field. The climate theme has involved a dramatic reversal of belief systems on the threat of global warming. A PR campaign of malign brilliance has remoulded US public opinion to such an extent that not a single Republican candidate in the mid-term elections professed to believe there was anything much
to worry about in human enhancement of the greenhouse effect.
If your reading of the news is cursory – as it is of necessity for busy people – these would be the big themes you would probably have picked up from the year. Financial crisis? Overblown, evidently … a lot of fuss over not much … markets are resilient … modern capitalism is elastic … the system works.
Energy crisis? Well, BP surely did mess up and so should cough up, but the oil has disappeared now … people overreacted … we can get back to normal. And as for weaning ourselves off oil, look at the vast amounts found off Brazil. Climate crisis? There can’t be all this smoke without fire. It really does look as though climate scientists like to scaremonger.
But if you have a bit of time to read the daily grind, a very different picture emerges, and I would argue that the extent of our triple-crunch dilemma can be seen clearly in both the fine print that is the Triple Crunch Log and in the small details: what people say and do.
Let me start with the financial crisis. In January last year, the US CEOs of the disgraced investment banks testified in Congress about what they thought had gone wrong during the credit crunch. JPMorgan Chase CEO Jamie Dimon declared that a financial crisis is something that ‘happens every five to seven years. We shouldn’t be surprised’. Goldman Sachs CEO Lloyd Blankfein, in contrast, compared the financial crisis ‘to a hurricane nobody could have predicted’.
Dimon’s breathtaking analysis should strike fear into the hearts of every adult who hopes to see their child grow up to have a job. The global banking system was hours away from complete implosion in 2008. We are talking about banks closing ATM machines. If this is the kind of precipice we can expect to have to peer into every five years, then we need a better operating system than modern capitalism.
Blankfein seems closer to the mark on severity, but he is wrong in that nobody could have predicted it. A good few economists and prescient financial journalists did predict it. They were simply drowned out by cries of ‘rubbish’ and ‘irresponsible scarmemongering by people who don’t understand’ by investment-bank CEOs such as those testifying. Those people were locked in dysfunctional group-think at best, and their reluctance to countenance any re-engineering of the system by regulators or politicians is something we and they will no doubt live to regret.
As Nobel Prize-winning economist Paul Krugman concluded having watched the congressional testimony, the bank bosses showed themselves to be ‘clueless’. ‘The bankers’ testimony showed a stunning failure, even now, to grasp the nature and extent of the current crisis. And that’s important: It tells us that as Congress and the administration try to reform the financial system, they should ignore advice coming from the supposed wise men of Wall Street, who have no wisdom to offer.’
For my energy-crisis example of news to watch, let me take the release in November of a report by a group of British companies analysing the risk of global oil supply failing to keep pace with demand. I am a member of this group, the UK Industry Taskforce on Peak Oil and Energy Security. We warn that global oil supply will start to drop by 2015 at the latest, and we fear the impacts on an oil-dependent world will be quite as bad as the credit crunch. Among them will be oil prices so high that governments will find it increasingly difficult to generate the growth needed to raise the taxes to pay the interest on the bonds they’ll have to service in order to pay the accumulated costs of bailing out the banks.
Finally, my climate-change example. At the time of the Copenhagen climate summit in 2009, the Russians were somewhat cavalier about global warming. But in the summer of 2010, as the worst heat wave on record spawned wildfires that destroyed entire villages, severely damaged the wheat crop, cloaked cities in smoke and advanced on nuclear power plants, things changed. On 30 July, Russian President Dmitri Medvedev said this: ‘What’s happening with the planet’s climate right now needs to be a wake-up call to all of us, meaning all heads of state, all heads of social organisations, in order to take a more energetic approach to countering the global changes to the climate.’
Yes, Mr President, and let’s hope that while they’re dealing with the climate crisis in 2011, they try harder to deal with the financial and energy crises as well.