Starting to Feel Queasey

There is considerable discussion in green circles these days about whether we should support the nationalisation of the banks. We need to be clear about what this means. First, we need to distinguish between ownership and control. At present, the government is taking on ownership of the banks but, because of its ideological revulsion from any sort of economic management, it is not controlling them.

This is an irresponsible and dangerous policy. Brown and Darling appear to have naively believed that, once substantially publicly owned, banks would automatically start acting in the public interest, abandoning a lifetime of self-interested profiteering. They still appear reluctant to appoint citizen directors, or other public-minded experts, to the banks' boards. A green proposal for control of the banks would surely also include their breaking into smaller, regional and local banks with requirements to serve businesses in their local communities with lending facilities.

The more serious question is whether we can afford to support the banks. Where is the money coming from to balance the bad assets of the bankrupt banks? Initially, we were borrowing it from our children. Now we are creating it in return for our financial credibility in the world - hence the precipitate decline in the pound. The end of this road comes when private-sector investors refuse to accept government 'paper', effectively ceasing to believe that the assets and workers of UK plc can make good on the IOUs.

It appears that we are reaching that situation. The value of long-term gilts (money borrowed from investors now that we promise to pay in 30 years' time) is falling. The quantitative easing we have heard so much about is being used only as a bootstrap technique to conceal this unpopularity of government debt. So the Bank of England is providing itself from nowhere with the ability to buy our own national debt.

No country can absorb the sorts of debts that have been produced by reckless bank lending. The policy of quantatitive easing to finance the unfinanceable lacks all credibility and begins to suggest a situation where, by taking on bankrupt businesses, we may be moving towards banktupting our own nation. Tweet

Green New Deal: What's the Deal? And How Green Is It?

Chatter about this mind-catching proposal is everywhere in green circles. My hearty congratulations to the authors who have managed to capture the imagination and direct it towards economics. I've been trying to do that for some time and know how challenging it can be.

It is fairly inevitable in a recession that the government will become a more significant part of our economy. If nothing else, as the economy as a whole shrinks, the public sector grows relative to the private sector, where jobs are dependent on immediate spending. Add to this that, in a civilised society, we pay something to those who are out of work and the balance is bound to shift towards government spending.

This means our money - either now or in the future - and therefore we have a democratic right to decide how it is spent. Some of the proposals for this spending from Labour and the Tories are very far from green - such as the building of more roads and other vast infrastructure projects. We need to think big but also think local: this would be the heart of a truly green new deal.

For me the priorities for spending would be local green banks, preferably organised as mutuals, which could lend money to small, local businesses according to strict criteria about their sustainability. This would underpin the growth of the local green economy and ensure that we emerged from the recession with a much greener economy.

And more important than money, we should be thinking about food and energy. As the pound sinks on the foreign exchanges we will realise the foolishness of government statements that food security is of no strategic importance. As we negotiate in international markets from a position of weakness we will regret the fact that our main export is financial services. Who will buy? Hardly anybody at all I would have thought. Tweet