A Green New Deal requires nothing less than putting the globalized financial system under the authority of nation states.
Climatologists have warned us that humanity has a "carbon budget" of approximately 3.2 billion tons of CO2 emissions, accounted for since 1870, to avoid the most dangerous impacts of climate collapse and global warming. At the current rate of global emissions, this budget would be used up in 10 to 12 years.
Worse still, in 2019, another group of scientists, the United Nations (UN) Intergovernmental Platform for Biodiversity and Ecosystem Services (IPBES), warned that nature is deteriorating on a global scale at rates unprecedented in human history. . The rate of extinction of species is accelerating, with serious and immediate impacts on the world's population. The UN called for "a fundamental reorganization of the entire system, encompassing technological, economic and social factors, including paradigms, goals and values."
The Green New Deal is an action plan to achieve that urgent reorganization of the entire system in a short time. The first question we must ask is: who makes this deal? Can the New Green Deal be a single global plan, implemented by a global authority, or can it be managed more locally?
As Herman Daly, pioneer of ecological economics and architect of the "steady state" economy, has said: the human economy is a subsystem sustained and contained by a global ecosphere in delicate balance, which in turn is fed by finite flows of energy. solar energy. Life support systems on Earth do not recognize boundary boundaries. So can the New Covenant work on a scale smaller than the entire planet?
While the impacts of the current crisis are being felt everywhere, the majority of current and historical global greenhouse gas emissions were generated in rich countries. Meanwhile, per capita emissions in poor countries remain relatively low. Therefore, ecological justice requires a significant redistribution of wealth, from rich producers and emitters of toxic emissions from fossil fuels to low-income countries.
Furthermore, as the Global Commons Institute (GCI) has argued, rich countries must reduce their emissions until per capita emissions converge around the world. For some time now, the UN has been defending the "contraction and convergence" proposal. It has failed to take hold because global institutions are weak, largely without responsibilities, and lack political leadership.
It is clear that global initiatives cannot be our only hope. There is an alternative approach: international cooperation based not on global institutions, but on the authority of nation states. For the New Green Deal to be transformative, its implementation must be at the level of democratic accountability. Policies agreed at the international level would be implemented and applied by institutions with local and national responsibility that reflect domestic conditions.
But even if we can create policies at the state or local government level, does this mean that those who operate in the markets of the global financial system will support the policies of different nation states? The existing dollarized financial system, which is no longer anchored in the real economy, will it support and finance a New Green Deal at the national level?
The existing dollarized financial system, which is no longer anchored in the real economy, will it support and finance a New Green Deal at the national level?
We have to be realistic and accept that, with a few exceptions, the sector would not help finance a massive climate stabilization project on terms that are acceptable and sustainable. As it stands, those who operate in globalized capital markets behave like "lords of the universe." They are not accountable and remain aloof from governments and communities for whom transforming systems is an urgent task.
If we are to mobilize the financial resources necessary for the massive changes that require the conservation, restoration and sustainability of life on Earth, then the globalized financial system must be subordinate to the needs of nations and be a servant in the task of the transformation.
If the global sector is to be tamed, then the first challenge will be to attack the hegemony of the currency that underpins globalized finance: the US dollar.
Imperial power and the US dollar
The preeminence of the dollar arose as a result of the United States at the Bretton Woods conference in 1944 forcing the rest of the world to adopt its currency as the world's "money." John Maynard Keynes had advocated for a global currency, not tied to any country and administered in the interest of the international community.
He was defeated at Bretton Woods, as the United States imposed its will on a weakened Europe. Today, that decision still allows the United States to enjoy a "free lunch" at the expense of the rest of the world. Its "exorbitant privilege" is a reward for the insurance it provides to the rest of the world, especially in times of crisis.
With the Federal Reserve acting as the global lender of last resort, the United States made trillions of dollars available to European and Asian banks during the great financial crisis of 2007-2009. This "insurance" is valuable in times of crisis, but it could have been provided by an independent international central bank that works and is accountable to all nations, not just the most powerful.
