Raise Green Podcast Episode #5: What is the Future of Finance?

Monetary policy may seem like a nebulous concept, but it has incredible influence over the well-being of both people and the planet. Dr. John Clippinger is a researcher and activist who knows this very well, as he has dedicated his career to rethinking financial systems and modelling the ways they can facilitate beneficial, holistic outcomes. John joins our co-founders Franz Hochstrasser and Matt Moroney on the fifth episode of the “Raise Green” podcast. “Raise Green” is a 7 episode podcast series exploring the climate crisis through the minds of local leaders and global experts. Listen to the approximately 30 minute Episode #5 here on Spotify.

John Clippinger’s urge to restructure financial systems is rooted in the inherent failures and inequities of the current system. He starts by highlighting the ways COVID-19 has accentuated cracks in our traditional economic model, with no easy way to recover. The Federal Reserve issued an unprecedented $6 trillion dollars for pandemic relief: buying debt off of corporations, while simultaneously providing unemployment stimulus to aid individuals with their own daily needs and debts. Yet despite federal aid and a soaring stock market, we still saw a contraction of about 33% of the US economy.

We clearly need to reevaluate how we approach debt, but even more notably, the entire financial system must adapt to fundamental changes exposed by the shocks of 2020. For example, millions of people in the service industry simply aren’t able to return to their normal work, and we can’t use outdated solutions to address this. John elaborates on the current model of “extractive capitalism,” a centuries-old relic of industrialization, wherein economies are set up to maximize material output (regardless of the costs). John, Franz, and Matt all agree on the need to evolve towards “biological capitalism,” or what we often refer to as ‘inclusive capitalism’, a holistic, self-sustaining system that prioritizes the health of people and the environment.

The idea is to design markets that achieve productive outcomes without negative externalities. Rather than mitigating greenhouse gasses as a given aspect of the system, economies could be organized not to produce them in the first place. This brings John to what he calls “reflexive mutual organizations,” self-contained systems with feedback loops that accumulate value for all those involved. That is to say, systems that inherently benefit themselves as well as the components necessary for life, not unlike the idea of circular economies highlighted by Eva Gladek in episode #1 of our podcast series. He envisions smaller decentralized organizations, “nodes,” interacting within a larger, self-sustaining economy.

John acknowledges that this “civic homeostasis” would require parameters with a proper incentive system, which is where verifiable metrics are important. Our industrial economy is based on endless consumption of fossil fuels, and to course correct, investments inevitably need to be redirected to more resilient technologies and renewable or regenerative systems and practices. We can encourage that by verifying the full-extent of the negative impact wrought by current practices, as well as creating independent metrics that better convey the value of positive impacts. The latter is starting to be done with Renewable Energy Credits for a given megawatt-hour of renewable energy generated, since electricity is easier to quantify than other social or environmental benefits. This creates an exchange that can be independently verified: clean energy produced vs greenhouse gasses offset, but we’re just scratching the surface of how to properly quantify and express these benefits. As we’ve told the U.S. Treasury Department in the past, we must demand more and better data to improve understanding of actual impacts.

Even despite the competing crises of the day, we are moving towards a holistic economy at a promising rate. The more we can encourage and verify positive feedback loops in smaller nodes, the more examples we have for modeling and achieving better results. John believes that, likely sooner rather than later, we’ll have the parameters to move towards a holistic economy that benefits all life on earth.

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