Finance-based transition solutions: approach with caution

Andrew presents the fundamental criticisms made by economists Clive Spash and Frédéric Hache of the influential Dasgupta Review of the economics of biodiversity. Whether or not these criticisms are persuasive, their review points to significant dangers lurking in the financialisation of Nature.


Currently, greens are wrestling with the concept of transition, and how to build a social provisioning system that delivers needs and the possibility of flourishing without breaching biophysical limits (or at least by significantly minimizing these breaches). Work by Green House on just transition and the climate emergency economy are examples of such work. They are of course not alone: various proposals for green new deals abound, all offering routes of escape.[1]

Meanwhile – and not quite the same thing – economists are devoting considerable resource to consider how to move smoothly from the current ecologically unsustainable economic model to one that will allow endless economic prosperity within ecological limits. Recent discussion has turned to financing arrangements: namely, how to encourage financial market actors to make ‘good’ investments in the right things. That, it is claimed, must happen if society is to make the investments necessary to facilitate transition.

The Dasgupta Review (2021) is a UK Treasury report on the economics of biodiversity, written by the esteemed economist Partha Dasgupta, aided by a panel including Nicholas Stern, author of his own rather famous report in 2006.[2] The Dasgupta Review was lauded by its Ambassador David Attenborough, World Wildlife Fund, the RSPB, and several business and finance bodies. Significantly too, the Dasgupta Review is seemingly influencing thinking in the Green Party of England and Wales.[3]

The leading ecological economist Clive Spash is well-known for his excoriating criticisms of mainstream economics. In a recent intervention, Spash and his co-author Frédéric Hache offer a lengthy and fundamental critique of the Dasgupta Review (Spash and Hache, 2022). Spash and Hache’s deconstruction is significant per se and asks broad questions about how greens might think about the economy. In the first parts of this gas, I present my understanding of Spash and Hache’s main arguments and consider some of their implications. In short, I am sympathetic to their analysis that whilst promising a lot, in the end the Review falls back on methods and concepts that have well-established clear weaknesses.[4]

Beyond these criticisms, Spash and Hache describe the Review as “…the latest attempt at justifying the financialisation of Nature…” (p. 1); however, they do not expand on this point. Yet, it is crucial: even if Spash and Hache were wrong in their assessment of the Dasgupta Review, the dangers of financialisation would imply that relying on finance as the vehicle to just transition would be unwise. These questions are highly pertinent especially at a time when the current UK Chancellor of the Exchequer is speaking about financial deregulation as the engine of economic growth and when a key promise in one candidate’s campaign to become UK Prime Minister has been to remove restrictions on financial activity such as solvency rules on insurance companies. Thus, the final section of the gas considers what financialisation is – for now, let us treat it as the transformation of everyday life into financial products – and why it is problematic.

Before going any further, let us outline the main findings of the Dasgupta Review.

The Economics of Biodiversity: the Dasgupta Review

‘The Dasgupta Review’ is in fact the subtitle to the HM Treasury-commissioned report on The Economics of Biodiversity.[5] The Dasgupta Review was commissioned to assess the economic benefits of biodiversity, the costs and risks of biodiversity loss, and “actions that can simultaneously enhance biodiversity and deliver economic prosperity” (see Spash and Hache, 2022, fn. 7). In this respect the Review echoes prevailing narratives of minimal or no economic loss solutions to ecological crises as found in the Stern Review, Adair Turner’s recent work on technological fixes, some narratives on ‘green growth’, and many treatments of the Green New Deal.

The Review’s foreword, by David Attenborough, uses appropriately serious language of “crisis”, “breakdown”, “plunder”, and a human “onslaught”. It calls for “collaborative action by every nation on [E]arth” (Dagupta Review, pp. 5-6). Dasgupta’s own preface begins with a justification of abstract economic models as parables and a characterisation of economics as “also a quantitative subject” (p. 3), an adequate description (and implicit approval) of how economics tends to be done. It also indicates the Review’s approach.

