Category Archives: environment

Brexit: moving away from globalisation towards self-reliance

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Colin Hines has drawn attention to a 2017 report written by Victor Anderson and Rupert Read entitledBrexit and Trade Moving from Globalisation to Self-reliance’, published and launched by Green MEP Molly Scott Cato.

Although it regrets our leaving the EU and wishes we wouldn’t, the report is written as an alternative approach assuming we are outside the EU. Its Executive Summary states: “This report puts on to the political agenda an option for Brexit which goes with the grain of widespread worries about globalisation, and argues for greater local, regional, and national self-sufficiency, reducing international trade and boosting import substitution”.

Hines continues: “As I am aware it is the first time a report from a politician isn’t clamouring to retain membership of the open border Single Market”

It details the need for an environmentally sustainable future involving constraints to trade and the rebuilding of local economies. Indeed the report actually calls for ‘Progressive Protectionism’ rather than a race to the bottom relationship with the EU. Some of the points made on page 14:

  • Reducing dependence on international trade implies reducing both imports and exports.
  • It is therefore very different from the traditional protectionism of seeking to limit imports whilst expanding exports.
  • It should therefore meet with less hostility from other countries, as it has a very different aim from simply improving the UK’s balance of payments.
  • It could be described as ‘progressive protectionism’, or ‘green protectionism’.

For detailed proposals on how this could and should be done, see http://progressiveprotectionism.com/wordpress/

He adds, “Also ground-breaking in Green Party literature of late is its discussion of the arguments for and against managed migration. Its sensitive handling of this contentious issue for many in the Greens does mark an important step forward and hopefully will help to start an internal debate about whether or not the party should reconsider its open borders approach”.

Hines feels that we won’t leave the EU – and central to that happening will be a realisation across Europe that to see off the extreme right they must manage internal migration and protect domestic jobs. At that point the reasons for supporting Brexit for most are no longer valid.

He ends: “This timely report makes a crucial input to the debate, one that will rage for the next two years”.

 

 

 

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Climate change should be placed “front and centre” of the central bank’s mandate to boost green investment

A Green Bank of England, Central Banking for a Low-Carbon Economy

Delphine Strauss (Financial Times) summarises advice in this report (link to pdf above) from the campaign group Positive Money.

It recommends that climate change be placed “front and centre” of the Bank of England’s mandate so that the central bank can boost green investment.

The report has won backing from Lord Deben, who chairs the independent Committee on Climate Change which was set up by the government to monitor the UK’s progress in meeting its statutory targets for cutting emissions:

“They are right to seek some radical measures, because the issues are radical. I think that monetary policy does need to reflect these risks”, he said, adding that central banks should do more to ensure the availability of green finance and divest from fossil fuel companies that showed no inclination to change their business.

The BoE has been reviewing UK insurers and banks’ exposure to climate-related risks and supports efforts to develop international standards for voluntary disclosure.

Mark Carney, the BoE’s governor, has repeatedly warned of the physical damage climate change could wreak on the economy and the risks to financial stability that might result from a sudden revaluation of carbon-intensive assets.

Positive Money argued that this concern for financial stability will look “incoherent” unless the BoE does more to boost investment in the transition to a low-carbon economy. Its report urged the government to rewrite the mandate of the Monetary Policy Committee to include green objectives explicitly and called on the BoE to look at ways to build climate-related risks into its macroeconomic models.

The Positive Money report urges the BoE to set an example:

  • by disclosing the carbon risks of assets on its own balance sheet
  • by ending the practice of buying bonds issued by fossil fuel companies
  • and by financing green projects via quantitative easing during any recession.

It argued that the BoE has unintentionally promoted high-carbon sectors because its criteria for asset purchases favoured the bonds of large fossil fuel companies.

 

 

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Nurture and rebuild local economies and international relations: Hines, Corbyn, McDonnell

Opposition to open borders and failed neo-liberal policies that transferred wealth to the private sector and cut funding public services, fuelled the Brexit result, Donald Trump’s election and the continued rise of Marine Le Pen in the French polls. Colin Hines, in a letter to the Financial Times, said that these trends all point to the conclusion that the future will be one of protectionism, asking “The question is, what kind?” His answer:

“President Trump is a 1930s-style one-sided protectionist. He wants to curb imports that cause domestic unemployment, but at the same time plans to use “all possible leverage” to open up foreign markets to US exports”.

