Friday, June 08, 2007

sustainability versus institutionalised greed around the world

I am part of several efforts to introduce or enhance sustainability-related thinking and actions in the global economy.

In one such effort, I introduced the expression "institutionalised greed" into the discussion, and this has raised some puzzlement. I have been asked what I mean by that particular expression.

As this might be of wider interest, I excerpt my response:

"What I meant by 'institutionalised greed' is, for example, that the world's largest collections of money (pension funds) are, in theory, interested in stable long-term earnings, because their commitments are to fund pensions for their "members" for the rest of their lives – and there are statistical models that predict fairly accurately what those commitments will mean over the decades ahead (barring major disasters, in which case on average their commitments REDUCE)

In theory, therefore, all pension funds should be invested long term. In fact, however, most pension funds have a horizon of three years in their investment strategy.....

Or take the stock exchange system – as we have it at present, this enables "day traders" to buy/sell from moment to moment simply on the basis of whether they can make any money from the buy/ sell RIGHT NOW and without regard to fundamentals – nothing immoral about this in itself, only it nurtures a "short term greed" mentality – and the simple way to counter that would be to have two classes of shares for all companies – "short-term shares" and "long-term shares" – the proportion of these to be varied from time to time depending on whether we wanted to slow down or speed up the rate of economic activity. For example, a government could introduce 50% of each for all public companies, and reduce the proportion of short-term shares steadily over time, or increase them steadily over time. Of course, companies themselves could introduce such shares without waiting for government action. Worldwide we have a system of 100% long-term shares (in, e.g., family-owned companies) and 100% short-term shares (in all public companies). I am simply arguing for a better balance in the publicly-traded companies which actually drive the national and global economies, so that we have less short-termism in the global economy.

Another example of institutionalised greed: most companies that I know put the hourly movements (or less) of their share price on the computer screens of all workers, as if the workers should be focused not on their jobs but on pushing up the share price! In fact, NO worker (not even the CEO) can do very much to influence share price movements since those are mostly determined by flows of international capital to different regions and industries depending on their relative attractiveness at any moment. What any CEO does is to influence (to a certain extent) the price of her/his company relative to others within the "same industry" – but this is a very slight influence compared to the influence of the massive flows of capital across regions/ industries...However, the CEO's incentives are tied not to increases in profits on a long-term and sustainable basis but to increases in share price....

Workers too are monetarily incentivised to focus on their narrow jobs rather than to think of the long-term good of their company as a whole or of society...

Most important: the entire culture, worldwide, is now oriented to making a quick buck – that is why we have so few bright youngsters who think as their first priority of joining the government or multilateral agencies – everyone wants to go into consultancy or investment banking or the financial industry (and only those who "fail" at this go into other areas) – well, that is too broad a generalisation – but I think you see what I am aiming at

Even medicine and law (which were originally "public service" professions where one earned a reasonable amount but the main "payment" was public recognition and respect) are increasingly seen only as means of earning lots of money....

So we have an institutionalisation of greed worldwide (actually, primiarly since the end of the Second World War and the rise of Darwinistic thinking) – and, if we do not focus on understanding, analysing and countering this worldwide culture of institutionalised greed, we have no chance of winning the struggle for a sustainable future. Sphere: Related Content

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