17 Pages Posted: 10 Dec 2011
Date Written: December 9, 2008
The present crisis in the global economy is more serious than anything that we have witnessed since the 1930s, yet policies designed to tackle it are limited and inadequate. Those that have been proposed, in terms of fiscal stimulus, rely on an outmoded view of the economy, where money can be used to force economic growth. Since the recognition of planetary limits such a strategy is no longer admissible. Instead, we need a global system where countries agree to limit their carbon dioxide emissions: this paper outlines the Contraction and Convergence model, which proposes that countries do this within a framework of equal per capita emissions for all global citizens. However, within the existing financial architecture such a policy would do nothing to prevent the US from continuing to print dollars and to use these to gain an unfair share of world production. Other countries controlling reserve currencies would also be able to avoid strict limits. The policy answer proposed is that of the Ebcu (environment-backed currency unit) — a neutral global trading currency to be used by countries that have also signed up to the C&C model.
Keywords: Financial crisis, credit crunch, Ebcu, Contraction and Convergence, climate change, Bretton Woods
JEL Classification: F02, F30, N20, Q40
Suggested Citation: Suggested Citation