There have been a number books that have analysed the problems with the global financial system. Many are very good at describing how we got into the mess we are in, but fall short when it comes to solutions. Nick Silver’s book delivers what he promises on the cover - to answer the question “How to Make the Financial System Work for the Economy, People and Planet”.
Nick Silver approaches the question by getting down to the basics of what a financial system is supposed to do - which is to allocate capital in the real economy. The decisions that the financial system make, Silver argues, in the end shapes the structure and future course of the economy. Silver argues that despite the mythology, capital markets are not free and are in fact a creation of the state. But power has been concentrated in a very few organisations and the agents in the financial system manage the capital stocks and flows in the economy in such a way as to generate revenue for themselves.
Because the financial system is broken in many ways, change is inevitable. But where will it come from? Silver argues that a lot of the impetus has to come from government. Governments helped create the system and they have the power to “un¬create” it.
The finance sector should take this message to heart. The mood in the community is volatile and the disconnection between the finance sector and society invites populist governments to act. The question is not whether there will be change, but how and when change will happen. Finance sector organisations are in the position to influence the direction that policy makers take by taking heed of community concerns.
There are a number of solutions that Silver offers. One idea is to establish development banks at a granular scale, working in individuals communities, which would in fact take us back to where the finance sector started, in so doing addressing the current dearth of investment in many communities.
Nick Silver has a track record, through his leadership of the Community Bonds Initiative, of working to bridge the gap between investment and society. This book provides a pathway for the next iteration of change.
Finance, Society and Sustainability is available on Amazon from 20 July 2017.
Network for Sustainable Financial Markets