Areté Club Blog

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1. Sonia
   Posted November 26, 2009 at 3:24 am | Permalink

   By Julian Evans,

   I have been asked by Sara to write the blog entry on the last Arete event, which happened at the Army & Navy Club in St James’ Square on November 18, and which involved two excellent speeches, by Lord Paddy Ashdown and private equity executive Susan George, on the weighty topic, ‘Why the world will never be the same and where we go from here’.

   The discussion was under ‘Arete rules’, so I can’t quote or summarise what the speakers said, so instead I’ve been asked to share any thoughts of my own that were prompted by the discussion.

   The discussion hinged, quite rightly, on two key crises that face us today – the Credit Crunch, and the Environmental Crunch. One of these crises is all-too-familiar, the other is somewhat more rare, and harder to prepare for.

   I’m a 32 year-old financial journalist, and I’ve already lived through several financial bubbles and their aftermaths. I don’t quite remember the 1989 crash, but I certainly remember the 1998 emerging market crises, the 2001 bursting of the dot.com bubble, and of course the present crisis.

   All the decades I have been alive, markets have become increasingly deregulated, banks have grown bigger and more powerful, and speculative crises have become more frequent and more severe. And still the banks get away with it – they still get to keep their profits, and socialise their losses. When the system is so rigged, you’d surely be a fool to be in any other business.

   This latest crisis has been a wonder to behold, in that it has affected almost the entire world – I say almost, because there are still countries lucky enough to be ‘off the grid’, such as Turkmenistan or North Korea, and who have therefore been little affected by the crunch. But most of the rest of the world has been affected – proof of the increasing interdependence of our societies, as Lord Ashdown pointed out.

   But some parts of the world are coming out of the crisis quicker than others. GDP is forecast to be above 7% in China and India this year. Brazil is also booming. Turkey is looking strong. Saudi Arabia is well-poised to recover. These countries have had a good crisis. They have emerged as key parts of the G20, which has itself emerged as the principal global decision-making body in the post-crisis world.

   We can safely make the prediction, as was made during the dinner, that the credit crunch heralds the end of the West’s centuries-long monopoly on power, and the rise of Asia. But what kind of ideology will rule? At the moment, China is run by a communism in which few still believe, while the West is run by a free market capitalism in which even fewer have faith. What sort of philosophy will we live by in the future?

   One could suggest both free market capitalism and Marxist communism are doomed to the scrapheap of history, because they are philosophies based on unlimited industrial growth, and we are now coming up against the limits of that growth – which brings me to the second of our era’s crises, the Environmental Crunch.

   The ghost at our dinner was the Reverend Thomas Malthus, who warned two centuries ago what happened when population exceeded resources. The food price shocks of 2008 gave us a brief but unsettling glimpse of how quickly order breaks down when people do not have enough to eat.

   So what is the way forward? Perhaps we can develop all the available arable land to the maximum efficiency. Perhaps there is a role for private capital to play, as well as multilateral and local government capital. Perhaps there is an important role for new technology to play in developing, or synthesising, new food types.

   But the predictions we are now hearing from scientists as to what the world will be like in 70 years time – in other words, within some of our lifetimes – are so catastrophic as to be bewildering. They make the business of prediction extremely difficult. Look at this image (above) in a recent copy of the New Scientist, which shows scientists’ predictions of what the world will look like in 2100, and which parts of it will be habitable if the world is four degrees warmer.

   Where is Asia? Almost completely uninhabitable. So how we can speak of the rise of Asia? Where is Africa? Almost completely uninhabitable. So how can we speak of the rise of African markets? Where is habitable? Russia, the UK, Scandinavia, Canada, and Antarctica. These, according to the New Scientist, are the areas of the world where it will still be possible to live in just under 100 years. Somehow, 9 billion people are going to have to fit into these countries. Will it happen peacefully? Will we join together and sing a hymn to interdependence? I’m afraid not.

   However, perhaps the lesson we receive from the Environmental Crunch will be so severe, so damningly obvious, that we emerge from the ashes with a genuine realisation that we are all in this together and we have to live responsibly and sustainably. Perhaps.

   But maybe I am being overly pessimistic, or at least, overly credulous of the scientific consensus. The future is never exactly as we think it will be. Scientists are rarely as wise as they think they are. We may yet escape this unfortunate destiny. An opportunity is approaching in a few weeks time, at the climate conference in Copenhagen, where the world’s leaders can gather together, and prove to this hardened cynic that enlightened interdependence is still possible.