The picture above is not of some Regency building in Brighton, England. It is in fact the oldest (or so I was told) Trades Union Hall in the world – the Melbourne Trades Hall. Sure is impressive, and with a lovely relaxed, unbureaucratic feel to it….

We were up at the crack of dawn to fly to Melbourne from Adelaide…newspapers full of the crisis inside the Labor government.  Julie Gillard looks to be in deep trouble over the handling of Australia’s policy on refugees. And then found the appalling tale of Babcock and Brown – Australia’s biggest ever corporate collapse –  the Ned Kellys of this age…only Ned Kelly could never have dreamed of looting so much ‘swag’.  And Kelly – whose remains have just been unearthed (see here) – was at least caught by competent Aussie cops at the time, and tried by a competent judge.   As the Sydney Morning Herald noted, the Aussie ‘watchdog’ didn’t even sniff Babcock and Brown….

Went straight from the airport to the fine Melbourne university campus for a meeting with climate and sustainability scientists and university trade union officials – to talk about financing the transformation of the economy away from fossil fuels….Not at my best after a night of fitful sleep…Then, after a nap, a wonderful evening at the above mentioned Trades Hall – it was titled Babbling in the Bar -but was in fact a lively discussion of economic policy, the financial system and the policies that Australian trades unionists should be demanding of their Labour government…..From there to the famous Lygon Street,Melbourne’s ‘Little Italy’ – for dinner at – a Vietnamese….times are a’ changin in Melbourne. And finally, after a ride on a tram and train ….sleep!

Read about my speaking tour of Australia below – from the SEARCH Foundation:

The SEARCH Foundation is currently touring eminent British economist and author Ann
Pettifor around Australia and she is visiting our shores with a warning; the GFC inducing credit
crunch is not over and Australia’s banking sector is vulnerable.

Ms Pettifor is visiting Adelaide, Sydney, Melbourne, Canberra and Brisbane for speaking
engagements over the next fortnight.

“Before the Credit Crunch of 2008-2009 Brits and Americans were convinced that the good
times could last forever. Our orthodox economists, central bankers and politicians encouraged
us in that delusion. Today millions of the unemployed, homeless and bankrupt are paying
a heavy price for the failure to understand the role of the private banking system in causing
systemic and widespread economic failure.” Ms Pettifor said.

“Australians would be well advised not to fall into the same trap.

“At the same time, the increased frequency of extreme weather events is challenging the
widespread delusion that there is no limit to the rate at which humanity can go on polluting the
atmosphere and looting the seas and wider ecosystem.

“Australians, who have suffered more from extreme weather events than we have in Britain
would do well to take the lead in warning the world of a widespread delusion: that there are no
limits to the rate at which we can consume and ‘grow’.

“Instead we all need to address the most urgent crises facing humanity: the continuing global
financial crisis (it never did end in 2008); the threat of peak oil; the threat of climate change;
and now the rising threat of food and water shortages. That is why we, at the New Economics
Foundation first proposed the Green New Deal in July, 2008.

“We argued then, and we argue now, that societies must first fix the out-of-control globalised
financial system. We must strip the Masters of the Universe of their mighty power – after all
they rely on the world’s taxpayers to guarantee their profits and bonuses, and to socialise their
losses.

“Only then can we put the domestic banking system to work to help finance the transformation
of the economy away from costly globalised finance on the one hand and dependence on
fossil fuels on the other. Instead, tight but low cost-finance, generated by our domestic banking
systems must be put at the service of the transformation of the economy.

“We need massive investment in sustainable, renewable sources of energy and in the
conservation of the ecosystem’s resources.

“The banking system must provide regulated, low-cost finance for that investment. Just as
the banking system of the late 1930s and 40s helped finance economic recovery from the ’29

Crash; and then the challenge societies faced in 1939: World War.

“Such a transformation – a Green New Deal – will require greater self-sufficiency, and the
localisation of economies as far as practicable. It will also require the training and recruitment
of a ‘carbon army’ of workers – skilled and unskilled – to turn every building into a power
station, and to make every building energy-efficient.

“But just as central bankers and politicians turned a blind eye to the looming credit-crunch of
2008, so now they are turning a blind eye to the financial and ecological threats facing society.

