10 years ago today saw the collapse of Lehman Brothers bank and the fall out of an economic crisis that has wrought devastating effects on social cohesion globally and continues to do so. The 1% that gambled huge sums of borrowed money on junk bonds, generating obscene wealth for a handful of the already super rich, walked away largely unscathed, while ordinary people have been left to deal with the impacts.
Since 2008, in Europe alone, 2.4 trillion euros worth of ‘new money’ has been created by central banks across the region in order to bail out the very institutions that have caused the crisis. That’s the equivalent of around 30,000 euros for every European citizen.
Meanwhile tens of millions of people across the region have been pushed into poverty and are relying on handouts to scrape by. These conditions have created fertile ground for far-right populists that have put the blame on migrants who had to flee civil unrest in their home countries or because of water and food shortages intensified by a rapidly warming climate. Impacted people are being turned against each other as wealth accumulates in fewer and fewer hands.
What has this got to do with the climate crisis?
6 years ago Bill McKibben, 350.orgs founder wrote his seminal article – Global Warming’s Terrifying New Math – based on a report by financial analysts .
It made the root cause of the climate crisis unmistakably clear: fossil fuel companies are planning to burn more than five times more fossil fuels than is possible to stay below 2°C of global warming.
And here’s where the connection with the economic crisis is laid bare. The biggest fossil fuel companies in the world are valued (in trillions of dollars) on the assumption that the proven coal, oil and gas reserves that they have access to will be dug up and burnt.
Think about that for a moment. Simply put – taking serious action on climate change would wipe trillions off the value of some of the world’s biggest companies.
Yet despite this knowledge the banks and institutional shareholders propping up the industry continue to pour billions into it. The growing power of social movements and the rise of renewables is already disrupting the business model of the fossil fuel industry in ways that could trigger the mass sell-off of failing fossil bonds. It could mark the unfolding of a financial crisis of unthinkable magnitude. We must with urgency intervene.
From master to servant
In order to achieve economic and climate justice we’ll need to bring fossil-fueled finance under control. We will need to redefine the value of finance as a servant to people and kick out the dominant use of finance by the few to master the many.
We’ll need to break the bonds between banks and the fossil fuel industry and create new flows of money towards the solutions. Instead of the financial system serving a corporate elite and its shareholders, it must be fundamentally reshaped to support more community-based solutions. Solutions that have been leading the transformation to an equitable renewable energy economy by shifting power away from the big fossil fuel giants and towards more localised economies.
1.5°C – Climate Justice. I.e. the amount that warming should be limited to in order to avoid devastating impacts being experienced by those communities that have done least to cause the problem
200bn – the finance being given to new fossil fuel projects in the form of subsidies and bank loans each year over the last 10 years
480bn – an estimate of the finance that must be put into solutions every year for the next 10 plus years in order to limit warming to 1.5°C
A recent study from an economics institute in the Netherlands determined that around 480bn per year needs to be spent on renewables and energy efficiency to have a good chance of meeting a 1.5℃ target.
To put that in context, the EU’s defence budget is around 700bn per year. The telecoms market in Europe last year was valued at just under 300bn. These are all big figures, but in reality tiny fractions of the global economy. 480bn for example is less than 5% of Europe’s GDP.
If we can print trillions to save the banks, we can create the modest amounts to build out the modern, renewable infrastructure needed to avert the worst ravages of a fossil-fueled climate crisis.
We’re not talking unrealistic amounts of money here. These sums are readily available when the political will exists. And this is where there is another link to the financial criss that started to unfold 10 years ago. Money is a social construct which at its most fundamental level represents a social relationship. When money is created by a government or a bank for example, and lent to people or a company it exists in the form of debt. The person with the cash now owes the person that created it, and that money must be repaid at some agreed point in the future. Money in this sense could be seen a manifestation of social power and domination. That’s why when commercial banks (the banking and political class in neoliberalism being essentially the same people) gamble and lose hundreds of billions, crashing the global economy, their debt is let off and new money is created to bail them out.
Arguably the climate crisis could be averted, and relatively quickly, if money was created to build out the solutions. But the political will needed to achieve that would need to be based on a willingness to redistribute large amounts of wealth and power.
Guess what? Those holding that power now aren’t going to let go of their wealth without being forced (or being made irrelevant) to by a popular movement. And it is with this awareness that we need to be building a movement capable of reclaiming the value of money in the interests of people and our common home.