Ten years ago the financial system collapsed and governments around the world intervened to save it. Much of the subsequent legislation, regulation and angst has attempted to make the system less risky so it does not collapse again. But few have asked a more fundamental question: what is the purpose of the financial system and does it do what it’s supposed to do?
Ten years on and the global financial system remains chronically dysfunctional. My concern is not that it collapses again but that it continues on its current course.
Yet an alternative way of doing things is possible. Over many years the finance industry has developed a set of powerful tools which could be used to improve well-being and solve our environmental problems. For example, to avoid dangerous climate change, the required rapid shift away from fossil fuels requires enormous levels of investment into low carbon infrastructure.
We mostly know how to do this technically, and the funds are available; there is a savings surplus where trillions of dollars are sitting in government bonds earning negative returns that could be mobilised into the low carbon economy. So why is this investment not happening at the scale required?
A sustainable future requires investment but the payoff is worth it. shutterstock.com
Instead, these powerful financial tools have been co-opted by the finance industry for the purpose of growing its own revenue and importance, with resultant collateral damage to society and the environment.