Voice of Future Generations

Creating an International Expert Commission on Future Finance

Dr. Maja Göpel, Ronde, 28 July 2008

What is an Expert Commission?

• An Expert Commission is the decision-making body for WFC programmes or projects. The group is composed of a Chair drawn from the Council, a staff coordinator, a Management Team member and members from the Council, Board of Advisors and staff.

• Academics, researchers, civil society, business persons and Members of Parliament will also be appointed as necessary.

• On the basis of the WFC’s mission to be a voice for the rights and needs of future generations, the Commissions identify best policies that will help create a more just, sustainable and peaceful world in the following manner:

From Information...

• Each commission will conduct and/or commission research consulting leading experts to prepare draft “Best Policy Reports” on the identified topic.

• The Commissions will identify the key elements of the challenges, the “Action Gaps”, and the implications of taking various actions.

• Each Report will define a set of best policies in line with the WFC policy selection principles that are usually presented as model legislation and proposals for closing gaps in international legislation.

• Each Commission will hold meetings that may be co-sponsored by other organizations and serve to finalize reports, recommend outreach strategies and plan concrete activities.

...to Action

Following the publishing reports, the WFC will then mobilize support for the adoption and implementation of specific policy recommendations by national parliaments and other decision making bodies. The reports will be published in several languages and distributed worldwide.

WFC promotional activities include amongst others :• The production of best policy brochures, books and DVDs,

development of Best Policy Award• International hearings for decision-makers with the e-

Parliament and a supportive online platform • Alert Mailings to decision-makers and opinion leaders• International conferences and enabling workshops

WFC Work Program on Future Finance

The WFC program on Future Finance seeks to define which role an economy should play in sustainable and just societies and how this can be adequately theorized.

Basic assumptions: 1. We need a paradigm shift and regulatory shift that make money and

markets means to higher societal ends again. 2. Currently, measures of environmental protection and social justice

are “costly” or “inefficient” and externalized wherever possible - creating a system that threatens stable living conditions for humanity and its planet.

How can Finance support sustainable activities that promote wellbeing and social justice of current and future generations of life on this planet?

Basic Principles for Sustainable Economies

1. Survival is impossible without eco-system services, making the economy a subsystem of a finite system

2. The economy is to serve the people (life) and not the people to serve the economy

3. Development is about people and not about objects

4. Monetary growth is not the same as development, and development does not necessarily require growth

5. The value principle is that no economic interest or activity can be above the reverence for life

Manfred Max-Neef, WFC Councillor & Barefoot Economist

Social Banks as Perfect Partners - Making Sense with Money

WFC policy reform work aims to protect and demand socially and environmentally oriented financial institutions that apply money as “a means to achieve positive social and environmental change.”

Expert Commission needs the experience of best practices to define the best policies that support them

Goals of the Commission work:

1. Identify systemic challenges to sound investment patterns

2. Challenge public myths and wrong measures that block change

3. Promote rules and laws that support just and sustainable finance

4. Target key institutions and players that could implement these rules

Future Finance:Work Program for 2008/2009

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Phase I: Planting the Seed• Selection of Commission Coordinator and formation of the

Expert Commission on Future Finance• Research and development of background report on crucial

players, positions and recommendations • Expert Commission meeting to define priorities and outreach

strategies

Phase II: Promoting Solutions• Outreach strategy with information material, media work,

online platform, parliamentary hearings, high-level meetings• Political advisory work, strategic alliance building and

advocacy at the relevant international conferences• Organization of an international conference

Future Finance:Work Program for 2010/11

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Phase III: Fostering Change• Promotion of a “core policy pack” on Future Finance• Enabling workshops with political decision-makers and legal

experts• Film on best success story

Phase IV: Expanding Activities• In-depth assessment of results and outcomes of outreach

and possible revision of strategy• Regional and/or substantial expansion of the work on Future

Finance

Goals of the Commission: Money as Servant, not Master

A sustainable and just financial system should:

1. regenerate the environmental resource base

2. reduce poverty and inequality

3. generate economic value

4. be carried out within an open and accountable system of governance

It would be part of an economy that:

1. serves the people and the planet

2. taxes bads and not goods

3. measures reality and not ideology

4. makes money the servant, not the master

Goals of the Commission: Money as Servant, not Master

1. Identify systemic challenges to sound investment patterns

• Money is capital: not equivalent to real goods or “enabler” of productive economic activity (5%), but a commodity itself that is invested in a financial market to generate high returns (interest, price/currency speculation)

