Five books that made me think differently in 2024
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Estimated reading time ~ 12 mins
One of the challenges involved with writing a newsletter is the need to consume a rich variety of insights from multiple sources, both within my own subject area, but also those on the edge, or in other realms completely. It’s often that the most useful and important nuggets of insight can be gleaned from splicing together data and narratives from disparate subject areas.
The five non-fiction titles listed below are just some of the books I’ve read during 2024, but by far and away, they are the ones that have left a lasting impression on me. Primarily its because, as a collection of books, they have changed the way I think about economic growth, the role of markets, and what it means for the climate and nature.
You can skip to the end for my summary, but I recommend you read the individual book summaries (and preferably the books themselves) before you do. I’d be interested to hear your thoughts.
Growth: A reckoning, by Daniel Susskind
Growth: A Reckoning begins by outlining just how lucky we are to be alive today. Up until the late 18th Century ones standard of living changed little from one year to the next. Life was harsh. A struggle to survive. A period known as the ‘Great Stagnation’. But things started to change around the year 1800. The economy began to grow.
The need to measure the size of the economy was '“forged in the heat of the Second World War, a way to know what resources could sensibly be diverted towards the conflict at any moment in time.” The need for growth was forged in it’s aftermath. As Susskind explains, the “pain and uncertainty” of the Great Depression still haunted people, and so anxiety over widespread unemployment soared as discharged soldiers flooded back home.
It wasn’t long before the pursuit of growth for its own sake became the answer for politicians of all stripes, trying to have their cake, and eat it too. However, there was a cost to pay and it was only later that the true price became apparent, not just in environmental terms according to Susskind, but also “the emergence of vast inequalities…the creation of technologies whose disruptive consequences for work and politics it is not clear we can control, the desolation of local cultures and thriving communities.”
The book also dispels the narrative, held in some quarters, that we should simply redefine Gross Domestic Product (GDP), or focus on slowing or even contracting the economy, if we are to avoid the costs associated with growth. At it’s heart it stems from a misunderstanding about what the real driver behind economic growth. Hint: It’s not finite resources.
But how to chart a path between growth - and all the benefits it has given us - while also minimising the costs. As Susskind outlines in the concluding chapters of the book “we have far greater control over the nature of the economic change than is commonly supposed.”
The Twilight Before The Storm: How to Avoid a World on Fire, by Viktor Shvets
The Twilight Before The Storm looks back over the past century examining the closest parallels to today, what can we learn from that time, and how can we prepare for might come next? Shvets makes a compelling case that “our current environment resembles the 1930’s more than any other period in modern history. The same pressures that shaped the 1930’s and led to the ‘world on fire’ of the 1940’s are evident in abundance today.”
If you’ve read Growth: A Reckoning then you will no doubt recognise many of the same pressures that Shvets outlines in his book, “from financial crises and ‘secular stagnation’ to low productivity and extreme inequalities, from the rise of new powers to demographics. But a lack of global consensus on what constitutes the ‘right’ economic, social, and political models is arguably the most important commonality.”
The key concept Shvets applies to the modern world is the ‘Fujiwara effect’ - when one hurricane merges with another. In today’s world the Fujiwara effect results from the intersection between financialisation and technology, “with excess capital fuelling technological innovation, which in turn, creates even more surplus capital, reinforcing an ever-faster evolution of the Information Age.”
This comes at a cost however, the “toxic intersection between these two powerful forces is today compounded by environmental degradation, a consequence of neo-liberal policies that for more than three decades prioritised growth and wealth creation, irrespective of externalities.”
Shvets believes that the state will ultimately integrate itself into more facets of daily life, somewhat akin to the period after the Second World War, in order to alleviate these externalities, “The debate is no longer about ideological objections to state involvement but rather about more optimum ways of encouraging, persuading, and incentivising private sector participation…while ensuring upstream and downstream benefits.”
Shvets first book, The Great Rupture: Three Empires, Four Turning Points, and the Future of Humanity is also very much worth your time. As the title suggests it takes a much longer term view of history, and while it touches on some of the same themes and concepts that arise in his latest book, it is just as insightful.
Values: An Economists Guide To Everything That Matters, by Mark Carney
Mark Carney’s book examines “how our society came to embody Wilde’s aphorism - knowing the price of everything but the value of nothing. How by elevating belief in the market to an inviolable truth we moved from a market economy to a market society. And how we can turn this around.”
The book first takes us on a tour of how money has evolved over time through to the present day, including the gold standard and the development of fiat money. Carney’s sentiments will be familiar to readers of Carbon Risk, that credibility and trust are vital to the functioning of money, but that this “cannot be maintained without political support. This in turn requires public understanding, which is built through transparency and accountability, and it requires consent which is grounded in solidarity.”
Carney goes onto to discuss the way the market has skewed our sense of what matters, “Market value is taken to represent intrinsic value. And if a good or activity is not in the market, it is not valued.” This is something Susskind picks up in Growth: A Reckoning where, he jokes, “Marry your house cleaner and the country’s GDP will fall, for example, but send your parents to a care home and GDP will rise.”
As Values highlights, although “[Adam] Smith emphasised that effective market functioning requires particular sentiments - trust, fairness and integrity - he didn’t recognise the paradox of how the act of valuing can change those sentiments.” As Carney argues “Economics has generally avoided this question in part because it purports to be a value-neutral subject. This position is untenable…market[s] can change the character of the goods and the social practices they govern.”
The Twilight Before The Storm shows how the financialisation of markets has been taken to an extreme. Values shows how they are also fragile, but that doesn’t need to be so if they also serve the needs of society, “Markets are not ends in themselves, but powerful means for prosperity and security for all. As such they need to retain the consent of society - a social license - to be allowed to operate, innovate and grow.”
