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Abstract
Macroeconomic policies have devastating effects on the environment. They shape the economic processes that drive deforestation, soil erosion, the exhaustion of living marine resources, greenhouse gas emissions, and the massive loss of biodiversity. Despite this, the vital connection between macroeconomic policies and the environment has thus far received little attention by the academic and the policy-making communities.
Rethinking Macroeconomics for Sustainability reveals the linkages between monetary, financial and fiscal policies, and the environmental degradation that threatens the planet's biosphere. In doing so, it examines the complex lines of transmission from policy priorities all the way down to the effects at the local level, as well as analyzing the deep-seated relationship between macroeconomic policy models and their impacts on growth, peoples' livelihoods and the environment.
Besides exploring the relation between macroeconomic and climate change policies, as well as efforts to 'green' the world economy, the book considers five key case studies in Latin American economies. Going beyond this, it also sets out specific policy recommendations, both at the national and international levels. All this is based on the incontrovertible premise that macroeconomic policies must to be redesigned in order to attain long-term sustainability objectives, and that monetary and fiscal policies are as important for environmental stewardship as they are for growth and prosperity.
'This book couldn't come at a better time. As nations across the world debate macroeconomic policies to prevent and mitigate future financial crises, they will have to start asking hard questions regarding what the environmental impact of such policies may be. Nadal's book is groundbreaking because it ties macroeconomics and the environment, shows how one has impacted the other, and provides guideposts for reform and reconciliation. It is a must read for macroeconomists and for environmental economists, policy makers and advocates trying to grapple with the triple crises in finance, climate change, and development more broadly.'
Kevin P. Gallagher, Boston university
'Thoughtfully argued and eloquently written, this book is an indispensible treatment of the critical issues of economic growth and the environment.'
Frank Ackerman, Stockholm Environment Institute-US Centre, Tufts University
'Exceptionally good. Alejandro Nadal delivers a sharp critique of mainstream macroeconomics and conventional environmentalism, before moving on to integrate climate science, development policy and post Keynesian thought in a compact new synthesis. Lucid, original and forceful, this important book should become a teaching staple.'
James K. Galbraith, University of Texas at Austin
Alejandro Nadal is Professor at the Centre for Economic Studies of El Colegio de Mexico. He is co-chair of the Theme on the Environment, Macroeconomics, Trade and Investment (TEMTI) of the International Union for the Conservation of nature, IUCN.
Table of Contents
| Section Title | Page | Action | Price |
|---|---|---|---|
| About the author | i | ||
| Box, figures and tables | vi | ||
| Box | vi | ||
| 1.1 The invisible hand: metaphor or scientific result? | 24 | ||
| Figures | vi | ||
| 2.1 The IS–LM model | 62 | ||
| 2.2 Macroeconomic policy in the IS–LM model | 63 | ||
| 2.3 Environmental equilibrium in the IS–LM model | 64 | ||
| 5.1 Reprimarization: Argentine sectoral GDP 1935–2004 | 114 | ||
| 5.2 GDP and GDP per capita growth rates, 1990–2007 | 118 | ||
| 5.3 Costa Rica: evolution of GDP, 1992–2008 | 123 | ||
| 5.4 Costa Rica: evolution of inflation rates, 1984–2008 | 124 | ||
| 5.5 Ecuador: trade balance in monetary and physical terms | 128 | ||
| 5.6 Mexico: monetary policy and money supply | 134 | ||
