The New Green Deal Is Just Old White Elephants

The New Green Deal Is Just Old White Elephants

What happens when politicians see that their monster stimuli have not delivered? They bring the next rabbit out of a hat. They need a new name and a new magic solution to make citizens believe in the magic of demand-side policies despite the constant failure of those same plans.

Take the Eurozone examples:

A huge stimulus in 2008 in a “growth and employment plan”. A stimulus of 1.5% of GDP to create “millions of jobs in infrastructure, civil works, interconnections, and strategic sectors”. 4.5 million jobs were destroyed and the deficit nearly doubled. That was after the crisis because between 2001 and 2008, money supply in the Eurozone doubled. The Eurozone has been a chain of stimuli since day one.

The so-called “Juncker Plan” or  “Investment Plan for Europe” hailed as the “solution” to the European Union lack of growth was the same. It raised 360 billion euros, many for white elephants.  Eurozone growth estimates were slashed, productivity growth stalled and industrial production fell in December 2018 to three-year low levels.

The Eurozone’s massive “green” policy plan has made the European Union countries suffer electricity and natural gas bills for households that are more than double those of the US, and unemployment is still twice that of the United States, while growth stagnates. In 2016 household electricity prices averaged 26.6 c/kWh in the Euro area and 12.7 c/kWh in the US.

Let us start debunking some myths about this last rabbit out of the interventionists’ hat.

No, it is not a New Deal, and it should not be.

When FDR launched the New Deal the size of government, public spending and debt were nowhere close to today’s elevated levels.

At the height of the New Deal, federal spending never went above the 1934 level of 10.7%.  Even considering the extraordinary cost of the Second World War period, public sending went from a maximum of 43.6% down to 11.6% by 1948.

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Disclaimer: All opinions expressed in the books, interviews and articles by Daniel Lacalle are strictly personal and do not reflect the strategy or philosophy of any specific firm.

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