The credit crunch as the new climate change

In: Uncategorized

4 Aug 2008

The following comment by me appeared in this week’s Fund Strategy.

Has anyone noticed that the credit crunch is the new climate change?

Until about a year ago, we were being advised to take such measures as reducing energy consumption, not wasting food and being financially frugal to save the planet. Now we are being told to do more-or-less the same thing for the sake of our household finances in the midst of recession. It seems that austerity is in the air.

The most stomach-churning expressions of this trend are the self-appointed experts who dispense their banal advice at every opportunity. They tell us how much money we can save by making packed lunches to eat at work or making sure we do not leave our televisions on standby. Such trite observations are routinely indulged by the media.

But such measures are also backed by government and business. The government sponsors reports such as those on how much food is wasted and promotes regulations to discourage the use of plastic bags. A Scrooge-like attitude to consumption is being encouraged at every opportunity.

This is all pretty strange because the credit crunch and climate change are two fundamentally different types of problem. The former is a relatively muted economic slowdown driven by difficulties on the consumption side of the economy (see last week’s comment). The latter is a long-term trend towards an increase in average global temperatures.

If the two have anything in common, it is more in the reaction to them than what they are. Both seem to be prompting a panic reaction that is out of proportion to the immediate threat.

In both cases, the reaction emphasises the need for people to behave “responsibly” and curb their consumption. At best, such measures are irrelevant. At worst, they encourage a small-mindedness that detracts from finding a solution to the problems that they are ostensibly supposed to tackle.

In the case of the economy the challenge in broad terms is to find new ways to promote economic growth and encourage a culture of genuine innovation. In relation to climate change, it is to develop new technology and to work out the best way to adapt to the challenge.

Looking at either problem from the narrow perspective of the individual consumer only mystifies what is going on. We need a broader vision if we are to move forward with confidence.

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