EthicalMarkets.com » CHANGING THE GAME OF FINANCE - The Diigo Meta page

• 28 Oct 09
  

  Joelle Nebbe-Mornod
  • members are still captive to the discredited paradigms of finance I have mentioned. Until trustees and shareowners change incentives for their asset managers and consultants, they will still obsess over benchmarking each others’ performance according to these now destructive criteria and models. Financial networks are complex, adaptive systems, but reliance on this approach serves little more than to comfortably abstract the debate.
  • trading for trading’s sake has become pathological, an addiction similar to gambling
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  • • Addiction to trading and internet-use are now studied by psychologists as is the elevated testosterone levels exhibited by traders in London’s financial markets. Thus, one cannot expect any human actors embedded in today’s financial networks to think more deeply about their purpose, social utility or the systemic risk that finance now clearly poses to all societies and to ecosystems. At what point did financial markets metastasize to become a cancer on their host: human societies? To ask individual traders or companies would be analogous to expecting the patients and psychiatrists in a mental hospital to design a more optimal system to address dysfunctional aspects.
    • Even less charitable criticism comes from Prof. Simon Johnson at MIT, former chief economist of the IMF who comments on Wall Street’s capture of politicians of both parties in the US Congress as “mind control”
    • financial networks must be examined from these perspectives and we see their design flaws immediately: they were designed by individual actors and firms to maximize their self-interest and produce rewards in money terms. They were never designed to optimize at the societal level, let alone to function within natural system constraints. Furthermore, they optimized for trading as the primary means to money rewards (hence the growth of proprietary trading desks, day traders, high frequency trading and algorithmic program trading which now dominates market activity).
    • Here, again, money-creation and credit-allocation follow power laws and are designed by sub-system level actors and institutions (banks, central banks, local and national government agencies). Their design criteria are fitted to highly abstract goals: containing or targeting inflation, increasing or decreasing the money supply, NAIRU formulas for unemployment levels, fostering private investment – all vague generalities and measured with dubious statistics
    • The movement toward planetary awareness is now worldwide
    • All our crises are closely related to the dying fossilized paradigm of “economism” and its deadly addiction to continuous economic growth measured in money, whatever the social and environmental costs.
    • But instead of backing enforcement of carbon caps and shifting tax burdens from incomes and payrolls to taxes on carbon and all other pollution and waste, the US “market fundamentalists” demanded that “allowances” to continue emitting carbon be given to polluters to trade with each other.
    • Economic methods usually favor quantifying costs to incumbent sectors and existing institutions, rather than estimating savings, benefits and revenues from new ways of doing business, new technologies and social policies. For example, the climate debate focuses on GDP growth “losses.” Critiques of GDP-measured growth, including my own over the past 30 years, are finally gaining traction
    • Yet the financial sector still dominates US politics: bailing out Wall Street firms was deemed necessary to “restore” the financial system. Investing in growing the green economy, our children’s health and education for a prosperous future are deemed “too expensive,” even as a BBC-Globescan poll in 20 countries found 72% of their public’s support governments investing in renewable energy and green technology.

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