A green fix?

The global Green New Deal is being pitched as a solution to the twin crises of economic downturn and environmental emergency. But, asks Daniel Ben-Ami, is it really a recipe for austerity?

If it was not environmentally incorrect to use the expression, it would probably be referred to as killing two birds with one stone. There is a growing global consensus that a green stimulus package could help solve the economic and environmental crises facing the world. Perhaps a more apt metaphor would be revitalising two parrots, probably endangered species, with a dose of the same green medicine.

It seems so obvious that it is not immediately apparent how anyone could disagree. The conventional wisdom is that the world is facing at least two crises: economic and environmental. Why not design measures that could help solve both problems at once? That is what the discussion of a “Green New Deal” is all about.

But if the solution is so transparent it begs the question of why it is still in the early stages of being implemented. It could be that many Green New Deal proposals are flawed. Or perhaps there is a more fundamental problem with the concept itself.

This cover story will focus on the Anglo-American discussion, although it is important to note it is an international debate (see box). It will start by outlining the main elements of the Green New Deal on both sides of the Atlantic and their genesis, and then examine the drawbacks of the proposals. To anticipate the main conclusion it will argue that the Green New Deal represents a programme for green austerity rather than economic revival.

In America the idea of a Green New Deal is probably most closely associated with Barack Obama and his administration, but was broadly supported by other presidential candidates too. However, it was being discussed at least 18 months before Obama was elected president.

As far back as April 2007 the term was used by Thomas Friedman, the influential foreign affairs columnist for the New York Times in an article for its Sunday magazine. Many of the key ideas were developed by the Center for American Progress, a think tank based in Washington DC. Its president, John Podesta, a former chief of staff to president Bill Clinton and co-chairman of the Obama-Biden transition team, is author of The Power of Progress: How America’s Progressive Can (Once Again) Save Our Economy, Our Climate and Our Country (Crown 2008).

Another key thinker behind the Green New Deal, Van Jones, is a senior fellow at the Center for American Progress. His book, The Green Collar Economy: How One Solution Can Fix Our Two Biggest Problems, was published by HarperCollins in 2008. High powered endorsers of the book included Al Gore, an environmental activist and former vice president, Nancy Pelosi, the speaker of the House of Representatives, and Friedman.

In Britain the prime minister, Gordon Brown, has used the term but it is most closely associated with the New Economics Foundation (NEF), which describes itself as a “think and do tank”. In July 2008 the NEF published a report on A Green New Deal. However, an embryonic Green New Deal was proposed by Richard Murphy and Colin Hines, two co-authors of the NEF report, in October 2007.

Although the details of the different sets of proposals vary, the overall thrust is similar. President Franklin Delano Roosevelt’s economic stimulus package is seen as having rescued America from the Great Depression. The challenge now, as seen by proponents of the Green New Deal, is to adapt the New Deal of the 1930s to help tackle the current climate crisis.

It is probably in America that the idea of the Green New Deal is most developed – although South Korea also has a strong case (see box). Two of the key points of Obama’s American Recovery and Investment Plan are stated on the White House website as:

– “Doubling the production of alternative energy in the next three years.
– “Modernising more than 75% of federal buildings and improve the energy efficiency of two million American homes, saving consumers and taxpayers billions on our energy bills.”

More elements of the programme are spelt out in the section on energy and the environment. They include:

– “Help create five million new jobs by strategically investing $150 billion over the next 10 years to catalyse private efforts to build a clean energy future.
– “Within 10 years save more oil than we currently import from the Middle East and Venezuela combined.
– “Ensure 10% of our electricity comes from renewable sources by 2012, and 25% by 2025.
– “Put one million Plug-In Hybrid cars – cars that can get up to 150 miles per gallon – on the road by 2015, cars that we will work to make sure are built here in America.
– “Implement an economy-wide cap-and-trade programme to reduce greenhouse gas emissions 80% by 2050.”

This programme is broadly in line with the proposals in a September 2008 report (PDF) by the Center for American Progress, and written by economists at the University of Massachusetts-Amherst, on Green Recovery: A Program to Create Good Jobs and Start Building a Low Carbon Economy.

The aim of creating green jobs is being developed by vice president Joe Biden’s Middle Class Task Force. The agenda for its first meeting last week argued:

“First, quite simply, it means more jobs. At a time when good jobs at good wages are harder and harder to come by, it is critical we find new and innovate ways to create more such jobs. Building a new power grid, manufacturing solar panels, weatherising homes and office buildings, and
renovating schools are just a few examples of ways to create new good quality jobs – green jobs – and strengthen the foundation of this country at the same time.

