What Financial Meltdowns Teach Us About the IPCC
When I describe the weird world of climate science to people who are strangers to that world I know it sounds fantastical. But there are strong parallels with the recently destroyed economies of Iceland, Greece, and Ireland.
By any rational standard, the climate science world is surreal. People who behave outrageously still get taken seriously. It’s as though everyone has decided not to notice. It’s as though we’re part of an alternate reality where the normal rules don’t apply.
In a sensible world, scientists who refuse to share the data and computer codes behind iconic climate graphs and important conclusions would be ostracized by the scientific community. Instead, they get showered with awards and accolades (see the bottom of this post for more detail).
In a sane universe, the fact that two-thirds of the chapters in the 2007 Intergovernmental Panel on Climate Change (IPCC) report were written by scientists known to be affiliated with the World Wildlife Fund lobby group would damage the IPCC’s reputation beyond repair. Instead, we collectively pretend it doesn’t matter.
When I describe the weird world of climate science to people who are strangers to that world I know it sounds fantastical. Yeah, right I imagine them thinking behind their polite smiles. Surely it can’t be that bad. Surely there’s a reasonable explanation.
Boomerang: Travels in the New Third World is Michael Lewis’ latest book on the global financial train wreck. Brimming with sharp observations and fabulous turns of phrase, it examines recent financial shenanigans in Iceland, Greece, and Ireland among other places.
I experienced a shock of recognition while reading those case studies. People were doing bizarre things that they – and all of those around them – should have known would lead to tears. Yet almost everyone bought in. Normal rules were jettisoned. Ordinary morality was abandoned. Disbelief was suspended. The few souls who tried to sound the alarm were ignored, ridiculed, demoted, or fired.
In other words, the behaviour I’ve spent the past three years writing about isn’t unique to climate science. The same pattern is horrifyingly evident elsewhere. It’s as though our IQs have all dropped sharply in recent years. It’s as though we have no standards anymore.
Allow me to explain:
Iceland is home to 300,000 people. In five years those people went from being a nation of sensible fishermen to imagining they were the new princes of high finance. Writes Lewis:
[A] hedge fund manager explained Icelandic banking to me this way: you have a dog, and I have a cat. We agree that each is worth a billion dollars. You sell me the dog for a billion, and I sell you the cat for a billion. Now we are no longer pet owners but Icelandic banks, with a billion dollars in new assets.
That’s the bare-bones version of what happened. Suddenly Icelandic banks no one had ever heard of were buying century-old British banks, not to mention sports teams and airlines. Although it was all a mass delusion, it carried on for years.
When everyone finally came to their senses the banking sector losses alone amounted to $330,000 for every man, woman, and child in Iceland. And that’s not counting the personal debt associated with mortgages that far exceed the current value of the property to which they are associated – as well as the fact that the Icelandic stock market all but collapsed.
Lewis quotes someone from the International Monetary Fund saying:
It was just a group of young kids. In this egalitarian society, they came in, dressed in black, and started doing business.
Here’s another quote, from a British banker testifying before a House of Commons committee:
They ran their business in a very strange way. Everyone there was incredibly young…And they had no idea what they were doing.
When a Danish bank wrote a report concluding that something was amiss in the Icelandic banking sector the reaction was eerily similar to what we see in climate science. The messenger was accused of having suspect motives and the message was summarily dismissed.
When an economics professor from Chicago gave a speech five months before Iceland’s economy crashed in October 2008 (in which he declared that their banks were already dead and that the economy had no more than nine months) Lewis reports that Icelandic bankers in the audience “sought to prevent newspapers from reporting the speech.”
In other words, a gang of Icelandic kids trashed their nation’s economy. And rather than stopping them, the grownups went along for the ride. The checks-and-balances we would all expect to have been in place, the safeguards we would imagine going hand-in-hand with financial transactions of that magnitude, were entirely absent.
Does this make rational sense? No. Does it sound plausible? Not really. But it happened. And the people of Iceland are going to be living with the consequences for a long, long, long time.
In Greece, the lunacy differs only in the details. The Greek banking sector was apparently solid and sensible, but the 11 million people who reside in that nation are apparently collectively incapable of doing basic math. According to Lewis, two-thirds of Greek doctors (including plastic surgeons) report incomes of less than 12,000 euros a year in order to avoid paying tax – and there’s a widespread belief that all 300 members of the Greek parliament are falsely reporting the value of their homes.
During an election year it’s normal for tax collectors to be sidelined by the government. Nor does anyone seem to worry about being caught for tax evasion (or the bribery of tax collectors) since prosecutions take between seven and 15 years to wind their way through courts that show little sign of taking these matters seriously. As one tax collector explained to Lewis:
If the law was enforced, every doctor in Greece would be in jail. I am completely serious.
