Modern Monetary Theory Would Hasten the Shift Off Carbon
A new economic theory now gaining traction could open the door for the trillions of dollars that will be needed to drive a rapid transition off carbon—in spite of the baked-in reflex to ask where the money will come from without driving governments deep into debt.
“That reflex is wrong, according to proponents of modern monetary theory (MMT), an emerging field of economics that shows government deficits aren’t the problem for countries that issue their own currency,” Gizmodo reports. “Instead, it’s political will and gauging the state of economic well-being, beyond metrics like deficits and GDP.”
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The thinking behind MMT “is basically that a government can never run out of money as long as it issues its own currency,” the publication adds. “That doesn’t give it licence to make the money printer go brrr with abandon, since that could lead to inflation. And it’s not that we shouldn’t tax Jeff Bezos since we don’t need tax revenue to pay for things.”
But the still-contested theory calls for what its lead proponent, Stony Brook University economist Stephanie Kelton, “calls a more holistic view of the economy that looks not just at government deficits but available resources like people, steel, ecosystems, and other serious deficits we’re starting to run up against.” Instead of what she calls “the deficit myth”, Kelton says policy-makers should pay attention to “the untapped potential” in the economy.
“We’ve already seen lawmakers approve trillions of dollars in spending in response to the coronavirus,” and Kelton “believes the economy has enough slack to handle quite a bit more spending without risking inflation,” Gizmodo adds. “With a crucial decade in front of us for climate action, that recovery money could be the seed that transforms the economy into one focused on clean energy, caring for each other, and centres justice.”
Read Gizmodo’s full interview with Kelton here.