A socio-ecological turnaround towards an economically stable monetary and financial system is an urgent socio-political task, as was the energy turnaround starting in the 1970s. The energy turnaround is well on its way, even if it is still far from being complete. And a financial turnaround as described above: Where does it stand?
To answer this question, it is useful to keep typical phases of major social transformations in mind:
- Negation of the wrong
- Development of pioneering practice in a niche (‘first mover’)
- Slow diffusion of the new practice and mutual learning (‘early follower’)
- Creation of a politically conducive framework for spreading the desired practice
- Massive diffusion of the new practice at different speeds (‘early adapters’ and ‘late adapters’)
- Changed practice as a new mainstream
(e.g. according to Loske, Reinhard 2015)
This was also true for the energy turnaround. Markus Duscha provided consultation services for ministries, municipalities, citizens’ initiatives, energy suppliers, and many other stakeholders during phases 3 to 5 with his practice-oriented research and consulting at the ifeu institute starting in the early 1990s.
In FaFin’s view, the financial turnaround is comparatively close to the beginning in phases 1 to 3, depending on the thematic focus, and only in very few places is it in phase 4.
What were the success factors for the energy turnaround during these phases? Can they be transferred to questions related to the financial and monetary system? An example may at least illustrate the opportunities arising from this analogy:
One key factor for success was the municipalities, which adopted decentralised energy and climate change mitigation plans, tested new approaches and carried out pilot projects (mainly during phases 2 and 3 according to the above model). However, this did not stop at individual technical projects (such as individual solar energy systems). New political instruments were also tested and bundled into strategies (called ‘concepts’ or ‘plans’). One forerunner of the successful German Renewable Energy Act (EEG) was called ‘cost-covering compensation’ for solar power. It was introduced by municipalities such as Aachen through their municipal utilities. In turn, this was vigorously promoted by very active local citizens’ movements (more information available here).
German municipalities, however, not only have municipal utilities, they also have municipal savings banks. What pioneering roles could they play in a municipal financial turnaround? In addition, there are also many citizens’ initiatives and companies that are working on issues of sustainability, but they are not yet looking at the financial system. However, the example of the Network Money Compass (‘Netzwerk Geld-Kompass’) in Heidelberg clearly shows that this can be changed.
So how would it be to get municipal financial turnaround concepts on track? Concepts to develop something new that can be used as a model for wider policy frameworks (from phase 3 to phase 4), hopefully not too late, i.e. before the next collapse of the financial sector.
The founder of FaFin has many other ideas that can be transferred from the energy turnaround to the financial turnaround. To name at least one further approach, this includes intensified strategic networking of social forces that recognise the necessity of changing direction. By joining forces, it is easier than before to build up the political pressure needed for the broad implementation of the necessary changes.
Of course, there are many factors that cannot be transferred from the energy sector to the financial sector without adaptation. This includes the fact that the framework conditions are much more international. However, pressure to change is very high in the industry due to digitisation, ongoing financial and monetary crises, the ECB’s low interest rate policy and other regulations. This can be deliberately utilised as an opportunity to create more sustainability!
The Fair Finance Institute provides strategic consulting, research and design services to create tailored, pragmatic solutions for the various phases of transformation on the path to the financial turnaround.