This post by Ann Pettifor is reposted from TNI, as part of their Longreads series, State of Power 2019.
It was just a montage of words uttered over a video in the summer of
2018. Soon the words went viral. They helped unseat a Wall St-friendly
Democrat – one primed to be the next Congressional leader. They were
uttered by Alexandria Ocasio-Cortez.
This race is about people vs money. We’ve got people. They’ve got money. A New York for the many is possible. It doesn’t take a hundred years to do this. It takes political courage.
She
was right. It did not take a hundred years. All it took was one summer,
political courage, a big idea – The Green New Deal – and hard graft. A
Green New Deal would subordinate the financial system to the interests
of society and the ecosystem, and help transform the economy away from
its addiction to fossil fuels, she argued.
The big idea, her hard work and courage were all that was needed to harness latent power: the power of the people of the Bronx.
Her
story will underpin the theme that follows. Citizens’ latent and
untapped power in countries with sound taxation systems to hold
financial elites to account – and implement a Green New Deal. It can be
used to transform the balance of power between the people and the
private finance sector. It is power that lies in abeyance, repressed by
the dominant moneyed class. But suppressed also by the narrow, myopic
view that we, and our politicians, have of the potential economic power
of citizens.
Video explainer on the Green New Deal
To
harness citizens’ power, it is important to understand that taxpayers
have agency over global financial markets. Around the world, taxpayers
subsidise, embolden and enrich centres of financial power like those of
Wall St and the City of London.
The bank bailouts after the Great
Financial Crisis demonstrated that citizens and their publicly financed
institutions have the power to protect capitalism’s rentiers from the
discipline of the ‘free market’. Thanks to the backing and firepower
provided by millions of honest, taxpaying citizens, central banks
deployed immense financial power and bailed out the globalised banking
system – stemming a cascade of debt deleveraging that could have
contracted the money supply, credit, and economic activity and deepened
the crisis.
Thanks to taxpayers, central bankers prevented another
Great Depression. It was a great power deployed in the name of
citizens, but without their authority – or even their knowledge.
To
grasp and deploy this financial power in the interests of society and
the ecosystem, citizens need to understand that this was and is
ultimately our power. It is latent power, not used by citizens
to defend the public interest, but by technocrats to defend the
interests of private wealth.
To grasp and deploy this financial power in the interests of society and the ecosystem, citizens need to understand that this was and is ultimately our power. It is latent power, not used by citizens to defend the public interest, but by technocrats to defend the interests of private wealth.
Money and debt
The reason for our political impotence can be found in the fog and
mystery surrounding the creation of money and the operation of the
monetary system. Thanks to the economics profession’s neglect of money, debt and banking, there is a great deal of misunderstanding and confusion about money and the financial system.
Arguments
rage about whether money is just ‘created out of thin air’ – or whether
gold or bitcoin are real money. Whether bankers and/or governments can
just ‘print’ money ad infinitum. Or whether there are limits to the
printing of money. The ignorance and confusion is probably no accident.
It helps protect the private finance sector from scrutiny: ‘all the
better to fleece you with’ to quote the wolf in the fairy tale.
Sensible people (including the Bank of England)
agree that money, as Joseph Schumpeter explained, is nothing more than a
promise to pay, as in, ‘I promise to pay the bearer’. As such, money is
a social construct, based on trust or promises to pay and upheld by the
law.
When someone applies for a loan from a bank, the money is
not in the bank. Instead, licensed commercial banks ‘create’ money every
time a borrower promises to pay. They make the loan by entering numbers
into a computer, and (digitally) depositing funds into a borrower’s
account. The borrower promises to pay back the money created by the
banker. As guarantee the borrower offers collateral, signs a contract,
and agrees to pay interest on the loan.
For that trust to be
upheld, the institutions that create money (licensed commercial banks)
are supported and regulated by a publicly backed central bank issuing
the currency. Regulation ensures that trust between banker and borrower
is enforced.