| 5.7 Mexico: fiscal policy and Financial Requirements of the Public Sector | 136 | ||
| 5.8 Mexico: GDP and environmental costs | 137 | ||
| Tables | vi | ||
| 1.1 Annual GDP rate of growth, 1950–98 | 10 | ||
| 3.1 UNFCCC estimates of adaptation costs | 68 | ||
| 3.2 UNFCCC estimates of mitigation costs, 2030 | 71 | ||
| 5.1 Growth rates in GDP per capita: selected countries in Latin America | 106 | ||
| 5.2 Fiscal policy priorities in Argentina, 1993–2001 | 112 | ||
| 5.3 Brazil: cattle by region, 1995–2005 | 121 | ||
| Acronyms | vii | ||
| Acknowledgements | ix | ||
| Introduction | 1 | ||
| 1 | Macroeconomics and the environment | 9 | ||
| Introduction | 9 | ||
| Growth after the Second World War | 10 | ||
| table 1.1 Annual GDP rate of growth, 1950–98 | 10 | ||
| Box 1.1 The invisible hand: metaphor or scientific result? | 24 | ||
| Growth: friend or foe? | 26 | ||
| Concluding remarks | 32 | ||
| 2 | The macroeconomic policy connection | 33 | ||
| Introduction | 33 | ||
| Macroeconomics: evolutionary paths | 35 | ||
| Macroeconomic policy and the environment | 47 | ||
| Key issues for environmental macroeconomics | 53 | ||
| Concluding remarks | 58 | ||
| Appendix I: The IS–LM model and the environment | 59 | ||
| Figure 2.1 The IS–LM model | 62 | ||
| Figure 2.2 Macroeconomic policy in the IS–LM model | 63 | ||
| Figure 2.3 Environmental equilibrium in the IS–LM model | 64 | ||
| 3 | Macroeconomic policies and climate change | 65 | ||
| Introduction | 65 | ||
| Climate-change costs: how big a problem? | 66 | ||
| table 3.1 UNFCCC estimates of adaptation costs | 68 | ||
| table 3.2 UNFCCC estimates of mitigation costs, 2030 | 71 | ||
| Macroeconomic policies in the IPCC’s AR4 | 74 | ||
| Macroeconomic policies and climate change | 77 | ||
| Concluding remarks | 85 | ||
| 4 | The Green Economy Initiative | 86 | ||
| Introduction | 86 | ||
| The Green Economy Initiative | 87 | ||
| Sector-level analysis and macroeconomic policy constraints | 93 | ||
| Concluding remarks | 102 | ||
| 5 | Latin American focus | 104 | ||
| Introduction | 104 | ||
| Import substitution as a development strategy | 105 | ||
| table 5.1 Growth rates in GDP per capita: selected countries in Latin America | 106 | ||
| Neoliberalism in Latin America: the open economy model | 108 | ||
| Five country-level studies in Latin America | 111 | ||
| table 5.2 Fiscal policy priorities in Argentina, 1993–2001 | 112 | ||
| Figure 5.1 Reprimarization: Argentine sectoral GDP 1935–2004 | 114 | ||
| Figure 5.2 GDP and GDP per capita growth rates, 1990–2007 | 118 | ||
| table 5.3 Brazil: cattle by region, 1995–2005 | 121 | ||
| Figure 5.3 Costa Rica: evolution of GDP, 1992–2008 | 123 | ||
| Figure 5.4 Costa Rica: evolution of inflation rates, 1984–2008 | 124 | ||
| Figure 5.5 Ecuador: trade balance in monetary and physical terms | 128 | ||
| Figure 5.6 Mexico: monetary policy and money supply | 134 | ||
| Figure 5.7 Mexico: fiscal policy and Financial Requirements of the Public Sector | 136 | ||
| Figure 5.8 Mexico: GDP and environmental costs | 137 | ||
| 6 | Guidelines for macroeconomic policy and sustainability | 140 | ||
| Introduction | 140 | ||
| Redefining the central objectives of macroeconomic policy | 140 | ||
| Critical issues in macroeconomics and sustainability | 144 | ||
| Guidelines for macroeconomic reform | 153 | ||
| Concluding remarks | 161 | ||
| 7 | International macroeconomic reform for sustainability | 163 | ||
| International economics and sustainability | 163 | ||
| Reforming international macroeconomics for sustainability | 178 | ||
| Concluding remarks | 190 | ||
| Conclusion | 192 | ||
| Notes | 195 | ||
| Introduction | 195 | ||
| Chapter 1 | 196 | ||
| Chapter 2 | 198 | ||
| Chapter 3 | 201 | ||
| Chapter 4 | 203 | ||
| Chapter 5 | 205 | ||
| Chapter 6 | 209 | ||
| Chapter 7 | 210 | ||
| Conclusion | 213 | ||
| Bibliography | 214 | ||
| Index | 227 |