“For example, right now, Australia’s mining boom is masking the vulnerability of her banking
system – and the threats that both high levels of household debt, and instability in globalised
capital markets pose to Australian banks – and therefore to the economy.

“Despite Mr. Glenn Stevens’ sanguine approach to the stability of Australia’s banks in his
recent testimony to the Australian parliament, insurance against the risk of Australian banks
defaulting – credit default swaps – climbed nearly 50% over August. That means that investor
expectations of Australian banks’ defaulting are on the rise. In addition, the cost of raising
40% of Australian bank funding ($100 billion) in global capital markets has been rising as a
result of instability in the Eurozone and US.

“The rising cost of this integration of the Australian banking system in the globalised economy
invariably means that Australian banks – and the financing of the current account deficit – are
more vulnerable to the whims of global investors.

“And as a result of the falling confidence in global capital markets, interest rates on loans
to Australian businesses and households will rise too – at a time when their customers are
snapping purses shut; house prices are sliding as Australians slowly pay down very high levels
of debt; and mortgage costs have been ratcheted up by the RBA’s raising of base rates to the
highest in the developed world;

“No amount of iron ore is going to fix Australia’s financial system. Australia needs a Green
New Deal.”

For media interviews with Ann Pettifor whilst she is in Australia, please call Peter
Murphy on 0418 312 301.
’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’
Note to editors.
1. Ann Pettifor a fellow of the New Economics Foundation (nef) in London, UK, and director
of PRIME economics, is visiting Australia on a two-week tour, sponsored by the Search
Foundation.

Ms Pettifor first predicted a credit crunch in September, 2003 on launching a book she edited
and Palgrave Macmillan published: “The Real World Economic Outlook.” Later in October,
2006, Palgrave Macmillan published her book: “The Coming First World Debt Crisis”. Then in
a Times interview in 2009, she warned that “the worst of the slump is yet to come.”
2. In his recent evidence Mr Stevens of the Reserve Bank of Australia said: “Major Australian
banks report being offered substantial US dollar funding offshore on account of their relatively
high credit standing. In any event, their reliance on such wholesale funding is much reduced
from three years ago, with the large increase in deposit funding at home and slower balance
sheet growth.” And yet in May this year, Moody’s downgraded all four of Australia’s major
banks, as ABC reported at the time.

It was wonderful to be, first of all at such a professionally and well organised event (congrats to Mark Letcher and his team). It was also fantastic to be amongst such an interesting array of speakers including John Gapper ‘the secret gardener’ who has spent the last 35 years propagating wild flowers in Brighton and Hove (watch his talk here) and Alice Ferguson and Amy Rose – two mothers with a simple but brilliant idea to get children playing outside (watch their talk here).

My talk was on how we can afford to finance the Green Transition – watch below:

I am privileged to be a speaker at the World Forum on Enterprise and the Environment, hosted by Sir David King of the Smith School of Enterprise and the Environment, Oxford. Sir David today has a column in the Guardian in which he calls on Prime Minister David Cameron to exercise leadership on the global stage.   Ah….leadership. A rare thing.

I am here to argue, once again, that ‘we can afford what we can do’ and that UNEP’s calculations of the costs of de-carbonising the economy over the next 50 years are eminently affordable…provided of course, that we get a grip on that great public good: the finance sector. But so long as we fumble about, trying to mobilise and direct pension funds and other ‘savings’ towards these life-saving activities…for so long shall we have a blind spot for the real answer to financing de-carbonisation.

PepsiCo’s Dr. Derek Yach is chairing this morning, and reports that their CEO – Indra Nooyi – asked the company’s chief legal officer to investigate PepsiCo’s legal obligations in relation to the environment. The lawyer concluded that given that companies were granted a license ‘in perpetuity’ – they therefore had obligations to ‘perpetuity’….Interesting.

Rt Hon. Simon Upton (a New Zealander) Director OECD – argues, refreshingly, that there is no such thing as international regulation – only national regulation….Now arguing that the  1st thing we have to do for green growth is get rid of subsidies. Second, scale up finance for biodiversity – graph on current investments including environment-related ODA  - which is stagnant, if not falling.

