Climate change: how the jet stream is changing your weather
Northern Atlantic current is shifting course — with implications for crops and sea levels

Leslie Hook in Ilulissat, Greenland

At the summit of the Greenland ice cap the temperature rarely rises above zero degrees centigrade — the elevation is 3,200m and the ice below is more than a mile thick.

But last Friday, as the sun beat down, a small weather station laden with sensors captured something highly unusual: the temperature crept past zero and up to 3.6C — the highest since records began three decades ago. As temperatures rose across the massive ice sheet, which blankets an area five times the size of Germany, around 60 per cent of the surface started to melt, one of the largest ever recorded.

Scientists know of only three prior occasions in the past 800 years when there has been melting at the very top of the ice cap, which is kept chilled by the large volume of ice beneath. But this seems to be getting more frequent — it is now the second time this decade it has happened.

“The last time we saw melting at the summit, in 2012, we thought it was the extreme of the extremes, and wouldn’t happen again so quickly,” says Konrad Steffen, a professor of climate and cryosphere at ETH Zurich, who operates a network of 18 monitoring stations across the ice sheet. “But now we are facing more of these extremes.”

Prof Steffen’s data shows that between July 30 and August 2 a heatwave in Greenland produced several record highs across the ice sheet, including at East Grip, the second highest monitoring station. “If you start melting at the top of the ice sheet, we are going to lose [the] Greenland ice sheet long-term,” he adds.

The immediate trigger for the heatwave was a shift in atmospheric currents high above the earth’s surface: the North Atlantic Jet Stream, a fast current of wind that blows from west to east, had formed a buckle that was trapping warm air over Greenland. The same pattern had caused a record-setting heatwave in Europe a few days earlier, before shifting over to sit on top of the Greenland ice sheet.

It’s not just Greenland’s weather that is governed by the jet stream. Across Europe and North America, it controls extreme weather conditions of all kinds, from winter cold snaps, to heatwaves, to storms.

As the world gets warmer, the behaviour of the jet stream is one of the most studied and hotly debated mysteries of climate change. Scientists are racing to understand how this current of air is changing as the planet heats up, and whether it will get stronger or weaker — which holds big implications for weather patterns, crop yields and rising sea levels.

“It is essentially the most important weather phenomenon,” says Tim Woollings, lecturer in physical climate science at Oxford university. “If you had to choose only one piece of information to get a handle on the weather in the northern hemisphere . . . then that would be the jet stream, what it is and where it is going.”

Graphic explaining how the Jet Stream works

July 2019 was the joint hottest month — with July 2016 — ever recorded by modern instruments, according to data released on Monday. This is attributed to the underlying warming of the planet, with burning fossil fuels increasing the level of carbon dioxide in the atmosphere, but also the behaviour of the jet stream, which has brought about some big heatwaves.

Even in cool Greenland, it has been uncomfortably warm. “We are not sleeping very well these days, it’s just too hot,” says Flemming Bisgaard, a pilot and entrepreneur in Ilulissat, a town on the coast of West Greenland, which saw highs above 20C during the heatwave.

While that might not sound bad to European ears, the persistent heat has been melting the permafrost layer under the soil, causing roads to buckle and house foundations to shift, and necessitating expensive repairs. “Thirty years ago, all the engineers said the permafrost would always be there, you can just build straight on the ground,” says Mr Bisgaard. “Now it is a huge problem.”

Globally, an even bigger threat is the amount of water pouring off the Greenland ice sheet as it melts. About 200 cubic km of ice disappeared from the surface of the Greenland ice sheet in July alone, according to Martin Stendel, climate scientist at the Danish Meteorological Institute. That volume of water, if spread across an area the size of England, would stand 1.5m deep.

“It should result in a measurable difference in sea-level rise,” says Mr Stendel, pointing out that Greenland has already contributed about 1cm to rising seas over the past 15 years. The July melt alone would contribute about half a millimetre, he estimates.

An iceberg floats in Disko Bay behind houses during the recent warm weather in Ilulissat, Greenland

The North Atlantic Jet Stream is born high in the atmosphere, more than 7km from the earth’s surface. The temperature difference between the cool Arctic and the warm equator creates a pressure difference, and a narrow band of powerful wind. The turning of the earth makes this strong current — it averages around 170kph — flow from west to east, and helps explain why it is quicker to fly from New York to London than in the opposite direction.

