Peter Blom, CEO and chairman of Triodos Bank, says that banks need to have real values and by mimicking natural systems they can operate more effectively
Today, all the warning lights in the banking and financial system are red – the Greek bail out, the eurozone crisis… But the real problem is a debt crisis. We are heavily over indebted, as countries, as businesses, as people. Banks have created incredible amounts of debt and central banks have been lowering interest rates to almost zero so that more debt can be created and people can consume more. But we cannot go any further.
It’s painful to see how quickly governments came out with trillions to save the financial system, whereas to combat poverty, deliver a transition to a low carbon economy, and finance small businesses – all the things we really need – there is no money available. I strongly believe it’s not a matter of resources; there are plenty. It’s purely a matter of political will.
To renew the financial sector, banks have to be smaller and less complex so that they are back in the positive control of people and not a negative liability for society. Governments had to bail out big banks but most small banks that stayed close to their mission have had no problems.
Triodos Bank has grown markedly in the last 4 years – 20% per year, because we stick with lending only to sustainable businesses. We try to make a connection to the real economy. Through Google maps technology for instance, our website shows every project and business that we finance. We want our customers to know where their money is, offering them real transparency. There are other banks like us, and new types of banking need to come to the debate as real, practical and financially solid alternatives.
I’ve had many discussions with politicians and other key decision-makers who don’t know how to solve the problems we now face, and aren’t transforming popular discontent into sensible discussion with the banks. It’s frightening but at the same time, this is exactly the moment to bring in new ideas. To do this, we need new images and metaphors. Interestingly enough, those can be found in nature, in how our planet functions.
As banks, we have to be connected to what’s happening in society and serve the real economy
In nature, for example, there is effectiveness, rather than efficiency. Banks have always steered towards efficiency, becoming leaner and leaner, but now there is no resilience in the system. That’s not what nature does; it’s very effective, very ‘rich’, and has an overall surplus.
Nature flourishes where there is diversity and not where there are monocultures. The big banks are monocultures. If one goes wrong, so do the others. It was totally different 30 years ago. Then we enjoyed a richer diversity. You had banks that focussed on the agricultural sector, others on small businesses. And banks had a clear function.
But then, around 1980, with the new liberalism of Thatcher and Reagan, things changed – including in mainland Europe – from static thinking that business is business and banking is banking, to more linear thinking. Banks became businesses, started to grow, to do more trading on their own account and profits went up.
At the same time, businesses became banks. General Electric in the US for example, decided to go into leasing financial services because they made far more money that way than manufacturing refrigerators. Businesses got more and more separated from the real economy.
That linear thinking is one of the root causes of where we are now. It has been the paradigm at business schools such as Harvard, Columbia and the London School of Economics. This thinking has to change or we won’t get the bankers we need. Today, we require a different sort of thinking, a systems thinking – or you could call it organic, or holistic thinking. It’s all about interconnections. We have to go beyond the linear thinking.
As banks, we have to consider the special role we play and be connected to what’s happening in society. We have to serve the real economy, which means looking at what banking activity is needed, not looking at where the most money and shareholder value can be made.
Another example of learning from nature is how we look at time. In nature, time is a function of development, which happens within a certain rhythm. But in banking, faster is considered better and in the stock markets 60% of trading is now done by computers, which work in nanoseconds. The way things are done has been dehumanised. We should slow down the sphere of money so it can relate meaningfully to the real economy again.
Overall, I believe we are looking for ‘biomimicry’ for the financial sector. Fortunately, there is a growing movement of banks who want to do things differently. Two years ago we created the Global Alliance for Banking on Values, which now includes 14 banks from Bangladesh to Peru, Mongolia and Canada.
The way I understand Schumacher* is that ‘small’ is not only about being local and having your own community. It’s also about small organisations being strongly connected to others. In that way, small is the new big. Small banks, connected through networks, can create a less risky financial system.
By creating this diverse worldwide network of ethical banks that share values in the true sense, we think we can make a much bigger impact. We are still quite a small network, but already serve 20 million people, and we want to build on that.
But people can start to make the change too. Banks are very worried about their customers taking action and asking questions such as, what are you doing with my money? Move your money if they won’t change. That is the best thing that you can do, and it will work. Make a conscious choice with what you’re doing with your money. Follow your heart, use your head.
* This article is an edited extract from a talk at the Schumacher Centenary Festival 2011, an event in Bristol that celebrated the work of pioneering green economist, EF Schumacher [a special feature on the festival was published in the winter 2011 issue of Positive News – to get a copy please become a member].