Labour Day demonstrations in San Francisco, USA
San francisco, USA © J. Maillard / ILO

Understanding the systemic crisis
This inequitable framework has consistently threatened the viability of the legitimate missions of many institutions at each wave of the systemic crises. Solutions adopted to deal with the crises by multinational corporations and other institutions operating within the business and government sectors have often proved to be not only ineffective but also self-defeating. Above all, the negative effects of these solutions threaten to delay the democratisation process of the global economy:

From the perspective of the business sector, the continuous restructuring of multinational corporations through relocations, cross-border mergers and acquisitions aimed merely at increased market shares not only threatens to revert the financial system back to monopolistic or undemocratic corporate practices, but also lead to a re-colonisation process. The mass layoffs that accompany such restructuring reduce the capacity of consumers to buy the products and services that these companies offer, and thereby contribute to enormous losses of revenue, leading to their own bankruptcies. These bankruptcies induce the economic downturn of a series of other small- and medium-size companies and institutions, including the investment banks that finance their equity capital and loan structure. However, while the multinational corporations are able to obtain creditors’ protection and more financing from their governments with taxpayers’ money during further downsizing operations, many small- and medium-size companies and institutions are forced out of business for the lack of such privileges.

From the individual’s perspective, this kind of market expansion not only brings job loss but also loss of lifetime savings, because of the pension funds, insurance policies and savings bank accounts invested through investment banks in these multinational corporations. The social insecurity, economic hardship and humiliation generated by these losses induce a variety of cycles of violence throughout the world.

Double exclusion
Moreover, the one-way liberalisation that restricts the trade of economic goods from the soft-currency to the hard-currency countries, and encourages the financial or investment flows to the soft-currency countries, leads to a double exclusion of the soft-currency countries. In other words, this one-way liberalisation prevents the equitable participation of the peoples of soft-currency countries within the interdependent global economy. The incumbent governments of soft-currency countries affected by this double exclusion succumb to various country management techniques or macro-economic policy advice. These techniques often aim at balancing national budgets by maximising the revenue generated through the hard currency transfers into the country by further devaluation of the soft-currencies. These transfers include large amounts of money sent to dependent families at home by those who work abroad, official development grants, and charity or aid money which is either transferred or administered by a variety of inter-governmental and international non-governmental organisations operating in soft currency countries.

Unjust loss of creditworthiness
In this context of devaluation, the practice of remunerating foreign employees of multinational corporations and other institutions based in soft-currency countries at income levels equivalent to the standards of developed countries, results in an implant of a vast income gap. Such an income-gap increases local inflation; the prices of basic needs imported from other countries and local goods become unaffordable for the majority of the people. The consequent reduced capacity of local consumers to buy these goods drive the local companies and institutions out of business, thus leading to the retrenchment of local employees and to social unrest. This sequence of events not only draws the focus away from the national and local development priorities within soft-currency countries but also threatens to push the incumbent governments out of power by causing political instability. Such economic, social and political instability and insecurity encourages the flight of capital of both foreign and local investors.

Above all, the loss of value of the local currencies prevents people in soft-currency countries from re-paying loans from both private and public investors in the hard-currency countries. Such an unjust way of losing credit worthiness and jobs result in a dual loss of dignity. In this context, when country credit rating agencies downgrade the soft-currency countries, foreign investors and fund managers withdraw their investment capital with a warning that classifies the soft-currency countries as high-risk countries. However, this incapacity to re-pay loans and a reduced capacity to buy the goods from hard-currency countries doubles negative effects for people in hard-currency countries: the consequent increase of unemployment and economic disparities within hard-currency countries jump-starts a new wave of social instability, violence and financial systemic crisis. The speculative investment trends that flourish in this climate of increasing currency gap contribute to deepen the next wave of crisis, and to increase poverty.

This explains why this ever-increasing currency gap – which continuously reinforces the inequitable founding basis of the global financial system – continuously frustrates the goals of humanitarian missions. The expected benefits for both hard- and soft-currency countries from re-locating multinational corporations’ production and service units in soft-currency countries have been far outweighed by the negative effects of this one-way liberalisation process. Thus current poverty eradication programmes and prevalent ethical interventions need to be complemented by new ethical responses that focus specifically on addressing the global poverty perpetrated by the double exclusion of the soft-currency countries from the global economy. The concern to address current economic injustices within both hard- and soft-currency countries perpetrated by the increasing currency gap, is expressed in the search for a new investment ethic.