Private bankers can only create new money and operate
effectively as part of the monetary system, which includes a central
bank. While commercial bankers can digitally create new money at the
bidding of a borrower, they cannot print currency or mint coins. Only
the central bank can do that. The central bank’s great power is to issue
the currency – sterling or the dollar or the rupee –in which new money is created. And to help determine the value of the currency.
That power can be exercised by central banks only because of the collateral backing the currency they create. That collateral is made up of citizens’ tax revenues. The more taxpayers that back the currency, the sounder the tax-collection system, the greater the value of the currency.
This process is illuminated if we compare the collateral that backs up the US Federal Reserve with that of Malawi. The central bank of Malawi, like the Federal Reserve, issues a currency. But Malawi has far fewer taxpayers than the US.
Malawi’s currency has less value globally because it lacks the substantial taxpayer collateral that industrialised countries can mobilise behind their currencies. Photo credit: Ahandrich [CC0, Wikimedia Commons]
Thanks largely to colonialism and to IMF policies, Malawi also lacks important public
institutions: an independent central bank; a sound tax-collection
system; a system for enforcing contracts or promises to pay (criminal
justice); and a well-regulated accounting system for assessing assets
and liabilities. Consequently, Malawi’s currency – the kwacha – has
little value compared to the dollar.
Even worse, due to the absence or weakness of public institutions, Malawi is reliant on other people’s money
– obtained via other monetary systems. Access to foreign monetary
systems mostly takes the form of loans in dollars, sterling or yen –
that are heavily conditional. While some of the money may benefit the
Malawian people, the cost of repayment to foreign financial institutions
invariably takes its toll on the nation’s financial resources, its
human and ecological assets.
It is the lack of
monetary autonomy provided by sound public institutions, including a
tax-collection system, that renders citizens in countries like Malawi
relatively powerless, and vulnerable to predatory foreign lenders.
It
is the lack of monetary autonomy provided by sound public institutions,
including a tax-collection system, that renders citizens in countries
like Malawi relatively powerless, and vulnerable to predatory foreign
lenders. It also explains how and why poor countries remain dependent
and subordinate to rich countries.
Regrettably the IMF and World
Bank actively discourage low-income countries from investing in the
vital public institutions essential to a sound monetary system – one
that would restore their financial and economic autonomy.
Citizens
in countries with sound monetary institutions and a tax-collection
system enjoy considerable potential power and agency over the globalised
financial system.
Taxpayers – not banks – underpin the financial system
Understanding how taxes prop up the value of a nation’s currency for
private financiers is a first step in understanding citizens’ potential
power. The world’s mobile financial speculators and rentiers prefer to
deal in currencies underpinned by stable public institutions,
financed and backed by millions of taxpayers. While of course there is
trading in many emerging market currencies, speculators prefer to hold
sterling, dollars, euros and yen. These currencies are backed by strong
economies. But their value is ultimately derived from citizens –
willing, honest, law-abiding taxpayers – who provide the revenues that
underpin the currency.
Taxpayers do not just pay direct and
indirect taxes every day, month or year. Because new taxpayers are born
every day, citizens will pay taxes for decades into the future. If our
publicly financed state institutions remain stable, tomorrow’s new-borns
will go on paying taxes into the future.
To understand the
duration of taxpayer power, it helps to look back at the history of the
British financial system. Back in 1748 the British government issued
perpetual bonds, which were debts with no maturity date for repayment,
but which paid interest to lenders at 3 per cent each year. The
government had no difficulty selling these bonds (known as ‘consols’) to the public. Public confidence – that the British government would fulfil its obligations to pay interest on the loans in perpetuity
– was high. That confidence was justified, as interest was paid on the
bonds each year until finally they were redeemed in 2015.
No other asset has that kind of long-term, safe backing.
Ambitious and manipulative Becky Sharp in Thackeray’s classic nineteenth-century UK satirical novel Vanity Fair wished that she could
‘exchange
my position in society and all my relations for a snug sum in the Three
Per Cent Consols…for so it was [wrote Thackeray] that Becky felt the
Vanity of human affairs, and it was in those securities that she would
have liked to cast anchor.’
