From 2007 to 2010, a financial and economic crisis gripped the United States, Europe and the world. 7 million Americans lost their jobs, 10 million were pushed below the poverty line, thousands of families lost their homes, and many lost their savings. Somewhat lower numbers were reported from Europe, although the structural mechanisms behind the crisis were seemingly similar, eventually affecting not only the West, but the whole world. It is foreseen that the effects of the crisis will last for years, and it is still uncertain if a full recovery will be possible.

Given that a variety of highly speculative practices put into place by the banking and finance sector during the "neoliberal“ decades between the early 1990s and 2007 allegedly played a role in triggering the crisis, the request for more down-to-earth and sustainable ways of dealing with money and finance has surfaced to international attention. Particularly in Europe, social banks were among the most successful financial institutions during the crisis years, with annual growth rates of up to 30%, factually doubling their assets between 2007-10. This unprecedented success was supposedly due to the fact that many European savers shifted their assets from mainstream banks to social banks, driven by the hope that the latter would handle their money in less abstract and egoistic, and more realistic and community oriented ways. In recent years, social banks have forged influential global networks such as the Global Alliance of Banking on Values and the International Association of Investors in the Social Economy, which pursue the ambitious strategy of reaching out to 1 billion people by 2020.

Given that, not least as a result of the crisis, increasing numbers of people are improving their financial literacy and are taking a growingly critical stance towards the mainstream international banking and finance sector as we knew it before the crisis, the seminar poses the questions of whether (and how) social banking and social finance may concretely contribute to improving the current financial system, and how they might help to restore confidence in capitalism by providing “best practice” examples in selected fields.

The seminar will try to provide some answers to these questions by examining the pros and cons of contemporary social finance and by outlining perspectives of structural complimentarity and cooperation between speculative and sustainable finance.

Audio Synopsis:

In his seminar, Professor Roland Benedikter argues that too little has been done to reform the banking and financial sectors in the wake of the recent crisis, then presents social banking and social finance as an alternative system. First, he argues that the widespread bank bailouts of the past few years have "saved the wrong system" and points out that many of the largest US banks, for example, have actually grown since the crisis despite calls by the Obama administration for these banks to downsize or break in to smaller pieces. He acknowledges that new measures initiated by both the Obama administration (establishing a consumer protection bureau; imposing limits on fees by financial intermediaries) and by European countries (banning high-risk transactions in Germany; reducing public liability for private bank bailouts) are steps in the right direction. He adds his own suggestions, including increased regulation, better international agreements on regulating capital flows, a fee on high-risk speculative transactions, and a preventative tax on banks to protect against future crises. Many of these reforms, however, have faced enormous opposition from the major players in the banking and finance sectors in Britain, the United States, and China.  Progress seems to have stalled, with popular figures like Niall Ferguson, who once led calls for dramatic reform, now insisting that the system is too resistant to change, and that simpler goals such as a new hippocratic oath for the financial sector will suffice.

Benedikter then presents social banking and social finance as an answer to the seemingly intractable problems of the traditional system.  He first describes the industry in terms of what it is not. Traditional banks, he argues, made three major mistakes leading up to the crisis: irresponsibility (loans that were too high, too much derivative investment); lack of transparency; and unsustainability (by participating in speculation and contributing to market bubbles). The current economy, he explains, is based on a tripolar system: a "real" economy of manufacturing and tangible goods; and two "side economies" of real estate and financial derivatives, which have steadily drawn capital away from the real economy since 1989. A breakdown of this unsustainable system was predicted by multiple think tanks before 2007, based partly on the frantic growth of the derivatives market (from  $100 trillion to $516 trillion annually between 2001 and 2006 - for perspective, Benedikter cites the annual world GDP figure of approximately $50 trillion).

Social banks, on the other hand, invest 100% of their capital toward responsible, transparent, and sustainable ventures such as green technology and social initiatives. Banks emphasize knowing their customers, which requires them to operate on a smaller scale than traditional banks, and conversely customers know where their money is invested and can even participate in making investment decisions. These decisions  are meant to take the potential social as well as financial return on an investment into account. Benedikter describes this as a "Triple Bottom Line" approach, emphasizing profit, people, and the planet.

