Quote of the week: the need for a Green New Deal

WindTurbines

The following extract was penned in a book on globalisation published back in 2017 which, given the global crises which have subsequently occurred, seems like some time ago. However, its spirit and application across the world are surely needed now more than ever. The longer that governments leave such interventions on the back burner, the more perilous and costly the economic, social and environmental future is likely to be. The scale and disruptive nature of the change that is required will only increase the longer these kinds of policies are neglected.

“The overarching policy need for all countries, domestically and through international co-operation, is to pursue a Green New Deal. This needs to include investing in domestic and industrial energy efficiency to reduce the demand for energy; investing in renewables – wind, solar, hydroelectric, wave and tidal power – to meet these (reduced) energy needs; cutting transport emissions through regulation, innovation and localisation; altering consumer behaviour through public engagement and involvement; and shifting corporate behaviour and management decision-making through the use of legislation, regulation and taxation, and by promoting greater corporate diversity. This increased corporate diversity should include the active use of public enterprise. A small number of companies acting in environmentally friendly ways can have important knock-on effects for other companies in their networks. This is one use to which new public enterprises could be put. Increased corporate diversity should also include stronger co-operative, mutual and employee-owned sectors. Such firms may be more suited to local, regional and national operation rather than global, which is a further benefit in terms of strengthening the local in the economy – across the world.”

Jonathan Michie (2017), Advanced Introduction to Globalisation, Cheltenham: Edward Elgar, p.125-6.

Misleading the public on tax: burdens, incentives, well-being and society

taxThis post was inspired by the platitudes on tax currently making the headlines in the UK during the current leadership contest for the Conservative party, the winner of which will become Prime Minister. But the issues apply far more widely, to any country with a functioning economy and tax system!

Following the resignation of the UK’s Conservative Prime Minister, Boris Johnson, around a dozen candidates are expected to declare themselves in the running for leadership of the party and the next premier. Many have already stated their intention to do so. They have started by setting out some policy pledges. They have all promised to cut taxes, within varied time frames, from day one to when circumstances allow, though the majority seem to want to go ahead swiftly.

In the midst of global economic, social, and geopolitical crises, perhaps circumstances will not allow for some time. But whatever happens, the competition to be the next UK Prime Minister looks to be stimulating an unhealthy mix among the candidates of fantasy and lies with regards to prospective policymaking.

Announcing the wish to cut taxes may make some headlines (and that is probably the point), but so far such statements are disappointingly devoid of economic, social or fiscal context. The pressure for politicians to overpromise, ultimately leading them to underdeliver, may be difficult to avoid, but it keeps pouring fuel on the fire of cynicism with regards to the political class. It is helpful in this kind of situation to soberly contend with some of the misleading rhetoric and analysis regarding taxation, and the public spending which it funds, lest we forget amidst all the excitement regarding future cuts to the former. Continue reading

Ten reasons why we live in interesting (economic) times

599px-The_Blue_MarbleFor those wedded to economics or political economy as ways to help explain the world, we live in interesting times. By this I certainly do not mean that things are going well. There is plenty that is not. But humanity’s problems of necessity call forth potential solutions, even if they prove at times to be the wrong ones. Sometimes we can get it right, and that is cause for hope.

This post takes the form of a list of the current issues that call for economics to address them. The ten reasons are ones that I feel are particularly pressing. I hope you agree. Continue reading

Steve Keen’s manifesto for a new economics

Keen-Interview

A brief review of prominent heterodox economist Steve Keen’s latest book, in which he lays out his vision for the future of economics, arguing that the neoclassical approach has been highly damaging to humanity, and needs to be replaced.

Steve Keen has a new book out, entitled The New Economics – A Manifesto. It is the latest chapter in the author’s tireless efforts to replace neoclassical economics and its damaging dominance of mainstream thinking with what he argues is a more scientific and explanatorily powerful body of thought drawing on post-Keynesian and, more recently, Biophysical economics.

Keen, who has been a heterodox or non-mainstream economist since his student days, has been critiquing neoclassical economics for many years. Post-Keynesianism takes its main inspiration from arguably the twentieth century’s greatest and most influential economist, John Maynard Keynes. It draws on the work of Keynes’ followers at Cambridge University, and those who studied under or have been influenced by them, though post-Keynesians remain a radical minority in the grand scheme of things.

