Can the economy and finance serve the environment? We’ll discuss the topic in a conference on September 24 at Terra Madre Salone del Gusto.
Among the speakers we welcome Italian economist Leonardo Becchetti.
He has no doubt that the laissez faire school of economics must be discarded: “An economy where everyone just does what they want leads us straight to catastrophe, as the lack of responsible individual choices impacts negatively on others.” Instead we must go beyond “the nightmare of a totally chaotic society in which people are unable to contribute to resolving its problems.” Leonardo Becchetti teaches political economy at the University of Rome Tor Vergata, presides over the ethical committee Etica Sgr, the savings management arm of the Banca Etica group.
An economy where everyone does what they want, the so-called laissez faire economy: it leads us straight to catastrophe. This idea, that everyone can follow their selfish appetite trusting in the “invisibile hand” of the market to balance everything out: it doesn’t work in the face of global crises like the pandemic and the climate crisis, which require a high level of coordination among all actors.Leonardo Becchetti
Leonardo Becchetti at Terra Madre
On Saturday, September 24 at 11 a.m. Leonardo Becchetti will speak at Terra Madre Salone del Gusto at the conference What if the economy served the Earth? where the preconditions necessary to render the economy more ethical and environmentally-sustainable will be discussed.
The economy serves the Earth at Terra Madre
A concrete example of this vision at Terra Madre is provided by NaturaSì, an organic-only chain of shops in Italy which issues bonds that are remunerated as shopping vouchers. The investors, in other words, accrue interest in the form of vouchers that can be used in NaturaSì shops. The amount of money gathered among the investors is used by NaturaSì to support organic and biodynamic agriculture. The objective is establish a virtuous circle which, on the one hand, gives farmers new means to support quality products, while raising awareness among investors of the importance of acting according to a plan that is ethical, as well as being remunerative.
Professor, has finance taken steps towards a more ethical approach?
For some years now there’s been a growing sector in finance which I called “generative finance”. It’s a revolution because it assumes that the objective of an investment is not just to obtain the largest profit possible, without consideration for the consequences. The objective, in fact, is to generate positive social and environmental impact. This type of finance has produced focused bonds, like green bonds or social bonds, through which investors are committed to investing money in projects that have a serious social or environmental impact. This sector is growing, and producing significant results: it continues to work in this manner, developing new goals which I believe are very important.
The civil economy is an economic approach according to which behind consumer and investment choices there isn’t just an attempt to maximize profit, but care for the community and an awareness that there is no gain which comes at the expense of other individuals, or the planet. It’s an approach which pushes us to ask ourselves about the value of our choices, promoting choices which give meaning to our existence insofar as these choices are not made simply for ourselves, but also for others.
In a video three years ago explained that the obstacles which are slowing down the definitive affirmation of a civil economy are four: lack of awareness, scarcity of information, the difficulty of coordination and differences in price. Where do we stand now?
In finance, overcoming these obstacles has always been easier than it is in retail, because the people managing investment funds are aware of the problems in front of them, like the climate crisis, which force us to make conscious, sustainable decisions. It’s also been demonstrated that there’s no greater cost to pay: green bonds have the same risk profile as traditional bonds. The questions is different when we talk about retail, the real economy, and the daily choices of consumers.
Why is it different?
Today, for consumers, the main obstacles are two: coordination and prices. Regarding the first issue, it must be said that many people act in a certain way only if they think that others are doing the same. In other words, it means that they think their individual choices don’t count for much. The other important issue is price. An example, regarding mobility: sustainable choices have a greater cost, at least initially, than less-sustainable choices. Popular response is proportional to spending power.
How can we overcome this impasse, besides through prudent political decisions?
There are two aspects to consider. On the one hand there’s the idea that every gesture has great value: the idea that voting with your wallet matters. Making decisions that increase generativity, that is, the sense of satisfaction in people’s lives. On the other hand, there’s a sense of urgency created by external factors that pushes people to become less careful and conscious: it’s the pedagogy of catastrophe and it means that when humanity feels its back is against the world (for example, by feeling the effects of climate change personally), this increases the urgency and the willingness of people to change their behavior.
Today, for consumers, the main obstacles are two: coordination and prices. Regarding the first issue, it must be said that many people act in a certain way only if they think that others are doing the same. In other words, it means that they think their individual choices don’t count for much. The other important issue is price. An example, regarding mobility: sustainable choices have a greater cost, at least initially, than less-sustainable choices. Popular response is proportional to spending power.Leonardo Becchetti
Voting with your wallet means putting immediate personal benefits to one side and thinking of the consequences of one’s own choices in the bigger picture, for the community, if not globally. Is that the end of individualism?
An economy where everyone just does what they want, the so-called laissez faire economy, leads us straight to catastrophe. This idea that everyone can follow their selfish appetite trusting in the “invisibile hand” of the market to balance everything out: it doesn’t work in the face of global crises like the pandemic and the climate crisis, which require a high level of coordination among all actors. These issues make it clear that the absence of cooperation and irresponsible choices by one individual impact negatively on everyone else.
The alternative that we propose is to bring together all generative individuals, and to become a critical mass: there are initiatives like the Civil Economy Festival, which will be held in Florence from September 16-18. These are important tools that show that it’s possible to wake up from this nightmare of a totally-chaotic and individualistic society in which people feel abandoned and unable to contribute to resolving their own problems.