More and more leaders want to tackle environmental and economic problems with a single shot. But even if you accept that challenge, how do you go about it?
GPEnewsdocs has let us be the first to feature a new interview this year’s on Trade & Development Report. It puts climate change front and center by focusing on the need to consider a “global” Green New Deal. Lynn Fries interviewed UNCTAD’s Chief Economist and UNCTAD Director of Globalization & Development Strategies Richard Kozul-Wright, who was one of the lead authors of this report, which he also presented recently to UN member states.
RICHARD KOZUL-WRIGHT: Just ask yourself, or look, how did the advanced economies pay for the fight against fascism? The United States entered World War II with four planes and a battleship and 10 guys with guns on the Delaware River. I mean, they were massively under militarized. Yet within four years, they had created the largest army in the world, a highly sophisticated military, aircraft, seafaring fleet. And they didn’t do that by talking about public private partnerships. I can tell you that. Roosevelt did not go to Henry Ford and say: Can you help me pay for the war, Henry? They did not go to the private sector. They used the mechanisms available to the public sector to generate huge investments to meet the challenges of the day. And essentially that, I think, is what needs to be done – in both developed and developing countries – if the challenges of the 2030 Agenda and the climate challenge are going to be met.
LYNN FRIES: Welcome to this report from GPEnewsdocs. I’m Lynn Fries. Everyone’s increasingly anxious on two fronts in particular: economics and the environment. And the real challenge is to find solutions to these two problems simultaneously. So states RKW in launching this year’s annual Trade & Development Report TDR.
The 2019 Trade & Development Report provides solutions to problems detailed in the 2017 & the 2018 TDR forming a trilogy of reports with RKW as lead author. Kozul-Wright is UNCTAD’s Chief Economist and UNCTAD Director of Globalization & Development Strategies. This newsdoc features a meeting at the UN Geneva as delegates of UN Member States are being briefed on the 2019 Trade and Development Report by Richard Kozul-Wright. We go now to our featured clips.
RICHARD KOZUL-WRIGHT: If you want to be kept awake at night, you should all read the book by David Wallace. Wells called the uninhabitable earth. Which is the, which is, which goes through the damage to the environment that has already taken place on the back of what is relatively a minor rise in global temperatures. And if we take the IPCC seriously, anything above two degrees is going to lead to catastrophic economic challenges. At two degrees C, I think IPCC estimates something in the order of $70 trillion of damage. Once you get to three degrees centigrade above or four degrees, which is where we would end up if we continued on our current growth path, then you’re talking in the order of hundreds of trillions of dollars in terms of damage from climate change by the, by the end of the century.
We know that. I think we all know that. No one’s going to dispute that. The point that I think is critical to our story is if we’re going to deal with those challenges that are being generated by a warming world and we’re going to address the 2030 agenda as well, then we have to have a massive investment push. The only way to solve these problems is through large scale investment. I think everybody acknowledges that. Investments in these interconnected public goods are the only way to solve the challenge. And we in UNCTAD have put a figure of $2 to $3 trillion on that. Some of you might have heard that Bernie Sanders, in his recent pronouncements of a Green New Deal for the United States has put the figure of $16 trillion over the next 10 years in terms of delivering on what he thinks are the necessary components of a Green New Deal. We’re talking about, as the World Bank says, from billions to trillions of dollars a year in the kinds of investments needed to address the imbalances and breakdowns that we see linked to climate and to economic failures of one kind or another. So, no, I don’t think anyone disputes that.
So the question is where’s the investment going to come from? That’s the big challenge that we all face whether you’re in the advanced world or in the developing world. The big problem that we have and when we look at this challenge and, and look to think about solutions to the challenges is that the rules of the hyper-globalization game, the rules that we tried to outline in our previous two reports, have not changed since 2009 in any fundamental way. And one of the unreported features of hyper-globalization is that it does not deliver sufficient productive investment. We are living in a world of insufficient investment and have been doing for 20 years.
So despite the fact that hyper-globalization – being pro-business, cutting taxes, keeping wages low – was going to be good for investment, that’s not what the evidence shows. The evidence shows that we already live in a massively insufficiently invested in world, and that’s a big problem when you’re making an argument that in fact, we need another $6-$7 trillion a year investing in public goods to solve the kinds of problems that have been outlined in the 2030 agenda and in the IPCC Reports. So that’s, that’s a first problem.