Now we have Colombia’s Ms Sandra Bessudo, President Juan Manuel Santos’s environmental adviser.  Colombia is doing the right thing, says Ms Bessudo, and the President wants to prioritise job creation and the environment. Colombia wants to belong to the OECD….’we need the international community to help us, and invest….Please visit’ she ends with.

Now Robert Peccoud, Research Director of Agence Française de Développment – since 1995 – is racing through his presentation….very few clear, consistent financial commitments made by countries for biodiversity, he notes. ODA funds for biodiversity, can e.g. go to build a road to boost tourism….

Questions for Ms Bessudo on addressing biodiversity challenges in the midst of armed conflict. Today, we have a much safer country, she says. Within the ministry of defence there is an area working on the defence of biodiversity and ecosystems, she says.

We now move on to ‘the new economy toolbox’ with Pavan Sukhdev, founder and CEO GIST advisory and McCluskey Fellow, 2011, Yale University.  True Cost calculate that externalities of top 3,000 corporations: 2.2 trillion – 1/3 of profits of these companies. (Private Profits, Public Losses).

REDD+ (Reducing Emissions from Deforestation and Forest Degradation) important that we get that right, he says: REDD mixes social as well as ecological solutions.

Get away from some of our hang-ups, e.g. arguing about ‘fungibility’ ….Political challenge: recognising importance of ecological infrastructure…GIST…we have to look at the ecological infrastructure…targeting social returns on investment….ecosystem restoration is a huge benefit…about spending public money on public wealth…nothing to stop governments from doing this, but one of the biggest stumbling blocks he has come acros….TEEB reports: – a community, funders, UNEP etc…’.Valuations’ vs ‘Marketization’….you don’t have to look at markets…as in classical, supply-driven and liquid markets.

Mr James Griffiths of WBCSD (World Business Council for Sustainable Development) 200 global company members…with US$7 trillion sales revenue. $190 billion a year – the benefit of insects in the US….bigger than Walmart’s contribution to the US economy! …What can companies do, etc…

Dr Trista Patterson, Economist….Apologies readers: someone, more likely, something, stole my text….and Dr. Patterson’s contribution was so interesting….Will try and retrieve it.

Below is a short paper I wrote as part of work with Sir David King and the Smith School of Enterprise and the Environment:

“We are capable of shutting off the sun and the stars because they do not pay a dividend. London is one of the richest cities in the history of civilization, but it cannot “afford” the highest standards of achievement of which its own living citizens are capable, because they do not “pay.”

If I had the power to-day, I should most deliberately set out to endow our capital cities with all the appurtenances of art and civilization on the highest standards of which the citizens of each were individually capable, convinced that what I could create, I could afford….

John Maynard Keynes. “National Self-Sufficiency,” The Yale Review, Vol. 22, no. 4 (June 1933), pp. 755-769.

UNEP’s latest publication, Towards a Green Economy tackles the vexed question of financing the Green Transition and estimates that

“to halve CO2  emissions by 2050, requires investments of approximately US$ 750 billion per year from 2010 to 2030 and US$1.6 trillion per year from 2030 to 2050. The World Economic Forum and Bloomberg New Energy Finance, on the other hand, calculate that clean energy investment needs to rise to US$ 500 billion per year by 2020 to restrict global warming to less than 2ºC, while HSBC estimates that transition to a low-carbon energy market will require US$ 10 trillion between 2010 and 2020.” (Towards a Green Economy, page 33.)

The Green Economy team at UNEP make their assessment based on achievement both of the above carbon emissions target, but also the Millennium Development Goals, and estimate a range of US$1.05 trillion to US$2.59 trillion annually.

“On average, these additional investments amounted to 2% of global GDP per year over 2010-2050, across a range of sectors to build capacity, adopt new technologies and management techniques, and scale up green infrastructure.”

The report then proposes a range of potential ways of financing these investments. The UNEP team look to “institutional investors such as pension funds and insurance companies”; to “public financing” by which no doubt is meant taxation and government borrowing from capital markets; to global development institutions (e.g. the IMF, World Bank and other multilateral institutions); and finally to “stable and resilient capital markets.”