“Second, more green jobs mean more money in your pocketbook at the end of the month. If we create jobs that aim to reduce your energy costs – like your electric bill and your home heating bill – that means you have more disposable income for other things.

“Creating more green jobs has multiple benefits. It helps the economy as a whole; it helps our environment; and it will save you money.”

On the face of it there is little to object to in this package. Some critics, particularly non-Americans, would no doubt baulk at the protectionist insistence that green cars are built in America. But most people would prefer clean energy over dirty energy or energy efficiency over energy inefficiency.

It should also be noted that the Obama plans are still tentative. America has only just passed its stimulus package. It will take a while to see how it is implemented.

However, there are clues to problems with the conception of the Green New Deal. Strip away the Obama-esque rhetoric of “hope” and “change” along with “bold” initiatives and the reality is much grimmer than the upbeat language suggests.

Obama’s election as America’s first black president certainly represents an important change of style but arguably the political changes are less significant. It is notable how many Washington insiders, particularly from the Clinton administration, are on his staff. To the extent that the Green New Deal represents a change, it is probably for the worse rather than the better.

A clue to the limited and fearful character of the Green New Deal is clear in the statement (PDF) by Al Gore, the arch prince of American environmentalism, to the Senate foreign relations committee in January. He put it into the context of three threats that are facing America: the risk of the planet being destroyed, the recession and terrorism.

This is hardly a bold vision for a confident new America. On the contrary, it represents a fearful and defensive response. America no doubt faces problems, but it does not help to pose them as existential threats. It is ironic that the Democrats often accused the Republicans of the “politics of fear” when George W Bush was in office. It is hard to think of anything more neurotic than Gore’s vision of a triply embattled America.

Although Gore is not officially part of the Obama administration, the emphasis on energy independence in the current White House is also worrying. It represents a nervous energy isolationism rather than a genuinely bold move to solve America or the world’s energy problems.

Another clue to the limited character of “green jobs” can be found in Van Jones’s book on the Green Collar Economy. He describes “the main piece of technology in the green economy” as the caulk gun [sealant gun]. In other words, making buildings less drafty seems to be a central focus of the drive for green jobs. Jones goes on to argue that “another bit of high-tech green technology is the clipboard”. This is to make note of the energy improvements that can be made to buildings.

There is nothing inherently wrong with draft-proofing buildings or energy efficiency but it hardly constitutes a bold programme for economic rejuvenation. Instead it probably means millions of low paid people with caulk guns and clipboards trying to make old buildings more energy efficient. It is likely that in many cases it makes more economic sense to build modern new buildings rather than “weatherise” old ones. In any case, such measures are unlikely to add additional dynamism to the American economy.

It is also worth exploring the Obama proposals in more detail. It is certainly true that investment in energy infrastructure, particularly in its production and distribution, could help bolster economic productivity. But as James Woudhuysen and Joe Kaplinsky argue in Energise! (Beautiful Books 2009) this means investing with a view to producing abundant cheap energy (see Fund Strategy, “Authority and flair light up key debate”, February 9, 2009).

This can involve renewables but it needs investment on a massive scale for it to provide sufficient quantities of cheap energy. It also involves nuclear energy, probably including nuclear fusion in the future, while there will remain a substantial role for fossil fuels for a long time to come.

From this perspective the Obama energy package is not up to the job. The investment in renewable energy is probably relatively small when set against the scale needed. More strikingly there seems little discussion of nuclear energy while it shuns the importance of fossil fuels.

It also embodies a common misconception about energy efficiency. When energy is used more efficiently it tends to mean that more is used rather than less. The long-term global trend is for energy to be used more efficiently over time. For example, a smaller quantity of energy is needed to produce each unit of GDP. But, as GDP increases so does the total amount of energy used. Energy efficiency has its place but it does not solve the problem of growing global
demand for energy.

Although some of the individual measures in the Obama package make sense the overall thrust is
austerity. This is obscured by the upbeat rhetoric but becomes more apparent as the details of the programme are examined.

Essentially what is being proposed is curbing of energy use, or at least limiting its growth, rather than producing substantially more energy to help the economy expand. Nor is creating a generally low paid green army of energy efficiency monitors likely to add anything to economic dynamism. It is likely to be more akin to a 21st century form of conscription, only with caulk guns rather than real guns.

If this drive to austerity is implicit in the American Green New Deal it is more explicit in the package proposed for Britain by the NEF, an influential think tank, and by Lord Chris Smith, the chairman of the Environment Agency. Although both sugar their proposals with grandiloquent Obama-style rhetoric, the austerity inherent in their proposals is usually explicit.

