Most of that transformation will come from the efforts of ordinary people at creating the building blocks of the successor society on the ground, and from those building blocks replicating laterally and coalescing into an ecosystem of counter-institutions that expands until it supplants the previous order.

Some of it will come from political engagement to run interference for the new society developing within the shell of the old, and pressuring the state from outside to behave in more benign ways. Some of it will come from using some parts of the state against other parts, and using the state’s own internal procedural rules to sabotage it.

Some of it will come from attempts to engage friendly forces within the belly of the beast. Individuals here and there on the inside of corporate or state institutions who are friendly to our efforts and willing to engage informally with us can pass along information and take advantage of their inside positions to nudge things in a favorable direction. As was the case with the transition from feudalism and capitalism, some organizational entities — now nominally within state bodies or corporations — will persist in a post-state and post-capitalist society, but with their character fundamentally changed along with their relationship to the surrounding system.  If you want to see some interesting examples of attempts at “belly of the beast” grantsmanship and institutional politics, take a look at the appendices to some of Paul Goodman’s books.

A great deal, I predict, will come from efforts — particularly at the local level — to transform the state in a less statelike direction: a general principle first framed by Saint-Simon as “replacing legislation over people with the administration of things,” and since recycled under a long series of labels ranging from “dissolution of the state within the social body” to “the Wikified State” to “the Partner State.” The primary examples I have in mind today are the new municipalist movements in Barcelona, Madrid, Bologna, and Jackson and the dozens and hundreds of cities replicating that model around the world, as well as particular institutional forms like community land trusts and other commons-based local economic models.

There is no “magic button” that will cause the state to instantaneously disappear, and it has currently preempted the avenues and channels (to paraphrase Paul Goodman) for carrying out many necessary social functions. So long as the state continues to be a thing, I prefer that its interventions in society and the economy take the least horrible forms possible, and that its performance of the necessary social functions it has preempted be carried out in the most humane and humanly tolerable ways possible during the period of socializing them — i.e., returning them to genuine social control by non-coercive, cooperative forms of association. I prefer that reforms of the state be Gorzian “non-reformist reforms” that lay the groundwork for further transformations, and bridge the transition to a fundamentally different society.

In dealing with cases like catastrophic climate change, where lifeboat ethics comes into play and it’s justifiable to forcibly shut down economic activities that actively endanger us, when the regulatory state has already preempted the avenues for otherwise shutting down such activities, stepping back and allowing the state  to actually do so — especially when it’s acting against entities like corporations which are abusing power and privilege granted by the state in the first place — may be the least unsatisfactory short-term option. When the state has created and actively subsidized the entire economic model that threatens the biosphere, intervening to partially curtail and reverse that model is probably the form of intervention I’m least likely to lose any sleep over.

To take a case from ten years ago as an illustration, something like Obama’s stimulus package was necessary, given the existence of corporate capitalism on the current model and its chronic crisis tendencies towards surplus capital and idle productive capacity, to prevent a Depression. So long as capitalism and the state existed, some such intervention was inevitable. Given those facts, I would prefer that the hundreds of billions of dollars in stimulus spending go towards fundamental infrastructures that would bridge the transition towards a more sustainable and less destructive model. I recall reading at the time that for $200 or $300 billion dollars — about a third or less of the total package — it would have been possible to build out the bottlenecks in the national railroad system and transfer around 80% of long-haul truck freight to trains, thereby reducing carbon emissions from long-distance shipping to a fraction of their former value. Instead, Obama elected to dole out the money to “shovel-ready” projects, which meant local infrastructure projects already promoted and approved by local real estate interests and other components of the urban Growth Machines, to promote further expansion of the ultimately doomed model of car culture, sprawl, and monoculture.

Given that massive deficit spending to avert Depression was inevitable, it would have been far less statist to simply spend money into existence interest-free along the lines suggested by Modern Monetary Theory, either by appropriation for government projects or simply depositing it into people’s checking accounts as a Citizen’s Dividend, than to finance deficit spending by the sale of interest bearing securities to rentiers. It would have been less statist to carry out quantitative easing functions by eliminating the current central banking model of authorizing banks to expand the money supply by lending it into existence at interest, and instead creating new money by simply issuing in the form of a Basic Income. It would have been better to make the bank bailout conditional on banks marking mortgages in default down to their current market value and refinancing them on more affordable terms. You get the idea.

Which brings us back to the Green New Deal.

Getting back to our earlier principle that, if the state has already entered the field, I prefer state interventions that are less shitty rather than more shitty, I would definitely prefer that tax money be spent building public transit that partially reverses or undoes a century of social engineering through state subsidies to highways and civil aviation, to interventions that continue to subsidize the further expansion of car culture.

The question is, to what extent does the Green New Deal actually do this?

Insofar as it proposes shifting public funding from the automobile-highway complex and civil aviation system to local public transit and intercity passenger rail, or reducing fossil fuel extraction and shifting to renewable energy, I think it’s about the best line of action we could possibly expect from a state given the likely realities in the near-term future.  

But there are two main structural problems with the Green New Deal as proposed by Michael Moore, Jill Stein, and Alexandria Ocasio-Cortez. First, it takes for granted most of the existing economy’s patterns of energy use and simply calls for decarbonizing actual power generation.

As an illustration of the general spirit of this approach, Alex Baca mentions a Berkeley parking garage:

It’s got “rooftop solar, electric-vehicle charging stations, and dedicated spots for car-share vehicles, rainwater capture, and water treatment features” — not to mention 720 parking spots. It cost nearly $40 million to build. At night, it positively glows. And it’s a block from the downtown Berkeley BART station.

That America’s most famous progressive city, one where nearly everything is within walking distance, spent $40 million to renovate a parking garage one block from a subway station suggests that progressive Democrats remain unwilling to seriously confront the crisis of climate change.

In fairness to Ocasio-Cortez, she does favor shifting a considerable share of public subsidies from highways to public transit. But the overall thrust of her approach is far more towards decarbonizing power generation than changing the ways we use energy.

The Green New Deal, Baca says, “has a huge blind spot.”

It doesn’t address the places Americans live. And our physical geography — where we sleep, work, shop, worship, and send our kids to play, and how we move between those places — is more foundational to a green, fair future than just about anything else. The proposal encapsulates the liberal delusion on climate change: that technology and spending can spare us the hard work of reform.