Contrarily, an alternative definition of good economics is that it is inherently qualitative and quantitative (stressing both words and numbers) in its approach to research. Indeed, Dasgupta acknowledges that an unfortunate consequence of dominant approaches to method has been to exclude Nature. He correctly identifies that many of the recent attempts to incorporate Nature, or so-called ‘natural capital’, have been inadequate, merely grafting ecology onto standard models. One of the objectives of the Review is, thus, to allow modelling of Nature recognizing that humans (and hence economies) are embedded in it. This is done to satisfy the person wishing to understand humans’ place in Nature, what Dasgupta calls the “social evaluator” or, significantly, the “citizen investor”, arguing people are all asset managers. In turn, in the Review,

the natural world is studied in relation to the many other assets we hold in our portfolios, such as the vehicles we use for transport, the homes in which we live, and the machines and equipment that furnish our offices and factories. But like education and health, Nature is more than a mere economic good. Nature nurtures and nourishes us, so we will think of assets as durable entities that not only have use value, but may also have intrinsic worth. Once we make that extension, the economics of biodiversity becomes a study in portfolio management. (Dasgupta Review, p. 4)

The Review then goes on to say that for countries to choose a sustainable path, they need to adopt national accounts that incorporate “inclusive wealth”, i.e., a stock recognising that Nature is an asset, albeit one that can depreciate. In doing so, as economists often do, Dasgupta invokes Adam Smith, namely his intention to understand the nature of the wealth of nations. He also acknowledges that Gross Domestic Product is not suitable for the purpose of measuring national wealth, because GDP is a flow of income, whereas wealth is a stock from which the flow is generated.

The objective of the citizen investor – and by extension, the whole community of nations – is to maximise inclusive wealth. The Review does acknowledge that what inclusive wealth means will differ according to the conditions and needs of particular parts of the world: for example, shortages and/or poor quality of water will have different impacts on farmers than on urban dwellers. The Review also notes ways in which ‘natural capital’ is different from other assets: first it is mobile, leading to effects emanating in one place but occurring in another. Second, the processes by which natural capital assets are produced are silent and invisible, much more complex than for produced goods such as factories and oil fields. Indeed, the Review offers a lengthy treatment – encompassing annexes on tipping points, biodiversity and climate change, measuring biodiversity –of planetary boundaries. Much – although not all – of this treatment chimes with green concerns.

Spash and Hache’s critique

Spash and Hache acknowledge many of the Review’s contributions outlined above and seem to agree that, at least on the surface, it offers new ways of thinking, possibilities and solutions. In the end, though, they present offer a range of forceful criticisms of the vision laid out above. They criticise the Review as being not actually very new, and of falling back on old techniques that have been subject to fundamental criticisms for some time. These can be categorised as:-

1) The model of the economy underlying Dasgupta’s arguments is flawed, being insufficiently connected with the biophysical reality and assuming continuous growth is always possible.

2) The model relies on being able to value (monetarily) natural capital. This is problematic for several reasons. Despite showing awareness of well-established critiques of economists’ methods of valuing nature, the Review nonetheless assumes that this can be done. There are fundamental problems in treating Nature as capital at all. There are also well-known fundamental problems in aggregating capital, yet the Review claims that capitals in various forms, including manufacturing processes, Nature, social relations, education and health, can all be captured in a single monetary measure.

3) The Review’s new, key concept of ‘enabling asset’ – of which biodiversity is an example – does not in fact require that Nature is valued, even if it were possible, therefore making it less, not more, likely to be protected by the market.

4) The analogy drawn in the Review between financial management and protection of the natural world is inappropriate.

5) As noted above, the Dasgupta Review facilitates the further financialisation of Nature, i.e., the transformation of Nature into financial products, principally for the purpose of enriching and empowering further the financial sector.

Ultimately, Spash and Hache see the Dasgupta Review as committing the same errors as earlier treatments, in making false claims to reach valuations of Nature, reducing it to a financial asset tradeable at reliable prices on well-functioning markets, all in the pursuit of growth.

