Money is a social relation. It is an abstract measure of what we all owe to one another.
The monetary-growth imperative question: interest rates driving our economy to growth and reinforcing inequalities.
Conventional financial theories of asset pricing and portfolio allocation are grounded in neoclassical conventions of utilitarianism and profit seeking and fail to address the ecological economic tenets of scale and distribution. Private financial markets have profoundly negative impacts on social and ecological welfare through moral hazard, the inequitable distribution of wealth, disregard for biophysical constraints, and emboldenment of financial crises.
To date, ecological economists present some fundamental critiques to financial theories. Discounting and present value maximization overestimate the value of exploiting resources in the short term over perpetual decline in the long run. Moreover, a stock of investment cannot sustain a perpetual flow without a physical process resource inflows and product outflows. While the production of real wealth is constrained by the biophysical limits of physical resources, financial speculation entitles investors to more wealth without the constraints of production. Finally, the distribution of financial assets lead to greater concentrations of wealth, creating real profits for asset holders without increasing real wealth. The illusion of unconstrained wealth is only maintained while scale and inequitable distribution increase and where the financial sector remains disconnected from the real economy.
The operationalization of ecological economic principles in finance requires measures to disincentivize short-termism, unproductive allocation, and speculation. First, incorporating social and biophysical indicators can improve pricing and allocative efficiency by reorienting capital towards social justice and ecological restoration. Second, systems thinking can be utilized to trace interdependence in capital flows that lead to financial crises. There is currently a lack of formal theoretical and methodological models that sufficiently predict future occurrences. Finally, the efficacy of policy alternatives that bind financial growth within biophysical limits must be considered. Some alternatives include interest free loans to real economic development, smaller decentralized systems, higher reserve requirements and restricted leverage, taxes on financial transactions, tightly regulated financial instruments, and incentives aimed at maintaining the productive capacity of ecosystems upon which economic activity ultimately depends.
How can you make a difference?
- Move your money and accounts to a local credit union
- Actively participate in your credit union through Annual General Meeting, electing boards, recruiting board members
- Credit Unions can be challenging for low income Canadians to access as they can discriminate based credit score – push your credit union to support low income banking
- Push credit union to create positive impact Guaranteed Income Certificates
- GIC’s that invest in social or community housing
- Seek out responsible investment advice to align your investments with “new normal” values.
- Expand your perception of investing from purely financial to generating security for future consumption needs.
- Eg. Invest in your capacity to produce food, build shelter, make and fix needed tools
- Consider what aspects of your budget you can de-financialize. Use relationship building alternatives.
- Child care clubs rather than hiring a childminder
- Meal clubs and meal planning to reduce the amount your household eats out
|Local and Municipal||Federal & Provincial/State|
|Create positive interest initiatives – use the forward natural capital of existing natural regions to express the long-term value of a region, natural space, or ecosystem service||Create alternative system of income such as a) universal basic income; b) two tiered currency system|
|Evaluate local ecosystem services||Nationalized money supply and coordinated Monetary Fiscal Policy|
|Establish, enforce/encourage the use of local currencies outside of the banking systems (time banks, alternative currencies, etc.)||Eliminate debt and call for a debt audit|
|Encourage local credit unions/cities to purchase community bonds issued by social and solidarity economy organizations||Cap income and interest rates and allow for negative interests purchased by central banks (inspired by Islamic banking)|
|Support a system of regional and municipal public banks and coops and advocate for the public sector to deposit liquidity within local credit unions/coops|
|Modern Monetary Theory put into practice|
Allies, Related Resources, and E4A Publications
- Uneven Earth Green New Deal Series: http://unevenearth.org/2020/01/public-money-for-environmental-justice/
- Toward an Ecological Monetary Theory by Joe Ament
- Ecological Monetary Theory Joe Ament
Change in Action
While not all of these projects direction involve E4A, they are great examples of diverse examples of socio-ecological change in action.
- The Berkshares Local Currency
- MMT in practice in the US already? https://mronline.org/2020/03/26/the-federal-reserves-coronavirus-crisis-actions-explained-part-1/?fbclid=IwAR0822tXrVKOh3k1dNziTpDO7Ett0MDWNKyKFBPwEX3oF0lmzI7LYdGEguw