Financing the transition (summaries)

Financing the transition will be challenging. In broad strokes, the current process of privatizing public value for firm profitability, while leaving many of the unpaid costs to be picked up by the broader public, the environment and government, will have to be reversed, and the state will be critical to that reversal. It will require front end investments, both public and private, with long term savings and / or increased government revenues related to new economic activity.  It will challenge how government departments think about their budgets, in part because funds will have to come from multiple units, in part because savings and revenues will not necessarily accrue in the same budgets as expenses, nor even at the same level of government. This will require a new level of intergovernmental collaboration and reporting so that each level of government can understand, at least nominally, how their changes contribute to system level improvements and savings. Current approaches to cost-shared financing - within and between governments, and between governmental, business and civil society actors -  will have to be modified. For some private investors and lenders,  it will require below market rates of return and patience.  For foundations, it will require long term support, and commitment to an agreed upon change process.  For NGOs, it will mean committing to what gets results, rather than what the organization has the skills and interest in doing. Institutions will have to think differently about "charitable" work, given that many change initiatives will mix market and non-market activities.

It will be based on a blended finance model, though broader than what is typically discussed in the literature.  There will be a need for concessionary financing (public funds, below market rate social finance and community bonds), for private money that can be tied to the concessionary financing and measurable transition results, sometimes referred to as impact investing (cf. Havemann et al., 2020).  But grants and operating expenditures by NGO and foundation money will also be critical, as will investments by practitioners and entrepreneurs themselves. Grants, however, will have to be strategic, and not based on broad calls for proposals because we know that the groups applying for grants are not usually the biggest contributors to problems (see Instruments). And it will all need to be co-ordinated.  A recipe for failure occurs when change leaders have to spend all their time lining up funding from multiple unco-ordinated pots, each with their own requirements, timelines and administration.  Funders will have to park organizational egos at the door to make it easier for effective financing to flow. The use of aggregating funding organizations will be critical. Activists will have to accept financing from somewhat uncomfortable sources. What needs to be avoided is the financialization process, the use of increasingly arcane and opaque financing instruments that have already been proven problematic for the food system (cf. Burch and Lawrence, 2009). In other words, rather than seek enterprise, fund or program success, investors, foundations and governments will need to collaboratively seek system success (Crosby et al., 2021).

This approach also requires reduced income inequality addressed in many change areas of this site. Particularly important will be revamping the tax system and reducing tax avoidance by the ultra rich (see Goal 6, Income, Tackling Income Inequality). The Canadian Centre for Policy Alternatives  proposes (see Klein, 2020 on these and other measures) the following tax system changes and associated additional revenues:

• $11 billion a year if capital gains income is treated the same as employment income;
• $2 billion a year from a withholding tax on money in tax havens;
• $9 billion a year from increasing the federal corporate income tax rate from 15 % to 21 % (still well below World War II levels)
• $2 billion a year from an inheritance tax of 45 % on the transfer of estates worth more than $ 5 million.

Klein (2020:257) concludes that, "the options for raising new tax revenues from those who can well afford it are myriad and boosting revenues by $80 to $100 billion is entirely possible."

Canada is significantly behind on all this. More progress has been made with international organizations on these issues for the financing of sustainable agriculture, and some also with promising but challenging funders - pension funds, insurance companies and diversified funding institutions (cf. Havemann et al. 2020).

And, of course, different kinds of financing packages will have to be aligned with the activity.  The finance world is too focused on technological innovation, when many food system problems must be addressed more with knowledge and management. A common problem then  is capital financing for projects that really need long-term operating dollars.  Research is not the same as program delivery, and they each need different funding instruments.

Because markets do such a poor job of valuing public goods,  ultimately, funding for many things will have to be public because the food system must move away from being a primarily private sector realm to a public one. Food is ultimately about individual, community and societal health, and achieving it is more a public than private activity. An increasingly significant interpretation of modern monetary theory (and the realities of COVID-19) states that public financing is not the issue, that governments do not need to borrow or tax before they can spend.  Because governments control their currencies, they can create money, so long as it does not trigger significant inflation, and invest it in public infrastructure and services.  Taxes can be used to suppress inflationary pressures, curb the demand generated particularly by the wealthy, and redistribute to generate greater social equity (cf. Hickel, 2020; Kelton, 2020).

The summaries in each goal area reflect this progressive transition to a public food system.