Baca points, in particular, to the car-centered urban design model — promoted by decades of social engineering by the automobile and real estate industries in conjunction with urban planners — which locates housing and work/shopping in monoculture enclaves widely separated from one another and linked by freeways. More than anything, we need to return to the kind of urban layout that prevailed before widespread car ownership: compact population centers with a mixture of residences and businesses where people can get to work and shopping by walking, wheelchair, bicycle, bus, or streetcar. And rather than just replacing internal-combustion vehicles with electric ones and coal plants with solar panels, we need to travel fewer miles and consume less power.

Baca’s focus on urban layout, as on-the-mark as it is, doesn’t go nearly far enough. Equally important is industrial organization and the need to relocalize production and change the fundamental ways that production and distribution are organized.

Because of a combination of massive subsidies to energy consumption and transportation, entry barriers that promote cartelization and enable oligopoly firms to pass on overhead from waste and inefficiency to consumers on a cost-plus basis, socialization of the cost of many material and social inputs to production, and artificial property rights like trademarks and patents that facilitate legal control over the disposal of products whose manufacture is outsourced to overseas firms, we have market areas, supply chains, and distribution chains many times larger than efficiency-maximizing levels if all costs were internalized by capitalist firms. And even when production within a plant is rationalized on a lean or just-in-time basis, the existence of continental or trans-oceanic distribution chains means that the old supply-push model of the mass production era is just swept under the rug; all the in-process inventories stacked up by the assembly lines and warehouse inventories of finished goods that characterized Sloanist production have just been shifted to warehouses on wheels and container ships.

Ultimately, what we need is a relocalized economy on the lines described by Kropotkin, Mumford, and Borsodi, which capitalizes on all the advantages offered — but ignored — by the introduction of electrically powered machinery in the Second Industrial Revolution. Namely, we need high-tech craft industry with community and neighborhood workshops using general-purpose CNC machine tools to produce for consumption within the community, frequently switching between product runs as orders come in on a just-in-time basis. This would eliminate not only a huge share of the transportation costs embedded in the current system, but additional costs associated with mass marketing in an environment where production is undertaken without regard to existing orders, and the cost of waste production (planned obsolescence, the Military-Industrial Complex, car culture and suburbanization, etc.) that is used as a remedy for idle production capacity.

Building “infrastructure” as such is not progressive. It’s only progressive when it’s compatible with things like industrial relocalization and the replacement of the car culture with compact mixed-use communities.

Second, the Green New Deal is very much an agenda for saving capitalism in the same spirit as the original New Deal. It’s an anti-deflationary program to create new outlets for surplus labor and capital and provide “jobs” for everyone, instead of directly confronting the fact that technical progress has drastically reduced the amount of labor and material inputs required to produce a high standard of living and seeing that the leisure and productivity benefits are distributed fairly.

This was central to the Green New Deal model proposed by Michael Moore several years back, and it’s central to Alexandria Ocasio-Cortez’s version.

The Wikipedia article on “Green New Deal” attributes first use of that phrase to Thomas Friedman, who envisioned it as a way to “create a whole new clean power industry to spur our economy into the 21st century.” And the creation of new “green” industries as a huge source of “jobs” has been the chief selling point of every Green New Deal proposal since. More broadly, it’s the defining theme of the whole “Progressive Capitalist” or “Green Capitalist” paradigm promoted by Warren Buffett, Bill  Gates and the like. The idea is to use new technology as a weapon against capitalism’s chronic problem of surplus capital without a profitable outlet, by enclosing it as a source of profit, and using it to create new industries and new support infrastructures that will provide a new “engine of accumulation” or “Kondratiev wave” to soak up capital for another generation or so. This creation of new industries is one of the “counteracting tendencies” to the tendency for the direct rate of profit to fall that Marx described in volume 3 of Capital.

And that’s basically the same vision promoted by Michael Moore: run those Ford and GM factories at full capacity and put millions of auto workers back to work building buses and bullet trains, and employ millions more building solar panels and wind generators. The problem is that the cheapening and ephemeralization of production technology is rendering a growing share of investment capital superfluous at such a rapid rate that building buses and trains and generators will barely put a dent in it. And in any case, a major share of existing production is waste that just needs to be ended, not run on a different power source;  while replacing necessary transportation with more environmentally friendly forms is a great idea, the fact remains that most existing transportation is also unnecessary and should be eliminated by restructuring the layout of cities and industry. The buses and bullet trains may take up the slack left by ceasing to produce cars for a few years, at most.

There is simply no way to invest enough money in producing alternative energy, trains and public transit to guarantee 40-hour-a-week jobs, get the assembly lines moving in Detroit again, and prevent the bottom from falling out of the capital markets, without enormous levels of waste production.

So to the extent that AOC and her friends want to keep oil and coal in the ground and promote decarbonization, and end America’s subsidies to car culture, I wish them well. But “green jobs guarantees,” promises of economic expansion through new “green industries,” and similar approaches aimed at prolonging the long-term survival of capitalism, are a dead end.

Where does that leave us? What do we do in the meantime?

In framing the alternatives, I start from the assumption that our primary purpose is actually building the post-capitalist society, and that our engagement or lack of engagement with the state is a secondary course of action whose main purpose is to create a more conducive, less harmful environment in which to do the building. If you want to vote strategically for the sake of damage mitigation, or try to push the state in less environmentally harmful directions, or shift its existing interventions in a more environmentally favorable direction, more power to you.

It was this kind of thing that Antonio Negri and Michael Hardt referred to, in Declaration, as part of a symbiotic strategy between the horizontalist left with its practice of building prefigurative counter-institutions, and leftist parties attempting to influence state policy. It’s fine for grassroots movements engaged in constructing a new society outside the state to throw support behind political actors who are taking specific measures to push things in the right direction, or enlist their help in running interference for us and creating a more favorable environment for the process of building the new society. But it’s absolutely vital to retain total autonomy and freedom of action, and resist being turned into the social movement auxiliary of a political party as Van Jones tried to do with Occupy, and not let leftist parties in government divert suck up all the energy and oxygen from those engaged in building counter-institutions like Syriza did to Syntagma after coming to power in Greece.

Our most important strategic focus must be on institution-building. The most important form of institution-building is at the local level, and some of it may or may not entail incidental engagement with local government.

