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What’s to be done?
Action for sustainable developmentThe problem – and the solution
Let’s briefly recuperate: We’ve seen how the prime obstacle to sustainable development, that is, to poverty alleviation, sustained economic growth and proper environmental management worldwide, is lack of money. That lack of money is caused partly because the available money is poorly allocated: it is concentrated among rich individuals and corporations, who use it for consumption, speculation and investments aimed at obtaining short-term economic benefits. Investment in sustainable development, however, requires a long-term perspective. It is a public task, and therefore, the domain of government. But governments lack the money needed for investment in sustainable development, and as things are going , will be even shorter of funds in the future. Yet a large-scale reallocation of funds, from the (wealthy) private to the public sector is neither politically nor economically feasible. Moreover, it would not generate sufficient funds for the large-scale investment in sustainable development that is needed. For that it is necessary to create money.
Money creation is possible without creating inflation as long as the demand created by it does not exceed the productive capacity of society, and as long as faith in the value of money is maintained. Both can be achieved by making money creation the responsibility of an international financial agency that is well regarded in the financial community, such as the IMF. That agency should impose and enforce strict conditions on money creation, remain freed from political influences, and be supported by the main hard currency nations and the rest of the international financial community. Under those conditions the faith in the value of the existing and the created money can be maintained and demand-driven inflation prevented.
Everyone will benefit from money creation. The very poor will get access to services and a minimum income that will allow them to satisfy their basic needs. Lower and middle-income groups will benefit from better public services and more and better job opportunities. The rich and the business sector will benefit from expanded investment and business opportunities. And, very importantly, politicians and governments will benefit from happier voters and citizens.
So we have the choice. We can continue on our present path, with billions of people living in deprivation, thousands of people, most of them children, dying each day because of lack of basic services, a deteriorating environment and an economy in the doldrums. We can continue on this path to see things get worse, because of a deteriorating environment and very possibly, a downward economic spiral resulting in an expansion and deepening of poverty. Or we can choose to at least explore the idea of sustainable development financed by money creation. The only obstacle to doing so is economic dogma, an irrational fear that is not based on science or even solid reasoning, but a self-propagating incantation that has been sung so many times, by so many people, that everyone has begun to take its contents for granted.
Consider: the prime obstacle to resolving the many problems the world faces today, and the even worse problems lying ahead, is lack of money: the only production factor that can be created at will. A small set of unsubstantiated beliefs keeps this obstacle in place, and worse, obscures it to such an extent that few see it, and even fewer question it.
Question: So what’s to be done?
Answer: All individuals and groups with a genuine concern for what’s going on in our world should rally into a movement for sustainable development. That coalition should argue for opening the debate on money creation. The call for opening the debate should be aimed simultaneously at the international financial institutions, notably, IMF, World Bank and OECD, and at the international academic community. Goal will be to have leading economists "come out" and openly recognize that in principle, money creation for sustainable development is possible. From there on the challenge will be to force political decision makers to accept the premise, and to take the action required to put it on the international political agenda. The main task of economists and other experts will be to design the mechanisms and instruments that will allow for money creation for sustainable development without causing inflation or other adverse side effects on national and global financial and economic systems. The main task for politicians - spurred on by the movement for sustainable development - will be to work together to establish an international coalition for money creation for sustainable development. That coalition should then give the mandate to the relevant international agencies to implement and use the designed mechanisms and instruments.The main initial problem will be to have the first established economists cross the line. They will be taking a considerable risk in facing the initial scorn of their colleagues. However, once the first pundits have crossed others will follow. As indicated elsewhere on this site (see ppp Economic Faith) it should be recognized that academic debate on new paradigms is, as a rule, less based on arguments and reasoning than on personal attacks and the corresponding animosity. Likewise, the goal of such debates is, for the academic establishment, not the improvement of their science but to protect established reputations, leading positions, and the corresponding access to financing.
Question: What should happen once the possibility of money creation for sustainable development has been put on the agenda?
Answer: As already indicated, the movement for sustainable development should demand of their governments that the principle is put into practice. That would entail 1) the refining of economic measurement to make reliable estimates of the productive capacity of national economies and the global economy, so as to be able to determine how much money could be created and invested without causing inflation, 2) the creation of national, regional and global sustainable development programs, with time frames and cost estimates, to be financed through money creation, 3) the design of monitoring mechanisms that would ensure that money is adequately spent and that the created money flowing into the economy does not cause inflation, and 4) the design of measures to be taken in case money is inadequately spent, and/or inflation would occur.Parallel to the above the academic economic community should be pressed to develop a new kind of economics, aimed at answering the question of how to satisfy the needs of all of humanity as well as create wealth in an ecologically sustainable and socially just manner. This new economics should address the real limitations in economic development in the most effective way, using the quantity of money as an instrument.
The above would entail a radical expansion of the roles of the international financial institutions, notably the much-maligned IMF. The IMF would not only function, as it does at the moment, as a global monetary watchdog and lender of last resort. It would also become responsible for creating and issuing money required for sustainable development in accordance with the needs of participating economies, without causing inflation, and in ways that would ensure that the money is properly spent. To fulfil this role adequately the IMF should be free of political interference, i.e. of influence peddling by either rich or poor countries. Instead the organization should be managed and supervised by highly qualified professionals with no ties whatsoever to a particular national government. This conversion of the IMF and comparable organizations to politically independent agencies, where policy is made purely on the basis of technical criteria, would be another key issue for the movement to press.
Question: What, if anything, does the above described focus for action imply for individuals and groups striving for sustainable development? In particular, the enormous variety of action groups and non-governmental organizations that now rally against globalization?
Answer: the myriad action groups and other organizations of the anti-globalization movement have the potential to become the spearhead of the movement to promote money creation for sustainable development. Indeed, at present it is difficult to imagine another force with the potential to do so. But a radical change in approach is needed. Mostly, these groups are now, or are perceived to be, against things: against globalization, against capitalism, against corporations, against free trade, and against the IMF and the World Bank. They get together to protest but for the remainder, pursue their own agendas. Therefore, it is difficult to establish what they are for. The challenge is to convert their opposition to a proposition: money creation for sustainable development. A proposition that will, in almost all cases, be instrumental in achieving the current, widely diverse goals of the organizations involved. Some flexibility will be required: for example, participants in the movement will have to accept that what is now one of their favorite enemies, the IMF, will get to play the key role in this initiative. That acceptance could be facilitated, first, by the consideration that the mission, operation and political dependency of the IMF would be altered radically. Second, acceptance of the role of the IMF would be fostered by the notion that it would be the only organization with sufficient status in the international financial system to make money creation work.Joining forces to promote money creation, then, will require a major shift in the thinking and mode of operation of most of those striving for sustainable development. Let us hope that the people and organizations involved can make that shift – by realizing that jointly, they hold the key to the only approach that would enable society to set in motion the worldwide drive for sustainable development on the needed scale.
See also Global Development, the book: Chapter XIII - Strategy
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