by Damon de Laszlo, ERC Chairman
It’s difficult to underestimate the crisis we are heading towards. Years of prosperity and Western complacency have left us in a bad position to deal with the next few years. Western governments, and democracy in general, find it difficult to anticipate changes in the status quo.
The West also must face the fact that the calibre of the leadership and those around it has declined considerably. While the role of government has expanded and become far more complex than it was twenty or thirty years ago, confusion has also increased with the ability of minority interests to get public attention through the internet etc. The interests of the majority are being undermined by decisions taken to placate single-issue pressure groups.
Since the financial crisis of 2008, both the UK and the US have lacked the strategic thinking that is needed to guide long-term policies. This problem is seen in stark relief with the political response to global warming. To move from a carbon-based energy generating system to a system based on capturing and utilizing low concentrations of energy derived from the sun, remembering that the primary input to wind and biomass is also solar, is very complex. It is doable but requires a lot of strategic thinking and joined-up policies to direct the resources, reaching hundreds of £bn, needed to re-plumb the entire infrastructure of modern economies. It’s wonderfully easy to announce you are going to phase out oil and gas for transport and energy without apparently having any idea how the current systems that support our economies work. It’s relatively easy to make an electric car, the technology has been around for a hundred years. However, re-building the whole electricity distribution system, the hidden plumbing of a modern economy, is a huge investment and requires a long-term strategy that is not evident in any western government’s thinking.
Energy aside, Russia turning into a rogue state, apart from the horrors it is inflicting on Ukraine, is going to have a catastrophic effect on world food supplies. It is not just that one-third of the world’s grain production has essentially been lost, at least for the next twelve months, but the side effect on energy prices is having an immense effect on the supply of fertilizers that we are also dependent upon for the rest of the world’s grain production, as well as most other foodstuffs.
Food prices, as well as energy prices, are beginning to rise at an alarming rate and it is difficult to see how this trend will not continue. It seems to be forgotten that grains are also the primary feed for stock, from pigs and poultry to beef. Here again, we see in the UK a lack of intelligent government thinking as huge numbers of pigs are being slaughtered and the meat wasted because of a lack of vets! The UK and the EU’s Common Agricultural Policy seems to lack a basic understanding of the need for food security and has forgotten that the natural inputs from the weather are highly variable. While UK and Europe will experience food poverty, leading to civil unrest, underdeveloped countries are likely to experience starvation
Russia’s war in Ukraine, along with Covid, are two recent factors that have come together to create an unprecedented crisis in global supply chains, which had brought huge benefits in recent history. There has also been a twenty-year rise in government debt around the world which creates a hidden reduction in the resilience of the global economy. Debt is borrowing from the future, exacerbating the economic problems we face.
Looking for the good news, China will work its way out of its Covid crisis and along with the US, which is nearly self-sufficient in natural resources, will continue to maintain growth, albeit at a slower rate. The two economic giants working together could mitigate the damage we are likely to feel from the various impending crises.
Damon de Laszlo
9th May 2022