Financial Bailout -- A Spur to Sustainability?

The same blindness that produced the financial meltdown is producing the larger sustainability crisis with its potential to destroy the regenerative capacity at the heart of the planet's life support system. In the name of survival, jobs, and pragmatic economics, the human economy poisons the life support system, overwhelms its processing capacity, and liquidates its infrastructure: the fertile soil, the oxygen producing and carbon sequestering forests, and other "natural capital."  Blithely ignorant of the larger crime, the human economy increasingly damages the on-going critical life-support functions of nature that are streams of real wealth inputs to the human economy for which there are no substitutes. And in exchange for what? Usually the exchange is for single-period consumption moments. We're tearing down and burning up the house to keep the winter winds at bay! But for how long will that strategy succeed?! Not long enough as the U.S. financial sector recently discovered of the same type of ignorance.

The beginning of any bailout plan has to be a regulatory response based on knowing the difference between economic investment and recreational gambling. There is always risk with investments in real wealth production but never at the level of gambling where the odds always favor the house. We must prime the economy for real wealth production not  the masquerade of ponzi schemes. Past deregulation has confused investment and gambling to the point where reckless recreational gambling appears to be serious economic investment.

The new regulatory system must fuel the real economic wealth production of on-going economic prosperity. It must prohibit any form of gambling with society's hard-earned financial capital (savings) entrusted to the private sector in a capitalistic economy. Gambling is an individual choice and pastime that can occur legitimately only when the individual bears the full burden of the costs and consequences. Gamble in Las Vegas, not on Wall Street. The stewardship required to wisely invest humanity's historical legacy of financial capital earned from the blood sweat and tears of our forebearers and ourselves must be executed with responsibility equivalent to the sacred trust intrinsic to it. Allowing, under any guise, the fake investment of gambling is a sham.

The deal with Wall Street, if there is one, should be structured as a long-term public loan to restructure a bankrupt private sector of a free market economy ONLY because not doing so could undermine the whole economic system. It should accomplish the task of avoiding the need for firms to take a current one-period write-down that would break the bank (economy) for all. It should allow the industry to get back on its feet, become productive again, and allow the housing and other financial markets to stabilize around goods priced to reflect their real long-term value, not their shor-term low, zero, or negative value in a collapsing market. The deal should include an equity stake for the Public White Knight Investor in the future growth and profits of the firms or sectors involved. The interest rate on the loan should reflect the level of risk the public is taking in bailing out these sectors and firms. Anything less makes a sham out of capitalism. 

Finally, it is likely that the principles of innovation, savings, and real wealth production at the heart of an environmentally sustainable economy may have some import in redesigning a new financial system for the 21st century. Pursuing this value would contribute to the lightening-fast economic transformation required to avoid the larger catastrophe of the accelerating collapse of the real economy -- the environment--occuring now. Fixing the accounting system to accurately reflect the range of real effects on natural capital--both positive and negative--would go along way toward fixing the human economy's capacity to generate correct price signals for the direction, pace, and magnitude of economic activity, investment, and innovation. Undoubtedly, there are other implications as well, and they should be explored and harnessed to the task of reinventing not only a financial system, but the financial system that will power the transformation to the durable prosperity of a sustainable human economy. In this way, the financial crisis could be a spur to sustainability.