Transforming Finance to Grow Green Sustainable Economies

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For InterPress Service
© Hazel Henderson, 2011

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By Hazel Henderson © October 2011

“We recognize finance as part of the global commons,” affirms the Transforming Finance statement, signed by financial professionals worldwide critical of today’s casino capital markets. Financialization has produced the global debt bubble. Needed now are write-offs and haircuts to bond-holders and bank shareholders, a curb on bettors buying credit default swaps, as well as below 1% financial transaction taxes to limit volatility and high-frequency trading by computers – now 60% of all transactions. All those seeking cleaner, greener, fairer sustainable economies must join with financial and market reformers to restore finance to its proper role of serving, not exploiting, real local economies worldwide.

Key innovators pioneering more ethical markets and engaging the business and financial sectors have included the ILOUNEP-FI and more recently the UN Global Compact and the UN Principles for Responsible Investing. Private groups include the Social Investment Forum, Calvert, Ceres, World Business Council for Sustainable Development, Instituto EthosBSRThe Future 500, SVN, the Green Economy Coalition and now hundreds of mutual funds and asset managers offering ethical green investments. The UN Preparatory Meeting for Rio+20 for Latin America and the Caribbean, while emphasizing the importance of transitioning to green, sustainable development, focused on poverty, green jobs and the responsibilities of corporations and financial reforms curbing speculation and “neoliberal” policies.

Yet the power of mainstream finance still dominates governments, forcing taxpayer bailouts, raising public deficits and demanding “austerity,” cuts in safety nets, public services and jobs. The wider but fragmented forces pushing for greener, fairer sustainable economies have not yet confronted these Lords of Finance. The economics profession (never a science) has clothed finance, banking and markets in obfuscation, using convoluted math and unnecessary complexification to hide the truth: economics is politics in disguise (Inside Job). In my Politics of the Solar Age (1981), I described “economists as apologists” – providing cover for the powerful, justification for privilege, patriarchal structures and policies. (See Henderson editorials). I exploded their myths: financiers do not provide capital – they are merely intermediaries; money is not wealth, but an information system designed track and keep score of human transactions, social and environmental capital. Today the arcane politics of money-creation and credit-allocation by central banks and their cronies in financial markets now manipulate money-printing. These global bubbles of fiat money, credit and debt starve the world’s real economies.

The spate of international meetings leading up to the Rio+20 summit in June 2012, at last, are engaging with global casino finance. Short-changed social, health and environment ministries, together with professional and scientific bodies, academics and CSOs are facing down the bastions of finance, central banks and economic ministries and their academic apologists. As yet another financial crisis looms, politically weaker social ministries and their allies are illuminating the hidden connections between out-of-control financialization and their concerns for global poverty, inadequate healthcare, education, access to energy, water and the costs of environmental destruction and climate change. Brazil’s President Dilma Rousseff set a similar tone at the UN General Assembly.

The debates worldwide, IISD negotiations in preparation for RIO+20, are clarifying how the current financial system, markets and flawed economic indicators are actually exacerbating poverty, social and environmental destruction. Speculation in commodities, especially food and oil clearly contributes to rising food and fuel prices – often causing rising political backlashes. GDP averages incomes per capita – hiding poverty gaps and has no asset account to value public infrastructure and offset public debt. The deeper dilemma that all face is the influence financiers hold over government policies, through their lobbying and, now in the USA, unlimited special interest money pouring into elections. While voters, taxpayers and citizens take to the streets in frustration, trust in markets, governments, politicians, businesses and confidence in all institutions plummets.

We learn how bankers and financiers fought ferociously to weaken the reforms in the US 2010 Dodd-Frank law. They shaped the law to defer action to regulators who now are surrounded by these same financial lobbyists, bent on weakening the new rules. Similar power plays attacked the UK’s Vickers Independent Commission on Banking which called on “ring-fencing” retail banking and shielding depositors from the risks of trading and investing activities. This would begin to restore stability as did the US Glass-Steagall Act which separated retail banking from brokerage, investing, trading and insurance since the 1930s but was repealed under the Clinton Administration. The Bank for International Settlements’ new Basel III rules to increase the capital reserves banks must hold against their losses has also been attacked, notably by Jamie Dimon, CEO of JPMorgan Chase, who called it “anti-American.” A new report, Treasure Islands, documents how offshore banking avoids regulation in all countries by setting up phony regimes, not only those formerly cited(!) by the OECD’s Blacklist but also the City of London and the USA, the states of Delaware, South Dakota, Oregon, where thousands of corporations are domiciled to avoid taxes, regulation and disclosure of their finances.

Cleaning up this global financial cesspool is a daunting task requiring courage and wider cooperation between all groups seeking the cleaner, greener, fairer and sustainable economies for our common future. Progress is driven also by the new round of financial crises upon us. Meanwhile, private investors have placed $2.4 trillion in green sectors worldwide since 2007. Phasing out tax loopholes and subsidies to fossil fuels, nuclear power, ethanol and those supporting “too big to fail” banks and their backdoor bailouts by central banks’ money-printing are now all on the global agenda (GSI). The G-20 and many countries support financial transaction taxes (FXTRS), not only to curb robotized high-frequency trading while protecting real investors, but also to help reduce government budget deficits.

Scorecards based on faulty economics and money coefficients, such as GDP, are being challenged by the new broader, multi-disciplinary indicators on website “dashboards” which by-pass macroeconomics’ flawed methods: the OECDs Better Life Index, Canada’s Index of Wellbeing, China’s Quality of Life GDP and in the USA the Calvert-Henderson Quality of Life Indicators. These mirror triple bottom line accounting correcting companies’ books and methods to internalize their social and environmental costs that economists dismiss as “externalities.” Too many companies and bankers’ business models operate on “externalizing” these costs to taxpayers and society, with their fraudulent “returns” then added into GDP. This leads to flawed public accounting and policies, and mispricing of sovereign bonds of Greece, Ireland, Portugal, Italy, Spain, since GDP’s money-focus ignores the other forms of wealth: well-trained workforces, efficient infrastructure and productive ecosystems (Hazel Henderson, “GDP: Grossly Distorted Picture”).

Textbook economics relies only on traditional money-circuits and finance and dismisses barter as “primitive.” Yet, electronic barter is now a flourishing staple of internet trading and banking: from mobile phones in Africa, Asia and Latin America to B2B bartering sites like Baidu in China;, Kabbage and other “crowdfunding” ( in the USA; Zopa in Britain; Craigslist, Freecycle and many others worldwide. These information-rich dimensions of the growing green sustainable economies add new options. We applaud all these efforts to reform and bypass casino capitalism, such as the responsible investors Tipping Point Conference, convened by UNEP-FI’s Roundtable in Washington, DC, Oct. 18-20, 2011, of which we are a media partner. All these concerned organizations supporting the growth of fairer, greener sustainable economies will converge at Rio+20 in June 2012. They hold the hopes of millions of citizens worldwide for a better common future.

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Hazel Henderson, D.Sc.Hon., FRSA, president and founder of Ethical Markets Media, is author of award-winning Ethical Markets: Growing the Green Economy, among other books. Her editorials are syndicated by InterPress Service, and articles appear in journals worldwide. She leads the Transforming Finance initiative, created the Green Transition Scoreboard®, co-developed the GNP alternative the Calvert-Henderson Quality of Life Indicators and co-organized the Beyond GDP conference for the European Commission, funding two Beyond GDP surveys, finding strong support worldwide for ESG metrics in national accounting. In 2010 she was honored as one of the “Top 100 Thought Leaders in Trustworthy Business Behavior 2010” by Trust Across America.