Pressuring local government to scale back zoning laws that mandate sprawl and monoculture, and to stop actively subsidizing sprawl through below-cost extension of utilities to outlying developments, may well be fruitful. But the most productive path in local decarbonization will be the work of actually retrofitting suburbs and strip malls into mixed-use communities with diversified local economies.

These things will become a matter of necessity for survival, as the combined effect of Peak Fossil Fuel and monkeywrenching efforts aimed at keeping it in the ground make long commutes prohibitively expensive for growing numbers of people, and growing numbers at the same time are forced by rising unemployment, underemployment, and precaritization to supplement or replace their wage incomes with direct production for use in the social economy.

When it comes to strategic action to promote decarbonization, direct action to make the fossil fuel industries unprofitable and fossil fuel projects unworkable in practice are at least as important as any local “carbon free” initiatives. Physical obstruction of pipeline projects, the use of the legal system and bureaucracy to sabotage them with their own system of rules, divestment efforts, and sabotage of existing pumping stations and other vulnerable nodes, together offer great hope for making such projects increasingly risky and decreasingly attractive and hastening post-carbon transition.

And it’s the people engaged in open hardware and micro-manufacturing efforts, hackerspaces, neighborhood gardens, community currencies, community broadband projects, squats in abandoned buildings and vacant lots, community land trusts and cohousing projects, tool libraries and other genuine sharing efforts, who are actually building a society that will function on zero waste and sustainable energy.

In the end, I think it’s a mistake to put our hopes in a party or in progressive celebrities like Bernie Sanders or AOC, no matter how much better they are than more mainstream politicians. I have much more modest hopes for whatever level of political engagement with the state I choose. A political party — the Millennial wing of the Democrats, the Greens, DSA — will not be the avenue by which we create a post-state, post-capitalist society that’s worthy of the human beings who live in it. Our main goal, and most attainable one, is simply using whatever opportunistic center-left non-entity is most likely to get elected to stave off the immediate fascist onslaught and buy time. At best, in the most ideal situation — and this is at least plausible as the demographics of both the country and Democratic Party shift toward leftish Millennials — we might hope for a caretaker state that offers a somewhat less virulent social democratic model of capitalism and allows a relatively benign atmosphere for our own efforts.

But if you want to see the actual future, look at what people are building on the ground. As a character in Marge Piercy’s Woman on the Edge of Time put it, revolution, was not uniformed parties, slogans, and mass-meetings; “It’s the people who worked out the labor- and land intensive farming we do. It’s all the people who changed how people bought food, raised children, went to school… who made new unions, withheld rent, refused to go to wars, wrote and educated and made speeches.”

The post One Cheer — More or Less — For the Green New Deal appeared first on P2P Foundation.

As alarm bells sound over the advancing destruction of the environment, a variety of Green New Deal proposals have appeared in the US and Europe, along with some interesting academic debates about how to fund them. Monetary policy, normally relegated to obscure academic tomes and bureaucratic meetings behind closed doors, has suddenly taken center stage.

The 14 page proposal for a Green New Deal submitted to the US House of Representatives by Congresswoman Alexandria Ocasio Cortez does not actually mention Modern Monetary Theory, but that is th it’s e approach currently capturing the attention of the media – and taking most of the heat. The concept is good: abundance can be ours without worrying about taxes or debt, at least until we hit full productive capacity. But the devil is in the details….

MMT advocates say the government does not need to collect taxes before it spends. It actually creates new money in the process of spending it; and there is plenty of room in the economy for public spending before demand outstrips supply, driving up prices.

Critics, however, say this is not true. The government is not allowed to spend before it has the money in its account, and the money must come from tax revenues or bond sales.

In a 2013 treatise called “Modern Monetary Theory 101: A Reply to Critics,” MMT academics actually concede this point. But they write that “these constraints do not change the end result,” and here the argument gets a bit technical. Their reasoning is that “The Fed is the monopoly supplier of CB currency [central bank reserves], Treasury spends by using CB currency, and since the Treasury obtained CB currency by taxing and issuing treasuries, CB currency must be injected before taxes and bond offerings can occur.”

The counterargument, made by American Monetary Institute researchers among others, is that the central bank is not the monopoly supplier of dollars. The vast majority of the dollars circulating in the United States are created, not by the government, but by private banks when they make loans. The Fed accommodates this process by supplying central bank currency (bank reserves) as needed; and this bank-created money can be taxed or borrowed by the Treasury before a single dollar is spent by Congress. The AMI researchers contend, “All bank reserves are originally created by the Fed for banks. Government expenditure merely transfers (previous) bank reserves back to banks.” As the Federal Reserve Bank of St. Louis puts it, “federal deficits do not require that the Federal Reserve purchase more government securities; therefore, federal deficits, per se, need not lead to increases in bank reserves or the money supply.”

What federal deficits do increase is the federal debt;  and while the debt itself can be rolled over from year to year (as it virtually always is), the exponentially growing interest tab is one of those mandatory budget items that taxpayers must pay. Predictions are that in the next decade, interest alone could add $1 trillion to the annual bill, an unsustainable tax burden.

To fund a project as massive as the Green New Deal, we need a mechanism that involves neither raising taxes nor adding to the federal debt; and such a mechanism is actually proposed in the US Green New Deal – a network of public banks. While little discussed in the US media, that alternative is being debated in Europe, where Green New Deal proposals have been on the table since 2008. European economists have had more time to think these initiatives through, and they are less hampered by labels like “socialist” and “capitalist,” which have long been integrated into their multiparty systems.

A Decade of Gestation in Europe

The first Green New Deal proposal was published in 2008 by the New Economics Foundation on behalf of the Green New Deal Group in the UK. The latest debate is between proponents of the Democracy in Europe Movement 2025 (DiEM25), led by former Greek finance minister Yanis Varoufakis, and French economist Thomas Piketty, author of the best-selling Capital in the 21^st Century. Piketty recommends funding a European Green New Deal by raising taxes, while Varoufakis favors a system of public green banks.

