Doing Nothing Costs The Earth

Democracy in the driving seat

Ann Pettifor has written many treatises that challenge the prevailing economic orthodoxy. The economists most recent work concerns the case, and need for, a Green New Deal which the PRIME Director contends is the nexus between monetary theory and the ecosystem. Modelled on Roosevelt’s New Deal and his abandonment of the Gold Standard, Pettifor envisages a future where the government, as opposed to Wall Street, will be the driving force of the economy.

The genesis for the Green New Deal emerged through a series of debates in which Pettifor and her fellow economists emphasized the link between credit, consumption and green gas emissions. But it was the inability of the environmentalists to not only acknowledge this link, but also their dismissal of unorthodox approaches to monetary theory, that initially led to huge rows between the two groups.

It was only after the Bank of England published it’s paper on money creation in 2014, that the environmentalists began to take Pettifor and her group seriously. The persistent arguments about the specifics of monetary theory on one side, and a lack of sufficient attention to the ecosystem on the other is, however, an indication that within the two disciplines there remains an attitude of ‘never the twain shall meet’.

Flawed

While Pettifor is sympathetic to the notion that the connection between gold and currency issuance is implicit to natural law and international financial stability, the economist nevertheless views this as a flawed part of the commodity theory of money:

“I don’t want to give the impression that I think it’s good for us to have endless streams of credit. The sound money people have got a point. But the way to manage that is not by limiting it to a bar of gold that is stashed away in a bank”, says Pettifor.

The economist adds:

“The point about gold is that it’s finite. But actually, society and the economy can’t be finite. We’re constantly changing. Right now, we need to transform our economy away from fossil fuels and towards a more sustainable energy. That is going to [literally] cost us the earth if we don’t get it right.”

Cognizant of the fact that money is a promissory note, Pettifor argues, not that banks be allowed to issue credit lines and extend them ad infinitum, but they be invested in sound economic activity generating income and tax revenues.

Pettifor’s broader point is that the implementation of a Green New Deal and the building of a sustainable ecology predicated on the development of a sustainable system of finance, will prevent the bankruptcy of a financial system whose traditional role has been detrimental to the protection of the earth’s finite natural resources.

Power with the people

The power to change the status quo lay in the hands of the general public who tend not to acknowledge the collective strength they have at their disposal. Pettifor has highlighted the fact that without the tacit support of American tax payers, the Federal Reserve wouldn’t have had the power to underwrite mega rich corporations like Apple and Amazon with cheap money in response to the Covid crisis.

Furthermore:

The Bank of England would not be able to generate the kind of huge liquidity that the public have come to expect from them if not for the unconditional backing by some 30 million British tax payers. And a former UK Labour government would not have been involved in the biggest bail out in British history. without first having applied any terms and conditions to the loan.

Pettifor calls for a global people’s equivalent of the Tax Payers Alliance to help rein in these kinds of excesses.

The economist notes that the starting point for a Green New Deal is not only that there be a shift in the lending system of the banks and a re-orientation of the mechanics of finance, but that governments need to be able to intervene, through the Central Bank, in order to kick start the transformation process away from fossil fuel dependency towards alternative industries.

Future direction

Essentially, Pettifor envisages the future direction of green investments by governments’ will involve them being split into four environmentally friendly sectors – transport, energy, land use and care. Controversially, the economist argues that within two to three decades what will be fundamental to the stability of the ecosystem, will be a requirement by nations, globally, to be more self sufficient and to limit their consumption.

Pettifor stresses that the Green New Deal is not a nationalist project, but on the contrary, an internationalist one – a wake up call:

“We have to work internationally and multilaterally in a coordinated and cooperative way – underpinned by public institutions – to tackle this huge crisis, which is the breakdown of the climate and of biodiversity.”

Pettifor’s solutions are threefold – 1) managing the spigot of credit, 2) managing the rate of interest on loans, and 3) empowering governments to spend not only as if on a war footing, but also in a way that recognises the limits of the ecological asset base. “As part of Jubilee 2000, we cancelled one hundred billion dollars of debt owed by thirty countries. So, I know it’s possible”, says Pettifor.