One of the most alarming articles I’ve read this month was by the Cambridge-based economist Ha-Joon Chang. He’s the author of 23 Things You Didn’t Know About Capitalism, and has a sharp eye for how markets and economies work in practice. Anyway, he noted that despite a substantial devaluation of the pound since the financial crisis, both service exports and manufacturing exports had also fallen. This isn’t how devaluation is supposed to work.
The received wisdom about the collapse of the British entertainment chain HMV and its acquisition by the distress specialists Hilco is that it didn’t see the internet coming. And doh! Actually, the truth has a lot more to do with economics and the way finance dominates business. This long post is broken into two parts: part 2 is here.
The immediate cause of HMV’s collapse, of course, was the British recession, which has gone on longer than anyone expected, and the economy is now teetering on the edge of an unprecedented triple dip recession. Here’s the NIESR chart showing comparative GDP since the pre-recession peak for the past six recessions. The black line at the bottom is the current recession, and yes, this chart should be on the wall of every economic policymaker in the UK.
I’ve just had a review of The New North published in the APF’s quarterly newsletter, Compass. I’m sharing it here.
As the Arctic ice cover shrinks ever smaller, it seems a good time to review Laurence Smith‘s book The New North, which was well-received when it was published in hardback and has just been published in paperback. It tells four stories about the way in which climate change will re-shape the north of the planet (generously defined as the world north of 45*N) in the decades to 2050.
Smith, a geographer at UCLA, describes the book as “a 2050 thought experiment”, and any futurist would have been pleased to have written it. His building blocks are four long-term global trends – demographics, natural resource demand, globalisation, and climate change. Along the way a fifth intrudes, of “enduring legal frameworks”, that he sees as an outcome but I would regard as a further long-term trend driven by value shifts towards increasingly rights-based political frameworks.
John Maynard Keynes said, famously, that ‘practical men’ were usually ‘slaves to some defunct economist’. Something similar is true in futures work. There are some views of the world that are so embedded that no amount of good futures analysis can dislodge them from the minds of their adherents. Indeed, the futurist Jamais Cascio has coined a term for this, “legacy futures“, which describes futures that are trapped in a moment that has already passed, a “now” that is already history.
These thoughts are prompted by the latest wave of lobbying by British business interests for a third runway at Heathrow. I get weary writing about this: I went through the relevant trends at length a couple of years ago and found that in terms of air transport in the richer world almost all the trends were headwinds. More recently Chris Goodall at Carbon Commentary has noted that demand for business air travel from the UK was declining for some years before the crisis. (Since then he has returned to the subject, most recently using Civil Aviation Authority data to lay into the misleading numbers deployed by the campaigns that promote the expansion of Heathrow.) It’s worth noting that all that stuff about flights to China, trotted out again by the CBI in the past month, is more or less just plain wrong. It disregards the huge number of flights to Hong Kong from Heathrow, compared to the negligible numbers from other European hubs, which expansionist advocates contrive to overlook.
A couple of years ago The Futures Company collaborated with the Institute of Development Studies on an ambitious futures project which was designed to understand the possible futures of a post-crash global economy, and then to identify impacts for development. One of the conditions of the tender was – unusually – that we subsequently write up the work for academic publication, and the paper we wrote for the journal Foresight has recently been commended as one of the best papers in the journal during 2011. In turn, this means that it’s available for open download until 10th October from the website of the publishers, Emerald.
The client for the project was a British government department, and the sponsor within the department was sure that he didn’t want the scenarios to be developed using the mainstream 2×2 double uncertainty method. I was fairly sure about this as well; for one thing, I didn’t believe – given that the scope of the scenarios was the entire global economy – that the 2×2 would produce sufficient nuance, and secondly, I knew from experience that while it is possible to translate 2×2 scenarios into soft models, just about, the translation can be messy.
For our part of the work (on which I worked with my colleague Joe Ballantyne), therefore, we used a ‘light’ version of morphological analysis – largely for reasons of time – substituting a form of pattern analysis for computer-based analysis. In turn this meant that Andy Sumner of the IDS, the paper’s third author, was able to draw out the main elements that linked the national economies to the global economy and categorise them.
I’m proud of the paper, which I think describes well the way that a fairly complex futures process, done quite quickly, was able to drive insight and improve our anticipation of the future. In the few days before the window closes: enjoy.
A few years ago Citigroup (yes, it’s a bank) came up with the notion of ‘plutonomy‘ to describe the way the economy was going. It was a neologism, of course, but one that needed little or no explanation.
But even three years after the financial crash, we’re still seeing that ethos and that economy on our streets and in our public realm.
There’s still commentary coming out on the riots and their aftermath almost faster than I can read it and reflect on it, but in the next two posts I’m going to try to pull together some of the better commentary on the English riots last week. The first post will look at the immediate circumstances of the riots, and the second one at some of the wider contexts.
As the Greek financial system lurches from one brink of collapse to the next, it’s worth trying to identify what we know about the current state of the Atlantic financial crisis that broke in 2008. In summary, I think it is this: the present approaches to dealing with debt will fail until the banks take losses as well. And that needs financial and social innovation.
Here’s a thought. One way into several of the policy issues dominating British news headlines – from the future of the national health service, to the Southern Cross catastrophe, to the funding of higher education – is to look at them through the lens of Jane Jacobs’ distinction, in her book Systems of Survival, between systems based on territory (‘guardians’) and systems based on exchange (‘traders’). Most human societies need both. But when we get the distinctions between them blurred, breakdown and corruption follows.
Suddenly, with the turn of the decade and the latest World Economic Forum opening, we’re awash with projections of how the world economy might look in 2050, produced by economists, and each as implausible as the other. Two, from HSBC and PwC (both open in PDF) offer similar (and improbable) views of a hugely expanded global economy to 2050. But they also seem to assume that the future will be a lot like the past.