Varoufakis explains that Europe needs a new source of investment money that does not involve higher taxes or government deficits. DiEM25 proposes for this purpose “an investment-led recovery, or New Deal, program … to be financed via public bonds issued by Europe’s public investment banks (e.g. the new investment vehicle foreshadowed in countries like Britain, the European Investment Bank and the European Investment Fund in the European Union, etc.).” To ensure that these bonds do not lose their value, the central banks would stand ready to buy them above a certain yield. “In summary, DiEM25 is proposing a re-calibrated real-green investment version of Quantitative Easing that utilises the central bank.

Public development banks already have a successful track record in Europe, and their debts are not considered debts of the government. They are financed not through taxes but by the borrowers when they repay the loans. Like other banks, development banks are moneymaking institutions that not only don’t cost the government money but actually generate a profit for it. DiEM25 collaborator Stuart Holland observes:

While Piketty is concerned to highlight differences between his proposals and those for a Green New Deal, the real difference between them is that his—however well-intentioned—are a wish list for a new treaty, a new institution and taxation of wealth and income. A Green New Deal needs neither treaty revisions nor new institutions and would generate both income and direct and indirect taxation from a recovery of employment. It is grounded in the precedent of the success of the bond-funded, Roosevelt New Deal which, from 1933 to 1941, reduced unemployment from over a fifth to less than a tenth, with an average annual fiscal deficit of only 3 per cent.

Roosevelt’s New Deal was largely funded through the Reconstruction Finance Corporation (RFC), a public financial institution set up earlier by President Hoover. Its funding source was the sale of bonds, but proceeds from the loans repaid the bonds, leaving the RFC with a net profit. The RFC financed roads, bridges, dams, post offices, universities, electrical power, mortgages, farms, and much more; and it funded all this while generating income for the government.

A System of Public Banks and “Green QE”

The US Green New Deal envisions funding with “a combination of the Federal Reserve [and] a new public bank or system of regional and specialized public banks,” which could include banks owned locally by cities and states. As Sylvia Chi, chair of the legislative committee of the California Public Banking Alliance, explains on Medium.com:

The Green New Deal relies on a network of public banks — like a decentralized version of the RFC — as part of the plan to help finance the contemplated public investments. This approach has worked in Germany, where public banks have been integral in financing renewable energy installations and energy efficiency retrofits.

Local or regional public banks, says Chi, could help pay for the Green New Deal by making “low-interest loans for building and upgrading infrastructure, deploying clean energy resources, transforming our food and transportation systems to be more sustainable and accessible, and other projects. The federal government can help by, for example, capitalizing public banks, setting environmental or social responsibility standards for loan programs, or tying tax incentives to participating in public bank loans.”

UK professor Richard Murphy adds another role for the central bank – as the issuer of new money in the form of  “Green Infrastructure Quantitative Easing.” Murphy, who was a member of the original 2008 UK Green New Deal Group, explains:

All QE works by the [central bank] buying debt issued by the government or other bodies using money that it, quite literally, creates out of thin air. … [T]his money creation process is … what happens every time a bank makes a loan. All that is unusual is that we are suggesting that the funds created by the [central bank] using this process be used to buy back debt that is due by the government in one of its many forms, meaning that it is effectively canceled.

The invariable objection to that solution is that it would act as an inflationary force driving up prices, but as argued in my earlier article here, this need not be the case. There is a chronic gap between debt and the money available to repay it that actually needs to be filled with new money every year to avoid a “balance sheet recession.” As UK Prof. Mary Mellor formulates the problem in Debt or Democracy (2016), page 42:

A major contradiction of tying money supply to debt is that the creators of the money always want more money back than they have issued. Debt-based money must be continually repaid with interest. As money is continually being repaid, new debt must be being generated if the money supply is to be maintained.… This builds a growth dynamic into the money supply that would frustrate the aims of those who seek to achieve a more socially and ecologically sustainable economy.

In addition to interest, says Mellor, there is the problem that bankers and other rich people generally do not return their profits to local economies. Unlike public banks, which must use their profits for local needs, the wealthy hoard their money, invest it in the speculative markets, hide it in offshore tax havens, or send it abroad.

To avoid the cyclical booms and busts that have routinely devastated the US economy, this missing money needs to be replaced; and if the new money is used to pay down debt, it will be extinguished along with the debt, leaving the overall money supply and the inflation rate unchanged. If too much money is added to the economy, it can always be taxed back; but as MMTers note, we are a long way from the full productive capacity that would “overheat” the economy today.

Murphy writes of his Green QE proposal:

The QE program that was put in place between 2009 and 2012 had just one central purpose, which was to refinance the City of London and its banks.… What we are suggesting is a smaller programme … to kickstart the UK economy by investing in all those things that we would wish our children to inherit whilst creating the opportunities for everyone in every city, town, village and hamlet in the UK to undertake meaningful and appropriately paid work.

A network of public banks including a central bank operated as a public utility could similarly fund a US Green New Deal – without raising taxes, driving up the federal debt, or inflating prices.

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This article was first published under a different title on Truthdig.com. Ellen Brown is an attorney, founder of the Public Banking Institute, and author of twelve books including Web of Debt and The Public Bank Solution. A 13^th book titled Banking on the People: Democratizing Finance in the Digital Age is due out soon. She also co-hosts a radio program on PRN.FM called “It’s Our Money.” Her 300+ blog articles are posted at EllenBrown.com.

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We’ve been taking the wrong approach to communicating about climate change. I get that the situation is dire. Really dire. But it goes way beyond the fact that every year is the hottest year on record, sea levels are rising, drought is forcing millions into refugee status, the Great Barrier Reef is almost dead, the oceans are 26 percent more acidic than preindustrial levels, our topsoil will be gone in less than 60 years, and we’re already at least 1.5 degrees Celsius toward the two degrees said to herald a real catastrophe. That’s all bad. The reality is actually worse.

By any rational analysis, civilization as we know it is on the brink of true disaster. And despite their outward messaging, even climate-denying, anti-scientific, messianic nations like the United States are quietly preparing for the coming storm. No, they’re not looking at how to mitigate climate change, but how to prepare for its inevitability. We’re building walls — not to keep out today’s immigrants, but to block tomorrow’s climate refugees. We’re being trained by our president and other leaders in the dark art of seeing people from other nations as less than human — a trick that will make it easier to watch as flooding and other climate catastrophes wipe out millions. “At least it’s them and not us,” we’ll be able to tell ourselves. This sort of alienation verging on sociopathy takes time to develop. But we’re working on it.

