To Secure a Future, Britain Needs a Green New Deal

This is an extract from a chapter in Economics For the Many (Verso, 2018) edited by Rt. Hon. John McDonnell MP. The chapter was written in August, 2017. 

If we are to secure a sustainable, stable and liveable future for the people of Britain, then implementation of the Green New Deal will be vital. Not just for the sake of the ecosystem, but also for the sake of rebuilding a stable, sustainable economy. A sustainable economy will be one dominated by a “Carbon Army’ of skilled, well-paid workers.

IPPR's UK Industrial Strategy: focus on demand, not just supply

The British economy is simply not performing the way we need it to. As the Interim Report of the IPPR Commission on Economic Justice shows,  the UK has the weakest performance on investment, productivity, trade and geographical imbalances of any major European economy.

It must be about more than the ‘supply side’. There’s little point improving the conditions for investment when demand is so weak. Since the financial crisis private sector investment has flatlined. There’s a vital need for Government to increase public investment to pick up the slack. In our report we call for an injection of £20bn in additional annual public investment spending by 2020-2, or 1% of GDP. This would take net public investment to 3% of GDP, its OECD average.


How to weather the Brexit storm? Focus less on trade, more on investment

“Strong and stable” seems of a world so far, far away.  The recent Daily Mail headline “PM slaps treacherous Chancellor down” portrays a government in political chaos. Thanks to open, unresolved intra-Brexiteer warfare, ministers are unable to agree the basics of how to exit the European Union. This state of uncertainty intensifies just as the risks to British jobs and living standards are becoming starker and more potent. Ironically, just as we teeter towards the cliff, ONS data reveals that exports of goods to the EU grew over the last three months, while those to the rest of world fell back, a fact not devoid of dark humour.

OECD ignores deficit hawks, backs higher public investment in infrastructure & people

This morning, the OECD has published its latest Economic Outlook, which includes individual country forecasts. It is pretty downbeat about the UK’s near term prospects, and implicitly critical of the Conservative government’s policy plans. It argues that there is "fiscal space", and that higher public investment should be considered

The policies supported by the OECD, in the context of Brexit, are in essence the same as those which the 130 economists have backed in their letter to the Observer – and whom the FT's economics editor Chris Giles thinks should be “disregarded”.

Forgotten macroeconomics in the manifesto debate

The assessment of the impact of the policies in the election manifestos in the media is rather static as comments mostly ignore their positive impacts on growth, investment and productivity. This policy brief on the Labour Party's manifesto brings the forgotten macroeconomic principles into this debate.  The manifesto's economic policies can lead to higher private investment and productivity, and help to rebalance the economy.

2015: Productivity Unpuzzled

In his contribution to "the Cracks Begin to Show: a Review of the UK Economy in 2015", Jeremy Smith looks at the development of labour productivity. Unlike the dominant supply-side approach to productivity (which remains important for the long term), data show that it is demand and economic activity that drive shorter term changes.  

The government is caught on the horns of a dilemma.  Should it celebrate the (real but skimpily-remunerated) increase in employment over the last 3 years?  Or see this as the result of a dysfunctional low productivity economy, increasingly of its own shaping?  

Central bank policy rates and the real economy

A letter by PRIME's Director Ann Pettifor, published in the Financial Times last Thursday (10 December), discusses central bank policy rates and the real economy. 

In her letter Ann argues that Larry Summers is right to point out how few tools central bankers have to “delay and ultimately contain the next recession”. (FT, 6 December, 2015). "We share his pessimism. However his analysis of the so-called 'neutral rate of interest being lower in the future than in the past' is based on the flawed notion of a 'growing relative abundance of savings relative to investment'”. 

The secret, anti-democratic and (new-style) protectionist TPP

I do not have any pretension to detailed knowledge of the Trans-Pacific Partnership Agreement, the newly finalised “free trade” (sic) deal between the US and other (mainly Asian) countries, which excludes China as an act of policy.  I am not alone of course in my ignorance, as the deal – shockingly, given its enormous scope and implications - still remains a state secret. 

“Living within our means”: deficits & the business cycle

If there is one thing that unites Members of Parliament of left, centre and right, it appears to be a strange religious faith in the dogma, "we must eliminate the deficit and live within our means". 

In a current article in Socialist Economic Bulletin, John Ross writes:

John McDonnell, the new Shadow Chancellor, has created something of a stir by his firm opposition to budget deficits to cover current expenditure – writing ‘let me make it absolutely clear that Labour under Jeremy Corbyn is committed to eliminating the deficit and creating an economy in which we live within our means.’

Today’s Budget and the crisis in Ukraine

In response to a letter from MP Caroline Lucas, Bank of England governor Mark Carney hinted in the Financial times today that the Bank of England could potentially invest in a programme of ‘Green Quantitative Easing’. The idea of ‘Green QE’ is that the Bank of England would – with the agreement of the government - buy bonds from e.g. the Green Investment Bank, which could then use the financing to subsidise low carbon projects.

Governments must fix financial imbalances

ABC Sydney´s "The Business Programme" asked Ann Pettifor for an interview on the current situation in international finance. Ann made a strong case that nothing is being done to fix the structural imbalances in the global financial system, in particular the high debts that have accrued in advanced economies across all sectors – government, business and households.

A National Plan for the UK - from Austerity to the Green New Deal

Ann Pettifor is a member of the Green New Deal Group, which today, 8th September, 2013 published its fifth anniversary edition - a National Plan for the UK. The first report was published in July, 2008, before the collapse of Lehman's and was (in our humble view) far-sighted in its analysis and recommendations.

IMF backs ‘delusional’ infrastructure spending

In a debate on BBC’s Newsnight last week, Matthew Hancock MP, former chief of staff to George Osborne, accused me of being “delusional” when I called for a new major programme of infrastructure spending on projects with a positive social and economic return. Today’s IMF Concluding Statement from their latest consultation mission calls for

 “fiscal space for further (sic) growth-enhancing measures…[which] could be used to fund higher infrastructural spending, which has a high multiplier and raises potential output.” (my emphasis)

Latest UK GDP data even worse than it looks

The latest release for British GDP in the 3rd quarter was unrevised – but the composition of that growth was awful. GDP rose by 0.5% in the quarter and is just 0.5% higher than a year ago. But analysis of the components of growth suggests the outlook is deteriorating. Household consumption did not grow at all in the quarter and contracted by 1.5% over the course of the year. Investment (gross fixed capital formation) fell by 0.2% in the quarter and by 1.8% from a year ago. In terms of domestic expenditure only government spending rose in the quarter, up 0.9% on the quarter and 2.9% over the year. This is testimony to the multiplication of ‘austerity’ measures: If unemployment and poverty are increasing at a faster rate even than you cut welfare benefits your total welfare bill will rise.

GDP Data Show UK Stagnation Is Due to Home-grown Policy, not Eurozone Woes

Publication of the latest estimate of UK GDP data shows that the recession was much sharper than previously thought. The revision shows that GDP contracted by 7.1% rather than the 6.4% previously estimated. The recovery which began in the 3rd quarter of 2009 was also slightly stronger than previously estimated, the economy expanding by 2.8% until the 3rd quarter of 2010. From that time onwards the economy has stagnated completely, with zero growth in the three quarters since. The result is that the British economy is 4.4% below its peak level before the recession, which is now estimated to have begun in the 2nd quarter of 2008.

How To Wreck A Recovery- Coalition government policy and Q1 GDP Data

The latest publication of the British GDP data for the 1st quarter of 2011 (Q1 2011) is unrevised - the economy expanded by 0.5% having contracted by 0.5% in Q4 2010. However the much fuller data provided in this third estimate of growth, as well as revisions to prior quarters, gives a clear picture of the dynamic of the economy. The economy has effectively stagnated since the Coalition government introduced the Comprehensive Spending Review in October (in fact it has marginally contracted). In the previous four quarters to Q3 2010 the British economy had expanded by 2.5%. By examining the data in detail it is possible to determine the causes of that stagnation.

GDP figures: the verdict

The 0.5% rise in GDP is hardly any rebound from the same contraction in the economy in the previous quarter. Government policy has turned 2.8% growth into economic stagnation. Zero growth over the latest six months clearly reflects the initial impact of the cuts. For example, construction is now in a "double-dip" recession – two quarters of negative growth having expanded in the middle of 2010. That prior expansion was led by the government's construction investment, reflecting the impact of Labour's previous efforts to stimulate the economy. As a result, the economy grew 2.8% in the previous 12 months.