The Solution to Economic Collapse for both Wall Street Banks and Ecovillages
A. Allen Butcher • The School of Intentioneering • Denver, Colorado • April 18, 2022
Whatever may be the differences, a common threat will bring together the staunchest rivals. The story I am about to tell, however, is not about banks and ecovillages working together, it is about collectivization being the strategy employed separately by the big banks, which are normally competitors, when faced with the common threat of the Great Recession, and similarly, the collectivization into ecovillages of people faced with the threat of economic collapse: past, present, and future. There is a connection in this story between big banks and small ecovillages, yet before getting to that let’s start with the story of when Wall Street banks had to suspend competition and embrace collectivization. This is instructive because something like this history is likely to repeat in our lifetime.
Nomi Prins is a financial writer talking about the next big economic fall she calls the “Great Distortion.” She uses a graph showing a bifurcation and divergence beginning in 1971, from when President Nixon ended the gold standard and instituted fiat money in which the real-world economy carries on with a gradual increase, while the financial economy takes off on a much steeper climb upward. It was a stumble of that “financialized” part of the economy that caused the Great Recession of December 2007 to June 2009, which subsequently recovered and resumed its climb toward what she and many others believe will be the next major stumble of the economic system.
The classic problem of capitalism is called “overproduction,” which is when the capacity to produce outpaces the markets’ ability to sell, due to market saturation, or consumers’ inability to purchase, or simply abundance reducing demand. From the 1970s on, overcapacity resulted in investment capital, having no place else to go, beginning to be continually reinvested in the financial sector of the economy, causing the divergence in the First World between a stagnant real economy and a “hyperactive financial economy.” The two then became ever more disconnected, as Nomi Prins’ graphic depicts, up to and then ever since the financial economy imploded with the Great Recession.
Consider the contemporary spectacle of the richest people in the world launching themselves into space. This is an indication of big money looking for something spectacular to do. While there is the Giving Pledge advocated by people like Warren Buffett and Bill Gates for the rich to give away large amounts of their fortunes, and the idea of “philanthro-capitalism” involving corporations creating solutions for social problems, not enough of those instances of social responsibility are happening. (Bishop & Green, passim)
Fortunately, there was one person involved in international finance in the 1980s who used his wealth not for luxury homes and yachts, instead to nurture the rise of the Global Ecovillage Network. Before telling that story, the context of his earlier work needs to be presented.
Susan Strange was the Professor of International Political Economy at the University of Warwick in England, and Emeritus Professor at the London School of Economics. In her 1986 book Casino Capitalism she states, … “The Western financial system is rapidly coming to resemble nothing as much as a vast casino. … As in a casino, the world of high finance today offers the players a choice of games. Instead of roulette, blackjack, or poker, there is dealing to be done—the foreign exchange market and all its variations; or in bonds, government securities or shares. In all these markets you may place bets on the future by dealing forward and by buying or selling options and all sorts of other recondite [i.e., obscure] financial inventions. Some of the players—banks especially—play with very large stakes. There are also many quite small operators. There are tipsters, too, selling advice, and peddlers of systems to the gullible. And the croupiers in this global financial casino are the big bankers and brokers. They play, as it were, “for the house.” It is they, in the long run, who make the best living.” (Strange, p. 1)
Practically any event in the real world could snowball into something that would affect the credit and foreign exchange markets, requiring transnational corporations along with importers and exporters to carefully protect themselves from such risks. The need is then to diversify a company’s capital assets and liabilities, and the best way to do that is by “geographical diversification,” meaning having corporate offices in different countries with different currencies. The result of that long-run strategy, Strange points out, is the tendency of a firm, “to increase their short-term needs for hedging against exchange rate risks, thus adding still further to the volume of transactions in the financial casino.” (Strange, pp. 12-3)
In his 2010 book, On the Brink: Inside the Race to Stop the Collapse of the Global Financial System, the U.S. Treasury Secretary Henry Paulson explained that the stress of the ongoing crisis was weighing upon him.
