Philippe Lamberts: “Revitalise the economy with green investments On May 22, 2014 the citizens of the Netherlands, like the citizens of all the other member states, will go to the polls to choose their representatives for the European Parliament. But what do we really know about the European Union? The Green European Foundation, with the Dutch Foundation Bureau de Helling, is organising a series of lectures in Utrecht featuring well-known speakers to discuss how the EU works, what its role is and why we should care about the up- coming elections. Philippe Lamberts, a Member of the European Parliament from the Belgian Ecolo party, presents his vision on a socially committed green economy. It’s time to resolve the crisis with a Green New Deal. But what does that imply in concrete terms? He extends terms like “debt” and “competition” to the economy, mankind and the environment, and he argues for widespread investment in a greener Europe
In a series of six lectures, Bureau de Helling, the Green European Foundation and the GroenLinks working group on Europe delve “deeper into Europe”. The Green New Deal – a green and socially responsible strategy for tackling the economic crisis – was Philippe Lambert’s main theme in the third lecture. Lamberts has earned his reputation in the European Parliament by framing strict legislation for banks.
The aspirations of the orthodox Let’s start by looking at the answer favoured by orthodox economics. That means the mainstream parties: not only the Christian Democrats and the Liberals, but also those who call themselves socialists like François Hollande. They build their houses on the quicksands of the orthodox economic discipline. They have all been trained in the same theories, and are all incapable of adapting their models to the limitations of our planet. The orthodox contingent strives for economic growth. They perceive two main obstacles to growth: government
debt and a lack of competitiveness. We have to lower government debt, they argue, because it depresses the spending power of businesses and of families. But if it is so, how come we never hear that viewpoint expressed by a businessman. Their second obstacle is a poor competitive position. Our businesses are not competitive enough, the orthodox claim. We need to sell more because it boosts economic growth. To restore growth, they wield a surprising tool: a blunt axe. On the pretext of “sustainable, inclusive, smart growth”, the troika has left a trail of destruction through southern Europe. They have imposed draconic restrictions on government expenditures in order to curb a national debt which is judged to be similarly draconic. They aim to revive competitiveness by cutting labour costs. That implies lower wages and hollowed- out social services. The choices are political ones, and are not neutral in social respects: if you decide to sanitise the budget by cutting expenditures, it has a greater impact on those who are low on the income scale than on those in higher brackets. The better off are able to compensate the inadequacy of public services by paying more, for example for private schools or clinics. The pressure on labour costs also has most impact on those who live on a wage and do not have some other source of income.
The challenges of the 21st century What are the real challenges that face us in the 21st century? Lamberts points to two time bombs threatening human welfare: one of social inequality and one of the environment. Economic inequality has risen in most Western countries in the period between World War II and the present economic crisis: the rich have become richer and the poor (relatively) poorer. The crisis has aggravated this disparity. By the end of 2012, no less than one in four Europeans were living below the poverty line. Even in Germany, the most prosperous EU member country, there is an extremely high number of poor people despite the relatively low unemployment figures. This indicates that our society is unhealthy. Wealth too is unevenly distributed. A mere one percent of the population of Europe owns 25 percent of the total capital (60,000 billion euros). A mere 5 percent of the capital is left over for the less well- off 50 percent. This inequality is growing year by year. How long will it take before violence erupts? Equality is not just a goal for its own sake. Wilkinson and Picket’s book The Spirit Level shows that numerous indicators of health and security correlate with economic equality. A greater equality of incomes leads to a higher life expectancy – even among the richer members of more egalitarian populations. An equal society is a society with less tension. Then there are the problems of the environment. Global
Philippe Lamberts: „Revitalise the economy with green investments
climate change is not the only environmental threat to our planet. The scarcity of certain mineral resources is becoming increasingly acute. Many people point to recycling as the solution but that too has its limitations. Consider titanium. Titanium dioxide is widely used as a white pigment in paint. How can you recycle it? Scrape it off the wall? It’s not recoverable. We face not only a dearth of oil in the course of this century, but also shortages of titanium ore, coal, natural gas, iron, aluminium and copper. The orthodox believers respond that we can always discover new mineral resources; but they do not allow for the fact that our planet is limited. The area of agricultural land per head of the population is also shrinking. We now have only half of what was available fifty years ago. The world population has surged and the deserts are spreading. The orthodox claim that we can increase yields by modern agricultural techniques. But industrial agriculture depletes the quality of the soil. These are the two major challenges. The accelerating degradation of our planet and of humanity is the fault of an ideology which sees short term profits as the only important indicator for society. Everything must be done for sake of the market. Everything is turned into a commodity and is open to speculation. This applies even to our lifespan, upon which the life assurance companies speculate. We are moreover blackmailed by the financial giants: they threaten us with social dislocation if the government fails to shore up the old financial structures from taxation. Growth, the only answer in orthodox quarters, cannot solve these problems. Besides there is a relation between the growth of an economy and emissions of carbon dioxide. Some argue that it is possible to decouple economic growth from CO2 emissions, but the correlation can only be weakened and not broken. In recent decades, economic growth in Western society has failed to reduce the environmental burden and has done nothing to counter inequality.
