Santa Cruz Permaculture recently interviewed Marco Vangelisti, who has a background in finance and investment management and was a founding member of Slow Money. He is a 100% impact investor and helps communities increase their capacity for local investing. Marco’s workshop is titled “Essential Knowledge for Transition: Understanding the economy, money and investing and how to transform them for a regenerative world” and will take place February 23-24.
Our interview began by acknowledging the fact that some people think economics is just plain boring. Others find it confusing, or overwhelming because while they know it has direct effects on their lives, how it functions and the various forces at play can seem complicated and beyond our control, and that can cause anxiety. Why is this, and how do we overcome the inertia around understanding economics so that we can actually transform our current systems for a regenerative world?
SC Permaculture: For many people, the concept of “economics” is either boring or frightening orboth. What drew you to economics and finance, and what keeps you interested in this work?
Marco: The economy and the logic of the market have permeated every aspect of our lives and the way we interact with each other to meet our daily needs, yet most people feel unable to or uninterested in understanding how the economy works.
Part of the problem is the way economics has been taught in school in the U.S. in the last forty years. Case in point–I came to the U.S. after studying math in Italy and attended economics classes as UC Berkeley. Economics as taught in college had taken a quantitative turn and my math skills were very useful. Only after the financial crisis of 2018 I finally understood that the assumptions required to “quantify” economics and apply to it the mathematical apparatus rendered it not only inaccessible to the regular public but also irrelevant for understanding how the actual economy worked.
It turns out that understanding how the economy works not only does not require understanding economics (especially the current hegemonic strain of neo-classical economics) but it is actually accessible to anyone with a basic level of education and curiosity.
Economic decisions made by the financial and economic elites in this country, without our understanding let alone our consent, profoundly affect our lives. To exercise true democracy we need to reach a collective understanding of how the economy actually works and challenge the economic decisions made by the few which affect them many. I see this as the necessary path to bringing about a more just and compassionate society. This is was motivates me to share with regular people my understanding of the economy and of the financial world.
SC Permaculture: You touched on this a little already, but why is understanding money, banking, economics, and finance important for the average person?
Marco: Basically the money and banking system, the economic system, and the financial system act as the operating system of society. The way these systems are currently configured leads to a number of undesirable outcomes like concentration of wealth and power, increased inequality, the housing unaffordability crisis, mounting levels of debt, increasing insecurity of the labor force, environmental degradation. It does not have to be that way! A systemic approach is called for and can be brought about by citizens equipped with a critical understanding of those systems and the more benign alternatives we can to create.
SC Permaculture: How have your years of experience working in finance influenced your current views on money, the economy, and capitalism?
Marco: My 20 years in finance made me understand the extent to which great wealth has been accumulated in the hand of the few through a process of extraction. One of the primary mechanisms of value extraction and expropriation has been finance and investing. Capitalism has been transformed into a form of financial capitalism that has sucked the life out of labor but also out of the old industrial capitalism of the prior century.
To understand our current economic situation it is also critical to understand the role of banks in the creation of debt and money therefore inflating asset bubbles, creating business cycles (or increasing their magnitude) and the process of expropriation.
SC Permaculture: What is the main problem with our current banking system and what could be the role of public banking in the new economy?
Marco: Our current banking system is based on a private for-profit model which has not served our economy well. A common description found in most of the introductory economic textbooks describe banks as intermediaries that collect excess savings and lend it to expand productive activities in the economy. It turns out that banks create the money they lend and very little of their lending goes to productive activities. Most of their lending now goes to fund acquisition of existing assets – mostly in real estate. This causes asset bubbles and the housing unaffordability crisis experienced by most desirable cities in the U.S. A significant portion of their profit comes from fees and very high credit card interests.
The private banks also rely on government subsidies in the form of FDIC (Federal Deposit Insurance Corporation). As we have seen in the build up to the financial crises of 2007-2008 banks created too much money, lent it recklessly to fuel a massive housing bubble and when the whole edifice of credit collapsed the U.S. Government had to step in and clean up the mess. Banking in a modern economy has become an essential component of the economic infrastructure and the private sector has demonstrated that it cannot be trusted in managing the awesome privilege of creating the money we use every day.
An obvious solution is to turn a large portion of the banking activity into a regulated utility owned by the public through a network of local, state or federal governments. The public banking sector in Germany is considerable and is credited with the post WWII stability and resilience of the German economy. A network of public banks in the U.S. could provide credit where credit is needed (especially to rebuild our failing infrastructure and to support the productive economy), would not fuel financial speculation and asset bubbles, would not engage in usurious practices or unscrupulous lending, and would not be a drain on the economy through ever increasing fees and high interests.
