How a ‘Green New Deal’ can save the world?

Pakistan's leading economist thinks that neoliberalism has caused great damage to the world economy. He believes that this system needs to be changed and the way forward to the current crisis is 'Green New Deal'.

Green New Deal

The multiple failings of neoliberal agenda since its beginnings in the late 1970s, manifested in economic policies – including that of structural adjustment programmes by multilateral institutions like International Monetary Fund (IMF) – and backed by manifestos of numerous political parties overall for many years now, was unfortunately, not enough to understand the consequences of this agenda, whereby primarily, consumption globally going on steroids, ‘profit over people’ becoming a norm rather than an exception, and income and wealth distribution acutely perpetuating into the hands of few almost everywhere.

The world missed a chance during all those years to reshape the economy and before it politics that formulated policy broadly away from markets, which delivered ‘little for many and a lot for few’, and put the climate crisis on the fast-track. Another chance to turn the system to work for all, and not a just few, was missed after the Global Financial Crisis 2007/08 (GFC). Can the world afford to miss yet another chance – especially when climate change crisis has significantly become an existential threat – and not move towards a ‘Green New Deal’? Indeed not.

Read more: Global CO2 emissions to drop 4-7% in 2020: will it matter?

The world would have been very different, perhaps a lot more painfully different, especially in terms of income inequality, politics of xenophobia and fear mongering, and climate crisis, had President Roosevelt not come up with the original ‘New Deal’ in the first place, which shifted political discourse and public policy away from the ‘prolonged misery shock’ seen in the advanced countries after the Great Depression of 1930s; with the New Deal having positive repercussions for developing countries as well, both in terms of bringing social policy and welfare aspects centre-stage in development policy. Yet, the rise of neoliberal policy almost everywhere, dismantled the positive effects of the New Deal and its broader impact in the next few decades; and by now immensely raising the need for not just a New Deal, but a Green New Deal.

At a time when COVID-19 was just appearing on world stage late last year, world-renowned scholar Naomi Klein in her latest book ‘On fire: the (burning) case for a Green New Deal’ like many voices globally, vociferously put forward the case in these words, ‘The idea is a simple one: in the process of transforming the infrastructure of our societies… humanity has a once-in-a-century chance to fix an economic model that is failing the majority of people on multiple fronts… from wage stagnation to gaping inequalities to crumbling services to the breakdown of any semblance of social cohesion… a Green New Deal could instill a sense of collective higher purpose… [and] takes its inspiration from Franklin Delano Roosevelt’s original New Deal, which responded to the misery and breakdown of the Great Depression with a flurry of policies and public investments…’

To quote, he indicated ‘Governments should provide financial support to company workers while refashioning the economy to provide new jobs in different sectors

At the same time, it needs to be understood that unlike what the Green New Deal is being thought of by governments generally, and in doing so they are immensely limiting the scope of what it really should encompass, the Green New Deal is not a ‘stimulus package’ but rather a ‘survival package’ as a leading political economic thinker and an opinion writer for the Guardian, George Monbiot calls it, and points out ‘In other words, let’s have what many people were calling for long before this disaster hit: a Green New Deal.

But please let’s stop describing it as a stimulus package. We have stimulated consumption too much over the past century, which is why we face environmental disaster. Let us call it a survival package, whose purpose is to provide incomes, distribute wealth and avoid catastrophe, without stoking perpetual economic growth. Bail out the people, not the corporations. Bail out the living world, not its destroyers. Let’s not waste our second chance.’

The neoliberal assault, and its consequences in terms of first individual economies more and more working for a few in many countries, secondly, the GFC happening as a result of extremely irresponsible financial sector and weak government oversight/regulations, and now the immense loss of life and economy caused by COVID-19 due primarily to the unprepared policy at the back of wrong market signals (left primarily unregulated), all point towards a different policy response from public policy, whereby governments can no longer continue to be the ‘nanny state’– a phenomenon highlighted by renowned scholar, Dean Banker, in his 2006 published book ‘The conservative nanny state: how the rich use the government to stay rich and get richer’, among others – for the already super wealthy sectors like oil, aviation, and banks, and continue to care less for the workers; all those people in need for financial help in general, and the climate, which is changing for the worse at the alarming rate.

Read more: YES, THE WORLD ECONOMY IS COLLAPSING!

For instance, as George Monbiot points out ‘The [British] government has given ‘easyJet’ a £600m loan even though, just a few weeks ago, the company frittered away £171m in dividends: profit is privatised, risk is socialised.’

Governments almost everywhere are sadly still not smelling the coffee – perhaps because of the deep pockets of the corporate world and overall influence/wealth of elites/oligarchs, in turn having more say in terms of election funding/results than the general electorate – and are likely to squander the opportunity by not learning from the dangerous consequences of the neoliberal assault on broadly economies and politics, and how it led to GFC, and now the pandemic, and the fast deteriorating climate.

In this regard, George Monbiot, pointed in his recent piece ‘Airlines and oil giants are on the brink. No government should offer them a lifeline’ that similar to the situation of GFC, perhaps even more so due to the scale of devastation under the pandemic, governments everywhere have an opportunity to fix the system towards a Green New Deal, because corporate interests everywhere are dependent on government for bailouts.

