Published on AlJazeera, by Joseph E. Stiglitz, April 6, 2011.
Japan’s disaster and the global recession provide stark lessons on societies’ failure to manage risks, economist says … //
… We have seen two of the big risks in recent years, but have done little to bring them under control. By some accounts, how the last crisis was managed may have increased the risk of a future financial meltdown.
Too-big-to fail banks, and the markets in which they participate, now know that they can expect to be bailed out if they get into trouble. As a result of this “moral hazard”, these banks can borrow on favourable terms, giving them a competitive advantage based not on superior performance but on political strength. While some of the excesses in risk-taking have been curbed, predatory lending and unregulated trading in obscure over-the-counter derivatives continue. Incentive structures that encourage excess risk-taking remain virtually unchanged.
So, too, while Germany has shut down its older nuclear reactors, in the US and elsewhere, even plants that have the same flawed design as Fukushima continue to operate. The nuclear industry’s very existence is dependent on hidden public subsidies – costs borne by society in the event of nuclear disaster, as well as the costs of the still-unmanaged disposal of nuclear waste. So much for unfettered capitalism!
For the planet, there is one more risk, which, like the other two, is almost a certainty: global warming and climate change. If there were other planets to which we could move at low cost in the event of the almost certain outcome predicted by scientists, one could argue that this is a risk worth taking. But there aren’t, so it isn’t.
The costs of reducing emissions pale in comparison to the possible risks the world faces. And that is true even if we rule out the nuclear option (the costs of which were always underestimated). To be sure, coal and oil companies would suffer, and big polluting countries – like the US – would obviously pay a higher price than those with a less profilgate lifestyle.
In the end, those gambling in Las Vegas lose more than they gain. As a society, we are gambling – with our big banks, with our nuclear power facilities, with our planet. As in Las Vegas, the lucky few – the bankers that put our economy at risk and the owners of energy companies that put our planet at risk – may walk off with a mint. But on average and almost certainly, we as a society, like all gamblers, will lose.
That, unfortunately, is a lesson of Japan’s disaster that we continue to ignore at our peril. (full text).