Money & Sustainability: The Missing Link
5. Conclusion Surely the monetary system has amply proven its inadequacy in view of the frequency of systemic crises worldwide — averaging ten per year over the past forty years? It may be a banking crisis, a monetary crisis and/or a sovereign-debt crisis, or a combination of them. However, the tendency to consider each systemic crisis separately tends to obscure the common drivers behind all these crises. The 2007-2008 banking crash has been the worst on record so far. More catastrophic consequences were avoided through massive government support for the financial sector, followed by large-scale Keynesian stimulus programmes to avoid a deflationary depression. This has resulted in significant budget deficits and additional public debt. If we keep within monetary orthodoxy, pressures will continue to mount on governments to reduce their deficits by any means, including the dismantling of government-funded social safety nets. In parallel, the cost of baby boomers retiring and the need for massive support for a post-carbon economy present two unavoidable developments requiring large governmental financial resources. The only solution the financial sector has offered is the privatisation of most significant publicly owned infrastructures. How governments will be better financially positioned to deal with the critical needs of this decade at the end of this process remains unclear. Why would governments be more creditworthy when they have to pay rent for the public offices they once owned, or tolls for the use of highways that were previously free? Budgetary pressures and the threat of a major monetary crash will continue for many years. The social and political consequences are hard to imagine, but will no doubt include large-scale social unrest in a number of countries, which may favour more nationalistic and extremist political parties. Such movements are already identifiable both in the USA and in Europe even though the big financial squeeze is just beginning. History has shown that it is easier to start extremist movements than to stop them, and that such scenarios often end up being ‘resolved’ through conflict. The next chapters will deal with the following questions: • Beyond the symptoms, is there a systemic mechanism that explains endemic financial and monetary instability? If so, what is it? • Assuming that the monetary system can be stabilised, are our current monetary arrangements appropriate to deal with the challenges of the 21st century? To be precise, is today’s monetary structure compatible or not with the sustainability issues ahead? • Are changes in the monetary structure possible? If so, what should they be?
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