The world faces two main challenges, namely climate change which leads to global warming with all
the adverse environmental consequences and increasing income inequalities which undermine both
capitalist system and democracy. Social scientist, environmentalist, and activists try to explain the
issue and find solutions with limited success. In this context, the concept of Green New Deal (GND)
has emerged. A set of proposals championed by Alexandria Ocasio-Cortez, an American politician
and activist, and many prominent members of the Democratic Party is compared with the New Deal
Policy of American President Roosevelt during the Great depression period (Carlock, Greg and Sean
McElwee 2018). In the first part, the GND is explained in the context of adverse climate changes and
income inequalities in the recent times. The GND is interrogated in terms of both the mainstream
liberal economics and Marxism analysis in the second and third parts respectively. In the final part
inferences and conclusions are given along with suggestions along with further research in this
exciting area of study.
PART 1
From New Deal to Green New Deal
Franklin Roosevelt's New Deal Policy based on Keynesian Macroeconomic theory was successful in
pulling out American economy and consequently the world economy from the consequences of the
perils of the Great Depression of 1930s. Public expenditure funded by deficit financing was the key
instrument. According to John Maynard Keynes, the famous British economist, a fall in effective
demand caused the depression in the economy, which had resulted in decrease in investment,
output, employment on income. The rise of effective demand depends on expenditure on
consumption, private investment and Government activities in the economy. Expenditure on
consumption and private investment cannot be increased in a short period. Hence the only
alternative is increasing the public expenditure through deficit financing, which means Government's
expenditure is more than income (Keynes, 1997). This type of Government intervention in the
economy happened during the first New Deal Programme (1933-1934) and subsequently on a larger
scale during the second New Deal Programme (1935-1938) in the American economy and the
positive dramatic changes brought about by these policies are elaborately described in the textbooks
of modern macroeconomics.
The period between 1945 (the end of World War II) and 1973 (the year first Oil Shock took place) is
often called “The Golden Age of Capitalism”. Then there was a decline in Keynesian interventionist
macroeconomic policy and rise of Neo-Liberal pro-market macroeconomics advocated by American economist Milton Freidman since 1980s. The euphoria of Neo-Liberals ended with 2008
international financial crisis which began with the bankruptcy of the US investment banks, Bear
Sterns and Lehman Brothers and impacted the global economy subsequently (Stiglitz Joseph, 2015).
Major financial institutions and industrial firms were bailed out with public money and the revival of
Keynesian policies was reported. Soon, however populists who support disruptions came and gained
power and influence with BREXIT and election of the US president Mr. Donald Trump. Protectionist
policies of the Trump regime and the trade war between US and China make the observers to use
the term “Deglobalisation” to describe the current scenario. Climate change and increasing income
inequalities have been described as major global challenges. In this context a debate on GND has
emerged.
Supporters of GND claim that the proposed policies would ensure 100 percent clean and renewable
energy within a decade, zero net emissions within three decades, America emerging as the leading
exporter of clean technologies and most importantly a more equitable distribution of income (The
Economist, 2019). These objectives seem to be idealistic but the supporters are optimistic that the
objectives would be achieved. They recommend huge public investments to transform energy and
transport infrastructure, massive support for green industries, large scale efforts to provide
necessary training to workers and income support to those who are unable to work. A strong and
effective carbon taxation regime is one important suggestion. The revenue collected from the
carbon tax would be paid as dividend to the underprivileged. The funds for these ambitious projects
would be raised through borrowing. There are plans to strengthen the interest groups such as trade
unions and small manufacturers to get political support for the proposals. The proposals for
expanding public expenditure in a massive scale to build ‘Green’ infrastructure and in education and
training to bring about more ‘equal’ income distribution are viewed with skepticism by the
economists of the mainstream liberal school of thought to which we now turn.