The jet stream was first identified around the turn of the 20th century — early research efforts by scientists even included a few ill-fated voyages in air balloons. Technically there are four jet streams that circle the planet — two in each hemisphere — but the most studied is the northern hemisphere polar jet, due to its central role in European weather patterns. but it was not until the 1980s, and the advent of modern satellites, that really good data on the jet stream and other atmospheric currents became available, allowing measurement of its precise speed and direction.

This relatively short time period is part of the reason why it is so hard to tell how the jet stream is being affected by climate change. Unlike temperature records, which stretch back to the pre-industrial era, there is no detailed account of what the jet stream was doing before human-induced global warming kicked in.

Often in physics you can write down equations and out pops the answer and everyone agrees, but we can’t do that with the jet stream,” says Paul Williams, professor of atmospheric science at Reading university. Part of the challenge is the chaotic nature of the atmosphere, which would already have a lot of natural variability, such as El Niño cycles, even in the absence of anthropogenic climate change.

The impact of the jet stream on climate change, and whether it will shift in the future, is hotly debated by scientists. It is seen as one of the central issues that will determine how weather patterns across western Europe, in particular, will shift as the planet heats up.

“This is a critically important part of climate science, and one of the least well understood,” says Prof Williams. “We know the climate is getting warmer, and this is settled by now, but it is the consequences of that warming — like the jet stream — that we are just starting to explore.”

Graphic showing how the Gulf Stream works

One prominent theory is that global warming will cause the jet stream to slow down and become wavier — resulting in more summer heatwaves, among other developments. The jet stream typically helps to keep cool air near the poles and warm air near the tropics, but when it swings out to make a dramatic bend, it can carry pockets of warm air north, cool air south.

“The climate change aspect is contributing to these very persistent, big waves of the jet stream,” says Jennifer Francis, senior scientist at Woods Hole Research Centre, and one of the leading researchers to identify the trend. She believes the natural undulations of the jet stream are becoming bigger and more pronounced because of climate change.

As the planet heats up, she says, warming is distributed unevenly. At the moment, the Arctic is warming much faster than the rest of the world because the decrease in sea ice means the ocean is absorbing more heat from the sun. As the temperature difference between the poles and the tropics narrows, that can weaken the jet stream and cause the swings to be more dramatic, Ms Francis says.

An aerial view of melting ice at Ilulissat in Greenland © Sean Gallup/Getty Images

“We think the rapidly warming Arctic is making these wavy patterns happen more often, and as a result we are seeing weather patterns themselves become much more persistent,” she adds, meaning that weather such as heat or storms can be trapped in place for longer. “We are just starting to be able to measure these types of changes in the jet stream because they are so recent.”

Other scientists predict the opposite could happen: climate change could cause the jet stream to get stronger and move toward the poles. Atmospheric models — the complex simulations that run on supercomputers and forecast long-term weather and climate — tend to support this view.

“Most climate predictions suggest a pole-ward migration of the jet, but that is quite a slow process,” says Adam Scaife, who heads long-term prediction for the UK Met Office and is a professor at Exeter university.

If the jet stream over Europe shifts to the north, that would bring milder and wetter weather to northern Europe, with more storms coming to the UK. In the summer, it could mean more settled weather, meaning fewer storms and less precipitation.

Map showing changing ice mass in Greenland

“If there are changes to the structure of the winds . . . that could either add to climate change in some regions, or alleviate it in others,” he says, depending on the location. “To get the additional conditions that are crucial for making the temperatures rocket, like clear skies and lack of rainfall, then the jet stream is all important.”

Further complicating the picture is the interaction between the jet stream and the ocean currents that flow in the North Atlantic — also known as the Gulf Stream. The winds have long been known to influence the ocean currents, and a growing body of evidence suggests the ocean currents also influence their atmospheric equivalents.

As the world warms, scientists are only now beginning to understand the knock-on impacts of a hotter planet, and what this means for critical atmospheric currents. The changes in the jet stream are something researchers call “non-linear” phenomenon: shifts that can take place suddenly or not at all, that do not proceed in a straight line.