Becky’s envy derived from the security granted to those with funds enough to invest in the British government’s debt – known then, and for several centuries, as Three Per Cent Consols (shorthand for Consolidated debt). On an inheritance of £10,000 wealthy young women of the nineteenth century could live on the tidy sum of £300 a year; £25,000 would generate a comfortable £750 a year.
Illustration in William Makepeace Thackeray’s Vanity Fair from 1848 [Wikimedia Commons]
Public
debt is an asset that earns income – just as a buy-to-let property
earns rent for its owner. But while a buy-to-let investor has to sweat
to maintain, advertise and rent out the asset, debt earns income effortlessly for the wealthy and for financiers. It does so by paying interest added at a certain percentage per year.
Unlike
an investor’s property, debt is light as air, intangible, invisible.
The only evidence of its existence is found in database entries, numbers
on a balance sheet or in words on a ‘bearer bond’.
The
differences do not end there. A building or property is subject to the
laws of physics. It can age, crumble, or be razed to the ground.
Football clubs are great assets – because fans are committed long-term,
and willingly and regularly pay ‘rents’ to the owner of the asset, for
the privilege of watching their team, or by buying a club T-shirt. But
clubs can lose value by falling down league tables. Works of art – say a
Rembrandt painting – are assets with greater longevity, but are also
likely to deteriorate, and in any case, are subject to the whims of
fashion.
Not so the government bonds of countries like Britain.
While sovereign debts can be defaulted on, safe government debts do not
rot with age, as Professor Frederick Soddy (1877–1956) once explained.
That is because debts are not subject to the laws of thermodynamics, but
to the laws of mathematics. As such, debt effortlessly earns income for
investors, at mathematical rates. And if the debt is the safe public
debt of nations like Britain, the US or Japan, it can do so for a long,
fixed period of time.
The British government has since 1694
honoured its debt obligations without fail. In a world of globalised
capital flows in which capital sloshes from one part of the world to
another, the price of UK government bonds may rise and fall, but their
safety and longevity is never in question. That is because the system is
managed by public authority, not left to ‘the invisible hand’ – but mainly because most British citizens regularly and faithfully pay taxes.
It’s the collateral stupid
And to understand why safety is such a big issue for the private
finance sector, remember this: the global financial system froze in
August 2007 and then collapsed. Not because financiers ran out of money.
Not because of a run on the banks. But because everyone in the sector –
everyone – lost confidence in the value of assets used as collateral,
particularly the value of sub-prime property mortgages on bank balance
sheets.
Why did that matter? Because the value of sub-prime assets (mortgages) had been used to leverage inordinate amounts of additional
finance through borrowing. If the asset or collateral against which the
borrowing had been leveraged was worthless – then the leveraged debt
was unlikely to be repaid from the sale of the promised sub-prime
collateral.
The collapse of confidence in asset values (or collateral) led to the collapse of the globalised financial system.
And
that is where we, citizen taxpayers, came in. Citizen collateral, in
the form of tax revenues, did not collapse in value in the crisis.
Instead public collateral maintained the authority of central banks, and
gave them the power to issue new central bank money (liquidity) in
exchange for assets from private bankers. The process was called
Quantitative Easing (QE).
The backing of taxpayers enabled central
bankers to bail out Wall St and the City of London. The safety and
soundness of our taxes upheld the value of currencies, despite the
crisis. This was most evident in the US. Even as the global economy
tanked, and financial turmoil soared, the value of the dollar rose.
Central banks used the collateral power provided by citizens to leverage vast amounts of central bank money – about $16 trillion – to bail out the global banking system.
Public debt as a gift to financiers and rentiers
To fully understand the power wielded by central bankers, it is
important to understand that each time the government applies for a
loan, or issues a bond, it creates a debt – or liability – for the government. At the same time, by borrowing, the government creates a valuable financial asset for the private sector.