These are the sorts of things people do when they feel powerless to effect any change. They see the future as fixed — as something to predict and prepare for — but utterly impervious to their intervention. It’s the posture toward the future assumed by most corporations. They hire futurists and scenario planners to tell them what is most likely to happen 10, 20, or 50 years from now so they can invest in whatever is going to be valuable in that environment. Back in the 1980s, the futurists started talking about the coming water crisis. That’s what turned water into a private commodity — accelerating and worsening the very crisis they predicted.

Likewise, any futurist worth their coverage in Wired is telling their corporate clients about the coming global climate crisis in stirring detail: which regions will be underwater; how temperature changes are likely to effect social unrest, politics, and violence levels; how and where the populations of Africa and Southeast Asia will migrate; and so on.

We’ve won the communications battle in the sense that the rich and powerful now accept the reality of climate change and are actively betting on it happening. They believe us. But we’re losing the war in that they don’t believe the crisis can be averted. As speculators, they’re more committed to betting on the most likely future instead of investing in the future they’d like to see happen. In the finance world, betting on what you hope for is derided as “emotional investing.” One is supposed to bet only on existing probabilities — not on one’s genuine goals or dreams. And this mentality is self-perpetuating. The more we invest in the inevitability of climate disaster, the more assuredly we bring it on and the more devastating a future we are creating for ourselves.

If we’re going to get business on our side (after which government is sure to follow), we have to convince them that the most likely future scenario is one where the whole world tries to get in on the bet that we can avert climate change. Or at least we can mitigate its effects. Slow it down. Build more resilience. We have to show that the world is on board and ready to do and pay for what is necessary to keep the planet livable for the vast majority of species.

As a thinker who is often mistaken for a futurist, the last thing I should be doing is standing in front of people and telling them how many millions or billions of people may die, how mass migrations will threaten the sanctity of nation-states, or how the oceans are on the brink of death. Because then my audiences will start betting on those outcomes.

No, the people who needed to hear the alarm bells have heard them. Those who didn’t — who couldn’t — respond to the warnings with anything but self-interested bets on shotguns, iodine tablets, water futures, and land in New Zealand? They need to hear a different message. They need to hear that climate change is about to be defeated. If they don’t get in on climate remediation now, on the ground floor, they’ll miss the opportunity. This is the chance to invest in organic agriculture and to sell short on Monsanto and Big Agra. This is the time to go all in on solar, wind, and geothermal.

And once they do — once the big money is really in — just watch as Wall Street starts lobbying for the Green New Deal proposed by Alexandria Ocasio-Cortez and others. Net-zero greenhouse emissions is not a pipe dream, but a plausible, positive, attainable goal.

Let’s start talking about our collective sustainable future in ways that make people bet on it.

Photo by tim_gorman

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Funding through the Federal Reserve may be controversial, but establishing a national public infrastructure and development bank should be a no-brainer. The real question is why we don’t already have one, like China, Germany, and other countries that are running circles around us in infrastructure development. Many European, Asian and Latin American countries have their own national development banks, as well as belonging to bilateral or multinational development institutions that are jointly owned by multiple governments. Unlike the US Federal Reserve, which considers itself “independent” of government, national development banks are wholly owned by their governments and carry out public development policies.

China not only has its own China Infrastructure Bank but has established the Asian Infrastructure Investment Bank, which counts many Asian and Middle Eastern countries in its membership, including Australia, New Zealand, and Saudi Arabia. Both banks are helping to fund China’s trillion-dollar “One Belt One Road” infrastructure initiative. China is so far ahead of the United States in building infrastructure that Dan Slane, a former advisor on President Trump’s transition team, has warned, “If we don’t get our act together very soon, we should all be brushing up on our Mandarin.”

The leader in renewable energy, however, is Germany, called “the world’s first major renewable energy economy.” Germany has a public sector development bank called KfW (Kreditanstalt für Wiederaufbau or “Reconstruction Credit Institute”), which is even larger than the World Bank. Along with Germany’s non-profit Sparkassen banks, KfW has largely funded the country’s green energy revolution.

Unlike private commercial banks, KfW does not have to focus on maximizing short-term profits for its shareholders while turning a blind eye to external costs, including those imposed on the environment. The bank has been free to support the energy revolution by funding major investments in renewable energy and energy efficiency. Its fossil fuel investments are close to zero. One of the key features of KFW, as with other development banks, is that much of its lending is driven in a strategic direction determined by the national government. Its key role in the green energy revolution has been played within a public policy framework under Germany’s renewable energy legislation, including policy measures that have made investment in renewables commercially attractive.

KfW is one of the world’s largest development banks, with assets as of December 2017 of $566.5 billion. Ironically, the initial funding for its capitalization came from the United States, through the Marshall Plan in 1948. Why didn’t we fund a similar bank for ourselves? Apparently because powerful Wall Street interests did not want the competition from a government-owned bank that could make below-market loans for infrastructure and development. Major US investors today prefer funding infrastructure through public-private partnerships, in which private partners can reap the profits while losses are imposed on local governments.

KfW and Germany’s Energy Revolution

Renewable energy in Germany is mainly based on wind, solar and biomass. Renewables generated 41% of the country’s electricity in 2017, up from just 6% in 2000; and public banks provided over 72% of the financing for this transition. In 2007-09, KfW funded all of Germany’s investment in Solar Photovoltaic. After that, Solar PV was introduced nationwide on a major scale. This is the sort of catalytic role that development banks can play, kickstarting a major structural transformation by funding and showcasing new technologies and sectors.

KfW is not only one of the biggest but has been ranked one of the two safest banks in the world. (The other is also a publicly-owned bank, the Zurich Cantonal Bank in Switzerland.) KfW sports triple-A ratings from all three major rating agencies, Fitch, Standard and Poor’s, and Moody’s. The bank benefits from these top ratings and from the statutory guarantee of the German government, which allow it to issue bonds on very favorable terms and therefore to lend on favorable terms, backing its loans with the bonds.

KfW does not work through public-private partnerships, and it does not trade in derivatives and other complex financial products. It relies on traditional lending and grants. The borrower is responsible for loan repayment. Private investors can participate, but not as shareholders or public-private partners. Rather, they can invest in “Green Bonds,” which are as safe and liquid as other government bonds and are prized for their green earmarking. The first “Green Bond – Made by KfW” was issued in 2014 with a volume of $1.7 billion and a maturity of five years. It was the largest Green Bond ever at the time of issuance and generated so much interest that the order book rapidly grew to $3.02 billion, although the bonds paid an annual coupon of only 0.375%. By 2017, the issue volume of KfW Green Bonds was $4.21 billion.

