Green Keynesianism/The Green New Deal

The argument

The starting point is that the costs of a sustainable transition are enormous and that this is not the decisive objection. The potential costs of transitioning to a sustainable economy are indeed very large, but the costs of doing nothing will be greater, which means the comparison is not between spending and saving but between two kinds of expenditure. Once that is established, the question becomes how the spending is organised rather than whether it can be afforded at all. Keynesian models supply an answer already familiar from other contexts. They rely on huge public spending to create jobs, which raises the incomes of the people who hold them, which increases consumption, which in turn stimulates growth. The growth is not incidental to the model: it is what offsets the cost and debt accrued from massive public spending. The expenditure is treated as an investment that generates the returns required to service it, rather than as a sum subtracted from a fixed national total. Green Keynesianism applies this structure to decarbonisation, and proponents argue that the fit is unusually good. The transition requires exactly what Keynesian spending produces, namely large-scale construction of physical infrastructure carried out by many workers over a long period. The spending that builds the sustainable infrastructure is the same spending that creates the jobs and drives the growth, so the climate objective and the economic mechanism are not in tension but are one programme described twice. In these terms Green Keynesianism is a win-win: it promises to create jobs while building the sustainable infrastructure we need. This matters for the wider question because nothing in that programme requires abolishing markets, private firms or private investment. It is a redirection of public spending within a capitalist economy rather than a replacement of one, which is why capitalism can adapt and ending climate change does not mean the end of capitalism.

Context

Green Keynesianism seeks to wed the policies of economist J. M Keynes, which focused on heavy state investment to stimulate growth, with the incredible costs needed to transition to a sustainable economy. Keynesianism is a theory of demand-side economics, positing that economic growth and full employment are sustainable in a system where there is adequate demand. Where there is high unemployment there is low demand, because consumers do not have money to spend. Keynes suggests that government investment can generate demand for goods and services where the market stagnates through investment and infrastructure projects which create jobs. The idea of "greening" Demand-side economics developed around the time of the 2008 financial crash, rising to prominence in 2018.

Premises

Counter-arguments

To be effective, Green Keynesianism would be very expensive. The American Action Forum, a Centre-Right think tank, puts the cost of a US Green New Deal at $93 trillion - quadruple the US' current level of debt and nearly five times its GDP. This level of public borrowing would be unprecedented and may lead to spiralling debt and government insolvency. Critics from the left may argue that the Green New Deal does not solve the problem at the heart of the climate crisis, the fallacy of infinite growth on a finite planet. As soon as the Green New Deal fails to produce growth - which it must eventually do - it will collapse. There are also practical issues with the Green New Deal. Renewable Energy Sources require land, and energy to produce. Britain would need to cover 30% of its landmass to meet its energy requirements with solar panels. They also require the extraction of high quantities of earth minerals to produce.

Rejecting the premises

[Rejecting P1] Both costs are asserted without figures, and the comparison between them is the substance of the disagreement rather than a shared starting point. [Rejecting P2] The Keynesian mechanism is stated as though the growth reliably offsets the borrowing. That is contested among economists and turns on what the money is spent on and over what period it is repaid. [Rejecting P3] "Win-win" does the work an argument should. The counter-argument sets out objections from both directions: the borrowing involved would be without precedent, and critics on the left hold that a programme premised on renewed growth does not address the limit the climate crisis is said to place on growth itself.