Governments
regularly (once or twice a month) invite pension funds, insurance
companies and other private financiers to finance their bonds or loans,
in exchange for promises to pay interest annually, and to repay the
principal in full at the end of the term of the loan (bond).
This
process is in effect no different from a woman seeking a mortgage. She
invites a banker to accept her ‘bond’ or promise to repay in exchange
for new finance, backs this up with collateral, and commits to pay
interest annually and the principal in full at the end of the loan’s
term.
Once the commercial banker has issued the finance and
accepted the bond, the woman has a liability – to repay the bond. The
banker on the other hand, has an ‘asset’ – the woman’s bond or
mortgage. It is valuable to the private bank because unlike gold the
loan generates income for every year that the woman pays interest. It is
probably backed by the collateral of her existing apartment. Plus, the
principal on her loan will probably be worth more in real terms when it
is finally repaid.
Governments raise finance from both the private
finance sector, or from a central bank, in just the same way as an
ordinary borrower raises money from a commercial bank. The government
promises to pay interest, and offers collateral. The difference between a
government’s bond and the woman’s mortgage is that a bond issued by a
government with a good record of repayment is a more valuable asset. As
such it serves as vital collateral (or ‘plumbing’) for the private
financial system.
The woman’s mortgage is also an asset, but will
be less valuable because she may not have established a good credit
record, and may be backed by just one income (her own). The government
by contrast, is backed by a revenue stream from millions of taxpayers.
That
explains why government bonds (or government debt) are extremely
valuable assets for the private finance sector. They are safe and
reliable. They generate income (interest payments) on a regular basis.
Debt as a security or asset can be used to borrow (or ‘leverage’) additional finance.
Just
as the ownership of a property enables a homeowner to re-mortgage and
raise additional sums secured against that property, so safe, valuable
financial assets act as collateral for the raising of
additional finance. Newly borrowed money, guaranteed against either the
original debt/collateral, or against the stream of interest payments
derived from the debt, can then be invested, or lent on at a higher rate
of return.
At the time of its bankruptcy Lehman
Brothers was said to have a leverage ratio of 44. That’s like having an
asset that earns £10,000 a year, and then taking out a £440,000 loan
secured against it, to go on a gambling spree
To
understand leverage, think of a homeowner who borrows £80,000 against a
property worth £100,000 with just £20,000 in equity or capital. She has a
leverage ratio of four. In other words, she has borrowed four times the
equity/capital in her asset.
At the time of its bankruptcy Lehman
Brothers was said to have a leverage ratio of 44. That’s like having an
asset that earns £10,000 a year, and then taking out a £440,000 loan
secured against it, to go on a gambling spree. According to the Bank for
International Settlements, Wall St’s investment banks started with a
leverage ratio of 22 in 1990, which rose to ‘the dizzy height of 48 at the peak’.
Leverage
on that scale is most easily achieved against collateral that is as
safe as public debt. The scale of wealth generated would be unimaginable
to a present-day Croesus.
Shadow banking and the collateral factory
There
is another aspect to safe, public collateral not widely understood.
That is how it is used in the shadow banking system – the private
financial system that operates in the financial ‘stratosphere’, beyond
the reach of states and regulatory democracy.
Non-regulated
bank-like entities that have scooped up the world’s savings (e.g. asset
management funds, pension funds, insurance companies) hold vast
quantities of cash. BlackRock for example, has $6 trillion in assets.
These
sums cannot safely be deposited in a traditional bank, where only a
limited amount is guaranteed by governments. So to protect the value of
the cash, the asset management fund will, for example, make a temporary
loan of cash to another in need of it, in exchange for, or guaranteed by, collateral. This exchange is known as a repo – or repurchase arrangement.
As
Daniela Gabor has argued, the US and European repo markets, the largest
in the world, are built on government debt. In other words, ‘the state
has become a collateral factory for shadow banking’.