What we hear from the international community in terms of trying to solve this problem is that basically we need to bring in the private sector. The only people with money in this world, apparently, are the private sector. So we have to somehow find the incentives, we need to incentivize private finance to deliver public goods. It’s what the World Bank calls ‘Maximizing Finance’. That’s their, that’s their story. There’s a simple problem with the story. And the simple problem is there is absolutely no evidence to support it. So when we look at the evidence about what private capital has done to deliver public goods, it’s on a minuscule basis. And when you go back longer in history, all the evidence suggests that if you want to deliver public goods, the only sector that delivers public goods is the public sector. And so what you need is properly financed public sectors if you’re going to deliver on these kinds of challenges.
On top of that, the kinds of solution, the kinds of policies that are offered to support private capital in delivering public goods, on the evidence that we’ve seen actually delivers the opposite of what you’re trying to do. It delivers more exclusivity. We’ve seen that from the financialization of the world economy over the last 30 years. So it doesn’t deliver a greater inclusion and it certainly doesn’t deliver sustainability. If there’s one thing that we know about 21st Century finance, it’s highly unstable. And it doesn’t deliver the kind of sustainability that we’re looking for.
So as a consequence of that, our argument is what we need is something much more ambitious, what we call a Global Green New Deal in the report. And that’s a deal that will reclaim the policy agenda from footloose capital; will seek to deliver economic justice for those thrown under the bus and will seek to reverse decades of environmental degradation.
What we think we need to go back to, is what Keynes in his famous letter to Roosevelt in the late 1930s wrote: What we need once again is to discover faith in the wisdom and power of government. Because that is the only way in which we turn the kinds of vicious circles that we’re in, into the virtuous circles that we think we want to need and want. And this is what the Green New Deal, as we understand it, is all about.
We think these are the basic elements of a Green New Deal: ending austerity; redistributing income has to be part of any Green New Deal. That’s not only good in terms of inclusivity; it’s good for the economy too. It boosts global demand. So ending austerity and redistribution of income is actually a source of economic growth. We need to increase public spending quite clearly in the goods and services needed to make the industrial and environmental transition. That obviously includes investments in improving the energy intensity of output – more efficient energy systems- but also requires us to shift the composition of energy away from fossil fuels to renewables. That’s a key component of any Green New Deal.
We need a progressive, direct taxation as part of the funding mechanism. And as a consequence of the greater activity that we think we can generate from these kinds of policies, you will also get a high tax base as a consequence. So in a certain sense, I think Ann [Ann Pettifor] will talk about this a little bit more, Green New deals are self- financing. They partly generate the resources you need to make the productive investments to solve the problems that you want to solve. People say, oh yeah, this is an agenda against business against private investment. No, this is an agenda that wants more private investment. It’s a crowding in agenda in which the private sector will actually invest more in the new sectors that are being created as a consequence of the shift in the growth path that is being advocated. Obviously that will, at least on our point of view, require industrial policy. Fortunately, the world is rediscovering industrial policy and the discussion of industrial policy is, once again, back on the policy agenda. And it needs to be taken much more seriously. That will be an important element of any Green New Deal.
And of course we’ll need to change the credit system. We don’t want a credit system that directs credit into financial speculation and transacting simply amongst other financial agents. We want a credit system that is able to backstop the kind of investments in the public and private sector that are needed to deliver on the Global Green New Deal. And we have a, I think, a very good chapter in the report on the reassessment of public banks as a necessary agent of a Green New Deal. And including a much more active role for central banks as a key element in reconfiguring the financial system in a way that can deliver the kinds of investments we want to see.
A final point in terms of any Green New Deal at the domestic level, policy coordination -between industrial policy, between trade policy, macro policy – has to be an important part of any consistent framework. I don’t want to go into the details, but Chapter Three of the report tries to model these kinds of policy changes. Not because we’re offering a blueprint to you in terms of particular policy measures but simply to show that if you combine a higher wages, more productive investment, increased government expenses, higher taxes you can combine that with attempts to create jobs, higher growth, and to decarbonize the economy. It’s not some sort of pie in the sky utopian model. And it’s certainly not a de-growth model. You can combine these elements with the right kind of policy mix to deliver a more inclusive and sustainable growth path.