Mr Stendel, from the Danish Meteorological Institute, says this can exacerbate the effects of climate change. “We have background warming, and we have enhancement due to these non-linear effects, like the changes in the general circulation,” he says.

Tourists at Ilulissat walk among free-floating ice during the unseasonable weather in July © Getty

That has major implications for the melting ice sheet and means that sea levels could rise faster than expected. The most recent report from the UN Intergovernmental Panel on Climate Change forecast between 45cm and 82cm of sea level rise by the end of this century if emissions keep increasing. A growing number of scientists think that may be too low.

“That probably underestimates the upper range of sea level rise,” says Mr Stendel. “Here in Copenhagen we are very close to the sea so we have to keep an eye on it.”

As scientists race to solve the jet stream puzzle, the risk is that the models are not able to forecast it sufficiently over the long term, to prepare for the changes it will bring. “One of the greatest triumphs of meteorology is forecasting the weather,” says Mr Woollings, pointing to predictions like whether it will rain tomorrow. “We’d love to be able to do that for climate change too.”

The Fraught History of Japan-South Korea Relations

The recent trade spat is rooted in grievances developed over four centuries.

By Jacob L. Shapiro


Japan and South Korea’s monthslong trade dispute shows no signs of abating any time soon. Japan’s decision last week to grant permission for exports of photoresist, a material used in the manufacture of semiconductors, to South Korea may give the impression that the two are on the path to resolving their spat. But that’s far from the case.

The dispute began with South Korean demands for compensation for abuses inflicted during Japanese occupation of the Korean Peninsula. In response to South Korea’s seizure of Japanese corporate assets in January, which would be used as payment for wartime forced labor, Japan instituted a new, onerous process for approving exports of photoresist, hydrogen fluoride and fluorinated polyimide to South Korea – one that requires submitting up to nine supporting documents for every new shipment and a review process that can take up to 90 days. The deeper problem, however, is that Japan’s attempt to rap South Korea over the knuckles may not have the intended effect. In the short term, Japan can inflict a great deal of pain on South Korea. In the long term, Japan has ensured that South Korea will be looking for ways to end its dependence on all things Japanese.
A Fraught History
Japan and Korea have a long history, fraught with Japanese violence against and condescension toward the Korean people. During the 16th century, three successive Japanese leaders embarked on a violent campaign to unify the Japanese islands. The second of these men, Toyotomi Hideyoshi, is generally credited with having unified the islands by the end of the 1580s. But that wasn’t enough for Hideyoshi. He began to dream of an empire that would encompass present-day North and South Korea, China, the Philippines, Taiwan and Goa. Hideyoshi intended to start with Ming China, and the best way to get to there was through the Korean Peninsula. So in 1592, he deployed 158,000 men to Korea (then known as the Joseon kingdom), where his soldiers made quick work of the Koreans until the Ming army crossed the Yalu River and fought the Japanese to a stalemate. A second invasion, made up of 140,000 troops, in 1597 did not achieve victory either, though its stragglers returned to Japan with the severed noses of at least 38,000 Koreans and Chinese killed during the campaign, a collection of war trophies commemorated by the Mimizuka shrine in Kyoto today.

These invasions were the beginning of more than 400 years of the Korean Peninsula’s suffering at the hands of foreign powers. They’re also the foundation of Korean grievances against the Japanese. Future Japanese rulers, including Hideyoshi’s successor, Tokugawa Ieyasu, sought to repair Japan’s relationship with Korea. But nothing Japan did in the intervening centuries erased the collective memory of struggle for the Korean people. A few decades after Hideyoshi’s invasions, the Korean Peninsula faced new depredations following the collapse of China’s Ming dynasty. Sixteenth-century Korea looked to China as both an economic and cultural center, while China looked at Korea as a loyal and dependent ally. Unfortunately for both, the costs of China’s defense of Korea from Japan exacerbated a brewing political crisis in present-day Manchuria. Groups of Jurchen tribesmen rebelled against Ming rule and would eventually declare their own Qing dynasty in 1636, leading to the Ming Emperor’s ouster in 1644.