The austere implications of the NEF’s Green New Deal package are made clear in the section of its pamphlet on the Second World War – a period for which the NEF, along with many greens, has considerable nostalgia. While tip-toeing around the carnage of the war itself, there is a section on: “How constraints drive innovation, problem solving and creativity, the World War II experience”. A key passage is telling:

“Some unintended consequences of war, and how society reacts to it, can be positive. In Britain in the 1940s, war
led to the empowerment of women, infant mortality fell and life expectancy for those at home increased rapid
cuts in consumption. The use of private vehicles almost ceased entirely, and the use of domestic electrical appliances fell significantly as did overall household consumption.” (New Economics Foundation, A Green New Deal, 2008, p28.)

The implications of this passage are astounding. It clearly suggests that reduced consumption, fewer private vehicles and less use of domestic appliances were positive developments. It is a blunt advocacy of austerity, but at least it has the merit of being open about what it is proposing.

Lord Smith proposed a similar idea, albeit in a more tentative way, in a public lecture on “the economic and environmental challenges” to the Royal Society of Arts on February 11. He nodded in the direction of Obama by saying he had retaught us to “tell it as it is, yes, but give a sense of hope that things could be made different”. He then concluded:

“Until last year, we tended to assume that the key to perpetual economic progress was ever-increasing consumption, and indeed that part of the cure for economic ills is to restart the consumption motor. Could we, though envisage a time when we think more of the balance between consumption and consolidation and – dare we think it – sharing; when we try to find our way to a new economics that factors in the needs of future as well as current generations.” (Out of red, into the green. After the credit crunch: a more sustainable future (PDF).)

In reality the idea that economic growth should be curbed has been widely discussed since the 1970s. And sustainability as a concept was endorsed by a landmark United Nations report more than two decades ago (Our Common Future, Oxford University Press 1987). The recent economic downturn has simply given added impetus to such well-trodden ideas.

It is clear which side of the debate Smith is on. Although he poses a need for discussion it is apparent that he believes curbing consumption would be desirable.

In broad terms there are two ways in which America and Britain can grapple with the current economic
crisis. The first is to reconcile people’s hopes and aspirations with that of a permanently sluggish economy. This means encouraging parsimony and even rationing while pushing large numbers of people into low paid, menial “green” jobs. Despite the rhetorical flourishes, and occasional protestations to the contrary, this is the trajectory along which the proposals for a Green New Deal is moving.

The alternative path involves working out ways to restore strong growth to a sagging economy. Public investment in areas that can help raise overall productivity, including infrastructure, can certainly play a role. But the goal has to be to create a more dynamic economy rather than reconcile people to low productivity.

It should never be forgotten that economic growth, which is
the basis for rising consumption, provides the bedrock for popular prosperity.

Global growth of Green New Deals

The idea of the Green New Deal is not confined to America and Britain. On the contrary, it is being promoted by several national governments and influential international organisations.

Perhaps the best known global advocates of a Green New Deal are Ban Ki-moon, the secretary general of the United Nations (UN) and Al Gore, the environmental campaigner and former American vice president. In a joint article in the Financial Times on February 16 they argued: “we need to make ‘growing green’ our mantra”.

Within the UN system the director of the UN Environment Programme (Unep), Achim Steiner, has proved a tireless advocate. In October 2008 Unep launched an official Global Green New Deal initiative.

South Korea has one of the most advanced Green New Deal programmes in the world. It is spending about 3% of its GDP on green measures and aims to create 956,000 jobs. Its low carbon projects include developing railways, fuel efficient vehicles, energy conservation and environmentally friendly buildings.

Japan’s environment ministry is considering the possibility of a Green New Deal along American lines. It is studying such measures as energy saving electrical appliances and car-sharing schemes. It also plans to create up to one million jobs through measures including interest free loans to environmentally friendly companies.

China does not seem to be using the term “Green New Deal” but there are significant green elements in the country’s substantial economic stimulus packages. These include energy efficiency measures and developing its rail transport infrastructure.

Germany does not officially have its own “Green New Deal” but it has endorsed the concept at a senior level. For example, Frank-Walter Steinmeier, Germany’s Social Democratic foreign minister, has argued in a speech that “the world needs a Green New Deal”.

Overall the European Union launched a “Triple 20” strategy in November 2008 to reduce its carbon emissions. According to Unep’s report on A Global Green New Deal: “The goals include a commitment to reduce the greenhouse gas emissions in the European Union (EU) 20% below 1990 levels by 2020, increasing the share of renewable sources in total energy consumption by 20% and improving energy efficiency by 20%.”

In the private sector the World Economic Forum launched a report on Green Investing at its January meeting in Davos. The organisation called for $515 billion (£362 billion) of investment in a clean energy infrastructure.

WilderHill New Energy Global Innovation