How to Finance the Transition to Sustainability: A Post-Keynesian Institutionalist Role for Development Banking

Transition to a sustainable future implies multiple objectives: environmental, financial, and socioeconomic. However, is it possible to reconcile profitability criteria with equality concerns and environmental responsibility without challenging dominant financing methods, values, and habits of thought? A holistic approach inspired by Post-Keynesian Institutional Economics would answer in the negative. If values and institutions need to change in favor of sustainability, then public organizations within a democratic political process have a role to play. Development banks, as dynamic public agents, in terms of Veblen-Commons’s progressive reform and institutional change and Minsky’s concerns about financial stability, are well placed to address this challenge. They can operate as bridges between markets and governments when the private sector is unable to take the risk of environmentally and socially beneficial projects. They can assume a leading role in the context of a “creative” democratic state that builds new institutions and inspires universal values. Transition to sustainability is not possible without democratic negotiation between social groups, changing habits of thought, and “reasonable” pricing of financing. Moreover, this transition would be at risk if financial stability is not accounted for. Development banks conceived in Veblen-Commons-Minsky terms can address all these challenges.