The grand sweep of history reveals that while governments are certainly capable of messing up their demographic futures, they are much less able to remedy demographic disasters. This peculiar asymmetry (on which I have written more here) is easiest to observe in autocratic states, like Soviet Russia, China, and Singapore. Each of these countries initiated their new regimes with anti-natal policies, such as increasing access to abortion, sterilization, divorce, and the infamous One Child Policy. However, each of these countries reversed course within two generations when they discovered their policies had been “too successful,” realizing that their social programs, economies, and national security would soon be in disarray due to impending demographic decline.
Let’s come right out and say it: Anyone who still thinks climate changeis a greater threat than climate policy to financial stability deserves to be exiled to a peat-burning yurt in the wilderness.
Lest you’ve forgotten, the world’s central banks and other regulators are in the middle of a major push to introduce various forms of climate stress testing into their oversight. The Federal Reserve, Bank of England and European Central Bank, among others, want to know how global temperature variations a century hence might weigh on Citi’s or Barclays’ or Deutsche Bank’s capital and risk weightings today. The fad is for quantifying, with preposterous faux-precision, the costs of reinsuring flood risks, or fire, or the depressed corporate profits of a dystopian hotter future.
Well, if you seek “climate risk” to financial stability, look around you. It has arrived, although in exactly the opposite manner to what our current crop of eco-financiers predicted. Europe’s plight tells a tale that could become all too familiar in the U.S. soon.
The U.K. may be facing a wave of business bankruptcies exceeding anything witnessed during the post-2008 panic and recession. Some 100,000 firms could be forced into insolvency in coming months, bankruptcy consultancy Red Flag Alert warned this week. These are otherwise healthy firms with at least £1 million in annual revenue. Business failures on this scale would dwarf the roughly 65,000 firms of any size that went under from 2008-10.
The culprit is energy prices, which the consultancy believes could account directly for around one-quarter of the possible insolvencies. These prices are rising for British businesses in intervals of several hundred percent at a time and sometimes with steep deposit requirements from utilities that fear precisely a wave of bankruptcies.
Politicians are happy to blame Vladimir Putin and his Ukraine invasion for the current energy disaster. But what transformed that one-off shift in the relative price for energy into a global disaster was two decades of green-energy policy beforehand. In Europe, that includes a fixation on renewables incapable of powering industrial economies absent battery technologies that don’t exist, a refusal to tap domestic fossil-fuel reserves such as shale gas, and a deep and irrational hostility to nuclear power in many parts of the Continent.
This has created an energy system of dangerous rigidity and inefficiency incapable of adapting to a blow such as Russia’s partial exit from the European gas market. It’s almost inevitable that the imminent result will be a recession in Europe. We can only hope that it won’t also trigger a global financial crisis.
David Henderson weighs in on Brad DeLong’s “strange concept of market failure.” (Speaking of which, remember this June 2009 post by Bryan Caplan?)
The prime minister is head of government but not head of state. The separation of those functions inoculates Britain from the infantilism peculiar to the American republic. Here the cult of the presidency invests absurd glory and expectations in that office’s occupants, who generally are mediocrities because politicians, like lawyers and plumbers and columnists, etc., produce a bell-shaped curve.
Dear college & university presidents,
If you mandate the new BA4/5 bivalent booster for students, you will be doing so on the basis of no clinical evidence that it stops disease transmission or protects against severe disease. Nor any human safety data whatsoever.