Realities of Shifting to a Sustainable Economy

“The true nature of the international system under which we were living was not realized until it failed.”  —Karl Polanyi

A transition to a sustainable economy requires not only population stabilization, breakthroughs in resource productivity and checks on material consumption, but also constraints on aggregate investment. Built into the DNA of finance is the goal of optimizing relatively short-term returns on investment, which, when successful, induces exponential growth in the aggregate stock of financial capital. When that expanding stock of financial capital is then reinvested, it spurs ever-increasing demands for natural resources and pressure on waste sinks. The contradiction between the finite scale of the biosphere and the endless growth of finance capital will be resolved either through crisis or, as advocated here, through foresight and remedial action. Shifting the economic system demands a fundamental transformation of finance, at least for the real investment decisions of the largest actors in the economy. We must view this profound shift as a critical national and global security priority that will require unprecedented intervention by governing institutions on the public’s behalf. 

Context

The egregious offenses of modern finance need little elaboration. The finance-induced Great Recession—still a depression in parts of the European Union—has been causing oppressive pain and suffering, with multi-generational consequences, including increased wealth inequality, cascading throughout the global economy. If we can peer beyond the human wreckage, we may glimpse a silver lining: the lingering economic crisis has provided even mainstream economists a reason to question as never before the very foundations of our finance-driven economic system. Just as dangerous as rogue banks too big to fail or to govern—and the predatory casino finance that has become their stock-in-trade—is the growth imperative that drives the modern economy beyond the resource and waste sink limits of the biosphere.

Finance’s most important practical functions in the real economy are the transformation of savings into investment and the credit creation process of the banking system. The reorientation of the flow of real investment (not to be confused with financial asset speculation) is the bridge to, and the steering mechanism for, a Great Transition to an economy that serves people while respecting the ecosphere’s physical limits. For now though, the same planetary boundaries that dictate limits to growth also imply limits to investment, since investment fuels growth. No economic system in the history of civilization has ever had to contemplate such a constraint. How much and where large economic actors like multinational corporations and nation-states invest will significantly determine the quality of the economic system of the future and, given present social and ecological stresses, our collective well-being and global security. As a consequence, real investment choices must become a central concern of global governance, notwithstanding the many failings of governing institutions.

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This BLOG  looks at pensions and their impact on what are called Public Private Partnerships or P3’s these are not really about private funding at all but about two streams of public funding, pensions and government with private capital a third partner.
We will also deal with other pension matters, such as Defined Contribution Plans (DC) vs Defined Benefit (DB) PLANS, the weakness in private plans, the need for pension reform in public pensions to have shareholder rights, directorships and ethical investment directives and policies. 
Finally taking the long view we will show how these funds are forms of evolving social capital that is dominating private capital as we evolve into socialization of capital. 
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