IFF, like any other sentient organisation, has been thinking about the causes and consequences of the global economic and financial crisis. We recently brought together a number of members in a workshop to take stock of our collective analysis, scanning and conversation of recent months - and to see what we might have to offer to a wider constituency.
The IFF financial crisis workshop report notes that the financial crisis is now widely recognised as a ‘conceptual emergency‘ in IFF terms. Part of the mainstream analysis is precisely about how we came to rely on concepts and mathematical models that proved (like all models) inadequate to complex human reality. Wired’s article on David Li’s ‘formula that killed Wall Street‘ is a parable for our times on the often misleading power of simple answers to complex questions. Paul Krugman makes the same point:
‘Some people say that our economic problems are structural, with no quick cure available; but I believe that the only important structural obstacles to world prosperity are the obsolete doctrines that clutter the minds of men.’
In our workshop we explored some of those assumptions, doctrines, that are now open to challenge. Here are a few:
- ‘Events that cannot be predicted are not going to happen’ - Challenge: black swans can be anticipated.
- ‘Better regulation will prevent future crises’ - Challenge: the modern economy is an edge of chaos phenomenon, the cliff will always give way from time to time.
- ‘The stimulus packages will work’ - Challenge: not if they fail to account for systemic effects beyond the intention of any individual rational actor, and not if they only serve to repair the bubble effect in the existing system.
- ‘We just need to wait for the upturn in global economic growth’ - Challenge: there are significant structural shifts in the global economy ahead that may have a big impact on global growth patterns, financial crisis or not.
If we are willing to entertain these challenges, and engage with the true level of uncertainty in the future environment, we will be both better prepared for anticipated future shocks and to take advantage of otherwise hidden opportunities.
The workshop concluded with some of the ‘promising seeds of hope’ we see ahead, including the next big economic plays required to replenish the global coffers, and the opportunities for NGOs and others to shift the global system decisively towards more sustainable models. Indeed, one of the great uncertainties is who will prevail: those who seek to repair the old system or those who want to innovate the new?