PART 2
Environment Degradation and income inequalities
Market failure is viewed as the major reason for environmental degradation and rise in income
inequalities in the neo-classical liberal economics. Negative externalities (social costs being higher
than the private cost) could be discouraged through taxation and positive externalities (private
benefit being lower than the social benefit) could be encouraged through subsidies. As the economy
grows it will take care of its environment. A poor country cannot afford to spend time and money on
environmental protection. Poverty is the worst polluter. Prosperity brings more effective
environment regulations. Individuals, communities and countries begin to protect their environment
when they can afford to spend money on such activities (Norberg, Johan 2005). Liberal writers
mention ‘California Effect’ to support their argument. During 1970’s the state of California in the US
introduced several stringent emission regulations on the car manufacturing factories to protect the
environment. Many people expected that there would be shifting of the factories to other
neighbourhood states. Infact, these factories did not move to the other states. Instead the other
states also began introducing stringent emission regulations on their car manufacturing factories. It
shows that responsible environmental behaviour is contagious. A good example is always worth
imitating.
Liberal mainstream economists point out that the supporters of GND movement advocate massive
public expenditure on the infrastructure and training of the workers to address the climate change and income inequality issues because of the ‘Category Error’ in their analysis. Alexandria suggests
that income tax rate in the US should be increased to 70 percent from 37 percent. She declares that
she is a ‘socialist’. Elizabeth Warren, another popular leader of Democratic Party wants a heavy
wealth tax on multimillionaires (Business Standard, 2019). It is like trying to defeat Hitler with a
fascism tax (The Economist 2019). Climate change and income inequality issues should be
addressed with economic growth achieved through the use of right technology, enlightened
management practices and improved good governance outcomes. The mainstream liberal
economists consider the Green New Deal proposals will undermine economic growth, encourage
rent -seeking and accelerate environmental degradation.
PART 3
A Marxian Analysis of Climate Change and GND
Karl Marx wrote on ecological contradictions also apart from his analysis of economic contradictions
in capitalism (Marx, Karl 1976). Dialectical Materialism, materialistic interpretation of history and
the theory of surplus value are the three pillars of the Marxian analysis of capitalist economic
contradictions which would lead to crisis and collapse of the system and emergence of socialism.
Marx could foresee ecological crisis apart from economic crisis under capitalism (Foster, John
Bellamy 2000). Ecological crisis is called ‘The Second Contradiction of Capitalism’. Capitalist system
transforms the material conditions on which all life depends. The main limitation of contemporary
ecological analysis (including the GND initiatives) is its inability to relate the problem of nature to
the problem of economy and the society. We shall discuss only two important aspects of the
Marxian analysis of nature and society, namely ‘Metabolic Rift’ and the ‘Lauderdale Paradox’. These
concepts should be understood in the broad context of the historical materialism which includes
ecological materialism also.
The dominating capitalist objective is to increase accumulation of capital. In the Marxian scenario,
the GND programme appears politically popular but naive in terms of political economy analysis.
There seems to be a leftward swing in political debates in the US and they will be settled at the 2020
Presidential elections. Democratic Party proposes massive government intervention to address
climate change and income inequality issues. Democrats seem to have a more “positive view” of
socialism than capitalism. On the other side there are pro-business and pro-capitalist Republicans.
There seems to be a growing ideological divide between socialist Democrats and capitalist
Republicans (Business Standard, 2019). Marxian concepts of Metabolic Rift and the Lauderdale
Paradox provide valuable insights to place these contemporary political debates on climate change
and income inequalities in proper perspective.
Conclusion
The Green New Deal (GND) proposals which aim to address climate change and income inequality
issues are increasingly engaging in the American political debates in the context of Presidential
elections next year. As elaborated above, these proposals are viewed as flawed and unrealistic by
mainstream liberal economists and naive Marxian analysis of ecology. The environmental agendas of
major political parties in India are not comprehensive and implementation of environmental programmes by the Central and State governments, in general, unsatisfactory (Guha, Asi and Elphin
Tom Joe 2019). The climate change and income inequality issues cry for more attention in
developing countries particularly India. The foregoing narrative on these vital issues from different
theoretical perspectives emphasizes the need for further research in this exciting area of study.
