Two recent publications show the significant disparity in how people are thinking about fixes to the capital system. Each has great merit, but the differences in scope and focus say a lot about how much attention and funds go toward the uber-financialized economy (the one where all the very big pools of newly printed dollars continues to flow), and why more attention needs to be drawn toward the other economy – the one that the rest of us live and play in.
I had been anxiously awaiting the recently released UNEP Inquiry’s global report, “The Financial System We Need: Aligning the Financial System with Sustainable Development” that was launched 8th October in Lima on the occasion of the IMF/World Bank Annual meetings. The thesis of this report is that the “heartland” of the global economy (i.e. the financial system) can evolve to serve its “core purpose of growing and sustaining the real economy.”
The release of this 112 page report summarizes its 3 key findings:
– A ‘quiet revolution’ is underway as financial policymakers and regulators take steps to integrate sustainable development considerations into financial systems to make them fit for the 21st century.
– Momentum is building and is largely driven by developing and emerging nations including Bangladesh, Brazil, China, Kenya, and Peru, with developed country champions including France and the UK.
– Amplifying these experiences through national and international action could channel private capital to finance the transition to an inclusive, green economy and support the realization of the Sustainable Development Goals.
This Report does a credible job of focusing on the very important goals needed in the attempt to harness or govern the uber-financialized system toward a more sustainable path, toward less destruction of the planet, less devastation of our natural resources, and outlining an attempt to reign in the faster growing wealth and income disparities that continue to produce more poverty, ill health and societal ills. However, I was also disappointed that the scope of this Report paid little or no attention to the re-establishment of a capital market structure for the vast majority of companies, and for almost all individuals that could participate in helping to fund those companies.
Earlier this year I had been contacted by Mr. Simon Zadek, one of the three individuals primarily involved in this report, and we discussed its framework and whether there was anything I could contribute. Having come from the world of regulating several U.S. stock exchanges, and teaching a course on capital markets at one of the sustainable MBA graduate schools for many years, Mr. Zadek was hopeful that I might have a particular view that could be helpful to this report.
What we both discovered during out conversations, however, was that the focus on this upcoming report had little to do with what we at Cutting Edge Capital are doing – i.e. working to build healthy resilient capital markets for everyone to participate in; capital markets that can help smaller companies raise funds from all types of investors who currently see few to no options to fund companies that they feel connected to either by geography, community, or some other meaningful affiliation.
And then there is this new article by Keith Harrington, “Patient Finance: Why Slower Money Is the Key to a Real Economic Recovery.” One sentence (among many) in this article stands out to me. Mr. Harrington first shows a keen grasp of the capital markets that attract the vast majority of attention (and large funding dollars to study), and explains well why we continue to be bested by this system that is built for speed and crashes, and then states, “[b]ut one thing is for certain: If we don’t find a way to shift our increasingly financialized economy to stable ground, the next big crash is inevitable.”
He refers here to the very same lack of attention that I encountered with those writing the UNEP Report. Much is made of how we might begin to bring additional measures and actions to bear to make more transparent how the one capital market might make itself more “sustainable,” whatever you take that to mean. But why not also provide a well-funded report on how a new economy, or as Mr. Harrington states, a “new financial landscape” is beginning to take hold.
As one of the proud members of Mr. Harrington’s “checkerboard revolutionaries,” I continue to be amazed at this discrepancy of attention, but we revolutionaries will not be dissuaded by this lack of notice. It is understandable that so much time, focus and funds are spent on a massive economic system fueled by funds that flow as if created almost magically out of thin air. But those funds do very little to touch us in our communities and in our relationships with each other. That one massive capital market system seems almost mythical in its proportions and in the equally massive wealth it creates for just a few. For the rest of us, however, it would seem that we are left to our own devices for building this new economy. And build we will, because the one we are creating is the Community Capital Market that truly impacts us. It is the one we can participate in and know we can make a difference by supporting each other and the communities we identify with.
Viva la Community Capital Revolution!