2 October 2019

Why we need a Green New Deal to solve humanity’s greatest challenge

The world’s largest international institutions continue to insist that “private financing” is the only way to avert climate apocalypse – an idea that seems ludicrous.

By Grace Blakeley

The Labour Party’s annual conference committed to implementing a Green New Deal (GND), the aim of which is to decarbonise the UK economy by 2030. The idea for a GND first emerged in the wake of the financial crisis of 2008, when a group of economists and policymakers – including the MP Caroline Lucas, the economist Ann Pettifor and the Guardian’s economics editor Larry Elliott – advocated a decarbonising stimulus programme in response to the financial crash.

A decade of austerity under the Conservative Party meant that a UK GND failed to materialise. But the idea became a central demand of progressives in the US, such as the congresswoman Alexandria Ocasio-Cortez.

But proponents of the GND recognise that decarbonisation in one country will not be enough to reverse the climate crisis. Climate change has no regard for national borders and a mass transition from fossil fuels to renewable energy is required to ensure the world meets its decarbonisation objectives.

Co-operation between the Global North and Global South is key for this transition. Many countries in the former have only managed to “decouple” economic growth from greenhouse gas emissions by offshoring carbon-intensive activities to the Global South. Many of the raw materials and manufactures necessary to achieve decarbonisation will also have to come from states in the Global South.

The world needs a global GND co-ordinated through multilateral institutions, such as the World Bank and the IMF, which can financially and logistically support the transfer of resources, knowledge and technologies from north to south. But is the multilateral system up to the task?

The United Nations Conference on Trade and Development’s (UNCTAD) report of 2019 answers with an emphatic “no”. The report is scathing of the economic consensus shared by international institutions, under which “austerity is the macroeconomic default option, liberalisation the favoured policy tool for affecting structural change and debt the main engine of growth”.

Years of what UNCTAD calls “hyperglobalisation”, led by these institutions, has resulted in “financial insecurity, economic polarisation and environmental degradation” .

UNCTAD laments that policymakers have failed to learn the lessons of 2008. International institutions continue to advocate public-private partnerships, state guarantees and securitisation to “de-risk” large investment projects necessary to meet the UN’s Sustainable Development Goals. The world’s largest international institutions continue to insist that “private financing” is the only way to avert climate apocalypse.

The report also paints a bleak picture of the global economy. Many low-income countries are “drowning in debt”, the global financial system remains deeply unstable and climate breakdown is already wreaking havoc in those parts of the world, such as the Bahamas and Mozambique, with the poorest populations and lower carbon emissions.

The idea that the private sector will provide the funds necessary to solve the greatest challenge humanity has ever faced seems ludicrous.

UNCTAD insists that a global, co-ordinated public investment drive is the only way to achieve the global GND. Governments must “use all the policy instruments at their disposal”, deploying fiscal policy, industrial policy, credit guidance, financial regulation and social security policy to respond and adapt to climate breakdown.

But many international institutions prohibit states from using their full fiscal and monetary powers. Rules on state aid, capital account management and government spending imposed by institutions such as the European Union and the World Bank prevent states from intervening in their economies. Meanwhile, those countries in receipt of IMF loans are still forced to implement conditions, often including public spending cuts, in exchange for lending.

The existing international economic system is unfit for purpose when it comes to delivering the GND. But UNCTAD’s report, which recommends the use of capital controls, the creation of international climate banks and the expansion of “policy space” granted to national governments, falls short from a more urgent conclusion: achieving a global GND means building a new international economic order from the ground up.