SC Permaculture: Could you briefly describe the mission behind Slow Money? How did it get started and what have been some results of this organization so far?
Marco: Slow Money is a movement that emerged out of the Slow Food movement. It recognizes that our industrial food system and our financial systems are problematic and that a new ethos is called for to address the problem caused by both.
The idea is to direct some of the personal investments towards the goal of restoring the fertility of the soil in our own foodshed by supporting local farmers and food producers who treat soil and people with respect. The idea is to measure the success of our investments by the world they make possible and not just by the financial return they generate.
There are currently about 20 local Slow Money groups around the U.S. that have mobilized around $60M of capital to fund more than 600 small family farms and food enterprises.
SC Permaculture: What does impact investing mean? What is one example?
Marco: Impact investing refers to a form of holistic investment that is aware of the non-financial impacts an investment has on communities and ecosystems. Socially responsible investments mostly consists of screening the worst offenders out of a mutual funds of the stock or bonds of publicly traded companies (mostly multinational corporations). Impact investing usually focuses not on publicly traded companies but on funding specific project that try to address a social or environmental problem.
One example is Community Foods Market (CFM) in West Oakland. West Oakland is currently a food desert and its 28,000 residents don’t have access to a full grocery store where they live. After a decade-long effort, Community Foods Market will open the very first full-service grocery in West Oakland in decades. California residents can invest in the project through the DPO (direct public offering) of CFM shares. This would be a very clear example of an investment that is trying to solve a social problem–in this case eliminating a foods desert in the Bay Area.
SC Permaculture: In the past decade, you’ve seen changes already taking shape in our economy and society. Can you share a few of your favorite examples of these changes?
Marco: One of the most positive changes I have noticed in the last decade has been the resurgence of worker-owned cooperatives which represent a systemic alternative to capitalism. Unlike most privately owned and all of the publicly owned companies out there, worker-owned cooperatives are democratic institutions bound to other cooperatives by an ethics of collaboration and support instead of competition.
Another hopeful sign has been the eschewing on the part of many of the Millennials I know of the consumerist fervor that has characterized the American society since the middle of the 20th century. The social enterprise movement has also grown and young people are more likely to dream about building a social enterprise than becoming a CEO of a large multinational corporation.
SC Permaculture: Thank you so much for sharing your perspectives, Marco! We look forward to seeing you in February.
Learn more with Systems Change and the Next Economy: Regenerative Design for People & the Planet
Join us this February 23-24 in Santa Cruz, CA to spend the weekend learning about all of this and more with Marco Vangelisti! Register online here. Additional information about the Systems Change & The Next Economy course, including dates, workshop titles, and instructor biographies for our January, March, and April workshops, is available at http://santacruzpermaculture.com/economy/
I recently found out about the work of Walter Jehne and I was blown away.
Walter is a retired soil biologist from Australia who has created a new framework for dealing with climate change that combines multiple fields of science and provides a clear path for navigating the existential challenge we face.
It turns out that even an immediate cessation of all carbon emissions would not be enough to deal with the challenges presented by climate change. We need to mimic nature to restore the hydrological cycle on a planetary scale in order to cool the planet while we go about moving the excess carbon out of the ocean and the atmosphere and back into the soil – a task that will probably take humanity a few centuries.
Here is a short talk by Walter on the topic.
Here is the big picture.
According to Walter, we receive 342 Watts per square meter of incident solar radiation (ISR) each day but only 339 W/m2 leaves Earth because some of the heat re-radiated by the Earth gets trapped in our atmosphere due to the greenhouse effect. The main culprit has been identified as CO2 concentrations in the atmosphere which has been increasing due to human activities – primarily our land management practices (deforestation, industrial agriculture, desertification) and the burning of fossil fuels. As a reference point, the pre-industrial level of CO2 concentration in the atmosphere was 280 parts per million (PPM), now in excess of 400PPM
We clearly need to stop emissions of CO2 and in fact we need to draw down carbon from the atmosphere back into the soil. But dealing with carbon alone will not do the trick. As we draw carbon down from the atmosphere into the soil, the ocean, which has acted as a massive buffer and has acidified in the process, will rebalance and release carbon back into the atmosphere. Even in the best-case scenario, it will take humanity at least a century to rebalance the three carbon pools (ocean, atmosphere and soil) to restore the 280 PPM of CO2 in the atmosphere that we need for a stable climate.
In other words, we have to handle the increased energy in the atmosphere due to the average daily 3 W/m2 imbalance mentioned above and the resulting climate instability for more than a century.
