The climate crisis is a major problem, and one that will need substantial changes in the way that we live in order to address it. One of the realities of this is that there must be a cut in living standards to achieve these changes, a fact that the Green New Deal at best seeks to obfuscate, and at worst is knowingly ignoring.
The issue is revealed by their claim:
‘The Green New Deal will massively improve energy, housing, and transport for us all – and achieve ambitious climate goals in the process’
Ladies and gentlemen, boys and girls, most of us have entirely satisfactory energy, housing and transport. The only reason they need to be improved is that their real costs – including the pollution they cause – is not being paid; we are damaging the environment by our energy use, housing and transport choices, and not paying for it. To avoid that damage, the ‘Green New Deal’ is proposing to spend a lot of money, but it has got to be paid for somehow. This is where the sneaky confusion (or is it deliberate deception?) at the heart of the Green New Deal kicks in.
Economics is about the creation and allocation of economic resources in the broadest sense. The national income is a certain sized cake; the economic debate is about how to allocate the product, and how to make the cake grow. Because the cake is measured in units of currency as a matter of convenience, it can then become confusing about whether we are measuring the resources – or the cash that is being generated. Add in the role of financial markets in moving ever more unreal money around, and idea that ‘our finance sector will serve the public good… and fund climate solutions and progress’ can emerge.
Let’s be clear: in order to make the changes necessary to avoid a climate catastrophe real resources, not just money, will need to be spent. At present those resources are doing something else in the economy:
They are providing consumption for people
They are providing government expenditure
They are providing investment so that firms can maintain or increase their production.
The resources to avoid the climate catastrophe must come from one of these pots. They can’t come from anywhere else.
Looking at this another way: as I said before, at present most of us have entirely satisfactory energy, housing and transport. The climate crisis needs us to accept that we can’t keep our present experience of energy, housing and transport; in effect we are getting these things by damaging the environment, and that damage is going to HURT us soon. Something has got to change to stop us doing damage to the climate; in effect we must consume less.
To be fair I’ve oversimplified to be clear; some of the investments under the Green New Deal would create returns on any basis. Thus expenditure to improve insulation is likely to be a gain all round, and solar panels and wind farms may be able to offer electricity as cheaply as our present set up – though the cost of ensuring the lights stay on on cold, windless, winter nights must be included in the cost calculation. There is thus a good case for enabling such investments in various ways: a specific fund for government buildings to be better insulated (hospitals, prisons and offices could all, surely, do better).
However the core deception of the ‘Green New Deal’ remains; the resources for less profitable changes have got to be carved out of other expenditure and that will reduce living standards. They use the term ‘New Deal’ to appeal to the experience of the 1930s; the difference is that then there was massive underutilisation of capacity in the economy, which the New Deal was able to use to rebuild the economy. That is not the situation now; our capacity utilisation is near the sustainable maximum, and our unemployment is low.
We need to address the climate crisis. An honest answer is to increase taxes on polluting items so that private investment will be released to reduce their pollution. The Green New Deal would generate random inflation (as it competes for resources), substantial constraints on the economy, and a less efficient solution. But because it can be sold as painless, it appeals more than my answer. Yet the scary thought is that an honest answer can’t be sold to the population; the losers will whinge too loudly for politicians to be prepared to overrule them. Gretta Thunberg is depressingly thin on specifics – perhaps wisely because she risks alienating anyone who’d lose out as a result of any specifics that she offers when she’s emphasising the need for change. But really we need to be honest; it’s going to hurt. The Green New Deal is an attempt to pretend otherwise; this is evil.