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Downloads/Impactassets Issuebriefs 1.Pdf Monetary institutions for a finite planet – Essays toward an ecologically-embedded political economy of money Romain Svartzman Department of Natural Resource Sciences Faculty of Agricultural and Environmental Sciences McGill University, Montreal June, 2020 A thesis submitted to McGill University in partial fulfillment of the requirements of the degree of Doctor of Philosophy © Romain Svartzman 2020 “Labor is only another name for a human activity which goes with life itself . ; land is only another name for nature, which is not produced by man; actual money, finally, is merely a token. The commodity description of labor, land, and money is entirely fictitious”. Karl Polanyi (1944/2001, p.75) Abstract This research advances the scholarship on how the monetary and financial system contributes to our ecological crises and is increasingly affected by them; and on the kind of reforms needed to re-embed monetary institutions within our planetary boundaries. The academic community and policymakers are increasingly aware of the vulnerability of the global financial system to the materialization of ecological risks. However, most approaches to the problem are grounded in an apolitical and therefore limited understanding of both ecological issues and of money and finance. This thesis departs from the neoclassical economics worldview supporting these approaches by building on two largely disconnected streams of research, which have respectively re-politicized: human-nature relationships, notably through ecological economics and the world-ecology perspective; the role of money and finance in capitalist dynamics, notably through post- Keynesian economics and institutional approaches to money. Together, these different perspectives point to the fact that, since the ways in which money is institutionalized result from conflicting views over what should represent value, the need to revisit our dominant value systems in the Anthropocene will require transforming our monetary institutional arrangements. By merging these ecologically- and monetarily-informed perspectives, this thesis addresses, in the form of essays, the following four critical topics: (i) The limitations of central banks’ theoretical framework to identify and manage ecological risks (“Green Swans”), including those related to climate change. Climate- related risks are not only too complex and nonlinear to be measured with precision, rendering existing financial risk models and climate-economic models largely useless, they are also impossible to hedge as long as system-wide action is not taken. This means that central banks, and with them, our existing monetary institutional arrangements, will unavoidably be dragged into uncharted waters in the age of climate and ecological risks. i (ii) The relative ability of the incipient field of ecological macroeconomics – at the crossroad between post-Keynesian economics and ecological economics – to overcome the limitations of mainstream environmental economics. While the field provides new policy tools that could be used for an ecological transition, it falls short of addressing both the political economy implications of different possible transition paths, and how human-nature relationships need to be revisited for the purpose of a finite planet. (iii) The need to revisit the so-called “monetary growth imperative” debate through institutionalist approaches to money, which nuance the findings of ecological macroeconomics. Whereas the post-Keynesian endogenous view of money shows that there is no mechanical impossibility to maintaining interest rates in a non- growing economy, its approach remains incomplete insofar as it dismisses the historical reasons that led to the generalization of interest-bearing debt and their connection to the aspiration of endless accumulation, which is incompatible with the physical reality of a finite planet. (iv) The need for, and obstacles to, a reform of the international monetary system (IMS) through ecologically-informed perspectives. Reforming the IMS will be essential to a global ecological transition but will first require addressing the political ecology of global imbalances. The international currency hierarchy that stands in the way of Peripheral countries’ development paths is inextricably related to an ecological hierarchy, which maintains these countries in the role of providers of cheap resources to the Center and recipients of multiple forms of pollution. These four essays bring complementary insights into the development of an ecologically- embedded political economy of money, one that can provide theoretical foundations to envision monetary institutions for a finite planet. ii Résumé Cette thèse vise à faire progresser l’état des connaissances sur la manière