It is that time of year again when some of us engage in the
pleasant and harmless game of answering “What will the coming year bring?”
There are a few things that we feel we know with some certainty. For instance there will be earthquakes and
tsunamis in Japan and some of these will claim fatalities. But such a prediction is trivial, as Japan
experiences thousands of quakes a year and a handful cause a handful of
casualties. But no one, not even the experts, will dare to predict the next Big
One. There are some global trends that
seem to be inescapable – the earth is heating up, it is very likely to continue
and, as a species, we seem to be entirely incapable of getting our act together
and doing something about it. We simply
blame our leaders. Meanwhile, the annual increase in greenhouse gas emissions
during 2011 was the highest ever. But
the consequences of global warming are difficult to predict. They are likely to be catastrophic, but in
what ways exactly – that is the question.
Some things appear to be fairly safe bets for the coming
year, and mostly they concern continuities rather than changes. For instance, regardless of an increase or
decrease of political turbulence in the Middle East, it is highly likely that
the great Pyramid of Giza will remain standing, simply because it has a good
record – it has been standing for over 5,000 years; it has presided over the
ages of the Pharos, the Romans and Greeks, the Kingdoms of the Arabs and
Ottomans, the very brief British Empire. Its survival for millennia means it is
unlikely to disappear in 2012.
Similarly we can make an educated guess to distinguish
between the continuities that are more likely to survive the year and those
that are less likely to survive. For
instance it would seem more likely that the Great Wall of China will still be
standing at year’s end than the Israeli wall that wraps itself around the
Palestinian territories, simply because the former is much older and generally
it is the new that disappears quickly rather than the old. The Great Wall of
China has already outlived the walls that surrounded ancient Rome and the wall
that separated Berlin, and it is likely to outlive the Israeli wall as well as
Wall Street and our various firewalls.
Irrationally, we tend to think that those things invented
during our own life times will last. I remember a student trip to Berlin and an
expert from the West Berlin Information Service informing us that she would be
long dead, that we would be long dead and forgotten, but the Berlin Wall would
still be standing. It was March, 1989.
Eight months later the wall came down.
Our myopic obsession not only with the new, but with the
illusion that our contemporary innovations possess incredible historical
significance, borders on fetishism. Will Google or Twitter really outlast the
Great Wall of China, not to mention the Great Pyramid of Giza? This is what
makes games of predicting the future so hilarious and difficult. I would guess
that it is extremely unlikely that Facebook will still be around in a hundred
years’ time, though of course I might be wrong.
But making meaningful predictions is difficult. A leading
British politician in 1974 predicted that it would take years before the
country would have a female prime minister and added “not in my time”. The politician was called Margaret Thatcher
and she became prime minister five years later. The parlour game of predictions
becomes most entertaining when participants begin to take their predictions
seriously, the point when participants mix up their fantasies with a reality
that has yet to materialize. The equivalent of today’s fortune tellers often go
by the title economists or bankers. Their predictions are as likely to be true
as those of astrologers. Indeed I fancy
that the occupation of the astrologer will survive that of the economist. Some economists and bankers today believe
they can anticipate the future – a logical fallacy as, by its nature, the
future is unknown and a future anticipated would already be present in the
present and consequently not be the future.
Dante, in his Inferno,
positioned soothsayers deep within the bowels of Hell. For trying to divine the future their
terrible punishment was that “each was marvelously twisted between the chin and
the beginning of the chest for the face was turned towards the kidneys, and
they were forced to walk backwards, since seeing forward was taken from them”.
(Canto 20;10-15). He describes: “the tears of their eyes were bathing their
buttocks down the cleft” (Canto 20; 37-39.
Today we don’t condemn our soothsayers to hell, we pay them
big bonuses instead, even when they get it wrong, which they do frequently. As the world economic system totters on a
precipice, they are left in charge And
they get it wrong, again and again and again.
Here are examples of predictions made by some leading economists/bankers
last year. They come from the Swiss newspaper the Tages-Anzeiger.
As stock-markets crashed in the affluent West, many
economists suggested investing in the emerging markets of the East. On January
25th 2011 Philipp Baerstschi, Chief Strategist at the leading Swiss
private bank Sarasin, stated that the Chinese stock market would rise “by about
20% by the end of the year”. Instead, by the end of 2011 the Chinese stock
market decreased by 21.7%, one of the biggest losses of the year.
David Kostin, Chief
Strategist at Goldman Sachs stated on January 22nd 2011: “We expect
that the S&P 500 will rise to 1500 by the end of the year”. Instead, on the last day of 2011 the S&P
stood at 1,261 points.
The influential American Hedge Fund manager John Paulson
predicted in late 2010 “The price of gold will reach 2,400 dollars, a doubling
by the end of 2011”. Last Friday, the
end of 2011, the cost of gold was 1,581 dollars per ounce, an increase of just
over 10%, not a doubling.
In January 2011 Nick Beecroft, Senior Consultant to the Saxo
Bank, predicted that in the second half of 2011 the Euro would recover against
the Swiss franc “we can reckon on a clear increase to between 1.35 and
1.40”. Instead the Euro nose-dived in
late 2011 and only intervention by the Swiss National Bank stabilized the
exchange rate (for now at least) at about 1.20.
Astrologers base their predictions on the positions of the
stars. Economists base their predictions
on the much more ethereal concept of “present trends”. But which trends will be of significance? How
will they interact? What will be the consequence of the unforeseen? And what
will be the influence of what John Maynard Keynes termed “the animal spirits” –
the irrational dreams and hates of the human psyche? Economists, plotting out their graphs and
pie-charts, convince themselves of their own certainties, like the astrologists
with their cosmic maps and horoscopes. As the philosopher A.C. Grayling has put
it: “All around us we see developments which, naturally enough, we project
linearly into the future, taking too little account of interactions between
those developments, changes in moral and political fashion, the unexpected and
unforeseen, and the unforeseeable.” (Ideas
That matter: a personal guide for the 21st Century. London,
2009, page 159).
Economists who believe they can see into the future are
guilty of hubris. They project a feeling
of certainty. They need to nurture a sense of humility. And before they do even more damage, they
need to learn how to say and mean the important words “I do not know”.
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