I was reminded today about the creative and even revolutionary vision at the core of ”sustainable development” when I read a blog from the Rudolf Steiner Foundation (RSF) of San Francisco. RSF provides capital to organizations doing socially beneficial work, many of which would not qualify for, or could not afford, commercial bank loans.
It’s not just that RSF supports social causes, however: its process for doing so is also socially beneficial. The blog described a recent meeting of RSF investors, borrowers, and staff in which these stakeholders set the interest rate to be paid to RSF investors. That rate is pegged at 1 percent. RSF adds 4 percentage points to that (to cover its costs) to arrive at the interest rates it charges on its loans to RSF borrowers.
Look closely at the previous paragraph. What words normally found in a description of interest rate determination are missing? (Hint: “market”, “supply”, and “demand.”) And what concepts in that paragraph are not found in the brochure of your nearby commercial bank? Stakeholders with rate-setting power, of course.
That’s right: RSF has developed an alternative to market-determined interest rates. In modern market economies, it’s virtually an article of faith that you can’t do better than market-determined prices. Market prices are indeed likely to be efficient in an economic sense. But at RSF, social goals and transparency come prior to economic efficiency. The mission of supporting socially beneficial enterprises is primary.
In most markets, buyers and sellers have opposing interests: buyers want the lowest possible price, and sellers the highest. How is it that investors and borrowers at RSF are able to agree on interest rates without invoking the market’s “invisible hand”? One answer is a shared sense of values: RSF lenders and borrowers are similarly inclined to seek the common good. Another is that both groups know each other. Across a negotiating table, each hears the needs and concerns of the other. The process is open, the hand visible.
Is the RSF model scalable? Perhaps not in a vertical sense, if relationship building is key: thousands cannot easily negotiate face to face. But the model might be replicable as a series of small, socially framed markets across a region, nation, or even the world. The important reminder here, as we count down to the UN Conference on Sustainable Development in Rio de Janeiro in mid-2012, is that a sustainable society will often be boldly different, sometimes overturning the assumptions that underlie long-familiar ways of operating. Creative thinking like socially-determined interest rates—thinking that emerges regularly from RSF—keeps this important truth before us.