Green financial market policy is based on the principles of liability and responsibility – in stark contrast to what we experienced recently during the global financial crisis, when these principles were flouted on a massive scale: despite bank losses running into billions and bail-outs funded by the taxpayer, bankers and shareholders are still being paid massive dividends and bonuses.
Lessening the power of the financial markets
When banks become so large and powerful that the state cannot allow them to fail, government itself becomes vulnerable to blackmail. This is because there is no incentive for the financial institutions to adopt a responsible attitude towards risk. They know that if they gamble away their money, the taxpayer will step in. The aim of Green financial market policy is to remove the state from the banks' vice-like grip. A proper regulatory system must be put in place to ensure that banks operate more responsibly and become more resilient. However, less risk means lower profits. The 25 per cent return aimed for by Deutsche Bank Chairman Josef Ackermann will then be completely unrealistic. In any case, such overblown goals are not compatible with sustainable financial management and are the cause of the current disaster.
The present financial market structures give individual actors the power to jeopardise the entire system. For example, there are onlythree major credit rating agencies worldwide. If one of them gives the thumbs down to a company or country, this puts it in a very difficult position. Ironically, these agencies overrated the US subprime market. The essence of the market economy, however, is that no one should act as a central planner. Green financial market policy therefore aims to limit the power of individual actors and provide a greater role for the market, in order to prevent it from collapsing as a result of errors by individuals, taking jobs and prosperity down with it. The current bail-out policy, on the other hand, is creating larger and larger banks but shies away from radical market reform. This is bad for competition and costly for society.
Consumer protection in focus: more green investment
Protection for consumers investing in the financial markets is another central pillar of our financial market policy. Every year, investors lose billions as a result of bad financial products and poor advice. We want to regulate the financial market so that it puts investors' interests first. This is how all good markets should be organised. Transparency on costs, profits and risks has a key role to play here along with the principle that financial investment entails responsibilities. Investment policies based on ethical, social and ecological criteria should therefore play a more prominent role in future – in other words, there must be more green investment.
A green market economy, not a return to the old-style economy
From our perspective as Greens, the message is clear: we want a new type of market economy. We want a green market economy. "Crisis management" is not enough. We need a radical shift away from economic activities at the expense of the environment and the climate, and an end to global injustice. With the Green New Deal, we are proposing a new type of economic system which defines progress in terms of sustainability, equity and justice. You can find out more on our Economy pages.
Our new financial market regime means that there will no longer be any countries, markets, institutions or products which fall outside the scope of financial market supervision. Havens must be abolished, and highly speculative financial products must be properly regulated. The same applies to the shadow banking system consisting of hedge funds and special purpose vehicles (SPV), which must be subject to effective control.
We want to impose a tax on all financial transactions, thus ensuring that the capital sector makes a fair contribution to the welfare of the community. It is unfair to levy a turnover tax on every bread roll that is sold, but not on transactions made in the financial markets.
A greater role for the market and for the state
As paradoxical as it may sound, we Greens want a greater role for the market and for the state. A greater role for the market means more competition, which will prevent a disproportionate amount of power being concentrated in the hands of a few individual actors, making governments vulnerable to blackmail and generating profits at consumers' expense. We want a greater role for the state in order to safeguard a sustainable social and ecological economy now and in future, with stringent rules and effective supervision, consumer protection and sustainable financial markets. The laisser-faire of the past has driven the economy, states and citizens to the brink of ruin. Green financial market policy is therefore committed to regulated markets that create real value.