Democratizing Finance and Financial Institutions

Prof. Dr.rer.pol. Martin BüscherProtestant University Wuppertal/ Bethel, Institut for Diaconic Science and Diaconic Management (IDM)

WCRC-WCC-CWM ConsultationsOctober 3rd, 2012, Guarulhos, Brazil

The Sourcerers Apprentice

- The Story – J.W. von Goethe

Five Theses

Thesis I Economics are rooted in Theology.

Economics are rooted in Theology

Protestant, calivinist ethics as the basis for the rise of capitalism – spirit of achievement, humble caring and investment

Liberal Economics – Adam Smith as a theologian

Economics are rooted in Theology

Blunt Secularisation

Good Reasons for Protestants to Argue Economically with Authority

Thesis II

Economics are disrooted from theology and ethics, in finance in its most anachronistic way

Financial Markets Misrooted

Anachronism of normative fundaments of liberal economics

Quasi-religious Settings: Markets as benefiary

Vacuum of ordering powers in neo-liberal naivte

Financial Markets Disrooted

Naivte of Economics in considering contexts

Naivte of Theologians to see the need for economic competencies in in actively shaping economic policy

Thesis III

For the service of life, financial institutions need a countervailing power.

Primacy of politics leads to integrate ethical dimensions.

Countervailing Power

IMF-Policy is dominated by group interests, aiming at untamed financial markets (individualistic approach).

Normative Considerations in a kosmopolitan framework for service of life are systematically neglected.

Countervaling Power

Complete replacement would miss the chance to direct international capital flows.

Make use of the institutions with the primacy of politics, replacing the primacy of markets.

Countervailing Power

Aim is efficient impacts of comprehensive democratic control and social, ecological and cultural sustainability, not the efficiency of financial markets.

Thesis IV

The IMF shareholder structure is replaced by a stakeholder governance

Civil Society replacing Shareholders

Accordingly, the board is not only composed of financial experts (share-holder concept), but by governments, trade unions, NGOs, consumer organisations, etc. (stakeholder concept)

Thesis V

The serving role of financial markets has to be reestablished. For that a set of instruments can be applied.

Set of Financial Policies

Financial Policy Constraints of capital flow, capital control Taxes on capital import Taxes on foreign currency trade (Tobin

Tax) Bail-in of private creditors Constraining credits to foreign investors

Set of Financial Policies

Cooperation of national financial markets control institutions

Guidelines for risk management of banks and insurances

Higher taxes on capital gain

Set of Financial Policies

Balanced currency exchange rates Limiting offshore markets by the Financial

Stability Forum (FSF) Limiting speculation Creating financial markets for

economically developing and emerging markets

What can the WCC-WCR-CWM do?

Series of Encounters with IMF-Representants and political authorities (Stiglitz Commission, IMF, WTO)

Found WCC School of Economics, Governance and Management (SEGM) for economic competencies and empowerment