question we should ask is, whose deal is this? Can the Green New Deal be a single global plan, implemented by a global authority, or can it be managed more locally?
As Herman Daly, pioneer of ecological economics and the architect of ‘steady state’ economics, has argued: the human economy is a subsystem sustained and contained by a delicately balanced global ecosphere, which in turn is fuelled by finite flows of solar energy.4 The earth’s life support systems do not recognise boundaries. So can the New Deal work on any lesser scale than the totality of the globe?
While the impacts of the current crisis are felt everywhere, the largest share of historical and current global emissions of greenhouse gases originated in rich countries. Meanwhile, per capita emissions in poor countries are still relatively low. Ecological justice therefore requires a major redistribution of wealth, from rich producers and emitters of toxic fossil-fuel emissions, to low-income countries.
Furthermore, as the Global Commons Institute (GCI) has argued, rich countries must reduce emissions until per capita emissions converge across the world. The proposal for ‘contraction and convergence’ has for some time now been advocated at the UN.5 It has failed to gain traction because global institutions are weak, are largely unaccountable and lack political leadership. It is clear we cannot rely on global initiatives as the only hope.
There is an alternative approach: international cooperation based not on global institutions, but on the authority of nation states. For the Green New Deal to be transformational, its implementation must be at the level of democratic accountability. Policies agreed at an international level would be implemented and enforced by locally and nationally accountable institutions that reflect domestic conditions.
But even if we can create policy at the level of the state or of local government, does this mean that those active in the markets of the global financial system will support the policies of different nation states? Will the existing dollarized financial system – no longer tethered to the real economy – support and finance a Green New Deal at national level? We have to get real and accept that, with some exceptions, the sector would not help finance a massive climate stabilisation project on terms that are acceptable and sustainable.
As things stand, those that operate in globalised capital markets behave as ‘masters of the universe’. They remain aloof and unaccountable to the governments and communities for whom the transformation of systems is an urgent task. If we are to mobilise the financial resources needed for the massive changes required to conserve, restore and sustain life on earth, then the globalised financial system must be subordinated to the needs of nations, and made servant to the task of transformation.
If the global sector is to be tamed, then a first challenge will be to tackle the hegemony of the currency that sustains globalised finance: the United States dollar.
Imperial Power and the US Dollar
The pre-eminence of the dollar came about as a result of the US strong-arming the rest of the world into adopting its currency as the world’s ‘money’ at the 1944 Bretton Woods conference. Keynes had argued for a global currency, not tied to any one country, and managed in the interests of the international community. He was defeated at Bretton Woods, as the US imposed its will on a weakened Europe. Today that decision still allows the US to enjoy a ‘free lunch’ at the expense of the rest of the world. Its ‘exorbitant privilege’ is a reward for the insurance it provides the rest of the world, especially in times of crisis. As the Federal Reserve acts as global lender of last resort, the US made trillions of dollars available to European and Asian banks during the Great Financial Crisis of 2007–09. This ‘insurance’ is valuable at times of crisis, but it could just as easily have been provided by an independent, international central bank working with, and answerable to, all nations, not just the most powerful.
The ‘exorbitant privilege’ enjoyed by the United States is remarkable given that the country sustains ever-rising external debt and deficits, because global demand for the dollar exceeds US production.6 In contrast to Britain’s imperialist role as a major exporter of capital, the US is a major capital importer. It uses its power to attract financial resources, surpluses of capital from Asia and the oilexporting countries.
A second great benefit the United States enjoys is the power to borrow in its own currency, over whose value it has some control. This means that the US avoids the exchange rate risks faced by other countries when they borrow and have to repay in a different currency. If the dollar were to depreciate, that would not matter to US authorities, as the nation does not own debt issued in euros, yen or sterling. When the dollar falls in value, the debts owed by the United States fall in value too. Thus the dollar as the world’s reserve currency regularly affords the US cheap, low-risk finance with which to sustain its large trade deficit and its exorbitant consumption of the world’s goods and services.
The hegemony of the dollar in global finance remains unchallenged despite the recent financial crisis, as the historian Adam Tooze has pointed out. In fact, the US dollar did not merely survive the 2008 crisis, but was reinforced by it.7 As a result of both the global financial crisis and the weakness of the Obama administration, Wall Street banks are bigger and more powerful than before the crisis. That outcome was not inevitable. It was largely due to a failure of progressive, global leadership by the Obama administration. Unlike Roosevelt, Obama had no direct experience of Wall Street and its ability to inflict systemic economic failure on millions of innocent Americans and their families. Instead his advisers, such as Alan Greenspan, Larry Summers and Robert Rubin, were themselves architects of the globalised and deregulated financial system. Under the Clinton administration they had teamed up to defeat a plan by Brooksley Born, the chair of a federal agency, for stronger regulation of derivatives. In 1999 Summers and Rubin together pushed through the repeal of the Roosevelt administration’s 1933 Glass–Steagall Act, which had prevented banks backed by taxpayer guarantees from being affiliated with investment banks that engaged in financial speculation.
The Obama administration’s support for Wall Street has been compounded by the Trump administration, dedicated to upholding and weaponising Wall Street power. To fortify its imperial overreach, the US budgeted $750 billion (3 to 4 per cent of US GDP) for defence in 2020, and stoked talk of further foreign invasions – what the US presidential candidate, Bernie Sanders, calls the ‘forever wars’.
Fuelling Consumption, Inciting Corruption
Backed by a great imperial power, the US dollar works hand in hand with ‘the invisible hand’ of the market – or, less abstractly, with the invisible hands of powerful agents active in financial markets. It is a globalised system committed to ‘the constant expansion of production and driven by the constant impetus to capital accumulation’, to quote Simon Pirani of the Oxford Institute for Energy Studies.8 It is a system that, enabled by the dollar’s power to breach regulatory barriers, has deliberately been detached from democratic oversight at the level of nation states. Its purpose is to accumulate wealth for the tiny minority that operate in the finance sector. This is achieved through the production of, and speculation in, intangible financial assets, most notably credit.
Credit is the main driver of economic expansion (defined by economists as ‘growth’) and consumption. It has stimulated the extraction of fossil fuels through industrialisation, urbanisation, motorisation and the growth of mass material consumption and consumerism by the affluent classes, in both high- and low-income countries.9
Deregulated credit in a world of mobile capital does not just fuel consumption, it also incites corruption, of both the political and finance sectors. Drug dealers, traffickers and gangsters engaged in a global trade responsible for roughly 450,000 deaths as a result of drug use in 2015, which has made them amongst the wealthiest beneficiaries of today’s system of unregulated, globalised, mobile capital.10
Credit is presumed to ‘grow’ exponentially as private finance enhances capitalism’s ability to, first, create society’s new ‘wants’, what J. K. Galbraith called our ‘psychologically grounded’ desires: ‘wants’ that do not ‘originate in the personality of the consumer’, but are ‘contrived by the process of production’.11
In