Yesterday, I was at the wonderful Gresham College for a seminar on housing – I posted some highlights earlier. But here’s a lightly edited version of my talk.

It explores the risks posed by the UK’s partially deflated housing bubble and sets out some radical options for reform (elucidated in more detail in the Long Finance paper from the talk is drawn).

And for those of you don’t know Gresham, I recommend Michael Mainelli’s brief history…

Sir Thomas Gresham (1519 to 1579) traded cloth and linens between England and the Low Countries at a time when Cambridge and Oxford had a duopolistic hold on higher education in England. A Cambridge man himself (Caius College), if Gresham’s skippers had visited an Oxbridge College they would, at best, have had the door of a college opened to them and then been laughed at in Latin for their ignorance.

If you’re going to backstab some one properly, do it from the front. Sir Thomas died of apoplexy in 1579 bequeathing one moiety of the Royal Exchange to the Corporation of London and the other moiety to the Mercers’ Company, charging them with the nomination of seven Professors to lecture in Astronomy, Divinity, Geometry, Law, Music, Physic and Rhetoric. He required the lectures to be in Latin and, horror horribilis, English. In effect, Sir Thomas, who pursued monopolies himself, used his will of 1575 anti-monopolistically to crack the Oxbridge oligopoly by bribing seven professors to give lectures to the public, in English.

Gresham College is about ‘new learning’. Sir Thomas felt strongly that the ‘new learning’ should be available to those who worked – merchants, tradesmen and ships’ navigators – rather than solely gentlemen scholars. In the 17th century, the Royal Society was founded to explore “natural philosophy”, new learning through experimentation. So, it is no surprise that the Royal Society was founded and housed at Gresham College for half a century (1660 to 1710) and numbered among its associates Gresham Professors Petty, Boyle and Evelyn.

I gave a talk at Gresham College yesterday, drawing on my paper for the Long Finance Foundation on risk and resilience in the UK housing market.

Also on the panel was Channel 4’s Economics correspondent, Faisal Islam. He had a couple of great quotes. This from Gordon Brown’s first budget speech in 1997 (click through to admire the retro styling of the last 1990s Treasury website):

For most people the acquisition of a house is the biggest single investment they will make. Homeowners rightly expect their investment to be protected by sensible policies pursued by Government.

I am determined that as a country we never return to the instability, speculation, and negative equity that characterised the housing market in the 1980s and 1990s. Volatility is damaging both to the housing market and to the economy as a whole.

So stability will be central to our policy to help homeowners. And we must be prepared to take the action necessary to secure it. I will not allow house prices to get out of control and put at risk the sustainability of the recovery.

When Brown spoke, the average house cost £75k  - about £10k above the early 1990s nadir. A long long boom was just beginning. Prices would peak in February 2008 at an average of… £232k!!!

In other words, Brown promised not to let house prices spiral out of control and then allowed them to treble, during a period when household disposable income increased by only 30% or so.

The second quote is a more recent one – from Mervyn King, the Governor of the Bank of England. Last month, Faisal asked King whether the current re-inflation of the housing bubble was sustainable. Prices are currently only around 7% below their peak and seem overvalued by every measure.  Only cheap money – pumped into the markets by the government – and very low interest rates is keeping the market afloat.

Isn’t the market going to deflate very rapidly once government funding is withdrawn? King’s response:

No one can forecast asset prices, so I don’t think you can predict that asset prices will fall back. I don’t see why that should in and of itself lead to a change in asset prices, because we all know this problem is there and that’s already reflected in to current asset prices.

As Faisal points out, this shows confidence in the efficient market hypothesis that is breathtaking given a global financial crisis that was driven by an asset price bubble. In King’s fantasy world, buyers know that there will be much less credit available in the future – so this concern is already included in current market prices.

King’s insouciance – and Brown’s negligence – both beggar belief.

Shock news that Hector Sants, chief executive of the FSA, has resigned. Though, I am sure the two events are not causally related – let me again plug my paper, published last week by the Long Finance Foundation, on risk in the UK mortgage market, which was was highly critical of the FSA’s response to the housing bubble.