Debt and competitiveness as green concepts The two main concepts of orthodox economics are debt and competitiveness. The Greens must not sidestep the discourse on competitiveness. Competitiveness depends on the value you create in relation to the cost of creating it. The costs include not only labour but also energy, raw materials and financial capital. When it comes to improving competitiveness, orthodox economists consider only labour costs. But we can also reduce our costs by using raw materials more efficiently and by taking advantage of sustainable energy. As for financial capital, the main reason for China’s success is the country’s low capital costs. Once the Party decides to achieve supremacy in a certain area, the capital is provided free of charge – for example to companies operating in solar and wind energy. No one there raises
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questions about the price of capital. Our own financial markets expect a 15 percent yield. That quickly becomes infeasible once employees insist on a wage rise. Besides, high yields on capital are in any case unsustainable in a competitive market economy. Acting to reduce the wage bill is taking the easy way out: cutting wages by 10 percent gives immediate results. The alternatives call for investment, and the results will not come instantly. We live in a short- term society. As for the “debt” factor, the consensus, particularly in the Netherlands and Germany, is that debt is bad. It is certainly unfair when we shift the burden of debt onto a future generation. That is an intergenerational injustice. Lamberts has no objection to using the term debt, “but if we do let’s talk about the whole concept.” Debt has several components. Firstly, there is government debt, about which people make far too much fuss. Then there are private debts. These are supposedly innocuous, but that is pure ideology. Market participants, in the orthodox view, know what they are doing with their cash, whereas politicians act irresponsibly. Is there any truth to this? Before the economic crisis hit Spain, there was a huge rise in debts held by companies, families and financial enterprises, while the government debt shrank. Why is private debt harmless but a rising public debt dangerous? Why do we place severe constraints on governments but only mild ones on private debt? If debt is dangerous, we ought to impose strict rules for companies, families and banks. Financial debt may be risky but as long as you can use it to create sufficient added value it may be good. If you only use it for consumption or speculation, it’s not good. But there are other kinds of debt: social debt and environmental debt. Inequality can impose a heavy burden on future generations. If the level of education declines, in orthodox terms, the productive potential of society is diminished. You can gradually reduce a social debt but it calls for a huge effort. Environmental debt refers to the exhaustion of non- renewable mineral resources and to the global climate. It is practically impossible to recover from an environmental debt, particularly in the short term. The time scale is a geological one. It’s not hard to redeem or restructure a financial debt, but the obsession with public debt will not help us reduce private debt, social debt or environmental debt.
The Green New Deal This is the challenge facing the political fraternity: how can we make it possible for everyone to lead a full life within the physical limitations of this world? On the one hand it is about enabling, because everyone has their own idea of what constitutes a satisfying life. On the other hand, we should not become fixated on income, for there are other things that make life worthwhile. But we must always respect the constraints of our planet, for otherwise it will survive happily without us. And that is
Philippe Lamberts: „Revitalise the economy with green investments
not what we have in mind for humanity. The key concept of the Greens is investment. This refers not only to financial investment but also investments in people, energy, and mineral resources – long term investments. We must invest in a green infrastructure, in green energy, in buildings, public transport and manufacturing. But technological innovation alone is not sufficient. It must go hand in hand with changes in behaviour. To curb food wastage, we need social innovation to bring the producer closer to the consumer. The recovery of nature is another area we should invest in. There are parts of our environment that must urgently be revitalized, for example agricultural land. Another kind of investment is in social cohesion. Mainstream politicians see cohesion as a free gift, the reward for a growing economy. The Greens argue that growth is a precondition. Social protection must be treated as an investment. An economy cannot produce value while people are inadequately educated and in poor health. We can for example take measures to promote lifelong education and training. It is areas like these that need our investments. They are the most credible source of sustainable jobs.
How do we make this happen?
services amount to 20 percent of GNP. Can we ensure that our government is a promoter of innovation? Can we make certain that when it buys goods and services they will be of the highest social and environmental value? If the government sets an example, the market will follow. Reforming the fiscal system is the most urgent task for politicians. The question is whether the present taxation regime is socially just. The answer is that it isn’t: it does nothing to improve equality. Is it economically efficient? Of course not. Here’s an example: multinationals pay much less tax than small and medium sized enterprises. And does the taxation system protect the environment? Not at all. So there are three reasons to thoroughly overhaul the tax system. None of this will be possible without a functioning democracy. Not everything has to be organized by the government itself. Industry can play its part too. The state does not have to take care of everything. We must mobilize the whole of society, in a democracy that operates honestly and credibly. “In my view today’s politics largely ignores the interests of society. How can we help ordinary people to take part in the democratic process? Currently the EU has more and more say over economic and social policy. Power is migrating to Brussels, but without real democratic control. So democratic reform is extremely urgent.”
The government has two tools at its disposal: legislation and finance. Examples of legislation include CO2 targets as well as rules for the financial sector. The rules must be simple because complicated laws are full of loopholes. Government expenditures on goods and
© Green European Foundation, February 2014 The views expressed in this article are those of the authors’ alone. They do not necessarily reflect the views of the Green European Foundation. With support of the European Parliament. Green European Foundation asbl 1, rue du Fort Elisabeth, 1463 Luxembourg Brussels Office: 15 rue d’Arlon, 1050 Brussels, Belgium Phone: +32 2 234 65 70 - Fax: +32 2 234 65 79 E - mail: info@gef.eu - Web: www.gef.eu
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