“Back in my temporary office on the 13th floor [of the New York Federal Reserve bank], a jot of fear suddenly overcame me as I thought for a moment of what lay ahead of us. Lehman [bank] was as good as dead, and American International Group’s (AIG) problems were spiraling out of control. With the U.S. sinking deeper into recession, the failure of a large financial institution would reverberate throughout the country—and far beyond our shores. I could see credit tightening, strapped companies slashing jobs, foreclosures rising ever faster: millions of Americans would lose their livelihoods and their homes. It would take years for us to dig ourselves out from under such a disaster. (Paulson, p. 214)
“All weekend I’d been wearing my crisis armor, but now I felt my guard slipping as I gave in to anxiety. I knew I had to call my wife, … (Paulson, p. 215)
““What if the system collapses?” I asked her. “Everybody is looking to me, and I don’t have the answer. I am really scared.” (Paulson, p. 215)
““You needn’t be afraid,” Wendy said. “Your job is to reflect God, Infinite Mind, and you can rely upon Him.”” (Paulson, p. 215)
Friday, September 12, 2008, Treasury Secretary Paulson called a meeting at the New York Federal Reserve of Wall Street CEOs to come up with a rescue for Lehman Brothers bank. They had to work together to save one of their competitors, because otherwise the impact upon the financial markets and their own companies could be disastrous. Everyone in the room knew that AIG was now in trouble, and the CEOs asked why they should weaken their companies to help one competitor, if the next rescue to be crafted was going to be an even bigger problem, with more problems beyond that successively impacting the financial industry? Tim Geithner, president of the New York Fed responded, “Let’s focus on Lehman.” (Paulson, pp. 192-3)
For a room full of convinced free-marketers beset by the “classic question of collective action,” the issue became at what point does the good of the group overrule individual needs? If each company now had to be prepared to help its competitors, how then can the worth of any particular company be accurately gauged by the market? (Paulson, p. 198)
The world had suddenly gone topsy-turvy. It was no longer business-as-usual. It was a very unusual business when the assumptions of the capitalist free-market had to be replaced by the necessity of collective survival. The CEOs working with Geithner and Paulson that weekend at the New York Fed were being asked by the government to set aside their individual concerns for the long-range good of their industry. Jamie Dimon of J. P. Morgan pointed out that his bank would act responsibly in this crisis, yet that he “ran a for-profit institution and had an obligation to his shareholders.” The stated goal was to create a private-sector consortium that presumably would be able to aid any other financial-industry corporation that might need it next, like Merrill Lynch or Morgan Stanley. Lloyd Blankfein of Goldman Sachs asked, “Do you think this makes sense? … Goldman will act responsibly. We’ll do our part, but this is asking a lot, and I’m not sure it makes sense.” (Paulson, p. 201)
Lehman Brothers bank collapsed in September 2008 and the government bailout of Wall Street was well underway. The Great Recession was challenging many people to step outside of the free-market box. In the process of responding to a macro-economic threat to the entire country and the globalized financial system, the U.S. Government was trying hard to rescue major corporations without nationalizing them, while the corporations themselves were having to change their competitive skins to begin to look and function like they were part of a collective intentional banking community practicing mutual aid.
Tuesday, September 16. It was learned that AIG needed $85 billion. Paulson writes, “AIG’s incompetence was stunning.” The previous Sunday that figure had been (only) $50 billion, so how could AIG be sinking so rapidly? They needed $14 billion by the close of the next business day! (Paulson, p. 229)
Secretary Paulson admitted that the proposed solution was essentially to bail out Wall Street. The Fed chairman, Ben Bernanke, explained to President Bush, “We are past the point of what the Fed and Treasury can do on their own.” Now it was up to Congress to revise the nation’s fiscal policy to save the economy, and raise the nation’s debt limit to do it. In his phone conversation with Secretary Paulson, President Bush naively commented, “Someday you guys are going to have to tell me how we ended up with a system like this and what we need to do to fix it.” Friday, October 3 congress passed the Emergency Economic Stabilization Act of 2008 (EES Act). (Paulson, pp. 237, 256-7, 328)
Monday, October 13. The heads of nine of the largest U.S. banks arrived at the U.S. Treasury building, compelled to attend a meeting where they would have to work together. They waded through a cordon of photographers and reporters on the steps of the Treasury building, entered the conference room, and sat on one side of the Department’s twenty-four-foot-long mahogany conference table, in alphabetical order according to the names of their banks: Bank of America, Bank of New York Mellon, Citigroup, Goldman Sachs, J. P. Morgan, Merrill Lynch, Morgan Stanley, State Street Corporation, and Wells Fargo. Together they held over half of all bank deposits in the U.S. Facing them was: Henry Paulson, Treasury Secretary; Tim Geithner, president of the New York Federal Reserve Bank; Ben Bernanke, Federal Reserve chairman; Sheila Bair chair of the FDIC; and John Dougan, Comptroller of the Currency. (Paulson, pp. 359, 363)