But before the Qing ruled China, they invaded the Joseon kingdom – in retaliation for its loyalty to the Ming Emperor – and made an example of the Koreans. Korea never blamed this state of affairs, which would remain in place until 1895, on China. The Qing dynasty was always seen as fundamentally illegitimate, a barbarian usurpation of Confucian political power. In that sense, Korean attitudes toward China have always been softer than attitudes toward Japan, despite the fact that the Chinese and Japanese both viewed the Korean Peninsula as their sphere of influence – and used violence to keep it that way.

This history is the backdrop for the Sino-Japanese War of 1894-95, the Russo-Japanese War of 1904-05, and the subsequent Japanese annexation of the Korean Peninsula in 1910. Like Hideyoshi’s 16th century invasion, the Sino-Japanese War was essentially a conflict over the status of the Korean Peninsula. At the end of the 18th century, while the Qing dynasty was on the verge of collapse and China was being exploited by foreign powers, Japan was at the peak of the Meiji Restoration and dreaming of a Pacific Empire once more. If not for American, British and German recognition of Korean independence in 1883, Japan might well have invaded Korea before 1894. By then, however, Japan felt strong enough to end China’s dominant position in Korea once and for all. In 1894, a popular Korean rebellion by a fringe religious sect called the Tong-Haks marched on Seoul. Historian Fred Arthur McKenzie has suggested the Tong-Haks were supported and armed by Japan, which hoped to use the uprising as a pretext for invasion. Whether or not this is true, the Korean government called on China for help, and once the Chinese dispatched troops to the Korean Peninsula, Japan had its pretext for war.

Japan routed China in the Sino-Japanese War, obliterating the Chinese navy, seizing the port of Lushun and crossing the Yalu River itself this time. At this point, Japan began its quest to remake Korea in its own image. Japan, after all, had just undergone the Meiji Restoration and could credibly claim to be the only Asian power capable of standing up to the West. To do this, it had to break the corrupt and antiquated Korean political system. When the Korean queen conspired to thwart Japan’s efforts, Japan simply had her killed. What began as a Japanese quest to eliminate Chinese influence on the Korean Peninsula and bring political reform to Korea ended with the increasingly brutal Japanese rule of the Korean Peninsula. It was at this time, with the Qing dynasty on the verge of collapse, that Russia also saw an opportunity to establish its primacy in Manchuria and perhaps even in northern Korea. Japan moved quickly, becoming the first Asian power to defeat a Western one in the modern age.

This was especially bad news for Korea. In a decade, Japan succeeded in defeating and humiliating the two other regional heavyweights that could have balanced out Japanese power. With Russia and China eliminated as rivals, and with the British and the Americans unwilling to intervene on Korea’s behalf, Japan decided it was time to solve its Korea problem once and for all. At the time, Japanese strategists had come to believe that control of the Korean Peninsula was crucial to strengthening the Japanese Empire. Toyokichi Iyenaga, a former Japanese ambassador to the United States, wrote in 1912 that, “From the strategic standpoint, Korea is to the Japanese Empire as a spear pointed at its heart. Whatever nation holds this weapon becomes supremely important to Japan.”

Japan’s intention when it formally annexed Korea in 1910 was to make sure no country could ever point that spear at Japan’s heart again. During the occupation, Japan brought modernity to Korea. Between 1909 and 1913, Korea’s foreign trade tripled and its rice production increased by 25 percent. Japan established a judicial system, a monetary system based on the gold standard and a system of public education. It also built railroads, sewers, highways and telegraphs. There was just one problem: In the words of historian Clarence Gilliland, Japan’s ultimate goal was “to crush out knowledge and memory of the history and institutions of Korea and in its place to instill a national patriotism for Japan.” In this sense, Imperial Japan was a far more destructive external influence than China. China treated Korea like a vassal state – but did not try to wipe out Korea’s distinctiveness. Japan, on the other hand, looked at the Koreans as a less evolved version of its own people – and sought to transform them to resemble the Japanese. It backfired. Japan’s heavy-handed rule triggered a renewed emphasis on Korean identity and gave rise to a strong sense of Korean nationalism. What began as an attempt to modernize Korea slowly gave way to 35 years of Japanese imperialism – a period over which South Korea and Japan are still fighting today.
Strategic Divergence
This is an oversimplified account of Japanese-Korean relations, but the history is critical in understanding just how deep the enmity between the Japanese and Korean people runs. It is also key in understanding what’s happening between South Korea and Japan today. Their dispute is not about Japan’s domination of the Korean Peninsula in 1910-45, nor is it about compensation for conscripted labor or so-called “comfort women.” These are simply the most recent examples in a long list of grievances. Japan, the cause of so much of Korea’s misery, is today the third-largest economy in the world and a unified and cohesive nation that has enjoyed the full protection of the U.S. military and the benefit of U.S. technology transfer over the past seven decades. The Korean Peninsula, on the other hand, remains divided not by the Koreans’ own choice but because foreign powers like Japan used Korea as a pawn. From Seoul’s perspective, when it asks Japan to show remorse, it is met with Japanese arrogance and threats that it could be cut off from the world’s top source of fluorinated polyimide, etching gas (which includes hydrogen fluoride) and photoresists, upon which South Korean manufacturers depend.