Let us now explore each of these points in turn, with a particular focus on the fifth, the one to which Spash and Hache devote least attention.

The underlying economic model of the Dasgupta Review

In their section 2, Spash and Hache argue that the unifying model underlying the Review is fundamentally wrong, for several reasons. Most importantly, Spash and Hache argue, the Dasgupta Review does not take sufficiently seriously fundamental limits to economic growth, or the core biophysical critiques of ever-expanding capital economies as articulated by Donella Meadows et al, Nicholas Georgescu-Roegen, and modern ecological economists. Now, as already noted, the Review contains lots of material on planetary boundaries, recognising that these place absolute limits on growth. However, Spash and Hache (p. 4) claim that these “limits become side constraints that can simply be dealt with by optimal investment strategies, getting the prices right and creating more wealth (i.e., growth as normal)”. This approach weakens the Review’s claims to embed Nature in economic analysis or recognise the sense in which the economy is dependent on and embedded in Nature.

Additionally, the Dasgupta Review offers no alternative to the prevailing model of the economy, even when alternative visions including the circular, sustainable, foundational, etc. are available. According to Spash and Hache, “the only thing that matters [to Dasgupta] is maximizing social value measured as monetary wealth invested in a capital stock. The aim of life is to maximise rates of return on investments. Achieving social good requires that the wise ‘citizen investor’ choose the optimal portfolio of capital assets” (p. 5)

Problems of valuing Nature

The goal of maximising inclusive wealth is undermined by fundamental general problems in valuing Nature. These problems are acknowledged by the Dasgupta Review; indeed, it does recognise the many unpaid benefits that flow from Nature and does try to lay out in some detail what biodiversity means. Ultimately though, Spash and Hache claim, these concerns are swept under the theoretical carpet.

It is well known that objects in Nature present problem for economists. Economists tend to try to capture the diverse multi-dimensional complex reality in terms of a single measure, market price, which via market processes is seen to balance out forces of supply (from firms seeking profits) and demand (from consumers seeking utility from goods). They recognise, correctly, that there may be little relation between the value in use of something and its price. Accepting that market prices can get prices ‘wrong’, economists seek to reach ‘true’ prices via policy interventions, such as carbon taxes. Armed with these ‘true’ prices, markets will no longer make the mistakes they formerly did. Producers will now not be able to avoid the costs of their pollution and consumers will no longer be able to take artificially cheap flights.

Economists have long recognised that many things, such as species and rivers, may not be traded or tradeable on a market and so do not have a market price. Here, though, there is a problem, since as discussed, whatever is ascribed a price is assumed to have a value in use, so monetary valuations convey importance as well as facilitate comparison. Thus – at least from the economist’s perspective – environmental objects need to have some monetary value put on them. So, economists engage in various forms of non-market valuation, for instance by asking people what they would be willing to accept as compensation for the loss of a species. These techniques are held to give us proxy values for environmental objects. This process can capture the worth of something and, in so doing, arrive at a solution that is somehow just or fair.

However, these pervasive techniques of valuation are subject to well-established criticisms. For instance, they try to capture what a consumer would be willing to pay to preserve an environmental object, or willing to accept as compensation for its loss. They can do this in various ways, using surveys or experiments which try to replicate a real-world scenario. These are well-intended techniques, and they can be augmented by inviting groups to discuss their valuations, including asking them about the criteria they have used to reach them. However, they are undermined because humans cannot conceptualise the complex scenarios they are being asked about. Spash and Hache argue – controversially perhaps – that appealing to uninformed views on scientific concepts is not a good way of arriving at ‘true values’.