The risks of
this unregulated market for the global financial system, are scary. One
reason is that while someone operating in the real world, say a
homeowner, may only once be able to re-mortgage her asset or property,
unregulated shadow bankers can use a single unit of collateral to
re-leverage a number of times. Manmohan Singh of the IMF has estimated
that by late 2007 collateral ‘churned,’ or was used roughly three times
to leverage additional borrowing in speculative markets.
That’s
like using the value of a single asset – one’s property – to guarantee
additional borrowing from three different banks. In the real world of
financial regulation, homeowners are not allowed to do this.
If we are to understand the history of how the rich have become immensely, grotesquely richer on unearned income, while earned
income has fallen in real terms, leverage ratios against public assets
in the both the real and shadow banking sectors explain a great deal.
In short, the ability to regularly drain a government of interest payments, and to use the asset of public debt to leverage additional finance, is why asset management firms, private equity corporations, insurance companies, pension funds and financial speculators have massively increased their capital gains. It is also why secure government debt is in such demand. Private financiers can’t get enough safe government bonds – or public debt.
The shortage of public debt and the rise of austerity economics
The Great Financial Crisis (GFC) triggered a flight away from
private debt and to the safety of public debt – especially the safest –
British, European and US debt.
This huge financial shock of the
GFC led to a massive contraction of the global money supply, and
threatened deflation – a generalised fall in prices – which would in
turn lead to bankruptcies, unemployment and wage cuts.
To
counteract that threat, central banks – on our behalf – expanded their
balance sheets and, in exchange for collateral (much of which was dodgy
or ‘toxic’), provided extraordinary levels of new credit or liquidity to
the private financial system. In the process, civil servant technocrats
in central banks protected free-market players from bankruptcy and the
discipline of the free market – dealing a considerable blow to the
ideology.
The deflation shock cried out for a massive fiscal
response. There was an initial, but limited fiscal expansion, which led
to what Credit Suisse called a ‘flood of safe collateral that caused
public shadow money (Treasuries, mortgage-backed securities, US
government agencies) to soar, fully offsetting the contraction in private shadow money (corporate bonds, asset-backed securities, and non-agency mortgages)’.
As
a result of the panicky demand for public debt, the price of government
bonds rose, and because of the way the bond market operates, the yield
(‘interest rate’) on bonds fell dramatically. Demand for public debt,
greatly eased government borrowing (interest) costs.
Pretty soon though, politicians and officials in government
treasuries, cheered on by orthodox economists, right-wing think tanks
and the media, soon fell back on neoliberal or ordoliberal theory, and
imposed fiscal contraction – or austerity. Public investment –
government spending – was either slashed or prevented from rising.
These
double standards –the expansion of finance for the private finance
sector, and contraction for the public sector – are intrinsic to
orthodox economics, but seldom challenged by the economics profession.
These
double standards –the expansion of finance for the private finance
sector, and contraction for the public sector – are intrinsic to
orthodox economics, but seldom challenged by the economics profession.
As a result the production of government collateral (public debt) fell.
Austerity and the simultaneous wage freezes and cuts at first worsened the crisis. Since 2010, austerity has both prolonged the crisis, and held back recovery in the US and Europe. The effect of this backward economic policy was to increase insecure, low-paid, low-skilled and unproductive employment, while lowering wages across the board.
Austerity isn’t working poster. Credit: Flickr/Wandererwandering/CC BY 2.0
In
the US, while the initial Obama-led stimulus stabilised the economy, it
was insufficient to restore long-term stability. Instead there were
severe state and local government spending cuts, households were left to
retrench after the sub-prime trauma, and wages fell in real terms.
Between 2009 and 2014, inflation-adjusted wages in the US were flat or
falling across a range of available wage measures. More recently, real
wages grew, but growth rates for recovery as a whole still trail far
behind the 2.0–2.2 per cent annual rates from 1947 to1979.
As a
result of austerity, the issuance of safe government debt contracted.
