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A sustainable alternative to the financial meltdown

Although the global financial problems are causing trouble for investors now, they could lead to something better – for investors and the environment.

Bernard Lietaer believes parallel currencies can help fund social services, like healthcare, when conventional currencies can't.

Photo: Richard Mauro Ricchiutiw

Like many entrepreneurs, David Griswold started his business with a big vision and a small line of credit. He wanted to help coffee growers learn sustainable farming and connect to buyers who’d pay them fairly, and he had a $300,000 business loan to make it happen. It took almost a decade, but Sustainable Harvest Coffee Importers’ sales of organic, fair-trade java hit $15 million, and orders were fast multiplying. Just as important to Griswold, the company had plowed its profits into training farmers, and his business model, based on transparency, seemed to be working.

But in 2006, the bank pulled the plug. The complaints were rational, from a banking perspective. With margins already tight, spending money training farmers left the company with a relatively flimsy balance sheet. Sorry, they told Griswold, you’ll have to show higher profits, or find financing somewhere else. "My back was really up against a wall," Griswold said. 'I had no idea it would be this hard. I thought, I have this great business model, it’s working, someone should be willing to finance it. But that’s not how banks work."

As the financial meltdown has rocked the global economy, 'how banks work' or fail to work, as the case may be, has become more relevant than ever. At its root, the current crisis is born of an inherently unsustainable business model: making loans to people who can’t pay them back. But when judgment is passed swiftly, using daily stock prices, monthly investment returns and quarterly earnings reports as yardsticks, showing a short-term profit takes on an outsized importance. To keep the fast money flowing, banks created complex financial instruments no longer anchored to tangible assets, such as a real person in a real house. "So much of the economy has become a virtual economy," says Debi Barker, director of the U.S. office of Navdanya, an international organization that promotes sustainability. "It’s not tied into anything real. That’s an economy that creates havoc."

That havoc is now upon us, and, optimists say, it’s an opportunity to change the short-term thinking that rules the financial world, and created this mess in the first place. For businesses that want to grow at a measured pace and judge their success in more than dollars, finding financing has been close to impossible. That’s changing rapidly, and it’s about time. Thanks in part to the financial crisis, efforts to build a new kind of economy have moved into the mainstream. The wreckage of an unsustainable financial system could turn out to be the best catalyst for a more sustainable alternative. "We need a fundamental reorganization of the general approach to the economic system," says George Lowenstein, a professor of economics and psychology at Carnegie Mellon University in Pittsburgh, Pennsylvania.

That reorganization is already underway: Investors are increasingly interested in alternatives to traditional capital markets; climate change and volatile oil prices have highlighted the need for renewable energy; consumer activism is pressuring companies to reform unfair labor practices; countries and communities around the world have embraced new forms of currency to pay for crucial public services like ­education and health care. The time is right to change radically how businesses operate, how investors fund them, and how economies grow.

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