dont le système monétaire et financier contribue aux crises écologiques, comment il est affecté par celles-ci, et quels types de réformes pourraient être nécessaires afin de le ré-encastrer dans nos limites planétaires. Malgré une prise de conscience croissante par la communauté académique et les responsables politiques de la vulnérabilité du système monétaire et financier international aux risques écologiques, leur manière d’aborder le problème reste souvent ancrée dans une vision dépolitisée et donc incomplète des crises écologiques et de la monnaie. Afin de pallier ces lacunes, cette thèse repose sur deux courants de recherche qui ont re- politisé, d’une part, les relations entre systèmes humains et systèmes naturels, en s’appuyant notamment sur l’économie écologique et l’approche de l’écologie-monde (« world-ecology ») ; et, d’autre part, le rôle joué par la monnaie et la finance dans les dynamiques du capitalisme, en s’appuyant notamment sur l’économie post-keynésienne et les approches institutionnalistes de la monnaie. Ensemble, ces approches indiquent que la transformation des systèmes de valeur dominants qui est nécessaire pour faire face à l’Anthropocène ne pourra se faire sans revisiter nos institutions monétaires, celles-ci étant au cœur même de l’expression de la valeur. Cette thèse mobilise et croise ces différentes approches afin d’analyser, sous la forme d’essais, quatre sujets identifiés comme essentiels pour penser nos institutions monétaires à l’ère des crises écologiques : (i) Les limites du cadre théorique utilisé par les banques centrales pour identifier et gérer les risques écologiques extrêmes (« Cygnes Verts ») tels que ceux liés au changement climatique. La complexité et l’incertitude liées aux risques climatiques sont telles qu’elles rendent inopérants les outils traditionnels de gestion du risque et les modèles économie-climat. Les banques centrales sont par conséquent entraînées en terrain inconnu à l’ère du changement climatique et des risques écologiques ; iii (ii) La capacité de la macroéconomie écologique, à la croisée de l’économie écologique et de la théorie post-keynésienne, à répondre aux limites du cadre théorique dominant. Cette discipline encore naissante offre une panoplie de mesures pouvant être utilisées dans le cadre d’une transition écologique et ignorées par la théorie néoclassique. Néanmoins, elle ne parvient pas à s’attaquer à la question des relations entre systèmes humains et systèmes naturels, ni à penser l’économie politique des différents chemins de transition possibles ; (iii) Le besoin de revisiter le débat sur « l’impératif de croissance monétaire » à travers l’institutionnalisme monétaire. L’approche post-keynésienne a démontré qu’il n’y a pas d’impossibilité mécanique à prélever des taux d’intérêt dans une économie sans croissance. Cependant, cette approche ignore les raisons historiques qui ont mené à généraliser la pratique du taux d’intérêt, et leur articulation avec la recherche d’une accumulation infinie qui reste fondamentalement incompatible avec la finitude de notre planète ; (iv) L’exigence de réformer le système monétaire international (SMI) en vue d’une transition écologique, et les obstacles potentiels auxquels une telle réforme ferait face. Une refonte écologique du SMI ne pourra se faire sans s’attaquer à l’écologie politique des déséquilibres globaux : la hiérarchie entre devises qui empêche aux pays périphériques de développer des politiques économiques autonomes est intrinsèquement liée à une hiérarchie écologique, qui les maintient dans le rôle de fournisseurs de ressources peu chères et de réceptacles de pollutions multiples. Ces quatre essais apportent des enseignements complémentaires qui contribuent à poser les bases d’une économie politique de la monnaie encastrée écologiquement. Celle-ci s’avérera essentielle pour penser nos institutions monétaires dans une planète finie. iv Acknowledgments I would like to express my sincere thanks and appreciation to: Dr. Nicolás Kosoy for his invaluable guidance. His expertise and passion have been essential to find my path in the muddy waters of transdisciplinary studies. I am extremely grateful for all the time he dedicated to me, including long conversations that helped me define my research, trust in my ideas and make my thesis a fulfilling adventure. Dr. Peter G. Brown for believing in me from the very first day and for accepting me into the Economics for the Anthropocene (E4A) research initiative, while giving me the time and intellectual space to explore what I was truly looking for. He contributed to make a dream come true. Eli for her love and friendship, for the endless support throughout the ups and downs of this thesis, for taking interest in my research and helping me shape my ideas. My family, and in
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