Investors benefit from the high credit and sustainability ratings of KfW, the liquidity of its bonds, and the opportunity to support climate and environmental protection. For large institutional investors with funds that exceed the government deposit insurance limit, Green Bonds are the equivalent of savings accounts, a safe place to park their money that provides a modest interest. Green Bonds also appeal to “socially responsible” investors, who have the assurance with these simple and transparent bonds that their money is going where they want it to. The bonds are financed by KfW from the proceeds of its loans, which are also in high demand due to their low interest rates; and the bank can offer these low rates because its triple-A ratings allow it to cheaply mobilize funds from capital markets, and because its public policy-oriented loans qualify it for targeted subsidies.

Roosevelt’s Development Bank: The Reconstruction Finance Corporation

KfW’s role in implementing government policy parallels that of the Reconstruction Finance Corporation (RFC) in funding the New Deal in the 1930s. At that time US banks were bankrupt and incapable of financing the country’s recovery. Roosevelt attempted to set up a system of 12 public “industrial banks” through the Federal Reserve, but the measure failed; so he made an end run around his opponents by using the RFC that had been set up earlier by President Hoover, expanding it to address the nation’s financing needs.

The RFC Act of 1932 provided the RFC with capital stock of $500 million and the authority to extend credit up to $1.5 billion (subsequently increased several times). With those resources, from 1932 to 1957 the RFC loaned or invested more than $40 billion. As with KfW’s loans, its funding source was the sale of bonds, mostly to the Treasury itself. Proceeds from the loans repaid the bonds, leaving the RFC with a net profit. The RFC financed roads, bridges, dams, post offices, universities, electrical power, mortgages, farms, and much more; and it funded all this while generating income for the government.

The RFC was so successful that it became America’s largest corporation and the world’s largest banking organization. Its success may have been its nemesis. Without the emergencies of depression and war, it was a too-powerful competitor of the private banking establishment; and in 1957, it was disbanded under President Eisenhower. The United States was left without a development bank, while Germany and other countries were hitting the ground running with theirs.

Today some US states have infrastructure and development banks, including California; but their reach is very small. One way they could be expanded to meet state infrastructure needs would be to turn them into depositories for state and municipal revenues. Rather than lending their capital directly in a revolving fund, this would allow them to leverage their capital into 10 times that sum in loans, as all depository banks are able to do. (See my earlier article here.)

The most profitable and efficient way for national and local governments to finance public infrastructure and development is with their own banks, as the impressive track records of KfW and other national development banks have shown. The RFC showed what could be done even by a country that was technically bankrupt, simply by mobilizing its own resources through a publicly-owned financial institution. We need to resurrect that public funding engine today, not only to address the national and global crises we are facing now but for the ongoing development the country needs in order to manifest its true potential.

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This article was first published on Truthdig.com.

The post Why Germany Leads in Renewables: It Has Its Own Green Bank appeared first on P2P Foundation.

The Federal Reserve alone could do the job. It could buy “Green” federal bonds with money created on its balance sheet, just as the Fed funded the purchase of $3.7 trillion in bonds in its “quantitative easing” program to save the banks. The Treasury could also do it. The Treasury has the constitutional power to issue coins in any denomination, even trillion dollar coins. What prevents legislators from pursuing those options is the fear of hyperinflation from excess “demand” (spendable income) driving prices up. But in fact the consumer economy is chronically short of spendable income, due to the way money enters the consumer economy. We actually need regular injections of money to avoid a “balance sheet recession” and allow for growth, and a UBI is one way to do it.

The pros and cons of a UBI are hotly debated and have been discussed elsewhere. The point here is to show that it could actually be funded year after year without driving up taxes or prices. New money is continually being added to the money supply, but it is added as debt created privately by banks. (How banks rather than the government create most of the money supply today is explained on the Bank of England website here.) – while leaving the money supply for the most part unchanged; and to the extent that new money was added, it could help create the demand needed to fill the gap between actual and potential productivity.

The Debt Overhang Crippling Economies

The “bank money” composing most of the money in circulation is created only when someone borrows, and today businesses and consumers are burdened with debts that are higher than ever before. In 2018, credit card debt alone exceeded $1 trillion, student debt exceeded $1.5 trillion, auto loan debt exceeded $1.1 trillion, and non-financial corporate debt hit $5.7 trillion. When businesses and individuals pay down old loans rather than taking out new loans, the money supply shrinks, causing a “balance sheet recession.” In that situation, the central bank, rather than removing money from the economy (as the Fed is doing now), needs to add money to fill the gap between debt and the spendable income available to repay it.

Debt always grows faster than the money available to repay it. One problem is the interest, which is not created along with the principal, so more money is always owed back than was created in the original loan. Beyond that, some of the money created as debt is held off the consumer market by “savers” and investors who place it elsewhere, making it unavailable to companies selling their wares and the wage-earners they employ. The result is a debt bubble that continues to grow until it is not sustainable and the system collapses, in the familiar death spiral euphemistically called the “business cycle.” As economist Michael Hudson shows in his 2018 book And Forgive Them Their Debts, this inevitable debt overhang was corrected historically with periodic “debt jubilees” – debt forgiveness – something he argues we need to do again today.

For governments, a debt jubilee could be effected by allowing the central bank to buy government securities and hold them on its books. For individuals, one way to do it fairly across the board would be with a UBI.

Why a UBI Need Not Be Inflationary

In a 2018 book called The Road to Debt Bondage: How Banks Create Unpayable Debt, political economist Derryl Hermanutz proposes a central-bank-issued UBI of one thousand dollars per month, credited directly to people’s bank accounts. Assuming this payment went to all US residents over 18, or about 241 million people, the outlay would be close to $3 trillion annually. For people with overdue debt, Hermanutz proposes that it automatically go to pay down those debts. Since money is created as loans and extinguished when they are repaid, that portion of a UBI disbursement would be extinguished along with the debt.

