Whilst entrepreneurial types might thrive on disruption, most businesses and individuals value economic stability and financial security. This makes extreme market volatility bad for both Profit and People; but it could be much worse for the Planet, says Jim McClelland.
If you still associate the term ‘volatility’ with just liquids, gases and a tendency to vaporise or evaporate, then you are either a chemist, or a hermit. For anyone not cocooned in a white-coat laboratory, or a wifi-free cellular dead-zone, volatility has become the defining characteristic of economies and markets worldwide. It is the word of 2022; and it is bad.
The wrong kinds of records are being broken monthly, weekly, even daily. Everywhere, people have been experiencing exceptional signs of economic instability and financial insecurity, such as the highest inflation, lowest growth, steepest rise and sharpest fall.
In the City, stock-market trading screens flash green, then red, in real-time, as gamblers place their bets. Some unlucky punters, like vulnerable retirees, will likely lose; other opportunists, like hedge-fund managers shorting the Pound, may get to toast their win.
There is ‘blood in the water’, as they say.
In Nature, change is constant. However, this is not the same as the volatility in finance and economics
Fair warning of foul weather
For UK citizens, probably the only thing to seem consistent this year has been the all-too-regular interest rate rise, with the Bank of England hiking up the official figure no fewer than seven times in the last 10 months, alone. Debt has got a lot more expensive.
Savers might have seen a slight uplift in interest earned on cash deposits, but, for most, these relatively modest gains have been dwarfed by heavy losses on their stocks and shares. For many private investors and pension holders, the silver-surfer dream has now about-turned into a wipe-out nightmare of drowning, not waving.
However, we cannot exactly say that we were never warned, in the fine print, at least.
No matter where you put your pot of (green) gold, the investment vehicle should, by law, come with something of a health warning attached, alerting you to the potential risks to both your savings and income. Disclaimers tend to follow a standard pattern and the classic line simply declares: “The value of shares and investments can go down as well as up.” Over recent weeks and months, that has proved something of an understatement!
So, what, if anything, can we learn from these traumatic events?
Lessons to learn and values to share
The lessons are obviously different for different companies and individuals — some are harsh, even brutal — and no two situations, or sets of circumstances, are quite the same.
However, there are some common principles to extrapolate and values to share:
- Globalisation is not necessarily a good thing;
- Social equity is not something you can trade;
- You need a flexible plan for your post-work life;
- The cost of living is an unfairly relative term; plus
- We all now have a new-found respect for resilience.
In terms of the triple-bottom-line of sustainability, shifting the focus of our thinking from Profit and People to the Planet can provide us with a companion list of learnings to apply:
- Localisation is a good thing;
- Environmental equity is something in which we should invest;
- We need an adaptable plan for a climate-ready future;
- The full cost of living cannot be counted in just money; plus
- Real resilience is more than mere resistance — it is restorative and regenerative.
Interestingly, whilst the two lists of lessons might initially look aligned, they can prove surprisingly hard to learn together. It takes an agile sustainability mindset to hold all thoughts in play at once. Furthermore, volatility is a point of difference, not similarity.
The true cost of living unsustainably
In Nature, change is constant — habitats and species evolve over time. However, this is not the same as the volatility in finance and economics. Distinctions must be made.
Whilst some companies and brands might go under, in general, markets, stocks and shares can often recover their losses, quickly and sometimes completely.
The same, sadly, cannot be said for natural capital.
According to the latest Living Planet Report 2022 from WWF, global wildlife populations have plummeted by 69% on average since 1970. Unlike some short-term share price slump, there is no ‘buy the dip’ scenario in play here — the Earth’s stock will not be bouncing back any time soon. In this case, down often stays down, perhaps forever.
So, the greatest risk for the future from this period of intense volatility might well be that our collective knee-jerk response to the effects of the economic turbulence and societal disruption is that we will, either unwittingly, or knowingly, make bad choices for the environment and the climate. Ultimately, these will impoverish our prospects on the Planet.
This is the true cost of living unsustainably; and some of us, will lose everything.