The Green New Deal

Abstract from a talk by Colin Hines at the Gaia Foundation in September 2009. Written by Stephen Frank.

Colin Hines coined the term 'Green New Deal' in 2007 and brought together a group of finance, tax, energy and environmental experts to form the Green New Deal Group. In July 2008 they published a New Economics Foundation report 'A Green New Deal: Joined up policies to solve the triple crunch of the credit crisis, climate change and high oil prices'. Colin is an advisor to the Green Member of European Parliament Dr Caroline Lucas, author of the book 'Localization - A Global Manifesto (Earthscan) and before that was the Co-ordinator of Greenpeace International's Economics unit having worked for the organization for 10 years.

Colin Hines sees globalisation benefiting Big Business while making the countries it exploits poorer. Before this credit crunch, international competitiveness and the opening up of markets to get the cheapest deal anywhere in the world seemed like a natural, inevitable way to proceed. Every country in the world was warned not to tax the foreign businesses that employed their people too heavily. If they did, those businesses and their money would move to other countries where they could get cheaper deals. But less revenue from lower taxes also led to lower public expenditure and unfortunately, this was accompanied by lower employment, and lower social and environmental standards.

Big Business activated globalisation. It was very influential in persuading politicians that all the old constraints on banks made them inefficient. Stopping the constraints was the way to open up world markets. The goal was maximum trade and money flow for maximum profit. People bought into it because it was fuelled by massive credit that made many feel rich. Even if you didn't have much money, you could have credit. Even if you hardly owned anything, you could get on the property ladder.

However, a handful of economists, politicians and journalists could see that this wasn't going to last. In opposition to mainstream thinking, they saw free trade, open markets, globalisation, international competitiveness as the root causes of many of the problems that are now emerging. Colin Hines was one of those who sensed the danger. He "knew it was going to be 1929 again. Not totally the same. But clearly, something as bad as that was coming - you could smell it." Consequently, he began researching Franklin D. Roosevelt's New Deal and out of this developed the concept of The Green New Deal (GND).

In 1929, as now in 2009, finance was the problem. Then it was shares - the newspapers and the radio were full of hot tips - whereas this time around it was property, with too many people borrowing money to buy property to get richer and richer. After the 1929 crisis, Roosevelt realised he had to put finance back in the cage by regulating the banks and financial transactions. This is beginning to happen now too. However, in contrast to the cuts being proposed now, the second thing Roosevelt did was to spend huge amounts of public money on building or rebuilding the infrastructure - roads, dams, bridges, public centres, schools. This generated 10 million jobs between 1933 and 1937. In 1929, the gap between rich and poor in America was huge and subsequently the third thing Roosevelt did was to tackle inequality so that more people could earn sufficient money to spend some again. This commerce kept the system going. He was responsible for what was called the Great Compression and because of his policies the gap between rich and poor was effectively reduced. This lasted all the way through Eisenhower, Nixon and Kennedy, right up to Reagan and Thatcher when the constraints on the banks were removed and which has led to a growing gap between rich and poor again. However, this time around, the escalation in inequality in most countries of the world went hand-in-hand with a rapacious use of the world's resources and a massive exploitation and displacing of the poor - particularly in developing countries - all fuelled by massive credit.

Colin Hines' GND updates Roosevelt's concept within an environmental context. It consists of three sections: Firstly, reintroducing various financial controls to try to make finance serve society rather than society being at the mercy of finance.

Secondly, tackling inequality. This could occur partly though making the taxation system more equable. For instance, something like a quarter of the money that goes into government subsidies and pensions goes to a tiny section of the wealthiest people. This should be remedied. Colin would also like to see a gradual increase in carbon tax and also suggests fat and sugar taxes to reduce the expense to society of the increasing obesity in all age groups in this country. He would also like to tackle inequality internationally by changing the tax laws. He suggests that it should be made legal that all companies are required to declare and pay tax on their profits in the countries where they make them. This would stop what is called transfer pricing, which is when a company pretends it loses money in Africa, for example, and happens to make it in Lichtenstein where it is not taxed. Thus Africa loses the tax revenue it is supposed to get.

Thirdly, job creation. What would generate a great many jobs where they are most needed would be to link up and resolve the two crucial problems of climate change and unemployment. Colin suggests that the energy structure of the entire country could be restructured by training a carbon army to examine every building in Britain with a view to making them more energy efficient and converting them to produce their own energy.

Roosevelt raised a large amount of public money for his New Deal. Colin points out that, apart from the public money that needs to be raised for the GND through substantial taxation, there is, at present, a large amount of private money looking for a home - pensions, insurance, personal savings, etc. People are very uneasy about going back into the stock market and they are no longer getting good returns from banks. A solution to finding a home for all the private money could be to re-introduce Local Authority Bonds, but this time as Green Local Authority Bonds. Green Bonds that are used for the good of the environment and will help localities and give a good return are bound to attract investors.

When feed-in tariffs are introduced in the UK in 2010, the energy utility companies will be obliged by law to purchase sustainably produced electricity generated by small, renewable energy producers at a higher price than electricity generated by fossil fuels. The difference in price between the two will be added to the bills of all of those still using fossil fuel generated electricity. Thus, in effect, those continuing to use fossil fuel generated electricity will be helping to kick-start and build the sustainable energy industry. The economics of using this system are already well known as it has already been done in various parts of the world, with Germany leading the way. They report a £50 billion project, making flats and apartments more energy efficient with renewables, after which they introduced the feed-in tariff to generate the money to pay the bonds which paid the people who put the solar pv panels on their roofs, etc. It's a huge industry in Germany. 43 other countries are doing it too, with Britain finally also about to join.

These bonds would have the potential of offering pension schemes and insurances, etc, a safe return based on using a percentage of the difference in price between the two groups as described above. Again, in effect, those still relying on fossil fuel generated energy will be paying off these bonds. But the idea is that having to pay more will serve as an incentive for people to switch to sustainably produced energy sooner rather than later.

Within the open market, it is likely that many companies would threaten to leave for cheaper job markets if the government introduced substantial taxation to pay for the GND. This could threaten the political resolve towards a GND. However, at present people do not yet see an alternative to the free market. They still believe we need to out-compete others, such as the Chinese. However, there has been a 90% drop is world trade since the credit crunch and Colin believes the pendulum will swing even further away from open markets and globalisation. The future, he believes, doesn't lie in exports for companies but in domestic demand, away from globalisation and towards a protectionism that cares for the local environment and produces its commodities locally. Everything that can sensibly be produced within a nation or region should be so produced. Long-distance trade should be only for acquiring what cannot be provided within the region where people live. He believes that the end goal of all trade and all domestic policy for re-building the economy should be through securing local and national livelihoods in ways that minimise carbon use and the use of raw materials. Everything has to converge towards re-building and protecting the economy and the environment in sustainable ways. If we do this, we can rebuild the economy whilst saving the environment.