The key to Walter’s insight is that carbon (CO2) mediates less than 5% of the total energy in the atmosphere; 95% of the total energy is governed by Earth’s hydrology!
It turns out that CO2 concentration of 400PPM and even 500PPM (which we are almost certain to reach before we turn this big carbon ship around) is not going to kill us – only CO2 concentrations in excess of 10,000 PPM are lethal to humans.
The real issues are more powerful storms, rising oceans, aridification and the effect on food production, higher temperatures and more violent weather events. To address all of the above while we go about the long drawn process of rebalancing the planetary carbon pools, we need to understand and manage the hydrological cycle.
The punchline is that we need to engage in a planetary effort to restore the carbon sponge in the soil to take advantage of the cooling effect of plants’ transpiration.
Vegetation acts as a powerful hydrological air conditioning system – each gram of water that is transpired moves up to 590 calories of heat from the ground to the upper atmosphere. Through the process of water transpiration, forests and vegetated landscapes are currently transferring 24% of the ISR (incident solar radiation) back into the upper atmosphere. Unfortunately, we humans have created 5B hectares (one hectare is 2.47 acres) of deserts by cutting down 75% of the original Earth’s forests, thereby reducing this powerful cooling effect. The clearcutting of forests should now be considered ecocide and a crime against humanity.
Our task now is to extend the longevity of green growth to keep transpiration going and to expand plant cover.
Keeping the ground covered by vegetation at all times is important for a couple of reasons. One is to maximize the land area that can act as a natural air conditioning system through the process of pants’ transpiration. The other is to keep the ground cool since soil covered by vegetation is much cooler than bare soil.
As exposed soil is quickly warmed up by ISR it endangers the microbes in the soil responsible for soil fertility, water retention and proper soil structure. The result is often soil erosion including the creation of soil dust in the air that acts as aerosol nuclei for vapor hazes in the air. It turns out that water vapor in the atmosphere represents 60% of the greenhouse gases (GHG) while CO2 represents only 20% of GHG.
We also know that every bit of solar energy that hits the soil is re-radiated out to space as infrared-long wave radiation and that part of this re-radiation is trapped by GHG in the atmosphere. The amount of re-radiation is governed by the Stefan-Boltzmann equation (J* = σ T4) linking the amount of re-radiation to the fourth power of the temperature.
It’s clear therefore that merely dealing with CO2 concentrations in the atmosphere is insufficient in handling the global warming effects brought about by the 3 W/m2 of energy imbalance mentioned above.
While it is imperative that we reduce CO2 emissions, a much more powerful way to handle the planetary heat imbalance is to reduce the amount of re-radiation in the first place by keeping the ground cool. We can also reduce the amount of re-radiation that gets trapped in the atmosphere by reducing hazes particles and water vapors.
Now how to reduce the water vapor and persistent hazes in the atmosphere?
The key is to condense the water vapor into high albedo clouds which can reflect up to 120 W/m2 of the ISR and more importantly can close the hydrological cycle by bringing the water back to the land as rain. To accomplish this we need to aggregate millions of water vapor particles and haze particles into a drop of rain with the help of rain nuclei.
There are only three types of rain nuclei. The first are salt particles emitted into the air mostly by the oceans’ wave activity. The second are ice crystals that form at high altitudes or at high latitudes. But by far the most important rain nuclei are hydrophilic bacteria hitching a ride to the atmosphere through plant transpiration. The rain then clears the water vapor and persistent hazes from the atmosphere allowing more of the re-radiated heat to escape into the upper atmosphere and rehydrates the landscape, recharging the soil carbon sponge that supports and extends the ground vegetation.
The bottom line is that restoring the hydrological cycle on Earth will allow us to manage the effects of global warming by restoring the carbon sponge in the soil, therefore extending the activity of plants that are not only the most powerful hydrological air conditioning system on Earth but are also the best carbon pumps available to draw carbon out of the atmosphere and back into the soil.
The effects of increasing the soil carbon sponge are greater water holding capacity (for each additional gram of carbon the soil can retain an additional 8 grams of water), more vegetation and therefore cooler ground (reducing the level of heat re-radiation), more fertile soil, and richer microbial communities in the soil providing more nutrient dense food.
If you have read this far, you must be intrigued by the work of Walter Jehne and interested in learning more. Your reward is this more extensive talk by Walter Jehne which I’m sure you’ll find fascinating.
Besides learning more about the expanded framework Walter created, you can also make sure your investments are not still part of the problem and participating in the destruction of the remaining biological capacity we need to restore the hydrological cycle necessary to avert our species extinction!