To avoid a re-run of the 1930s, when the US and others took a similar approach, Hines advocates a very different kind of “progressive protectionism” – one that can benefit all countries by nurturing and rebuilding local economies, reducing the level of international movement of goods, money and services. Policies geared to achieving more job security, a decrease in inequality, and protection of the environment globally would be championed.

Shadow Chancellor: a focus on developing strong local economies 

Sienna Rodgers reports that the shadow chancellor is in Preston today, a city whose ‘co-operative council’ has taken an innovative approach to funding in the face of swingeing budget cuts (see Localise West Midlands). In his speech McDonnell will champion “creative solutions” for local authorities suffering under austerity, from bringing services back in house to setting up energy companies, with a focus on developing strong local economies.

Such economic action, many believe, must be accompanied by a profound change in our foreign/defence policy 

A serious commitment is required to averting armed conflict, wherever tensions rise, by diplomacy, mediation and negotiation, redirecting the wealth currently used to subsidise the arms industry and to prepare for aggressive military action. This has also long been advocated by John McDonnell   (see Ministry for Peace, archived).

These are the policies of Jeremy Corbyn, who has made peace and disarmament his major international priorities. He has already appointed MP Fabian Hamilton as shadow minister for ‘peace and disarmament’, with a brief to ‘reduce violence, war and conflict’, participating in multilateral disarmament meetings at the UN in New York.

Mr Hamilton, who will prioritise reducing supplies of guns and other weapons worldwide, said that Labour is strongly committed to helping to reduce the violence, war and conflict in the world which destroys so many innocent lives every day and – many would add – cripples the economies of many regions, forcing their citizens to emigrate to find peace and to make a living.

 

 

 

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Green quantitative easing – good sense

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Richard Murphy and Colin Hines published the Green QE report, which is summarised below.

In March 2009 the Bank of England began a programme of quantitative easing in the UK – in effect, the Bank of England granted the Treasury an overdraft but to keep the European Union happy had to do so by buying Government gilts issued by the Treasury from UK commercial banks, pension funds and other financial institutions.

There were three reasons for doing this:

  1. To keep interest rates low;
  2. To provide banks with the money they needed to lend to business and others to keep the economy going.
  3. To make sure there was enough money in the economy to prevent deflation happening

No one was sure whether quantitative easing would work, and as we note, no one is sure for certain whether it has worked.

We do however suggest in this report that several things did happen:

  • The banks profited enormously from the programme, which is why they bounced back into profit so soon after the crash– and bankers’ bonuses never went away;
  • The entire government deficit in 2009/10 of £155 billion was basically paid for by the quantitative easing programme. If you wanted to know how the government met its costs, now you do; There was a shortage of gilts available for investment purposes as a result of the Bank of England buying so many in the market. Large quantities of funds were invested instead in other financial assets including the stock market and commodities such as food stuffs and metals.
  • The USA also undertook quantitative easing at the same time as the UK, which meant that despite near recessionary conditions commodity prices for coffee and basic metals such as copper have risen enormously. This has impacted on inflation, which has stayed above the Bank of England target rate;
  • Deflation has been avoided, although the relative role of quantitative easing in this versus the previous government’s reflation policies is unclear;
  • Interest rates have remained low.

However, one thing has not happened, and that is that the funds made available have not resulted in new bank lending. In fact bank lending has declined almost steadily since the quantitative easing programme began.

there is an urgent need for action to stimulate the economy by investing in the new jobs, infrastructure, products and services we need in this country and there is no sign that this will happen without government intervention.

For that reason we propose a new round of quantitative easing –or Green QE2 as we call it.

Green QE2 would do three things. First it would deliver the Green New Deal – the innovative programme for investment in the new economy the UK needs as outlined by the Green New Deal group in its reports for the New Economics Foundation. This would require three actions:

  1. The government would need to invest directly in new infrastructure for the UK.
  2. The government needs to invest in the UK economy, in conjunction with the private sector, working through a new National Investment Bank;
  3. The government must liberate local authorities to partner with the private sector to green their local economies for the benefit of their own communities, and it can do this by providing a capital fund for them to use in the form of equity that bears the residual risks in such projects.

