Positive Money’s report Escaping Growth Dependency, published in early 2018, drew a link between the current debt-based monetary system and the escalating ecological crisis. The report also offered reforms and policies that would simultaneously tackle debt and promote a sustainable transition – akin to the Green New Deal currently receiving so much attention in the United States.

Last year, Mark Burton at Steady State Manchester authored a post arguing against some of the report’s conclusions. This post addresses those criticisms and re-situates monetary reform in the wider ecological movement.


The main argument of Escaping Growth Dependency (EGD) is that the incentive political leaders face to reduce real (as opposed to nominal) levels of debt is a source of ‘growth dependency’. In other words, governments seek to adopt growth-friendly policies even when that growth is environmentally unsustainable, since growth in gross domestic product (GDP) reduces the burden of debt – itself an important policy objective.

By contrast, Burton argues that unsustainable growth is a symptom of deeper, more structural issues with capitalism. To establish this, he presents a sophisticated analysis of the foundations of capitalist accumulation. However, he overreaches somewhat when he writes:

“The first error of PM then, is to see the provision of credit as primary, as driving capitalist accumulation, rather than something that emerges from it, more or less keeping pace with it, but far from driving it.”

Depicting credit relationships as a superstructure (or ‘pyramid’, according to the Lapavitsas passage Burton cites) mounted on the productive economy is a neat sketch. However, one suspects that the hyper-financialisation that has occurred in the world’s largest economies – in the US and UK in particular – has played a more significant role than ‘keeping pace’ with broader production, as Burton claims. Since 1950, the share of GDP contributed by the financial sector has almost quadrupled in North Atlantic economies. This over-expansion of finance and credit did indeed lead to the financial crash – but that crash did not see a return to an older, muted role for finance.

Bank lending is at the heart of this hyper-expansion. Burton is right to say that bank credit is the same as investment from funds, debt raised by bonds, etc., in the sense of allowing reinvestment and the generation of further profit. But he understates the importance of the difference between bank lending and these other forms of credit. New bank lending grows the money supply, while other forms of credit do not. And the growth in the money supply in just a few decades has been astronomical. This inordinate increase in purchasing power has enabled over-production, but also gears the economy towards an even more intense pursuit of short-term profit.


Burton’s appeal to theory is well intentioned. Such debates are important for ensuring the ecological movement has the right objectives.

However, his critique seems to misinterpret the mechanism presented in the report. EGD is mostly about governments and how the money and banking system shapes the incentives they face. An important, background assumption is that government policy is a major cause of our pursuit of growth.

The ‘sources’ of growth dependency identified in the paper are all reasons why an elected government with short time horizons would seek an ecologically destructive growth path. Later, Burton recognises this in his account of the causal mechanism presented in EGD (which comes later in his post). It is curious, then, that he first delivers his critique at the theoretical level of credit and accumulation, rather than questioning whether debt really influences policy (or whether policy can affect growth).

Nonetheless, it is noteworthy to see a paper by Tim Jackson and Peter Victor cited as evidence that credit economies do not lead to higher growth. However, even if that study casts doubt on the causal chain proposed in EGD, it is not quite clear which link is at fault. The contribution made in EGD is to theorise how governments’ interests lead to damaging, growth-promoting policies, and how a new perspective on money could break that particular link.

A weak relationship between credit-based monetary systems and higher growth rates may be caused by confounding factors that prevent government action from feeding through to growth. Therefore, Jackson and Victor’s empirical finding, while important, does not necessarily discredit the entire causal mechanism proposed by EGD.

Moreover, the paper does suffer from a major shortcoming in excluding housing investment and house price inflation. These are crucial elements because rising house prices presents an incentive for banks to lend to mortgages – loans secured on a house – which account for over half of bank lending in the UK. The FALSTAFF model used by Jackson and Victor also limits government’s role to spending, bond issuance, and taxing households. This construction downplays the power of the state to shape productivity and economic relationships in the private sector.

In summary, a research agenda for ecological monetary reform could ask which factors influence the credit-growth relationship, and how they vary internationally and over time, with a particular focus on politics and public policy.


Unconvinced by the proposal for a Sovereign Money System (SMS – one of two policy options discussed in EGD, the other being Sovereign Money Creation, or SMC), Burton describes his core elements of a banking system that would serve as an ecologically favourable alternative to what we have today. The main features include community banks and credit unions, joined together in networks, that lend locally and adhere to ethical and environmental principles; strict financial regulations for banks, restricting lending to the housing market and on financial intermediation; and a more active role for government, investing in public projects paid for by bond issuance, which serves as a ‘safe haven’ of long-term, low-risk assets.

These are all reforms Positive Money would be delighted to see introduced, and even receive mention in the paper. The SMS is a single (if attention-grabbing) proposal for a reform to end endogenous money creation in the economy and address some of the ways finance hurts the environment. It is by no means an exhaustive reform agenda. Burton’s criticisms of it are broadly in line with those made by other theorists. His claim that

“we can imagine the consequences of [allocation of public money by the government] under circumstances like the present with climate change denialists and fracking enthusiasts in positions of power”

is fairly spurious, given that the same criticism would apply to any attempt to coax governments into spending more on ecological and environmental projects. However, he is right to point out that an SMS would not necessarily improve the allocation of credit in the private sector from an ecological standpoint, and that other changes are also needed. An SMS would be no silver bullet – a notion that was admittedly implicit in too much of Positive Money’s earlier literature, but which a close reading of EGD should set straight.

EGD features a section that addresses the ‘Limitations of Sovereign Money’. There the report addresses how in a future financial system ‘it may be that we need banks which are capable of operating ‘close to the ground’ to assess and finance new renewable energy projects’, as part of much more widely and evenly distributed power networks. And:

“Ownership and governance is important because it determines what and whom banks are accountable to… Therefore, we will also need a diverse array of banking institutions that are fit for purpose to transition our economy at the community, regional and national levels… values-based banks such as green state banks, stakeholder banks, and ethical banks.”

This would apply as much to banks operating under an SMS (lending money saved in ‘investment accounts’) as to those in a more typical monetary system, to take steps towards fixing private credit allocation.

Nowhere in Escaping Growth Dependency is it assumed that ending fractional reserve banking is the only option for positive change. But the report does claim that monetary reform is often overlooked as a viable area of work for the ecological project. More than that: a ‘scarcity’ of money is all too often used to justify forestalling investment in the projects needed to move the economy towards a steady-state option. The changes to the banking sector Burton proposes would all square neatly with an increased use of publicly created money, via Sovereign Money Creation, to fund progressive spending priorities, such as the ‘greater supply of social housing’ and ‘redistribution’ he would like to see. Building a wish list of reforms to move beyond GDP growth is a pluralist project by necessity.