THE PROTESTERS ARE THE ONES WE SHOULD LISTEN TO AT THIS SUMMIT

COMMENTARY ARCHIVES, 3 Apr 2009

Johann Hari

The way out of the credit and the climate crunch is the same – a Green New Deal

When this hinge-point in human history is remembered, there will be far more sympathy for the people who took to the streets and rioted than for the people who stayed silently in their homes. Two global crises have collided, and we have a chance here, now, to solve them both with one mighty heave – but our leaders are letting this opportunity for greatness leach away. The protesters here in London were trying to sound an alarm now, at five minutes to ecological midnight.

Many commentators seemed bemused that the protesters focused on the climate crunch as much as the credit crunch. What’s it got to do with a G20 meeting on reviving the global economy? Why wave banners saying ‘Nature Doesn’t Do Bail-Outs’ today? Because both crises have their roots in the same ideology – and both have the same solution.

We are facing a collapsed economy and a rapidly warming world because an extreme ideology has dominated world affairs for decades. It is the belief that markets aren’t just a useful tool in certain circumstances; they are an infallible mechanism for running human affairs. If the economy ebbs, the market will put itself right by punishing wrong-doers. If the climate begins to unravel, business will rectify its own behaviour voluntarily. Now we know how well this market fundamentalism works.

The climate is currently going the same way as the banks. Last month, the world’s climate scientists gathered in Copenhagen to explain we are facing "devastating consequences" – not in some distant future, but in my lifetime and yours. Unless we swerve fast, we are soon going to hit global temperatures that no human being has ever lived through. We don’t have much time. By 2015, we will have belched so much carbon into the atmosphere that we will cross the Point of No Return: the climate will start to unravel as all its natural cooling processes break down one by one, guaranteeing we become hotter and hotter. Once we hit an increase of 4 degrees, much of the world will become uninhabitable, and there will be vast wars for what remains.

This isn’t the warning of apocalyptic wackos: it’s the judgement of the climate scientists who have consistently been proven right up to now. Steven Chu, the Nobel Prize-winning scientist who has been appointed Energy Secretary by Barack Obama, says: "I don’t think the American public has gripped in its gut what will happen. We’re looking at a scenario where there’s no more agriculture in California. I don’t actually see how they can keep their cities going either." Goodbye Los Angeles, San Francisco, San Diego. And that, he stresses, is only the start.

The distinguished environmental scientist James Lovelock warns that climate changes tend not to happen gradually, inch-by-inch. They suddenly flip – in our case from a cool world to a very hot one. He believes the hotter new world we are bringing into being could support, at best, a billion people. That would require 84 per cent of the world’s population to die off.

That’s why the protesters were talking about the climate. It should be the number one issue at every global meeting. And the way out of the climate crunch and credit crunch is the same – a Green New Deal. Our leaders are divided about whether we need a fiscal stimulus at all. Obama, Gordon Brown, and the Japanese Prime Minister Taro Aso are leading the charge for a burst of big government spending to jump-start the global economy, while Angela Merkel, Nicholas Sarkozy, David Cameron and the US Republicans are arguing this will simply be a debt-funded splurge to nothing.

It’s a strange debate to have now, because the opponents of any stimulus seem to be mired in a row that was resolved back in the 1930s. John Maynard Keynes transformed the way that we think about recessions. Before him, everybody believed the Merkel-Cameron-McCain line that recessions are like bad weather: you just need to wrap up and sit it out, even though it hurts. But Keynes transformed all that.

He showed that recessions are actually caused by a failure of consumer demand. When people sense that they might lose their job, they – perfectly sensibly – cut back on their spending. They buy fewer DVDs or restaurant meals or holidays. But this causes a fall in demand for services – and more people lose their jobs, causing demand to fall further in turn, and on and on, in a spiral. He called it "the paradox of thrift": what is rational for an individual consumer is irrational for the society as a whole.

But he also showed that there is a way out: the government needs to spend large sums of money, financed by borrowing, to get all the workers waiting idle back into action. This form of government spending brings consumer demand back – and reverses the downward trend. Then, once you’ve recovered, you pay off the debt. Keynes stressed you can spend this money on anything: at one point he proposed burying wads of cash and paying people to dig them up. But today, we face an incredible coincidence.

At the same moment, we need to spend lots of money on something, anything – and we need an immediate transition to a low-carbon economy. And it gets better: it turns out a green stimulus is best for the economy. A major study by the University of Massachusetts compared the effects of an old-style stimulus that simply gives people more cash to a green stimulus.

They found that a green stimulus creates four times more jobs, and three times more "good jobs", defined as those that pay more than $16 per hour. Why? Because a green stimulus is labour-intensive: you spend more money on people and less on machines. And the money you spend stays at home, making it easier to sell: you can only insulate a loft in Hull in Hull; you can only build a wind farm in the Mid-West in the Mid-West.

But it’s not happening. A study by HSBC has found that only 6 per cent of Britain’s stimulus so far has gone to green projects. In the US, it is just 16 per cent. It is nonsense to claim there aren’t enough green projects "shovel-ready": during World War Two, the industrial capacities of our countries was transformed from making consumer goods to making tanks and weaponry in less than sixty days. We could do the same.

But this alacrity shouldn’t surprise us. The weight of conventional wisdoms and the sway of powerful corporations with vested interests in the old sickening world holds back even the better leaders.

The first New Deal wasn’t handed down by Franklin Roosevelt as a benevolent gesture. On the contrary: he came to power as a budget-balancing centrist, and only became a great President because he was confronted by massive riots and civil disobedience across the United States. The American people pushed him in a more radical direction, often with behaviour that made this week’s riot in London look like a Buckingham Palace reception.

On Wednesday, one of the young protesters sat in a tent at the edge of the City of London, looked out towards the glistening towers of the financial district, and said to me: "The dinosaurs were killed by an asteroid. Suddenly, we are realising that we are our own asteroid." She shook her head. "How can so many people just sit at home and watch it happen?"

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