Reflections On The Concept Of
A 'Green New Deal'
By Peter Custers
19 February, 2009
In recent months, the idea of a ‘ Green New Deal' has speedily gained popularity among policymakers worldwide. Reacting to the financial crisis, both governments of central capitalist economies and of emerging capitalist powers in Asia have resorted to a variety of measures aimed at countering the recession and at drawing their economies from the slump. Amongst the measures which the governments of the US and China for instance have decided upon, are public investments in infrastructural improvements, as also investments aimed at promoting production of alternative energy. Yet there is ample reason to be cautious when assessing these measures' social and green significance. Though the shift in policymaking is demonstrably large if compared with the neoliberal policies that were pursued in previous decades, - the question that needs to be posed is whether the term ‘ Green New Deal ‘ is really appropriate as an umbrella concept describing the new policy direction of capitalist governments. For one, the term is already being coined at a time when its parameters have not been clearly defined yet (1). Below, I propose to critically reflect on the concept of a ‘ Green New Deal'.
To start, let me propose my own definition of the concept. A ‘ Green New Deal' comprises a set of governmental measures, such as the purchasing of market commodities and transfer-oriented taxation measures, which all aim at stimulating a country's business cycle. Historically speaking, the concept of the New Deal dates from before the time when John Maynard Keynes emerged as leading theorist among the economists of central capitalist countries. Still, New Deal -type measures can well be analyzed and understood with the conceptual apparatus as laid down by Keynes (2). Contrary to Keynes' own vision, though, the type of measures to be bracketed as Green New Deal should simultaneously maintain a green and a social standard. On the one hand, they need to aim at countering the negative social consequence of the present global economic crisis, such as the rapidly rising level of unemployment. On the other hand, the measures should also represent a shift in policymaking in the direction of an environmentally friendly economy, which shift notably entails the transition towards an economy that no longer relies on fossil fuels. It is only if both conditions are met, that we can truly speak of a ‘ Green New Deal' .
Before elaborating on measures which fulfill the two mentioned criteria, it is necessary to briefly reflect on history. For as indicated, the very concept of a New Deal is grounded in history, dating as it does from the period of the 1930s when Western economies faced a severe depression in consequence of the 1929 krach . In the US , the then President Roosevelt introduced a series of measures aimed at pulling the American economy from the slump. These included salvaging measures, i.e. measures intended to prevent banks and industrial companies from going bankrupt. They also comprised measures aimed at creating additional employment, and at supporting the unemployed. Last-mentioned category of measures included, for instance, the founding of the TVA (Tennessee Valley Authority), a regional government body entrusted with the task of constructing dams in the Tennessee river . The US government also adopted a law allowing it to open gruel kitchens, and a social security law offering financial support to the elderly, the disabled and other groups. The social category of governmental measures, however, constituted only a part of the whole.
Roosevelt‘s New Deal period is not reputed to have been a period of very successful government intervention in the US economy. According to the wellknown American economists Paul Baran and Paul Sweezy, for instance, a crucial weakness underlying the policy was that the socially oriented keynesian measures of intervention were very limited in size. The story goes that Keynes at one point in the 1930s personally visited the White House. Here he discussed his views with Roosevelt, and argued that the US President should accept the need for substantially higher budget deficits. Yet the US President is reported to have stuck to his position in favour of a balanced budget, a budget which is balanced on the whole. Government expenditures, measured in current Dollar terms, reportedly increased from merely 10.2 Billion US Dollars in 1929, to 17.5 Billion US Dollars ten years later, in 1939. This represented no more than a 70 percent increase, whereas the Gross Domestic Product during the very same period dropped, from 104.4 Billion US Dollars to 91.1 Billion US Dollars (3). Hence, Roosevelt 's New Deal has been seriously criticized because of the fact that the size of its social components was highly circumscribed.
Yet seen from the vantage point of history, the New Deal did have positive significance. Precisely since there is a tendency to provide the programmatic orientation of the new American President Obama with the label of a ‘Green New Deal' , it is crucially important to stress that Roosevelt 's New Deal was very largely a civilian program of public expenditures. True, the military allocations of the US government did rise over a period of ten years, i.e. between 1929 and 1939. Yet they remained rather modest in percentage terms. In the first mentioned year 1929, they reportedly constituted 0.7 % of the Gross Domestic Product (GDP). Towards the end of the period, in 1939, they amounted to 1.4 % of the US 's GDP (4). Furthermore, the respective increases in military expenditures in the government budget, and the increases in civilian allocations were similarly large in size, - i.e. in the sense of their respective proportionate growths. Yet the civilian purchases remained manifold larger than the government's military purchases. In other words: although Roosevelt's public investments and transfer measures could not be termed ‘green', they very largely bore the characteristic of civilian measures aimed at promoting an upswing in the US economy.
