Ecological transition in a monetary economy of production: a heterodox approach

Abstract

The global warming challenge is probably the major issue of our epoch, calling for a concerted response involving as many entities as possible. The economic system being the main responsible of this troubling situation, it is logical to address it first. The actual monetary economy of production has the banking system as the main driver of its functioning which justifies putting our attention on it. Central banks play a prominent role in such a system. They thus dispose of a relevant room for maneuver, which constitutes one of the main topics addressed here. Before that, this article discusses environmental concerns in a monetary production economy, advocating for an ecological economics approach as our privileged analytical foundation and highlighting the seminal role of the banking system in the monetary essence of our economic system, thus calling for an effort to enrich current monetary policy practices which must depart from the myth of ‘market neutrality’. We therefore propose four axes of intervention with regard to the greening of central banks’ action, which aim at redirecting credit away from carbon-intensive activities and towards low-carbon economic sectors. As needed as it is, adjusting monetary policy would however not suffice, the actual climate crisis being enrooted within the economic growth mantra applied through a profit-seeking scheme. A questioning of the very basis of our economic system is thus required to make the economy sustainable and finally safeguarding the conditions of life on earth.