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'New economics' is old hat

There were earthquakes on both sides of the Atlantic yesterday. By mid-afternon, US financial stocks had suffered their worst one-day fall since 2000 after the release of figures showing sharp drops in US home sales and house prices. Several hours later, New Labour lost Glasgow East, one of its safest seats, to the Scottish Nationalists. Translated into a general election, the result would all but wipe out Gordon Brown’s party.

The events are self-evidently connected and the depth of the global economic and now political crisis has prompted a return to the drawing board by the New Economics Foundation and others. The NEF’s A Green New Deal, has analysis and proposals to deal with the “triple crunch”: the global financial crisis, climate change and the rapid depletion of oil.

There’s no doubting the report’s appreciation of the depth of the developing cataclysm, though on many counts they underestimate its extent. But far from offering anything new, their analysis invokes the ghost of economist John Maynard Keynes and the spirit of US President Roosevelt’s failed attempts to resuscitate the economy during the Great Depression of the 1930s.

The report brings together some of the influential actors on the liberal left and government advisors. They include Larry Elliot, economics editor of The Guardian, Tony Juniper and Charles Secrett, former directors of Friends of the Earth, Jeremy Leggett, a leader in bringing solar technologies to market, and Ann Pettifor who led the Jubilee 2000 campaign for debt relief.

Their ambitions are bold. The group aims to forge a broad new political alliance, promoting “joined-up thinking” (a long-abandoned mantra from New Labour’s first term of office) about what they say are the four systems that dominate our world: the market, the state, civil society and the eco-system. This, they hope, “will lay the basis for a radical transformation and renewal of our financial, political and ecosystems”.

Sounds stirring and even faintly scientific, doesn’t it? But in reality this is a travesty of systems thinking, a travesty of science, and a travesty of economics. There are many things they’ve chosen to ignore. Look again at the vaguely Maoist “four systems” list. No sign of the global web of hugely powerful corporations, or of the employees of their subcontractors whose labour produces the commodities for sale in the markets.

Look again at the targets of “radical transformation and renewal”. The underlying economic system isn’t there either. Is this just an oversight? No, this group of nine are just a few of those who are desperate to cover up the central role of the economy in precipitating the looming inter-related, multi-dimensional global upheaval of which they recognise just three aspects.

The number of people who realise that the capitalist system is at the root of the crises is growing rapidly. Those that haven’t already are losing faith in the ability of New Labour to come up with a solution of any kind. Just look at Glasgow East. In invoking the 1930s, the Green New Deal is a concerted attempt to corral those who justifiably fear for the future into a campaign for a life support system for capitalist production.

At the heart of the proposals are a return to regulating the financial sector, raising funds by windfall taxes on oil and gas companies, and using these and pension funds to make loans to companies investing in clean-energy infrastructure be repaid out of future profits. The report is peppered with patriotic-style phrases like “the need for mobilisation as though for war”. It’s an old and dangerous story, one that ignores the power over governments gained by the transnational corporations during the growth frenzy of the last 40 years.

The urgency of building a movement to replace capital, not to rescue it, cannot be overstated. This will mean a major programme extending social ownership to all sectors of the economy, ending the distribution of profits to shareholders, and replacing the system of selling labour for wages with collective decision-making about the distribution of an organisation’s income. Clearly this is not something the existing political and economic system can deliver. We need a new politics as well as a new economics.

Gerry Gold
Economics editor
25 July 2008

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