Ever wanted a big picture snapshot of the world’s state-of-play? We got access to a spirited discussion between KS Jomo, the Asst. Secretary General for Economic Development at UNDESA, and Ambassador Burhan Gafoor, the Chief Negotiator of Singapore for Climate Change. You’re about to get the top level points on what’s afoot, how the issues relate, and where we need to move for the future: businesses, governments, and people. [Editor’s note: assume most snippets are attributed to KS Jomo, with some reformatted from Burhan Gafoor, and our commentary alongside.]
Right now our global society is facing numerous consecutive crises:
- economic meltdown following sub-prime mortgages that were sold on globally,
- food price spikes due to geographic and climate issues, and speculation,
- increased inequality in the global South brought on by decades of deregulation, trade imbalances and liberalization, and so-called “immeasurizing growth”
- onset of global climate change in the form of severe and erratic weather that is severely affecting conditions around the world (and will continue to do so)
Economically, how’d we get here?
In sum, the 1970’s began a transition era with Nixon sacking the
Bretton Woods System (read: no more gold reserves backing $$$). The 1980’s rolled on with less taxation and government involvement in financial structures. There was lower growth, higher inequalities, growing market instability, and trade liberalization; in general, trade terms moved against developing nations.
The 1990’s saw immeasurizing growth in many of these same countries, showing that more did not necessarily equate to better opportunities. There was a loss of tariff revenues, and shifts in production and export capacities. Many countries couldn’t afford the high costs of building competitive/new industries in this environment, and a backslide ensued.
Entering the new century, global money shifted from South to North, with hallmarks including higher volatility, lower growth, higher instability, and widespread “jobless growth”. Now, enter into this progression the era of cheap and easy money in countries like the U.S. and U.K. The big economies borrow themselves to the rafters, savings plummet while in Asian savings increase, and debt-fueled overconsumption ensues. Mega-multinationals use this cheap era to overinvest in capacity. You know what happens next: Lehman Bros. et al, catastrophic banking collapse, and the falling of financial dominoes around the world. Destruction of value. Not pretty.
Now the U.S. has dropped a lot into stimulating the economy again, Europe has done a bit but petered out, and in general--even though the money’s still cheap-- corporations have little incentive to invest. They still have far too much capacity available, and it’s underutilized already. Why buy more?
When the last fish is caught, only then will they learn money cannot be eaten
So, against this economic backdrop, many countries—both developed and especially developing—are not in good shape. With the global economy royally rooted by the turn of events, investors turn to “safe havens” like certain currencies and commodities including food stocks. Now food security comes into play, with speculation driving price spikes that reach all time highs in early 2011. Food stocks like grain go sky high for the average guy on the street.
Not only that, but production of first generation biofuels (e.g. certain ethanols) were already affecting prices of staples like maize, and spikes in the cost of crude oil (another commodity) also added to the transport cost of food. Chronic issues like environmental degradation, overfishing, loss of farmland, and deforestation further complicate the global situation. Big instability brews in developing countries and some riots ensue. According to the World Bank, some 44 million worldwide slip into poverty and go hungry from June 2010 through early 2011… and it’s not over yet.
Climate change another destabilizing factor
But wait, the food issue gets more complicated. Fires in Russia and Floods in Australia brought on by climate anomalies destroy large amounts of wheat and other essential food crops, further knocking up prices. So as intense weather episodes (and floods, fires, etc. come with it), we can expect more of this in the future with further food insecurity. Climate change isn’t happening “over there” anymore: it’s coming to a market shelf near you.
And what are we doing about it? While UN COP 16 in Cancun at the end of 2010 made some traction on consensus, there’s still a lot that needs sorting, and with an ever shortening time horizon. Even if consensus can be reached among the United Nations countries, the best result will be stabilizing greenhouse gasses like carbon around 450ppm—still not low enough to stem off a temperature shift of 3-6 degrees Celsius or so (read: major detrimental effects on environmental stability worldwide will still ensue)—
and that’s if we’re lucky.So what needs to happen, if even to get that far? Well, low emissions economic growth isn’t going to just come about from the market. A growing body of evidence (Economist, Financial Times, et al) is supporting the fact that carbon trading has not helped speed progress on mitigation (e.g. cutting emissions), nor helped solve financing issues towards mitigation and adaptation to climate change—as we’re already starting to experience.
The UN and others advocate that the world needs a radical shift from dirty fossil fuels to renewable energy, and helping developed nations to make this leap lest they follow the same old polluting industrial model. This is going to take big investment and mechanisms from governments and international organizations to get passed the initial costs and risks. Raising living standards while reducing climate change is no easy task, and markets alone won’t solve it.
So what’s it going to take to get out of this mess?
In short: political will, leadership, the ability to push back on the power of bond markets, investments in areas neglected before the economic crisis (especially renewable energy and small holder agriculture), increase in agricultural research, and a revamp of the global economic system—complete with better oversight and legislation. Gee, piece of cake.
Governments have their work cut out for them to make some tough decisions around their long term futures. Business as usual is gutting the global population from the bottom up. Sooner or later it will affect everyone. As individual governments make progress, collectively groups like the UN can take further action on these combined, intertwined global issues—speeding worldwide responsiveness as it has with other historic global threats like CFC’s on the ozone with the
Montreal Protocol in 1989. Global action can, and has, taken place successfully and it needs to happen again.
Business and industry has its part to play-- especially multinationals with their cross-border reach. Investing in new business models, cleantech, and renewable energy, as well as sustainable agriculture are good bets. Where there are risks, there are opportunities: if the crises we face don’t provide business with suitable impetus for action, they shouldn’t be in business.
The public sector likewise has its own role to play, and that is an active one politically and financially. Pressure needs continual application on governments and business to help drive recovery. Right now, the market conspires against recovery in every sense of the word—vocal and visible public action is needed to help change that.
Will we have the wherewithal to tackle these monumental challenges? Answer that question not with words and thoughts, but tangible actions.
(this article originally appeared on Ecopoint)