Global Warming and its Economic Risks

Benjamin Hulac looks into the impact of global warming on the economic side.

Climate change is the most severe global economic risk of 2016, the World Economic Forum said yesterday.

The nonprofit economic analysis institution, set to convene next week in Davos, Switzerland, for its yearly meeting, has labeled climate change or related environmental phenomena—extreme weather, major natural catastrophes, mounting greenhouse gas levels, water scarcity, flooding, storms and cyclones—among the top five most likely and significant economic threats the world faced in each of its annual reports since 2011.

The 2016 report, the latest installment of a report the WEF has published since 2007, marks the first time an environmental risk tops the rankings.

“Climate change is exacerbating more risks than ever before in terms of water crises, food shortages, constrained economic growth, weaker societal cohesion and increased security risks,” Cecilia Reyes, the chief risk officer of Zurich Insurance Group Ltd., one of the organizations that worked on the report, said in a statement.

The WEF document does not paint a sanguine picture.

North America’s eastern seaboard, East Asia, Southeast Asia and the South Pacific are particularly exposed to extreme weather patterns and natural catastrophes, according to the report—a survey conducted in the fall of 750 experts, who answered questions about 29 types of global risk, like cyberattacks, government instability and weapons of mass destruction.

Global climate change threatens top producers of wheat, corn, rice and other agricultural commodities, the report notes. Recent years illustrated the “climate vulnerability of G-20 [Group of 20] countries such as India, Russia and the United States—the breadbasket of the world.”

Hot, dry and tense
Climate change is compounding and amplifying other social, economic and humanitarian stresses globally. It is linked to mass and often forced migration; violent conflict between nations and regions; water crises; and, as the world population rises and simultaneously gets hotter, food shortages, the report reads.

“Forced displacement is already at an unprecedented level,” the authors continue, referring to emigration.

 

In this hotter, water-scarce future, tensions will likely grow between nations.

“Unless current water management practices change significantly, many parts of the world will therefore face growing competition for water between agriculture, energy, industry and cities,” the authors write.

 

A growing business awareness
Following the worldwide financial meltdown of 2008, the people WEF surveyed listed the collapse of investment prices as the most likely and most grave hazards. Yet that trend shifted.

“Environmental worries have been at the forefront in recent years,” the authors wrote, “reflecting a sense that climate change-related risks have moved from hypothetical to certain because insufficient action has been undertaken to address them.”

 

Paris ‘a starting point’
Economists, regulators and financial experts have become increasingly vocal about climate risks.

Governor of the Bank of England Mark Carney, in a September speech at Lloyd’s of London headquarters, said the warming climate could “bring potentially profound implications for insurers, financial stability and the economy.”

 

“It’s a risk that needs to be managed,” Bernhardt said. “The challenge, historically, is that it’s been treated as an uncertainty.”

Source: http://www.scientificamerican.com/article/top-economic-risk-of-2016-is-global-warming/

Mapping Russia’s Strategy

Russia is in a geographically vulnerable position; its core is inherently landlocked, and the choke points that its ships would have to traverse to gain access to oceans could be easily cut off. Therefore, Russia can’t be Athens. It must be Sparta, and that means it must be a land power and assume the cultural character of a Spartan nation. Russia must have tough if not sophisticated troops fighting ground wars. It must also be able to produce enough wealth to sustain its military as well as provide a reasonable standard of living for its people—but Russia will not be able to match Europe in this regard.

So it isn’t prosperity that binds the country together, but a shared idealized vision of and loyalty toward Mother Russia. And in this sense, there is a deep chasm between both Europe and the United States (which use prosperity as a justification for loyalty) and Russia (for whom loyalty derives from the power of the state and the inherent definition of being Russian). This support for the Russian nation remains powerful, despite the existence of diverse ethnic groups throughout the country.

As a land power, Russia is inherently vulnerable. It sits on the European plain with few natural barriers to stop an enemy coming from the west. East of the Carpathian Mountains, the plain pivots southward, and the door to Russia opens. In addition, Russia has few rivers, which makes internal transport difficult and further reduces economic efficiency. What agricultural output there is must be transported to markets, and that means the transport system must function well. And with so much of its economic activity located close to the border, and so few natural barriers, Russia is at risk.

It should be no surprise then that Russia’s national strategy is to move its frontier as far west as possible. The first tier of countries on the European Peninsula’s eastern edge—the Baltics, Belarus, and Ukraine—provide depth from which Russia can protect itself, and also provide additional economic opportunities.

With regard to the current battle over Ukraine, the Russians have to assume that the Euro-American interest in creating a pro-Western regime has a purpose beyond Ukraine. From the Russian point of view, not only have they lost a critical buffer zone, but Ukrainian forces hostile to Russia have moved toward the Russian border. It should be noted that the area that the Russians defend most heavily is the area just west of the Russian border, buying as much space as they can.

The fact that this scenario leaves Russia in a precarious position means that the Russians are unlikely to leave the Ukrainian question where it is. Russia does not have the option of assuming that the West’s interest in the region comes from good intentions. At the same time, the West cannot assume that Russia—if it reclaims Ukraine—will stop there. Therefore, we are in the classic case where two forces assume the worst about each other. But Russia occupies the weaker position, having lost the first tier of the European Peninsula. It is struggling to maintain the physical integrity of the Motherland.

Russia does not have the ability to project significant force because its naval force is bottled up and because you cannot support major forces from the air alone. Although it became involved in the Syrian conflict to demonstrate its military capabilities and gain leverage with the West, this operation is peripheral to Russia’s main interests. The primary issue is the western frontier and Ukraine. In the south, the focus is on the Caucasus.

It is clear that Russia’s economy, based as it is on energy exports, is in serious trouble given the plummeting price of oil in the past year and a half. But Russia has always been in serious economic trouble. Its economy was catastrophic prior to World War II, but it won the war anyway… at a cost that few other countries could bear. Russia may be a landlocked and poor country, but it can nonetheless raise an army of loyal Spartans. Europe is wealthy and sophisticated, but its soldiers have complex souls. As for the Americans, they are far away and may choose not to get involved. This gives the Russians an opportunity. However bad their economy is at the moment, the simplicity of their geographic position in all respects gives them capabilities that can surprise their opponents and perhaps even make the Russians more dangerous.

The Fourth Turning Has Arrived

An excellent discussion with Neil Howe on his seminal work on generational cycles (“turnings”) in America revealing predictable social trends that recur throughout history:

Neil Howe: The Fourth Turning Has Arrived

Source: http://www.peakprosperity.com/podcast/82232/neil-howe-fourth-turning-has-arrived

Neil Howe: The Fourth Turning Crisis Has Arrived

History offers a guide to crisis management

by Adam Taggart for peakprosperity.com: