There is a lot of commentary ‘out there’ at the moment on the party manifestos ahead of the general election next month. Some of these comments have basically summarised the Green party manifesto as ‘just Labour, but more left wing’ – higher taxes, higher spending, larger public sector, ending austerity. Maybe.
But a fundamental divide remains when we look at economic growth. Most parties want to promote it – “to share the proceeds of growth” – and it provides politicians with a ready answer to journalists asking where will the money will come from for today’s promises. However, the Green party manifesto says they reject GDP growth entirely as a policy objective, and if in power would be happy to see it flatline.
Decoupling Growth: should it be done?
Some of the greener elements within the Labour party have, quietly and for a while now, been talking about decoupling growth from carbon. This approach allows for increasing GDP, but with a switch to renewable energy and low-or-no carbon technologies. But it is one thing to decouple GDP from carbon; it is something much bigger altogether to decouple it from economic policy.
Other economists, and not all of them green, point to our changing world. They highlight the trend over recent decades from there being just one or two super-powers to a “multi-polar” world where countries such as China and India have a growing influence. These economists point to the massive growth in super-cities, and to population growth heading towards nine billion people. They question how every country can grow its GDP, especially when the days of cheap or exploitation imports from poor countries into rich countries are coming to an end. The oil shock in the 1970s started to teach rich countries that lesson. Areas of difficulty remain. Africa still struggles to sell its food fairly within the tariff-protected West, and there are green debates about food miles which need to be reconciled with equity debates and promoting fair trade.
But basically, we having a changing and complex world where power is shifting. We also have growing inequalities despite these massive global forces. We see large companies with more wealth than small countries. We see individuals with more wealth than whole towns or regions.
When the global financial crisis hit in full force in 2008, the Queen famously asked, “why did no-one see this coming?” Apart from a few Marxist professors choking on their cornflakes, the polite answer would have been, “well Ma’am, they did know it was coming, but it paid them to keep quiet.”
So instead some graduate mathematicians came up with a complex formula that magically confirmed that sub-prime debt can be turned into triple-A assets, and were promptly well-paid by Wall Street to work their alchemy on the balance sheets. Expensive books were written about the new, respectable “value at risk” magic formula. “You see, Ma’am, it was totally tulips.”
So growth and GDP are now damaged goods. The world probably cannot afford it, certainly in the long run. The political economist John Maynard Keynes said, “In the long run, we are all dead.” True, and not to be too gloomy but this just might be how it happens globally unless we change our ideas.
Decoupling Growth: can it be done?
To be blunt about it, GDP growth has been held out politically as the hope for the poorer person everywhere that good times are just around the corner. If that is taken away, what can they look forward to in a world of green economics?
One trick is to have your cake, and eat it too. In this example we prioritise growth in the service sector. So, we can talk about growing employment levels where people provide services to other people. Teachers, nurses, waiters, accountants, advisors and so on, ideally all on bicycles and public transport. A bit flippant, but you get the picture. The difficulty here is how to stop this growth in earnings and economic activity ‘spilling over’ into unsustainable consumption – more air travel for holidays, bigger cars, more stuff at home, and so on.
Another difficulty is that it is perfectly possible to have no growth, but also a worsening environmental balance sheet. Consider, for example, reducing the number of wind turbines in exchange for more use of shale gas or fracking. Zero growth, yet more carbon. Zero growth in itself is not green. Of course, Green party politicians will reasonably point to the rest of their manifesto (home insulations etc) as an overall benefit to the environment.
But, basically there has to be a rationing of carbon and other finite resources – by taxes or regulations or a combination of both. So, green economics would suggest lower taxes on labour and new or higher taxes on carbon.
So, could it be done? Well, we don’t know yet because no-one has yet tried it, nor even dared to suggest it. Higher taxes for rich people still seems easier to sell on the doorstep than higher carbon taxes or rationing for everyone.