Despite the fact that few taxes actually make it into government coffers, government expenditures have ballooned. Lewis reports that the amount of money being paid to government workers has doubled over the past 12 years and that the average government job pays “almost three times the average private-sector job.”
Greece’s national railway is a poster child for that country’s special brand of financial insanity. It takes in only 100 million euros a year in revenue, but pays its employees 400 million (on top of the 300 million it spends on trains, maintenance, and so forth). The next time someone tells you North America should build railways like the ones they have in Europe, this seven-to-one expenses-to-earnings ratio may be worth remembering.
And then there’s the pension problem. In an era in which everyone is living longer, Greek women retire as early as age 50 and Greek men as early as 55 if they work in occupations that are considered “arduous.” Explains Lewis:
more than six hundred Greek professions somehow managed to get themselves classified as arduous: hairdressers, radio announcers, waiters, musicians, and on and on and on.
Is this a way to run an economy? Does any of this make rational sense? No. But rather than being a bad dream, this is modern-day Greece. Evidently climate science isn’t the only milieu in which dodgy behaviour has become the norm, in which outlandish things are said and done and everyone just shrugs.
Finally, there’s Ireland. The short version is that foolish decisions on the part of Irish bankers fueled a construction boom that far outstripped demand. When the real estate bubble burst the Irish government guaranteed the bad loans, which means Irish taxpayers now have to pay them off.
The debts are so large and the damage to the economy is so extensive that, as Lewis explains, the Irish people are no longer in control of their own destiny. Because no one trusts their judgment anymore, foreigners have been sent in to clean up the mess:
The new bank regulator, an Englishman, came from Bermuda. The Irish government and Irish banks are crawling with American investment bankers and Australian management consultants and faceless Euro-officials, referred to inside the Department of Finances simply as “the Germans.” Walk the streets at night and, through restaurant windows, you see important-looking men in suits, dining alone, studying important-looking papers. In some new and strange way Dublin [is] now an occupied city: Hanoi, circa 1950.
A few years ago an Irish economics professor became alarmed when he realized that students he’d only recently been teaching were now being cast as financial experts on TV – and that they were all assuring the public there was nothing to worry about. When the professor submitted an opinion piece to the Irish Independent sounding the alarm about the precarious state of Ireland’s banks, Lewis reports that the editor “wrote back to say he found the article offensive and wouldn’t publish it.” A second newspaper declined to publish the piece before it finally appeared in the smaller circulation Irish Times.
In other words, Irish journalists chose sides just as journalists have chosen sides in the climate debate. They took the word of the establishment, they believed the bankers. Rather than ensuring that a variety of perspectives were heard on a matter of national importance, journalists denied the public the opportunity to consider alternative points-of-view. In doing so, they infantilized and betrayed the very people they are supposed to serve.
In the space of a few years, therefore, three different economies have crumbled. Millions of people have had prosperity slip through their fingers. To an outsider it’s perfectly clear that years of bad decision-making led inevitably to what has since happened in Iceland, Greece, and Ireland. It’s perfectly clear that, rather than applying the brakes, the educated classes took part in these mass delusions.
All the people one would expect to blow the whistle – elder statesmen, seasoned bureaucrats, regulators, journalists – failed in their duty to protect the society to which they belonged. They stood mute as the ship sailed smack into the iceberg.
It’s difficult to believe that smart people can behave so foolishly – and yet these three national tragedies are proof positive. Which brings me back to the climate industry. According to Rajendra Pachauri, the chairman of the UN’s Intergovernmental Panel on Climate Change (IPCC), to criticize his organization is tantamount to being a conspiracy theorist. In his words:
According to Pachauri, we should all trust the IPCC’s findings because thousands of people take part in the process that produces them. He would have us believe it isn’t possible for a large group of individuals to delude themselves, to be mistaken about important matters.
But that reasoning is flawed. We now know that entire countries can – and do – fall under a spell. We know that entire societies tell themselves fairy stories that aren’t remotely true. We know that entire populations are capable of exercising monstrously bad judgment.
The mere fact that lots of people took part in the delusion didn’t save Iceland, Greece, or Ireland from their day of reckoning. Nor will it save the IPCC.
See page 4 of this PDF for Michael Mann’s claim that the computer code which produced the hockey-stick graph – the most important piece of visual information in the 2001 IPCC report – is “a private piece of intellectual property.” Backup link here.
Entry filed under: books, ethical & philosophical, IPCC, Rajendra Pachauri, World Wildlife Fund. Tags: books, Intergovernmental Panel on Climate Change, IPCC, Michael Lewis, Michael Mann, Rajendra Pachauri, World Wildlife Fund, WWF.