Unlocking Positive Systemic Change and Identifying Leverage Points for Sustainable Transformation

On the 4th of December in Dubai, GEFI hosted the 2nd of 3 engaging ‘Adam Smith and Ibn Khaldun at COP28’ evening lectures at the DIFC Academy, exploring the perspectives of Scottish Adam Smith and Arab Ibn Khaldun on unlocking positive systemic change and identifying leverage points for sustainable transformation.

In a keynote address, Amal Larhlid, Partner at PwC, reminded us that the path forward requires a bold reimagination, a world where “thinking outside the box” is redefined because boxes never existed. She emphasises the importance of societal cohesion and calls for a critical examination of how taxonomies and carbon taxation, as tools of market influence, can be harnessed for positive change. Her vision is one where companies become agents of good, investing in a future where profit and purpose coexist harmoniously.

“Finance goes beyond being a mere medium of exchange; it acts as a channel for meaningful initiatives…The journey is not solely focused on money making but on meaning-making,” said Amal.

 

The Ibn Khaldun Perspective

Lecture by Tan Sri Azman Mokhtar, Chairman, Leadership Council of the Malaysia International Islamic Finance Centre (MIFC); Global Steering Group, GEFI

The lecture delivered by Tan Sri Azman Mokhtar on unlocking positive systemic change seamlessly bridged the preceding lecture with the one to follow. Tan Sri Azman reminds us that the Asian financial crisis served as a stark reminder that there is more to life than just finance. It exposed the interconnectedness of financial, social, and political systems, highlighting the fragility of prosperity built solely on economic foundations.

Drawing upon the wisdom of two intellectual figures, Ibn Khaldun and Adam Smith, Tan Sri Azman highlights their shared wells of scholarship, despite their temporal separation. Both thinkers explored themes of Division of labour, specialisation in production and trade, labour theory of value, Free trade and free (but regulated) markets, personal and collective agency and social solidarity and harmony (invisible hand, within a moral economy of Smith, good assabiyah of Ibn Khaldun). Their insights have laid the foundation for classical and neoclassical economics, influencing future thinkers like Marx, Keynes, and North, Putnam, and Ostrom.

He emphasises the need for critical reflection and a willingness to learn from the past. Citing the concept of “loss of ijtihad,” he encourages us to revisit the “fork in the road” of history to understand the choices that led us here and avoid repeating mistakes. He argues that development necessitates a multidisciplinary approach, transcending the siloed perspectives of traditional academic disciplines.

His exploration of the relationship between profit and purpose is particularly relevant in today’s world. He posits that finance should not be an end in itself, but rather a tool to support the real economy and ultimately serve society. He envisions a “thoughtful economic man,” driven by wisdom and a sense of social responsibility.

Tan Sri Azman challenges the traditional pyramid structure of economic power, arguing for a more circular approach where finance and the real economy are interconnected and mutually supportive. He sees Islamic finance as a valuable model for promoting ethical and sustainable investments, but as it stands, it can occasionally be guilty of green flagging. Tan Sri Azman concluded by highlighting the enduring relevance of Ibn Khaldun’s insights he has drawn upon across his varied career to set investment strategies that consider both material prosperity and moral responsibility.

Quotes:

“To restrain our selfish, and to indulge our benevolent affections, constitutes the perfection of human nature” Adam Smith, The Theory of Moral Sentiments

“The natural state of man is a state of peace and security …Civilisations flourishes or declines according to the cohesion of its component parts …” Ibn Khaldun, Muqaddimah

 

The Adam Smith Perspective

Lecture by Prof. Adam Dixon’s, Adam Smith Chair in Sustainable Capitalism, Adam Smith’s Panmure House, Edinburgh Business School, Heriot-Watt University

Prof. Adam’s lecture offered a valuable counterpoint to the often-simplistic narratives surrounding the climate crisis. He reminds us that addressing this complex challenge requires a delicate balance between decisive action, respect for individual needs, and a deep understanding of the interconnectedness of social, political, and economic systems.

Prof. Adam delved deeper into the multifaceted nature of the climate crisis, emphasising that it is not just an ecological issue but also a social and political one. He urges us to read Adam Smith’s works as a whole, recognising the interconnectedness of his “Theory of Moral Sentiments” and “Wealth of Nations.” He argues that Smith, writing in a pre-capitalist era, envisioned a gradual, non-violent approach to societal change, where statesmen understand the limitations of imposing drastic reforms and respect the slow pace of societal evolution.
Prof. Adam challenges the notion of forceful change, emphasising the need for understanding the capacity and tolerance of the community. He acknowledges the diversity of human emotions, needs, and decision-making capabilities, suggesting that a one-size-fits-all approach is unlikely to succeed.

This led Prof. Adam to question the current state of the climate economy, critiquing the piecemeal approach to mitigation and adaptation. He expresses skepticism towards throwing money at the problem without a clear understanding of its effectiveness. He voices concern about the unequal impact of climate change, highlighting the disparity in costs faced by developed and developing countries.
Prof. Adam emphasises the need for a “just transition” that acknowledges the differing realities and priorities of different societies. He questions whether we are truly doing enough and criticises the lack of consensus on the path forward. He argues that addressing the climate crisis requires more than just an endpoint; it demands a clear understanding of the “how,” considering both adaptation and mitigation strategies.

Furthermore, Prof. Adam raised concerns about the unintended consequences of drastic policies, questioning whether revolutionary change is necessary or even desirable. He suggested that we can drive more sustainable forms of capitalism while respecting the individuality of different societies.

Finally, Prof. Adam highlighted the challenges facing the sustainable finance industry. He recognised the accusations of being both “man of humanity” and “man of system,” struggling to balance humanitarian concerns with the need for economic progress. He acknowledges the current focus of sustainable finance on the Global North and emphasises the need to bridge the gap with the Global South.

Quotes:

Adam Smith’s Man of Humanity approach:

“The man whose public spirit is prompted altogether by humanity and benevolence, will respect the established powers and privileges even of individuals, and still more those of the great orders and societies, into which the state is divided. Though he should consider some of them as in some measure abusive, he will content himself with moderating, what he often cannot annihilate without great violence. When he cannot conquer the rooted prejudices of the people by reason and persuasion, he will not attempt to subdue them by force; but will religiously observe what, by Cicero, is justly called the divine maxim of Plato, never to use violence to his country no more than to his parents. He will accommodate, as well as he can, his public arrangements to the confirmed habits and prejudices of the people; and will remedy as well as he can, the inconveniencies which may flow from the want of those regulations which the people are averse to submit to. When he cannot establish the right, he will not disdain to ameliorate the wrong; but like Solon, when he cannot establish the best system of laws, he will endeavour to establish the best that the people can bear.” TMS VI

Adam Smith’s Man of System approach:

“The man of system, on the contrary, is apt to be very wise in his own conceit; and is often so enamoured with the supposed beauty of his own ideal plan of government, that he cannot suffer the smallest deviation from any part of it. He goes on to establish it completely and in all its parts, without any regard either to the great interests, or to the strong prejudices which may oppose it. He seems to imagine that he can arrange the different members of a great society with as much ease as the hand arranges the different pieces upon a chess- board. He does not consider that the pieces upon the chess- board have no other principle of motion besides that which the hand impresses upon them; but that, in the great chess- board of human society, every single piece has a principle of motion of its own, altogether different from that which the legislature might chuse to impress upon it. If those two principles coincide and act in the same direction, the game of human society will go on easily and harmoniously, and is very likely to be happy and successful. If they are opposite or different, the game will go on miserably, and the society must be at all times in the highest degree of disorder.” TMS VI