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The Macroeconomics and Financial System Requirements for a Sustainable Future

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Finance and the Macroeconomics of Environmental Policies

Part of the book series: International Papers in Political Economy Series ((IPPE))

Abstract

The paper develops a macroeconomic analysis along broadly defined Post Keynesian and Kaleckian lines, which incorporates ecological constraints on the pace of economic growth. Since growth is viewed as demand-driven, this involves bringing demand into line with the sustainable ‘ecological footprint’. A simple model of demand-driven growth is constructed from which some basic conclusions are drawn of the consequences of slower growth and lower investment, including those for the rate of interest and the rate of profit. The macroeconomic policy to deliver full employment is indicated. The growth of the effective labour force and the sustainable rate of growth of the ‘ecological footprint’ are introduced and the relationships between them and the demand-driven rate of growth is explored. The macroeconomic analysis has to be embedded with analysis of the monetary and financial system. For this purpose a circuitist analysis is presented. The paper considers the ways in which the monetary and financial systems should be restructured to be consistent with sustainable growth and low unemployment. The major aims of this restructuring would be to underpin financial stability, and more importantly to focus the financial sector on the allocation of funds into environmentally friendly investment.

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Author information

Authors and Affiliations

  1. University of Leeds, UK

    Giuseppe Fontana & Malcolm Sawyer

  2. University of Sannio, Italy

    Giuseppe Fontana

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  1. Giuseppe Fontana
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  2. Malcolm Sawyer
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Editors and Affiliations

  1. University of Cambridge, UK

    Philip Arestis

  2. University of Leeds, UK

    Malcolm Sawyer

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© 2015 Giuseppe Fontana and Malcolm Sawyer

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Fontana, G., Sawyer, M. (2015). The Macroeconomics and Financial System Requirements for a Sustainable Future. In: Arestis, P., Sawyer, M. (eds) Finance and the Macroeconomics of Environmental Policies. International Papers in Political Economy Series. Palgrave Macmillan, London. https://doi.org/10.1057/9781137446138_3

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