Keen was one of the few economists to correctly predict a major financial and economic crisis in the years leading up to 2008. Not one of these iconoclastic souls was a neoclassical. In the 2011 edition of his book Debunking Economics, he painstakingly deconstructed much of neoclassical theory, and began the task of laying out the monetary economics he felt should replace it. Continue reading

Many Middle Ways: Mark Carneyism – a former central banker’s political economy

MARK_CARNEY_COLOUR_RT012-scaledThis is the latest post in my series on the ‘many middle ways’ that are possible for our political economic system, which lie somewhere between market fundamentalism and state socialism, both of which I reject as unworkable if we wish to achieve widely-shared and sustainable prosperity alongside the promotion of human rights and liberty, broadly conceived.

Mark Carney is a former governor of the Bank of England, and before that of the Bank of Canada. He is now UN Special Envoy for Climate Action and Finance, alongside a number of other advisory roles. Before he began his career in public service, he worked at investment bank Goldman Sachs. His book Value(s), subtitled Building a Better World For All, was published earlier this year. It is quite a tome, coming in at over 500 pages. It has been praised by a variety of influential individuals, ranging from Christine Lagarde, President of the European Central Bank, to popstar Bono. Continue reading

Ending Covid with enlightened self-interest

The battle against Covid is coined by Martin Wolf in today’s Financial Times as a ‘gobal war’. He argues that the pandemic can be defeated within a year with the right approach to policy across the world. If this can be done, it will be optimism fulfilled. But it will require significant global cooperation, and support for the poorest and most vulnerable countries.

The advent of the pandemic shows that global health is very much a public good, requiring public action to manage effectively. Globalisation has suffered over the last year or so, with disruption to global supply chains and efforts to more closely manage national borders in attempts to prevent the importing of cases of the virus. Lockdowns have created major economic damage, both both nationally and, inevitably, internationally. No prosperous society or economy can remain isolated from the rest of the world, and while some of the richest can withdraw into greater self-reliance for a time, there remains a need to sustain international integration. Capitalist prosperity relies in part on the growth of global markets. Other pressing global crises remain, particularly environmental concerns such as climate change, pollution and the loss of biodiversity. Covid is diverting the energies of policymakers at a crucial time. Continue reading

Stepping back for a more holistic vision

599px-The_Blue_MarbleLast night I watched an episode of the BBC documentary Earth From Space, which used satellite imagery to observe the patterns, colours and structures of the natural and man-made world from space. Each episode provided a commentary on different aspects of the Earth, zooming in to examine in some detail the activities that such an elevated view draws one in to see. It was truly fascinating, and made me think about the consequences of the pictures taken of Earth as a whole in the early 1970s, known as The Blue Marble. This became a symbol of the environmental movement, and spoke to many of the frailty of the natural world as a whole. Around the same time, The Limits to Growth report was published and, though it remains controversial, it continues to inspire popular resistance to and criticism of the growth trends of industrial economies and populations across the world. Continue reading

Questions of fairness in political economy – what should we do?

This post is a thought experiment, for myself as much as for my readers. It is laid out as a series of questions on some of the most important topics in political economy and economics. At its heart, it tries to stimulate thinking about the highly loaded and subjective notion of fairness, and ultimately asks: what is fair, and what is unfair? Careful readers will note that the way many of the questions are framed presupposes certain value judgements. The order in which the topics are presented is not intended to imply that some are more vital than others, but maybe they reveal something about the author himself.

Taxation and public spending

Is it helpful to see taxation as theft or as the price we pay for organising a civilised society?

Which is fairer for the poorer members of society, and which for the wealthy: taxation that is progressive or regressive? Which of these choices creates greater incentives for productive activity?

Do high rates of tax penalise economic success?

Is it fair for wealthier individuals to pay a larger proportion of their income in tax than poorer ones?

Should we tax income more from wages, or from profits?

Should we rely more on taxing income or consumption?

Should we tax wealth at a higher rate than we tax income?

Should we emphasise the taxation of wealth in the form of housing, land or financial assets?

If the distribution of income and wealth is perceived as unfair, and even inefficient, should the government rely more on redistribution via taxation and public spending, or predistribution via changes to the regulation of the economy, so that income and wealth prior to taxation and public spending are more equally distributed?

