I've made the argument that property rights protect the environment, but here is an Islamic financier suggesting usury destroys the environment too...
Hence Michael Lipton's example of a hypothetical plantation farmer who faces a choice of land use. He can farm his trees on a sustainable basis and produce 1000 units in profit annually for ever. Or he can move to intensive farming and produce 1250 units of profit annually for twenty years, after which his land turns to desert. With interest rates of more than 9% per annum, a standard discounted cash flow analysis recommends that the farmer chooses the intensive option. Unfortunately, this 'killing of the golden goose' is not confined to theory. The world's top deforesting nations are among its most indebted partly because saving trees is less of a priority than servicing international debt.
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Unfortunately, a powerful commercial logic called financial leverage is preventing change in these matters. The business model of most modern corporations is to borrow money at a rate of interest that is below the rate of return earned when investing that money. For example, by borrowing £100 at 5% and investing it in a one year project that yields 20%, the executive manager can earn £15 for his firm. And the banker will earn £5 of interest on his newly created money. It is a rather cosy symbiosis, but its logical consequence is that firms will grow increasingly large over time. Instead of borrowing £100 in order to make £15 of profit, why not borrow £100 million and make £15 million of profit instead?
Now that is interesting, and seems plausible. And when you leverage it with concentrated borrowing power, then you gt abusive big business (big is not necessarily bad...)
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