The comparisons to the U.S.-China trade war are obvious. In that dispute, too, there is a dominant party that can inflict more damage on the other than vice versa. What China has in spades, however, is resilience, developed in part through the historical memory of how the U.S. and other Western powers deprived China of unity and wealth in the 19th and 20th centuries. There are still internal disagreements in China about whether the country should try to rise peacefully without antagonizing the United States or whether conflict with the United States is simply inevitable. Chinese policymakers who believed that the U.S. and China could coexist as relatively equal powers are now being drowned out by those warning that China must prepare for the inevitable American backlash that will come from its increased economic, political and military might, no matter how peacefully it is couched. The same is true in the Japan-South Korea relationship. Japan has a greater ability to inflict damage on South Korea’s economy than vice versa. But South Korea has reservoirs of historical memory to draw upon to resist Japan’s moves no matter how long Japan wants to block its products from reaching South Korea.

South Korea and Japan both have mutual defense treaties with the United States, but not with each other – the United States has historically brokered peace between them in what some might call geostrategic marriage counseling. Indeed, the U.S. had to twist South Korea’s arm just to get Seoul to agree to share intelligence with Japan on North Korea’s nuclear weapons program and other Pacific matters, an arrangement that now seems precarious at best. In fact, for all of South Korea and Japan’s overlapping interests, they have one fundamental strategic divergence. Japan wants a neutralized Korean Peninsula. And so long as the Korean Peninsula is divided between an economically dependent country and a malnourished hermit kingdom run by a despot, Japan is satisfied, especially with the U.S. commitment to defend its allies from North Korean aggression. South Korea’s ultimate goal, on the other hand, is unification with the North and a restoration of Korean independence, which has eluded the peninsula for generations. In the short term, unification with North Korea may seem impossible, and indeed, President Moon Jae-in’s administration is more enthusiastic about the possibility than the South Korean political opposition has been. Ultimately, however, the Korean people are a single people, and their division is unnatural. There is an overwhelming force driving the two countries back together – one that Japan in particular has always sought to thwart.

Moon alluded to this force after a cabinet meeting last week, when he said, “The advantage Japan’s economy has over us is the size of its economy and domestic market. If the South and North could create a peace economy through economic cooperation, we can catch up with Japan’s superiority in one burst.” This remarkable statement generated quite a buzz in South Korea – the Chosun Ilbo published an op-ed aptly titled, “Has Moon Left the Planet?” – but it should be no surprise that Moon’s long-term vision is to unite the Korean Peninsula. A peacefully unified Korean Peninsula would obviate the need to maintain a security relationship with the U.S., which Washington appears hell-bent on making South Korea foot the bill for. It would greatly strengthen Korea’s position relative to Japan, and perhaps even allow Seoul a freer hand in dealing with Japanese and U.S. competitors like Russia and China. It should also come as little surprise that South Korea announced a plan to invest some $6.5 billion in research and development over the next seven years in an attempt to end its reliance on Japanese imports. South Korean strategists at this point have no choice but to hope for the best and plan for the worst when it comes to Japan’s strategic ambitions in the Pacific. Seoul cannot count on Japan to have its best interests at heart any more than Pyongyang can.

