Chapter 14: Reconciling the Policy Goals of Full Employment and Ecological Sustainability
INTRODUCTION As we have seen in this book, ecological economists believe that the growth of macroeconomic systems must be curtailed to achieve ecological sustainability. Impoverished nations aside, ecological economists are strongly urging governments to commence a rapid transition towards a steady-state economy. Naturally, this demands that restrictions be placed on the rate of resource throughput which, as was demonstrated in the previous chapter, severely limits the growth in real Gross Domestic Product (GDP). The problem confronting ecological economists is that, under the institutional arrangements of most countries, a growth rate of around two to three per cent is required to prevent unemployment from escalating. This raises a very important question: How can low rates of unemployment or, preferably, full employment be achieved in a low growth or steady-state economy? Ecological economists have been largely silent on this issue. I believe their failure to adequately respond to this question signiﬁcantly harms their cause. To answer the above question, the fundamental factors underlying the conﬂict between the sustainability and full employment goals are sketched. It is then argued that a critical step towards achieving full employment is the severing of the GDP-employment link. Following this, the various means to achieving full employment in a low growth or steady-state economy are surveyed and discussed. At this point, the IS-LM-EE framework is invoked as a means of assessing the use of expansionary demandside policies in circumstances where the incoming resource ﬂow is limited to an ecologically sustainable rate. Also analysed in the...
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