One of the examples Carney gives to demonstrate why markets are both part of the problem, and the solution is the climate crisis, “Climate change is the tragedy of the horizon. It’s catastrophic impacts will be felt beyond the traditional horizons of most actors - imposing a cost on future generations that the current generation has no direct incentive to fix.”
Carney suggests that the tragedy of the horizon can be broken “if the transition to a low-carbon economy begins early and follows a predictable path.” However, markets can only anticipate and smooth the adjustment to net zero if they have “the right information, proper risk management, and coherent, credible public policy frameworks.”
Climate Capitalism: Winning the Global Race to Zero Emissions, by Akshat Rathi
“Climate Capitalism is an antidote to the dominant narrative that because we’ve ignored the climate crisis for so long, it will soon be too late.” Instead, author Akshat Rathi argues that smart policies can harness capitalism to cut carbon emissions without killing markets or competition, “It is now cheaper to save the world than destroy it.”
Climate Capitalism takes you for a tour around the globe, focusing on the biggest emitters (China, India, and the United States) to show how capitalism is being used in very different ways to incentivise a decrease in carbon emissions. The important point is that each country is making best use of its competitive advantages to decarbonise its economy.
In one chapter the book focuses on the role that institutions have played in enabling climate solutions to flourish. Rathi singles out the International Energy Agency (IEA) for its role as a beacon for the energy industry, signalling where it needs to be, and how much capital needs to be invested if the world is to reach net-zero. Not everyone agrees with Rathi’s view here, arguing that the IEA have neglected their mandate for energy security, and maybe contributing to a misallocation of resources.
Rathi rightly explains that “One of the core tenets of capitalism is the creation of a marketplace ideas…The most passionate capitalists fear that climate action will bring in government intervention that would kill the market, as it tries to redirect the economy.” But as argued in both Growth: A Reckoning and The Twilight Before The Storm, governments have the power to utilise market incentives in order to direct innovation and investment in those areas most likely to correct the externalities that have built up.
For example, Climate Capitalism looks first at California, a jurisdiction that has long stood out for its environmental leadership, and how climate policies such as the Low Carbon Fuel Standard (LCFS) have helped incentivise the construction of Direct Air Capture (DAC) facilities. We then move to Denmark where Rathi highlights the direction played by the government there in the aftermath of the 1970’s oil crisis. In particular how Denmark looked to generate electricity from the wind, developing a whole new industry from scratch, to improve its energy security.
The Case for Nature: Pioneering Solutions for A Planetary Crisis, by Siddarth Shrikanth
Siddarth Shrikanth makes a compelling case that there is more to climate action than just greenhouse gases, “The case for tackling climate change on its own is the case for ensuring human survival; the case for nature is, ultimately, the complementary case for securing a living planet worth living for.”
As the previous books in my selection also make clear, The Case for Nature argues that, “we can no longer treat nature as a distant wonder to be enjoyed on occasion before we retreat once again to modernity: natural capital fundamentally underpins our wellbeing and deserves a central place in our economic framework.”
Shrikanth goes onto make the case that “With time running out…we need to make a serious effort to fold nature’s value into the system we already have: one that has, to its credit, brought remarkable progress and improved living standards for many, but has clearly gone too far in the direction of environmental destruction.”
Some jurisdictions, such as certain Chinese provinces are adopting alternative metrics such as Gross Environmental Product (GEP), “Relying solely on GDP for national accounts is clearly incomplete; GEP helps correct that myopia by measuring the total value of ecosystem goods and services supplied to human wellbeing annually.”
Governments are yet to “truly integrate natural capital into their economic planning, and GEP is nowhere close to replacing GDP measurements.” The author of Growth: A Reckoning would suggest that this would be a mistake anyway; it’s impossible to boil everything we value down to one number, and even if we could, it deflects from what’s important.
Businesses are already well ahead of governments in putting a price on nature. For example, The Case for Nature takes a deep dive into eco-tourism. For many countries “eco-tourism remains the most tangible business case for nature there is,” and is estimated to be worth “roughly 180 times the dollar-value of the voluntary carbon market in 2021.”
Despite many false starts in the voluntary carbon market, Shrikanth offers some hope that we may be able to finally develop a proper market-based system. Technology makes this possible, since “we are [now] able to monitor ecosystems with incredible precision, creating the trust and transparency that all good markets are built on.”
How these 5 books have made me think differently
Economic growth has brought vast benefits, but it has also comes at significant cost, one that has gone unpaid; not only damage to the environment, but also rising inequality and broader social disruption. We need to be clear about what we want in future, and seek to engineer a market economy that can deliver it, rather than merely growth just being an end itself. Unfortunately we’re more divided than ever as to what the best course of action is, a division that may take decades to revolve.
Markets can do tremendous damage if they are left unfettered, yet markets remain the best system we have for delivering incentives for change. As we’ve skewed too far towards neo-liberal policies in the past, governments are now likely to swing in the other direction and install guardrails to ensure that markets have broad societal buy-in.
If we are to meet our environmental ambitions - keeping the climate within 2°C, while also protecting and restoring the natural environment - then governments must use markets to change the incentive. History shows that the relative price of labour and energy was a key factor in kicking off the Industrial Revolution, and prices can be used tomorrow to encourage investment in industrial electrification, carbon removal, regrowing forests, or whatever else.
*** This is the last Carbon Risk article for 2024. I will be back in the first week in January. If none of the books listed above work as a gift idea, then consider giving someone a gift subscription to Carbon Risk :) Thanks again for your support and I wish you all a merry Christmas and a happy New Year ***
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