It's not the 'what', but the 'how': Exploring the role of debt in natural resource (un)sustainability

Gonzalez-Redin, Julen, Polhill, J. Gareth, Dawson, Terence P., Hill, Rosemary, and Gordon, Iain J. (2018) It's not the 'what', but the 'how': Exploring the role of debt in natural resource (un)sustainability. PLoS ONE, 13 (7). e0201141.

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Abstract

A debt-based economy cannot survive without economic growth. However, if private debt consistently grows faster than GDP, the consequences are financial crises and the current unprecedented level of global debt. This policy dilemma is aggravated by the lack of analyses factoring the impact of debt-growth cycles on the environment. What is really the relationship between debt and natural resource sustainability, and what is the role of debt in decoupling economic growth from natural resource availability? Here we present a conceptual Agent-Based Model (ABM) that integrates an environmental system into an ABM representation of Steve Keen's debt-based economic models. Our model explores the extent to which debt-driven processes, within debt-based economies, enhance the decoupling between economic growth and the availability of natural resources. Interestingly, environmental and economic collapse in our model are not caused by debt growth, or the debt-based nature of the economic system itself (i.e. the 'what'), but rather, these are due to the inappropriate use of debt by private actors (i.e. the 'how'). Firms inappropriately use bank credits for speculative goals–rather than production-oriented ones–and for exponentially increasing rates of technological development. This context creates temporal mismatches between natural resource growth and firms' resource extraction rates, as well as between economic growth and the capacity of the government to effectively implement natural resource conservation policies. This paper discusses the extent to which economic growth and the availability of natural resources can be re-coupled through a more sustainable use of debt, for instance by shifting mainstream banking forces to partially support environmental conservation as well as economic growth.

Item ID: 55078
Item Type: Article (Research - C1)
ISSN: 1932-6203
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Copyright Information: © 2018 Gonzalez-Redin et al. This is an open access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.
Additional Information:

Correction issued 13 Aug 2018: Gonzalez-Redin J, Polhill JG, Dawson TP, Hill R, Gordon IJ (2018) Correction: It's not the 'what', but the 'how': Exploring the role of debt in natural resource (un)sustainability. PLOS ONE 13(8): e0202509. https://doi.org/10.1371/journal.pone.0202509

Date Deposited: 15 May 2019 05:50
FoR Codes: 14 ECONOMICS > 1402 Applied Economics > 140205 Environment and Resource Economics @ 100%
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