This may seem like a dramatic conclusion to reach from what on the surface looks like a simple trade spat. As Japanese officials have emphasized, Japan’s new export procedures aren’t even a full export ban – they are simply an enhanced security protocol to ensure that Japanese technology does not fall into the wrong hands. But from Japan’s perspective, Seoul should be grateful that Japan was willing to share its technology with South Korea in the first place and should stop bringing up past injustices every time it wants something from Tokyo. In this sense, however, Japan is perhaps as out of touch with the implications of its actions as it was in 1910 and 1592. Japan may think what it is doing is in South Korea’s best interest, but South Korea has over 400 years of historical experience to doubt Japan’s intentions. This particular spat may be resolved in the short term because South Korea’s economy is even more dependent on Japan’s than China’s is on the United States’, but in the long term, Japan may have added one more insult to injury for whoever will be pointing the spear at its heart in future decades.

Trump’s Cross of Gold

US President Donald Trump wants to compress the United States trade deficit and enhance the competitiveness of domestic manufacturers by using tariffs to raise the price of imported goods. And the fixed exchange rates he needs to achieve that goal are the real reason behind his nomination of Judy Shelton to the Federal Reserve Board.

Barry Eichengreen


SINGAPORE – There are now scores of efforts to psychoanalyze US President Donald Trump’s nomination of Judy Shelton to the Federal Reserve Board. Some emphasize Shelton’s fidelity as an early adviser to the Trump campaign. Others point to her conversion into “a low-interest-rate person.” Still others highlight her advocacy of the gold standard as insulating US monetary policy from an unreliable Fed.

These interpretations all miss the point, which is that Shelton is a proponent of fixed exchange rates. Her belief in fixed rates is catnip to an administration that sees currency manipulation as a threat to winning its trade war.

Team Trump wants to compress the United States trade deficit and enhance the competitiveness of domestic manufactures by using tariffs to raise the price of imported goods. But a 10% tariff that is offset by a 10% depreciation of foreign currencies against the dollar leaves the relative prices of US imports unchanged.

Countries seeking to maintain the competitiveness of their exports have an obvious interest in encouraging such currency adjustments, or at least in not resisting them. In fact, they don’t actually have to do anything in order for their currencies to fall when the US applies tariffs.

The US current-account deficit is just the difference between US investment and US saving, which tariffs do nothing to change. If the current account doesn’t change, then neither can the relative price of domestic and foreign goods. So the exchange rate must move, of its own accord, to offset the tariff.

Thus, the challenge for Team Trump is to get other countries to change their policies to prevent their currencies from moving. That’s what the demand for stable exchange rates and an end to “currency manipulation” is all about.

Consider Shelton’s call last year for a new Bretton Woods system. The goal, as she described it, would be to establish a “coherent mechanism for maintaining exchange-rate stability among national currencies,” the same goal as the one that was set at the original 1944 Bretton Woods Conference.

But in the absence of a global conference – something that would be anathema to Trump – the way to get there is the same as under the nineteenth-century gold standard. Then, the leading power, Great Britain, unilaterally fixed the domestic currency price of gold. Other countries, seeing the advantages accruing to Britain, followed its example.

Once multiple countries had pegged the domestic price of gold, the exchange rates between their currencies were effectively fixed. Today, the idea evidently is that if the US moves first, “preemptively” as Shelton puts it, other countries will follow.

Behind this presumption, however, lie a number of logical non-sequiturs. First, other countries show little desire to stabilize their exchange rates, restored gold standard or not. They understand that different economic conditions justify the adoption of different monetary policies, which in turn requires exchange rates to move.

Second, gold is no longer a stable anchor. The dollar price of gold has fluctuated from $900 in 2009 to $1,900 in 2011 and back to $1,500 today. Having the Fed peg the price of gold in dollars would do nothing to peg its relative price – that is, the price of gold relative to the prices of other goods and services. For the relative price of gold to double, as it did between 2009 and 2011, consumer prices would have to fall by half, in a catastrophic deflation.

The price of gold relative to CPI inflation was less volatile in the nineteenth century, but this reflected the importance of gold mining. When the price of gold rose relative to the prices of other commodities, more resources were allocated to mining. Additional gold was extracted as a result, causing its relative price to fall. More precisely, other prices rose, as that additional gold backed an inflationary increase in money supplies.