the adverse environmental consequences and increasing income inequalities which undermine both
capitalist system and democracy. Social scientist, environmentalist, and activists try to explain the
issue and find solutions with limited success. In this context, the concept of Green New Deal (GND)
has emerged. A set of proposals championed by Alexandria Ocasio-Cortez, an American politician
and activist, and many prominent members of the Democratic Party is compared with the New Deal
Policy of American President Roosevelt during the Great depression period (Carlock, Greg and Sean
McElwee 2018). In the first part, the GND is explained in the context of adverse climate changes and
income inequalities in the recent times. The GND is interrogated in terms of both the mainstream
liberal economics and Marxism analysis in the second and third parts respectively. In the final part
inferences and conclusions are given along with suggestions along with further research in this
exciting area of study.
PART 1
From New Deal to Green New Deal
Franklin Roosevelt's New Deal Policy based on Keynesian Macroeconomic theory was successful in
pulling out American economy and consequently the world economy from the consequences of the
perils of the Great Depression of 1930s. Public expenditure funded by deficit financing was the key
instrument. According to John Maynard Keynes, the famous British economist, a fall in effective
demand caused the depression in the economy, which had resulted in decrease in investment,
output, employment on income. The rise of effective demand depends on expenditure on
consumption, private investment and Government activities in the economy. Expenditure on
consumption and private investment cannot be increased in a short period. Hence the only
alternative is increasing the public expenditure through deficit financing, which means Government's
expenditure is more than income (Keynes, 1997). This type of Government intervention in the
economy happened during the first New Deal Programme (1933-1934) and subsequently on a larger
scale during the second New Deal Programme (1935-1938) in the American economy and the
positive dramatic changes brought about by these policies are elaborately described in the textbooks
of modern macroeconomics.
The period between 1945 (the end of World War II) and 1973 (the year first Oil Shock took place) is
often called “The Golden Age of Capitalism”. Then there was a decline in Keynesian interventionist
macroeconomic policy and rise of Neo-Liberal pro-market macroeconomics advocated by American economist Milton Freidman since 1980s. The euphoria of Neo-Liberals ended with 2008
international financial crisis which began with the bankruptcy of the US investment banks, Bear
Sterns and Lehman Brothers and impacted the global economy subsequently (Stiglitz Joseph, 2015).
Major financial institutions and industrial firms were bailed out with public money and the revival of
Keynesian policies was reported. Soon, however populists who support disruptions came and gained
power and influence with BREXIT and election of the US president Mr. Donald Trump. Protectionist
policies of the Trump regime and the trade war between US and China make the observers to use
the term “Deglobalisation” to describe the current scenario. Climate change and increasing income
inequalities have been described as major global challenges. In this context a debate on GND has
emerged.
Supporters of GND claim that the proposed policies would ensure 100 percent clean and renewable
energy within a decade, zero net emissions within three decades, America emerging as the leading
exporter of clean technologies and most importantly a more equitable distribution of income (The
Economist, 2019). These objectives seem to be idealistic but the supporters are optimistic that the
objectives would be achieved. They recommend huge public investments to transform energy and
transport infrastructure, massive support for green industries, large scale efforts to provide
necessary training to workers and income support to those who are unable to work. A strong and
effective carbon taxation regime is one important suggestion. The revenue collected from the
carbon tax would be paid as dividend to the underprivileged. The funds for these ambitious projects
would be raised through borrowing. There are plans to strengthen the interest groups such as trade
unions and small manufacturers to get political support for the proposals. The proposals for
expanding public expenditure in a massive scale to build ‘Green’ infrastructure and in education and
training to bring about more ‘equal’ income distribution are viewed with skepticism by the
economists of the mainstream liberal school of thought to which we now turn.