In this short paper I want to argue that the financing of a ‘Green Transition’ is affordable, and need not be drawn down from what can broadly be defined as ‘savings’: namely the share of income not consumed by individuals, households, firms, governments and global institutions, and instead ‘saved’ as taxation, capital, pension funds, and reserves.

Instead the financing of a Green Transition should be undertaken in much the same way as e.g. the financing of the Industrial Revolution, the Second World War, and the recent 2007-9 Bank Bailout: by the banking system’s creation of credit at low, sustainable rates of interest. This financing must then be used for investment in productive activity that substantially lowers emissions, facilitates the transition to a de-carbonised economy, and generates the income to repay the public and private banking system’s loans.

The annual sums required for the Green Transition are not excessive, when compared, for example to the intervention undertaken to support the banks in the UK, US and euro-area during the financial crisis. According to the Bank of England’s 2008-9 Financial Stability Report (June 2009, Issue No. 25)

“overall, the total value of actual and contingent support in North America and Europe rose to over US$14 trillion, equivalent to about 50% of annual GDP.”

UNEP’s requirement of 2% of GDP  for financing the Green Transition is modest by comparison to the financing made available by central banks to the private banking sector, and indirectly to governments (through the purchases of bonds/gilts) in 2009.

Savings not needed to finance the Green Transition

In this short note I want to re-state facts known to economists down the ages, but most clearly explained by Keynes, and then subsequently lost to the field of macroeconomics.

The nature of money is highly peculiar. It is very different from the point of view of an individual and from the point of view of the system as a whole. Individuals cannot magic money from nothing. But the banking system as a whole can magic money from nothing.

This money can be used to bring economic activity into existence. Credit creates savings/deposits. Economic activity generates saving, it is not constrained by saving.

Keynes’s predecessors, the Classical economists saw things differently.  According to Classical theory, saving was necessary prior to investment. Money – deposits or savings – existed only as the result of economic activity. These savings (or vaults of silver/gold) then created economic activity.

Keynes’s great contribution was to demonstrate the contrary: that saving, which is another word for non-consumption, or delayed consumption, is not necessary prior to investment. In other words, if a bank promises credit for an investment it really disposes of something belonging to the future: the coming saving. Credit creates deposits and savings. Credit creates economic activity.

Victorian constraints on finance

The economic theory that saving was necessary prior to investment came about, in part, because banks at that time were not adequate to the demands of rapid industrialisation, and firms could not easily raise funds for large-scale investment. Instead they relied on the savings of individuals. The saving habits of the time were therefore incorporated into Classical or Victorian economics and persist to this day in neo-classical economic theory – still dominant in our universities and think-tanks.

For the Victorians, banks were merely channels, passing money from lenders to borrowers; from individuals to firms and governments.[i] But as the banking system evolved, banks were able to create credit in excess of savings.  With time it became clear that neither savings, nor prudent savers were necessary or essential for investment.  Once society accepted banking systems and bank money, money was no longer a scarce resource.  Economic activity was, and is, no longer bound up with, and dependent on the few with savings in excess of income.

Investment was, and is no longer constrained by saving.

Today, to make loans, banks (both central banks and private banks) do not have “savings” or “deposits” – either theirs, or those of others – to extend to others as credit, and on which they charge interest.  The money for a bank loan does not exist, until the borrowers apply for credit. (The myth of ‘fractional reserve banking’ is just that: a myth.) Central banks do not need to tax the population, or to mobilise savings, before the creation of what is today known as ‘Quantitative Easing’, but was in the past known as ‘Money Market Operations’ etc.  

At the height of the financial crisis, Governor Ben Bernanke was asked where he had found $160 billion to bail out an insurance company, AIG. Had he raised the funds from taxation? No, he replied:

“It’s not tax money. The banks have accounts with the Fed, much the same way that you have an account in a commercial bank.”

“So, to lend to a bank, we simply use the computer to mark up the size of the account that they have with the Fed.” (CBS 60 Minutes Show 15 March 2009).

In today’s economy, there is no tangible quantity corresponding to the aggregate of bank money in an economy at any point in time. Such a tangible quantity/quality is not a necessary characteristic of money. The acceptability and hence validity of bank money is due to its being able to facilitate transactions. ^[ii] To enable society, in Keynes’s terms, to ‘afford that which we can create’.

