The mysteries of the summer solstice in the northern hemisphere are perhaps matched only by those of contemporary economic management. And not just because the long overdue visitor centre at Stonehenge has fallen victim to government spending cuts.
Whichever way you turn there is midsummer economic madness to relish. Six weeks ago, UK voters went to the polls in blissful ignorance of the state of the country’s finances. On Tuesday the coalition Chancellor’s first budget will spill the beans – indeed so many beans are there to be spilled that average family incomes may be downsized by £3,000 per annum over coming years.
Much the same has happened in Germany where Angela Merkel has done more spins around the spending yo-yo than a Chinese acrobat. Once a fervent fiscal disciplinarian, she softened into promises of tax cuts and industrial subsidies in the months prior to the September 2009 general election. Now she’s slapped down the biggest austerity measures in modern German history.
President Obama is unhappy about this, but then he’s unhappy about economic management anywhere but his own patch. The G20 meeting in Canada next weekend promises to be a jolly affair – few of the participants agree about anything.
I feel stronger in my prejudices that the blind are leading the blind in the management of modern economies. The response to recession appears to be obsessively influenced by mistakes made in the Great Depression of the 1930s. I find it hard to believe that the parallel remains valid, given the transformation brought about by globalisation.
The economic muddle has some curious similarities with the tribulations of climate change negotiations. As with the G20’s struggles with recession, much-needed UN regulations to stabilise the climate are getting nowhere. And just like economists, climate scientists disagree about the interpretation of historic relationships between key inputs and outputs, such as carbon dioxide and temperature.
Like global economic output, the trend in greenhouse gas emissions is unpredictable and counter-intuitive. With such modest global commitments to future reductions and with the Kyoto Protocol enfeebled by US non-participation, it’s a little baffling that fossil fuel emissions in the US plummeted by a massive 7% in 2009, the biggest fall since records began in 1947.
In the UK, the 2009 reduction in carbon dioxide equivalent emissions was even higher at 8.6%. The economic recession can account for only a fraction of these falls.
If the trend continues into 2010, the popular 10:10 climate campaign may suffer the fate of the Kyoto Protocol. Participating individuals and organisations will barely break sweat in reducing their emissions by 10% over a 12 month period.
Soon after the UK election, the campaign secured a coup in persuading the new government to sign up, reinforced by live video. After a breathless introduction by a 10:10 staffer, Prime Minister David Cameron promises that every government department will “make it happen.”
His famous smirk has never been so visible and sure enough within days it was public knowledge that UK government departments will be subject to average 20% spending cuts.
These rather sorry reflections suggest that the science of economics is in need of the remedy of last resort – a hefty dose of scepticism. We almost got there with the Sarkozy-inspired Commission on the Measurement of Economic Performance and Social Progress, headed by Joseph Stiglitz. Its 2009 report started promisingly:
….Clearly, measures of economic performance that reflected environmental costs might look markedly different from standard measures….the whole Commission is convinced that the crisis is teaching us a very important lesson: those attempting to guide the economy and our societies are like pilots trying to steering a course without a reliable compass
Exactly right – but the Commission failed to staff itself with scientists so that its environmental recommendation was reduced almost to a footnote, calling for “a separate follow-up.”
Not much chance of that in current spending environment.
this article was first published by OneWorld UK