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The Need for a Great Transformation

Though investments in renewable energy and green infrastructure are necessary for building a sustainable world, they are not sufficient. Barring an overhaul of the global financial and monetary system, humanity will keep stumbling from one massive, destabilizing crisis to the next.

LONDON – Today’s global economy suffers from multiple imbalances. The fundamental economic objective of endless “growth” fuels increases in heat-trapping atmospheric gases above and beyond what the planet can sustain. Urbanization, pollution, soil erosion, deforestation, the destruction of wildlife, and the degradation of marine ecosystems: these and other consequences of economic activity threaten humanity’s life-support system.

Worse, these ecological imbalances are further compounded by economic imbalances. The overproduction of oil, steel, diamonds, and cocoa (to list just a few examples) is at odds with declining global purchasing power, which is driving a trend toward “underconsumption” (as first defined by the economist John A. Hobson in his 1902 book, Imperialism).

Moreover, persistent imbalances between countries with large current-account surpluses and deficits create international tension, leading to protectionism and trade wars. Even before COVID-19, capital-account imbalances had rendered many countries vulnerable to capital flight or sudden stops. Global financial imbalances are of the greatest concern. The generation of boundless private and public credit has eclipsed the global income needed to pay down debt. Reckless lending to “special purpose acquisition companies” that borrow to finance spurious “undertakings which shall in due time be revealed” has resulted in a proliferation of financial bubbles.