Atul K. Shah‘s Organic Finance denounces our destructive, profit-driven financial system and proposes an alternative model rooted in community, ecology, and cultural diversity. Employing nature-based metaphors, the book makes a compelling case for a paradigm shift towards ethical, sustainable finance, though it stops short of detailing how such ideas could translate into real-life policy, according to Ismail Ertürk.
A vision for sustainable and socially responsible finance
The metaphor “animal spirits” refers to the critical role of emotions, of “spontaneous optimism” over calculation, in driving the behaviour of economic agents. John Maynard Keynes introduced the term in the context of the Great Depression of 1929, contradicting the premise in neoclassical economics that rationality guides human decisions. Following Keynes, Nobel Prize-winning economists Akerlof and Shiller theorised it in developing behavioural economics and finance after the Global Financial Crisis of 2007.
Shah’s concept of ‘Organic Finance’ aims to serve a sustainable socioeconomic future rather than an economy that promises unrealistic growth
Although the explanation of behaviour shifts from rationality in neo-classical economics to emotion in behavioural economics and finance, the agent remains the same: the selfish individual. For those of us seeking an alternative economic order, the question is: how do we replace the selfish individual in economics with a collective, socially and environmentally minded economic agency? The critical scholarly research after the 2007-2009 Global Financial Crisis highlighted the overlooked work of post-Keynesian macro economist Hyman Minsky who theorised the causes of financial instability in capitalism. New work, like that of Brett Christophers, Engelen et al. and Paul Langley, on the other hand, aimed to explain the crisis and the dysfunctionality of the existing financial system, rather than develop an alternative finance theory.
How metaphors effect change
Atul Shah’s new book Organic Finance is aware of the power of metaphors in changing theory, and delineates a list of them which could help to build a new, socially and ecologically responsible paradigm in finance. Shah uses the term “organic” to describe a financial system that connects to local economic and ecological needs at a time when “scientific” finance is failing spectacularly to serve both people and the planet. Shah’s concept of “Organic Finance” aims to serve a sustainable socioeconomic future rather than an economy that promises unrealistic growth, framed in quasi-scientific mathematical abstractions. He argues that building a globally sustainable finance will first require embracing “a taxonomy of different attitudes and beliefs about animals and nature”, and the importance of accounting for “vast diversity of finance cultures in the world” (151).
Shah’s book is an invitation to think radically about transforming how we conceive of and practice finance, rather than merely moving around its furniture.
The key metaphors Shah uses are soil, seed, death and decay, and forests (of hope), with a chapter dedicated to each. Two further chapters, “ecosystem” and “inner growth”, integrate the key metaphors into a vision of a financial structure that serves society and the planet rather than financial elites. Shah weaves together the metaphors referencing the ecosystem of organic life in nature to argue that ethical finance is rooted in the soil of “faith, trust, relationships, community and culture” (34). It grows not into an individual forest for each society, he contends, but into forests of diverse practices of finance addressing local needs within societies.
An alternative style for a bold message
Arguably, the book over-relies on metaphoric language, like the “rivers nourishing mother earth, without charging a fee” (101). But Shah holds that such language helps to constitute a normative finance for nature and societies that contrasts with a purely profit-oriented model that dominates today. He purposefully adopts a subjective, passionate writing style to create a “soul” for his reasoning that goes “against the tide of positivism, empiricism and technical complexity for its own sake” (173). This approach means that the book will not appeal to everyone, even those who share its criticality of mainstream economics and finance. But the book is consciously intended for a general readership who would find the technical language of finance an obstacle. Shah’s goal is to free their reasoning to imagine an alternative financial system. For readers of an academic background, Shah’s book is an invitation to think radically about transforming how we conceive of and practice finance, rather than merely moving around its furniture.
Shah knows the discipline well, giving weight to the book’s moralistic argument which might otherwise ring hollow. He offers practical advice on how finance should be taught in order to effect real change. He proposes teaching responsible leadership to finance students and introducing “debates and discussions with students and scholars from other departments like ecology or agriculture and forestry or theology…[to] … help break … the silos and enable students to see the wider depths and breadths of knowledge needed to tackle our environmental crises” (171).
The challenges of “big idea” thinking
Sometimes the passion that animates the arguments in the book leads to simplification. There are frequent instances in where the complexities in the history of capitalism and the history of money receive generalised judgements. For example, the book chooses not to explore the controversies in scholarly work on the assumed harmony in non-capitalist and faith societies. Shah gives examples both from the West and the East how religious and faith institutions historically have played significant role in the development of human knowledge. He highlights Jainism (28), a culture he knows well, as a good ethical model for social and environmental equity. But he does not problematise the social contestations and power relations that such faith-based organisations have been associated with. The book frames colonial power in economies, economics, moral values, and science as detrimental in history. But the socially oppressive local power dynamics in non-Western societies are not given due analytical and moral attention. In studying the supposedly egalitarian Bedouin society in the Middle East the anthropologist Lila Abu-Lughod describes the complexity of social status and rights by age, gender, wealth and genealogy.
Any attempt to transform mainstream finance must recognise the theoretical and practical difficulties and historical contingencies in building a radically new system.
Shah sometimes presents good and bad as black and white, without the shades in between that economic history and anthropology have studied. There is a gap, for example, around how his vision of ethical finance can be democratic in practice. How would ordinary people be involved in the creation of financial institutions and their regulation? Any attempt to transform mainstream finance must recognise the theoretical and practical difficulties and historical contingencies in building a radically new system. How would the metaphors in the book be translated into specific instruments for financial decision-making? Given that the ecological emergencies are global in nature, how would a global framework stemming from diversity in cultures be established to resolve them?
An urgently needed overhaul of the financial system
As the ecological emergencies we face globally affect daily lives more regularly through devastating heatwaves, wildfires, hurricanes, and floods, this book is a timely call to re-imagine how we live. The OECD’s latest annual report on the economic impact of climate change estimates a loss of 7 to 18 per cent in global GDP by 2050 if the 2015 Paris Agreement on carbon emissions is not met. The World Resources Institute (WRI) estimates that global wildfire activity could increase from 30 to 50 per cent over current levels by 2100 because of climate change. Our existing financial system, with its blatant epistemological and ethical weaknesses, cannot facilitate the radical change required to address the climate crisis. The book contributes significantly to the existing debates on the inadequacy of mainstream finance theory and practice, providing a compelling and imaginative alternative for its ethical transformation.
Note: This review gives the views of the author and not the position of the LSE Review of Books blog, nor of the London School of Economics and Political Science.
Main image: KENG MERRY Paper Art on Shutterstock.
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