‘Instability is a future staple’: thinking through the policy challenges of the 21st century

Civil servants will need to get used to increased volatility in a world of unprecedented challenges. The resilience of the state has never been more vital, says Matthew Bell
Flooding in Hebden Bridge, Yorkshire in 2012. Photo: Steven Lilley/Flickr/CC BY-SA 2.0

By Matthew Bell

06 Dec 2021

With Cop26 and the chancellor’s Autumn Budget having passed, along with the many associated pronouncements and actions, the giant tankers that are the national and the global economies may be slowly turning. The UK Treasury’s priorities will be “investing in strong public services, driving economic growth, leading the transition to net zero and supporting people and businesses”. The National Infrastructure Commission will have a new objective to support climate resilience and the transition to net zero and the government will turn its focus to implementing the net-zero strategy. The opposition parties are calling for even more action – rarely have we seen such widespread apolitical recognition of the need to tackle climate change. Is this a defining a moment in our efforts to address the greatest long-term threat to humanity?   

When future generations reflect on the defining feature of the 19th and 20th centuries, they will see a clear and unbroken narrative of the world in constant change thanks to industrialisation. To be sure, very significant events have punctured the smooth graph of growth driven by industrialisation but it has persisted throughout. What will historians say about the 21st century? If the first 20 years is an indicator, they may focus on instability rather than smooth growth. Or, more positively, they may comment on new approaches to resilience in the face of instability. 

From wildfires in countries ranging from the USA to Australia, floods from Germany to China, the disruption of energy markets and global supply chains, we are seeing a mounting number of events which present unprecedented challenges. This is far from a cry of despair. Future historians will be looking back to understand how we dealt with instability.  

The political will to answer the big questions 

If we succeed then the 21st century will be known as the age of resilience. A time when humanity applied new thinking to create resilient mechanisms – benefitting all. It will be the century where we move away from measuring and discussing central tendencies like average temperatures or sea-level rises, expected central forecasts for energy prices, GDP growth or salary, typical waiting times for hospital treatments, court hearings or the next generation of computers. Attention will turn to how much better or much worse we perform than anticipated by the average metric. Big questions like what happens if temperature rises are 4 degrees rather than 2-3C? If energy prices triple rather than rise somewhat? If some people need to wait two years for treatment rather than two months? These will be more prominent. There will be greater importance attached to publications and policies such as the National Adaptation Programme, in NHS reporting of the churn on waiting lists not simply the totals, in the transition between jobs and not levels of unemployment; and many other examples of understanding change and resilience rather than averages and progression. 

A focus on volatility – long studied in financial markets – will result in governments and companies focusing on how much they are willing to pay for resilience. In financial markets, the resilience of your portfolio of investments can be “purchased” by diversifying that portfolio. Diversification is often not an option (unless we really do colonise multiple planets very quickly) when it comes to broader threats. So resilience requires a focus on actions that will help to reduce the negative impacts and create positive changes should we end up “at the tails” with outcomes far from the expected average. 

Instability as a future policy staple 

Calculating far-from-expected outcomes is not new for many government departments. The concept of modelling low probability, high risk events, is the mainstay of emergency planning. However, that is very different to bringing such thinking and practice into the mainstream. Smart forward planning means building more healthcare capacity than “typical” demand growth might imply, building all infrastructure – from energy to digital to transport – in recognition of the extremes it may face, and developing faster ways to manage demand when queues form, panic starts and bad situations turn worse.  

Reacting to extremes as they occur is expensive and unsustainable, with inaction resulting in unaffordable bills to current and future taxpayers when we deviate from the “expected average”. But being proactive can also appear to increase costs – resilience is costly: from more NHS beds to duplicating some infrastructure to larger workforces in schools. These are real costs and only look small compared to the costs of reacting once crisis hits.   

What does this mean for the public sector, civil servants and their advisers? It requires us to provide better evidence for resilient-friendly investments. Greater clarity about the conditions under which spending, taxing or regulating in line with more resilient public services is good value for money; and when demand-side measures (reducing or changing consumer spending) are needed. Instead of such scenarios being relegated to annexes or “sensitivity analysis” it needs to be more central to the appraisal of options for government action. It also requires greater clarity about the role of government and of the private sector in delivering the resilience that will be needed. Cases for government intervention – built around market failures – need to understand the nature of those market failures when extreme or unexpected events occur, not just when the world is proceeding under “business as usual. Under stress, economies behave differently and the role of government is different.  

The 23rd-century historian may look back on us as going through the Dark Ages or a new renaissance. Their conclusion will depend on how we handle the volatility that will be the defining feature of our moment in history. 

Matthew Bell is a director of Frontier Economics, where he jointly leads its public policy practice. 

From 2014 to 2017 he was the chief executive of the UK Committee on Climate Change, and he was awarded an OBE in the Queen’s Birthday Honours List 2018 for services to combatting climate change 

Categories

Policy
Share this page
Partner content