Why is there a problem?
Look around. Global Climate Change is causing droughts and bushfires in Australia, making hurricanes in India and the USA more frequent and intense, melting polar ice caps, eliminating coral reefs, acidifying the ocean and raising average temperatures around the world. Biodiversity is under catastrophic threat due to habitat destruction contributing to the conditions which allowed disease to fester in bats and create the conditions necessary for corona virus to be passed on to humans. The global economy is in crisis as the fundamental resource inputs which supply it become more scarce and the pandemic cripples its normal operation. There are now twin global economic and environmental crises.
Every country from the USA to China to Europe to Australia is reeling from the economic effects of the pandemic with unemployment reaching levels not seen since the Great Depression of the 1930s. At the same time, global economic inequality of wealth and income is at a level not seen at any point in history. Without a universal health care system, The United States is losing its ability to guarantee the fundamental health security of its citizens. Global technology giants operate globally only paying a trivial amount of tax in any jurisdiction. With Brexiteers in the United Kingdom, Trump in the United States and other populist nationalist movements advocating authoritarian policies around the world there are a number of worrying trends in the global economic and political environment.
What was the new deal?
In the 1930s, America was in the grip of the great depression and stuck in a vicious cycle of government saving and economic recession. Unemployment spiked at over 30 percent. There were ques at soup kitchens for food and vast swathes of humanity struggled to survive. High interest rates encourages excessive saving creating still greater economic stagnation. The accepted economic wisdom of the time was that the government had to continue to save money as much as possible. This was eventually challenged by the great and at the time, radical economist John Maynard Keynes.
Keynes reversed the accepted wisdom and said that the government should borrow money, go into debt and spend big to stimulate the circular flow of income and restart economic growth. He went as far as to say that we should be paying people to dig holes and then fill them up again if only to reestablish the circular flow of income. Keynes was consulted by President Roosevelt who made the idea part of the policy platform of his presidency and implemented it in government. The policy was successful and America returned to a state of economic growth.
So, what is the green new deal?
The green new deal can be an amorphous concept because depending on the source which is relied upon, its exact characteristics are not clear. However, there are some common elements which emerge from the debate. Transitioning the world to an economy based on renewable energy is always an important element. Renewable energy is needed both in order to reduce carbon emissions but also to address the depletion of the fundamental resources like coal, oil and gas which we currently use to power the world economy. A less well understood concept is the introduction of circular economics which emphasizes recycling of the basic material inputs of the economy that are becoming more and more scarce. Basically, barring a massive leap forward in an experimental technology like magnetic containment fusion, we need a war time sized mobilization of the production of solar panels, wind turbines, electric vehicles and batteries to replace the antiquated energy system we had relied on in the 20th century.
The green new deal involves guaranteeing employment for anyone that wants work and in some quarters involves introducing a universal basic income which is funded by a tax on global technology giants, perhaps even based on the value extracted from data acquired about us as suggested by Andrew Yang. It also involves increasing taxes on the extremely wealthy both in terms of assets and income. Industries and technologies like highly automated and localized manufacturing will be developed and the loss of employment that results will require that people be retrained or supported while they are looking for work.
The green new deal also means guaranteeing universal healthcare to everyone. Universal healthcare supports the productivity and longevity of the labor force. It underwrites the value of human life. Incidentally, countries with universal healthcare have weathered the global pandemic much better because testing was free and people were more readily prepared to come forward for testing when they knew it wouldn’t mean the possibility of bankruptcy.
Can it really happen?
Perhaps the most notable economist to lend weight to the argument is Joseph Stiglitz who has a nobel prize in economics and is the Nobel laureate in economics and Professor at Columbia University. The idea is now an essential talking point for politicians like AOC and Bernie Sanders. There are some elements of it that are already happening in a number of countries around the world. Spain has announced that it will introduce a universal basic income which will persist beyond the pandemic. South Korea has announced a comprehensive green new deal policy package. Globally, renewable energy is the fastest growing energy sector and electric vehicles are the fastest growing sector of automotive production.
The economic stimulus packages in Australia, the United States, the United Kingdom and Europe have elements which approach the universal basic income type measures that advocates of the green new deal have been contemplated for some time now. It seems clear that the green new deal is now not simply an impossible pipe dream of lefty climate activists but is evolving into an essential set of measures to maintain the fabric of global civilization. The political willingness to fight for these reforms and the acceptance of them by policy makers is what is now standing between the envisioning of this idea and its real world implementation.