More fundamentally, Spash and Hache argue that the Review applies few of the lessons from available literature on environmental ethics and values. As Spash and Hache acknowledge, the Review does discuss the ‘intrinsic worth’ of Nature. The Review also notes that intrinsic worth can be different from instrumental worth, i.e. what the thing does for us. However, these positions are undermined, in various ways. For instance, elsewhere the Review almost collapses the distinction between intrinsic and instrumental value:

“The line separating an instrumental value from an intrinsic value is, in any case, wafer-thin when the instrument advances a value we hold deeply. What is taken to have an intrinsic value could well be an instrument for advancing a more deeply held value. Conversely, what advances a deeply held value could have instrumental advantages” (Dasgupta Review, p. 185).

Essentially, for all the extensive discussion in the Review, Spash and Hache claim it takes an anthropocentric approach: “For Dasgupta … all values, including the sacred and intrinsic, are imparted to things by humans and do not exist in entities themselves” (p.10). Whilst the Review acknowledges (p. 313) that “asking people to disclose the value they place on Nature is only the first step towards an understanding [its] full value”, unfortunately, they claim, it does not go beyond this. Thus, ultimately the Review underplays that people often place high intrinsic or sacred value on things, meaning there is no price at which they would substitute, say, a dolphin for a sofa, or for money. These items are priceless. Therefore, methods used to try to apply asset values to these objects are flawed. In addition, when different people have different valuation criteria (‘incommensurable values’), there may in fact be no one true price, so attempts to impose one via a single monetary criterion are also flawed.

None of this is news to environmental economists, who do their best with methods they know are flawed. Even in the Review, many of the problems are acknowledged, leading it to admit that empirical corners must be cut (see Spash and Hache, p. 9). And yet, Spash and Hache claim, the Review skirts round these problems and asserts that monetary valuation can proceed.

Fundamentally, if there is no objective way to measure or value things, then the processes advocated by the Review will not work. This is a problem of all market-based solutions, including carbon taxes. As Spash and Hache summarise: “That markets are not guides to intergenerational fairness, ethics or equity, would seem to bring the whole approach into question” (p. 18). This conclusion has general implications for the Dasgupta Review overall, not least because Spash and Hache note specific problems for the Review’s valuation of natural capital, one of its essential elements.

Problems in valuing capital

All the arguments above on valuation in general apply to all concepts of capital, whether produced (for example, machines and the factories they are in), natural (for example, ecosystems), social (for example, networks and communities), or human (usually a synonym for the products of education). Further, the concept of inclusive wealth assumes that all these capitals can be easily compared, measured and aggregated into an aggregate measure. However, well-established difficulties abound with the concept of aggregate capital.

Overall, Spash and Hache argue, the Review treats capital in a fundamentally flawed way. “Classes of capital are values, equated and summed. Human capital is an aggregation of values so that, for example, more ‘education’ can compensate for increased risk of death” (Spash and Hache, pp. 13-14). Similarly, health and morbidity, or even social relationships are treated as measurable in monetary terms, as therefore amenable to trade-off with money; and by lumping them together, are tradeable against each other.

That approach of course extends to natural capital, defined in terms of goods and services for human well-being, which are all given monetary values that are meant to capture their true values. Since it is assumed that natural capital can therefore be brought into direct comparison with other types of capital, one can then imagine trades-off between one type and another. A forest can be lost but if it is replaced by a dam, the net effect can be an increase in capital. However, drawing on the arguments from the previous section, this approach is flawed. There is no reliable basis for valuing a lagoon against a factory, or against some education, or a familial relationship.

Spash and Hache also hint at wider, more radical critiques of the Dasgupta Review’s approach to capital, drawing on non-mainstream approaches within economics. As they note, these approaches recognise that under capitalism, capital value is determined in social relations characterised by power.

“Under capitalism the key to power lies in gaining private property rights over resources, and this then lies at the heart of the debate over biodiversity. What is at stake is the legal right and economic authority to capture the surplus created by the production process” (p. 6).

So, here, the notion of capital suggests specific relationships between (classes of) people, an aspect ignored by the tradition underpinning the Dasgupta Review’s approach. Second, alternative approaches consider the notion of capital differently. For example, in Marxian approaches, capital is functional and not a stock of wealth at all. Physical goods become capital when they are employed for the purpose of profit making. Thus, treating Nature, education, social networks, health etc. ascapital itself presupposes that they are to be put to a profit-oriented use, rather than having intrinsic worth.