For investors that operate in today’s monetary economies, the relevant consideration is the availability of finance, not savings, and there need be no constraint on finance – because credit is not a commodity and there need be no limit to its creation.

This makes credit both a powerful resource for human development and protection of the ecosystem; but also a dangerous power if unchecked and governed by ‘light-touch regulation’.  If more credit is created by the banking system than there is potential for economic activity, then the outcome is inflation. If less credit is created than there is potential for economic activity, then the outcome is deflation. Furthermore, if loans are made at rates of interest above a sustainable rate of return, the loans become unpayable.

Supply and the price of money

Fortunately, bank money has a second great advantage, the very thing that had motivated its invention: lower interest rates. Public banks could increase the supply of money, and thereby lower its price: the rate of interest. Entrepreneurs were no longer ‘in hock’ to those with savings in excess of income, who were often usurers.

For unlike gold or oil, credit is not subject to the laws of supply and demand. And because it is not subject to the laws of supply and demand, its price – or the rate of interest – should always be low, and is necessarily a social construct. In other words, the price of credit is influenced not by shortages or gluts, but above all by committees of men and women, based in central banks, and in the private banking system, who determine the most appropriate rates of interest for the economy, or for the private banking sector. (Consideration is not, so far, given to the ecological sustainability of rates.) The 2009 creation of extraordinary levels of ‘support’ – $16 trillion – for the banking system was accompanied by decisions by central bank committees to push base or policy rates to the lowest levels in history. While rates across the spectrum did fall, central banks have unfortunately lost control over rates set by the private sector, now determined overwhelmingly by the British Bankers Association’s determination of the London Interbank Offer Rate (LIBOR).

Bank money was a remarkable and very welcome development; a great public good. Indeed capitalism owes much of its advance to the development of sound banking systems.

Using the banking system to facilitate the Green Transition

By increasing the amount of credit in circulation, bank money facilitated what we have come to regard as progress.  The development of modern technology (the light bulb and the steam engine) would not have taken place if entrepreneurs had not had their research and development funded by low-cost finance made available by bank money. Trade was made possible with bank money. The welfare state was made possible by bank money.  And financial crises have been ameliorated by the issuance of bank money.

The 2009 financial crisis demonstrated to the public that the relevant consideration is the availability of finance, in the form of Quantitative Easing, not savings, and there need be no constraint on finance. Society now needs to argue that just as there was no constraint on the financing of the 2009 bailout, so there need be no constraint on the financing of the Green Transition. Instead there must be careful regulation of that financing, and of the rate of interest attached to loans for investment in the de-carbonisation of the economy.

The financing and investment of 2% of global GDP in the Green Transition will in turn generate economic activity, and with it the deposits and savings needed to repay lending. There will be no need to resort to taxation, pension funds or other sources of ‘saving’. Indeed sound economic activity will generate additional savings for individuals, firms and governments.

[i] The US’s Treasury Secretary Tim Geithner believes that banks are merely channels. In testimony to Congress in September, 2009 he said: “Stripped of its complexities, the purpose of a financial system is to let those who want to save -whether for vacation, retirement or a rainy day -save. It is to let those who want to borrow -whether to buy a house or build a business –borrow. And it is to use our banks and other financial institutions to bring savers’ funds and borrowers’ needs together and carefully manage the risks involved in transfers between them.”   Financial Services Committee, Congress, 23 September, 2009.

……..To put the distribution in perspective, the amount of profit that Transocean plans to pay out in the next year is half of what Exxon ultimately paid for the Exxon Valdez disaster off the Alaska Coast.

t’s also more than double what BP has said they’ve spent on the cleanup to date.

Read more here:  http://rawstory.com/rs/2010/0517/spill-rig-owner-approves-1-billion-dividend-shareholders/

This is the press release from the new economics foundation:

“Two days ahead of the pre-budget report, and as the UN climate change talks open in Copenhagen – the second report from the authors of the original Green New Deal argues that the British Chancellor is likely to miss a historic opportunity to tackle public debt, create thousands of new green jobs and kick-start the transformation to a low-carbon economy.

