A lesson from the financial crisis: don’t wait for the crash

The economic crisis is just a sideshow compared with the task ahead in confronting climate change. [21 October 2008 | Peter Boyer]

The cautionary voices were few at first, easily ignored, though more recently they gained in numbers and strength and volume. Now everyone agrees that the world’s just-ended economic prosperity was something of a bubble. When confidence ebbed, it burst.

Confidence is a fickle thing, hardly a satisfactory basis for planning or predicting the future, and financial analysts are constantly shifting position as they read the tea-leaves. But we’ve had many warning signs, and they’re closely linked to what’s happening with our climate.

Failing to attend to the huge, unprecedented problem of climate change will mean losing not just our wealth but also the very fabric and structure of our civilised life, yet amid today’s world-wide economic turmoil it’s tempting to relegate the topic to the back-burner.

Two economists warned last weekend of the folly of such thinking. Ross Garnaut said that while it’s not easy to implement structural reforms – including a carbon emissions trading scheme – during an economic downturn, this is actually a good time because such a scheme will provide new economic directions that will stimulate investment.

His views were supported by Shane Oliver, AMP Capital’s chief economist, who said that rising unemployment would provide an abundance of workers for clean-energy initiatives. An emissions trading scheme would, in his view, help to make the necessary shift to a cleaner economy.

There are some useful lessons to be gained from the financial crisis. For instance, the mantra of greater market supervision is now being heard everywhere. Poorly regulated markets have brought us spectacular growth, but the end result has been an even more spectacular collapse, leaving both business and governments in dire straits.

Our best economists cautioned years ago that the intricate, interconnected world financial system had underlying weaknesses. They advised that when these weaknesses surfaced, as they inevitably would, the consequences would be dire and world-wide.

In a similar way, scientists have warned for decades of even more fundamental problems (linked, as it happens, to growing populations and economies) that threaten our future. The warning signs aren’t usually as obvious as a financial crash, and don’t seem to have excited such rapt attention, but they carry far more ominous portent.

Think of it. An economic collapse may bring a global depression, increased misery for the world’s poor, perhaps some international conflict. That is bad indeed, but the worst result on the climate front will be all that and more, including devastating loss of food production, diminishing water availability, rising sea levels and a planet unfit for life.

If governments could only show such concern about climate as they’re now at last doing over the state of financial systems, and be as attentive to fixing the problem, and if they could only grasp the truly devastating economic consequences of climate change, then we’d be a lot further advanced in meeting this supreme challenge.

Eventually, governments will act with feverish speed to curb climate change, because they’ll have no choice. But it seems that, as with the financial crisis, they’re waiting for the crash. If so, it will be all too late. Planet Earth will be a lot less forgiving than a mere human economy.

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