Shadowlands: the next tsunami
Forget Boris Johnson. He is a sideshow in the disintegration of human values surrounding us. Greater self-deceiving dishonesties are to be found in the institutions that claim to hold society together.
Of course Johnson lied to parliament. The government does so every day. With not a flicker of embarrassment, Ministers will now attempt to shower themselves with false praise in the launch of their ‘Green Day’ promises. The chutzpah is astonishing.
Net-zero targets are to be watered down. Carbon capture ‘aspirations’ will gloss over continued oil and gas extraction. Money will be thrown at hydrogen and nuclear as make-believe answers to everything else. And all the more transformative changes needed within this decade will be sidelined.
The missing links
Measures called for in the latest IPCC Report will go largely unheeded. The government will skip over its deferred ban on the use of peat in horticulture – a delay which will release an avoidable 31m tonnes of CO2 emissions. This is more than the (mythical) target the government promises in carbon capture (CCS) schemes every year.
UK home insulation measures, that have dropped to new historic low levels, will get skipped over, as will the g o v e r n m e n t f a i l u r e t o s w i t c h investment/subsidies from fossil fuels into renewable energy.
Ministers will announce no legal duty on water companies to clean up rivers before paying themselves bonuses and dividends. There will be no obligation for new housing to be energy self-sufficient, and no modal shift in transport subsidies in favour of radical carbon reductions.
Britain may be bottom of the European league for installing heat pumps (to replace gas) but this too will go unmentioned.
And don’t expect any talk of a moratorium on airport expansions or of subsidies for localised food systems, or turning all ISA’s into Green Bonds, or restricting vehicle finance schemes only to EVs.
Nevertheless, the government will flaunt its ‘Green’ credentials more gaudily than a St Patrick’s Day parade. The only thing missing will be the truth. In that, they are at one with Boris.
Around the country, Conservative MPs and candidates are distributing leaflets stressing their eco-friendliness. All are about window-dressing, not planet-saving. Mysteriously, all the leaflets have also dropped any mention of the candidates being Conservative.
Sinking in corruption
The greatest dishonesty, however, lies in the government’s denial that free-for-all economics is falling apart. Deregulatory obsessions have unleashed a chase for cheapness that has depleted soil fertility, exhausted water supplies and polluted rivers and seas at terrifying rates.
Unconstrained fossil fuel consumption poisons our lungs as fast as it destabilises the climate. Wild weather and regional wars accelerate these crises. And behind it all, casino economics pulls in the opposite direction to everything that climate physics tells us we have to do if our species is to survive.
For the Conservative government, deregulating everything became a religious mantra. Markets were encouraged to be moral, not required to be. What followed was widespread corruption… and disintegration.
From dodgy contracts for unusable PPE equipment to fraudulent claims for business grants during the pandemic, the government has thrown money at the rich whilst clawing it back from the poor. And now Britain ends up in a completely misguided inflation/recession debate.
When the Bank of England raised interest rates (again) it was done in the name of reducing inflation from the current 10.4% to a target figure of 2%. Good luck with that one.
Britain’s inflation is not driven by excessive pay settlements or overpaid workers. It comes from spiralling energy and food prices in a world in which successive Tory governments sold off the nation’s (public) safety nets.
So it is that UK energy traders can blackmail the government, threatening to turn off electricity from power stations at peak periods unless they are paid 4x the market price. These are crooks, not traders. In normal circumstances they would be living in prison, not luxury.
Think what would have happened to Just Stop Oil protesters if they threatened to close down a power station. The government would certainly not offer them 4x the market price just to go home.
In Denmark, by law, you cannot sell energy for a profit. It is a service, not a market. Yet even the notion of energy as a socialised commodity has become an alien concept in Britain. Re-regulation (and prison sentences) are what would drive down energy prices, not interest rate rises and corporate bungs. If you want energy prices to tumble even faster, switch all subsidies to renewable energy and (socialised) storage.
For food, the problem is more complex and more demanding. There are no answers to food security that can be detached from climate security, soil fertility and water availability. All require transformative planning – quick.
You can defer buying a house, going on holiday, replacing the fridge. What you can’t defer is feeding the kids ‘til the crisis is over. What’s needed is to re-invest in domestic food security while requiring the food system as a whole to cut its carbon footprint by 10% per annum.
To deliver food, climate and energy security requires a massive re-direction of capital investment and an exit from casino economics. In the absence of this, the Bank of England and the government just become part of the problem.
Shadow banking: the next meltdown?
Interest rate rises are no answer to the existential challenges Britain faces. What they have done, however, is highlight a more ominous threat heading our way.
The 2008 financial meltdown was triggered by banks and investors drawn into casino capitalism. The derivative products they gambled with were dodgy mortgages, issued to people never likely to keep up the repayments. Banks played pass-the-parcel with the risks until the music stopped. When Lehman’s went bust – having more debts than liquid assets – the whole game collapsed.
The world was supposed to have learned its lesson. But the gambling has moved elsewhere. Instead of High St banks, a secondary ‘shadow’ banking sector became the new casino. Shadow banks create credit and liquidity within the banking system. Instead of mortgages, the derivatives they now offer rely on low-interest government bonds. An eye-watering 1 quadrillion dollar market currently delivers the cheap credit banks rely on to keep the system from collapsing.
Post-2008, High St banks were set rigorous ‘resilience’ tests that guaranteed they had enough cash on hand to deal with any sudden market panic. But in exchange for bringing more liquid capital flows into the market, ‘shadow’ banks were exempt from such tests. Instead they were given ‘safe harbour’ status in the event of debt defaults.
So if interest rates rose and speculators raced to sell o ff government bonds, others have to step in. This is what happened with the collapse of Silicon Valley Bank (SVB) in the USA.
SVB triggered a run on bank shares and the collapse of 2 other small banks. Then High St banks saw their own share values fall as speculators sold off more government bonds. The whole banking system is praying the panic is not contagious. But high and rising interest rates increase the risk.
A rock and a hard place
The Bank of England is caught between a rock and a hard place. Interest rates on their own are an insufficient answer to the current crisis and could possibly trigger a bigger one. An obvious answer would be the introduction of a Tobin tax (of say 0.1%) on speculative transactions.
Such a tax wouldn’t have any impact on long term investment decisions but it would give governments new income streams to finance everything needed for a genuine Green New Deal. It would, though, also have to be something that turns economics upside down, kicking casino capitalism into the long grass.
The prospects of such an upheaval coming from Sunak’s government are not net-zero, just zero.
To answer the challenges set out by the IPCC and climate campaigners around the planet all require radical institutional and directional change, not a tinkering with interest rates. Neither the Bank of England, the financial casino surrounding it, nor the politicians they nurture, wish to countenance such change. For the rest of us, however, it may be the only lifeline we have left.
Embracing the alternatives
Everything missing from the government’s watered-down, mis-guided and disingenuous re-launch of its Green policies is as affordable as it is overdue. Everything is still (just) within our reach.
We can pay workers decent wages, upgrade the standard of Britain’s homes, clean up our rivers, re-Green our towns and cities, shift into renewable energy and develop sustainable food systems. But to do so, money has to be moved from the casino to the climate, away from growth obsessions and into circularity.
Everything hinges on our understanding that putting back is more important than taking out. This is exactly what Boris (and his ilk) will never understand.
Alan Simpson
March 2023