• Unchecked credit creation allows banks to lend more money than they possess, effectively creating new money and new forms of it

• Short-terminism imperative and gigantic loopholes in accounting through off-shore centers and intra-corporate balancing

• Neoclassical globalization: competition imperative and free capital mobility leave little policy space to guide investment decisions towards societal benefits

• Uneconomic growth: social and environmental costs now outnumber economic returns, as concepts of optimal scale, marginal costs and benefits are absent in macroeconomics

• Inequity: poor people and countries are excluded from sound credit and trapped by interest on debts

Goals of the Commission: Money as Servant, not Master

2. Challenge public myths and wrong measures that block change

• There is no shortage of money: we witness an over-abundance of credit, as fractional reserve system allows private banks to “create” 90% of money

• Speculators gain more from instability: idea of hedging risks completely lost in casino capitalism, enterprise is now bubble on a whirlpool of speculation

• Private banking impacts public spending: seignorage of issuing new money now privatized, little no-interest money for path-breaking investments

• Growth and wellbeing: more monetary wealth does not equal more wellbeing, as this depends on social fabric, environmental services etc.

• Wrong indicators: we fail to price environmental depletion and even count wars as benefits when causing more “economic activity”

• Putting power on the agenda: big financial institutions today lack liability and are “too big to fail,” outsourcing risks, privatizing profits and socializing losses

Goals of the Commission: Money as Servant, not Master 1/23. Promote rules and laws that support just and sustainable finance

“The unchecked pace of globalization and the unfair distribution of its benefits and damages” are a widely shared concern and installing adequate global financial regulation an “urgent priority”*

• Lengthen the time horizon of investors: make speculation unattractive to avoid financial crises and increase planning security

– tapered tax system with rate inversely related to time of investment

– interest rate control back to central banks (long, short, risky, safe)

– demurrage currencies that lose value when they are not spent

• Downsize financial sector: capital controls to regain national policy autonomy from the global financial market

– country-by-country accounting

– negative enforcement of offshore contracts

– no “too big to fail” mega banks or financial institutions

– separate retail banking from corporate (merchant) finance and securities (Glass-Steagall legislation in US until 1990)

* Overcoming Economic Insecurity, 2008 World Economic and Social Survey, United Nations

Goals of the Commission: Money as Servant, not Master 2/23. Promote rules and laws that support just and sustainable finance

“The need to minimise costs in the absence of universal regulations to make firms responsible for the environmental impacts pf their activities, leads to a disregard for the natural environment, directly reducing the well-being of us all and threatening our long-term survival”*

• Internalization by Design: negative externalities should have financial consequences to

– a) discourage occurrences;

– b) encourage alternative innovation;

– c) change relative distribution of profits in economy

=> e.g. Value Depletion Tax (progressive for bigger companies?)

• Positive incentives that directly affect relative profitability of those whose profits translate into societal benefit

– subsidies for spur necessary innovation like renewable energies

– tax rebates for sustainable conduct

* From old economics to new economics: radical reform and a sustainable future, nef background briefing for WFC, 2007

Goals of the Commission: Money as Servant, not Master

4. Target key institutions and players that could implement these rules

“Finance will have to return to its role as servant, not master, of the global economy: to return to its given role of dealing prudently with people’s savings and providing regular capital for productive and sustainable investment”*

• Nation States: role of central banks, taxation, negative enforcement

• European Union: Beyond-GDP performance indicators, Common Consolidated Corporate Tax Base (formula apportionment on revenues), taxation, reform Basle II

• International Accounting Standards Boards (law in 100 countries): pull off-balance sheet structures back into books and require country-by-country reporting in TNCs = transparency in tax havens, end of abusive securitization

• Reform Bretton Woods and IMF or demand a new body to manage global taxation and spending

*A Green New Deal. Joined-up policies to solve the triple crunch of the credit crisis, climate change and high oil prices, Green New Deal Group 2008

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Dr. Maja GöpelCampaign Manager

World Future CouncilBei den Mühren 70D-20457 HamburgGermany

Phone: +49 (0)40 3070 914-23 Fax: +49 (0)40 3070 914-14Mobil: +49 (0)178 6170 860Email: maja@worldfuturecouncil.org

Thank you for your Attention!

www.worldfuturecouncil.org

Thank You!