Why should this matter? Because the low supply of government debt tends
to boost (in fact, crowds in) the creation of unsafe private debt, or assets. These unsafe private
assets are used instead by the banking and shadow banking system to
expand borrowing and credit. Central banks rightly worry that such
credit expansion on unregulated, dodgy assets will probably lead to
another financial crisis.
Viewing public debt through the wrong end of a telescope
Understanding the value of public debt changes our view of it. Like a
loan undertaken for a project that will create employment and generate
income, public debt, if invested in productive activity, is a good
thing. It generates income. Not just salaries and wages for those
employed; not just profits for the private sector when salaries are
spent on their goods and services; but also tax revenues. Income,
corporation and consumer tax revenues, then used by government to repay
the debt.
Public borrowing and spending are especially important
after a crisis, when the private sector is weak, and lacks the
confidence to borrow, invest and spend. Yet most Chicago-school
economists view public debt as a threat to the economy. Governments that
cannot ‘balance the books’ are regarded as incompetent and hounded by
the media.
Hostility to public debt varies, but fear is embedded
in the German psyche, because the word for debt – ‘Schuld’ – is the same
as the word for ‘guilt’. Saint Matthew’s ‘forgive us our debts as we
forgive our debtors’ was interpreted by Saint Luke as ‘forgive us our
sins as we forgive those that sin against us’.
Until
we fully grasp the importance of public debt to the finance sector,
immensely wealthy, globalised corporations will continue to
parasitically extract rent from public assets; inequality worldwide will
continue to widen; and we, the many, will become relatively poorer and
powerless.
Guilt, sin and the public debt are deeply
intertwined, but only in the minds of economists, journalists and the
public. Debt becomes something quite different in the minds of
financiers and rentiers. To Wall St. and the City of London, the safe
public debt of Britain, Europe and the US is a truly awesome and even
phenomenal gift.
They cannot get enough of it.
Until we
fully grasp the importance of public debt to the finance sector,
immensely wealthy, globalised corporations will continue to
parasitically extract rent from public assets; inequality worldwide will
continue to widen; and we, the many, will become relatively poorer and
powerless.
When enough of us do come to understand this latent power, we will discover that another world really is possible.
Social democrats and the financial system
At the heart of neoliberal ideology – ideas shared by those that economic historian Quinn Slobodian defines as ‘globalists’
– is the belief that the state must shrink as a share of the economy.
Second, that private capital markets must remain ‘free’ to roam globally
and without friction. In other words, globalised capital markets must
have the ‘freedom’ to be detached from the world’s states, and from
democratic regulation.
As explained above, the deep irony of the
ideological obsession with self-regulating capital markets, austerity
and the shrinking of the state is that private financial markets cannot
function without the backing of governments, their taxpayers, and the safety of public debt.
The
‘timid mouse’ that is the private finance sector cannot operate without
the protection of the ‘roaring lion’ that is the public sector, to quote Mariana Mazzucato.
Given
that safe public assets are so fundamental to the stability of the
private financial system, why would right-wing politicians and officials
contract their supply? The answer can only be: ignorance, fed by
ideology opposed to the collective role of the state.
But what of
the left? The Great Financial Crisis was met with shock and disbelief on
the left. While many progressive economists had focused on the
domestic, tangible economy – the state, markets, labour and trade – they
largely ignored the intangible economy, the globalised finance sector.
Social democratic parties turned a blind eye to a global, deregulated financial system that threatened systemic failure.
In
the meantime, many had embraced ‘globalisation’ – the ability to travel
widely and draw money in any part of the globe; the ease with which
globalisation facilitated the import of exotic fruits and vegetables;
cheap smartphones; and the gifts bestowed by technology on the
globalised system. These were all met with enthusiasm by social
democratic parties that turned a blind eye to a global, deregulated
financial system that both facilitated these activities, but also
threatened systemic failure.
