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Not so much 'green' as 'cabbage looking'

Molly Scott Cato

22nd March, 2007

Gordon Brown's Budget was disappointing. But not just because of its economic niceties. It fails to address key issues which have become taboo amongst economists - money, debt and economic growth. Molly Scott Cato, a green economist and Senior Lecturer in Social Economy at the Cardiff School of Management, addresses all three...

How excited should we be getting about the political dinosaurs’ battle over the green ground of politics? How much can we expect from this budget, hyped as the greenest ever? It is obvious that, as a green economist, I should be calling for progressive taxation on air flights, but even David Cameron has reached that point. Should we just be packing up and sitting under a tree?

Not so fast. Contrary to popular wisdom, green economics is not about providing incentives within the existing economic structure and constraining its worst excesses. Far from it. Otherwise I probably would spend more time sitting under a tree. Green economics requires us to ask searching questions about some of the basic assumptions underpinning our economic system.

Let’s start with growth. Policies to counteract climate change are not being introduced for fear that they would threaten this holy grail of our economic system, although in reality it is the constant striving for economic growth that is driving planetary destruction. The fact that economic growth does not increase happiness has been recognized by even mainstream economists and yet the way our economy works means we must still pursue this pointless and destructive course. Within this framework climate change is just another opportunity to increase growth and profits by selling a different range of products. Instead we should be curtailing consumption and relocalising production.

So a green chancellor would not fear introducing measures that would reduce economic growth, such as significant increases in fuel duty and aviation taxes—or why not go the whole hog and introduce a carbon tax on all fuels at the point of extraction to deal with the supply side? And to deal with the demand side we should have DTQs (domestic tradable quotas)—an annual carbon allowance forcing us to control our production of carbon dioxide while allowing us choice about what we spend it on.

As the UK manufacturing sector is exported to China our carbon dioxide emissions are counted in China’s total rather than our own, hence the increasing emphasis in the climate change negotiations on putting pressure on China to reduce its emissions. This is grossly unfair when the products they make are consumed by us. Figures from the Carbon Trust show that, if these indirect emissions are taken into account, our consumption of food, household goods and ‘health and hygiene’ goods actually produce around 22MtC each of our annual total of around 176MtC, each comparable in size to the 24MtC contributed by space heating. These are the values that climate change policies need to focus on, and the budget should include a commitment to measuring indirect as well as direct carbon emissions, as well as including transport-related emissions within the negotiated totals (they were omitted during the Kyoto process).

The nature of money creation within capitalism is the primary pressure for growth within the economy. Because money is created as debt by banks, rather than by governments, this automatically puts a pressure on the economy to grow as people have to work to repay those debts. The real economy is always under pressure to catch up with the money supply. Debt and growth are the Scylla and Charybdis of the modern economy: if we stopped borrowing or stopped growing the economy would implode. Politicians need to regain control over the levers of the economy, and taking back the right to create money within democratic control, rather than borrowing money from banks, would be a useful first start. A green chancellor would also welcome a diversity of currencies. LETS and local currencies should be allowed to flourish, without bureaucratic involvement or threats of taxation from the Treasury.

The modern corporation has become detached from the real economy and from local communities. The pressure for ever-increasing shareholder value has led to gross inequalities as corporations play one national government against another to exert downward pressure on tax rates. A courageous green chancellor would abandon the pose of powerlessness and stand up to the corporate bullies. The budget could include measures to stimulate local production, such as banding corporation tax so that smaller businesses pay at a lower rate than larger businesses. Windfall taxes would become routine in the case of companies making profits because of factors beyond their control, such as weather changes or wars causing increases in oil prices. To address the problem of inequality and the social divisiveness it causes we should have legislation for a maximum differential—say five times—between the highest and lowest earners.

The government missed an important opportunity in the Companies Bill to exert political influence over the behaviour of businesses. A green chancellor would not be so cowardly and would amend the Act to make reporting of environmental and social standards along the whole supply chain compulsory and create penalties for companies not reaching agreed standards. Companies would also be required to undergo, at the public expense, an annual audit carried out by state auditors. The results, including the real as well as nominal value of all listed companies, would be made publicly available.

And finally, while we’re talking about markets, why not have some real competition? The Office of Fair Trading should use its powers to enforce competition to break up some of our largest companies—why not start with Tesco?

Molly Scott Cato is a reader in green economics at the Cardiff School of Management..

This article first appeared in the Ecologist March 2007

 

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