Transforming Finance: what's the big idea?

Dave Powell

08 May 2013

I'm dashedly excited.

This Friday Friends of the Earth, together with a wide range of colleagues from different campaign groups and think tanks, will mount a major conference called Transforming Finance. It will look at what might be one of the most important nuts to crack for moving to a sustainable economy: how do we overhaul our moribund finance system, and how can we get it ploughing serious cash into genuinely socially and environmentally useful investment?

If ticket sales for the conference are any indication then this is an issue that commands extremely widespread interest. And so it should.

Even on its own terms, the finance system is broken. The fundamental things that brought the whole hubristic enterprise to its knees in 2008 are still wrong now: massive, interconnected, speculative banks which can not individually fall without bringing others down with them. The crash required colossal state bail out but still had big impacts on our economy, hitting the poorest hardest.

And the macro problem is that the system isn't set up to do much very useful in the first place: flows of finance are overwhelmingly not into what you might think of as the 'real' economy - actual investment in productive assets - but into speculation. This is perhaps what Lord Turner, erstwhile head of the Financial Services Authority, had in mind when he described large parts of the finance industry as "socially useless".

We think we can and must do better.

With growth refusing to return to the UK economy, leading some commentators to begin to question whether things may have permanently changed - yet with the Government's visions for the economy still hooked around a buccaneering finance sector - the time is perfect for a discussion about the bigger picture.  What we and our colleagues are trying to do is look at what we think our economy, and the finance sector within it, should actually be designed to do - and what the big ideas might be that start to get us there.

The conference will ask two major questions:

1. How can we make finance work in the long term interests of people and planet?
2. How can we avoid disastrous asset price bubbles, debt crises and state bail outs - which have had such major impacts on our economy and society?

These are massive questions with no quick answers. We'll hear some of the great ideas that are out there though, like:

• Enforcing size limits on banks so they can't be 'too big to fail' - accompanied by a revolution in local banking to return banking to the service of local people, communities and businesses
• Using the massive money creating power of central banks like the Bank of England - which has already ploughed £375bn into the economy in the form of so-called Quantititative Easing (QE) - but directing it explicitly towards environmentally productive investment
• Changing the law to require bodies like pension funds to think differently about long term investment, rather than chasing short term profits

You can view much more about the full range of speakers on the Transforming Finance website. And although there aren't any tickets left, never fear - there'll be lots of outputs, including videos and a summary report of the main conclusions.

I'll report back on how it all went next week.