Finance for a Regenerative World Act II

assured, just as any living body needs food and water. Certainly a sick body can’t be further malnourished or the outcome is certain. This means austerity in a country staggering from an economic shock (think Greece, the United Kingdom, or Italy in the aftermath of the financial crisis) is not a viable policy. The IMF (and the Germans) would do well to understand this living systems principle.38 Furthermore, markets are also not well suited to very long time horizons where costs are difficult to internalize in market prices, either for technical or human behavior reasons, or where costs are really not costs that could be fixed with money, but “wrongs” that have no acceptable price. Modern society by and large accepts that murder and slavery are wrongs that can’t be fixed with money. Similarly, the knowing destruction of access to clean water and an ability to provision oneself from the earth’s natural bounty, and irreversible ecological damage like climate change or species extinction are examples of such “wrongs” for which there is no acceptable price, and therefore there is no market solution. Markets are simply the wrong tool, no matter how well designed. Yet markets In summary, markets have displaced our humanistic values that have stood the and finance together test of time as our guiding ethic. conspire to virtually ensure the destruction If we need further evidence, there is what Jeremy of life as we know it on Grantham refers to as “the tyranny of the discount this planet. rate,”39 a number which, when plugged into a formula, decides that our grandchildren’s lives have no value. (For example, a discount rate consistent with financial theory’s time value of money and future uncertainty would discount the future costs of climate change back to almost nothing.) In summary, markets and finance together conspire to virtually ensure the destruction of life as we know it on this planet.

This doesn’t mean markets cannot play a role as part of an integrated solution. Carbon markets are a good case in point, particularly when applied where small marginal changes in cost make a big difference in decisions to switch technologies entirely (like from coal to wind, for example). But a carbon market without an explicit quantitative limit of acceptable greenhouse gases (effectively a quota – different tool) can never 38 Austerity programs promoted by the IMF and other multinational organizations, in alignment with the neoliberal belief system that the rights of creditors in debtor nations need to be honored or the debtor nation will lose access to the global capital markets, compounding the distress, are not trivial. But if our approach is to respect the patterns and principles of living, regenerative systems that sustain themselves over time, we need to rethink our whole approach to debt resolutions in stressed economies. This is a complicated topic, but any realistic solution must involve debt write-offs to reset economies, no different than the logic of the bankruptcy code that enables bankrupt companies to get a fresh start. Such an approach happens to also be aligned with the religious concept of a debt jubilee.

39 Grantham, Jeremy, “The Race of Our Lives Revisited” (2018) 31 CAPITAL INSTITUTE / FINANCE FOR A REGENERATIVE WORLD / ACT II