The "exorbitant privilege" enjoyed by the United States is significant, given that the country maintains a growing foreign debt and deficit, because global demand for the dollar exceeds US production. In contrast to Britain's imperialist role as a major exporter of capital, the United States is a major importer of capital. It uses its power to attract financial resources, surplus capital from Asia and the oil-exporting countries.
A second great benefit the United States enjoys is the power to borrow in its own currency, over the value of which it has some control. This means that the United States avoids the exchange rate risks that other countries face when they borrow and have to pay in a different currency.
If the dollar depreciates, this does not matter to the US authorities, since the nation does not have debt issued in euros, yen or sterling. When the value of the dollar falls, so does the value of debts incurred by the United States. Thus, the dollar as the world's reserve currency provides the United States with cheap, low-risk financing to maintain its large trade deficit and its exorbitant consumption of world goods and services.
The dollar's hegemony in global finance remains unchallenged despite the recent financial crisis, as historian Adam Tooze has noted. In fact, the US dollar not only survived the 2008 crisis, but was strengthened by it. As a result of the global financial crisis and the weakness of the Barack Obama administration, Wall Street banks are bigger and more powerful today than before the crisis. That result was not inevitable. It was due in large part to the failure of progressive and global leadership by the Obama administration.
Unlike Franklin D. Roosevelt, the president who implemented the original New Deal agenda, Obama had no direct experience with Wall Street and its ability to inflict systemic economic loss on millions of innocent Americans and their families. His advisers such as Alan Greenspan, Larry Summers and Robert Rubin were the architects of the globalized and deregulated financial system.
Under Bill Clinton, they rallied to defeat a plan by Brooksley Born, chair of the Commodity Futures Trading Commission, for stronger regulation of derivatives. In 1999, Summers and Rubin together pushed for the repeal of the Glass-Steagall Act enacted in 1933 by Roosevelt, which had prevented banks backed by taxpayer guarantees from associating with investment banks engaged in financial speculation.
The Obama administration's support for Wall Street was compounded by the Donald Trump administration, dedicated to defending and increasing the power of Wall Street. To strengthen its imperial overreach, the United States allocated a budget of 750,000 million dollars (from 3% to 4% of that country's GDP) for the defense area in 2020, and fueled the conversations about new foreign invasions, which the candidate American presidential Bernie Sanders calls "endless wars."
Fuel consumption, incite corruption
Backed by a great imperial power, the US dollar works alongside the "invisible hand" of the market or, less abstractly, with the invisible hands of powerful agents active in financial markets. It is a globalized system committed to "the constant expansion of production and driven by the constant drive to accumulate capital," to quote Simon Pirani of the Institute for Energy Studies at the University of Oxford.
It is a system that, enabled by the power of the dollar to violate regulatory barriers, has deliberately become independent of democratic oversight at the level of nation states. Its purpose is to accumulate wealth for the small minority that operates in the financial sector. This is achieved through production and speculation with intangible financial assets, especially credit.
Credit is the main driver of economic expansion (defined by economists as "growth") and consumption. It has stimulated the extraction of fossil fuels through industrialization, urbanization, motorization, the growth of mass consumption of materials and consumerism on the part of the well-to-do classes, in both high-income and low-income countries.
Deregulated credit in a world of mobile capital not only fuels consumption, but also incites corruption, both in the political and financial sectors. Drug traffickers and gangsters engaged in a global trade responsible for approximately 450,000 deaths as a result of drug use in 2015, making them one of the richest beneficiaries of the current globalized and unregulated mobile capital system.
Credit is presumed to "grow" exponentially as private finance improves capitalism's ability to first create the new "needs" of society, what JK Galbraith called our "psychologically grounded" wants: the "needs." that they do not "originate in the personality of the consumer" but are "planned by the production process."
In this way, the faucet of easy dollar credit fuels global economic expansion and the constant drive for capital accumulation by the already wealthy. Consumption, in turn, is stuffed with fossil fuels, accelerating the growth of greenhouse gas (GHG) emissions.
