We have been having sex for some weeks now – what about starting a relationship?
I found myself talking about the social life of money in two very different forums last week. The first was on the topic of ‘promoting a savings culture’ in the UK at the CSFI, a no holds barred, lively debating forum MC’d by the incorrigible Andrew Hilton. The second was at the invitation of the Finance Lab at ICAEW who ran a workshop on ‘Preventable Surprises’ with a select group of stakeholders and opinion formers about the financial crisis – applying the lessons of the Deepwater Horizon disaster.
In many respects, both sessions were a great confidence boost for the point of view that underpins Abundance Generation and what it is trying to achieve in the world of financial services and sustainability. Aviva’s ‘Big Picture’ think piece has much in common with Abundance’s own manifesto and even its language was very similar which generated some new friends and contacts amongst the CSFI audience who also think the time has come to rethink the way we ‘make’ money.
The core philosophy of Abundance; that we need to move from a world dominated by what you can ‘get’ with money (which fits with a world obsessed and addicted to all forms of cheap credit) to what you can ‘do’ with money (which requires a long term investment view of money and a more balanced perspective on risk) was something which helped simplify the complexity of ‘what do we do’ in the face of a crisis not just in our financial system (that is just a symptom of a deeper problem) but in the very values and use we ascribe to money in our society.
New thoughts coming out of the cut and thrust of CSFI and the more collaborative atmosphere of the Lab centre brought my own focus back to the problem of markets. In particular, the idea that it is the State (or more pertinently in a democratic context ourselves as ‘the people’) that make markets and we make the markets that we deserve. This instantly attracts attack from passive/implicit neo-liberal acceptance of the reality of markets as somehow universal and immune from the society or culture in which they operate – regulated by rational not social or cultural physics. The idea that markets are ‘created’ or performed out of a social or cultural context challenges ideas of efficiency and objectivity despite copious evidence to the contrary coming out of the crisis itself and the success of socially produced and embedded markets such as Zopa or eBay.
The energy market in the UK is a case in point. It is a dysfunctional market, created by the State yes, but dysfunctional because of a lack of regulation and intervention from society to ensure the decisions it makes are right for the long term investment we need to make if we are not going to be held hostage to the price of high marginal cost fuels in the future (high marginal cost in economic as well as environmental terms). Markets and the information they use and value have limits. They “know” the price of everything but the value of nothing (to re-purpose a phrase) because markets seek to reduce the forces and costs of change – social, cultural and environmental – to a price at a particular instant and constantly discounts future cash and value flows which include economic as well as the familiar ‘triple bottom line’ benefits. To explain the slightly cryptic title to this post (taken from a cartoon in this week’s Private Eye) it is like deciding the value of marriage and family on the basis on the quality of the first time you kiss or have sex with your prospective partner. Or even perhaps the quality of restaurant choice for a first date...
The recent decisions on Feed in tariffs by the UK Department of Energy and Climate Change reflect that blind belief that ‘price’ is somehow a signifier of “value” and that markets are the best arbiter of economic and political decisions about how we generate energy in this country for the next 50 years or more. This is to miss entirely the point of subsidies for renewable energy sources (of whatever technology) which is to protect those technologies from the short term vagaries and volatility of a market which is driven by the high marginal cost of fuel (compared to renewable energy which has high set up costs but zero marginal cost apart from the discount rate on the money required to build the infrastructure something which requires market confidence to keep the price down, confidence which has been eroded by the current behaviour and signals coming from a department struggling with a arbitrary and short sighted decision not to make FiT part of the annual managed expenditure).
The economics of renewable energy makes its cost highly predictable and stable which limits the potential of the casino side of energy companies (betting on the rise and fall of energy prices – rather like those other well loved utilities our high street banks) to make money from speculation. Spending on FIT and ROC’s now is about encouraging a more stable (and green) future where businesses can plan and grow in an economy with more stable (and based on evidence from Ireland and Germany were renewable energy installation is ahead of the UK slow and cautious tiptoeing forwards – one that reduces energy bills for ordinary consumers once a critical mass is reached due to something called the ‘Merit order effect’.)