The search for an investment ethic
There is no easy way to develop a solid value basis for a new investment ethic within an inequitable financial system. The distrust between hard- and soft- currency countries generated by historical conflicts cannot be wiped out overnight. However, it is clear that expropriating capital/land and deploying human labour (slave and bonded or forced labour, child labour, women’s labour, migrant labour, etc.) in the process of economic development and re-construction have contributed to a myriad of conflicts. These conflicts have led to sharp disagreements on values in the economic field and to a plurality of opinions that often contradict one another. It has therefore, not only become difficult to define ethical criteria for investments, on the basis of cultural values expressed in terms of the “good” and the “bad” or “negative” and “positive” criteria, but such a basis has also proved its insufficiency to address the persisting financial crisis at the systemic level. Moreover, given the diversity of expectations within the global economy, profound questions like: What is ethical? Who decides what is ethical? For whom is it ethical? are often raised and cannot be easily resolved. Thus the time has now come to advocate a new investment ethic in which ethical criteria are defined on the bases of the core ethical principles of justice and mutual responsibility (i.e.: shared power between hard- and soft-currency countries). Here is a new opportunity to reinforce human dignity, human rights and freedom within the global economy, and to sustain social cohesion and global peace in an interdependent world.

The essence of the new investment-ethic

If ethical criteria are based on the principle of justice, it follows that one person or community cannot unilaterally determine what is just or fair without taking into consideration the opinions of all parties concerned, including those affected by investment decisions. It also means that, within an inequitable systemic framework of hard- and soft-currencies, what is ethical cannot be decided on the basis of speculation or simplistic assumptions about different countries and peoples.

This leads to the conclusion that investment decisions, insofar as they affect peoples’ lives, have a strong relatio-nal dimension; what is ethical in the area of investments can only be determined on the bases of the priority of investment needs and of consultative processes with the three main protagonists of the financial systems. These protagonists are: the investors, the companies or institutions that benefit from investments (security issuers), and those affected by investment decisions. Such a consultative process of decision-making, known as discursive-ethic, is conducted in a transparent way and enables us to identify injustices and introduce correctives; it also induces a transformation from speculation to consultation in the financial systems in which investments operate. Above all, it has the potential to ensure the equitable participation of both hard- and soft-currency countries within the global economy and thereby to democratise contemporary financial systems. It is this double-shift from speculation to consultation, and from domination to equitable participation within the interdependent financial systems that is at the heart of the new investment ethic.

Features of the financial instrument
This new concept of introducing timely correctives to address the economic injustices at the right time and the right place was given the name of Kairos Investment Fund. Kairos is a Greek word meaning the right time. The Kairos Investment Fund is a global investment fund developed to offer investors from both hard- and soft-currency countries the opportunity to practise the new investment-ethic. The fund has two main objectives:

• the ethical objective is to contribute to the evolution of a people-centred financial system in which there is equality of access to opportunities and information for all;

• the financial objective is to provide its investors with a financial return similar to that of a global mixed portfolio investment fund through middle- to long-term capital appreciation.

The priority of needs of investments within each country compartment of the fund is determined through the above-mentioned consultative process, in view of democratising financial systems. However, the portfolio construction of the fund is conducted through an ethically coherent and scientifically logical asset allocation model based on three main ethical criteria: shared responsibility, shared risk, and shared return between hard- and soft-currency countries. Various indicators related to purchasing power parity and human development, are used to translate these criteria in constructing the model. The ethical criteria for asset allocation within each country compartment takes into account the following four dimensions:

1. the priorities of both infrastructure and employment creation needs of each country;

2. the distinct roles and responsibilities of the three main economic actors, namely, the government, business and third sectors;

3. the development of small- and medium-size local companies and institutions within each country;

4. the investment in the three main asset classes (shares, bonds and cash).

Security issuers within each country compartment of the fund are selected on the bases of responsible social and environmental practices, responsible management of financial resources of companies and institutions, and transparency of information disclosure.

The portfolio construction procedure aims at optimising the allocation of both natural and human resources.

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