Today, after a century-long increase in the production of other goods and services, gold mining accounts for a much smaller share of global GDP. The stabilizing capacity of the mining industry is weaker, rendering the price of gold more volatile.

It might be argued that the volatility of the gold price reflects financial instability, which induces investors to rush into gold as a safe haven, and that the gold standard will produce a more stable financial environment. But there is no historical basis for this notion. Financial crises were a recurrent phenomenon under the gold standard. That is no mystery: having to stabilize the price of gold severely limited the ability of central banks to act as lenders of last resort to distressed financial systems. Instability regularly followed.

In short, arguments for a gold standard and pegged exchange rates are deeply flawed. But there is a silver lining, as it were: nothing along these lines is going to happen, Governor Shelton or not.

Barry Eichengreen is Professor of Economics at the University of California, Berkeley, and a former senior policy adviser at the International Monetary Fund. His latest book is The Populist Temptation: Economic Grievance and Political Reaction in the Modern Era.

Why we should measure national wealth in assets

There are problems in using gross domestic product as the metric of economic success

Diane Coyle

Urban green spaces like London’s St James’s Park are part of the natural capital that contrubutes to national wealth © Getty

When the privatisation programme of Margaret Thatcher’s government got into its swing in the mid-1980s, Harold Macmillan, a former UK Conservative prime minister, compared the policy to a family selling off its assets: “First of all the Georgian silver goes, and then all that nice furniture that used to be in the saloon. Then the Canalettos go.” You can’t eat the accumulated wealth of generations, but it has always been understood that assets are vital for lasting prosperity. No business would ignore its balance sheet — or rather, those that resort to tricksy off-balance sheet accounting often fail spectacularly.

Wealth is just as fundamental to national prosperity in the long term. Assets are the stored capacity to generate future income and consumption. They may be created by investments funded out of current income, or they may be gifts of nature. How well off people are in terms of their ability to consume or otherwise lead the lives they want depends not only on their own endeavours but also on the past accumulation of a wide range of assets.

Some of these are individual; human capital reflects personal effort and acquisition of skills, family and social background and the education system. Others, such as natural capital, are collective assets whose state reflects the entire economic system — globally, in the case of climate.

This speaks to widely acknowledged flaws in using gross domestic product as the key metric of economic success. For example, the paradox that a natural disaster is good for GDP, because of the required reconstruction of homes and infrastructure, is often pointed out. Yet immense resources go into measuring GDP and little into measuring wealth.

This is just starting to change. The World Bank is building a database on “comprehensive wealth”, defined as consisting of natural, human and produced capital, and net foreign assets. The UN has been developing a statistical standard for measuring natural assets.

The UK government’s natural capital committee and the Office for National Statistics are pioneering the development of natural capital accounts. They show that the value of natural capital, including mineral resources, urban green space, biodiversity and air quality, has been in decline. But much more data are needed to be able to say when any component will reach the tipping point of collapse, unable to contribute to future living standards.

There are statistics on financial capital and conventional productive capital such as factories; there are fewer on infrastructure, and its quality — how many postwar concrete buildings or bridges will soon need replacing? Some countries measure human capital, which the ONS is working on improving.

One key missing piece of the picture is social capital, or trust. Economic theory says this is vital. Anyone buying online puts their trust in someone they do not know, whose product they cannot see. In business, trust comes as goodwill, which makes it easier for a company to raise new capital. Social capital lies behind whether a government can raise tax revenues and provide public goods.

But how to define it with sufficient detail for statisticians to measure it? My colleagues and I are working on extending the definition and measurement of comprehensive wealth, in co-operation with organisations such as the ONS and UN. Our recent interim report highlights work such as a methodology for capturing in just two indicators the many dimensions of social capital.

However, the task is enormous — as big as the effort in the 1930s and 1940s to develop the current system of national accounts. GDP was a metric for its time: a measure of economic possibilities when the needs of the Depression and war were urgent. The pressing challenge for today’s economies is the sustainability of our present standard of living. Unless we measure our assets, we will not know how far we are living on borrowed time — until it is too late.

The writer is Bennett Professor of Public Policy at the University of Cambridge