Money for good: the rise of ethical finance
Finance & the crisis
It has been nearly two decades since a financial crisis unleashed an economic crisis known as the Great Recession. The post-mortem of the period running up to this event uncovered reckless investments, irresponsible lending, and banks given licence to create too much money. 30 years of deregulation had made financial services an even more unac-countable and opaque part of the UK economy, with a strong reputation for bad practice and high levels of public distrust.
In its immediate response to the crisis, the UK government’s rescue package for the finance sec-tor took the form of quantitative easing, a fiscal policy asking central banks to create new money to lend to banks who, in turn, were supposed to increase their lending to businesses and individ-uals. But rather than benefiting the real economy, government bonds were largely used to buy finan-cial assets, such as pension funds, and according to campaigners Positive Money, “boosted bond and stock markets nearly to their highest level in history.”
Alongside this monetary policy, the UK govern-ment introduced another controversial fiscal policy – austerity. Given the economic losses from the financial crisis, the Coalition government decid-ed it was necessary for a deficit reduction pro-gramme of £30bn of cuts in spending on welfare payments, housing subsidies, and social services. These cuts in the public sector translated into the loss or poorer delivery of existing services and the sale of 75,000 public assets, such as playing fields, community centres, and swimming pools. Taking only the case of public libraries, numbers have fallen by 17% – 4,482 to 3,718 – since 2010. Despite the narrative of the Big Society, a recent report by IPPR estimates that local councils have sold off assets that are worth in the region of £15bn, with only just over 3% of these assets being trans-ferred into community ownership.
The UK job market also became more insecure, as another legacy of the financial crisis was an increase in the controversial practice of zero-hour contracts in UK workplaces. These new levels of precarity represented a new opportunity for pred-atory lenders, such as the now defunct Wonga – a payday loans firm that was founded in 2006, shortly before the crisis. Exploiting high levels of personal and household debt, Wonga was charging annual percentage rates of up to 5,000%. Just a decade later, it fell into administration under pressure from politicians, the Financial Conduct Authority, and the cost of claims. Ultimately, it was a decade in which almost every financial institution failed taxpayers, customers, and investors.
