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Volume 7 January 2014 Taming the giant – towards a sustainable financial system www.greeneuropeanjournal.eu Contents Let’s tame the giant! 3 Benoît Lechat Towards a green economic and financial system 6 David Kemp The carbon bubble: the real threat to the financial system 13 Carl Schlyter The financial crisis heralds the need for a deep ecological transition 19 Theodota Nantsou Debt, the whole history 23 David Graber Life and debt 30 Tim Jones Positive Money: how to fix the creation of money? 36 Ben Dyson Debt and financialisation: the Portuguese example 41 Nuno Serra Financing a green industrial transformation 46 Reinhard Bütikofer Tax havens jeopardise the stability of the financial markets 51 Michaela Schmidt EU financial reforms: an unfinished business 57 Gaspard Denis Green struggles and victories against the mainstream orthodoxy 64 Philippe Lamberts The wrong phoenix rising 71 Jasper Blom Let’s tame the giant! The lessons of the last crisis always seem to be forgotten, and the financial Benoît Lechat world continues to grow and pose a risk to economy and planet. We Greens must marshal all our energy and ideas to reign it in. Page 3 Let’s tame the giant! In 1726, Jonathan Swift published his famous novel There are numerous reasons to make financial “Gulliver’s travel”. It has been said that the British regulation an absolute priority. Firstly, and it writer was inspired by the bursting of the South Sea cannot be overstated, the rise of populism financial bubble in which he had invested much of throughout Europe can be partly explained by the his money, as had the physicist Isaac Newton who widespread belief that taxpayers are paying for declared “I can calculate the movement of the stars, the reckless actions of the financial world and for but not the madness of men”. The arrival of Lemuel the unwillingness or inability of politicians to restore Gulliver on the island of Lilliput and his capture by fiscal justice and impose effective regulation. The the tiny Lilliputians is probably a metaphor of the fight against tax havens is a good example of this sudden and unforeseen change in the fortune of the situation. If some progress has been achieved (with writer, and the novel is a satire of the dark sides of the help of the Greens in the European Parliament) on 18th century English society which were at the base this level, more is need as the huge amount of money of this early financial crash. that is hidden in the tax havens not only deprives the states of important resources but is fostering Three hundred years later we are facing the a growing feeling of injustice throughout Europe. consequences of yet another financial crisis and we cannot be confident that we have succeeded Secondly, the current economic crisis has had in “taming the giant”, i.e. to protect ourselves from disastrous ecological consequences. It encouraged a dramatic repeat of the crisis in which the global many governments to delay the ecological economy entered in 2007. As described by Finance transformation of our economies and to fall back on Watch, during the last five years we have been the unsustainable use of fossil resources, like shale following the “status quo lifecycle”, even if some gas or coal. Further, it shrank the credit possibilities changes have been brought to the legal framework for the greening of our economies. It is true that the of the financial system. It seems thus that the time Greens have concrete measures to help the green has not yet come to appeal for frenzied optimism. economy and SMEs to overcome this problem. But these measures can only be implemented if we Nevertheless, the main argument of this seventh can convince more people that the financial crisis edition of the Green European Journal is based on is rooted in the combination of rising inequalities, a conviction that regulating the financial system is unsustainable models of consumption and financial not only an absolute priority; it is also a goal that is deregulations. We have been underestimating the politically within reach and in which the Greens can importance of showing the ecological dimension play a key role. of the crisis and to connecting the financial and the carbon bubbles. Page 4 Let’s tame the giant! Thirdly a continuation, or even worse a repetition Therefore it is also absolutely crucial to support of the systemic crisis, with its catastrophic social alternative lobbies developed by NGO’s like Finance consequences, would make the solutions more Watch or the Tax Justice Network. It is also urgent difficult to implement because the political majorities that the environmental movement starts to address to pass them would be narrower and the room for the financial issue. The Green political foundations are cooperation much smaller. Hoping that things get well placed to develop alternative economic models worse, so that more drastic action is taken, is not part and promoting the debate on provocative proposals of green politics. like those developed by the jubilee debt campaign or the positive money network. The paradox and probably the tragedy of our current situation is that the political legitimacy of all And, as documented in this edition, it is absolutely attempts to tame the giant is inversely proportional crucial to have a strong Green group in the next to their feasibility. Not for problems of principle, European parliament. but for political reasons. The current majorities dominating European governments and institutions are completely locked in the economic paradigm Benoît Lechat is editor-in-chief of the Green European Journal. that has led us to the crisis. They are also much more susceptible to the banking lobbyists. Volume 7 greeneuropeanjournal.eu Page 5 Towards a green economic and financial system Towards a green David Kemp economic and financial system The topic of greening the economic and financial system is broad and daunting. However breaking it down into a few key questions can highlight the steps that we as Greens must urgently take to reign in the financial industry Page 6 Towards a green economic and financial system Austerity continues to cause real hardship and is damaging social cohesion as well as future productivity; many EU democracies are still subordinated to the wishes of “the market”. What is “the economy” for? deplete the very social and environmental capital Allocating natural, human and financial resources to upon which it depends. the production of goods and services that improve human well-being in a sustainable way. This article sets out some of the most important flaws in the current design and measures that can be taken What is “the financial system” for? to correct them. Transporting financial resources through space Why should Greens be as militant about changing and time in a way that efficiently and sustainably the economy and the financial system as they are supports the objectives of the economy. about the environment and social justice? Hopefully people of all political persuasions will Because that system is the main obstacle to agree (at least in public) that the ultimate aim of the implementing Green environmental and economy is to benefit society. social policy. The main source of disagreement is whether the • Oh yes! The Crisis continues – Austerity continues objective of profit maximisation should be the to cause real hardship and is damaging social cohesion principle determining the design of the economy as well as future productivity; many EU democracies (with ex-post redistributive taxation taking care of are still subordinated to the wishes of “the market”, the social and environmental objectives) or whether EU banks have not been cleaned up (hundreds of social and environmental objectives should actually billions in subsidies and public bail outs so far [ref ECB], be built into the design of the economy. and more on the horizon in wake of the ECB’s review of banks next year), corporate and household debt This is where a Green world view can claim the is still huge in the EU (average = 200% of GDP), with intellectual (as well as moral) high ground: it holds productive investment and innovation smothered that a poorly designed economy can actually as SMEs in many countries struggle just to pay the be an obstacle to achieving essential social and interest ... [ref Economist 24/10/13]. environmental objectives as well as create extra economic costs. • This crisis is NOT new or different – There have been hundreds of monetary, sovereign debt and What we have now is an economy that is blind to the banking crises in the world over the last four decades social utility of what it produces and that, due to the [ref. “This Time its Different”,Reinhart & Rogoff]. If you resultant misallocation of environmental, human and had a car that broke down days after you had it repaired, financial resources, provokes unrest, creates social wouldn’t you question its design rather than your luck? hardship and generates huge “externalities” that Volume 7 greeneuropeanjournal.eu Page 7 Towards a green economic and financial system • The “economic Taliban” are the mainstream • The role of the public economy is politicians who lack the intelligence or courage to underestimated: when “the economy” is discussed question economic ideas that are hundreds of years in the mainstream, the term is virtually synonymous old (and originated as frameworks to help monarchs with the “(free) market economy”, in which the profits finance expansionist wars and colonialism – not to accrue to private producers. The notion that some help democratic societies finance innovation and production should be controlled by Government or the production of goods and services that promote civil society or even the consumers of the products human well-being [ref “The Cash Nexus”, Ferguson]).

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