The earth’s warming is inviting humanity to reframe the way we live as individuals and also revise how we organize socially. Approach to climate warming economy and policy tends to focus on specific ways to decouple energy production from fossil-fuels by using different financial mechanisms like carbon taxation, cap-and-trade, market based measures and strong investment in technological innovation and R&D. Although solving climate warming is sometimes seen as an opportunity for an entire transformation of the world, we rarely speak about what are the systemic issues that perpetuate it and have stalled its change for decades since James Hansen and other American scientists raised the alarms of global warming in the seventies [1].

As the Rooseveltian New Deal that in the 1930’ies helped to overcome the Great Depression and that financed the War efforts, the Green New Deal makes a case for the social aspects of climate justice and aims to tackle the threat that climate change poses to the American security, poverty and social inequality, through an ambitious proposal of robust government investment programs. The GND was first called by Thomas L. Friedman in a New York times column published in 2007 titled: “A Warning from the Garden” [2]. Thereafter brewed for a decade in the wake of the 2008 financial crisis until it was introduced in February 2019 by congresswoman Alexandria Ocasio-Cortez and Senator Ed Markey.

The aims of the GND is a transformational overhaul of financial capitalism, wealth distribution and corporate tax, addressing climate justice, racial justice, gender inequality and the increasing gap in wealth between rich and middle class in America. All of these issues are in many ways connected to climate warming and emissions mitigation. Therefore, to tackle climate change the GND plans to encompass multifaceted solutions to these questions in coordination with the technical and financial ones more specific to the decarbonization of our energy systems and greenhouse gas emissions.

Historically there is no doubt that FDR’s New Deal brought prosperity and shaped the Unites States middle class, ending austerity and unemployment for decades. Today, despite living in a polarized political era, most Democrats and 64% of Republicans backed the plan; until they knew it was promoted by AOC [3]. But the GND resolution not just faces strong opposition from the predominant Neoliberal ideology, it also lacks precision on how it will be engineered, making it look just as a mere statement of intentions. Reaching better understanding demands researching academic papers, books and other sources (like Bernie Sanders GND) that explain the plan.   

In what relates to economy, the way the GND is framed aims at the political gridlock between Neoclassical and Keynesian conceptualization monetary policy. These opposed views have inhabited the political conversation for decades, the prevalent view being the Neoliberal, which remains unchallenged and mainstream for about forty years since the first Reagan administration. This one believes in minimal government intervention leaving control over the monetary system to private authority (the markets) and hence expecting that the efficiencies of the free markets will deploy the solutions needed to abate climate disasters. In this train of thought historian of science at Harvard University, professor Naomi Oreskes, recently published an article in Scientific American arguing in opposition to this idea saying: “Will nations ever come together to keep climate out of the severe danger zone? […] the nation’s ambivalence about climate change long predates the last presidential election. A major reason is some American conservatives hostility to government intervention. If the U.S. and the world are to succeed in limiting disruptive climate change, the U.S. will have to give up the idea that free markets alone can adequately address climate change and accept the reality that markets need help from governments” [4]. I understand Oreskes statement as a call for market regulation.

 The GND poses challenges to the widely accepted ideas of financial capitalism and globalized economy demanding a major system change. In the words of Ann Pettifor, “to tackle climate change we need simultaneously to tackle the root cause of growing toxic emissions: a self-regulating, globalized financial system that pours exponential quantities of unregulated credit into the hands of speculators and consumers. This credit is used in turn to inflate the prices of existing assets [..] further it is used to accelerate the extraction and consumption of earths finite assets.” [5]. According to Pettifor overhauling this market mechanisms are at the center of the GND. This idea is in line with others progressive scholars and economists that argue in favor of pursuing limits to growth as opposed to the widely neoliberal idea of endless resources and unlimited economic growth (i.e. sustainable against unsustainable economy).

To the legitimate concern if the GND will be inflationary, Galvin and Healy run the numbers and argue that it would require an estimated increase of 40% in taxes, “not breaking any vital economic rules and would not lead to inflation if managed sensibly”[6]. The question is left to whether the US society would accept this tax rates. According to the Tax Policy Center – Urban Institute & Brookings Institution, “US taxes are low relative to those in other high-income countries. In 2018, taxes at all levels of US government represented 24 percent of gross domestic product (GDP), compared with an average of 34 percent for the other 35 member countries of the Organization for Economic Co-operation and Development (OECD)” [7]. In the Eurozone the Tax-to-GDP ratio in 2018 was 40.3 percent [8]. This discussion is very present at the moment in the US political arena and deserves a strong debate because it will influence our future economic decisions and climate change actions.

Austerity was the buzz word after the 2008 financial crisis and it has been the recipe for all economic crises in the last forty years. But it has not entirely worked as expected for the great majority of the working class, resulting in a transfer of wealth from the bottom to the 1 percent top. Needless to say the loss of wealth of most middle class. The idea of ‘there is no money’ should be discarded as an economic option because money as a technology to trade, consume and invest should enable us to do what we need to do to solve the problems we have as a civilization. There lies the question between Neoclassical and Keynesian models of understanding monetary policy (exogenous or endogenous origins of money). Like Galvin and Healy point out in their paper, I also support the argument in favor of challenging the Neoclassical-Neoliberal model. I argue that the way Neoliberal economics have operated in the last four decades is impacting the planet’s climate and the social cohesion of most Western developed countries in a negative manner. Democracy and Capitalism have provided the framework for economic prosperity and innovation, however unrestrained financial capitalism and endless growth is coming at a cost that is socially and environmentally unsustainable. Having reached this watershed moment should invite us to reflect on to where  this economic model is taking us.

Consensus is building towards the acceptance that Climate solutions come through collective pursuit of the greater common good. That everyone needs to pay its fair share, participate in the solutions and get to work to solve the greatest threat humanity has ever faced. Whereas these efforts should come from higher taxes, market efficiencies, massive government infrastructure projects, climate clubs or trans-national agreements is something that we need to have a discussion about. But the climate window narrows leaving us with little time to act. I believe we need to work in all these options together and it will lead us to the best possible outcome.   

References

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[1] Rich, Nathaniel. Losing Earth: A Recent History. New York: Picador, 2019.

[2] Friedman, Thomas L. “A warning from the Garden”: https://www.nytimes.com/2007/01/19/opinion/19friedman.html

[3] Gustafson, Abel, et al. “The Green New Deal has strong bipartisan support.” Yale Center for Climate Change Communication and the George Mason University Center for Climate Change Communication (2018).

[4] Oreskes, Naomi. “How to break the climate deadlock.” Scientific American 313.6 (2015): 74-79.

[5] Pettifor, Ann. The case for the Green New Deal. London: Verso, 2019. 8-9.

[6] Galvin, Ray, and Noel Healy. “The Green New Deal in the United States: What it is and how to pay for it.” Energy Research & Social Science 67 (2020): 101529.

[7] Tax Policy Center (Urban Institute & Brookings Institute) https://www.taxpolicycenter.org/briefing-book/how-do-us-taxes-compare-internationally#:~:text=Budget%20and%20Economy-,How%20do%20US%20taxes%20compare%20internationally%3F,average%20for%20other%20OECD%20countries

[8] Eurostat/News Release 166/2019. 30 October 2019. https://ec.europa.eu/eurostat/documents/2995521/10190755/2-30102019-AP-EN.pdf/68739572-f06a-51e4-3a5b-86e660a23376