Biodiversity as a financial asset

Even if the problems of valuing natural capital discussed above were not present, Spash and Hache note a specific weakness within the Dasgupta Review in valuing biodiversity. Crucial here is the Review’s concept of an enabling asset, which applies to anything that is ‘productive for human ends’ but is not classed as physical, human or natural but still “confer value to the three classes of capital goods by facilitating their use” (Dasgupta Review, p. 325). They include such things as social capital and publicly available (as opposed to private) knowledge. Significantly for the section below on financialisation, the Review counts financial capital as an enabling asset.

“Enabling assets are not always usefully measurable, but that does not matter, for they enable human societies to function healthily; and these functions can be measured” (Dasgupta Review, p. 325).

Crucially, the Review (p. 43) identifies biodiversity as an enabling asset, which sounds encouraging; however, Spash and Hache argue that the concept of enabling asset would work against what might superficially appear to be the main objective of the Dasgupta Review. The concept of enabling asset relegates biodiversity to something that the Review does not need to value directly. The upshot of the approach, they argue, is to make species extinction more likely: “Indeed preserving any species, or anything, that does not payback profit at the going commercial rate is inefficient. All slow growing species should be optimally and efficiently terminated. The stock should be liquidated and the capital invested elsewhere” (p. 15). This, they argue, is a consequence of treating biodiversity as part of natural capital. It also begins to illustrate how the very treatment of Nature as a financial asset is problematic.

Biodiversity protection and financial management are not alike

Spash and Hache reject fundamentally the Review’s claim that biodiversity protection is really the same as financial management. According to Spash and Hache, in the Review, destruction of Nature is held to be just a misallocation of resources, bad price signals leading to attempts to replace natural with human and produced capitals. Thus, in this framework, if one can account for Nature correctly, no problem. However, this approach is flawed, as shown above: it rests on unwarranted assumptions about the possibilities of valuing Nature and a flawed approach which unproblematically treats Nature (and other things) as capital.

In addition to the points already made, Spash and Hache note problems with the Review’s central reliance on financial management. First, they reject the analogy of Nature with capital, as something requiring investment. As they note, this is not the case. Nature regenerates itself – it does not require an investment, it only requires protection. By contrast, they claim, “biodiversity destruction has always been a corollary of capital accumulating growth, since such economic activities are about appropriation and transformation of natural resources” (emphasis added, pp. 18-19).

Second, they note that treating Nature like assets or ecological policy as asset management also suffers from treating the world in terms of risk, not fundamental uncertainty (p. 19). In a risky world, future events are not known but one can attach probabilities to them, perhaps based on past events, or ultimately merely a subjective assessment. A coin toss has a roughly 50/50 chance of being a head. By contrast, in an uncertain environment, about some future events, particularly long into the future, there is no reliable way of attaching probabilities to them:

“We simply do not know” (Keynes, 1937, p. 214)

In these cases, investors rely on convention, and by evaluating what others are doing. Decisions in stock markets are more like this than the imagined hyper-rational investor interacting with others to reach prices that reflect the ‘true’ values of the stocks, somehow reflecting fundamentals of the firm. “This inability to deal with strong uncertainty makes the asset management analogy both erroneous and dangerous” (Spash and Hache, p. 19). Instead, a precautionary principle seems more sensible.

This is important because, returning to the argument above, the underlying model of the Dasgupta Review is one in which financial markets, facilitated by the State, are efficient in arriving at true prices of Nature, allowing us to achieve its optimal use, in turn allowing economic growth to be maximised and sustained. However, this vision is wrong, as acknowledged implicitly:

“That markets cannot achieve efficient allocation is why Dasgupta requires a ‘social evaluator’ and accounting (shadow) prices based on social [cost benefit analysis]” (Spash and Hache, p. 19).

