Greening Up — Reimagining Our Plagued Economy – Part 2
By Michael Jessen
“There is a very strong feeling, I think, in many countries now that the existing systems, the old systems, just have not prepared us for this and haven’t been working….what is happening now has never happened before historically. And it gives all of us a chance to create something new.” – Stephen Lewis
Like the characters in Albert Camus’ novel The Plague, we are all marking time until restrictions can be lifted, setting us free to try returning to a normal life.
While Camus’ characters were sickened by a plague that began with dying rats, we are confined by the novel coronavirus known as COVID-19.
We may be limited by what we can do, where we can go, and who we can see but we have the power to plan the normal we want to have when the restraints are removed.
Rather than trying to explain the phenomenon of the pandemic, perhaps we should think about what it might teach us. The world that emerges from this epidemic can mend, improve, correct, and enrich the one we had before this crisis.
That better world will depend on the determination and resolve of each of us.
In my last column, I asked that we create a world with more equality. Those living in poverty far outnumber the billionaires and millionaires in our society. If we have learned anything during this pandemic, it is that the most important people helping to keep us alive are among the poorest paid – nurses, health care workers, grocery store clerks, delivery drivers, farm hands.
A 2019 paper by Lucas Chancel published by the World Inequality Database found inequality “has been rising at different speeds across countries since the 1980s. The financial crisis of 2008 does not appear to have inverted this trend.”
Chancel’s research also revealed “the reduction of gender pay gaps has tempered the rise of inequality in recent decades, but gender inequality remains particularly high among top income and wealth groups. Racial inequalities remain large as well.”
“Inequalities of wealth lead to a dispersion in wealth for all.” – Nassim Nicholas Taleb
Is a basketball player, a movie star or a company CEO really more valuable than a nurse, a truck driver or a supermarket worker?
Shouldn’t we design a recovery that leaves no one behind?
Let’s start conversations with our politicians about a basic income for everyone in Canada.
As the Basic Income Canada Network states “having a basic income is recognized as a highly effective way to support important societal goals, including the reduction and elimination of poverty and insecurity; the narrowing of extreme income and wealth inequalities; shared citizenship; and improved democratic and economic functioning.”
We must eliminate the falsehood that the more you earn the more valuable you are to society.
“There is a fundamentalist belief by capitalists that capital will save the world, and it just isn’t so.” – Thomas Piketty
Andrew Coyne, writing in the March 21 Globe and Mail, says the current coronavirus crisis “happens to have arrived at the end of a decade-long, worldwide binge on debt, driven by the ultra-low interest rates that have prevailed, with central banks’ encouragement.”
He adds: “Across the developed world, total debt – household, non-financial corporate and government – has grown to more than 270 per cent of GDP, according to the Bank for International Settlements.”
Canadians owe more than $1.6 trillion in mortgage debt, about 65 per cent of all household debt.
Modern day finance uses debt-based money creation – about 97% fabricated by banks – to drive economic growth fueling an upward spiral of debt.
Charles Eisenstein paints the picture bluntly in his book Sacred Economics: “The imperative of perpetual growth implicit in interest-based money is what drives the relentless conversion of life, world, and spirit into money. Completing the vicious cycle, the more of life we convert into money, the more we need money to live.”
Positive Money, a London, UK-based non-profit working to reduce the power of banks, advocates three simple changes to achieve this goal:
1. Take the power to create money away from the banks and return it to a democratic, accountable and transparent process.
2. Create money free of debt. Currently, banks create money when they make loans, meaning that for every dollar in your bank account, someone else must be a dollar in debt.
3. Put the created money into the real economy – creating jobs and supporting businesses – before it gets trapped in the financial markets and speculative property bubbles.
All of us are living beyond our means and the limits of our planet. We learned that in the wake of the 2007-2008 recession but we shrugged it off. Now our economic fantasy has snapped us back to reality again.
“Incremental adjustments to finance are not enough to tackle the monumental challenge of a rapid, sustainable and fair transition to a clean economy. We will need innovative and disruptive reforms that help reshape finance, so that it can help sustain our planet and enable us to thrive.” – Frank Van Lerven
A currently running Vancity Credit Union television commercial regarding climate change ends with the message “Start by changing where you bank.”
Canada’s largest credit union’s advertisement is a none too subtle jab at big banks that continue to lend money for fossil fuel developments in an era when the math says no more projects can reach production stage without causing climate havoc.
The latest Production Gap Report issued in November 2019 by the Stockholm Environment Institute shows that the world is on track to produce 120% more fossil fuels than can be burned under 1.5°C warming – the aspirational goal reached at the 2015 Paris climate talks.
Current plans and projections for fossil fuel production would lead, in 2030, to the emission of 39 billion tonnes (gigatonnes) of carbon dioxide (GtCO2). That is 13 GtCO2, or 53%, more than would be consistent with a 2°C pathway.
“A production gap of this magnitude implies a risk of substantial over-investment in fossil fuel exploration, development, and infrastructure,” the report states.
