Paying for a Green New Deal

by John M Repp

China over the last 45 years has developed a moderately prosperous society with a huge middle-class. Their middle-class is now at least three times larger than the middle-class in the United States, where unfortunately the middle-class is shrinking. In the process China increased their money supply by over 5000%. According to the economic theory used by economists in the United States and most of the western world, that large an increase in the money supply should have caused massive, maybe even runaway inflation. But China did not have massive inflation. How do we explain that?

Capitalism has several forms. We in the U.S. have financial capitalism instead of industrial capitalism. We have hedge funds buying a business, then stripping the valuable property from the business like land and the still profitable portions of the business, and then turning around and selling off the business for a huge profit, saying it was a “new and improved” operation and simply ignoring the huge debt the plunderers saddled the new business with. Remember Kmart, Sears and Payless; they were all destroyed by financial capitalism. This type of thing makes the GDP (the gross domestic product) look good but makes the economy worse for ordinary people. Hence the “affordability crisis.”

Trump would like to turn the United States into a modern version of the industrial capitalism, the system that “made us great” or at least made the top 1% wealthy, but he gets most of his financial and political support from financial operators who profit immensely off the current financial system.

But, back to China. China is not a purely socialist system like was the case with the former Soviet Union after the Russian revolution. China is a mix of socialist and capitalist features. Private companies, including many American private companies operate there. This short essay is not a justification of the authoritarianism of the current Chinese government.

So again, how did China avoid inflation with that amount of increase in their money supply? If we can understand this and do it ourselves on the scale needed, we could rejuvenate our economy and lead the transformation needed to deal with climate change while strengthening our middle-class. We may also need to use some tariffs, but not as a bargaining tool so the President can corruptly receive personal favors, but as a way to make the costs of production more equal to the costs of the item from other countries with lower wage rates like China and Vietnam.

The Chinese have government-owned banks and those banks loan money only to projects that will increase the goods and services available to export or consume. Chinese banks will not loan money to private financial operators. Another advantage the Chinese have, or rather publicly owned banks have, is the interest on the loans goes back to the government rather than becoming profits for private bank owners. Often half the cost of a new project would be the interest rate on the multiyear loan, but that money goes back to the government if the government owns the banks. That also means the government doesn’t need to tax so much. Again, despite what most people in the U.S. think, most of the corporations and companies in China are privately owned, just not the banks. Public banking and the financing of the production of real goods and services the people want and need is the key to how China has been able to  expand its money supply so much and not cause inflation. It is also way the United States could pay for a green new deal.

Ellen Brown, a key proponent of public banking in the United States, has written that New York City (NYC) should establish a public bank to finance the changes the newly elected mayor-to-be Mamdani has suggested NYC needs to become affordable. Mamdani agrees and here is a quote from him:

“We will build a city-owned bank — not to serve shareholders, but to serve you. A bank that invests in housing, in transit, in climate resilience. A bank that puts our money to work for our people.”
— Zohran Mamdani, Victory Speech, Nov. 4, 2025