Wednesday, March 25, 2009

The Perfect Storm = Climate Change + Economic Collapse


Following up on these previous posts there, here, there, here, there, here, there, here, there, here and there:


Perfect Storm of Environmental and Economic Collapse Closer Than You Think
Green measures have to be at the heart of any financial rescue packages if we are to avoid catastrophe

by Jonathon Porritt

A "perfect storm" of food shortages, scarce water and high-cost energy will hit the global economy before 2030, said the government's chief scientific adviser, John Beddington, last week. Factor in accelerating climate change and this lethal cocktail leads to public unrest, cross-border conflict and mass migration - in other words, an economic and political collapse that will make today's economic recession seem very tame indeed. But though I totally agree with John Beddington's analysis, I think he's got the timing wrong. This "perfect storm" will hit much closer to 2020 than 2030.

It may seem inappropriate - callous even, with unemployment at the two million mark in the UK - to be inviting people to get worked up about some possible economic collapse in the future. But if we are to avoid that ultimate recession, from which there will be no conventional recovery in a normal boom-and-bust cycle, then we have to start thinking about today's recession in a completely different way. Both in terms of our analysis of underlying causes and appropriate remedies.

On the analysis front, people seem blind to the fact that the causes of the economic collapse are exactly the same as those behind today's ecological crisis - and behind accelerating climate change in particular. As Adair Turner's first report as chair of the Financial Services Authority (FSA) demonstrates, the neo-liberal obsession with deregulation has done untold damage to capital markets. But people should understand that the same deregulatory fervour has caused untold damage to the natural environment, all around the world, for the past 20 years or more.

It's exactly the same when one looks at the unholy trinity that has made today's capital markets so spuriously dynamic: mispricing of risk, misallocation of capital, and misalignment of incentives. Catastrophic impacts on markets; catastrophic impacts on the environment.

And then there's the debt issue. Governments have systematically stoked up levels of personal and national debt (including insane asset bubbles in housing, land and property) explicitly to force-feed high levels of economic growth. We will all be paying off those financial debts for decades to come.

On the environment front, as our financial debts have built up, so have our debts to nature - in terms of the unsustainable depletion of natural resources, measured by the loss of topsoil, forests, fresh water and biodiversity. Everybody knows that liquidating capital assets to fuel consumption is crazy but nobody seems to know how to stop it.

There is a simple conclusion here: the self-same abuses of debt-driven "casino capitalism" that have caused the global economy to collapse are what lie behind the impending collapse of the life-support systems on which we all ultimately depend.

As regards appropriate remedies, the link between today's recession and the perfect storm that awaits us in 2020/30 couldn't be clearer: sort out today's calamity by investing in infrastructure and technologies to help avoid tomorrow's infinitely worse calamity. In other words, a massive "green recovery package" along the lines we are now seeing in the US, South Korea and other European countries, focusing on energy efficiency, renewables, smart energy grids, new transportation solutions and so on.

The government is sort of interested in this, with lots of very eloquent words about a new low-carbon industrial strategy. But as the Sustainable Development Commission has pointed out, the percentage of the total recovery-based expenditure devoted in the UK to this kind of "sustainable new deal" to date is derisory. It's about 7% as opposed to 80% in South Korea, for instance. We simply have to ensure that the unsustainable elements in today's recovery package (such as the useless VAT giveaway) do not overwhelm the low-carbon, sustainable elements.


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