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69 Green Keynesianism Beyond Standard Growth Paradigms JONATHAN M. HARRIS We have involved ourselves in a colossal muddle, having blundered in the control of a delicate machine, the working of which we do not understand. The result is that our possibilities of wealth may run to waste for a time—perhaps for a long time. —JOHN MAYNARD KEYNES, THE GREAT SLUMP OF 1930 In the wake of the global financial crisis, Keynesianism has had something of a revival. In practice, governments have turned to Keynesian policy measures to avert economic collapse. In the theoretical area, mainstream economists have started to give grudging attention to Keynesian perspectives previously dismissed in favor of New Classical theories. This theoretical and practical shift is taking place at the same time that environmental issues, in particular global climate change, are compelling attention to alternative development paths. Significant potential now exists for “green Keynesianism,” combining Keynesian fiscal policies with environmental goals. But there are also tensions between the two perspectives of Keynesianism and ecological economics. Traditional Keynesianism is growth-oriented, while ecological economics stresses limits to growth. Expansionary policies needed to deal with recession may be in conflict with goals of reducing resource and energy use and carbon emissions. In addition, long-term deficit and debt problems pose a threat to implementation of expansionary fiscal policies. This chapter explores the possibilities for green Keynesianism in theory and practice and suggests that these apparent contradictions can be resolved and that green Keynesian policies offer a solution to both economic stagnation and global environmental threats. A REINTERPRETATION OF THE KEYNESIAN VISION Keynes’s “colossal muddle” seems to apply well to the confusion and dismay characterizing both economists and policymakers in the face of the events of 2007–9 and continues to ring true as we grapple with slow and inadequate recovery and the possibility of a “double-dip” recession, especially in Europe. Ecological economists might also recognize the concept of a 70| Jonathan M. Harris blundering approach to a delicately balanced machine in a different sense, considering the widespread damage wrought on ecosystems that we only partially understand, as a result of unrestrained economic growth. But can the remedies suggested by Keynes—government intervention through fiscal and monetary policy to rebuild aggregate demand and economic confidence—also be reinterpreted in a more ecological sense? In a recent paper, Paul Krugman suggests that “Keynesian economics remains the best framework we have for making sense of recessions and depressions” (Krugman, 2009). With reference to current economic controversies, Krugman has pointed out that “not only do these disputes involve many of the same issues Keynes grappled with 75 years ago, we are—frustratingly—retracing much of the same ground covered in the 1930s” (Krugman, 2011). The issues include the need for government stimulus to respond to recession, and the counterproductive nature of “austerity” programs, which do indeed echo the 1930s. But a major difference from the crisis of the 1930s is the current importance of global environmental crises. Environmental issues were not absent in the 1930s (one important aspect of the New Deal was the Civilian Conservation Corps), but they have much greater scope today. The financial and economic crisis had the temporary effect of eclipsing major environmental issues in public debate. But these issues have, if anything, gained in urgency. The scientific evidence supporting human-induced climate change has grown stronger, the possibilities of catastrophic outcomes more significant, and the recommendations of scientists for carbon reductions more drastic, within the last few years. Water shortages, species loss, ocean pollution and fisheries decline, and a host of other issues have grown more pressing as human population crosses the 7 billion mark. How do these issues relate to the shifting perceptions of macroeconomic realities as we enter the second decade of the twenty-first century? On the recent economic crisis, I have suggested that there was a possibility of a synthesis between Keynesian macroeconomics and the kind of environmental macroeconomics originally called for by Herman Daly (Daly, 1991a, 1991b, 1996): Keynes did not focus on issues of ecological sustainability, but from our current standpoint in the first decade of the twenty-first century, it certainly seems reasonable to include environmental degradation as one of the “outstanding faults” of the economic system. The implementation of ambitious programs for social investment and redirection of the macro economy towards sustainability will be essential for preserving economic systems in the twenty-first century. It will, however, require a turn away from conventional macroeconomics. (Harris, 2009, p...

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