And I think all Green New Deals – whether they’re in the United States or the UK or wherever – will have these kinds of components in them. The problem is, it’s simply not good enough for the United States and the United Kingdom and the European Union to do this. That will not solve the problem of an unequal and environmentally endangered planet. That’s not enough. Doing this for 1 in 10 of the world’s population is insufficient.
Is this back to 1944? Do we need a new Bretton woods? A lot of people talk about the need for a new Bretton Woods. And in a certain sense, the answer is yes but it depends which Bretton Woods you’re talking about. It’s good to remind ourselves what the architects of Bretton Woods wanted to do because for most of the history of Bretton Woods, this has not happened. And the best person to go to, if you want to know what Bretton Woods was about is Henry Morgenthau who was the U S Treasury Secretary at the time of the Bretton Woods and the guy that had to sell Bretton Woods to the American public. And whose team was instrumental – Harry Dexter white and others – in terms of fashioning the Bretton Woods agenda. And he had to go to the House Committee on Banking and Currency to defend the Agreement. In 1945 he went, he was about to lose his job, but he went in ‘45 and defended [the Bretton Woods Agreement].
And these are the three elements of what is a good multilateral system; these are Morganthau’s ideas of what he was trying to do: Subordinate finance to the real economy, first thing you have to have. And that includes with respect to the trading system. Morganthau knew you don’t have a healthy trading system, if you have an unhealthy financial system. And we live in a world of an unhealthy, financial system. Is it surprising we have an unhealthy find a trading system? No, certainly not to Morgenthau because that’s what he expected from an unhealthy financing system. Second point, you can’t have political independence if you don’t have economic independence. It was Morgenthau who wanted policy space as an integral part of the Bretton Woods system back in 1944. So it’s not an UNCTAD invention. It’s an American invention – policy space – and a very good one too. And you can’t have a healthy trading system if you don’t have sufficient policy space for the actors who are participating in that system. So that’s the second point. Morganthau is very clear on that. Third point, you can’t have inclusive development in a world of economic aggression and bullying. The terms, economic aggression and bullying are not my words, they are Morgenthau’s words. And that’s true, obviously, of the trading system. We know that now. You can’t have a healthy trading system in which big powers play by one set of rules and enforce a different set of rules on weaker countries. And Morgenthau was out to stop that. Now, unfortunately, I don’t think we have any of those American principles for a healthy multilateral system. And at least in terms of our understanding of what a Global Green New Deal needs, we need to get back to those basics if we’re going to deliver on the ambition and the urgency that I think is needed to pull up the people and cool down the planet. Thank you.
LYNN FRIES: We are going to have to leave it there.Special thanks to UNCTAD and thank you for watching and for your interest in this segment of GPEnewsdocs coming to you from Geneva, Switzerland as a guest contribution to Naked Capitalism at nakedcapitalism.com.
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“We think these are the basic elements of a Green New Deal: ending austerity; redistributing income has to be part of any Green New Deal. That’s not only good in terms of inclusivity; it’s good for the economy too. It boosts global demand. So ending austerity and redistribution of income is actually a source of economic growth.”
More growth is green? This is delusional!
The only “solution” to addressing the reality of climate change, resource depletion, economic collapse, etc. is a prompt radical reduction in global energy/resource use worldwide. This is the Jackpot and will occur inevitably, either planned or dictated by Mother Earth. Let’s start with the wealthy because, in the words of Willie Sutton, “That’s where the money is”.
We should be clear about growth though. GDP can grow forever, theoretically, because it is the value of goods and services. Throughput is limited. We can only consume so many renewable and nonrenewable resources, we can only throw so many pollutants into ecosystems, before the environment breaks down. The financial and monetary parts of the economy do not face the same resource constraints. We need radical changes to deal with the environmental crisis in regards to realizing the limits of growth of throughput, but at the same time have to realize that financial superstructure has to change along with that. Thinking that this can happen within a chaotic market economy and that ecological information can be passed through markets is not realistic. If there is a transition, it will lead to some form of comprehensive economic planning, far beyond what capitalist societies are used to. To me, the question is whether or not the planning will be democratic. Given how inequitable our society is and how corrupt the political system is, a non-democratic form of planning could get pretty ugly. Seems that saving the planet and democratizing the economic system have to go hand in hand.
