Towards a Sustainable Financial System

What transformations of the global financial system are required to ensure a sustainable development of humankind in the 21st century? The Institute for Advanced Sustainability Studies – IASS – in Potsdam has started an investigation of this question. To support this inquiry, it will organize a series of workshops together with the European research network Global Systems Dynamics and Policy, coordinated by the Global Climate Forum. The first such workshop took place  in Potsdam, Germany, on December 8-9, 2012.  It was dedicated to an assessment of the proposal for a sustainable financial system made by the governor of the People’s Bank of China.

This is the first long-term proposal made by a major figure in today’s global financial system, and it builds on an impressive sequence of intellectual and political precedents. In a nutshell, the proposal envisages a transition from the present, Dollar-based system towards a system anchored in Special Drawing Rights (SDR) emitted by a suitably enhanced IMF. These SDRs, in turn, can be defined not in terms of consumer price indices as is the case with today’s currencies, but in terms of a price index for critical resources the world economy relies on. Relevant goods could include coal as well as emission permits for greenhouse gases. Ultimately, buffer stocks of related commodities may complement the classical instruments of monetary policy. Clearly, the proposal has major geopolitical, economic and environmental implications, all worth careful investigation.

The Potsdam workshop has been the first systematic effort at assessing that proposal. It was conducted in a sustainability perspective – a perspective all too often missing in financial debates. It is the starting point of a systematic inquiry on perspectives for a sustainable global financial system to be performed in the coming years.

Connected Activities:

Towards a Sustainable Global Financial System
Assessing the Perspective of Special Drawing Rights Linked to Commodity Buffer Stocks
Date: December 8-9, 2012
Potsdam, Germany

Connected Posts:

Some Remarks on Governor Zhou’s Suggestion to Reform the International Monetary System

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Further Reading:

Benes, J. and Kumhof, M. (2012): The Chicago Plan Revisited. IMF Working Paper 12/202. 

Boughton, J.M. (2002): Why White, Not Keynes? Inventing the Postwar International Monetary System. IMF Working Paper.

Douthwaite, R. (1999): Energy-backes currency unit and Special Emission Right proposal.

FEASTA (2004): Curing global crises: Let’s treat the disease not the symptoms.

Galicia-Escotto, A. (2005): Liability Aspects of SDRs, IMF Committee on Balance of Payments Statistics, Reserve Assets Technical Expert Group Issues Paper # 10.

Hourcade, J.-C., Perrissin Fabert, B.,  Rozenberg, J. (2011): Venturing into Uncharted Financial Waters: An Essay on Climate-Friendly Finance. CIRED working paper 35-2011.

Hourcade, J.C., Perrissin Fabert, B., Haites, E. (2012): Climate policies in an adverse context: bringing research on finance and macroeconomics on board.

Minutes of the workshop Towards a World Reserve System, November 6th, 2009, Columbia University, New York City.

Ocampo, J.A. (2010): Why Should the Global Reserve System Be Reformed? Friedrich-Ebert-Stiftung, FES Briefing Paper 1, January 2010.

Paus, L. and Troost, A. (2011): A European Clearing Union – The Monetary Union 2.0.

Ussher, L. (2012): Combining International Monetary Reform with Commodity Buffer Stocks: Keynes, Graham, and Kaldot.

Ussher, L. (2009): Global Imbalances and the Key Currency Regime: The Case for a Commodity Reserve Currency. Review of Political Economy 21(3), 403-421.

Ussher_appendix for GCF paper

Vitali, S., Glattfelder, J.B., Battiston, S. (2012): The network of global corporate control.

Volz, U. (2009): China’s Push for a New Global Monetary Order. Far Eastern Economic Review.

Williamson, J. (2009): Understanding Special Drawing Rights. Peterson Institute for International Economics Policy Brief, June 2009.

Yu, Y. (2012): Some thoughts on the Current International Financial Crisis and East Asia’s Responses

Zhou, X. (2009): Reform the international monetary system. Essay by Dr. Zhou Xiaochuan, Governor of the People’s Bank of China, 23 March 2009.