10 things we missed or got wrong 5 years ago at the height of the credit crunch and food/fuel spike

This summer will mark five years since 2008, the year of both the first flush of the global financial crisis, and of the peak of the combined food and fuel spike.

As David Steven and I have observed in various papers, the last decade was bookended by shocks – 9/11 at one end, and these two at the other. And while the resource spike and the credit crunch lacked the visual vividness of September 11, they were arguably just as significant in the way that they shook assumptions about the stability or direction of globalisation.

But it’s also intesting to look back now at that strange year, and reflect on how many of the initial fears, hopes and assumptions about the twin crises have been proved wrong with the benefit of five years’ hindsight – as well as various shifts that have taken place since 2008 that no-one foresaw at the time. Here are ten things that lots of us (well, I, anyway) got wrong or missed altogether back in 2008 – adapted from a futures presentation I gave to Oxfam last week.

  1. The impact of the economic crisis on the poor. Back at the height of the financial crisis, the assumption was that poor people would be hit hardest, as with most shocks. But actually, it was nowhere near so clear cut. As I noted in this post back in 2010, Laurence Chandy and Geoffrey Gertz at Brookings compared the 2008 and 2010 World Economic Outlooks, and found that among the 71 economies that managed to post an increase in per capita income in 2009, despite the bitter winds howling around them, there were three quarters of the world’s low income countries – “who, contrary to fears, fared relatively well through the crisis”.
  2. The way that the financial crisis would morph into a sovereign debt crisis in OECD countries. At the height of the financial crisis and in its immediate aftermath, all the talk was of preventing contagion in the financial sector, banks that were ‘too big to fail’, capital adequacy ratios, and how to regulate the ‘shadow banking system’ – coupled, of course, with the effect of the financial crisis on growth in OECD countries and worldwide. But I don’t recall anyone imagining that the crisis could end up taking down the Eurozone – or making it conceivable to imagine the US defaulting on its debt.
  3. The US energy revolution. Back in 2008, when oil prices touched $147 a barrel, lots of commodities traders assumed that oil would just keep going up as emerging economy demand met supply side constraints – and that the US’s huge dependence on imported oil was just a given until it started weaning itself off fossil fuels. Today, WTI oil prices are below $100; by 2020, the US is projected to be the largest oil producer in the world; and by around 2030, the US is projected to be a net exporter.
  4. The effect of the food spike on the poor. All through 2008 and 2009, I was trotting out the FAO figures that while 854 million people had been undernourished before the price spike, the figure had jumped to 1.04 billion afterwards. Except… it hadn’t. FAO’s methodology came under sustained fire and they ended up having to rescind their numbers (see this post of David’s). Instead, last year’s State of Food Insecurity report estimated that the total was still around 850m. The steady reductions in hunger the world saw from 2000 to 2008 had stalled – but it wasn’t the rout that was initially feared.
  5. The speed and intensity of climate change impacts. In 2008, the IPCC’s Fourth Assessment Report had just been published. Almost as soon as it had come out, though, scientists started noting privately that impacts seemed to be happening a lot faster than anticipated. Arctic sea ice melting has been the biggest story – but the effect of droughts, heatwaves and extreme weather on food production has also been scarily significant. Next year’s Fifth Assessment Report will make for deeply sobering reading, by all accounts.
  6. The changing face of conflict. “Traditional” civil wars are continuing their steady decline. But as the 2011 World Development Report noted, there’s been an increase in new kinds of conflict – for instance, subnational conflicts like the Naxalite insurgency in India, conflicts that slosh around without any regard for borders, as in the Sahel, or conflicts linked to organised crime (like Mexico: upper middle income country; recent G20 host; 60,000 killed and 1.2 million displaced by its drug war).
  7. 2008: the year when more people had cellphones than toilets. Access to improved sanitation has more or less plateaued since 2000, at around 60% of the world’s people. Access to mobile phones, on the other hand, has exploded: less than 20% in 2000, but now heading towards 100%. 2008 was the year they crossed over. (The big question: what are the implications for governance and political change when 3G and 4G networks mean that everyone’s on the internet?)
  8. The global tidal wave of protest – and its limitations. The Occupy movement only got going in 2011, just as the Arab Spring was also gathering pace. So were protests in Russia and elsewhere. As one blogger put it at the time, 2011 was “the year the millennials woke up”. But the aftermath of all these uprisings also showed something else: the limitations of protest without a clear alternative political programme.
  9. The Tea Party. Back in 2008, it was cheering that despite the real differences between Obama and McCain, both were committed to cap and trade, foreign aid, and (or so we thought) the closure of Guantanamo. Oh dear. As Theda Skocpol pointed out in her excellent 2012 analysis of what the hell went wrong on cap and trade, we had reckoned without the Tea Party, which started to gather pace from 2009 onwards.
  10. The continuing decline of multilateralism. Maybe I was naive on this one. But back in 2008, it looked as though the extent of global upheaval might finally have provided the kick up the arse that multilateralism needed. A new leaders’ level G20 came into being; prospects for the 2009 Copenhagen climate summit looked pretty good; a mood of purposefulness seemed to be in the air. But Copenhagen failed, Rio was a washout, and the G20’s track record since the initially hopeful signs of the London Summit in 2009 has given us (via Ian Bremmer and David Gordon) a new phrase: G Zero.

All of which provides a useful corrective next time you have to listen to me or some other wonk tell you that anything about the future is certain other than death and taxes. Here’s a link to my paper on 2020 development futures if you fancy a good long laugh in a few years’ time.