Financing a Green Economy

1. Financing a Green Economy …and the origins of Casino Economics and Fantasy Finance

2. Stages of Environmentalism Conservation John Muir

3. Stages of Environmentalism Regulation Rachel Carson

4. Stages of Environmentalism Investment E.F. Schumacher

5. Finance as Regulation • Preferential 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

6. Investment: What would a green or knowledge-based economy look like? • Focus on Services (human & environmental need): nutrition, access, illumination, education, etc. • Organization in closed loops: the ecosystem model.

7. Distinction between Investment and Gambling • Wall St. or Main St. • Phantom vs. Real wealth • The Economic Treadmill

8. Some basic facts • only 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.

9. Investment: 3 primary concerns limiting 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

10. Structural Problems • Prevalence of short-term over long-term investment • Single bottom line: full costs and social- & eco- benefits are invisible. • Lack of Democracy: input from stakeholders; financial control by ecopreneurs • Speculation: 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)

11. private & public fudiciary currencies certificates of deposit “fractional reserve” coins gold standard Breton Woods Currencies The Paper Economy “gold-exchange standard” metals “Interest Rate Standard” Casino Economy wheat, cattle, tools community currencies Money as Information: “Money is an information system used to deploy human effort.” (Linton) The Dematerialization of Money

12. Class and Scarcity • Basis of class in scarcity, material & cultural • Mass production & the Threat of Abundance • Waste: a means of artificially maintaining scarcity • Suburban sprawl / Arms industry : wasteful stimulus for the mass production economy 1945-75 • Financialization / Casino Economy : wasteful stimulus for the information-based economy 1980-2009

13. 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 Power • re-redistribution of income: offsetting wage hikes in the unionized sectors • Debt & the Economic Treadmill: Work-and-spend

14. 1970s: End of the Line for the Fordist Waste Solution • saturation of markets • social & environmental costs coming due: fiscal crisis of the state • limits to inflationary strategy • Vietnam war, decline of the dollar, German/Japanese competition • OPEC & the energy crisis • Petrodollars & Currency Crisis

15. 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

16. 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

17. Debt & Forced Economic Growth • Competition for money • Lack of purchasing power • 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

18. Debt in the US Economy • 1970s: debt 1½ the size of GDP • 1985: twice the size of GDP • 2005: 3½ times the size of GDP

19. 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

20. The Global Casino: Hijacking the Information Revolution • expansion of employment in speculative industry • Wall 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.

21. 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?

22. Who Does Corporate SRI? • Faith community, churches • mutual ethical funds for individual retail investors • Institutional investors (pension funds) interested in SD. • Commercial banks concerned with social and enviro risk in project finance and lending

23. 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

24. “Univeral” Investors & SRI • “Fiduciary capitalism”: the power of institutional investors • About 50% of US publicly-traded equity • Relationship to externalities in the economy • Convergence with SRI?

25. 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?

26. CERES Principles • Protection of the Biosphere • Sustainable Use of Natural Resources • Reduction and Disposal of Wastes • Energy Conservation • Risk Reduction • Safe Products and Services • Environmental Restoration • Informing the Public • Management Commitment • Audits and Reports

27. NGOs & Profit • A path for self-reliance? • Dangers • Hybrid networks and institutions?

28. Other Resources • Save 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