These historical reflections offer us a first criteria towards assessing the programs which different governments have put forward to fight the 2008/2009 recession. If the given measures are to be termed New Deal measures, they on no account can target an expansion in military allocations. Instead, the existing plans aimed at procurement of large armament systems, and other military keynesian expenditures need to be scrapped (5). If a Green New Deal is to be a step forward in comparison with the New Deal of Roosevelt, - there needs to be solid and unequivocal evidence that the US 's exceedingly high ‘defense'-expenditures will be downsized. There is no way in which the world's public can accept the level of expenditures as has prevailed under the Bush jr. administration, when annual military expenditures rose to above 1000 Billion US Dollarss ( 8 % of GDP!) (6). A New Deal , as also a new and greener version of Roosevelt 's Deal, to an overwhelming extent needs to have the characteristics of a program of civilian investments and transfer measures. If the Pentagon's behavior of completely wasteful spending is set to continue, - this will only serve to obliterate the radical difference between Roosevelt's policies of the 1930s, and those pursued by (most of) his successor presidents.
My second criteria for a Green New Deal is intended to help shape the more creative urge of the world's governments, i.e. their apparent wish to transform their economies in a direction that is environmentally sound. What exactly do we mean when we speak of green investments, green allocations and green transfer measures? A somewhat theoretical, yet in my view essential guideline, is that only such expenditures can be approved that are productive in an intrinsic sense, i.e. not in the capitalist sense that they result in profits, but in the sense that they contribute towards the sustenance of life and of biodiversity on the planet earth (7). This not only means that the production of all large armament systems, i.e of means of destruction, must be eliminated, but also that all those investments which bear a paradoxical character are to be scrapped. Here I am targeting those investments which help to enhance human welfare, but which at the same time have a negative impact on human health and our natural environment. If we do not demand that governments cancel their unproductive and paradoxical investments, we are instantaneously confronted with misuse of the attractive term ‘ Green New Deal' .
Thirdly, a true Green New Deal also needs to herald a radical rupture with neoliberal policymaking. There is a major danger that governments in the context of the present recession will only halfheartedly agree to shift policymaking in the direction of keynesianism . If such is the case, the investments and transfer measures that will be implemented by governments, will exert a very limited impact. Here, the example that comes to mind is the tendency of governments to devote a major or the main portion of their financial reserves towards saving banks and insurance companies located in the private sector. One of the key problems of today's globalized world economy, is that the financial sector has turned into a ‘ waterhead ‘ of the production economy, - a development which Keynes detested, and which in his time he tried to curt short. As long as the financial system, which system overwhelmingly is geared towards bagging short-term financial gain, predominates - it is impossible to construct an ecologically oriented economy (8). Governments should not be tempted into taking salvaging measures which serve to sustain the scope to operate freely for financial institutions. They should instead focus their energies on restraining the scope of operation of the banks, and on staging take-overs of financial giants.
Fourthly, a Green New Deal can only be characterized as green, if it actually heralds a transition towards a new type of economy oriented towards sustaining the environment. Here the question that needs to be posed is whether macro-economic policies aimed at stimulating aggregate demand, should aim at promoting resumed growth, or instead should aim at stabilizing social demand. Just to mention one example: capitalist economies have always targeted an expansion in the use of energy. Yet the question that needs to be posed is whether an expansive growth in energy use can be continued after a transformation in the direction of solar, wind- and other renewable energies has been achieved. From an ecological perspective it is only possible to properly address the problematic of exhaustion of the natural resources of the earth, via a full transition towards a stationary or ‘ circular flow' -economy (9). The present crisis in this sense presents a chance, an opportunity. Since it is not at all likely that the world economy will resume its speed of growth in the short run, - the transition towards a stationary and ecologically oriented economy can be accelerated.
The possibilities for a Green New Deal as just delineated, can be illustrated via a concrete instance. One of the countries in Europe which has progressed well in the direction of a new economy is Germany . This country's economy is transiting from dependence on fossil fuels - towards dependence on solar power, wind, biomass, geothermic energy and other forms of alternative energy. Towards this end, the German government some years ago devised a transfer mechanism which, to an extent at least, can be termed both green and keynesian . The transfer mechanism has been given the title of feed-in-tariff system (FIT) (10). Primarily in consequence of this mechanism, Germany has seen a steady increase in the consumption of alternative energy, amounting to at least 1% of electricity use per year. In 2007, the alternative sources together covered 14.2 % of Germany 's electricity use. Since the use of fossil fuels has concomitantly decreased in relative terms, - Germany has substantially succeeded in bringing down its emissions of greenhouse gases. According to the German energy expert Herman Scheer, the achievement in terms of emissions' reductions is larger than the reduction to which Germany is bound under the Kyoto Protocol.
