due to a failure of progressive, global leadership by the Obama administration. Unlike Roosevelt, Obama had no direct experience of Wall Street and its ability to inflict systemic economic failure on millions of innocent Americans and their families. Instead his advisers, such as Alan Greenspan, Larry Summers and Robert Rubin, were themselves architects of the globalised and deregulated financial system. Under the Clinton administration they had teamed up to defeat a plan by Brooksley Born, the chair of a federal agency, for stronger regulation of derivatives. In 1999 Summers and Rubin together pushed through the repeal of the Roosevelt administration’s 1933 Glass–Steagall Act, which had prevented banks backed by taxpayer guarantees from being affiliated with investment banks that engaged in financial speculation.
The Obama administration’s support for Wall Street has been compounded by the Trump administration, dedicated to upholding and weaponising Wall Street power. To fortify its imperial overreach, the US budgeted $750 billion (3 to 4 per cent of US GDP) for defence in 2020, and stoked talk of further foreign invasions – what the US presidential candidate, Bernie Sanders, calls the ‘forever wars’.
Fuelling Consumption, Inciting Corruption
Backed by a great imperial power, the US dollar works hand in hand with ‘the invisible hand’ of the market – or, less abstractly, with the invisible hands of powerful agents active in financial markets. It is a globalised system committed to ‘the constant expansion of production and driven by the constant impetus to capital accumulation’, to quote Simon Pirani of the Oxford Institute for Energy Studies.8 It is a system that, enabled by the dollar’s power to breach regulatory barriers, has deliberately been detached from democratic oversight at the level of nation states. Its purpose is to accumulate wealth for the tiny minority that operate in the finance sector. This is achieved through the production of, and speculation in, intangible financial assets, most notably credit.
Credit is the main driver of economic expansion (defined by economists as ‘growth’) and consumption. It has stimulated the extraction of fossil fuels through industrialisation, urbanisation, motorisation and the growth of mass material consumption and consumerism by the affluent classes, in both high- and low-income countries.9
Deregulated credit in a world of mobile capital does not just fuel consumption, it also incites corruption, of both the political and finance sectors. Drug dealers, traffickers and gangsters engaged in a global trade responsible for roughly 450,000 deaths as a result of drug use in 2015, which has made them amongst the wealthiest beneficiaries of today’s system of unregulated, globalised, mobile capital.10
Credit is presumed to ‘grow’ exponentially as private finance enhances capitalism’s ability to, first, create society’s new ‘wants’, what J. K. Galbraith called our ‘psychologically grounded’ desires: ‘wants’ that do not ‘originate in the personality of the consumer’, but are ‘contrived by the process of production’.11
In this way, the spigot of easy credit denominated in dollars fuels global economic expansion and the constant impetus to capital accumulation by the already-rich. Consumption gorges in turn on fossil-fuel extraction, accelerating the growth of greenhouse gas emissions (GHGs).
From the perspective of the ecosystem, perhaps the most damaging aspect of globalised, largely deregulated credit-creation is the finance sector’s demand for high, real rates of return on a relatively effortless process: the creation of new money. If interest rates are higher than the capacity of the earth, or the economy, to renew itself, then interest rates become brutally extractive. People who are obliged by low or falling incomes to borrow are driven to work ever-longer hours to raise the money needed to repay the interest on their debt. Firms, too, cut costs and exploit labour more intensively in order to raise the finance needed to service their debts. Governments strip the forests, trawl the seas and exhaust the land to improve ‘efficiency’ and generate the returns needed to repay their obligations, including foreign debt service.
Bring Offshore Capital Onshore
It is my view – expanded in the next chapter – that to manage economic expansion, halt the impetus to capital accumulation and lower GHGs, it is essential to first manage the spigot of globalised credit creation. To that end, it will be necessary to bring offshore capital back onshore, and to subject the system to accountable management and regulation at the level of the state. Next, to manage the global crisis of earth systems breakdown we will need an international currency independent of the sovereign power of any single, imperial state. Finally, we will need to establish an international ‘clearing union’ for the settlement of credits and debits between nations as we go about sharing the burden of transformation.
Many will regard such proposals for radical global system change as utopian. And so they will be – until a global shock makes system change inevitable.
The plain fact is that societies have over time developed monetary systems that make the mobilisation of financial resources eminently possible for society’s urgent needs. Given the establishment of these systems, there need never be a shortage of money. But publicly backed monetary systems cannot be managed and deployed in the interests of society and the ecosystem as long as they remain ‘globalised’– captured and moved offshore, beyond the reach of regulatory democracy. In what is effectively the financial stratosphere, monetary systems serve the interests not of societies but of the global 1%. This has not happened by accident. As the result of a deliberate process, the financial system has been detached from the real economy of nation states and from governmental regulation. Following the logic of neoliberal economics, it has been ‘encased’ to protect the sector from democratic interference, as Quinn Slobodian shows in his book The Globalists. In other words, globalised, dollarized financial capitalism shifted offshore has undermined the power of democratic governments and local communities to develop economic policies to meet urgent needs.
We have been here before. Today’s globalised system harks back to the gold standard system of the 1930s when the private finance sector wrested control of publicly backed monetary systems away from democratic governments. At the time those that argued for ‘system change’ – the dismantling of the gold standard – were thought delusional. When the system did collapse, many economists were shaken to the core. Mistakenly, they had believed the gold standard was, like gold, immutable.
We Must Take Back Power
Given the vast power of dollarized globalisation over the world’s economies, can governments as rich as Germany’s or as poor as Mozambique’s mobilise the finance needed for the transition to a liveable planet? Could governments cooperate to mobilise the finance needed by the world’s poorest countries? We know there are ample financial resources (savings) to pay for the transition. But do societies and their governments have the power to realise these resources?
The straightforward answer is no. That fact presents Green New Dealers with the first grand mission: nothing less than global financial system change. If we are to support the campaigning efforts of Extinction Rebellion and the school strikes movement; if we are to fulfil the goal of a fundamental, system-wide transformation of the economy to save the ecosystem, then we must combine and cooperate at an international level to bring about a revolution in the power relations of the globalised and dollarized economic system.
As I explain below, cooperation and coordination between a progressive British economist and an American president and his administration brought about such transformation in 1933 and again, less successfully, at Bretton Woods in 1944. We can do so once more – equipped with sound economic theory and political practice to mobilise our collectively paralysed societies. The purpose will be to transform the globalised financial system within which the domestic economic systems of nation states are situated and integrated, and to which they are subordinated.
Given these challenges, and given today’s politics, the task of transforming
