Financing a Green Economy

…and the origins of Casino Economics and Fantasy Finance

Stages of Environmentalism

Conservation

John Muir

Stages of Environmentalism

Regulation

Rachel Carson

Stages of Environmentalism

Investment

E.F. Schumacher

Finance as RegulationPreferential access to credit &

investment capital: one of the most important elements of a postindustrial incentive/disincentive structure

Crucial connection to emerging indicators of real wealth

Need for an alternative financial system

Investment: What would a green or knowledge-based economy look like?

1. Focus on Services (human & environmental need): nutrition, access, illumination, education, etc.

2. Organization in closed loops: the ecosystem model.

Distinction between Investment and Gambling

Wall St. or Main St.

Phantom vs. Real wealth

The Economic Treadmill

Some basic factsonly about 1 percent of

money on Wall St. goes to fund actual work or production.

small business represents about 50% of N. American economy, but gets less than 1 percent of total investment.

investment in local independent business creates 2-4 times as many jobs as investment in multinationals.

Investment: 3 primary concernslimiting social & environmental

destruction

taking control over our earnings & savings

financing regeneration despite Clean Tech, increasingly a small

business/community concern community investment key a ‘values-driven’ business issue

Structural ProblemsPrevalence of short-term over long-term

investmentSingle bottom line: full costs and social- &

eco- benefits are invisible.Lack of Democracy: input from stakeholders;

financial control by ecopreneursSpeculation: The Casino Economy: primary

function: soak up wealth beyond the consumption capacity of rich. Financialization.

SRI: "The biggest difficulty SRI faces is that it operates on an unspoken assumption that managers have genuine freedom to be socially-responsible.“ (Glickman and Kelly)

wheat, cattle, tools

metals

Currencies

coins

certificates of deposit

private & public fudiciary currencies

“fractional reserve”

gold standard

“gold-exchange standard”

Breton Woods

“Interest Rate Standard”

Casino Economy

community currencies

Money as Information: “Money is an information system used to deploy human effort.” (Linton)

The Dematerialization of Money

The Paper Economy

Class and ScarcityBasis of class in scarcity, material &

culturalMass production & the Threat of

AbundanceWaste: a means of artificially

maintaining scarcitySuburban sprawl / Arms industry :

wasteful stimulus for the mass production economy 1945-75

Financialization / Casino Economy : wasteful stimulus for the information-based economy 1980-2009

Keynesianism & the Crisis of Effective Demand

Baran & Sweezy: crisis of profitable investment outlets for capitalism.

Money: a tool of national economic planning. Strong domestic multipliers.

The Paper Economy: growing disjunction between the real & financial economies

 Planned Inflation & Purchasing Powerre-redistribution of income: offsetting

wage hikes in the unionized sectorsDebt & the Economic Treadmill: Work-

and-spend

1970s: End of the Line for the Fordist Waste Solution

saturation of marketssocial & environmental costs

coming due: fiscal crisis of the statelimits to inflationary strategyVietnam war, decline of the dollar,

German/Japanese competitionOPEC & the energy crisis

Petrodollars & Currency Crisis

Post-Fordist Casino Economy floating exchange rates: “interest rate

standard”Eurodollars & Petrodollars

new technologies & Megabyte Money financial sector: 30-50 times (?) larger

than the material economy Speculation: Stomp the weak / Get rich

quick Empty wealth creation: de facto

redistribution of wealth. The End of Mass Consumption & rise of

new “producer services”: new forms of ‘effective demand’.

Polarization of work and society end of social contracts: attack on Welfare State the growing gap between rich and poor

Where the US Economic Surplus Went, 1977 to 2007 Actual Wages vs. Productivity-enhanced Wages in the U.S.

Source: Les Leopold using B.L.S. data; The Looting of America, Chelsea Green Publishers, 2009

Debt & Forced Economic Growth

1. Competition for money

2. Lack of purchasing power

3. Wage dependency

equals

Export warfare

“The main point that needs to be understood is that in order for money to come into circulation, someone must go into debt to a bank. If there were no bank debt, there would be virtually no money—it’s as simple as that. Since banks charge interest on all this debt, and since the money to pay the interest can come only from further debt, debt grows like a cancer within the global economic ‘body.’ This debt imperative creates a growth imperative that is forcing us to destroy the life-support systems of the planet.”

--Thomas Greco

Debt in the US Economy1970s: debt 1½ the size of GDP

1985: twice the size of GDP

2005: 3½ times the size of GDP

Source: Magdoff , 2008: calculated from tables L.1 and L.2; Flow of Funds Accounts of the US; and table B-78 from the 2006 Economic Report of the President

The Global Casino: Hijacking the Information Revolution

expansion of employment in speculative industryWall St.: more advanced

technologically than the military.Bubble Economies: last ‘frontiers’

for capitalist growth.-stock crash of 1987-tech stock bubble of late 90s-housing bubble of 2001-07

Housing speculation: most destructive & exploitative of the poor & average people.

Speculation & Mainstream SRI

Is the stock market primarily concerned with investment?

Role of share price in “performance” of investments

How can qualitative factors be included in performance?

Who Does Corporate SRI?

Faith community, churchesmutual ethical funds for individual

retail investorsInstitutional investors (pension funds)

interested in SD.Commercial banks concerned with

social and enviro risk in project finance and lending

How Much Is Happening?

350 firms in EU for retail investors; .5% of total assets

3-5% of institutional investors

eco- and social banks & credit unions

“Univeral” Investors & SRI

“Fiduciary capitalism”: the power of institutional investorsAbout 50% of US publicly-traded equity

Relationship to externalities in the economy

Convergence with SRI?

Values-Driven Business & SRI

Debate about “going public”Beyond bootstrapping?: How can we

finance smaller-scale green alternatives?

Debt vs. Equity New enterprise networks &

institutions: development banks, loan funds, etc.

Local Stock Markets?

CERES PrinciplesProtection of the Biosphere Sustainable Use of Natural ResourcesReduction and Disposal of WastesEnergy ConservationRisk ReductionSafe Products and Services Environmental Restoration Informing the Public Management Commitment Audits and Reports

NGOs & Profit

A path for self-reliance?DangersHybrid networks and institutions?

Other ResourcesSave Wall St.? David Korten on NOW

on PBS http://www.pbs.org/now/shows/505/new-economy.html

NOW on PBS: Help for Homeowners? The Foreclosure Mess