People who were current on their debts could choose whether or not to pay them down, but many would also no doubt go for that option. Hermanutz estimates that roughly half of a UBI payout could be extinguished in this way through mandatory and voluntary loan repayments. That money would not increase the money supply or demand. It would just allow debtors to spend on necessities with debt-free money rather than hocking their futures with unrepayable debt.

He estimates that another third of a UBI disbursement would go to “savers” who did not need the money for expenditures. This money, too, would not be likely to drive up consumer prices, since it would go into investment and savings vehicles rather than circulating in the consumer economy. That leaves only about one-sixth of payouts, or $500 billion, that would actually be competing for goods and services; and that sum could easily be absorbed by the “output gap” between actual and forecasted productivity.

According to a July 2017 paper from the Roosevelt Institute called “What Recovery? The Case for Continued Expansionary Policy at the Fed”:

GDP remains well below both the long-run trend and the level predicted by forecasters a decade ago. In 2016, real per capita GDP was 10% below the Congressional Budget Office’s (CBO) 2006 forecast, and shows no signs of returning to the predicted level.

The report showed that the most likely explanation for this lackluster growth was inadequate demand. Wages have remained stagnant; and before producers will produce, they need customers knocking on their doors.

In 2017, the US Gross Domestic Product was $19.4 trillion. If the economy is running at 10% below full capacity, $2 trillion could be injected into the economy every year without creating price inflation. It would just generate the demand needed to stimulate an additional $2 trillion in GDP. In fact a UBI might pay for itself, just as the G.I. Bill produced a sevenfold return from increased productivity after World War II.

The Evidence of China

That new money can be injected year after year without triggering price inflation is evident from a look at China. In the last 20 years, its M2 money supply has grown from just over 10 trillion yuan to 80 trillion yuan ($11.6T), a nearly 800% increase. Yet the inflation rate of its Consumer Price Index (CPI) remains a modest 2.2%.

Why has all that excess money not driven prices up? The answer is that China’s Gross Domestic Product has grown at the same fast clip as its money supply. When supply (GDP) and demand (money) increase together, prices remain stable.

Whether or not the Chinese government would approve of a UBI, it does recognize that to stimulate productivity, the money must get out there first; and since the government owns 80% of China’s banks, it is in a position to borrow money into existence as needed. For “self-funding” loans – those that generate income (fees for rail travel and electricity, rents for real estate) – repayment extinguishes the debt along with the money it created, leaving the net money supply unchanged. When loans are not repaid, the money they created is not extinguished; but if it goes to consumers and businesses that then buy goods and services with it, demand will still stimulate the production of supply, so that supply and demand rise together and prices remain stable.

Without demand, producers will not produce and workers will not get hired, leaving them without the funds to generate supply, in a vicious cycle that leads to recession and depression. And that cycle is what our own central bank is triggering now.

The Fed Tightens the Screws

Rather than stimulating the economy with new demand, the Fed has been engaging in “quantitative tightening.” On December 19, 2018, it raised the fed funds rate for the ninth time in 3 years, despite a “brutal” stock market in which the Dow Jones Industrial Average had already lost 3,000 points in 2-½ months. The Fed is still struggling to reach even its modest 2% inflation target, and GDP growth is trending down, with estimates at only 2-2.7% for 2019. So why did it again raise rates, over the protests of commentators including the president himself?

For its barometer, the Fed looks at whether the economy has hit “full employment,” which it considers to be 4.7% unemployment, taking into account the “natural rate of unemployment” of people between jobs or voluntarily out of work. At full employment, workers are expected to demand more wages, causing prices to rise. But unemployment is now officially at 3.7% – beyond technical full employment – and neither wages nor consumer prices have shot up. There is obviously something wrong with the theory, as is evident from a look at Japan, where prices have long refused to rise despite a serious lack of workers.

The official unemployment figures are actually misleading. Including short-term discouraged workers, the rate of US unemployed or underemployed workers as of May 2018 was 7.6%, double the widely reported rate. When long-term discouraged workers are included, the real unemployment figure was 21.5%. Beyond that large untapped pool of workers, there is the seemingly endless supply of cheap labor from abroad and the expanding labor potential of robots, computers and machines. In fact the economy’s ability to generate supply in response to demand is far from reaching full capacity today.

Our central bank is driving us into another recession based on bad economic theory. Adding money to the economy for productive, non-speculative purposes will not drive up prices so long as materials and workers (human or mechanical) are available to create the supply necessary to meet demand; and they are available now. There will always be price increases in particular markets when there are shortages, bottlenecks, monopolies or patents limiting competition, but these increases are not due to an economy awash with money. Housing, healthcare, education and gas have all gone up, but it is not because people have too much money to spend. In fact it is those necessary expenses that are driving people into unrepayable debt, and it is this massive debt overhang that is preventing economic growth.

Without some form of debt jubilee, the debt bubble will continue to grow until it can again no longer be sustained. A UBI can help correct that problem without fear of “overheating” the economy, so long as the new money is limited to filling the gap between real and potential productivity and goes into generating jobs, building infrastructure and providing for the needs of the people, rather than being diverted into the speculative, parasitic economy that feeds off them.

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This article was first published on Truthdig.com. 

The post Universal Basic Income Is Easier Than It Looks appeared first on P2P Foundation.

Something amazing is happening in American politics. Wow it felt good, and weird, to type that sentence. Not sure if you noticed, but it’s been kind of a hellish shitshow recently.

Anyway… On Tuesday 13th November 2018, a group of young climate activists descended on the office of Nancy Pelosi, expected to lead the Democrats in the US Congress. They were demanding that she set up a special committee to create a proper climate action plan for the country – a Green New Deal.

They were joined by Alexandria Ocasio-Cortez, a new rising star in the Democrats – more on her later – who hasn’t even officially taken her seat yet, but who dropped in to show her support of this demand on her new boss.

There’s a lot to unpack here, and we’re going to dive in to the details. But first I just want to give a shout out to David Roberts, one of my favourite climate journos, who wrote this fantastic piece about this. I am going to be drawing on his article quite a bit for the first few sections of this post. You should totally read it too.

A Green New Deal – what now?

These young climate activists and Alexandria Ocasio-Cortez are calling for something called a Green New Deal – a vast policy package with the aim to address climate change by decarbonising the US economy while addressing economic injustice, creating good jobs, investing in much-needed infrastructure and public services. Read this to see for yourself how eye-poppingly ambitious it is. We’re talking 100% renewable power and a slew of other goals.