Secretary Paulson began with saying that they had been summoned because they and their institutions had to work together to save the country’s financial system, their companies, and their own jobs. He explained the solution that the government had devised, of the $250 billion that would be divided among them, and they were to sign a paper before they left agreeing to accept the capital infusions from the Treasury into their banks. (Paulson, pp. 362-3)
Richard Kovacevich, chairman of Wells Fargo resisted. ““I’m not one of you New York guys with your fancy products. Why am I in this room, talking about bailing you out?” … For a moment no one said a word, and then the room suddenly broke out in pandemonium, with everyone talking over one another.” (Sorkin, p. 525)
John Thain of Merrill Lynch asked what all the bankers wanted to know yet that no one else would question, “What kind of protections can you give us on changes in compensation policy?” His concern was that once the government had a stake in their companies, could a populist campaign force changes in the CEO’s pay? (Sorkin, p. 525)
Ben Bernanke interjected, “I don’t really understand why there needs to be so much tension about this, [think about] the collective good. Look, we’re not trying to be intimidating or pushy. …” (Sorkin, p. 526)
In late November Citigroup requested government aid for insuring $300 billion of its toxic assets of mortgage securities and corporate loans, even though in October the Citigroup CEO Vikram Pandit had received $25 billion of the EES Act funds. Without a rescue, Citigroup with $3 trillion in assets, would run out of cash by the following week. (Paulson, pp. 365, 410-1)
Andrew Sorkin states in his book, Too Big To Fail, that before the financial crisis Citigroup had been the largest American financial institution, and as it kept coming back to suck more and more money out of the government, Treasury officials began calling it the “Death Star.” (Sorkin, p. 530)
Secretary Paulson later wrote, “I had become the Treasury secretary who would forever be associated with government intervention and bank bailouts. The speed with which the crisis hit had left me no other choice, and I had set aside strict ideology to accomplish the higher goal of saving a system that, even with all its flaws, was better than any other I knew—I had been forced to do things I did not believe in to save what I did believe in.” (Paulson, p. 408)
There was plenty of criticism to go around. In 2009 Congress created the Financial Crisis Inquiry Commission to analyze what went wrong and how to fix the causes of the Great Recession, publishing its report in 2011 titled, The Financial Crisis Inquiry Report. In their book, All the Devils are Here, Bethany McLean and Joe Nocera wrote, “[I]t was very hard to find the line between delusion, venality, and outright corruption. Much of what took place during the crisis was immoral, unjust, craven, delusional behavior―but it wasn’t criminal.” (McLean and Nocera, pp. 361-2)
Even if his actions were not technically criminal, the person who most deserves to be held responsible for the Great Recession is Robert Rubin, the U.S. Treasury Secretary who “lobbied from his government post in 1999 to repeal Glass-Steagall,” then who as a consultant at Citigroup made $40 million as he worked to help the mega-bank take advantage of the relaxed regulations, then in 2000 he opposed the government regulation of derivatives. Ralph Nader says of Rubin in his 2014 book Unstoppable that, “He has not yet recanted from the gigantic folly of his concoctions. … Rubin experiences no shunning and is on the social circuit in New York and Washington, D.C.” (McLean & Nocera pp. 105-7; Nader, p. 157)
What Bethany McLean and Joe Nocera express, of course, is what is called, “business as usual.” Financialization is essentially the creation of ever more risky, high-stakes games in casino capitalism. Paul Volker, former chair of the Federal Reserve, explained at a Wall Street Journal conference in 2009 his view about financialization that it did practically nothing for the economy. “I have found very little evidence that vast amounts of innovation in financial markets in recent years have had a visible effect on the productivity of the economy.” (McLean & Nocera, p. 363)
Andrew Ross Sorkin states in his book, Too Big to Fail, about the unregulated financial instruments called securitized mortgages, collateralized-debt obligations, and the various “derivatives” such as credit default swaps and stock options contracts that, “Warren Buffett called them weapons of mass destruction.” (Sorkin, p. 156)
One thing that is not mentioned by any of the authors cited in this story (except Ralph Nader, pp. 142-3), neither Henry Paulson, nor Andrew Ross Sorkin, nor Bethany McLean and Joe Nocera, in any of their conclusions and lists of lessons about the Great Recession, is that credit unions had none of the problems of the banks, either before, during, or after the massive economic dislocation of the corporate capitalist system. The only significant impact of the Great Recession upon the credit unions is that membership in the movement substantially increased as people learned that credit unions are safer, have their own government-backed deposit insurance, and are more fiscally responsible than banks. This may be one of the most important lessons to keep in mind about the Great Recession, because there are many who believe that the next great economic calamity will be too big for the U.S. Congress to bail out.