PART 2
Environment Degradation and income inequalities
Market failure is viewed as the major reason for environmental degradation and rise in income
inequalities in the neo-classical liberal economics. Negative externalities (social costs being higher
than the private cost) could be discouraged through taxation and positive externalities (private
benefit being lower than the social benefit) could be encouraged through subsidies. As the economy
grows it will take care of its environment. A poor country cannot afford to spend time and money on
environmental protection. Poverty is the worst polluter. Prosperity brings more effective
environment regulations. Individuals, communities and countries begin to protect their environment
when they can afford to spend money on such activities (Norberg, Johan 2005). Liberal writers
mention ‘California Effect’ to support their argument. During 1970’s the state of California in the US
introduced several stringent emission regulations on the car manufacturing factories to protect the
environment. Many people expected that there would be shifting of the factories to other
neighbourhood states. Infact, these factories did not move to the other states. Instead the other
states also began introducing stringent emission regulations on their car manufacturing factories. It
shows that responsible environmental behaviour is contagious. A good example is always worth
imitating.
Liberal mainstream economists point out that the supporters of GND movement advocate massive
public expenditure on the infrastructure and training of the workers to address the climate change and income inequality issues because of the ‘Category Error’ in their analysis. Alexandria suggests
that income tax rate in the US should be increased to 70 percent from 37 percent. She declares that
she is a ‘socialist’. Elizabeth Warren, another popular leader of Democratic Party wants a heavy
wealth tax on multimillionaires (Business Standard, 2019). It is like trying to defeat Hitler with a
fascism tax (The Economist 2019). Climate change and income inequality issues should be
addressed with economic growth achieved through the use of right technology, enlightened
management practices and improved good governance outcomes. The mainstream liberal
economists consider the Green New Deal proposals will undermine economic growth, encourage
rent -seeking and accelerate environmental degradation.
PART 3
A Marxian Analysis of Climate Change and GND
Karl Marx wrote on ecological contradictions also apart from his analysis of economic contradictions
in capitalism (Marx, Karl 1976). Dialectical Materialism, materialistic interpretation of history and
the theory of surplus value are the three pillars of the Marxian analysis of capitalist economic
contradictions which would lead to crisis and collapse of the system and emergence of socialism.
Marx could foresee ecological crisis apart from economic crisis under capitalism (Foster, John
Bellamy 2000). Ecological crisis is called ‘The Second Contradiction of Capitalism’. Capitalist system
transforms the material conditions on which all life depends. The main limitation of contemporary
ecological analysis (including the GND initiatives) is its inability to relate the problem of nature to
the problem of economy and the society. We shall discuss only two important aspects of the
Marxian analysis of nature and society, namely ‘Metabolic Rift’ and the ‘Lauderdale Paradox’. These
concepts should be understood in the broad context of the historical materialism which includes
ecological materialism also.
The dominating capitalist objective is to increase accumulation of capital. In the Marxian scenario,
the GND programme appears politically popular but naive in terms of political economy analysis.
There seems to be a leftward swing in political debates in the US and they will be settled at the 2020
Presidential elections. Democratic Party proposes massive government intervention to address
climate change and income inequality issues. Democrats seem to have a more “positive view” of
socialism than capitalism. On the other side there are pro-business and pro-capitalist Republicans.
There seems to be a growing ideological divide between socialist Democrats and capitalist
Republicans (Business Standard, 2019). Marxian concepts of Metabolic Rift and the Lauderdale
Paradox provide valuable insights to place these contemporary political debates on climate change
and income inequalities in proper perspective.
Conclusion
The Green New Deal (GND) proposals which aim to address climate change and income inequality
issues are increasingly engaging in the American political debates in the context of Presidential
elections next year. As elaborated above, these proposals are viewed as flawed and unrealistic by
mainstream liberal economists and naive Marxian analysis of ecology. The environmental agendas of
major political parties in India are not comprehensive and implementation of environmental programmes by the Central and State governments, in general, unsatisfactory (Guha, Asi and Elphin
Tom Joe 2019). The climate change and income inequality issues cry for more attention in
developing countries particularly India. The foregoing narrative on these vital issues from different
theoretical perspectives emphasizes the need for further research in this exciting area of study.