John Michael Greer has just posted the latest instalment in a series of essays on collapsonomics over at the Archdruid Report – here’s a sample. I don’t agree with everything he’s been arguing in his series – but it’s thought-provoking stuff and definitely worth a read.

I’ve mentioned more than once in these essays the foreshortening effect that textbook history can have on our understanding of the historical events going on around us. The stark chronologies most of us get fed in school can make it hard to remember that even the most drastic social changes happen over time, amid the fabric of everyday life and a flurry of events that can seem more important at the time.

This becomes especially problematic in times like the present, when apocalyptic prophecy is a central trope in the popular culture that frames a people’s hopes and fears for the future. When the collective imagination becomes obsessed with the dream of a sudden cataclysm that sweeps away the old world overnight and ushers in the new, even relatively rapid social changes can pass by unnoticed. The twilight years of Rome offer a good object lesson; so many people were convinced that the Second Coming might occur at any moment that the collapse of classical civilization went almost unnoticed; only a tiny handful of writers from those years show any recognition that something out of the ordinary was happening at all.

Reflections of this sort have been much on my mind lately, and there’s a reason for that. Scattered among the statistical noise that makes up most of today’s news are data points that suggest to me that business as usual is quietly coming to an end around us, launching us into a new world for which very few of us have made any preparations at all.

Duncan Green has been perusing ALNAP’s report on lessons from past experiences of the aftermath of earthquakes, and has summarised some of the key findings.  This one was especially interesting:

Land disputes will rise: Land-ownership emerges as a critical issue in all earthquake disasters. First, there are property disputes even before the disaster. Will opportunists seize land in the chaos? Will squatters be able to return and rebuild their shacks (even if that is a good idea)? The loss of documentation, the destruction of landmarks, the deaths of property owners, and the need to formalise previously informal arrangements all add a new layer of complexity to existing land-ownership issues.

But there are positive opportunities too. Some disaster interventions have been effective in changing the pattern of formal house ownership, with new houses registered in the names of both husband and wife. A follow up on the 2001 El Salvador earthquake response, in which the World Bank implemented a joint-ownership policy for new houses, found some communities where 50% of respondents reported that a woman was one of the legal home-owners and that, overall, 37% of the homes were wholly owned by women.

There’s a load of other interesting material on Haiti in other recent posts on Duncan’s blog – e.g. this piece on why humanitarian work is so hard in cities.

Tomorrow, the 40th anniversary session of the World Economic Forum begins in Davos, with the theme of ”Rethink, Redesign, Rebuild“.  To coincide with it, David and I have teamed up with CIC director Bruce Jones to co-author a new report entitled Confronting the Long Crisis of Globalization: Risk, Resilience and International Order.

The report – commissioned and sponsored by the UK Foreign Office (though not a statement of government policy) - focuses on the mismatch between new transnational threats and flawed international institutions, and argues that if efforts to develop, reform and renew international institutions continue to fail, then there is a real and under-appreciated risk of a systemic failure that sees the current period of globalization start to unwind.

There’s precedent for this, we note in the report. The ’first globalization’ came to an abrupt halt in 1914 with two world wars and an intervening depression, having failed because:

States’ shared assumptions pushed them towards fragmentation rather than cooperation, mutual incomprehension instead of shared awareness. An epoch that that seemed to be characterized by interdependence and common interests ended in shared disaster.

Even just in the last decade, the three defining events -  9/11, the 2008 food and fuel price spike, and the credit crunch – were all about a collective international failure to manage shared risks effectively.  So, we argue, states’ foreign policy doctrines need to move away from the national interest – which is in any case defined badly, if at all – and towards shared risk management.

We also set out a range of concrete recommendations in pursuit of the same ends, including:

Creating new analytical mechanisms for creating shared awareness about shared risks. E.g. the IPCC provides crucial analysis of the problem of climate change – but there’s no equivalent on the solution.

