Paying for the future on the never-never

Citation

Blackman, C. (2009), "Paying for the future on the never-never", Foresight, Vol. 11 No. 1. https://doi.org/10.1108/fs.2009.27311aaa.001

Paying for the future on the never-never

Article Type: Editorial From: foresight, Volume 11, Issue 1

There is a definite sense of fin de siècle in the air as I write this editorial. The global financial system has been revealed as a house of cards, our growing economies fuelled by the sleight of hand of “easy” credit, and the cost of our live-for-today lifestyle coming home to roost. There are many failings, for which we all share responsibility to some extent but, chief among them, was the way in which our political leaders failed to control the greed of bankers. Effectively we allowed a positive feedback loop to be put in place whereby avaricious bankers were rewarded for taking ever-greater risks with completely inadequate regulation to govern them. The abuse of power should come as no surprise – but we are constantly surprised. And yet there is a sense of hope in the shape of President Obama, that he is the right man for these times, that he can restore our trust and provide the global leadership that has been sorely lacking over the past decade or more. Let’s hope he does not surprise us.

Meanwhile, regarding the economic crisis, there has been some debate in the media as to whether anyone predicted it or not. There were indeed economists who forecast a financial crash, such as Robert Shiller in 2005. And while I would not claim it as a prediction, I was part of a study team that wrote a detailed “Financial crash” scenario in 2004, describing a financial meltdown in the EU comparable to the 1929 crash brought about by failure of mortgage backed derivatives[1]. So the signals had been there for some time – and they were not exactly weak ones.

With the attempts now being made to prevent the recession we find ourselves turning into a lengthy depression, there are some mixed messages coming through. First is the apparent contradiction that although it was excessive borrowing that caused the mess, the way out of it is to borrow and spend even more. Whether the twenty-first century interpretation of Keynesism proves to be successful or turns out to be a huge gamble by desperate politicians, only time will tell. I suspect that the economy will prove rather hard to stimulate in the short term – although those that can are being encouraged to go out and spend for the common good, this is likely to be a weaker force than the overwhelming sense of the need to batten down the hatches and tighten our belts.

Some see a silver lining in all this, in that the crisis disrupts the paradigm of unsustainable economic growth. Perhaps the global recession will do more to reduce carbon emissions than the targets that are currently set. Might the crisis be so grave that it brings us collectively to our senses and sets us firmly on the path to a carbon neutral society? If that is where we should be heading in the long term, that is not really compatible with the “go out and spend” messages we are currently being given.

Some have speculated that this economic crisis marks a significant turning point for the USA as a global economy and superpower. Some analysts, such as John Gray, have described the economic crisis as a defining moment for the USA likening it to the Soviet Union and the fall of the Berlin Wall (www.guardian.co.uk/commentisfree/2008/sep/28/usforeignpolicy.useconomicgrowth). If that is so, then the era of American dominance in the world may well be over. Of course, futurists have forecast for many years the rise of Asia as the dominant region and this may well mark a significant shift in that direction. If the Japanese banking crisis of the late 1980s and 1990s is anything to go by, we might well see stagnating economies for the coming decade in those countries most deeply affected. On the other hand, this is very much a global economic crisis now and it is not exactly good news for economies such as China, who will be hit hard because of their high dependence on export markets.

More than this, what I think the crisis really shows is just how interconnected the global economic system really is. And one big question it raises is what would be the detailed economic consequences of a real shift towards the carbon-neutral economy by 2050 that seems so necessary?

Notes1. See Future Mobile Services study by SCF Associates for the Institute for Prospective Technological Studies and DG Information Society and Media, Appendix B, http://fms.jrc.es

Colin Blackman