Beyond Spash and Hache: financialisation

As noted above, Spash and Hache describe the Dasgupta Review as an attempt to financialise Nature. We saw in the previous section why this might be inappropriate way to treat Nature. The final two of Spash and Hache’s criticisms point to specific problems in relying on financial markets to address the ecological emergency. However, beyond these points, something Spash and Hache only touch on, are the wider issues around financialisation. Even if treating Nature as a financial asset were otherwise unproblematic, the nature of financialisation present sufficient reasons for scepticism about it.

Before moving on, a key clarification is necessary. Economists do not in the main talk about financialisation. When economists – or at least those non-mainstream economists that do so – talk about financialisation, they are not talking merely about finance. There is considerable work currently being done on getting financial actors to pay attention to – and attach value to – Nature, this being one example. Other current work assumes that major investment is needed to ease the transition to a sustainable path and that governments cannot provide this, thereby requiring that private finance steps in. Such arguments, perhaps anachronistically, tend to treat finance in a benign way, as mere grease for the wheels of industry, facilitating useful production. Such a view reflects a traditional view of credit as necessary to bridge the gap between production and receipt of revenue. The Dasgupta Review appears to take a benign view of finance and financial capital, seeing it playing a facilitative role (see p. 323). This approach echoes mainstream economics, which until recently had not placed finance or banking at the centre of its analysis, and instead hid them in ‘dark corners’.

Economists who are not in the mainstream have identified something they call financialisation, although, despite considerable academic work, it has no common agreed definition. Some describe it as a process capturing myriad changes to money and finance over recent decades, resulting in its internationalisation and disproportionate growth of finance (Bonnini, Kaltenbrunner and Powell, 2020). Others define financialisation as the transformation of everyday life into financial activity (Epstein, 2005). This latter concept seems to match best Spash and Hache’s notion of a “world converted to financial assets” (p. 20).

Examples of this transformation abound, be it the transformation of pensions into funds for financial speculation, packaging mortgage debt into financial products, or the advocacy of teaching children financial literacy, to make them individually capable and responsible for their financial state. Significantly, it has also entailed the replacement of state-provided social services by that funded by private financial capital, for instance public equity firms. As a result, “public provisioning and policy-making [is] increasingly investor orientated” (Hofferberth, 2022, p. 86).

This transformation is evident, for example in public and private debt rising at very high rates. Globally there has been a big expansion in volumes of credit, as shown in the rise of broad measures of money globally from 50% to 145% of GDP between 1960 and 2020 (Hofferberth, 2022, p.79). Finance has been increasingly willing to lend to households as doing so creates further opportunities for profit, and softer regulation has made it increasingly possible to realise them.

For global southern countries it is also evident in ever increasing flows of capital in and out of them, making them increasingly dependent on those flows and therefore subject even more to the countries (and institutions) based near or at the top of the international currency hierarchy. This increased dependency has been facilitated by international organisations such as the IMF, who have been seen to drive the process of financialisation and to support the needs of capital. So, to attract foreign capital, countries face pressure to provide conditions conducive to (financial) capital. For instance, states de-risk investment projects by providing guarantees of revenue flows to encourage foreign capital to flow in (Gabor, 2021).

Even for global northern countries, financialisation has many negative consequences. Financialisation has contributed to rising inequality within countries, a higher share of profits in total income, and via share bonus schemes and the rise of ‘supermanagers’ (Piketty, 2014), rapidly rising salaries for top earners, while average real wages have stagnated. The rise of private debt has worked as a mechanism transferring wealth from workers (and producers) to financial capital and property owners. Similarly, increasing public debt has been used as an argument for austerity, one form of which is lower public investment. As poorer segments of society are more dependent on public services and infrastructure, this shift drives further inequality. Meanwhile, the effects of lower real wages have been hidden by wage earners taking on higher private debt (see Hofferberth, 2022, p. 88).

