Distributed Global Financial Systems for Society (DOLFINS)

The deregulation and liberalisation of the financial sector across the globe in recent decades was based on the assumption that financial markets are stable and function best when they are more or less left to their own devices. The global financial crisis put paid to that assumption. Our current system is not sustainable from either an economic or a social perspective. Yet an economically and socially sustainable financial system is a prerequisite for financing the transition to an ecologically more sustainable way of doing business. So we are faced with the task of developing concepts and ideas for an economically, ecologically and socially sustainable financial system.

The DOLFINS project takes up this challenge using the tools offered by global systems science. It is distinguished by two approaches: firstly, it acknowledges that banks are not intermediaries, i.e. they don’t simply collect money from savers and lend it to businesses. Instead, banks make additional credit money based on the money they collect from savers. To date, the effects of this credit creation on the stability of the system as a whole have not been adequately researched.

Secondly, DOLFINS follows a transdisciplinary approach by involving relevant actors in the research process. For example, the NGO Financewatch is part of the project consortium and supports the efforts to integrate European civil society into the research process.

Alternative scenarios for the global financial system

Our research builds on the pioneering work of the organisational sociologist Charles Perrow, who demonstrated that a combination of high interactive complexity and tight coupling makes systems vulnerable. The global financial system is a prime example of such a system; it is a dense network of banks, insurers and institutional investors that spans the globe and binds the financial sectors of developed countries closely together. In the process of elaborating alternative scenarios for the future of the global financial system, the IASS is guided by the question of what form a global financial system with significantly less interactive complexity and looser coupling of the financial sectors of developed countries could take and how it would have to be regulated.

Contact:

Dr Armin Haas

+ 49 (0)331 288 22 378

Armin.haas@iass-potsdam.de

Duration:

03/2015 to 02/2018

Project partners:

Members of the DOLFINS consortium:

  • University of Zurich (Switzerland) – Coordinating body
  • Scuola IMT Alti Studi Lucca (Italy)
  • Global Climate Forum (Germany)
  • Centre National de la Recherche Scientifique (France)
  • Institute Jožef Stefan (Slovenia)
  • London Institute for Mathematical Sciences (UK)
  • Scuola Superiore di Studi Sant’Anna (Italy)
  • Fondation Nationale des Sciences Politiques (France)
  • Institute for Advanced Sustainability Studies (Germany)
  • University of Sussex (UK)
  • University of Zaragoza (Spain)
  • Young Foundation (UK)
  • Plusvalue (UK)
  • Finance Watch (Belgium)

Topics:

financial system, global systems science, network models of financial systems, systems science, game theory, systemic risks, integration risks, endogenous creation of money, sustainability, monetary policy, transdisciplinary research, citizen engagement, information and communication technologies, art

Team:

Scientific Project Leader: Dr Armin Haas

Research Associates: Daniela Eskelson, Steffen Murau

Supervising Director: Prof. Ortwin Renn

This project has received funding from the European Union’s Horizon 2020 research and innovation programme under grant agreement No 640772, and the Swiss State Secretariat for Education, Research and Innovation under contract number 15.0012.