GFC | many routes to environmental issues

The GFC — the global financial crisis — in 2011 was a shock that we knew was coming but chose to ignore.

Since the mid-1970s when the US decoupled its currency from the physical qualities of gold, money has grown very fast. It was as though it has a life of its own, fed and housed by banks and financial institutions that kept finding new ways to keep money procreating.

This all seems good. 

Money can be exchanged for goods and services. In the developed countries growth in money meant more people were able to gather wealth — it was time for the period of lords and serfs [gentry and peasants] to come to an end. 

Just about everyone could spend.

Overall things seemed to be going rather well until one of the new ways of growing money — the bundling up of sub-prime mortgages — failed causing huge financial losses to individuals, companies and even jurisdictions. Losses that in time brought down some of these financial institutions and shook the very basis of wealth creation.

Abruptly money stopped growing.

It also stopped flowing. And this happened almost everywhere because a key requirement to maintain economic growth [to keep money growing], was that the system was global. Everywhere heavy hits were taken 

Welcome to the GFC when the money stopped.

And welcome to the Western politicians worst nightmare because when money stops so does business and development. Jobs are lost as companies run out of cash and must downsize or go broke. 

As all this can happen very fast and soon there is a global financial crisis.

waterfront real estate in Sydney sells for a premium

Resolving the crisis

The global solution to the GFC was stimulus.

Governments around the world chose to inject funds to both prop up business and some of the ailing banks. The Australian government handed out cash and tax breaks to citizens so that they could go out and spend. The idea being that injecting funds would get buying and selling going again.

This cost government’s money. And for the most part this was money that they didn’t have and contributing to heavy budget deficit and debt — $17 trillion in the case of the US [$54,000 per citizen or $149,000 per taxpayer].

Here is a video that explains the staggering size of US government debt.

The GFC caused much pain and left a nasty legacy in the huge funds owed by governments, but for now, the crisis is averted.

GFC triggers environmental issues

At first glance the GFC might have seemed to be good for the environment.

Less commerce would mean less environmental impact. As economies slow there would be fewer resources mined, coal burnt, industrial outputs and potentially less pollution.

Several major environmental issues should ease, except that…

There has been a downturn in greenhouse gas emissions and far less appetite for the market solution to global warming that was designed to make greenhouse gas emissions expensive — a loss of enthusiasm that contributed to the collapse of the carbon markets.

  • The main mechanism to achieve greenhouse gas emission reduction [our solution to climate change issues] has fallen over.

And there are still 7 billion people needing to feed themselves [not to mention their pets], heat their homes and go to work. So agriculture has to go on even with increased financial uncertainty. This puts pressure on farmers to produce even when they are exposed to the financial crisis too. 

  • Some will push the limits focusing on yield and risk eroding natural capital and increasing land degradation.

With money being spent on stimulus and debt climbing there are fewer funds for other issues including environmental protection and biodiversity conservation.

  • Spending priorities change when funds are scarce

Australia managed to escape the worst of the crisis and came out of it with only modest national debt | Sydney central business district from the harbour

GFC lights up the real environmental issue

The environment is no longer on the list when we feel insecure.

Most of the world’s population no longer feels at ease in nature and so doesn’t retreat there in times of crisis. Instead we forget that nature sustains us and are even less likely to give it attention. 

When people are frightened to loose basic comforts and have less time and inclination to do the right thing, especially if the right environmentally friendly thing is expensive.

It is this last point that lies at the heart of all environmental issues.

Now that Homo sapiens is such an abundant species attitudes towards the environment really matter. And when we are concerned, worried, or frightened, we naturally default to ourselves — we look after number one.

This sounds terrible but it makes sense.

Our biology is designed to preserve self, offspring and relatives in that order. Our culture extends this instinct to include neighbours, tribesman, countrymen and ethnic group or people who think like we do.

In tough times we close ranks. It helps us cope.

In coping we forget about the environment — and this is the real issue.


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wherever financial institutions were found there was pain | Paris from the Eifel Tower

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