From an ecosystem perspective, perhaps the most damaging aspect of globalized, and largely unregulated, credit creation is the demand, by the financial sector, for high real rates of return in a relatively effortless process: credit creation. new money. If interest rates are higher than the ability of the Earth or the economy to renew itself, then interest rates become brutally extractive.
People who are forced into debt due to low or decreasing income are compelled to work longer and longer hours to earn the money with which they can pay the interest on their debt. Businesses also cut costs and exploit labor more intensively to obtain the financing necessary to pay their debts. Governments clear forests, deplete land and maritime resources to improve "efficiency" and generate the returns necessary to pay their obligations, including servicing the external debt.
Recover capital from abroad
In my opinion, to manage the economic expansion, stop the drive for capital accumulation and reduce GHGs, it is essential to first handle the tap of globalized credit creation. To this end, it will be necessary to bring back capital from abroad and subject the system to responsible management and regulation at the state level.
Next, to manage the world crisis due to the collapse of the planet's systems, we will need an international currency independent of the sovereign power of any imperial state. Finally, we will have to establish an international "clearing union" for the settlement of credits and debits between nations, and thus distribute the effort that the transformation demands.
Many will consider these proposals for radical change in the global system utopian. And so they will be, until ashock global make system change inevitable. The concrete fact is that societies have developed, over time, monetary systems that make the mobilization of financial resources eminently possible for the urgent needs of society.
Once these systems are in place, there should never be a shortage of money. But publicly backed monetary systems cannot be managed and developed in the interests of society and the ecosystem as long as they remain "globalized": captured and taken abroad, outside the reach of regulatory democracy. In what is effectively the financial stratosphere, monetary systems serve the interests, not of human societies, but of 1% of the world's population.
This has not happened by accident. As a result of a deliberate process, the financial system has become independent from the real economy of nation states and from government regulation. Following the logic of neoliberal economics, it has been "encapsulated" to protect the sector from democratic interference, as Quinn Slobodian shows in his bookGlobalists: The End of Empire and the Birth of Neoliberalism [Globalists. The end of the empire and the birth of neoliberalism].
In other words, globalized and dollarized financial capitalism, displaced outward, has undermined the power of democratic governments and local communities to develop economic policies that meet urgent needs.
We have been here before. The current globalized system dates back to the gold standard system of the 1930s, when the private financial sector wrested control of publicly backed monetary systems from democratic governments. At the time, those who advocated "system change" - the dismantling of the gold standard - were considered delusional. When the system collapsed, many economists were shaken to the core. They had mistakenly believed that the gold standard was, like gold, immutable.
We must regain power
Given the vast power of dollarized globalization over world economies, can rich governments like Germany or poor governments like Mozambique mobilize the funds necessary for the transition to a habitable planet? Could governments cooperate to mobilize the funds needed by the world's poorest countries? We know that there are abundant financial resources (savings) to pay for the transition. But do societies and their states have the power to dispose of these resources?
The direct answer is no. That fact confronts the defenders of the New Green Deal with the first great mission: nothing less than a change in the global financial system. If we are going to support the campaign efforts of Extinction Rebellion and the school strike movement; If we want to meet the goal of a fundamental transformation of the economy throughout the system to save the ecosystem, then we must combine and cooperate on an international scale to bring about a revolution in the power relations of the globalized and dollarized economic system.
Cooperation and coordination between a progressive British economist and an American president and his administration brought about such a transformation in 1933 and again, with less success, at Bretton Woods in 1944. We can do it again, armed with sound economic theory and political practice to mobilize our collectively paralyzed societies.
The purpose will be to transform the globalized financial system within which the internal economic systems of nation states are situated and integrated, and to which they are subordinate. Given these challenges, and given current politics, the task of transforming the system may seem impossible.
But, as David Roberts wrote in 2019: “We are not in an age of normal politics. There are no precedents for the climate crisis, its dangers or its opportunities. This requires, above all, courage and new ideas.
By Ann Pettifor - Translation: Carlos Díaz Rocca