This article is part 2 from Chapter 6 of Richard Heinberg’s new book ‘The End of Growth’, published by New Society Publishers. This chapter looks at ideas for post growth economics.
This second excerpt from Chapter 6 follows a section in the book called ‘The Default Scenario’ in which Richard describes the inevitable outcome of business as usual policies and a failure to recognise that economic growth is over.
To get past the wall of potential financial-monetary collapse, governments would have to resort to extraordinary emergency measures. In the best instance, this would create time and space to begin coming up with long-term, infrastructural responses to declining energy supplies and climate change—responses involving the redesign of transport systems, power generation and transmission systems, food systems, and so on. Of course, there is no guarantee that time, once gained, will be well spent. Nevertheless, in principle the wall can be traversed.
The solution is to have central banks create money out of nothing and to give it to their governments either to spend into use, or to pay off their debts, or give to their people to spend. In the eurozone, this would mean that the European Central Bank would give governments debt-free euros according to the size of their populations. The governments would decide what to do with these funds. If they were borrowing to make up a budget deficit—and all 16 of them were in deficit in mid-2010, the smallest deficit being Luxembourg’s at 4.2 percent—they would use part of the ECB money to stop having to borrow. They would give the balance to their people on an equal-per-capita basis so that they could reduce their debts, or not incur new ones, because private indebtedness needs to be reduced too. If someone was not in debt, they would get their money anyway as compensation for the loss they were likely to suffer in the real value of their money-denominated savings. Without this, the scheme would be very unpopular. The ECB could issue new money in this way each quarter until the overall, public and private, debt in the eurozone had been brought sufficiently down for employment to be restored to a satisfactory level.
“Adding money (“demand”) to an economy with high unemployment and unused productive capacity serves to increase productivity, increasing goods and services or “supply.” When supply and demand increase together, prices remain stable. And adding money to the money supply is obviously not hazardous when the money supply is shrinking, as it is now. . . . Financial commentator Charles Hugh Smith estimates that the economy now faces $15 trillion in writedowns in collateral and credit. If those estimates are correct, the Fed could, in theory, print $15 trillion and buy up the entire federal debt without creating price inflation. That isn’t likely to happen, but it does make for an interesting hypothetical.”