Experts urge nimbler global response to crises

William Maclean in Reuters: …Specialists in disaster response say that nations are almost completely unprepared for the likely emergence of so-called convergent crises with the potential to plunge markets and regions into prolonged turmoil. In these multi-faceted disasters, strains like a shrinking Arctic ice cap, theft of nuclear materials, oil or water shortages or cyber crime would worsen tensions among nations over traditional issues such as trade, territory and resources.

"Old" and "new" tensions would feed off each other, spurring nationalistic stances in world capitals. Losing faith in collective action, nations could blunder towards conflict. "Diplomatic practice has not kept up with these complex threats," said Pauline Baker, president of the Fund for Peace, a non-profit group that seeks to prevent conflict. "We need a new international architecture of crisis prevention and response."

…In a news-driven era where local crises can spread globally in minutes or hours, world leaders are still too parochial in their security planning and must be ready to act much more nimbly and closely to coordinate a response, analysts say. Yet with the exception of progress in tracking pandemics and tsunamis, global crisis management is inadequate "everywhere", said Greg Austin, Vice President for Programme Development and Rapid Response at the EastWest Institute think tank.

...With larger, more complex crises in prospect, hurried Cold War-style "hotline" consultations between a handful big powers will be inadequate, experts say. But few would relish the prospect of handling the cacophony of a G20 conference call….

An illustration by Eugene Chaperon, date unknown, Wikimedia Commons

Two crises, two shortsighted responses: Credit and energy

Tim Bond, head of asset allocation strategy at Barclays Capital, writing in the Financial Times: The global economy is facing twin shocks. Natural resource markets are delivering a supply shock of 1970s dimensions, while the financial system is delivering a shock comparable to the bank and thrift crises of the 1988-1993 period. The magnitude of each shock is very different. The financial markets require a recapitalisation of the banking system, with estimates ranging from $300bn to $1,000bn.

By contrast, prospective capital requirements in the resource markets dwarf the current needs of the banking system. According to the International Energy Agency, the global energy sector alone needs a real $22,000bn over the next two decades to meet the anticipated rise in primary energy demand. There is also the unavoidable necessity to reduce the CO2 intensity of energy production, a good 80 per cent of which is derived from the dirtiest of fossil fuels. While an accurate quantification of the size of the required green energy investment is not possible, it is likely to be of a similar scale to the expansion of energy supply.

...The broad story is of depletion. Most of the easily obtainable resource deposits have already been exploited and most usable agricultural land is already in production. Natural resource discoveries, where they continue to occur, tend to be of a lower quality and are more costly to extract. Meanwhile, the dwindling supply of unutilised land faces competing demands from biodiversity, biofuels and food production.

Predictably, the scale of response to each of these crises is in inverse proportion to their respective magnitude. In the US, the credit crunch has elicited an instantaneous fiscal package to the tune of $168bn, or 1.2 per cent of nominal GDP. In contrast, the latest annual budget appropriation for renewable energy spending is just $1.72bn – 0.01 per cent of GDP....

Biofuel pumps, Pete Birkinshaw, Wikimedia Commons