One solution is omnipresent at climate movement demonstrations: «System change, not climate change» is a slogan seen on cardboard placards from Kiruna to Cape Town, from Toronto to Tokyo. What is clear to anyone seriously coming to grips with the climate crisis is that the green transition must go far beyond what we know today from UN climate conferences or from debates around Switzerland’s CO2 law. But how could this system change be effected? How, for example, would the global financial system have to be structured such that it promotes rather than further hampers the green transition across world society? In her book «The Case for the Green New Deal» published in the autumn of 2019, British economist Ann Pettifor attempts to provide concrete answers to precisely these questions. In a nutshell, Ann Pettifor’s Green New Deal means building a society that guarantees access to education and health care for all, and an economy based on renewable energy sources, labour-intensive work, an environmentally sustainable public transport system, and one that is divorced from the growth paradigm.
In Ann Pettifor's view, the discussion around the right financial system throws up one central question of political power – who will decide where and under what conditions capital is invested, who controls key levers of the political economy and can therefore shape the architecture of a social system. In the context of the green transition, Pettifor raises the question as to whether the financial system should continue to be geared towards satisfying the individual interests of owners of capital. Or whether it can be so organized as to promote the building and maintenance of social structures that can ensure that the foundations of human civilization are preserved in an age of climate crisis. The current premise of the financial system, whereby every investment must in principle offer scope for profit, requires a growth imperative. But according to Pettifor, economic growth is ultimately possible only when fossil resources and human labour are exploited, with the well-known environmental and social repercussions. This is why, in Pettifor's view, the present financial market architecture makes the ecological transformation impossible.
A three-step plan
Pettifor's implementation plan for the Green New Deal (GND) is based on three premises.
First, time is running out. We have ten years in which to reduce worldwide CO2 emissions from fossil fuels to net zero. Failing that, we will miss the 2° target set in the Paris Climate Agreement. It is too late to hope for technological innovations that could resolve the contradiction between growth and environment. All that remains is changing the rules of our financial system as quickly as possible.
Second, the financial resources promised by the signatories to the Paris Agreement are not enough to achieve «net zero» by 2030.
Third, if the green transition is to be achieved quickly, comprehensively as well as democratically and legitimately, it must be socially equitable.
For Pettifor, the GND is necessarily a global project, the simple reason being that the natural bases of life – which are crucially dependent on climate – know no borders. Despite this, the GND will have to be implemented chiefly within nation states. This is so because Pettifor does not trust the competent multinational institutions, given their current make-up, to develop the political energy needed to implement the highly ambitious plan. For this, Pettifor places more faith in the global networks of social movements and in civil society. Together they can develop transnational policy goals and press ahead with them in each national context. Pettifor believes that this must all be achieved within the framework of democratic structures. If the Green New Deal is to garner the requisite political majorities, it must bring social advancement for the socially underprivileged. It will have to take on board feminist causes just as it does the fight against social inequality and poverty in the countries of the South.
The author admits that these are very high ambitions. However, it is nothing less than the very survival of human civilization that depends on their realization. Only strong political leadership of this process can in the near term mobilize the financial resources needed to set the green transition in motion over the next ten years. Only policymakers are able to channel financial market flows into the areas where they are urgently needed for the climate turnaround. The emergency situations created by the national socialist threat during the Second World War, or the stabilization of the global financial system in the wake of the 2008 crisis are proof that nation states can indeed undertake such short-term mega-projects. They mobilized enormous amounts of public funds in a short space of time to fund armies or to bail out the finance industry. For that, however, nation states need the appropriate, all-encompassing economic policy space, which today's financial system does not afford them. So curtain up for the reform of the system.
A three-pronged reform project
- The global offshore industry must disappear. It currently enables billions of dollars to circulate untaxed around the globe, thereby depriving public services around the world of hundreds of billions of dollars. Capital flows within corporations and in the realm of asset management must be disclosed and the relevant profits fairly distributed worldwide. Pettifor thus endorses the analyses of the Global Alliance for Tax Justice (GATJ), of which Alliance Sud is also a member.
- New financial market regulations are required to empower lawmakers to mobilize private capital for public investments such that it can be used for the green transition. Under a GND financial system as conceived by Pettifor, tax revenues would therefore not go exclusively towards government spending. With a well-funded budget, the State is also regarded by private lenders as a reliable borrower and can therefore use their loans at modest interest rates for GND investments. This nevertheless calls for new monetary and financial policy rules. Pettifor points out that global financiers benefit considerably from the tax-funded public sector and in particular from central bank services and resources, and sees this as a powerful lever in the hands of policymakers. The 2008 financial crisis for example showed just how much certain key industries – such as Switzerland's finance industry or the US automobile industry – depend on public resources when facing possible collapse as a result of a systemic crisis. The private sector’s dependence on the State as the «lender of last resort» is something that lawmakers should leverage in the future so as to place private capital at the service of the general public.
A strong fiscal authority with considerable economic policy space is paramount especially from the standpoint of many countries in the South. Whereas in Europe and North America the liberalizations of the past 40 years have led to privatizations of public services and the consequent weakening of democratic power structures, in African and Latin American countries the neoliberal paradigm has hampered independent efforts to build stable public services in the first place. The elimination of national borders with respect to international capital flows forced many of them into the International Monetary Fund and World Bank’s credit and debt regime. This threw them back into the age of colonial dependency. Systemic reform takes on greater urgency in these times of climate crisis, including in the global South. Eliminating the exorbitant levels of tax flight from former colonies, from which Switzerland too continues to benefit appreciably, would at last enable lawmakers in those countries to develop economic concepts that would liberate them from financial and political dependence on foreign donors, who are guided by their own interests.
- In Pettifor's view, central banks play a pivotal role in GND funding. Their low-interest policy, which has persisted since the financial crisis, is at odds with orthodox monetary policy theory whereby sustained low interest rates outside of crisis periods stoke inflation and lead to the destruction of value. Pettifor wants to see this interest rate policy used to fund the GMD. If this is to work, it can no longer be that banks, investors and the superrich are the ones profiting the most. Cheap money must benefit the entire society. This requires resolution of the question of debt limits. They restrict the scope for new government debt – i.e. borrowing for public investment – and instead of leading to stronger public sectors, promote a rigorous policy of austerity. Since 2008 this has produced further privatizations of public goods and placed greater power in the hands of private investors at the expense of lawmakers. This is how debt limits restrict the room for manoeuvre of democratic forces and secure the social power of financially powerful private individuals vis-a-vis the democratic interests of the wider community.
Favouring the primacy of action over money
Ann Pettifor's Green New Deal should help bring about a green economy without the growth imperative. In this steady-state economy, local, decent work should replace the use of fossil fuels and the exploitation of workers in the global South, where wages today are often too low to allow for a life of dignity. The economies of the rich countries would again become labour intensive rather than capital intensive. And the countries in the South would be rid of the pressure on wages that has so far kept huge numbers of their people in poverty. Many of the activities that we in the old industrialized countries have contracted out to low-wage countries would come back to us. Instead of producing cheap new goods, countries where the services industry is currently predominant would cease to be almost exclusively service providers but would also resume manufacturing, repairs and conversion. This task would be funded directly or indirectly through public investments. If such investments went into a labour-intensive society with good wages, this would prevent the destruction of economic value by cheap money, says Pettifor. Strong public institutions would have to ensure equilibrium of demand and supply of investment opportunities. The economy would transition to one without the growth imperative, but with secure livelihoods for all. The only losers would be the small and dwindling global minority who currently live exclusively from making their money – i.e. billions of people in fact – work for them.
Lastly, Pettifor wants to turn our society’s guiding principle on its head: whereas today we do only what we can afford, in the future we should be able to afford all that we can do.
Ann Pettifor, The Case for the Green New Deal, Verlag Verso, 2019, ca. CHF 24