The cuts won’t work, the Green New Deal Group’s second report shows how, contrary to the policy of all the major political parties, cutting public spending now will tip the nation into a deeper recession by increasing unemployment, reducing the tax received and limiting government funding available to kick-start the Green New Deal.

Instead a bold new programme of ‘green quantitative easing,’ rather than simply propping up failing banks, could help reduce the public debt and kick-start the transformation of the UK’s energy supply while creating thousands of new green-collar jobs.

Drawing on evidence from the great depression in the UK and the USA, the Group show how cuts in public spending then, before the economy had recovered, tipped both nations deeper into depression.
Now, the Group say, the Chancellor must announce a plan that updates the lessons from history for the challenges of the modern world, and spend to reduce the public debt by investing in the long-term restructuring of the UK’s energy infrastructure needed to meet the challenges of climate change and the inevitable peak and decline of oil.

To illustrate the potential of ‘green quantitative easing’, new calculations produced by nef (the new economics foundation) for the Group reveal that:

A sample of £10 billion in green quantitative easing invested in the energy efficiency sector could:

• Create 60,000 jobs (or 350,000 person-years of employment) while also reducing emissions by a further 3.96MtCO2e each year;
• This could also create public savings of £4.5 billion over five years in reduced benefits and increased tax intake alone;

A sample of £10 billion in ‘green quantitative easing’ invested in onshore wind could:

• Increase wind’s contribution to the UK’s total electricity supply from its current 1.9 per cent[i] to 10 per cent (39 TWhe) and;
• Create over 36,000 jobs in installation and direct and indirect manufacturing.
• This is a total of 180,000 job-years of employment – here we have described each ‘job’ as providing stable employment for an average of five job-years.
• Create a further 4,800 jobs in the operations and maintenance of the installed capacity and other related employment[ii] over the entire 20 year lifetime of the installation (equivalent to 96,000 job-years)
• And, if this directly replaced energy from conventional sources, it could decarbonise the UK economy by 2.4 per cent.[i] – reducing emissions from the power sector by up to 16 Mt[iii]CO2e[iv] each year  This corresponds to a £19 billion reduction in environmental damage

Or, a sample investment of £10 billion could:

• re-skill 1.5 million people for the low-carbon skills of the future, bringing 120,000 people back into the workforce, and increasing the earnings of those with a low income by a total of £15.4 billion.

The Group recommends:

• A £50 billion programme in ‘green quantitative easing’ in the short term to rebuild the economy. This is the amount of annual spending recommended by some of the most comprehensive analyses to date of the amounts needed to re-engineer the UK economy to meet the challenges of a low carbon future;

• Next, planning must begin for all of the new forms of bond finance detailed in the Group’s report to ensure the long-term stable funding needed for the long-term transformation of UK infrastructure.

Once spending on the green economy of the future has breathed life back into the deflated economy, the Green New Deal will require a whole new savings and investment infrastructure to meet the long-term investment needed to underpin the Green New Deal and to meet the needs of a new generation of investors who are fed up with all that has gone before.

This means secure new forms of saving which promise stable returns over the longer-term. The Group put forward a range of new measures to help public borrowing and encourage public investment by individuals, local authorities and companies in greening and reviving the economy. The foundations for these must be laid now. These include:

Measures on tax that are explicitly designed to re-gear the UK economy and transform energy infrastructure:

• Tax incentives on green savings and investment, so that future ISA tax relief – costing more than £2 billion a year – is only available for funds invested in green savings (tax relief for ISAs was more than the whole green stimulus package announced in the 2009 Budget, estimated to be worth just £1.4 billion).
• A general tax-avoidance provision to end the abuse of tax allowances. If just half of the tax avoidance in the UK was stopped by this provision, it would raise more than £10 billion a year.
• A Financial Transaction Tax, commonly known as a “Tobin Tax”. Such a tax, applied internationally at a rate of about 0.05 per cent has the potential to raise more than £400 billion a year. This could be the basis for a Green New Deal in the Global South, playing a significant role in enabling the majority world to adapt to climate change as well as breaking the carbon chains of fossil fuel dependence.
• New savings mechanisms that support the greening of the economy now, create thousands of new jobs and guarantee stable returns into the future:
• Green bonds, which will be issued by the government with the explicit guarantee that the funds raised will be invested in new green infrastructure for the UK. The bonds will carry conventional rates of return for bonds.
• Local authority bonds, to invest in energy efficiency and provide renewable energy for each of the country’s three million council tenants, as well as for all other local-authority-owned or -controlled buildings, such as town halls, schools, hospitals and transport infrastructure.
• Carbon linked bonds, to align investment returns with carbon saving and create a significant body of investors who will take the risk on there being carbon savings that can be secured.

