A Financial System Based on Natural Cycles
By Michelle Holliday
Here in Quebec, we are fortunate to have thousands of lakes. The tradition is to spend summer vacation splashing in the water at a 
lakeside cottage. Tragically, this tradition has been threatened in the past several years. Household use of phosphate-based lawn fertilizers and cleaning products has stimulated massive growth of blue-green algae in the lakes, which has choked out all other forms of aquatic life and turned the water toxic. It's poisonous enough to kill a dog.
It struck me one day how closely this situation mirrors the state of our financial system. We've over-stimulated growth to the point that all other forms of life are being choked out, and our biosphere has become toxic to us.
This isn't simply to say that we need to aim for zero-growth, as many in the sustainability movement propose. Physicist and author Fritjof Capra points out that, “Growth, of course, is characteristic of all life.” But he goes on to offer an important qualification: “[I]n the living world, it has not only a quantitative but also a qualitative meaning. For a human being, for example, to grow means to develop to maturity, not only by getting bigger, but also qualitatively through inner growth. The same is true for all living systems.”
How, then, do we develop an economic model that includes an appropriate level—and type—of growth?
Part of the solution may be found in a model called the Adaptive Cycle. Developed by Buzz Hollinger and elaborated by Frances Westley, the model shows that natural systems exhibit a continuous four-part process (typically depicted as a figure eight) of:
- Germination followed by
- Growth followed by
- Consolidation followed by
- Death and renewal, returning to germination, and so on.
In our economies, we have plenty of germination, growth, and consolidation. What our system generally lacks is sufficient death and renewal, with resources returned fully into the germination stage. The solution, then, may not be the total absence of growth—it may instead be a proportionate increase in economic death and renewal.
Getting more comfortable with the concept of death and renewal may not be as bad as it sounds. Some options might include:
- Producing only those goods that can be returned into the system fully and relatively quickly as germination (cradle-to-cradle manufacturing); making such “good” products cheap and “bad” products very expensive.
- Increasing the proportion of economic value generated by intangibles, which can germinate, grow, and consolidate without taxing the living system. This trend is already underway, both with the expansion of the technological and service sectors of the economy and with the individual shift toward meaning, experience, and connection.
- Reducing the pressure on companies to grow rapidly and incessantly (removing their legal obligation to do so, encouraging new forms of governance, such as cooperatives, and revising the general understanding of the purpose of organizations).
- Allowing failing companies to die so that the diversity of the economy is preserved—and so that society is not obligated to prop up companies that are “too big to fail.”
- Fundamentally reforming the financial industry (the debt and speculative markets, in particular) so that: (a) it no longer overstimulates growth unnaturally and faster than that growth can be processed through to renewal, and (b) it no longer jeopardizes an economy's resilience with excessive debt-to-GDP. See www.slowmoney.org for one example of how we might make this shift.
With changes of this sort, economic value could continue to grow without limit, but material production would ideally net out to zero growth, in what some economists refer to as “dynamic equilibrium” or a “steady-state economy.”
This vision raises the challenge of determining just how much growth would bring us to an equilibrium state. And it may be that the Earth will give us the answer. As it stands, when consumer spending falls, it triggers the US Federal Reserve Bank to lower interest rates in order to stimulate more spending. Instead, perhaps we'll need a system in which any reduction in the health of the biosphere would trigger a tightening of financial stimulus to growth.
Michelle Holliday has 20 years of experience in brand strategy, with particular expertise in authentic marketing. She founded Cambium Consulting after observing that the predominant organizational concepts and ways of working are neither optimal nor sustainable. And she is driven by the desire to help usher in an expanded set of beliefs and practices based on a view of organizations as living systems.
lake photo: Ian Britton