It is thus worthwhile to review Germany 's feed-in-tariff system, and assess whether, or to what extent, it can be emulated. The system has three main characteristics. First, energy companies are obliged by law to buy electricity from the producers of renewable energy, and such independent from who exactly are the producers of the energy. Secondly, the tariff for the purchasing of renewable energy is fixed by the German government, and such at a level assuring that production costs are fully covered. Further, the tariff is flexible, the supply price depending on the source of alternative energy that is being bought and sold. Moreover, the tariff level is a guaranteed one, it is fixed for a rather long period of time. It generally amounts to 20 years. Thirdly, the additional costs which the production of alternative energy entails, are transferred; they are imposed on all consumers of electricity, i.e. both on companies and on households. This happens via a premium on the user price of energy per kWH. In consequence, the feed-in-tariff system is characterized by distribution , i.e. by the spread, the transfer, of additional costs - from the producers of renewable energy to all consumers of electricity in German society.
The German system thus appears to be well fit for the task of achieving a historical transition in the use of energy sources, - from a highly polluting source of energy, i.e. the fossil fuels which threaten to cause climate catastrophe – towards the use of forms of energy which are not accompanied by emissions of CO2. Hence, the green significance of the given measure can hardly be slighted. Yet proponents of the system also argue that the system has social significance, since the legal rule regarding the feed-in-tariff system tends to enhance employment opportunities. In reports on the tariff system, it is argued that no less than 60 percent of employment in the industrial sector where means of production to generate alternative energy such as windmills and solar panels are manufactured (234 thousand employees in 2006), can be ascribed to the given tariff system (11). In addition, a Green New Deal could propose government investments which further facilitate the transition in the use of energy sources, and which help to fight unemployment under today´s crisis conditions. In any case, the German example is meaningful, since it has already has proven its effectiveness in practice.
One critical point that needs to be added is this. The staging of a transition from an economy based on the use of fossil fuels towards an economy based on alternative energy sources, is admittedly radical. If the process as initiated is completed, it would herald a rupture with a practice which capitalist economies initiated way back, at the time of the 18 th century Industrial Revolution (12). Some specialists further argue that the stated transformation inter alia implies a transformation towards a more independent type of production of energy by central capitalist economies. This then would contrast with the present global pattern of energy production, which is based on extraction and on the import/export of fossil energy sources. Nevertheless, we should not overlook the fact that the production of raw materials required to manufacture solar panels and windmills requires extraction as well, i.e. extraction of raw materials for alternative energy technology, which too will get exhausted in the foreseeable future. In other words: in order to ensure sustainability,- the transition towards renewable energy use, such as solar, wind and other alternative energy sources, does need to be accompanied by a transition towards an economy without growth , i.e. a ‘stationary' economy.
Let me now try to summarize my discourse. First: any use of the term Green New Deal should be avoided, unless and until the concept be clearly defined and its parameters set. Originally, i.e. speaking from a historical point of view, the concept of New Deal hails from the US . It was coined during a period of history, the 1930s, when the American economy had not yet been militarized, as it has been since. Consecutive American governments, ever since World War Two, have employed mechanisms of economic stimulation, which were not just keynesian in kind, but should properly be termed military keynesian . In contrast, the specific measures employed by President Roosevelt during the 1930s were characterized by the fact that they were primarily civilian in nature. It would be extremely cynical, if a present day version of the New Deal would fail to implement a dramatic reduction in the size of (the US 's) military allocations, for it is outright impermissible to label the production of weapons and of armament systems as ´green´. Hence, organizations wishing to go along with the discourse in favor of a Green New Deal should realize that such a Deal inescapably demands the scrapping of military keynesianism.
A Green New Deal further should also possess the criteria that only investments and transfer measures which are clearly productive , are acceptable. Productive investments refer to those investments that unequivocally aim at sustaining life on earth; they exclude investments and forms of manufacturing that express a paradox. This, for instance, means that all production of nuclear energy is to be cancelled. It is true, of course, that nuclear reactors do produce energy - energy which can be utilized to enhance human welfare. Yet the production of nuclear energy up to today continues to result in manifold types of nuclear and chemical waste. In the course of the mining of uranium, vast mountains of radioactive waste are generated. Also, when nuclear fuel rods are reprocessed in reprocessing facilities, - high-level nuclear waste that is intensily radioactive is generated, which waste cannot be deposited without risks to human health and to nature. Clearly, all public investments which tend to aggravate society´s problem of waste, or lead to an increase in the emissions of greenhouse gases, should be averted under a Green New Deal.
