Josh Farley on Monetary Policies for Ecological Economics
Video via http://vimeo.com/42636481
Discussion
Excerpted from a discussion by David Bollier of a talk by Josh Farley:
“What would “degrowth” look like and why is it needed? At the Degrowth conference in Montreal in May, Josh Farley, an ecological economist at the Gund Institute in Vermont, gave a brisk overview of the problems with our current debt-driven growth economy — and the feasible alternatives — in a seventeen-minute video. Farley and eight other co-authors give a more detailed critique in a paper that they presented, “Monetary and Fiscal Policies for a Finite Planet.”
Normally, I prefer to read a paper than to watch a video summary. But in this case, Farley is so compelling that I found it a pleasure to watch him deconstruct the conceptual errors of mainstream economic thinking and GDP. One fact that he cited really jumped out at me — in 1969 U.S. per capita consumption as measured by GDP was only half of current levels — and yet Americans were just as happy if not happier than they are now. Indeed, since 1969, there have been many declining metrics of health and happiness, such as greater obesity, infant mortality, etc.
For those dead-enders who insist that economic growth is a prerequisite to solving any of our social problems, it’s worth pausing on this fact — that Americans were in fact once healthier and happier despite consuming at half of contemporary rates. This proves that it is not utopian to think that we could lower our consumption and still be happy. It’s an historical fact!
Farley would like to conduct a more systematic study of how we might return to such a society. He calls his proposed research project “QOL 350,” which stands for the quality of life (QOL) that could be sustained at energy consumption levels not exceeding atmospheric concentrations of 350 ppm of carbon – the level that scientists say is needed to prevent climate change. A vital element of any QOL 350 vision, Farley says in his video, is to ensure greater fairness in economic distribution and to create institutions that encourage cooperative action.
Here’s the abstract for the paper Josh Farley and his co-authors submitted at the Degrowth conference:
- “Our current interest bearing, debt-based system of money creation exacerbates booms and busts, systematically transfers wealth and resources to the financial sector. Since interest rates exceed economic growth rates, this monetary system would be unsustainable even on an infinite planet, and it can only finance the creation of market goods and services. We must restore the power of money creation to the public sector, with built in mechanisms for reducing money supply over time as the economy contracts. This will allow the public sector to spend money as needed for public goods, including the restoration of natural capital, without going into debt.
This paper assumes the necessity of a steady-state economy. A steady-state economy must follow clear rules: renewable resource extraction cannot exceed the regeneration rate, pollution outflows cannot exceed absorption capacity, neither extraction nor pollution can threaten essential ecosystem functions, and essential non-renewable resources cannot be depleted faster than we develop substitutes. Currently, levels of throughput exceed all these rules. De-growth, defined as decreasing levels of throughput, is therefore an essential first step towards a steady-state economy.” (http://bollier.org/blog/what-does-degrowth-look)