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Financing a Green Economy: Dangers and Pitfalls of Casino Economics and the Importance of Regenerative Finance

Explore the dangers and pitfalls of casino economics and the need for regenerative finance in building a green economy. Learn about the importance of qualitative development, investment in local businesses, and the challenges of full-cost pricing. Discover how financialization and the casino economy have shaped our economic system and explore the potential of a knowledge-based economy.

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Financing a Green Economy: Dangers and Pitfalls of Casino Economics and the Importance of Regenerative Finance

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  1. Financing a Green Economy…and the origins of Casino Economics and Fantasy Finance • the Dangers of Finance • the Importance of Finance • Finance & Information • Financialization & the Casino Economy • Regenerative Finance

  2. Dangers & Pitfalls • Qualitative or regenerative development requires a focus on end-use and use-value • an inversion of the relationship of means and ends typical of capitalism • [same as with manufacturing] the mission comes first • need to go beyond the industrial definition of wealth: money and material • premised on the development of indicators of qualitative wealth

  3. The Challenge: • work to build full costs into market prices • ...while avoiding putting everything in monetary terms • “natural capital” / “social capital” etc. • use social- & eco- indicators as much as possible

  4. Life as a market transaction?

  5. Stages of Environmentalism Conservation John Muir

  6. Stages of Environmentalism Regulation Rachel Carson

  7. Stages of Environmentalism Investment E.F. Schumacher

  8. 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

  9. 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.

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

  11. 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.

  12. 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

  13. 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)

  14. Scarcity & Class • Class: arose from societies with a permanent economic surplus. • Based in • control of scarce resources (the surplus) • monopoly of ‘high’ culture • Undermined by • material abundance (sufficiency) • Widespread cultural production

  15. Watershed of Industrialism: The Great Depression • Structural “Overproduction”: productivity outruns worker capacity to buy. • Beginnings of long-term crisis of “effective demand” • Waste: main development strategy to create demand without redistributing wealth.

  16. The Post WW II Waste Economy Permanent War Economy The Suburb Economy: Oil / Autos / Subdivisions

  17. “The greatest misallocation of resources in human history.” …James Howard Kunstler

  18. 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

  19. 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

  20. 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

  21. 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

  22. 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

  23. 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

  24. 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

  25. 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.

  26. Austerity: ‘Self’-imposed Scarcity • most repressive solution to the overextension & destructive impact of debt. --creditors rights virtually sacrosanct --a kick-start to the timid debt-based economy • the other obvious solution: clean slate / jubilee / debt amnesty --the traditional remedy down through civilization. But in an age of potential abundance, this risks undercutting class power altogether by eroding both material and cultural monopolies.

  27. Security Deliberately undermined by capitalism to create scarcity conditions. “Security” : a euphemism for defense against Abundance. -- focus of contemporary capitalist “economic development” National Security State Incarceration Industry Financial Industry Info Technology Industry

  28. The Economy & Culture of Fear Mainstream politics and media today are mobilized for the creation of fear, based in both scarcity and personal insecurity. Reality TV competitions, extreme fighting, Tea Parties, racist fundamentalism, cultural scapegoating, etc. Question: should we be careful of adding more fear, however justifiable? (climate change, etc.)

  29. Green Financial Strategy • Limit and starve Wall St. gambling • Find ways of getting capital to regenerative enterprise

  30. A New Paradigm of Security: Meet Everyone’s Basic Needs Eliminates fear on many levels. Deflates the coercive power of money—allows ethical values to factor into personal economic decisions. Geared as much to unleashing individual and community creativity as protecting the vulnerable. Essential for empowering informal sector production & “self-provision” Essential for unleashing Mass Collaboration in the Network economy Supports imagination & innovation that transforms other sectors: e.g. community business.

  31. Ending the Coercive Power of Money Community Currencies • especially account-money systems Basic Income Guarantees • the more universal, the better Public Provision of Services • health care, transport, housing, infrastructure

  32. Decommodifying Money diversification of forms of everyday exchange • supporting the informational character of currencies. • undercutting the scarcity-power of money. financial industry restructured as public utility and/or service industry. • money directed to priority areas of green development • transition: green Tobin tax new forms of remuneration • direct consumption; basic incomes; account-money; free food, health care & housing gradually enlarging the sphere of gift relationships consistent with new productive forces based in mass collaboration

  33. Regenerative Finance Toolbox • Cooperative investing • Impact investment • Local Stock Exchanges • Crowdfunding • Community investment & revolving loan funds • Public banking

  34. 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?

  35. 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

  36. 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

  37. “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?

  38. 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?

  39. 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

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

  41. 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

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