According to a new study led by a researcher at Freie Universität Berlin's Otto Suhr Institute of Political Science, the level of gross domestic product (GDP) has no impact on the ability of states with monetary sovereignty to fund investments in radical decarbonization measures and ambitious social policies such as universal public services and a job guarantee. The study, 'How to pay for saving the world: Modern Monetary Theory for a degrowth transition,' has just been published in the journal Ecological Economics.
Ecological EconomicsAccording to a new study led by a researcher at Freie Universität Berlin's Otto Suhr Institute of Political Science, the level of gross domestic product has no impact on the ability of states with monetary sovereignty to fund investments in radical decarbonization measures and ambitious social policies such as universal public services and a job guarantee.
Degrowth presents governments with the question of how to finance the necessary ecological and social measures during this process of transformation—a question that Olk and his fellow research team members want to answer. They argue that public investment can be increased without GDP growth and that the process of degrowth simultaneously dismantles destructive, less necessary industries and prevents inflation.
The limits of public spending are therefore the social and environmental limits of production. According to Olk, for public investment in rapid decarbonization to occur, some resources that have thus far been used for production that is less necessary on a social level must be shifted to sustainable sectors through targeted policies.
"Governments are not doing what is necessary to protect our livelihoods in the face of an escalating climate crisis," explains Olk."But people can only demand better if they understand that climate inaction is not justified by any macroeconomic constraints. It is exclusively a matter of political power."
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