Measures that can be defended, are measures which tend to facilitate the transition towards an economy based on renewable energy. A concrete example in mind is the German feed-in-tariff system. Under this system, the additional costs incurred via production of solar energy, wind energy and other forms of alternative energy, are transferred from the producers of these forms of energy towards the consumers of all electricity that is sold in the German economy. This system helps accelerate the transition - from an economy based on fossil fuels emitting a massive amount of C02 into the atmosphere, towards an economy without greenhouse gas emissions. The privileging of the producers of renewable energy, as happens under the German feed-in-tariff system, also results in the creation of employment, notably employment by companies which manufacture windmills, solar panels, and other alternative energy technology. The given type of transfer measure thus contains both a green and a social element. Moreover, a Green New Deal can be further strengthened through the granting of subsidies, or via direct investments by the state in the sector where alternative energy technology is produced.
In the final analysis, a Green New Deal if conceived as purely keynesian , does not constitute a solution for this reasons that Keynes took the economy of exponential growth as his starting point. Yet the capitalist economy with its drive to accumulate, in the course of time is bound to get derailed, since it will gradually lead to the exhaustion of raw materials, and to ever rising expenditures and energy use in connection with extraction of raw materials. In other words: it is high time a transition be staged away from the present economy of capital accumulation - towards an economy which is stationary, which refuses to grow. This transition, moreover, needs to be staged at the world level, and needs to be strategized in a manner which will protect the global South. At present, the given perspective may sound very utopian, exactly the way the concept of a Green New Deal would have sounded utopian if proposed a few years back. Yet it is truly important that climate activists and environmentalists start discussing the given perspective, as part of their struggle to defend planet earth. In a period of economic crisis such as now exists, when dramatic changes and transformations are inevitable, we need a new vision, one that helps protect all forms of life on planet earth.
(1) on the acceptance by the governments of capitalist states, of the concept of a Green New Deal, see for instance Antoine Reverchon, ‘Le Pari Mondial de la Croissance Verte' ( Le Monde Economie , February 3, 2009);
(2) for Keynes' theory, see John Maynard Keynes, The General Theory of Employment, Interest and Money (Harvest/Harcourt, Orlando, Florida, USA, 1964);
(3) data cited from Paul A.Baran and Paul M.Sweezy , Monopoly Capital. An Essay on the American Economic and Social Order (Monthly Review Press, New York., USA, 1964, p.159-160); for an elaborate analysis of the policy pursued by the US government during the depression of the 1930s, see Alvin H.Hansen, Fiscal Policy and Business Cycles (W.W.Norton & Company Inc., New York, 1941 – in particular Part One, Chapter IV, ‘Fiscal Policy in the Recovery', p.83);
(4) Paul A.Baran and Paul M.Sweezy (1964), op.cit., p.160;
(5) for a recent theoretical analysis of military keynesian policymaking, zie Peter Custers, ‘Military Keynesianism Today – An Innovative Discourse' ( Leiden , December, 2008 – see the website of the ‘Tilburg Declaration': www.economischegroei.net );
(6) for data on the US 's military allocations under Bush jr., see eg. Chalmers Johnson, ‘The Economic Disaster Which is Military Keynesianism. Why the US has Really Gone Broke´ - http://mondediplo.com/2008/02/05military ;
(7) for a critical discussion regarding the role of the concepts ‘productive' and ‘unproductive' in economic theory, see Peter Custers, Questioning Globalized Militarism. Nuclear and Military Production and Critical Economic Theory (Tulika Publishers, New Delhi/Merlin Press, Londen, 2007, Chapter Six, p.82);
(8) for data on the dispropoprtionate growth of the capital of financial institutions during the era of neoliberalism, see eg. the document of the Euromemorandum Group, ‘Democratic Transformation of European Finance, A Full Employment Regime and Ecological Restructuring. Alternatives to Finance Driven Capitalism ´- www.memo-europe.uni-bremen.de ;
(9) for the concept of ‘stationary state' economy, see for instance Herman E.Daly and Kenneth N.Townsend, Valuing the Earth. Economics, Ecology, Ethics (MIT Press, Cambridge, Massachusetts, 1993, in particular the Chapters 13, 15 en 19; and John Stuart Mills, Principles of Political Economy. Books IV and V (Penguin Books, London, 1988, Chapter VI, p.113); on the idea of a stationary effective money supply, as discussed during the depression of the 1930s, see Alvin H.Hansen, ‘Recent Trends in Business Cycle Literature' (in Alvin H.Hansen, Full Recovery or Stagnation ? – Adam and Charles Black, London , United Kingdom , 1938, p.111);
(10) a neat summary on the functioning of the German feed-in-tariff system is provided in: ´Success Story: Feed-In-Tariffs Support Renewable Energy in Germany´ -
(12) on the historical transition from reliance on renewables towards reliance on fossil fuels that accompanied the Industrial Revolution, see for instance Clive Ponting, A New Green History of the World. The Environment and the Collapse of Civilizations (Penguin Books, London , 2007).
International Institute for Asian Studies ( I.I.A.S.),
Leiden , the Netherlands