How to pay for saving the world: Modern Monetary Theory for a degrowth transition

Christopher Olk, Colleen Schneider and Jason Hickel

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: Degrowth lacks a theory of how the state can finance ambitious social-ecological policies and public provisioning systems while maintaining macroeconomic stability during a reduction of economic activity. Addressing this question, we present a synthesis of degrowth scholarship and Modern Monetary Theory (MMT) rooted in their shared understanding of money as a public good and their common opposition to artificial scarcity. We present two arguments. First, we draw on MMT to argue that states with sufficient monetary sovereignty face no obstacle to funding the policies necessary for a just and sustainable degrowth transition. Increased public spending neither requires nor implies GDP growth. Second, we draw on degrowth research to bring MMT in line with ecological reality. MMT posits that fiscal spending is limited only by inflation, and thus the productive capacity of the economy. We argue that efforts to deal with this constraint must also pay attention to social and ecological limits. Based on this synthesis we propose a set of monetary and fiscal policies suitable for a stable degrowth transition, including a stronger regulation of private finance, tax reforms, price controls, public provisioning systems and an emancipatory job guarantee. This approach can support broad democratic mobilization for a degrowth transition.

Keywords: degrowth; ecological macroeconomics; fiscal policy; job guarantee; Modern Monetary Theory; universal public services (search for similar items in EconPapers)
JEL-codes: E12 E50 (search for similar items in EconPapers)
Date: 2023-12-01
New Economics Papers: this item is included in nep-ban, nep-hme, nep-mon and nep-pke
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

Published in Ecological Economics, 1, December, 2023, 214. ISSN: 0921-8009

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