A discussion period following the presentation addressed questions including:  What are the mechanisms available to enforcing the triple bottom line approach in social banking and social finance? Are social banks guided by a common charter? What are the details of the proposed high-risk transaction fee? Why have some US social banks been successful while others have struggled?

The 21st century has been branded the century of the worldwide return of ethnonationalisms. Conflicts based on cultural differences are boiling up in many regions, leading to civil wars and to the breakup of states. Many of these conflicts are direct and indirect consequences of modernization and transnationalization; and they are usually as complex as they are enduring and difficult to settle, because rooted in the "deep“ dimensions of culture and religion. The result is in many cases a conflict pattern where political solutions are often only of temporary value, because the far deeper rooted ethnic and cultural dimensions sooner or later undermine them and spiral the conflict up again. As a consequence, there is a new debate today about the advantages of partition and separation, and an increasing number of scholars and politicians seems to believe that the still most humane lasting solution for ethno-cultural conflicts is to institutionally divide ethnic groups once and for all, accepting to a certain extent (non-recurring) ethnic cleansing and new flows of refugees. Answering such approaches (like the one of Jerry Z. Muller propagated paradigmatically in Foreign Affairs, March/April 2008), Roland Benedikter presents a functioning and long-term proven model from Central Europe, where different ethnic groups have managed it to find a unique institutional arrangement that permits them to live together without territorial and political partition. In presenting core features of the model of autonomy of the Autonomous Province of South Tyrol, a border region between Northern Italy and Austria where three ethnic groups coexist and have made the area formerly ridden by civil wars (until 1972) now one of the wealthiest regions of Europe, Roland Benedikter shows how cornerstones of this model may be successfully applied also to other ethnic conflict regions.

Roland Benedikter, Dott. Dr. Dr. Dr., is European Foundation Fellow 2009-2013, in residence at the Orfalea Center for Global and International Studies of the University of California at Santa Barbara, with duties as the European Foundations Research Professor of Political Sociology. His main field of interest is the multidimensional analysis of what he calls the current "Global Systemic Shift", which he tries to understand by bringing together the six typological discourses (and systemic order patterns) of Politics, Economy, Culture, Religion, Technology and Demography. Roland is currently working on two major book projects: One about the "Global Systemic Shift", and one about the "Contemporary Cultural Psychology of the West", the latter comparing culturo-political trends in the European and American hemispheres. With both projects he is also involved in European Policy Advice.

Michael Karayanni, Edward S. Silver Professor of Civil Procedure  and Director of the Harry and Michael Sacher Institute for  Legislative Research and Comparative Law, Faculty of Law, Hebrew  University of Jerusalem. His research focuses on private  international law and inter-religious law, civil procedure, and  multiculturalism. He holds an LL.D in law from the Hebrew  University (2000) as well as an S.J.D. degree from the University  of Pennsylvania Law School, received in 2003. He is the author of  "Conflicts in a Conflict" (Oxford University Press, forthcoming 2012)

Event Summary

Professor Karayanni's talk addresses the question of why religious and political issues in Israel are dominated by the conflict around disproportionate funding for Jewish institutions and norms, and the implications this emphasis has on jurisdictional authority in Israel. Professor Karayanni points out that while there are 14 recognized religious communities in Israel, less than 2% of the budget for support of religious institutions goes to non-Jewish organizations. However, as a result of the relative lack of official recognition, the Israeli Supreme Court has in some cases deferred from enforcing Israeli administrative law, a practice that has afforded greater freedom to some private religious institutions such as religious schools, as Karayanni outlines demonstrates with examples from several recent court cases . He then describes how judicial freedom for some religious groups can create a "multicultural predicament" in which the autonomy allowed to minority religious groups may conflict with the best interests of more vulnerable members, such as women and children, in groups with illiberal social and judicial norms. Nonetheless, Professor Karayanni argues that the perception of being multicultural is important to the Jewish state, as it is in Egypt, Jordan, and India, where minority religious groups have similar autonomy.

A discussion session following the talk addressed such questions as: Is there any political will to divorce Jewish identity from the state and instead have it represented only through community institutions? How many Christian Palestinians live in the Palestinian Territory versus in Israel? How do they operate legally within the Palestinian community? How are minority Jewish sects treated in Israel? How would a binational state resulting in the absorption of Palestine affect these religious issues?