A second round of quantitative easing should involve direct expenditure on new infrastructure projects in the UK.

For example there is a desperate need for new energy efficient social housing in this country, for adequate investment in railways, not to mention a reinstatement of the schools rebuilding programme. Undertaking these activities would give the economy and immediate shot in the arm as well as providing infrastructure of lasting use which would more than repay any debt incurred in the course of its creation.

This is the result of the ‘Keynesian multiplier’ effect. This is the phenomenon that occurs when government borrowing to fund investment takes place during a time of unemployment.

That borrowing directly funds employment.

That new employment does four things.

First it reduces the obligation to pay benefits.

Second, it means that the person in that new employment pays tax.

Third, it means their employer pays tax on profits they make.

And finally the person in employment can then save, which means that they help fund the government borrowing which has created their own employment.

As Martin Wolf, the eminent Financial Times columnist has said in this FT video: “Borrowing is no sin, provided we use the funds to ensure that we bequeath a better infrastructure to the future”.

This is what we believe the programme we recommend would do and this is precisely why it is appropriate to do it now when the cost of government borrowing is so low, a point Wolf and Skidelsky also make.

Borrowing now to spend into the economy is the basis for the first stage of Green QE2 – and of the Green New Deal.

Read the whole report here: http://openaccess.city.ac.uk/16569/1/GreenQuEasing.pdf

 

 

 

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Professors Minford and Scott Cato: whose assessment will prove to be more accurate?

The BBC and other media outlets report the views of Patrick Minford, Professor of Applied Economics at Cardiff Business School, Cardiff University.

In his report From Project Fear to Project Prosperity, to be published in the autumn,  he predicts that a ‘hard’ Brexit will offer a ‘£135bn annual boost’ to economy around a 7% increase in GDP.

Minford, lead author of the introductory nine page report from Economists for Free Trade says that eliminating tariffs, either within free trade deals or unilaterally, would deliver trade gains worth £80bn a year. He has expressed the view that the British economy is flexible enough to cope with Brexit. The four elements in his calculation are listed in the Guardian as:

  • free trade, either via free trade agreements with the EU and the rest of the world, or if those are sticky via unilateral moves to remove our trade barriers
  • UK-run pragmatic regulation to replace the EU’s intrusive single-market regulation of our whole economy
  • our net EU contribution and
  • the cost to the taxpayer of the subsidy paid to unskilled EU immigrants, which we estimate at £3,500 per adult.

MEP Molly Scott Cato (left, speaking in the European Parliament), who read Philosophy, Politics and Economics at Oxford, giving up her professorial chair at the University of Roehampton after election, says that Patrick Minford’s  modelling is based on the UK unilaterally removing all restrictions and tariffs and trying its luck in a global market. According to LSE economists who have analysed his work, this would mean a massive fall in wages and the “elimination” of UK manufacturing.

Minford views the EU as a costly protectionist club, but in reality, Scott Cato continues, the single market eases internal trade and reduces costs: “In the real world, proximity, common standards, and rapid movement of components matter, hence the importance of the customs union. UK manufacturing is largely foreign-owned and revolves around assembly of components manufactured elsewhere in the EU. Ironically, this makes it even more important that we stay in the customs union, to ease the passage of components across borders”. She ends:

“Minford’s work is indicative of the whole Brexit project: based on the illusion that the UK has some manifest destiny that allows us to stand alone in a globalised world. It is high time this phony economics was sent into retirement”.

 

 

 

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Paul Hohnen: a better physically connected Europe could deliver multiple benefits

In the Financial Times today, Paul Hohnen* writes about the ‘hard realities of climate change’ showing across Europe, with the historic drought in Italy and Spain being only the latest example. He continues:

What seems increasingly clear is that Europe, with or without Britain, needs to invest hugely in climate abatement and adaptation infrastructure.

 A better physically connected Europe, in the form of enhanced inter-country electricity grids (for sharing surplus renewable power) and upgraded water catchment and distribution systems, could deliver multiple benefits.

In addition to reducing the risks to food, water and energy supplies, now and in the future, a grand European project to become collectively more resilient to energy and water stress could be just what is needed to give Europe the new and positive shared narrative so urgently needed. Not to mention the jobs, economic growth and technological innovation involved.

The EU’s enormous political and economic achievements over the past six decades are at risk on multiple fronts, including the environmental.

