COP26 and the Paradox of Thrift
The climate crisis is irrefutable, and action must be taken to stop the planet from hurtling towards disaster. But, at the same time, it is crucial for governments, central banks and financial markets to recognise the inevitable short term negative externalities arising from the fight against rising temperatures. De-carbonisation means under-consumption. With under-consumption comes the paradox of thrift. The rise of global savings and the paradox of thrift will be most acutely felt amongst the so-called mercantilists, but economic growth will also be constrained in the rest of the world, with consequent impact on domestic politics, geopolitics and income distribution. The COP26 Climate Conference is important because of the participating nation's commitments under the 2015 Paris Climate Agreement; they agreed to strengthen their climate commitments every five years. However, these promises are non-binding "National Determined Commitments". When you add up all of these na...