“Do we need a new Bretton woods?”
Maybe. Keynes had some not so progressive things to say about leaders from developing countries, but he did call for the socialization of finance in the General Theory, and his ICU/bancor idea did possibly contain some good ideas about how this could be accomplished internationally in a way that didn’t just benefit creditors and private financial capital. But, I don’t think we have any chance of dealing with this crisis if the WTO, the IMF and the World Bank stay as is.
Richard KW’s view was practical. He referred to a book on the coming death of the planet and said if anybody isn’t worried, they should read this book. Which is terrifying really. RKW was not advocating jump starting the old financialized economies at all. His top priority was sustainability and energy research and development. And he is proposing we do this using public funding, good policy, and good jobs. It is not the old profit seeking, polluting, looting playbook of the last 50 years. It is a return to good public policy. And sufficient investment. When we neoliberalized the economy the corporations failed to invest and solve problems. Instead they competed for money, profit and shareholder value. He acknowledges this without beating a dead horse but he explicitly says we have to structurally change the way money is organized. Reconfigure the central banks to stop distributing money to the private banking system because it has created this problem – by externalizing costs and achieving destructive monopolies, as we all know. He calls this behavior “foot loose” capitalism and says we now need public intervention globally and good public policy to achieve a Green New Deal. He’s right on every point. The one thing that disappointed me, because he is otherwise so mentally organized, was his total omission of the issue of chemical pollution. He didn’t mention the oceans and waterways, nor the erratic and devastating weather chaos. But those things would probably be bullet points as well in his vision to invest massively in public goods. The health of the planet being the biggest one. His focus is how to do this investing to enhance both society and the environment. He’s absolutely right, we do need a new economy to achieve this. His viewpoint was unequivocal and almost a relief to hear. (I’m just wondering if the Ann he referred to on the panel was Ann Pettifor?)
> So the question is where’s the investment going to come from?
One answer: “The unlocking of pensions is identified as a prime target.”
Cory Morningstar has released a couple more installments in her “The Manufacturing of Greta Thunberg” series. The above quote on pensions is from
theartofannihilation.com/the-global-climate-strikes-no-this-was-not-co-optation-this-was-and-is-pr-a-brief-timeline/
Right at the top of the article we see this:
2009: UN works on the prospect of a Global Green New Deal to reboot the global economic system. It simultaneously works on tools to assign monetary value to all nature, global in scale, with the goal of creating new markets (TEEB – later to be absorbed by the Natural Capital Coalition).
Note the phrase “Global Green New Deal”. This interview is another tentacle in what is the most dangerous propaganda campaign in history. I mean that.
It has to be global or it’s one step forward and two backward for us. He’s not talking about looting pension funds – we can probably forget that nonsense after the French get through with Macron – RKW is advocating a structural change in the way money is organized. He advocates organizing money for the public good. I couldn’t agree more.
This is directly from the Trade and Development Report 2019:
“The OECD estimates that institutional investors in member countries hold global assets of US$92.6 trillion and while figures for institutional investors in developing countries are harder to come by, estimates for the assets held by Brazilian pension funds exceed $220 billion and some $350 billion for combined African pension funds.”
Beyond pension funds, this is a plan to take global public assets (the environment) and monetize them. “Second, “de-risk” private investment and maximize the contribution of development partners by joining up regional and global “platforms” to boost investment, primarily by creating new large-scale asset classes, such as “infrastructure assets” that can be “securitized” by bundling high- and low-risk loans into new and “safer” financial products.” This language makes me very nervous.
It’s incomprehensible because it is actually unnecessary. They are talking about taking the value of everything and using it as collateral in order to write new credit for green investments. It’s not necessary to do it this way but lotsa people are thinking just this because, as Ann Pettifor says, it’s nonsense to say we don’t have enough money when all we do anyway is create money out of thin air in the form of credit. So this is what people are looking at to justify all the credit that will be needed to accomplish the GND. All sovereign countries could just as well spend directly into their own economies.
