Global capitalism has been revealed: less the immutable force, as unchanging as the laws of physics, more the tawdry shuckster hiding behind the curtain revealed as the less than mighty Wizard of Oz. Interestingly, that novel was written at a time in US history when financial interests were driving small businesses and farms to the wall, partly due to the policy of maintaining the Gold Standard (remember the yellow brick road?). The moral of the novel—and the film that followed—was that the little people need to have confidence in their own ability to put things right.
We are now 80 years on from the Wall Street Crash and, in spite of the warnings of Galbraith and others, the lessons were forgotten. A speculative bubble in asset values and in debt has burst and the consequences for innocent bystanders and useful businesses in the coming year will be dire. Then, as now, the environmental and financial crisis went hand in hand: it was pressure from the banks that forced over-production and led to the Dustbowl. Then, as now, the solution lies in enlightened economic and particularly monetary policies.
Our party has a chequered history of debating the question of money. Many have argued for the return of the right to print money to the people and away from the banks; others have countered that this would be inflationary. Today, even right-wing politicians are calling for ‘quantitative easing’ – a piece of jargon intended to conceal what is, baldly, printing money. The money is needed to replace what has been sucked out of the economy into the black hole of bad bank debts, and since it is public money the public should decide where to spend it.
The Green New Deal is an obvious candidate, with its targets for home insulation and support for the green industrial revolution as the remaining manufacturing companies are converted to produce low-carbon products. Rather than dropping the money randomly from helicopters it could be used strategically to stimulate the expansion of green sectors so that we come out of this recession with our economy transformed.
More fundamentally, money that needs to be put into the economy to prevent the slide into Depression could be used to establish the Citizen’s Income (CI) scheme which would be so fundamental to any green society. The politics of arguing for this are made much easier by the fact that so many families are already receiving a similar sum as tax credits. In fact, this scheme makes clear the prejudice successive governments have against people without children. Especially single people, and especially single people who can’t work or won’t work in the soul-destroying and environmentally destructive jobs that the present economy offers. A green economy would use CI to support such people to create their own sustainable livelihoods, a process which would also require asking questions about the distribution of assets, particularly land.
We have considerable leeway, gained from the reality which we should remind ourselves about during each morning’s meditation, that we now own most of the banks and therefore their business should be ours to decide. We need political management of bank lending, so that it can be used to support the move towards a low-carbon economy. But we should also manage the banks’ mortgage policies to prioritise keeping people in their homes. The ‘right to rent’ policy passed during last year’s spring conference was a great step in this direction, but perhaps we could go further and argue for a ‘home entitlement’ policy, where much of the debt mortgage-holders owe to banks – which after all was created by an artificial inflation in asset values caused by the banks to their own gain – is eliminated, leaving them with much lower monthly repayments. Without some radical moves in this direction many thousands will default in the coming year, meaning further destabilisation of the housing market and huge numbers seeking rehousing by hard-pressed local authorities.
Green economists, taking the phrase from Herman Daly, argue for a steady state economy, where you do not take more resources from the planet than can be replenished and where scarce resources are used frugally and recycled. Such an economy would also be typified by the absence of economic growth and zero interest rates. Again the movement of events is playing into our hands here. Of course, the decline in economic activity is happening chaotically and destructively at present, but within a few years we will all be used to living in a world where we do not expect our economy to grow from year to year and where making money from money without any involvement in the real economy is no longer a viable economic strategy.
As a former Chairman of HSBC told his listeners at a high-powered dinner back in 2003, we should remember that in Chinese the words for ‘threat’ and ‘opportunity’ are represented by the same character. The threats from the financial meltdown can also be read as the opportunity we have been waiting for. The ideology we have grown up with, of growth, excess and inequality, has been shown up to be as cheap and unreliable as the market system itself. Now is the time when we must have the courage to dream of the future we have always believed to be possible.
Molly Scott Cato, the party’s Economics Speaker, is a Reader in Green Economics at Cardiff School of Management. Her new book Green Economics: An Introduction to Theory, Policy and Practice was published by Earthscan in January.
