Time is the Scarcest Resource: Business Must Act on Climate Change

The world economy may be steering itself cautiously out of the doldrums, but leaders have struggled to agree remedies to the key threats on the agenda at the annual World Economic Forum’s Davos event. “Let me highlight the one resource that is scarcest of all: time,” said UN Secretary General Ban Ki-moon. He was specifically talking about the battle to halt climate change, but he could just have easily be addressing stalled world trade talks, Europe’s debt crisis, Chinese asset-price inflation or soaring world food prices. Victor Anderson, who is ‘One Planet Economy’ leader at WWF, doesn’t think those assembled at Davos really appreciated the significance of the ecology crisis and why it posed a threat to both business and politics as usual.

Jean-Louis de la Vaissiere for AFP in The Age (30 January 2011):

Global business leaders headed home from Davos on Sunday after a week in which were courted by politicians seeking plans to deal with debt, food scarcity, climate change and revolt on the Arab street.

The world economy may be steering itself cautiously out of the doldrums, but leaders have struggled to agree remedies to the key threats on the agenda at the annual World Economic Forum’s elite annual networking event.

“Let me highlight the one resource that is scarcest of all: time,” said UN Secretary General Ban Ki-moon, as dozens of senior international figures swung by to lobby some of the richest and most powerful people on the planet.

Ban was specifically talking about the battle to halt climate change, but he could just have easily be addressing stalled world trade talks, Europe’s debt crisis, Chinese asset-price inflation or soaring world food prices.

There was no lack of good will in Davos, the self-selecting group that makes the annual pilgrimage up the mountain to this snowbound resort is largely sold on the virtues of a globalised economy and multilateral cooperation.

But many of the debates at this year’s event were pessimistic in tone, and the political guests sometimes appeared caught flat-footed by shock events far beyond the Davos Congress Centre.

Russian President Dmitry Medvedev put on a credible show of defiance to the terrorists who bombed a Moscow airport shortly before he was due in Davos, but his arrival was delayed and his visit cut short.

His opening day speech was preceded by a minute of silence, and worries about extremist violence took the shine off the Russia delegation’s unveiling of a billion-dollar oil exploration deal with US giant ExxonMobil.

Meanwhile, Forum organisers were scrambling to address the number one topic of anxious discussion in the venue’s corridors — the popular revolts in North Africa and the risk of their spreading throughout the Arab world.

Davos managed to produce a trio of newly-minted ministers from the Tunisian interim regime, and they were warmly welcomed to the fold as champions of the fight for freedom, but between sessions delegates sought news from Egypt.

Western leaders fear Egypt’s revolution will trigger bloodshed and boost Islamism, but don’t want to be seen to be backing an autocrat like strongman Hosni Mubarak, and Davos never really managed to address the issue.

Meanwhile, topics debated with great elan at Davos 2010 have scarcely moved on: post-earthquake reconstruction in Haiti has stalled, the Middle East peace process is in ruins and Iran clings doggedly to its nuclear plants.

Since then the Lebanese government has fallen and Ivory Coast has found itself divided between two would-be presidents and on the brink of war.

With the political and environmental crises proving intractable, the Forum spent a lot of time listening to rival economic recovery plans, but here again Western leaders were on the defensive.

Russia and fast-growing India duelled to see which could plaster the resort city with more triumphant posters, and Chinese executives and officials made placatory noises about global trade imbalances without making concessions.

But a string of European leaders concentrated on defending the stability of the euro and their deficit reduction plans, while the United States insisted they had got it all wrong and that now was not the time to cut spending.

Source: www.news.theage.com.au

Victor Anderson for the Guardian Professional Network Wednesday 26 January 2011 

This week the world’s business and political elite gather in Davos, Switzerland, to discuss the planet’s future. Although economic rivalries are always at the top of the agenda, in recent years the Davos meetings of the World Economic Forum have found a little time to discuss climate change. However, there is as yet no sign that most of those who attend really appreciate the significance of the ecology crisis and why it poses a threat to both business and politics as usual.

The conventional view of the world is that there is a choice to be made between the risk of systemic change and the relative safety of sticking with what we have now. However if we take the idea of sustainability seriously, we can see it is not like that. Current unsustainability means that the situation we are in cannot be continued, and will change. The choice is therefore not between what we have and making a risky transition to something different. The choice is between two different forms of transition.

The signs of both forms are all around us, good and bad. We need to recognise that indications of the unintended and unplanned “bad transition” are not just to be found in climate change, biodiversity loss, and environmental deterioration generally, or in environmental and social problems put together.

There is also a distinctively economic component to the process. Some of it is to be found in the economic impact of climate change. Increased flooding, for example, has put enormous costs on agriculture and other economic activity, and of course raised insurance premiums paid by business and households.

More of the bad transition is to be seen in the way ecological deterioration, such as reductions in soil quality and water availability, undermines production, most obviously in the case of food.

However there is also a basic economic shift taking place at the moment which is as pervasive as the worldwide changes in climate and ecosystems. This phenomenon is structural inflation caused by unsustainable economics. Prices are, above all, a response to supply and demand. If demand is rising – and demand is rising fast across the world now for fuel, food, metals, and many other commodities – and supply is relatively fixed, prices will go up.

This is exactly what is happening, returning to the circumstances which preceded the financial crisis in 2008: “Global food prices have reached a nominal all-time high, surpassing the peak seen in 2007-08 – when bread riots rocked poor countries.” (Financial Times, 11 January 2011) “The price of steel has risen more than a third in two months” (FT, 17 January 2011). “Copper prices rose 33% in 2010“. (Wall Street Journal Europe, 4 January 2011). “Morgan Stanley analysts predicted recently that crude oil would go ‘above $100 per barrel’ in 2011.” (WSJE 4 January 2011)

As the world economy moves closer and closer to the limits of its resources, we get nearer to the points where various commodities are fixed in supply, or are increasingly risky to supply (as with oil extraction in places like the Gulf of Mexico), or where their output can only be expanded by limiting the production of other commodities. Climate change and ecosystem deterioration then restrict supply still further.

The outcome is bound to be inflation. Not just a temporary and localised form of inflation, but inflation structurally built in to the world economy.

In the UK, rising inflation now threatens the ability of the Bank of England to use monetary policy to counteract the deflationary effects of the government’s spending cuts. The next move for interest rates is likely to be upwards.

The general outcome of this form of inflation is stagflation: stagnation in output produced by inflation in input prices. When input prices rise, firms cannot afford to buy as many of the materials they use, and unless they can find a way to use those materials more efficiently, firms’ output will fall.

A no-growth economy does not depend on radical green campaigners persuading people that growth is undesirable, nor on the overturning of current values and priorities which that would require. It can be the simple outcome of unintended stagflation. A no-growth economy may be closer than we think.

Victor Anderson is ‘One Planet Economy’ leader at WWF

Source: www.guardian.co.uk