OPINION: Progress under threat

QUICK checklist. Cover international policy and politics. Sustainability. Financial services. Guernsey. What to write this month? Ukraine war. Eurovision. Culture wars. Inflation. Economics. Sustainability.

My apologies to Cher Eugene. This month’s looking like another literary meander.

So string that lot together, Sloanie.

Eurovision was an interesting shop window on the current state of European politics in the light of the Ukraine war. Watching the Eurovision voting the other week, I thought the ‘Boris bounce’ was quite evident. Though Graham Norton curiously failed to articulate this obvious political narrative. He was happy enough to attribute popular support for Ukraine in its war against Russia to it receiving more than double the viewers’ votes – a landslide so large it made the first-round jury vote redundant. All due respect to Sam Ryder, it was a glaring omission that Graham couldn’t bring himself to join the obvious political dots pumping the UK vote. Neither, clearly, did he feel it politically correct to labour the obvious around zee German and French round one null points.

My use of the phrase ‘zee Germans’ will be seen by some as a jocular homage to Guy Ritchie’s artistic genius. Others will consider that I’m being deliberately offensive or racist. But its use facilitates a simplistic nod to cultural change and the culture war that is currently raging online (that is if you read the left- or right-wing media). The topic of culture wars was the subject of Daniel Hannan’s excellent talk at the GPEG lunch at the OGH last Friday.

It was enjoyable. We don’t get enough good brain fodder locally and I’m looking forward to the others. For those who missed it, Daniel set out his worries that society had reverted to statist thinking and a tendency to mob culture that accompanies identity politics. His main tenet is that it was the individualistic Hobbesian culture and property rights that were the cornerstone of the remarkable economic progress of the last 200 years. Progress that is at risk of being lost in the current (mainly online) cultural revolution.

If you’re missing this cultural revolution, it’s probably because you’re no longer working from home and spending too much time online. These are interesting times in the world of work. With this work/life balance thing, there’s clearly a slug of the population who have got it in their head that work is some kind of optional extra. This thinking is economically dangerous.

Don’t get me wrong, I’m all for lazy days on the couch, Netflix binge fests and the like. But I don’t expect those activities to pay the mortgage. PwC’s proposed four-day Guernsey week is going to be an interesting experiment. I’m sure the long weekend will be very attractive to many. For an organisation that bills clients its staff time by the hour, I imagine it’s immaterial if staff do four longer shifts rather than five.

It’s particularly ironic timing, at a time when we have a cost-of-living crisis. In the old days, working a bit more to bring in a bit more money might have seemed sensible. But in 2022, the current cultural consensus apparently is that it’s better to forgo an extra day’s economic activity. Less is more. Very 1984.

It does seem to go along, though, with the current zeitgeist that the world owes us a living. That governments are there to bail us out. After the global financial crisis and quantitative easing, Covid and furlough, perhaps that’s not so much of a surprise. But governments bailing us out just to pay the bills?

Margaret Thatcher, along with quoting St Francis, said on entering Downing Street that she wanted to stop the UK’s handout culture. After 40 years it’s a culture that seems to be back with a vengeance.

I’m not suggesting that the problems of the price shocks of fuel and food are not real or very painful but the stock response of more government money and help is not sustainable. And lest anyone think this thinking is just endemic on the mainland, I cite the States’ Government Work Plan to be debated next month. Under the topic ‘improve living standards’ it resolves to ‘apply category 1 status’ (whatever that is) to the action ‘review minimum income standards with initial focus on income support’.

I’m an economist, I run a climate risk consultancy and I established a think tank to progress thinking on fiscal, environmental and financial sustainability. So why am I ranting like a swivel-eyed loon about work culture wars, public spending and Margaret Thatcher? And what has that got to do with Guernsey?

Because all these issues are having a real impact on our everyday lives and in my experience the typical local response is to be very complacent about how precarious the position of our economy is. A complacency borne from positive experience, I do admit.

During the easy times of the free money decade of the 2010s, I believe many lost the knack of critical thinking. Another consequence of this free money decade was a generation growing up not appreciating that as a society we’re not paying our way in the world.

There’s an excess of unproductive activity online, in social media, in marketing and, dare I say it, in the regulatory world across the global finance sector which is either going to get culled or whose cost will sink businesses as inflation takes hold, interest rates rise and critical thinking returns.

It’s in this context that decisions about sustainability need to take place. I’m an advocate of sustainability and of the need for action on climate change. But that’s not to be conflated with a mindless embrace of entitlement politics and a refusal to recognise economic home truths. In my opinion there’s a huge amount of nonsense flotsam and jetsam that needs to be kicked off the sustainability bus. I feel for HSBC’s Stuart Kirk, who I imagine was using provocative language just to bring a bit of critical analysis to thinking on climate change, not to speak against it.

It wasn’t covered in the GP pages but if you’re a reader of Environmental Finance and Funds Europe, you’d be aware that the ISICI’s first research paper revealed that the compliance costs of the EU’s approach to sustainable finance is likely to be in the region of 20bn euros per annum. Just for context, I am in favour of climate reporting, just not the bureaucracy of the EU variant. The paper argued in favour of the UK approach (www.isici.org/research).

But in researching this issue, we discovered that some estimates of compliance across the finance sector across the UK and Europe put it at 40% of operational costs. Often driven by increased regulations. Costs that in the free money decade didn’t properly impact. But they will.

Much of what we have done economically and socially over the last 15 years hasn’t been sustainable.

As I said at the launch of the ISICI, sustainability takes many forms. We might not do ‘culture’ at the ISICI, but culture does fashion everything we do and think.

In that context, is the way we presently act, think and work sustainable in these times?

Not a particular cheery end point. But they’re not cheery times.