The curse of big numbers

There are many irritating things about the world of politics and economics but perhaps the most irritating of all is something I like to call numberism.

The term might not be familiar but you will almost certainly know what I mean. Numberism is when politicians take a big number and inflate it up to such astounding proportions that it becomes utterly meaningless. This meaningless is, as they say these days, not a bug; it’s a feature.

The whole point of numberism is that these big numbers are meant to be entirely symbolic rather than actually representative. They are no longer numbers, per se, but symbols, punctuation marks: there to be shouted about and to headline press releases, but never, under any circumstances, to be taken too seriously.

I first encountered numberism at the hands of one of its earliest champions, Gordon Brown. Brown was Chancellor when I first started out as a reporter and every one of his Budgets was a festival of numberism: long lists of billions this and billions that, most of which had already been announced countless times before. The art of dissecting a Brownian speech was trying to work out whether, when you peeled away the numbers, there was anything new at all. Often there simply wasn’t anything.

The high point of early numberism came at the G20 summit in London back in 2009, when Brown unveiled a trillion-dollar package of measures designed to “save the world”. After a bit of probing it turned out that the number was actually a hodgepodge of lots of different things: some was money the International Monetary Fund had already committed to financial support (that old trick of re-announcing stuff), some was an extra promise to set aside more money if necessary, some was an increase in special drawing rights, a kind of international form of money created out of thin air.

The fact that these component parts (which actually added up to $1.1 trillion), were not really like-for-like, had entirely different purposes and, in some senses, didn’t really exist was actually beside the point. This was numberism - a big number designed not to be scrutinised but to be shouted about.

Brown is no longer Chancellor and the world has moved on to different crises, but numberism still prevails. It was there during COVID-19 when governments around the world vied to come up with the biggest-sounding combined rescue package. No matter that most of these numbers - hundreds of billions - were hodgepodges of different things: direct fiscal support, public guarantees, financial liquidity. They were big, big numbers, and for many politicians a big number is the ultimate signifier of Taking Something Seriously.

But now, in climate change, the ultimate transcendental challenge for planet earth, we may have reached the zenith for high numberism. Today in Glasgow Mark Carney, who is leading the charge on climate finance, announced the big number to defeat all big numbers: $130 trillion dollars. It is, even in Brownian terms, an audacious feat of numberism: the figure is too large for even economically-literate people to get their heads round.

Listening to the Today programme this morning over the space of about half an hour I heard different correspondents quoting three different figures: $120 trillion, $130 trillion, $135 trillion. Small mistakes perhaps; you might think five trillion dollars or so is nothing to get fussed about. Except that it’s significantly bigger than the entire economic output of the United Kingdom. For that matter, $130 trillion is just about the entire global gross domestic product.

Like most examples of numberism, the $130 trillion starts to fall apart the minute you start probing it. This is not, repeat not, money that’s going to be used to finance climate objectives. This is not a pot of money which will now be devoted to buying wind turbines or solar panels.

In fact, $130 trillion is simply the total assets owned by a group of financial institutions which have signed up to a pact on net zero. The vast, vast majority of this money - which actually comprises a third of assets in the world, and probably includes your mortgage and pension - will continue going into investments that have nothing whatsoever to do with the climate. But these money managers will also commit to investing in companies which have a credible strategy to get their emissions down.

That’s quite a significant commitment and will certainly affect a tiny fraction of that $130 trillion. More broadly, the commitment will potentially send a chain-reaction along the investment chain: companies in dirty, polluting sectors will find it ever more difficult to get the capital they need to build dirty, pollutive plants. This effort will probably accelerate a process which was already happening.

That brings us to another bit of numberism: the claim, in the press release announcing the $130 trillion package, that it represents a “25-fold increase” in assets committed to net zero. This is not quite right. If you took it at face value you might believe, as the release’s drafters doubtless intended, that Carney had converted vast swathes of reluctant financiers to change their spots and cancel all those cheques to coal-fired power stations. But it’s not that.

It’s certainly the case that the amount committed to the Carney vehicle, the Glasgow Financial Alliance for Net Zero (GFANZ), is up from $5 trillion last year. But this is mainly because GFANZ was brand new a year ago. Actually most mainstream financial institutions were pushing a net zero agenda and making commitments to finance climate transition projects long before GFANZ existed. Blackrock, by far the world’s biggest investment manager, was committed to this stuff back when Carney was still Bank of England Governor.

What’s changed is something slightly more prosaic, if nonetheless important: a bunch of institutions, most of which were fully-committed to net zero long before this COP and had their own objectives about how to get there, have now signed up to a wider kitemark and set of rules - the guidelines provided by GFANZ. It is a rebadging exercise.

These exercises are important - they mean we go from a Wild West of inchoate rules and regulations to a system where such rules are uniform and, hopefully, more transparent (we’ll see). This will all undoubtedly help, in a slightly subliminal way. But as anyone who works in finance or investing will tell you, these environmental governance restrictions have been percolating through the system for years now. They are already mainstream. That’s the reality; which is somewhat different to the version of reality that you might have heard about this morning - the one informed by numberism.

I am, as is probably already clear, not a big fan of numberism. I find it dishonest and misleading. I like numbers, and like the fact that they are often the best tool to strip away the bullshit and peer inside the reality of the world. Numberism is, well, the opposite. But here’s the thing: while I don’t especially like it, I also (gritting my teeth) think there’s occasionally a place for it.

Think back to Gordon Brown in 2009. It’s hard to say how much difference that $1 trillion figure made. Certainly the amount actually deployed fell far short of the number. But the gesture (this is numberism, remember) seemed to help. It helped calm investors. It helped reassure households that governments were serious about confronting the financial crisis. That summit turned out to be the turning point for the financial crisis.

The role played by the big number was almost certainly trivial, but the role played by the gesture was probably not. Gestures matter. So while the fact that politicians are once again resorting to numberism in their attempts to galvanise the world to take climate change seriously is deeply irritating, who knows: perhaps it might help. Perhaps it might, indirectly, at the margin, encourage companies to pursue more sustainable strategies in future. Perhaps it might show those who’ve given up hope in politicians and economists that at last business is starting to take this all seriously.

Given the scale of the challenge, maybe a bit of numberism might be acceptable. Maybe. But let’s not fool ourselves into believing that these numbers are anything more than abstract symbols.