Importantly, an increasing proportion of GDP is taken up by the FIRE (finance, insurance and real estate) sectors and there has been a rise in financial assets relative to GDP. This latter fact is often used to justify a policy focus, for instance to allow the City of London to dominate the economy, to consolidate what are seen as successes. However, this increased dependence has several negative additional consequences. Principally, it affects the likelihood of economic crises and how they will be managed.

The Global Financial Crisis of 2007-8 is a good example. The crisis was triggered by problems in the US housing market, a prime location of increased financial activity and speculation, financial products comprising packaged mortgage debt (and other so-called collateralised debt obligations), insecure and questionable lending and inflated house prices. Its collapse exposed questionable practices within and between financial market actors such as credit ratings agencies, as well as highlighting the laxness of both monetary policy and financial oversight. Whilst some of the initial victims of the crisis were wealthy investors as well as investment banks such as Lehman Brothers, the consequent collapse in the economies had real consequences. Structural problems in the economy had previously been masked by debt, generated by the financial sector.

Several policy responses were available, including doing nothing and allowing bad banks and other companies to collapse, allowing the economy to cleanse itself; however, it was instead decided to engage in large-scale transfers of money to financial institutions, notionally to ensure that the interbank market remained functional, ensuring there was sufficient liquidity for the economy to function. Now, it is true that attempts have been made to increase the regulation of financial institutions considering the crisis; however, arguably essentially those institutions ultimately benefitted from the rescue packages, with few negative consequences for them. This suggests that the crisis largely caused by finance was managed in its interests.

This last point about financialisation appears to be the most crucial. It captures and manifests the rising dominance of finance, particularly something called interest-bearing capital, relative to other forms of capital. (I am setting aside for now the problems above of identifying broad categories of capital). Interest-bearing capital is a concept from late Marx, of money loaned out as capital to make profit. Now, many productive activities require such interest-bearing capital, as there is a delay between producing the good and selling it. As such, the loan is a claim on future profit (in the form of interest paid on the loan). The only concern of the holder of interest-bearing capital is to get that interest payment. The goal of what is called securitisation is about securing a revenue stream to the financial sector (see Fine, 2017; Hofferberth, 2022).

Thus, the activity for which the loan is given is irrelevant, which has implications for the economy, through the different business models available to producers. Some organisations are focused on producing use value, providing for the needs of the community. These might include the need for social amenities including those that nurture or protect the environment and are typically provided by government, community groups and some forms of social enterprise.

In market economies most producers produce things to sell, to get exchange value. Here a crucial distinction exists between those who seek to create exchange value by using productive assets to create saleable goods and services that generate revenue streams. However, not all profit-seeking enterprises do this: some capture the exchange value created by others, e.g., by charging rents on spaces uses for value creation. Whilst the former type of firm seeks to hold on to its assets as sources of revenue, the latter is happy to sell off assets if that generates revenue. The former type of activity is necessarily long-term involving the development of productive capacity, through training and relationship-building; however, the latter is much more short term.

This distinction is important for the discussion of the Dasgupta Review because the type of activity described in the second example is that which characterises much financial activity, and increasingly so. Financialisation entails a shift from finance for production, to finance over production. Whilst there has for a long time been a place for speculation, now this role is dominant. Thus, the logic of this role dominates. An increase in Interest-bearing capital and its associated activities have led to a decline in fixed capital formation for productive purposes (Hofferberth, 2022, p. 88). In other words, there has been an expansion in finance for speculation over real investment. This means that the logic of interest-bearing capital has begun to dominate economic activity more generally.[6]

This shift is problematic for its wider implications, many of which have already been discussed. One of the key consequences is on the role of the state. Rather than providing social use value directly, the state has been moved out of that sphere and its role transformed into one of de-risking investments, i.e., giving finance a guaranteed stream of revenue. This, when politicians advance the case of the financial sector, this may reflect little more than its lobbying power.

