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A year on from the beginning of the pandemic, host, Ross Ashcroft, reconnected with Professor Steve Keen to talk climate breakdown, fraudulent economics, the so-called Great Reset and how we can think about charting a different course.

Prescient lessons and warnings

In the 1994 book, The Coming Plague, Laurie Garrett proffers prescient lessons and warnings about the threats posed to humans by a multitude of microbes. Within the context of the ‘global village’ where human beings are able to physically meet with one another over vast distances, microbes thrive. Therefore, every epidemic becomes a potential pandemic.

Garrett demonstrates how a false faith in the power of science combined with war, poverty and environmental degradation have all undermined the delicate ecological balance of the planet.

Garret’s central thesis is the starting point for Professor Steve Keen’s analysis of the contemporary economy. The author argues that existing neoliberal social structures, manifested in what William Baumol described as a spaceship economy, undermine public health.

“We are so confined by the system that we don’t have any room to move. Everything we do gets dumped back into the vessel we’re in”, says Keen.

The professor posits that what the post-COVID world is likely to throw into sharp relief, is the shift of the developed economies’ obsession with austerity which undermine the resilience of health care systems to respond to pandemics, towards a greater emphasis on publicly-funded infrastructural investments.

Keen outlines the crux of the matter:

“You have to build infrastructure and for a crises like this, it can’t rely just on the private sector. You need the state to be in there with the excess capacity that it can carry, whereas private organisations can’t afford to run such a large level of overcapacity at a loss.”

Economic illiteracy

The problem is that politician’s are rarely able to understand this level of economic literacy because their intellectual neoclassical-trained backgrounds, established solely on supply and demand market system fundamentals, prevent them from doing so. In other words, the political class are victims of their own false pretexts. The said class have no idea how the economy really works and they run nations as if they were private enterprises.

Further, publicly-funded infrastructural projects are seen as conditional upon the existence of surpluses. The Great Reset ‘Build Back Better’ mantra, ostensibly an indication of forms of excess capacity state intervention, is in reality, an advertising slogan devoid of any political substance. It is within this context that Sir Keir Starmer’s UK Labour Party, which effectively threw Jeremy Corbyn’s Green New Deal in the bin, is best understood.

Underpinning Starmer’s political strategy is the notion that by combining socially progressive policies with economically responsible ones, the party is able to run the economy better than their Conservative counterparts. But as Keen points out, this ‘best of all worlds’ conventional economic theory is, in reality, a fictional construct typical of those trained in the neoclassical school outlined above. The developed nations of the West, hamstrung by an obsession about eliminating government deficits, have effectively been conditioned into behaving like this by dogmatic politicians.

It doesn’t have to be this way. Keen, for instance, argues that the UK government could transform what is currently debt-based money by banks into a fiat base, thus freeing the public from debt. Also, they could invest in energy production and healthcare infrastructure. Human beings are, according to Keen, putting too much pressure on our natural environment.

Recently, Professor Sir Partha Dasgupta in echoing Keen stated:

“Our demands are far exceeding nature’s capacity to supply us with the goods and services we rely on’….We would require 1.6 earths to maintain the world’s current living standards.”

The disappearance of summer Arctic sea ice is indicative of increasing pressure being put on parts of the earths climate which is being tipped from one state to another beyond our power to reverse it.

William Nordhaus

In a September, 2020 paper, Keen was highly critical of the Nobel Prize winner William Nordhaus’ work on climate modelling. Keen claims that this modelling is based on the assumption that capitalism could cope with any environmental shocks, including climate change. But in order to do that, says Keen, Nordhaus had to show that the phenomenon was trivial.

In line with the neoclassical economists, “he [Nordhaus] literally mistook climate for the weather. The same thing was written by the Economist who wrote the economic section of the IPCC report in 2014”, says Keen.

Further, Nordhaus incorrectly assumed an interchangeable relationship between geographically specific income levels and temperatures. He also claimed that variations in climate and income over space occur over time.

Keen’s incredibly important paper appears, in part, to reflect the Dasgupta Review which concludes:

“To detach nature from economic reasoning is to imply that we consider ourselves to be external to nature. The fault is not in economics. It lies in the way we have chosen to practice it. Transformative change is possible. We and our descendants deserve nothing less.”

Keen, however, proffers an opposing approach arguing that Dasgupta attempts to put a monetary value on nature while simultaneously getting us to value it properly. Keen says that carbon rationing and non-monetary ways of thinking will help prevent humans riding roughshod over the planet.

On a more fundamental level, the economist believes that humans fall short in terms of understanding that they are intrinsically linked to climate and planetary well-being.

At present there appears to be an inherent inability to acknowledge that capitalism is overridden by planetary boundaries of a kind well understood, for example, by the physiocrats of the 17th and 18th century.

As Keen says:

“They were the ones who realised that land (ie free energy) is the source of all value. We need to get a complete reorientation of economics and take it back to the physiocrats into a physical-bio world before we are going to be able to cope with what’s going to come our way.”

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