Blame the weather
LAST MONTH
the World Economic Forum in Switzerland published their annual list of the Top Ten global risks.
There were some interesting snippets from this year’s Forum, which is a who’s who of global finance that meets annually to discuss ways to make the world a better place.
This year’s attendees included more than 30 heads of state or government (and our own Finance Minister Bill English) who rubbed shoulders with the likes of Margaret Attwood, Matt Damon, Bono and Bill Gates. Of the 2,600 attendees, just 15 per cent were women and two-thirds of the delegates live in Western countries representing just 12 per cent of the world’s population. The 104 firms whose delegates have attended more than three times in the past five years have collectively underperformed both the S&P500 Index and the Morgan Stanley Capital World Index – perhaps our Government should stay home next year!
This year the Forum listed its sixth global economic risk as a ‘‘greater incidence of extreme weather events’’. This proved prescient because just weeks later, the US has had blizzards and ice storms resulting in the worst January for flight cancellations in years (nearly 40,000 flights!). Extreme weather has indeed been a global phenomenon – England is having its wettest winter in 250 years, Thailand is enduring its coldest winter in decades and Tokyo virtually shut down in January amid the biggest winter storm in years.
What I find interesting is that the Forum identified weather as a significant economic risk. The world has experienced bouts of extreme weather for centuries and yet economies have continued to flourish. Yes, bad weather disrupts the plans of travellers and the transit of goods and it can reduce hours worked, but these effects are generally short-lived and the impact minor.
Stranded workers can often work from home, orders are simply delivered late, travellers make alternative arrangements and unintended spending on accommodation and alternative transport can be a positive offset.
We sadly know only too well the human impact of extreme weather, with lives lost and communities dislocated. But when you think of the economic impact of past environmental events and extreme weather, it has typically been temporary. Superstorm Sandy didn’t stop the US economy expanding in 2012, nor did Hurricane Katrina in 2005. Australia has coped with numerous droughts. Earthquakes have levelled cities but they haven’t levelled economies. I can’t help but wonder whether it is convenient for the blame for any economic woes in 2014 to be laid at the feet of the weather gods.
The expectations leading into 2014 have been huge – this is supposed to be the year of no more excuses. Governments and central banks have used all the tools in their arsenal to generate economic growth, and economies have duly responded. So much so that the US is withdrawing its support system - quantitative easing. Markets are watching closely to see if the postGFC economic experiment has worked.
It would be convenient to blame bad weather for any economic slippage. It is always easy to blame the weather man.
England is having its wettest winter in 250 years.