Improving the ‘bandwidth’ of the G20. E.g. by strengthening Sherpa mechanisms, and building links between the G20 and formal institutions, thus improving the range of policy options going to heads.

Setting up a ‘red team’ in the international system that has the job of exploring risks and challenging policymakers on whether enough is being done to manage them – similar to the Defense Research Advanced Projects Agency in the US, which has the job of “preventing surprise”.

Changing how governments organize and deliver foreign policy. We argue that all governments will need to spend more money on managing global risks, and do more to integrate the different elements of foreign policy (aid, diplomacy, military).

The paper’s conclusion:

The challenge facing globalization can be compared to ‘shooting the rapids’. Charting a course through whitewater, there are many possible paths, but few attractive destinations. It is the river, not the paddler, that dictates the speed with which the boat moves. There is no opportunity to pause and rethink strategy, or to reverse direction: it is the capacity to reorganize while undergoing change that ultimately determines the journey’s outcome. Above all, the challenge is a collective one: the direction of the boat depends on the combined efforts of all those on board.

The task of building a resilient globalization is similar. Much could go wrong. The pace of the transition will be dictated by the risks themselves, yet governments will only succeed if they are prepared to take the initiative. Even in the best case, outcomes will be ‘messy’ and far from perfect. Results will be determined by governments’ ability to act in concert, as well as with networks of non-state actors.

The aim should not be to balace power between competing states, but to aggregate the efforts of those willing to aim for the preferred destination, while marginalizing or excluding those who are not (including those who actively seek to capsize the boat).

World Food Programme report on the state of the science on what climate change means for hunger, plus policy recommendations. Authored by IPCC Impacts Chair Martin Parry with Mark Rosengrant, Tim Wheeler and Global Dashboard’s Alex Evans (December 2009)

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The World Food Programme has just published a new report (pdf; also Reuters coverage here) on how climate change will affect hunger, which both summarises the state of scientific knowledge on the issue and sets out a policy agenda to tackle it.  Key messages:

- By 2050, the number of people at risk of hunger because of climate change will be 10 to 20 per cent higher than it would have been without climate change.

- The number of malnourished children is expected to increase by 24 million - 21 per cent higher than without climate change.

- Sub-Saharan Africa will be worst affected, with the semi-arid regions either side of the equator hit hardest of all.

- But here’s the good news: if we get the policies right – on mitigation and on adaptation – the increase in the number of hungry people by 2050 could be limited to just 5% (which would actually be a substantial reduction in proportionate terms, given that population is projected to rise by 50% over the same period).

The lead author for the report was Martin Parry, the Chair of IPCC Working Group 2 (the part of the Panel that looks at impacts). I was one of three other authors, and wrote the part of the report covering policy responses.

Just watched a rather depressing Dispatches programme about post-traumatic stress disorder in UK troops – guys coming home and expecting to be attacked at any moment. One guy slept with a machete next to his bed and could still only get to sleep after drinking a bottle of vodka. Apparently the UK military will only give PTSD counselling if the soldiers ask for it. And none of them ask for it.

Meanwhile, the US military has just launched something called the Comprehensive Soldier Fitness programme, which has been developed by Penn University’s psychology department. Every two years, each US soldier will take some questionnaire to test their aptitudes in five areas: physical, emotional, social, family and spiritual. If they are not doing well in a particular area, they’re encouraged to take courses to up their score in that area (I don’t know what this involves…’your homework today: go out and find God’).

Anyway, supposedly it teaches the soldiers resilience, making them less likely to develop PTSD in the first place. As Brigadier General Rhonda Cornum (one tough old soldier, who was captured and abused during the first Iraq War, and said her abuse was “discomforting, nothing more”) puts it:

“It was developed because we recognized that we really did not have a good preventive and strengthening model for psychological health. It’s just a recognition that we spend an enormous amount of energy and resources on people after they’ve had some negative outcome, but we’re not doing anything deliberately as a preventive measure.”

