Wouldn\’t say that George Irvin is one of my favourite economists…..SOAS tends not to produce those to my ideological flavour. Or even to what I regard as the basic rules of logic. But still, this is interesting.
Essentially, trying a Green New Deal and a massive Keynesian stimulus for the economy would lead to a collapse in the pound. This would negate any possible benefit of said Green New Deal.
To which there are two possible solutions:
There are two ways out. One is to impose capital controls. But such controls, supposing for a moment that capital controls could be effectively imposed in today\’s world, would be tantamount to closing down much of the City of London and inviting retaliatory trade attack. Crucially, such controls are incompatible with EU membership, and the EU accounts for nearly 60% of UK trade. Leaving the EU is neither a sensible nor a realistic option.
The other solution is to join the euro. That is no panacea either. It would take time, it would entail conditionality and a referendum on the matter would probably produce a no vote. Some might argue that the EU stability and growth pact is at least as fiscally constraining as meeting current Treasury rules and that joining the euro would leave Britain unable to pursue an independent monetary policy. Others might argue that without the power to set interest rates, we would run the risk of a new housing bubble. But our monetary policy is already constrained by world financial markets, and the power to set interest rates has not prevented our housing bubble.
The central issue of a (hypothetical) negotiation over Britain\’s adoption of the euro should be the \”economic governance\” question. High priority would need to be placed on scrapping the common agricultural policy and creating a well-financed federal European treasury which, much like the US treasury, could issue its own paper and, most important, could be used to effect transfers between Europe\’s regions. In essence, improving eurozone governance should involve promoting mechanisms for recycling surpluses from surplus to deficit countries.
That is, that neither of the two possible solutions are possible in anything like real time. Thus they\’re not actually possible and thus neither is a Green New Deal.
Good, so that\’s that solved then and we can get on with thinking up other ways of dealing with matters.