The idea of a Green New Deal has been kicking around in environmental circles for years, and has long been championed by the US Green Party. But in just the last week, this is by far the most mainstream attention I have ever seen this idea get. It’s been discussed or at least mentioned on TV channels from Fox News to Russia Today, it’s been in many of the major national newspapers. As far as I know, this level of attention is unprecedented.

As the name suggests, the idea draws on the New Deal that President Roosevelt used to deal with the Great Depression. It’s basic Keynesian economics – essentially when the economy isn’t doing well, the government can fix it by spending a hell of a lot of money on useful stuff like infrastructure and research, which creates economic demand in the short term and higher productivity in the long term.

The ‘Green’ bit re-purposes this idea to be about retooling the economy to get off fossil fuels.

This most recent iteration of the concept is a little different because the US economy is not doing badly in terms of GDP – it’s actually growing. However most of that extra growth is only benefiting the rich, while ordinary Americans struggle. So the Green New Deal is more about economic justice than growth – good jobs paying living wages, public healthcare and education, affordable housing.

Alexandria Ocasio-Cortez, part of a movement

You may well have heard of Alexandria Ocasio-Cortez already, as she’s quickly become very popular in a short space of time. I have been reading up on her lately and I’m a huge fan.

She is the youngest woman ever to be elected to Congress, at 29 years old she is now going to represent the 14th district of New York – covering the Bronx and part of Queens. She caused waves when she ran for the primary against Democrat old-timer Joe Crowley and won, after he had held the seat for ten terms.

https://twitter.com/sunrisemvmt/status/1063917941383671808

She is very progressive – a self-described democratic socialist, clearly very passionate about social justice and environmental issues including climate change.

She is half Puerto Rican and she comes from a working class family. She ran an incredibly impressive grassroots campaign – didn’t take any money from corporate donors and had a passionate army of volunteers and small donations from ordinary people. Such a feat is almost unheard of. She won by focusing on the issues that her community cares about, running a positive campaign rather than making it about Trump. Central to her winning strategy was reaching out directly to the disengaged and disenfranchised who don’t normally vote, because politicians don’t normally speak to them.

She has a degree in Economics and International Relations and is incredibly intelligent and articulate and comes across as refreshingly genuine, with wheelbarrows of charm.

For you British readers – think Jeremy Corbyn, except a young Latina woman and more charismatic and even more progressive – and fresh, without the inevitable baggage of having been in politics for 35 years. But her democratic-socialist principles, her authenticity, being elected on the back of a grassroots movement – in those ways she’s very similar.

Even more exciting – she’s not alone, she’s part of a movement.

The new intake of Democrats from the recent mid terms is the most diverse ever, with more women than ever, historic numbers of people of colour, other minorities, as well as teachers and scientists running and winning. Many of these won on very progressive platforms and are bringing a much needed new energy into the stuffy and corrupt world of politics.

A organisation called Justice Democrats is recruiting, training and campaigning for Democrat candidates who back their platform of progressive policies.  Alexandria Ocasio-Cortez (or AOC for a cool abbreviation) is one of seven new Congress members they helped to elect in 2018.

And the climate activists who were demanding a Green New Deal? They are from a group called Sunrise Movement, a group of young people campaigning for climate justice, green jobs and the transition to a zero carbon economy.

We need strategy, not ideas

What AOC, Sunrise Movement and Justice Dems are doing here is actually very strategic. They aren’t just having a protest to demand a Green New Deal. That would raise awareness and get the idea talked about, but essentially not much else. Democrats now control Congress but Republicans have the Senate and the White House. And most mainstreams Dems aren’t even that concerned about climate action anyway. Even if they were, they have zero hope of passing this incredibly radical policy package at the moment.

But the demand isn’t actually for a Green New Deal itself. Here’s where it gets a bit ‘policy wonk’ so stick with me. This is interesting I promise.

The actual demand is for Democrat leader Nancy Pelosi to set up a special committee. This would have a specific mandate to spend two years building out a proper detailed plan for how to implement a Green New Deal, and then in 2020 when the next election rolls around, this time the big Presidential one, they would then have the plan ready for their campaign, and ready to implement if and when they win. And now that Democrats have control of Congress, Pelosi has the power to set up committees – with no approval needed from the Senate or President.

There’s another interesting part to the demand, and that is that this committee would not allow its members to take donor money from the fossil fuel industry. A smart protection against conflicts of interest co-opting it.

So far, they have got ten Congress members to support the proposal, and counting. That’s pretty damn impressive work.

https://twitter.com/sunrisemvmt/status/1063983199477473280

Nancy Pelosi herself has expressed some support for it, though hasn’t actually agreed. It’s extremely ballsy for AOC to make such a demand of her before even starting work, and siding with the external activists doing a sit-in was certainly a far cry from the usual wheeling and dealing behind closed doors that politicians usually engage in to get their ideas through.

But with this bold opening move AOC has made a name for herself and pushed ambitious climate action right onto the agenda. Pelosi may even need AOC’s support to be elected Speaker of the House, as she can’t afford to lose very many votes.

For a long time, I’ve been saying that the green left needs to stop fixating on great ideas for the end goal and focus more on strategy and tactics. That’s what’s actually happened here. The idea of a Green New Deal has been around for years, getting no where. Only now that it’s being used as part of a smart political strategy is it getting mainstream traction.

Do I think they will get their committee and make their amazing plan and then implement it in 2020 with the US becoming carbon neutral and amazing for working class people by 2030? Um… No. There are incredible obstacles in the way and getting any kind of decent climate or left wing policy through the US system is a colossal struggle – let alone something as radical as this.

But it’s good that this new movement is aiming high with their opening ask, because they will be sure to be haggled down whatever their opening is, even if it’s something that should have bipartisan appeal. By aiming big, they have moved the Overton window and shifted the conversation. A Green New Deal is now something that is within the frame of discussion, which is a significant change.

I’m very excited to see how this develops. If you’re as excited as I am, I suggest following the #GreenNewDeal hashtag on Twitter and following @Ocasio2018, @justicedems and @sunrisemvmt. And I’ll be writing about this more soon! And as always, subscribe to make sure you get the my next post.

Featured image credit: Corey Torpie, Wikimedia Commons, Creative Commons.

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