While the corporate dinosaurs were stumbling drunk and crashing, deathly poisoned by financialization, furry little financial cooperatives and ecovillages were nimbly avoiding being squashed in the milieu. Consumer financial cooperatives, called credit unions, had long been established, while the ecovillage movement was just evolving within the intentional communities movement, at the time that a benefactor found them.
J. T. Ross Jackson had worked as what Karen Litfin states as an international currency trader, who designed computer software to facilitate the business of his profession. In his 1996 Communities magazine article, “The Global Eco-Village Network (GEN): Encouraging Model Ecovillages Worldwide,” Jackson describes his background as having been in “operations research and international finance.” (Jackson, p. 40; Litfin, p. 12)
Evidently, Ross Jackson was one of those people who helped to create the infrastructure supporting the financialization of the international monetary system. Between 1984 and ’86 Jackson designed and sold computer software for the foreign exchange currency markets, managing to get himself in the right place, at the right time, with the right skills, to help bring on the greatest crisis in neo-liberal market capitalism since the 1930s Great Depression. Surely, if Ross Jackson had not done it, someone else would have.
What probably no one else would have done, however, is rather than live a life of leisure with his earnings, Ross Jackson started a foundation named Gaia Trust to fund the nascent ecovillage movement. As Jackson explains in Kali Yuga Odyssey, a spiritual experience he had with Swami Muktananda inspired him to use his skills and resources to support what at the time was a very young ecovillage movement, just being created. Ross and partner Hildur had early-on been involved in the beginning of the cohousing movement in Denmark, living twenty years in the community they helped found.
Redeeming himself for having participated in bringing-on the greatest financial evil in a century, Ross Jackson co-created a movement, the Global Ecovillage Network (GEN), that promises the best hope for survival through not only economic collapse, yet also potentially though the ecological collapse which is daily growing ever more imminent.
In the 2016 Communities magazine article, co-authored by Ross and Hildur Jackson titled, “The Global Ecovillage Network: Focal Point for a Global Movement,” the authors state, …
“Whether the global economy collapsed or we were able to make a planned transition to a sustainable future, I understood that it would be necessary in either case to build a new culture. At the foundation of this culture must necessarily be sustainable human settlements, and for this we needed good models. I believed that a network of ecovillages that provided such models would be an extremely valuable base on which to build.” (Jackson & Jackson, p. 14)
For sixteen years, from 1987 to 2003, the Gaia Trust funded the start-up of Global Ecovillage Network centers around the world, changing its emphasis then to support ecovillage training programs, including the “Sustainability Wheel” method of teaching the many related topics, published in Hildur Jackson’s and Karen Svensson’s 2002 book, Ecovillage Living: Restoring the Earth and Her People. (See: http://www.Gaia.org)
As the forces of financialization continue to build toward the next global economic implosion, potentially far more significant than any before, the work of Ross Jackson may help us all to follow his keen visionary foresight through the present and coming tribulations, to support the next step of humanity out of the Anthropocene and into the Symbiocene.
Bishop, M., & Green, M. (2010). Philanthrocapitalism: How giving can save the world (2nd ed.). London, England: A & C Black Publishers Ltd.
Jackson, J. T. Ross. (1996, summer). The Global Eco-Village Network (GEN): Encouraging Model Ecovillages Worldwide. Communities: Journal of cooperative living, 91. Rutledge, MO: Fellowship for Intentional Community.
Jackson, J. T. Ross & Jackson, Hildur. (2016, summer). The Global Ecovillage Network: Focal point for a global movement. Communities: Journal of cooperative living, 127. Rutledge, MO: Fellowship for Intentional Community.
Litfin, Karen T. (2014). Ecovillages: Lessons for sustainable community. Cambridge, UK; Polity Press.
McLean, B., & Nocera, J. (2010). All the devils are here: The hidden history of the financial crisis. New York: Portfolio Penguin Group.
Nader, Ralph. (2014). Unstoppable: The emerging left-right alliance to dismantle the corporate state. New York: Nation Books, Perseus Books Group.
Paulson, Henry M. (2010). On the brink: Inside the race to stop the collapse of the global financial system. New York: Business Plus, Hachette Book Group.
Sorkin, Andrew Ross. (2009). Too big to fail: The inside story of how Wall Street and Washington fought to save the financial system—and themselves. New York: Viking Press.
Strange, Susan. (1986). Casino capitalism. Manchester, England: Manchester University Press.