Read the first half of his interview with ThinkProgress Green, where Capital Institute founder John Fullerton discusses the $20 trillion carbon bubble.John Fullerton, a former Wall Street banker who founded the Capital Institute, believes that the financial industry can and must change its priorities to preserve the promise of a healthy civilization. His think tank is part of a growing movement of alternative economics, seeking a theory of capital and finance that addresses the crisis of climate change, instead of accelerating the destruction of our atmosphere.
Fullerton isn’t a traditional environmentalist. Rather, he learned about the scope of the climate crisis after retiring from JP Morgan in 2001, and reflecting on the state of the global economy in the wake of the 9/11 attacks:
I don’t have a particularly green background. I discovered it as a systemic crisis. I’m completely prepared to bet my life that the solution lies in looking at nature.
As related in the first post from his interview with ThinkProgress Green, Fullerton discovered that the global carbon-based economy is sitting on a $20 trillion bubble of unburnable fossil-fuel reserves, a potential economic crisis that dwarfs the collapse of the housing market.
Below, Fullerton talks about a hopeful path forward, where the financial industry is key to an economy based on “growing well-being instead of material throughput”:
We are in the process of an evolutionary if not revolutionary change in how we structure the economy. We’re going to need to redefine well-being. There have been people working on alternatives to GDP for twenty years now. “uneconomic growth.” We need to shift into growing well-being instead of material throughput. When people are adolescents, they’re physically growing. When they mature, they read books, go to yoga, increasing their growth in ways that don’t mean physical consumption. We’re on the proverbial rat race, and it’s not buying anyone well-being and happiness. There’s a hopeful scenario in front of us.
This maturation of capitalism, from consumption-based growth to the growth of happiness, will require a global shift of capital investment. This means, Fullerton argues, that finance is the “critical lever” to building resiliency:
Our premise is that finance is the critical lever to shift the course of the economy. The real investment decisions we make today will be the bridge to the economy of tomorrow. Interfering at the level of real investment flows is a real inflection point. There’s a zillion different examples of how we can shift the economy to be more resilient and less input intensive. For example, we can can choose to invest in resilient agriculture systems rather than trade-driven production.
A key area of immediate interest for the Capital Institute is the largely unregulated commodity markets, where global capitalism — multinational corporations, esoteric financial instruments, and hedge funds — increasingly control the use of the raw materials of civilization, from food to energy:
One of our focus areas for this year is the physical nature of commodities that are becoming scarce. You add to it this speculative capital looking to get ahead of these trends and you have the opportunity for some real problems. That’s a very serious issue and it’s the beginning of how markets break down and don’t solve the problem all the economists think they have, when you have non-substitutable goods. The market can’t solve that problem.
How does the tremendous shift away from a fundamental market failure begin? It boils down to understanding that all investment has a long-term impact, Fullerton says:
There’s a whole space called impact investing. The harder part is figuring out how to choke off the investment in the bad stuff, like expanding the tar sands dirty oil production. Investor-speak is to be long in what’s going to go up. People should want to increase resiliency in what’s going to be a turbulent time.
Fullerton and his Capital Institute is far from alone in the challenge of redirecting markets to serve the long-term goals of society again. Think tanks and academic groups such as Demos, the Institute for New Economic Thinking, the New Economics Foundation, and others are leading the vanguard of alternative economics. In June, the New Economics Institute will be hosting Fullerton and many other leading sustainable capitalists at the Strategies for a New Economy conference at Bard College to brainstorm a hopeful future grounded in the real world.