As a result, the left had no coherent
response to the collapse of globalised capital markets. Throughout the
period of austerity, the left – both in the US and Europe – found itself
on the back foot, defensive of social democratic governments that had
built up debts as a result of the Great Financial Crisis. Social
democratic governments endorsed both QE for bankers and austerity for
the majority. This approach guaranteed their downfall, and even
extinction. (The French Socialist Party no longer exists as a political
force or organisation, and was obliged to sell off its own headquarters.)
These
failures weakened the ability of the left to argue that at a time of
catastrophic private economic failure, public investment in jobs was
essential to restore social, political and economic stability. Instead
taxpayer-backed subsidies and assets were deployed by central banks via
QE to protect private profits and capital gains.
No wonder the public revolted.
What is to be done?
A first in the many steps that must be taken to transform the
economy is understanding. People cannot act to transform what they do
not understand.
Understanding how taxpayers guarantee and endorse
the activities of the globalised, deregulated private financial sector,
must be more widespread. Only then can we begin to demand ‘terms and
conditions’ for public subsidies and guarantees – and to use that power
to regulate and subordinate the globalised financial sector to the
interests of society as a whole. To demand that public financial assets
be used for public, not private benefit.
This understanding is fundamental if we are to respond to the greatest security threat facing humanity: climate breakdown.
Armed with understanding, we will then need a plan. The Green New Deal is such a plan.
The Green New Deal
The genius of Alexandria Ocasio Cortez’s Green New Deal is
that it provides a broad, comprehensive plan to transform the US
economy and tackle climate breakdown. If the efforts of US Democrats led
to an internationally coordinated campaign to implement it, the plan
has the potential to transform many economies around the world, and to
ensure a liveable planet in the future.
But – and it’s a big but –
a comprehensive plan for economic transformation will require financing
on a grand scale, comparable to that of a nation embarking on war. We
know that can be done. Governments have always found money to finance
wars.
Back in 1933, President Franklin D. Roosevelt’s plan – the New Deal – found money to fight a war against unemployment and poverty. His administration did so by overturning neoliberal economics, and implementing Keynesian monetary theory and policies. By ensuring that the monetary and financial system was managed by public, not private authority, his government raised the financing needed to lead the US out of the economic catastrophe of the Great Depression. Roosevelt’s New Deal not only created jobs and generated national income. It also tackled the ecological catastrophe that was The Dust Bowl.
WPA packhorse librarians, ready to deliver books and other materials to remote rural areas in Kentucky, 1938. Photo courtesy of the National Archives.
Implementation of the New Deal was achieved first, because the
Roosevelt’s administration had a clear understanding of the nature of
money, and of the publicly backed monetary system. But its success in
tackling Wall St interests was down to political mobilisation,
organisation and action. Roosevelt had the political courage and the
political ballast to confront, and subordinate the interests of Wall St
to those of society and the environment.
Any international
movement for a Green New Deal will have to summon up the same political
courage in countries around the world. Campaigners will have to
mobilise, organise and act to renounce the economic ideology that allows
the 1% to grow fantastically rich on taxpayer-backed subsidies,
bailouts and guarantees – while denying financial resources for public
investment, economic and ecological transformation.
Campaigners will have to discover, and then deploy, their latent power to subordinate global finance to the interests of society and the ecosystem.
ABOUT THE AUTHOR
Ann Pettifor is a political economist, author and public speaker on the global financial & economic system, on money, monetary policy, and on the UK economy. Her latest book, The Production of Money (Verso 2017) explains the nature of money and the monetary system. She is one of the few economists to have predicted the 2008 economic crisis. During the late 1990s, she led a campaign, Jubilee 2000, which as part of an international movement resulted ultimately in the cancellation of approximately $100 billion of debt owed by the poorest countries. She is currently director of PRIME (Policy Research in Macroeconomics) a network of economists that promote Keynes’s monetary theory and policies, and that focus on the role of the finance sector in the economy.
The post The Latent, Unused Power of Citizens and the Production of Public Collateral appeared first on P2P Foundation.