Now, again, this might be fine if the goals of the interest-bearing capital were driven by ecological or social concerns; however, that appears not to be the case. Thus, if finance has made bets on fossil fuels, it will not be amenable to the necessary policies of fossil-fuel downscaling. There is nothing whatsoever to guarantee that pro-social choices will be made. When Nature is merely a financial asset – and biodiversity a mere enabling asset within that category – as it appears to be the Dasgupta Review, there is no reason to believe that it will be valued.


This gas has explored the concept of transition, through the lens provided by Clive Spash and Frédéric Hache’s recent critique of the influential Dasgupta Review on the economics of biodiversity. As they say, whilst the Review contains useful material and has gained much high-profile endorsement, it should be treated with caution. Whilst the Review acknowledges many of the deep and well-established problems of valuing Nature, and of aggregating this into a single measure, it carries on regardless. Spash and Hache’s conclusions echo strongly those gathered twenty five years ago by Green House member John Foster (see footnote 4), and more recently Emma Dawnay’s proposal for reforming the UK Treasury Green Book. It is beyond the scope of this piece to speculate on the various reasons why mainstream economists have effectively ignored these problems for so many years; however, Spash and Hache claim that in the case of the Review, its governing purpose is not to protect Nature but to maintain growth, and specifically to provide opportunities to transform nature into financial products.

Spash and Hache offer powerful – and certainly controversial – arguments; however, beyond their arguments, I have explored briefly the significant inherent dangers in financialisation, the process of empowering and enriching the financial sector. Financialisation, implies, among other things, that all solutions to planetary crisis that rest on finance must be treated with extreme caution.


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Epstein, G.A. ed., 2005. Financialization and the world economy. Edward Elgar Publishing.

Fine, B., 2017. The material and culture of financialisation. New Political Economy, 22(4), pp.371-382.

Gabor, D., 2021. The wall street consensus. Development and Change, 52(3), pp.429-459.

Hofferberth, E. 2022. Pathways to an equitable post-growth economy: towards an economics for a social-ecological transformation. PhD thesis, University of Leeds.

Keynes, JM. 1937. The general theory of employment. The Quarterly Journal of Economics, 51 (2) (February), pp. 209–223,

Kliman, A. and Williams, S.D., 2015. Why ‘financialisation’ hasn’t depressed US productive investment. Cambridge Journal of Economics, 39(1), pp.67-92.

Piketty, T. 2014. Capital in the twenty first century. Harvard University Press.

Sandbu, M. 2022. The investment drought of the past two decades is catching up with us, Financial Times, 20 July.

Spash, C.L., 2011. Terrible economics, ecosystems and banking. Environmental Values, 20(2), pp.141-145.

Spash, C.L. and Hache, F., 2022. The Dasgupta Review deconstructed: An exposé of biodiversity economics. Globalizations, 19(5), pp.653-676.

[1] The UNEP’s Global green new deal is one example, the Whitley Fund for Nature global deal for nature is another.

[2] Rupert Read of Green House commented on the Stern Review. Read argued that Stern is growthist: i.e. Stern’s main argument for doing something about climate change is that it is better for growth to do so.

[3] The Dasgupta Review was discussed by the Tax & Fiscal Policy Working Group at the Party’s Autumn Conference, something given extra significance by the imminent revision of the Party’s Economy chapter of its policy.

[4] See for example, Green House’s John Foster’s edited collection, published in 1997 (in which Spash has a chapter), which lays out many of the same criticisms Spash and Hache make of the Dasgupta Review.

[5] The Dasgupta Review is not the first attempt to try to consider biodiversity. TEEB (The economics of ecosystems and biodiversity)is a project aimed at ‘making nature’s values visible’. Spash (2011) anticipates his criticism of Dasgupta in a critique of TEEB, which he parodies as ’terrible economics, ecosystems and banking’.

[6] Sandbu (2022) hints at this in his analysis of low investment rates in most of the global north. There is dissent to this view, though, even on the left: Kliman and Williams (2015) argue that low investment reflects lower overall profit rates in economy.