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5 March 2021

What would a truly “Keynesian” Budget have looked like?

Contemporary Keynesianism would not be content with managing aggregate demand, but would address itself to the systemic crisis threatening civilisation: climate change.

By Mathew Lawrence

The Master has returned. Ahead of this week’s Budget, opponents of potential tax rises, including the Labour front bench, claimed JM Keynes to their side, arguing tax increases would suck demand out of the economy when it needs it most. Supporters rightly responded that what matters is not the effects of specific tax or spending measures; rather it is the overall size of the fiscal package that determines the macroeconomic impact: the way forward is a green stimulus matched to inequality-reducing tax changes.

In the event, tasked with steering a fragile economy out of crisis and tackling inequalities of region, class and gender that Covid-19 has exacerbated, the Chancellor delivered a contractionary Budget: spending and tax decisions will become a drag on growth in the coming months, substantial cuts for public services are pencilled in, and with sluggish income growth forecast, this is likely to be the weakest parliament for living standards bar the 2015-2017 parliament. These outcomes are not the inevitable result of the pandemic but reflect conscious political choices. Sometimes the supposed new looks much like the old.

Yet amid the struggle to claim Keynes for political advantage, an essential point about Keynesianism has been missed: it was a technocratic class project interested less in regulating capitalism than in staving off civilisational collapse. For Keynes, the inevitable by-products of liberal-capitalist modernity – inequality, poverty amid plenty, unemployment – generated the conditions for revolution. The prospect of social disorder, of revolutionary threats to the bourgeois life of the Bloomsbury Set, is what haunted him and drove his prescriptions.

Through deploying monetary and fiscal tools to smoothly manage aggregate demand, euthanise the rentier and socialise investment decisions, a bureaucratic elite could forestall revolution and deliver transformation without rupture. As the political economist Geoff Mann made clear in his masterpiece In the Long Run We are All Dead (2017), Keynesian reason – which, Mann argues, predates Keynes himself – is not driven by the desire to maintain capitalism as such, but rather by the wish to secure a particular vision of civilisation in a world of dangerous instability. 


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In this context, a truly “Keynesian” Budget would have identified and responded to the actual civilisational threat facing us: the interconnected and accelerating crises of environmental breakdown and climate heating. In the face of radical uncertainty and long-term risk, it would institutionalise the “pre-cautionary principle”, frontloading transformative fiscal and regulatory action today to limit the damage that catastrophic losses from environmental breakdown threatens, and to address the inequalities hardwired into society by our economic model. 

The need for such an approach is urgent. As the UN made clear this year, we are dangerously off-track. Emissions must fall by 45 per cent in the next decade if we are to have a reasonable chance of stopping global temperatures rising 1.5ºC above pre-industrial levels, a threshold which, once crossed, would trigger immense, cascading harm that could threaten life as we know it. Yet even if all the national pledges submitted to the UN so far were fulfilled, which covers only a third of global emissions, emissions would be reduced by only 1 per cent by 2030 compared with 2010 levels. This is disastrously short of the pace and scale of decarbonisation that is required. We are accelerating toward a catastrophe in which those least responsible will bear the highest costs. For many, moreover, the crisis is already here.

[see also: What would Keynes do?]

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Since our current form of capitalism is generating planetary crisis – through its unsustainable logics of enclosure, extraction and compounding, fossil-fuel-powered expansion – contemporary Keynesianism should come not to save it, but to bury it. Systemic crisis necessitates systemic change. The true guarantors of disorder today are those content to manage – and so sustain – an economic system turbocharging environmental breakdown and stark inequality. We have the Keynesian tools we need to keep the planet habitable. A Green New Deal that combines market-restructuring green industrial strategies with a transformative surge of public investment in the institutions and infrastructures of a post-carbon economy can create thriving communities and healthy local economies.

The goal is not to safely stabilise the climate by imposing a kind of eco-austerity, but instead to guarantee everyone has the capability to live a life of deep freedom, with the means and security to pursue their vision of a good life. This requires building a democratic economy that radically expands well-being-focused, communal, resource-light forms of consumption and leisure; proactively scales up green industries and sectors, from care to low-carbon steel, while fairly reducing resource-intensive production, to usher in a post-carbon future; and redistributes wealth, income and security through the expansion of universal basic services, a humane welfare system that provides a minimum income guarantee, and the rebalancing of economic power through reimagining how our economy is owned and governed, for what purpose and for whom. Decarbonisation, in other words, delivered through the twin expansion of the democratisation and decommodification of economic life.


The political crisis of environmental breakdown consists in precisely this gap between what is required and what appears possible in the present conjuncture. This is where a departure from the politics of Keynesianism is required. Building the social power and cross-class alliances necessary to secure the civilisational transformation that the climate crisis demands – rapidly constructing a world beyond the institutions and infrastructures of the fossil age – will require a project that goes beyond technocratic managerialism and toward the expansion of democratic power. On a planet on fire, the cooling draught of the liberal political temperament , too narrow, depoliticised and constitutionally blind to the unfreedoms capitalism generates, is not enough to construct the broad-based alliances we need to effect transformative change.

Instead, we need a politics that can begin to construct a “post-carbon growth coalition”, capable of cohering sectoral, regional and class interests in a new political bloc, from hard-pressed working households to green and industrial capital to communities that have been deliberately deindustrialised without compensatory support for affected workers and their families. Anchored in a necessarily ambitious green recovery plan, this would emphasise and reward the work needed to sustain and reproduce life, from care work in all its varieties to logistics and retail workers, to the financing of sustainable production to meet social and environmental needs. And it would be alive to generational politics, telling a story of national renewal that can deliver security and dignity for “Generation Rent” as much as for pensioners and older voters. This must contrast with and overcome the dominant political coalition of the present: an alliance of asset-owners that links together homeowners and pensioners across the country with rentier interests concentrated in the City of London and the south-east.

In the aftermath of a Budget where the Chancellor put us on the path to a sluggish, two-tier recovery, there will be much discussion about the necessity of a properly Keynesian strategy, one that can genuinely “level up” through an ambitious decarbonisation agenda. In the context of planetary crisis, and the deep inequality shock of Covid-19, our answers must transcend narrow debates about the virtues or risks of particular taxes, and must be adequate to meet the future of mounting and interconnected crises we are hurtling toward. True Keynesianism demands nothing less.

[see also: The Budget showed the gap between the Conservatives’ green rhetoric and reality]