In 1929 the Roaring Twenties plummeted to earth with the Wall Street Crash. Its global aftermath caused mass unemployment and eventually a collapse of democracy across Europe, the rise of the Nazis, and genocide. The response to the Wall Street crash in both the US and Britain was to cut public spending. Austerity didn’t work then, and it didn’t work in the 2010’s either.
It’s a mistake to think of a country as a person. If one person maintains his income, but spends less, he can reduce his debts. But across a whole country, one person’s spending is another person’s income. Cutting public spending cuts our collective income, along with the foundations of our health and education. In 1932 the American people voted out Herbert Hoover’s austerity policies and elected Franklin Delano Roosevelt, and his New Deal. The US government invested in public works – home building, dam construction, transport infrastructure. They introduced a welfare system to support people. With money in their pockets, people spent more, and commerce recovered. Public works were only half of the New Deal.
The US introduced laws to strengthen trade unions. There was an explicit recognition that empowering workers to stand up for their economic interests serves the common good.
In 1932-3, the US passed the Glass-Steagall Acts – regulation that stopped excessive speculation by banks. The global financial system was broadly stable the rest of the century.
In 1999, under pressure from rich lobbyists, the US Congress repealed the Glass-Steagall Acts.
In 8 short years we saw the 2007 subprime crisis and the global financial crash.
If financial speculators can make more money gambling than investing in productive assets, we all suffer.
Post-Covid Britain faces two crises: poverty and the climate emergency. Even before Covid, life expectancy was falling in parts of the North East. Many families in work are unable to pay the bills. Thousands of our people can’t eat without support from food banks. Under Covid, economic inequality has risen – many are deep in debt, and unemployment is rising. Poverty causes long term scarring to the life chances of our kids.
In November, the UK will host COP26, the global climate summit, to review the targets set in Paris in 2016. Even if all countries stick to their agreed targets, we’ll see a global temperature rise of over 3 degrees C. Higher temperatures mean higher humidity. When you cover a thermometer bulb in wet cloths, and it still reaches 35 degrees C, it means it’s too hot for humans to sweat and cool down, even in the shade. Fans don’t help – the air is too humid. Without air conditioning, people die within hours. This will affect around half the world’s population. India, China, the Mediterranean, and large parts of the US and Latin America. That means it will affect us too: our economy is global. And I don’t want my kids inheriting a world where 3 billion people have been made homeless. It’s time for a Green New Deal. Let’s build a million low-carbon homes. Let’s build a net-zero public transport system, that’s cheap, safe and convenient. Let’s retrofit our buildings to save energy and save money. Let’s create a clean, cheap renewable energy grid. And while we’re on, let’s invest in education and training so people can get these jobs, and in sport, arts and entertainment so we can all enjoy ourselves on our days off. And in parallel to the Glass-Steagall Acts, we need to outlaw exploitative working conditions and phase out high-carbon technologies. Good employers and responsible firms need to be protected from those who undercut them with poverty wages or polluting business models.
We’ve got a plan for this in the North East. It needs £2.8 billion of public investment. It will create 55,000 good jobs. A person on an average salary pays over £15,000 a year in tax, once you include national insurance and VAT. So those 55,000 jobs will earn the government £825 million a year. The plan pays for itself in under four years. So that’s the cost of doing it. What’s the cost of not doing it? The more we invest with foresight, the less we will regret in hindsight.
Published Originally in The Journal and Evening Chronicle 15.3.21