Nobel Prize-winning economist Joseph Stiglitz talks about inequality, financial turmoil, and systemic failures.
‘Anybody concerned with systemic financial risk ought to be concerned about climate change,’ warned the Nobel Prize-winning economist Joseph Stiglitz during an event at Saïd Business School, University of Oxford, on 26 April 2023.
Speaking at a Global Journalism Seminar hosted by the Reuters Institute for the Study of Journalism in collaboration with Oxford Saïd, Stiglitz pointed out that, ‘in 2008, we discovered that problems in one part of the global financial system could quickly transmit into a systemic crisis.’ The US sub-prime mortgages market was small and localised, but as Lehman Brothers’ collapse led to problems with AIG, it became clear how very fragile the whole system was, he said.
Similarly, the fossil fuel industry is sitting on assets that are currently hugely valuable, but that will be worth nothing at all in a net zero world. Some time between now and 2050 the value of those assets will plummet – with a systemic impact. So climate risk is not just a physical risk, but potentially one of turmoil in the financial markets, real estate markets, and elsewhere.
Judging by their response to other financial crises, neither the regulators nor the central banks were likely to be effective in managing this, he suggested, citing the central banks’ current insistence on raising interest rates in response to escalating energy and food prices. ‘Will raising interest rates produce more food or more energy or more chips?’ he asked. ‘It’s almost incredible how badly they’re behaving.’