This means more kudos for Martin Seligman of Penn Uni, who invented the resilience training programme and has already persuaded the UK government to try it in our state schools (hey if it can work there, it can work in Afghanistan). He was the pioneer of the idea of ‘learned optimism’, having previously pioneered the idea of ‘learned helplessness’, when he showed that if you electrocute a dog for long enough, they will be unhappy.

The US military liked that idea too – they used it to develop interrogation techniques at Guantanamo Bay, much to Seligman’s annoyance.

Anyway, I’m all for this Comprehesive Soldier Fitness course, but I bet you one thing – nowhere in the course do they mention Stoicism. And that’s what it is – it’s teaching you to change your perspective on things, to get a ‘philosophical angle’ on traumatic events. Seligman took his ideas from another Penn psychologist, Aaron Beck, who took them directly from Stoicism – as he’s said to me in an interview.

But then, I guess if you admitted your ideas were directly lifted from a 2,000-year-old philosophy, you wouldn’t get such a fat cheque from the Pentagon…

Presentation by Alex Evans to a seminar organised for the UN Department of Political Affairs by the Geneva Centre for Security Policy (August 2009)

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Article by Alex Evans and David Steven on risk and resilience – part of a special in World Politics Review on risk and resilience in a globalized age (July 2009)

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Alex and I have a new article published  today by World Politics Review, as part of their special on risk and resilience in a globalized age. The other piece is by John Robb of Global Guerrilla’s fame.

In The Resilience Doctrine (also available in our library here), we argue that globalization is both unstable and inevitable, and that governments have little choice but to build collaborative platforms to manage risk. We conclude with a dozen guidelines for building an international system fit for the 21st century.

1. Develop a doctrine with resilience at its heart, using it to create a unified narrative about how to manage the risks the world will face between now and 2030.
2. Start with the ultimate objective of building and protecting global systems, cultivating a new constitution for the society of states.
3. Create incentives for connecting to the international system and increase penalties for exclusion. Avoid disrupting the global order for short-term gain.
4. Focus on function (what systems need to deliver in order to manage risk) over form (the organogram that devotees of international politics obsess over).
5. Build the global institutions (rules, norms, markets, organizations, etc.) needed to deliver these functions. Aim for a shared operating system capable of managing each key risk.
6. Invest in mechanisms that create, analyze and debate solutions, delivering the shared awareness that underpins successful reform.
7. Build shared platforms on which state and non-state actors can work together to re-engineer systems. Sustain them over the long periods needed to battle for systemic change.
8. Use open standards to foster interoperability, allowing networks of organizations to work together and achieve elevated rates of innovation and learning.
9. Develop a theory of influence tailored to the modern age and use it to bind together all the instruments of international relations (diplomacy, development, military).
10. Apply a rigorous principle of subsidiarity, devolving responsibilities to regional, national and local levels where possible, thus maximizing resilience throughout the system.
11. Use the opportunity to reform national governments, increasing their openness, while reducing the scope of their mission so that they do less, better.
12. Be accountable for outcomes, using shared metrics and external assessors to report publicly on whether resilience is increasing for those risks that will mean most to the future of our civilization.

Over on the public health section of the always-excellent Change.org, Alanna Shaikh has helpfully written The Definitive Swine Flu Post.  Here’s her advice:

1. Swine flu will spread globally. The only question is whether it will be a mild flu or a severe one. It could still go either way. My best guess would be that it will be bad, but not mass-death-1918 pandemic bad.

2. If you want to routinely protect yourself from swine flu, wash your hands every single time you enter a building with facilities to wash. This means when you go into your house, your office, a restaurant, a bar, whatever. Carry hand sanitizer, and disinfect your hands before eating if you are away from home and can’t wash your hands right before. Do not kiss your friends hello. Don’t share food, or eat the unwrapped mints from that bowl in the foyer of the Italian restaurant down the street. Now would be a very good time to quit biting your nails.