Total agreement here.
The link you provided makes for interesting reading, though I remain uncertain and skeptical about what can be concluded from the many PR campaigns. I feel there is definitely something strange going on behind the various Green New Deals. However I suspect efforts to unravel the hype will encounter a many-headed Gordian hairball not unlike those found when attempting to unravel the tobacco and especially the climate denial PR campaigns.
Nature will solve the problem.
What we hear from the international community in terms of trying to solve this problem is that basically we need to bring in the private sector.
This is classic avoidance.
Thank you. I very much appreciated getting to hear Richard’s talk and it gave me hope that the discussion can be directed toward real solutions. Like many, I fear that the standard disaster capitalism model will be implemented to the effect of shifting even more resources into the financial sector resulting in more wealthy business men flying private jets to wine and dine at more conferences about how to solve the problems using taxpayer money while enriching themselves. It is clear at this point that we don’t have the sophistication yet to understand how nature runs such a complex system off of mainly solar energy. Our current solar and wind systems rely on toxic materials that are mined using fossil fuels from under the earth’s crust while the scientist tell us bringing such materials to the surface is not within natures operating parameters (https://thenaturalstep.org/approach/) thus won’t end well. While it is clear that natural systems tend towards greater complexity on their own, that process requires energy to maintain. Much of the complexity in our western society is not needed and even detrimental as demonstrated by some of us who have taken a step back into a slightly simpler world and are much happier for it, yet there are many more that desperately need resources that can only be obtained through greater access provided by energy. One way that could be shifted to them is if the modern world drastically reduced its demand, by going back a 100 yrs, to living in one or two room shacks with dirt floors and getting rid of our cars and relying on public transport. As I can’t foresee that happening willingly, energy demand is likely only going to increase as long as it is available. Now I know nature will solve the environmental problem if let to its own. I also clearly understand I am part of that nature and as such I share in the responsibility to work with nature in implementing a solution. Thus it might be good to understand how nature works and what it is working on (https://biomimicry.org/).
So while we don’t know exactly where we are going, we do have a pretty good idea of which direction we need to go and I agree with Richard that private business at least as it is currently constructed of mainly top down run shareholder corporations isn’t going to get us there. Psychopaths and corporations operating as psychopaths are very good at thriving in disturb highly competitive environments, think weeds, because they are focused on exploiting resources for the present at the expense of the future and like your lawn they can survive a long time only if the environment remains turbulent and the competition is crushed. Now I will suggest that if a business was set up as a worker cooperative that it would operate more humanly or perhaps a better analogy would be as a mature tree that produces excess that it shares through its nuts, leaves and roots. (https://therealnews.com/third_party_content/economic-update-socialism-worker-co-ops) This is were I think you could find a positive association between business and government, taking some of the burden off government so the bureaucracies can stay smaller and more localized. I agree public banks are going to be a key part of this transition. Though weeds do provide the fertile ground (as Marx suggested) for more stable systems we have to stop “mowing the lawn” (wars?) for that to happen. Thus shifting resources to help the environment from the military industrial complex may be doubly beneficial.
Why do US firms off-shore to Mexico?
US companies prefer Mexico with its cheap labour, lax health and safety standards, and lack of environmental regulations. They can expose workers to hazardous chemicals and just pump toxic waste straight out into the environment, without incurring the costs associated in dealing with them in an environmentally friendly way.
https://thoughtmaybe.com/maquilapolis-city-of-factories
Female workers are best as they are less likely to stick up for themselves and are easier to exploit. Most of them are single mothers as well, they really need that wage to look after their children, it’s perfect.
Every avenue must be explored to reduce costs.
The lower the costs, the higher the profit.
China is even better; they have got cheap energy from coal fired power stations.
China has got everything a profit maximising company could want.
China had coal fired power stations to provide cheap energy.
China had lax regulations reducing environmental and health and safety costs.
China had a low cost of living so employers could pay low wages.
China had low taxes and a minimal welfare state.
China had all the advantages in an open globalised world and it went from almost nothing to become a global superpower.
It did have, but now China has become too expensive and developed Eastern economies are off-shoring to places like Vietnam, Bangladesh and the Philippines.
Neoliberalism was always going to be an environmental disaster.