This page is part of the site Global Development, dedicated to promoting a new approach to eliminating poverty, reversing environmental deterioration and generating sustained economic growth that benefits all of humanity. The site has been developed by Frans Doorman. No copy rights are claimed, but those using material are kindly requested to name the source.
Global sustainable development: a summary
This site discusses the need for setting in motion a global investment program for sustainable development, to be financed in a way that radically departs from orthodox economic policy. The key points made can be summarized as follows:
- The current tool kit of economic, social and environmental policies does not offer solutions to the problems of global poverty, environmental deterioration and lackluster economic growth. Due to population growth, deterioration of agricultural land, and water shortages, poverty is likely to broaden and deepen in the coming decades rather than diminish.
- The currently promoted "road map out of poverty" for poor nations, based on promoting exports, international trade and foreign investment, is feasible only for a handful of relatively developed, smaller countries. It does not address the key problem of poor countries: lack of local demand, caused by a lack of money.
- The lack of money is worsened on the one hand by the ongoing outflow of money to service international debts. On the other hand, local capital is mostly held by a small political and economic elite that moves it to where higher returns can be obtained at lower risk.
- For the rich countries the pundits see an increase in domestic demand as the way out of the current economic downturn. With consumers, business and the public sector all heavily indebted, it is not clear how the required increase in demand is to come about. Graying populations, the unsustainable current account deficits of the US and bad debt in Japan can worsen the situation in the coming decades.
- No money, no demand. No demand, no investment, and no consumption. The key economic problem, then, in rich and especially poor countries, is lack of money. As a result, the world’s productive capacity is underused: there is a gap between productive capacity and demand. Rising productivity, due to ongoing technological progress, will increase this gap.
- Demand for goods and services should be increased through the implementation of a global investment program for sustainable development. This program should aim to eliminate poverty by assisting the poor in satisfying their basic needs, and by giving all of humanity access to basic public services such as education, health care, clean water, and sanitation. The program should also address environmental deterioration and strengthen the functioning of government.
- A large-scale public investment program for sustainable development would kill two birds with one stone: it would counter poverty and environmental degradation and increase demand. The latter would result in sustained economic growth, in rich as well as poor countries.
- The money needed for a global sustainable development program cannot be generated in conventional ways, though taxation and borrowing. It would, therefore, have to be created. There are no physical limitations to money creation: certainly today, with much of the money supply already being virtual, money can be created at will.
- The main obstacle to money creation for sustainable development is economic dogma. One of the key tenets of orthodox economics is that money creation will unavoidably lead to inflation. However, that does not necessarily have to be the case if it complies with two conditions. The first is that it the influx of money should not exceed what the economy can handle. That means the extra demand created by it should not cause overall demand to exceed production capacity. The second condition would be that faith in the value of money would be maintained.
- To comply with these conditions, money creation and its supply to countries for investment in sustainable development should be centrally managed, and tied to strict conditions. Independent experts should closely monitor the expenditure of the created funds and its effects on the economy. A revamped IMF could come to fulfil this role, if it would be allowed to function without political interference, as a kind of global central bank.
- In this new model the IMF and its dependencies at national level would have a new main role: to match the money supply with the productive capacity of society. The overall aim would be to foster the optimal allocation of scarce production factors (land, labour, capital goods, natural resources and entrepreneurship) to satisfy not only economic demand but all of humanity’s basic needs, as defined by the principles of sustainable development.
- In this new economics money would no longer be considered as a scarce factor, but as a variable to be manipulated so as to optimise the use of the production factors that are tied to physical limits.
- Persons and groups genuinely concerned with fighting poverty, environmental deterioration, and the world we leave behind for future generations, should jointly push to open the debate on money creation for sustainable development. The call to do so should be aimed at all forums where global development is discussed, including the international academic community and the international financial institutions, notably IMF and World Bank.
- The anti-globalisation movement could become the spearhead of a movement to promote money creation for sustainable development. That would help to change its current "anti" image (anti-globalisation, anti-corporation, anti-free trade, anti-IMF) to a more positive "pro" image: pro-sustainable development.
For a further elaboration of these points return to Global Sustainable development: the issues.
Alternatively, for a more extensive summary go to Globalization and global development: realities and requirements
(Back) to Homepage Global Development
For contact details see Homepage