3. If your city sees an outbreak of swine flu, avoid crowds. Don’t take public transport, or attend public events like concerts or sports games. Limit your social contact by reducing your shopping trips to once a week. Wearing a mask is overkill unless your local health department recommends it.

4. If you have flu symptoms, stay home. Call your doctor, and describe your symptoms. She will decide if you need to go to a hospital. (Do NOT go straight to an emergency room.) Don’t go to school or work. If you do have to go out (like you live alone and need food), wear a mask and choose a time that minimizes human contact. Avoid contact with the people in your house. Cover your mouth when coughing or sneezing, and use paper tissues and flush them once they are used. Clean surfaces like doorknobs with a regular cleaner, like Lysol.

5. If you are genuinely terrified of bodies-in-the-streets mass public health hysteria, then prepare. It will make you feel better, and in the unlikely event your worst fears come true, it will help. If you can afford them, emergency supplies are always good to have. Any number of websites can help you make a plan. The CDC is a good place to start.

To which I’d add: if you do live alone, then you’re more vulnerable and you need to be thinking ahead.  The vulnerability here is less to infection per se than just the lack of backup: someone to go and get your Tamiflu from the chemist, or to get some food in for you.

So as Charlie recounts in his excellent new pamphlet Resilient Nation, the kind of preparation you really need to be thinking about is less a cupboard full of Tamiflu or a cellar full of canned food than a social network you can rely on.  So if / when you get to the point when infection rates are rising in your area, then agree to buddy up with friends and check on each other regularly. Swap phone numbers with your neighbours, so that if one of you falls ill then you can keep in touch without sneezing all over each other. Think about who else might need help in your circle or on your street.

On Tuesday Demos launched a report I’ve authored called Resilient Nation. The report argues that we live in a brittle society with  over 80 per cent of Britons live in urban areas relying on dense networks of public and private sector organisations to provide them with essential services.  But our everyday lives and the national infrastructure work in a fragile union, vulnerable to even the smallest disturbances in the network. And both are part of a global ecosystem that is damaged and unpredictable.

So how does Britain protect against threats (like terrorism), hazards (such as natural disasters) and major accidents? Much of our infrastructure is outmoded and archaic. And with their narrow focus on emergency services and institutions, so are the policies that underpin it. The pamphlet calls for a radical rethink of resilience.  Instead of structures or centralised services, it argues that citizens and communities are the true source of resilience for our society. Resilience, I suggest,  is an everyday, community activity. It is people’s potential to learn, adapt and work together that powers it. Only by realising this potential will we succeed in building a resilient nation.

The report connects neatly with the Government’s own work on community resilience – which could be a central plank in the next iteration of the national security strategy and may be a public strategy in its own right. The general feeling I got from meetings with officials in central and local government and relevant agencies as well as from people in pubs, sitting rooms, warehouses and meeting rooms was that citizens and communities were the missing piece of the resilience jigsaw.

More often than not in the past no one really bothered to talk about what role citizens and communities could play and this was reflected in official guidance and advice where they were seen as ‘a problem to be dealt with rather than a source of help’.

In short – the shift towards a more citizen focused approach to resilience is happening…and in the summer the Government will unveil its own thinking on the subject (one hopes using the 4Es of community resilience ).

And then I remembered the Government’s response to the Pitt Review and I began to have serious doubts about whether such a strategy will succeed.

(more…)

Space Hijackers have driven their armoured vehicle through the City, making it as far as the Royal Bank of Scotland – much to the amusement of everyone bar the police.

Like Charlie, I wonder whether they – the police – are making a mistake by fixating on demonstrators, rather than lower probability/higher impact threats, and on the capital, rather than the rest of the UK.

After all, the attack on the 2005 G8 came from Islamist terrorists and was not on Gleneagles itself (where security was suffocatingly high).

Following that pattern, I’d expect the threat level to be highest tomorrow morning – and in a city other than London, where many fewer security precautions have been taken. Given the Lahore cricket attacks, I wonder whether tonight’s football international at Wembley might be a target.

Panic not necessary. But a good time to be vigilant…