A new publicly owned ‘Green New Deal Investment Bank’ to allocate the capital provided by green quantitative easing, and new bank lending to government:

• Green New Deal Investment Bank, a publicly owned bank to hold and disburse capital provided by ‘green quantitative easing’. It will be used exclusively to fund companies and projects designed to accelerate the transition towards a low carbon economy.
• Treasury Deposit Receipts, like those issued during the Second World War, a mechanism whereby banks were forced to use their ability to create credit to lend to government.

The Green New Deal group believe that despite the appearance of calm, the need for the implementation of the Green New Deal is greater than ever. When the Group launched their first report, new analysis suggested that from 1 August 2008 there were only 100 months, or less, to stabilise concentrations of greenhouse gases in the atmosphere before we hit a potential point of no return. The climate clock is still ticking and nothing like the scale of reform needed to rapidly re-engineer the economy has been implemented, anywhere.

This could be a real opportunity for the UK to show global leadership by implementing an interlinked package that recognises the need for targeted public spending in a downturn.  Not to further fuel an economy hard-wired into ever increasing use of fossil fuels, but to revitalise the productive economy and lay the foundations of the low-carbon infrastructure of the future.

The opportunity for action is even more pressing than it was when President Franklin Roosevelt instigated his bold New Deal programme that touched almost every aspect of economy and society. The timescale is limited by the urgent need to stabilise concentrations of greenhouse gases in the atmosphere before the risk of uncontrollable global warming increases significantly. Today, there is a plan on the table that could revitalise our damaged economy while also radically restructuring it for a low carbon future. Now the vision is needed to implement it before it is too late.
-    ENDS –

For more information, or to arrange an interview with a member of the Green New Deal Group, please contact:

Ruth Potts, co-ordinator, the Green New Deal Group, on:

t: 020 7820 6357         m: 07749 026 203       email: ruth.potts@neweconomics.org

Quotes from the Green New Deal Group:

“There is a pervasive and infantile notion that government budgets are like household budgets. They are not. By spending and investing in jobs, governments generate tax revenues, reduce welfare payments – and cut government debt into the bargain. Government must spend away the debt – on flood defences, on alternative energy and energy efficiency.  By investing in green-collar jobs that can’t be done in  China, government spending will pay for itself, fill the economic crater caused by the collapse in private investment – and lead to a recovery in public finances.” Says Ann Pettifor, nef fellow and Green New Deal Group member

“In the bad old days of medicine, there was a popular belief that draining blood from the sick would help them recover. More often it hastened their demise. The idea that widespread cuts are necessary to help the economy recover and pay back the public debt may be appealing as a knee jerk reaction but it makes no economic sense. An economic transfusion of resources to build a low-carbon economy is what we need to get the patient on its feet. Do this and we will create jobs, raise revenues, cut carbon and increase our energy security. It is not a time for the economic policy equivalent of medieval bloodletting.” Says Andrew Simms, policy director of nef (the new economics foundation and Green New Deal Group Member

“This is about using fiscal policy - government spending, borrowing, and tax revenue – to create real jobs,  real investment and real energy security in our economy – and all of it green. That’s not just being green, that’s about working, financing, governing and sustaining green – all in a plan that works across conventional policy boundaries to show that the Green New Deal group doesn’t just talk about integrated thinking – it delivers it too” says Richard Murphy, Director of Tax Research LLP and Green New Deal Group Member

“Its time for the Bank of England’s quantitative easing programme to stop magicing money out of nothing to prop up the banks. Instead it should use this form of money to fund green jobs and business opportunities on a huge scale. Also people are saving not spending, so the Government needs to see ‘savers as saviours’ and provide inducements for them to use such savings to fund a Green New Deal”. says Colin Hines, convenor of the Green New Deal Group

