Scenarios for sustainability of global financial markets
ScMI has analyzed the scenarios developed by many renowned institutes of economic and of future research and connected them by using the Szenario-ManagementTM approach. The results are seven comprehensive scenarios which summarize the current state of knowledge.
When the Club of Rome investigated the “Limits of Growth” in the 1970s, it focused on the close relationship between growth of population, food production, industrial growth and resource consumption. However, three areas were not explicitly considered: the importance of technological progress, geopolitics as well as the financial sector.
Monetary and financial economics have been neglected for a long time and were only seen as a neutral intermediary between savers and investors. Lastly, in the global financial crisis 2007/2008 it became evident that it is by no means just a lubricant of economics but a control instrument that is decisive for the attainment of a global and sustainable development. In the first report to the European Academy of Science and Arts an international and interdisciplinary working group examined the relation between financial markets and sustainability. In order to consider the development opportunities, six scenarios were developed under the methodical leadership of ScMI that can be allocated to three different groups:
The stream of deregulation
Just as the Gulf Stream there are also powerful forces which drive the development in a direction to specific scenarios. Such a power is the deregulation of the movement of capital which started in the 70s with the release of exchange rates. A large part of the discussion focuses on where the powerful and no longer influenced flow carries our whole social and economic structure. The two first scenarios deal with this question.
Navigation through the rapids
In the first two scenarios there is literally no active navigation in the rapids of deregulation – neither in politics nor in civil society. In contrast, the following two scenarios are concerned with the possibilities of a regulatory framework which ensures the competing market mechanisms with the corresponding regulatory mechanisms:
The freedom of the seas – conscious control
All of the above described scenarios were characterized by a stream of deregulation – in other words of free global financial markets, free exchange rates, logic of competition between locations, the dominance of both capital and labor productivity but also of acceleration, high volatility of the markets as well as of a decoupling of the financial markets from the real economy. In the last two scenarios future scenarios are presented where the actors elude a quick deregulation.
Thinking ahead of the global financial crisis via different scenarios
Subsequently the individual scenarios were evaluated with regard to various sustainability requirements. Several ways to attain sustainable development were demonstrated – namely a strong innovation- and growth-oriented path of sustainability (Scenario 3: The tide lifts all boats), a sustainable path with consideration for inner social and international compensation (Scenario 5: Sustainable growth) as well as a sustainability path focused on regionalization.
In addition, with the publication in 2005 – 2 years before the global financial crisis – it became clear that the creation and regulation of the financial architecture have a significant effect on the real economy. Thus, only scenario 5 describes an environment that is largely free from financial and currency crises.
Scenarios in other books
The results of the scenario study can be looked up in the German book “How we are going to economize” by Stefan Brunnhuber and Harald Klimenta. In addition, the scenarios and their implementation in the global financial crisis should go into the report of the EU-Chapter of the Club of Rome and Finance Watch as well as into the World Business Academy. This report has gone into the book “Money and Sustainability – The Missing Link” by Bernard Liertaer, Christian Arnsperger, Sally Goerner and Stefan Brunnhuber.