Abstract
A debt-based economy cannot survive without economic growth. However, if private debt consistently grows faster than GDP, the consequences are financial crises and the current unprecedented level of global debt. This policy dilemma is aggravated by the lack of analyses factoring the impact of debt-growth cycles on the environment. What is really the relationship between debt and natural resource sustainability, and what is the role of debt in decoupling economic growth from natural resource availability? Here we present a conceptual Agent-Based Model (ABM) that integrates an environmental system into an ABM representation of Steve Keen’s debt-based economic models. Our model explores the extent to which debt-driven processes, within debt-based economies, enhance the decoupling between economic growth and the availability of natural resources. Interestingly, environmental and economic collapse in our model are not caused by debt growth, or the debt-based nature of the economic system itself (i.e. the ‘what’), but rather, these are due to the inappropriate use of debt by private actors (i.e. the ‘how’). Firms inappropriately use bank credits for speculative goals–rather than production-oriented ones–and for exponentially increasing rates of technological development. This context creates temporal mismatches between natural resource growth and firms’ resource extraction rates, as well as between economic growth and the capacity of the government to effectively implement natural resource conservation policies. This paper discusses the extent to which economic growth and the availability of natural resources can be re-coupled through a more sustainable use of debt, for instance by shifting mainstream banking forces to partially support environmental conservation as well as economic growth.
Highlights
Humanity has failed to make sufficient progress in solving most environmental challenges, such as climate change, freshwater availability, deforestation, marine fisheries collapses, among others [1]
Our model shows that the economy does not grow or become unstable due to the debt burden enhanced by the monetary system, or the debt-based nature of the economic system itself–but rather this is the outcome of the inappropriate use that firms and speculators make of debt
Our results show that the economy does not necessarily have to grow or become unstable due to the debt burden encouraged by the monetary system; yet this is the common outcome because of the inappropriate use that firms make of credits, i.e. for speculative and the pace of increasing technology efficiency processes
Summary
Humanity has failed to make sufficient progress in solving most environmental challenges, such as climate change, freshwater availability, deforestation, marine fisheries collapses, among others [1]. This has produced a number of discussions that highlight the impossibility of continuous economic growth within the ecological boundaries of our planet [2, 3]. This monetary business-as-usual trajectory requires the production of more goods and services [7]–along with pollution and resource use–and enhances the probability of system breakdown [8]
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