Is it fair that those with the highest incomes, who are required to pay the greatest absolute amount of tax, are more able to employ those who can help them evade or avoid it? Continue reading

From dirty to green: alternative pathways of industrial development

The history of economic development shows that long term increases in living standards and poverty reduction require sustained rises in productivity. In turn, this requires investment in improved and evolving technologies. What is more controversial, even among development economists, is the claim that some sectors are more important than others in this process, which argues for industrial policies that target sectors with a greater potential for productivity increases. Manufacturing, as well as some service sectors, seem to have this potential. Historically, industrialisation has been associated with this process.

The first industrial revolution in the UK took place in the 18th century and was associated with the spread of steam power, the use of machinery and the factory system among other advances. It subsequently spread to continental Europe, the United States and Japan in the 19th century. These developments transformed economies and societies and were associated with rapid increases in population.

Technological progress can take place gradually, with new knowledge and discoveries building on old ones. It can also give rise to more dramatic revolutions across many sectors. Many of the technological advances and growing output associated with the early industrialisers and their followers have proven to be ‘dirty’ or polluting and damaging to the environment. In today’s global economy, we are more aware than ever of the need for a transition to a greener, less damaging and more sustainable path of development. Yet there are many poorer nations which, if they are to significantly ‘catch up’ economically with their richer neighbours, will need to develop a larger industrial base in order to achieve rapid increases in productivity and living standards.

In order to do so, it is simply not sustainable for such nations to copy the ‘dirty’ path of the early industrialisers. A number of successful later developers, such as South Korea and Taiwan, employed interventionist industrial policies which dramatically accelerated growth to rates far greater than those of the early industrialisers, and enabled them to become rich within a matter of decades. The nature of these transformations was the product of a particular historical context and are not possible for many poor and emerging nations. Having said that, late developers, by definition, still have the potential to copy already existing technologies from richer nations rather than having to develop them from scratch, so fairly rapid growth remains a possibility for them. But with today’s concerns about the environmental consequences of economic growth, from pollution and climate change to losses in biodiversity, current late developers need to forge a ‘cleaner’ and greener development path. At the same time, they must be given space and even helped to adopt policies which reduce poverty and increase living standards, and this means promoting sectors with the potential for rapid increases in productivity.

There is therefore a need for the evolution and adoption of green technologies to help spur development paths in all nations, including the poorest. The latter need to ‘skip’ using dirtier and less sustainable technologies, since their global impact is too damaging.

The leaders and citizens of many poorer and emerging economies have argued that they should be allowed to follow the industrial development paths of today’s rich countries. The latter are seen as being hypocritical in denying poorer nations the (dirty) path that they themselves followed in their pathways to wealth and prosperity. This is a fair point. But globally speaking, we cannot afford for them to do so. What is needed instead, as already mentioned, is a green and sustainable development path. The technologies to support this process are already with us, and are continually evolving and improving. Today’s rich countries did not have the green option during their earlier industrial development, while today’s poor countries do. The right moral, economic and most sustainable option is for today’s richer countries to enable the transfer of cleaner and greener technologies to their poorer neighbours, and to encourage their rapid adoption and diffusion.

For today’s wealthiest nations, it seems that they had no alternative pathway to industrial development other than a dirty and polluting one, and today’s green technologies have been built on a dirty past. But today’s poorer nations do have a different option. In order to promote their sustainable development, make rapid inroads into poverty and significantly raise living standards, they need help from those who are most able to give it.

Economics and nature – approaches, problems, solutions

599px-The_Blue_MarbleIt is sometimes easy to forget the ‘other’ crises facing the world as we become absorbed in dealing with Covid-19. Opinions may differ, but climate change and, more broadly, humanity’s impact on planetary ecology, have not gone away. Stark inequalities of income and wealth, within and between many nations, are also key to much dissatisfaction, distress and conflict.

This post will look at some of the approaches used to study the economics of the ‘environment’, or ‘nature’, as some would have it. It identifies some of the problems addressed by these approaches, as well as some possible solutions, and raises some questions usually neglected by mainstream economics. These include ideas studied by political economy, such as treating economic growth and development as a process of socioeconomic (and natural) transformation, rather than a linear process of factor substitution and accumulation subject to random shocks. Continue reading