more accurately, social thing. All money originates as a promise to pay, as Joseph Schumpeter once argued.

Credit – based on the Latin ‘credo’ – is nothing more than a promise to pay. All those who have credit cards know there are no savings in the bank when the credit card is used to buy a smartphone. Instead the spending on the credit card is paid for later with the holder’s income – at the end of the month.

As all money starts as credit, and as all credit is a social construct – a person’s promise to another – money is not finite in the way that for example, gold is finite or that bitcoin are finite in number. Instead, money is a social construct.

However, as we also know trust is essential to the money system, and it is only possible to make promises and gain a credit card if one has income. Different individuals with different incomes have different credit cards. Mine entitles me to spend up to £5,000. A Saudi princess, by contrast, would have a credit card that entitled her to spend a great deal more – because the bank would know she is backed by a great deal of income.

Governments have much bigger equivalents to our credit cards. They are backed by millions of taxpayers providing monthly and annual income. Britain has about 30 million taxpayers. The United States has about 141 million taxpayers. Poor countries such as Malawi have far fewer and may not even collect taxes efficiently. So, depending on how they manage public services like tax collection, governments have the ability to raise finance for spending on a scale that eclipses the spending power of yours truly or even a Saudi princess. If they do not have a system for collecting taxes or the key public institutions that manage credit – like a criminal justice system for upholding contracts – then their ability to raise finance and invest in employment would be limited.

As we all know from our own experience, once we are employed, a wage or salary is paid at the end of the week, or month. Work generates income. Not just our own income, but income for the government in the form of tax revenues. Tax revenues allow governments to ‘balance the books’ and keep the public finances in order.

So, for governments the answer to the question: how is the credit paid for? is fairly straightforward. It is paid from income generated by taxpayers – after credit is invested in the economy to create employment and then income.

That is how all government spending is financed. The financial system is, in a sense, circular. It is not a system with just one tap – the money or credit or borrowing tap. It is a system that requires the good use of the credit ‘tap’ so that it creates investment and employment to generate income for repayment.

Of course, it can get very messy. If I spend my credit card on gambling, I risk not being able to raise the money to repay. If governments spend money on activity that cuts the nation’s income – through war, or unemployment – they will find it tough to balance the books.

That is why investment and employment are so vital to the stability of a financial and economic system. They provide us with jobs and income. Above all, they help government pay for credit, balance the books – and finance the Green New Deal.

How has your background in international financial infrastructure influenced the Green New Deal?

My background is in the field of sovereign debt. I helped lead an international campaign to cancel the debts of the poorest countries – Jubilee 2000. By the turn of the century we had persuaded big international creditors to cancel $100 billion of a huge build-up of unpayable debts incurred by some of the poorest countries. They had been lent money, in foreign currencies, by reckless creditors who colluded often with corrupt government borrowers – when their citizens had little capacity to repay. About $100 billion was written off for 35 countries.

That experience forced me to turn my attention to the international financial system – or architecture, and the way it is deliberately structured to benefit creditors, especially private creditors at the expense of sovereign debtors. I gained a stronger understanding, via the work of John Maynard Keynes, of the importance of managing the currently anarchic international system if governments are ever to have the ability to finance activity – like the Green New Deal – at a domestic level.

How do you hope readers will be influenced by your book ‘The Case for The New Green Deal’?

I hope that my modest little book will help green campaigners to understand and integrate finance and economics into their campaigning and that those concerned about economics and finance will finally start taking the science of earth systems breakdown seriously.

‘The Case for the Green New Deal’ is published by Verso

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