Notes to editors:

1.    The cuts won’t work: Why spending on a Green New Deal will reduce the public debt, cut carbon emissions, increase energy security and reduce fuel poverty is the second publication of the Green New Deal Group. Meeting since early 2007, its membership is drawn to reflect a wide range of expertise relating to the current financial, energy and environmental crises. The views and recommendations of the report are those of the group writing in their individual capacities. The report is published on behalf of the Green New Deal Group by nef (the new economics foundation)

2.    The Green New Deal Group’s first report, The Green New Deal: Joined-up policies to solve the triple crunch of the credit crisis, climate change and high oil prices was published in July 2008.

3.    The Green New Deal report will be delivered to the Prime Minister, Gordon Brown, the leader of the Conservative Party, David Cameron, and the leader of the Liberal Democrats, Nick Clegg, with a letter signed by the members of the Green New Deal Group demanding a response to its proposals.
The Green New Deal Group are, in alphabetical order:

Larry Elliott, Economics Editor of the Guardian,
Colin Hines,Co-Director of Finance for the Future, former head of Greenpeace International’s Economics Unit,
Tony Juniper, Environmentalist and Campaigner,
Jeremy Leggett, founder and Chairman of Solarcentury and SolarAid,
Caroline Lucas, Green Party MEP,
Richard Murphy, Co-Director of Finance for the Future and Director, Tax Research LLP,
Ann Pettifor, former head of the Jubilee 2000 debt relief campaign, Campaign Director of Operation Noah,
Charles Secrett, Advisor on Sustainable Development, former Director of Friends of the Earth,
Andrew Simms, Policy Director, nef (the new economics foundation).

15th December, 2008

Last week there were several media pieces that mentioned the Green New Deal, including The Times, The Observer, and The Independent on Sunday.

Also, UN Secretary General Ban Ki-moon has followed his colleagues at UNEP in calling for a Green New Deal.

You can also read nef’s Green New Deal Round-up here.

It is a small measure of the dramatic financial meltdown of 2007-08 that leading representatives of western liberal capitalism ransacked the past for reference-points to convey its scale…

Read more here

11th October, 2008

I have had an extraordinary day today, at an event in Bristol organised by the Schumacher Society.  Fritz Schumacher - of Small is Beautiful fame – died in 1977, and the Society was formed just thirty years ago, in 1978.  Today’s event was hosted by Diana Schumacher and Jonathon Porritt.  I was honoured to share a platform with Bill McKibben the great leader of the Green movement in the United States, and brilliant strategist behind the 350 campaign.

I majored on the financial crisis, and links between the Credit Crunch, the Peak Oil Crunch and the Climate Crunch – and our proposed strategy for dealing with all three – The Green New Deal. Bill majored on the climate, and gave a powerful and moving lecture. (DVDs available from the Schumacher Society). We were both pressed by the energetic and committed participants to talk in more detail about actual steps to ‘the new future’. But we both were more concerned to put out the financial and climate ’fires’ raging today – before we got down to building the new future. The delegates would not have it…..Tell us how to build the New Jerusalem they clamoured……

I had many inspiring encounters; but was especially taken by an encounter with James Bruges, author of The Big Earth Book.  He suggested that just as in the Anglo-American economies the availability of credit expanded as the house-price inflation bubble expanded, so debt repayments should contract as house-price values deflate. This is an entirely logical and fair approach, and one way in which to de-leverage the debts taken on by home-owners.

In Germany, it is not possible to obtain a mortgage linked to the current value of a property. Instead the mortgage must be linked to the average value of the property over a period of years (30 years??).  As a result, credit did not act as a pump, blowing up the value of property overall. And rising values did not automatically inflate the amount of credit in the system.

In the UK the opposite happened. As credit pumped up property prices, so the availability of credit (mortgages) was expanded to match the rising values of property, creating the vicious cycle that is now unwinding to such destructive effect. If that unwinding could be managed by forcing the banks to share in the loss suffered by homeowners on the de-valuation of the property, then some justice will have been done and people may not be evicted from their homes.

The Green New Deal group is inviting comment and debate on our report, and we plan to revise and improve our document in light of those comments. James Burges’s idea is bound to find its way in there……