In fact, there is no discussion on these lines. No mention of how to use the crisis caused by pandemic, to deal with its underlying neoliberal and climate change causes

To quote, he indicated ‘Governments should provide financial support to company workers while refashioning the economy to provide new jobs in different sectors. They should prop up only those sectors that will help secure the survival of humanity and the rest of the living world… This is our second great chance to do things differently. It could be our last. The first, in 2008, was spectacularly squandered. Vast amounts of public money were spent reassembling the filthy old economy, while ensuring that wealth remained in the hands of the rich. Today, many governments appear determined to repeat that catastrophic mistake… But the dependency of enterprises on public policy has seldom been greater in capitalist nations than it is today. Many major industries are now entirely beholden to the state for their survival…

The Bank of England has decided to buy debt from oil companies such as BP, Shell and Total… In the US, the first bailout includes $25 billion for airlines. Overall, the bailout involves sucking as much oil as possible into strategic petroleum reserves and sweeping away pollution laws, while freezing out renewable energy. Several European countries are seeking to rescue their airlines and car manufacturers.’

The developing countries are not doing much different. There is no discussion even to plan reform and support packages that bail out on large scale the workers and not the big businesses; a reform plan that revisits the economic model towards ensuring cleaner, sustainable and more equitable economic growth, similar to the ‘New Deal’, and more so the proposed ‘Green New Deal’. Pakistan, like many developing countries, is also not much different – no plans to approach a ‘Green New Deal’, government still being a nanny state to big corporate players like banks, media, and the energy sector, while has little will to use the ‘dependency’ factor of these players on government to bail them out, as an opportunity to go through with hard reforms.

Read more: HOW TO RUN ECONOMY AMID COVID-19?

In fact, there is no discussion on these lines. No mention of how to use the crisis caused by pandemic, to deal with its underlying neoliberal and climate change causes. At the same time, the government primarily remains a nanny state to the big businesses, while lockdowns are being prematurely eased, on a very weak pretext – given funds could be diverted away from bailouts of big businesses, lesser important development projects, and even through printing domestic currency, given little chances of any sort of inflation with unprecedentedly deflated aggregate demand and supply, both domestically, and internationally in terms of commodity prices – that the government has little financial and institutional capacity to provide relief to the poor and vulnerable in lockdown; allowing in turn, and sadly, the argument of ‘livelihoods over lives’ to hold ever so strongly.

To reinforce the need for governments everywhere to focus more on workers than bailing out big businesses with deep pockets and that hinder move to a ‘Green New Deal’ – like governments favouring oil companies over those working towards renewable energy, or bailing out big banks rather than supporting ordinary debtors in repayments – UN’s International Labour Organization (ILO) highlighted that around 1.6 billion people – almost half of workers worldwide – will be affected by COVID-19, and who are in ‘immediate danger of having their livelihoods destroyed’.

Moreover, an article in the Guardian reporting on ILO’s this briefing, indicated ‘Of the total global working population of 3.3 billion, about 2 billion work in the “informal economy”, often on short-term contracts or self-employment, and suffered a 60% collapse in their wages in the first month of the crisis. Of these, 1.6 billion face losing their livelihoods…“It shows I think in the starkest possible terms that the jobs employment crisis and all of its consequences is deepening by comparison with our estimates of three weeks ago,” the UN agency’s director general, Guy Ryder, told a briefing, foreseeing a “massive” poverty impact’.

The world can no longer postpone shunning Neoliberalism, and adopting a ‘Green New Deal’ that helps build societies in a meaningfully resilient and sustainable way

It may be pertinent to highlight, with regard to the immense cost of not coming forth with a ‘Green New Deal’, something which Monbiot highlights as follows, whereby ‘The current crisis gives us a glimpse of how much we need to do to pull out of our disastrous trajectory. Despite the vast changes we have made in our lives, global carbon dioxide emissions are likely to reduce by only about 5.5% this year.

A UN report shows that to stand a reasonable chance of avoiding 1.5C or more of global heating, we need to cut emissions by 7.6% per year for the next decade. In other words, the lockdown exposes the limits of individual action. Travelling less helps, but not enough. To make the necessary cuts we need structural change. This means an entirely new industrial policy, created and guided by government.’

The happening of Covid-19 pandemic, after eruptions of multiple coronaviruses epidemics over almost two decades now, serves many lessons about the consistent failure of policy, markets, and the political mindset, including the utter lack of preparedness of countries across the development spectrum to deal with such a crisis as being faced currently.

Read more: OPINION: OVERHAULING MACROECONOMIC POLICY OF PAKISTAN: PROSPECTS AND CHALLENGES

As Naomi Klein once pointed out in an article she wrote back in 2018 ‘There is nothing natural about Puerto Rico’s disaster’ and which fits quite aptly for the way in which countries overall are struggling to deal with the pandemic in terms of lack of preparedness and due to wrong policy choices made under the neoliberal mindset, ‘when you systematically starve and neglect the very bones of a society, rendering it dysfunctional on a good day, that society has absolutely no capacity to weather a true crisis.’ The world can no longer postpone shunning Neoliberalism, and adopting a ‘Green New Deal’ that helps build societies in a meaningfully resilient and sustainable way, and in a way that works for all, and not just a tiny segment of elites.

Dr. Omer Javed is an institutional political economist, who previously worked at International Monetary Fund, and holds a Ph.D. in Economics from the University of Barcelona. He tweets at @omerjaved7. This article originally appeared at Business Recorder and has been republished with the author’s permission. The views expressed in this article are the author’s own and do not necessarily reflect the editorial policy of Global Village Space. 

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