Progress at Bretton Woods
I returned late last night from the second Institute for New Economic Thinking (INET) Conference which took place at Bretton Woods. This was the site of the historic Bretton Woods Agreement signed in 1944, establishing the IMF and the World Bank, and creating the global world financial order following WW II. The Soros-backed INET was established to convene the world’s leading economists in order to rethink the discipline in light of the recent financial collapse, and provide an alternate career pathway for economists interested in doing unconventional research. A visit to INET’s website will not disappoint.
Given my agenda with INET, which is to put sustainability and the implications for finance on the table in order to shift understanding in this highly influential community, the conference was an unequivocal success. While the majority of the panels not surprisingly continued to debate the important headline issues of fiscal discipline and structural reform, the Euro zone, macro prudential bank regulation, and political economy, this year there were two panels focused on what I consider truly “new economic thinking.”
The first was a panel on Complexity Economics, which convened at 7 am Sunday morning, but which was nonetheless well attended by luminaries including Paul Volcker, Adair Turner, Martin Wolf, Robert Skidelsky and George Soros, to name just a few. The core idea being discussed was that biology rather than physics must become the organizing framework in understanding the economic system as a complex, non-linear, out of equilibrium, emergent system, just as all living systems, including the human body, are. Capital Institute followers know of my keen interest in complexity science and natural systems as the model to teach us how to create a resilient and sustainable financial system and economy. The fractals you see as the background of each of our website pages are a reminder of the importance of complexity science to finance.
I highly recommend listening to all the Complexity Economics panelists, but if I had to select two, they would be Eric Beinhocker’s engaging overview and Tad Homer-Dixon’s talk. Tad’s prior speech by the title The Great Transformation, which you can find in our resource section, is superb.
The second breakthrough panel at INET was organized by CIGI, which is the inspiration of Jim Balsille, Co-Chair &Co-Ceo of Research In Motion (maker of BlackBerry). CIGI is now an INET partner with a $25 million commitment. I am thrilled that GIGI’s focus in their partnership with INET is on sustainability.
The panel on “Sustainable Economics” also took place on Sunday (video not yet available at this time). Rob Johnson (Executive Director of INET and on our Board) asked me who the one person I would like to have speak on this topic. My suggestion was ecologist Bill Rees, who conceived the concept of “Ecological Footprint” with his graduate student Mathis Wackernagel, and is also on our Third Millennium Economy Steering Committee. Bill’s presentation on the economic system, not as a monetary phenomenon, but as a physical flow system that draws upon the earth's reasources and disposes waste into a closed system governed by the law of thermodynamics which we call the ecosphere, while challenging to many, pretty much rocked the house. This framework is the foundation of our work at Capital Institute.
The Keynotes by Larry Summers, Gordon Brown, and Adair Turner did not disappoint. Although all used the word “sustainability” at least once, more progress is necessary before the profound implications of Bill Rees’ talk are fully reflected in our policy leaders’ understanding of the challenge facing us at this time. Unfortunately I had to miss the closing conversation between Paul Volcker and George Soros, and the closing remarks from Rob Johnson which probably occurred around 11PM Sunday night. I will watch with interest when the link comes up at INET’s site.
Congratulations and my sincere gratitude go out to Rob Johnson and George Soros for hosting another inspirational and important conference. It was a privilege to be in attendance together with my Capital Institute collaborators Peter Brown, Juliet Schor, and Bill Rees. Many existing relationships were refreshed and many important new connections were made. I’m pleased to report strong media interest in our work as well. Most exciting was to see all the bright and enthusiastic students in attendance this year from as far away as Beijing who represent the future of economic thinking.