“We should ban banks from risk-taking because society is going to pay the price.” – Nassim Nicholas Taleb
At one point in late April, the price of oil went below $0 US per barrel. On April 27th, the price of oil slumped again. A barrel of West Texas Intermediate – the North American oil benchmark – fell to $12.57 US.
One of the big tar sands players, Cenovus Energy, posted a $1.8 billion loss for the three months between January and March. Cenovus has an all-in break-even point of about $38 US for West Texas Intermediate.
This is an industry that is feeling deep financial pain. But the climate math says the remedy is not a bailout.
On Friday, October 12, 2018, nineteen of the world’s leading central banks and regulators warned that the financial risks of climate change are “system-wide and potentially irreversible if not addressed”.
In the same report, the Network for Greening the Financial System stated “most NGFS Central Banks do not take into account climate-related risk in the conduct of their monetary policy.” The group issued A Call for Action: Climate Change as a Source for Financial Risk in April 2019.
Unfortunately, no American or Canadian bank was a signatory to the report although the Bank of Canada was accepted as a member in March 2019.
In January 2020, the NGFS announced that it had grown to 54 full members from five continents, with another 12 institutions as ‘observers’. The US Federal Reserve and other American financial regulators have had only informal contacts with the NGFS.
“People simply do not get the point that you can’t have sustainable growth forever. You can have sustainability forever, or growth for a few years.” – Jeremy Grantham
Like all institutions, banks must change their ways during this virus. They need to protect their clients, communities and other stakeholders not only from the impacts of this crisis, but also the climate chaos looming on the horizon.
The international tracking and campaigning organization BankTrack thinks banks need to undergo a fundamental rethink of what to finance and what not.
The latest version of the most comprehensive report on global banks’ fossil fuel financing Banking on Climate Change 2020 was released March 18th, revealing that 35 global banks have not only been sustaining but expanding the fossil fuel sector with more than $2.7 trillion in the four years since the Paris Climate Agreement. The report finds that financial support for the fossil fuel industry has increased every year since the Paris Agreement was adopted in December 2015.
“Banking is a very treacherous business because you don’t realize it is risky until it is too late. It is like calm waters that deliver huge storms.” – Nassim Nicholas Taleb
On March 31, Alberta premier Jason Kenney announced an investment of $1.1 billion of taxpayers’ money to TC Energy to fund construction of the $8 billion Keystone XL pipeline through the year, and set aside another $6 billion in a loan guarantee.
Then on April 2, JP Morgan Chase joined the rescue by leading a $1.25bn bond issue for pipeline builder TC Energy, a company that has had trouble arranging financing and permits.
This is the same bank that has lent $268.59 billion to the fossil fuel industry since the Paris climate accords.
Rita Trichur, writing in the March 13th Globe and Mail, found Canada’s Big Six banks had loans to energy companies totaling $60.1 billion at the end of January.
“We can – and must – bring our economic theory and practice into alignment with our latest understanding of how the universe and our humanity actually work!” – John Fullerton
John Fullerton knows we need to shape an economy according to nature’s principles. He was a managing partner when he quit JP Morgan in 2001 to think about designing a better system.
Fullerton’s 120-page white paper called Regenerative Capitalism: How Universal Principles and Patterns will Shape our New Economy was released in April 2015.
“Finance has become more abstract and ever more complex with previously unimaginable wealth accruing to the relative few who control increasingly massive concentrations of capital,” writes Fullerton.
Just as the authors of the original Limits to Growth – a book first published in 1972 – and The 30 Year Update advocated, Fullerton says “we are beginning to understand that a perpetually growing, resource dependent, waste generating economic system cannot operate indefinitely within the limits of a finite planet.”
Fullerton describes eight principles that should govern a regenerative economy:
1. In right relationship. “The current system is exactly inverted from the way it has to be,” Fullerton points out. “There is no such thing as environmental issues. We are part of the environment.”
2. Holistic wealth. “Money is not wealth,” Fullerton observes.
3. Adaptive management.
4. Empowered participation.
5. Honors community and place. (As poet Wendell Berry wrote, “There are no unsacred places; only sacred places and desecrated places.”)
6. Edge effect abundance.
7. Robust circulatory flow.
8. System balance.
“When stimulating growth is the solution to cyclical downturns, yet this growth of our resource intensive global economy presses against known physical limits of the biosphere, a contradiction arises we cannot ignore.” – John Fullerton
“We live in a time of interconnected crises: economic, social and ecological,” Fullerton says. “I came to the understanding that the economic system was the root cause of the ecological crisis, and that finance is what drives the economic system.”
Fullerton adds: “My suggestion is simple. Align our economy with these eight principles instead of the relentless pursuit at all costs of GDP growth and shareholder value.
“It represents a huge challenge to business as usual. But anything less is simply not a credible response to the immense challenges we face.”
During this pandemic we are realizing the impacts of our past behaviours on our future selves. This period of reflection can be the opportunity to make our lives more meaningful and to secure the future of the human species.
“What we need to do is break the financial community’s grip on society.” – Nassim Nicholas Taleb
Michael Jessen is an ecowriter living at Longbeach near Balfour, British Columbia. He is the author of more than 800 articles on climate change, sustainability, waste reduction, and simple living. He can be reached by email at [email protected]
