A Benign Spring Morning

28 Jan 2008 – Sophia Tickell

It was an absolutely perfect spring morning. We sat on the terrace sipping coffee and reading the papers looking out over the sea. The sun was really warm for the first time this year. The catkins were out and there were primroses and even a violet in the woods. The only chilling thing was that yesterday was 24th January and so, according to my body clock, should still have been mid-winter. The news from John (Elkington) that Davos is alert to climate change is in some ways a heartening case of stating the bleedin’ obvious about something that is so clearly upon us. And most of us will not experience it as a benign spring morning.

Climate change is surely what Max Bazerman and Michael Watkins would describe as a “predictable surprise”. In their book of the same name Predictable Surprises – The Disasters You Should Have Seen Coming and How to Prevent Them, the authors decry and analyze the lack of leadership in the face of entirely predictable and preventable disasters. Predictable surprises – and they cite, for example, 9/11 and the Enron scandal – have certain common characteristics. First, leaders knew the problem existed and would not solve itself. Second, organizations recognized that the problem was getting worse over time. Third, fixing the problem would incur substantial costs in the present and the benefits of action would be delayed. Forth – and related – the future savings is likely to be larger than immediate costs. Fifth, leaders fail to prepare for predictable surprises because of a human tendency to maintain the status quo – the “don’t rock the boat” school of thought. The sixth characteristic – and to John’s point about the tobacco lobby – is that a small vocal minority benefits from inaction and is motivated to prevent leadership action for private benefit.

Where is the evidence on climate? Well, it’s all over everywhere. The seminal report of ex-World Bank economist, Nick Stern – whose study on The Economics of Climate Change, tells us that the costs of action to reduce greenhouse gas emissions can be limited to around 1% of GDP each year. The costs of inaction, he argues, will be equivalent to losing at least 5% of global GDP each year, “now and forever”. Al Gore’s tireless An Inconvenient Truth campaign is packed with scientific findings* and political truths. Or if you like your information a little less emotive, Kerry Emanuel’s compact resume of What We Know About Climate Change published by the MIT press, may be more your thing. However you like your information, any substantive piece on the topic concludes that too many of our leaders are failing to adjust to this new reality. And what else might they be factoring into new public policy ideas? Well, number one on my list would be the equally compelling fact that by 2050 there are predicted to be 9 billion of us on this fragile, overstretched planet (compared with 6.4 billion today) and that 95% of the newcomers will be in developing countries. And the majority of them will be swelling the shanty towns of megacities of over 10 million people. The need to blend the anti-poverty and environmental agendas has never been clearer. As John says, the market will be a huge part of the solution, but so too will public policies.

The Sunday papers we were reading were still packed with speculation about the whys and wherefores of the enormous losses, 3.5bn GBP (5bn EUR), incurred by Societe Generale by rogue trader, Jerome Kerviel, adding to the woes of the already battered financial markets. While I doubt that the specifics of his case count as a predictable surprise, the collapse in the sub-prime market surely was. We know very well what happens if you lend money to people when they are ill-equipped to pay it back and then leave them to the vagaries of the market place. We saw it in the Latin American debt crisis of the 1980s which led to unspeakable hardship across that continent. And we are seeing it again today in a misery of repossessions, bad loans and personal ruin.

But amidst all this predictability, one thing really did surprise me. Apparently Jerome Kerviel is becoming something of a hero in his home town and across France as someone who has stood up to “Big Finance”. I found that rather perverse given that the losses will not just hurt the “Fat Cat” financiers as they are clearly seen. I would love more people to better understand how financial markets work so that they could be part of the movement to push back against a culture that favours short-term rewards today at the expense of long-term investments in tomorrow. If I’d been in John’s session about unsustainable trends I think I might have suggested starting there.

In October 2007, a UK High Court judge ruled that despite ‘An Inconvenient Truth’ containing nine scientific “errors”, the central thesis that climate change was happening and was being driven by emissions from humans is not in question.