An ever closer power and water infrastructure union would help demonstrate why the European project is as relevant as ever.

*Mr Hohnen was trained as an international lawyer, closely involved in the 1992, 2002 and 2012 UN sustainability summits, as well as in a wide range of climate change and other global treaties. He worked from 1975 to 1989 as an Australian diplomat at the OECD in Paris (global economic, development and environmental issues), at EU institutions in Brussels, and in Fiji and Sri Lanka. He was with Greenpeace International (1989-1997, as Head of Climate Policy, later Director, Political Division), and Strategic Director of the Global Reporting Initiative (GRI). An independent consultant since 2004, his clients have included government ministries, intergovernmental agencies, business and non-profit organisations.

Read his views on the broader canvas in Reasons to be both hugely disappointed and very excited

 

 

 

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Universal basic income (UBI)

Amazon has revealed its latest plan to automate American workers out of existence with its futuristic machine controlled grocery store.

According to a study by Ball State University’s Center for Business and Economic Research, the use of robots and other manufacturing efficiencies was responsible for 88% of the 7 million factory jobs lost in the United States since peak employment in 1979.

The Economic Security Project (ESP) – a coalition of over 100 technologists, investors, and activists – has announced that it is committing $10 million over the next two years to explore how a “universal basic income” (UBI) could ensure economic opportunities for all.

Elon Musk, the iconic Silicon Valley futurist, predicts “There is a pretty good chance we end up with a universal basic income or something like that, due to automation.”

With political uncertainty across the Western world highlighting rising levels of economic inequality, many others across the political spectrum are considering adopting UBI in the future, giving everyone a guaranteed minimum payment. In the 21st century to date there have been pilot projects in America, Canada, Namibia, Uganda, Kenya, Brazil, Holland, Finland, Italy and Scotland, described briefly in Wikipedia.

UBI – one of three main economic reforms?

James Robertson shared news (scroll down to 4.The Practical Reforms) of a meeting of the North American Basic Income Guarantee Congress at which there was co-operation between supporters of two of the three main reforms in total money system reform – land value taxation and basic income. Alanna Hartzok, General Secretary of the International Union for Land Value Taxation, expressed a hope for future meetings at which supporters of all three policy proposals could discuss the relationship between reform of the money supply, introduction of land value taxation and the replacement of welfare payments by a citizen’s income.

UBI – life enhancing?

Just as Green parties everywhere have said for many years, Elon Musk expects that UBI will enhance life with ‘ownwork’: “People will have time to do other things, more complex things, more interesting things and certainly have more leisure time.” Others, however, believe that without the need to pay for rent and basic necessities, people will not be motivated to work and will not make good use of their basic income and free time. Cynics will – and do – dismiss ‘the happiness agenda’ (Layard, Norberg-Hodge) and the recent Landmark study which found that most human misery in the Western world is due to failed relationships or ill-health rather than money problems and poverty.

If accompanied by a more comprehensive education?

The findings indicate the need for a broader education, giving some concept of good marital and parental relationships, an understanding of the country’s social and taxation systems and the development of expertise (until the Plain English Campaign succeeds) in interpreting official forms and negotiating online applications.

Increasing apprenticeships and retraining for those who become redundant is worthwhile but far more input is needed. The Sure Start focus involving parents and children from the earliest days was working very well until funding was cut by the coalition government in 2011, instead of building on its success.

Harrow mothers campaigning after 4 Sure Start centres had been given notice to quit

There are now 1,240 fewer designated Sure Start centres than when David Cameron took office – a fall of 34 % according to figures obtained by the Labour Party in a Freedom of Information request. The North East and London have seen the biggest fall in numbers, with over 40% of centres closing. The closure rate is increasing countrywide and councils have listed other centres which may well have to go this year.

Compensating for the cost of UBI

A total audit would balance the expense of an enhanced Sure Start programme and the cost of UBI over time, by quantifying:

  • reduced expenditure on the NHS and prison service due to the improvement in mental and physical health
  • and lower expenditure on policing and social services due to less stressful household and neighbourhoods, diminishing the intake of legal and illegal drugs and reducing crime.

So, in the foreseeable future, will 3D printers and robots take care of the necessities? And will basic income lead people to begin to improve relationships with each other and the rest of the natural world?

 

 

 

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