Ecological Boundaries

  • How Finance Can Help Save Our Planet

    March 23rd, 2015 by John Fullerton

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    The following post was adapted from a chapter I wrote for John G. Taft’s new book, A Force for Good, published just this past week by Palgrave Macmillan. John is the CEO of RBC Wealth Management, and I am proud to be in the illustrious company of individuals like Mary Schapiro, Robert Shiller, Sheila Bair, Roger Martin, and Dominic Barton, who were invited by John to contribute to this book. I think you will find A Force for Good a fascinating read as it explores, from a variety of experienced perspectives, how the financial industry can marshall, for the long-term public good, the creative energies and brainpower it has deployed in the past to develop derivatives, high-frequency-trading technologies, and other engineering complexities.

    In 2011, the Economist declared that civilization had entered into what is known as the Anthropocene era – a geologic period in which human activity is altering the health of earth. The piece contended that if we continue to operate as we have, we will cause irreversible damage to the life-supporting systems of the planet. What the Economist failed to point out, however, was the critical role that finance plays in shaping this outcome. Our relentless pursuit of the exponential growth of financial capital, hardwired into our economic system, will bring us to the brink of collapse if we don’t change course. Science tells us that our planet, along with all of its complex, interconnected biochemical systems that enable life to exist, are fixed in scale. Yet our dominant economic theories assume that our path to prosperity requires limitless, undifferentiated, exponential growth of the economy’s metabolism – defined as raw materials in and waste materials out. The emergence of the Anthropocene era requires a seismic shift in our economy. We must transition to a more sustainable and inclusive economic system that serves the needs of people while respecting the earth’s physical limits. The financial crisis of 2008-09 provided us with the perfect impetus for this shift, prompting even mainstream economists to question as never before the very foundations of our finance-driven economic system. What they and policymakers should consider is a holistic approach that takes a deeper look into the practice of finance, and in particular, long-term decision making that affects the flow of trillions of dollars of real investment in the decades ahead. In this, the Anthropocene era, large-scale investment decisions simply must be considered a vital part of the public interest and on the agenda of an informed, democratic process. The top 1,000 global corporations represent half of the total market value of the world’s 60,000 public companies and, undoubtedly, an even greater share of capital investment budgets. What demands our attention, therefore, are the decades-long impacts of the capital expenditure decisions these larger corporations make. The same goes for the impacts of large government capital expenditures like investments in infrastructure. Corporations generally make their investment decisions using an internal rate of return framework that compares a project’s expected financial return with the firm’s cost of capital. Concerns about the systematic impact on social and natural capacity rarely enter the analysis. That must change. There are three possible paths – all interconnected – to prompt that shift:

    1. We can work within the existing economic paradigm to shift the flow of investment by making commercial enterprises begin to pay the true social and environmental cost of their operations and by subsequently passing those costs on to consumers;
    2. Business, government and large pools of private capital can begin leading, through enlightened real investment in resource productivity and alternative energy to save money and accelerate the shift to a Regenerative Economy; And
    3. The public can demand a new set of rules and regulations – some local, some regional, some global – to establish the necessary guardrails and mandates to force the transition.

    That said, the scale and complexity of the necessary shift in thinking is unparalleled and time is not on our side. No economic system in the history of civilization has ever had to contemplate such a restraint. But the sooner we acknowledge the implications of this immense challenge, the better.

  • Why I Marched Against the XL Pipeline

    February 19th, 2013 by John Fullerton

    My daughter and I joined an estimated 50,000 demonstrators in Washington, D.C. marching against the XL Pipeline that would connect the Canadian Tar Sands to American refineries.  After a half century on this planet, I took to the streets.  Here’s why.

    The “business as usual” arguments in favor of building the pipeline as articulated by the liberal and >> Read more

  • Growth and Free Trade: Brain-Dead Dogmas Still Kicking Hard

    February 6th, 2012 by Herman Daly

    There are two dogmas that neoclassical economists must never publicly doubt lest they be defrocked by their professional priesthood: first, that growth in GDP is always good and is the solution to most problems; second, that free international trade is mutually beneficial thanks to the growth-promoting principle of comparative advantage. These two cracked pillars “support” nearly >> Read more

  • The Great Transformation

    October 3rd, 2010 by John Fullerton

    There are several “Great Transitions” circulating, visions for a transition to a just and sustainable economy and society.  Tellus Institute convened the Global Scenario Group, to produce the Great Transition Initiative in 2002, a comprehensive set of alternative futures.  More recently, the New Economics Foundation >> Read more

  • Where’s the Middle Class?

    August 2nd, 2010 by John Fullerton

    Capital Forum’s current series on “Reducing the Wealth Gap” ties in nicely with Edward Luce’s July 30 piece in the Financial Times“The Crisis of Middle Class America,” a sobering reality check, putting real people behind the statistics. >> Read more