Is the world as we know it going to collapse?

Posted on 11 February 2011

It seems that the closer we get to 2012 and the more we hear of ‘end-of-the-times’ related cataclysmic stories. Since the 2012 Hollywood blockbuster released in 2009, the belief in the end of our ‘age’ and subsequent birth of a new one as conceived by the Mayan calendar, has become mainstreamed. Personally, we don’t believe in the so-called Mayan prophecy and 2012 does not worry us more than 2011 or 2013. Having said that, one cannot ignore the frenzy around the idea of the collapse of the world as we know it. We’ve decided to look into the subject and see if there is any susbtance behind these warnings – and whether we should worry or not. Please note that this post is a follow-up to this one, where we argued that rather than viewing ‘collapse’ through the lens of conspiracy theories, we could understand it in a historical and ecological sense.

Reading the news is never cheerful as media tend to focus on negative reports. But reading the news nowadays has become a daunting exercice. In an article titled ‘Soon the economic deluge’, the rather conservative Forbes explains that “with the dollar in freefall, the monetary system is breaking down“; “Inflation is already lurking just offshore, preparing to crash into the economy“; “United States is entering its third consecutive year of deficits greater than $1 trillion coupled with continuing dramatic increases in the stock of money. Devaluation and economic chaos are guaranteed, just as they were in 1969.” MarketWatch, a rather conservative website, states that “America’s 10 worst years start right now“. Foreign Policy – a mainstream well-informed magazine, argues in an article named “the global economy won’t recover, now or never” that “our recent ‘difficulties’ are merely the next-to-last bubble in a process of boom and bust the world-system has been undergoing since around 1970. The last bubble will be state indebtednesses, including in the so-called emerging economies, leading to bankruptcies.” While the Pulitzer-winning journalist Chris Hedges explains that “America’s military and economic empire could collapse at any time“, some go as far as claiming that “the US has only weeks before economic collapse“.
Similarly, the excellent news aggregator Energy Bulletin has recently pulled together predictions about what we can expect in 2011 from a wide range of thinkers, writers, scholars and experts – and I’m sorry to say that these predictions are not rosy… According to Sharon Astyk, ASPO-USA Board of Directors, ”There is every reason to believe that we will see a food-price run-up similar to the one in 2008 in the coming year, making absolutely clear exactly how tightly food and energy prices are intertwined.” Tom Whipple, editor of Peak Oil Review argues that “the likelihood that we will see another 2008 type oil price spike in the next six months seems to be growing every day”. Gail Tverberg, editor of the Oil Drum shares that : “I expect 2011 will be a year of recession and increasing layoffs. It may start off reasonably well, but then an attempted price rise of oil to, say, $120 barrel, will prove to be too much for most economies. There will be countries and smaller political subdivisions (state, city) that take steps to restructure their debt with longer maturities. All of this will drive interest rates up, and make credit harder to find. The recession will worsen as credit contraction ensues. Governments will scramble to try to keep each other and banks from failing. In some cases they will be successful; in other cases they will not be.” Some consequences of these predictions are that There will be continued government cutbacks in pensions and social services in industrialized countries, such as the US, UK, Ireland, Spain and Greece. In France this year, millions demonstrated and went on strike. Popular protests such as these could change the political landscape” (Bart Anderson, co-editor of Energy Bulletin) which is precisely what has just happened in Tunisia.

There is undoubtedly a sense of urgency in many analysts’ viewpoints, and it would be foolish to ignore it completely on the basis that a collapse of the world as we know it seems too unthinkable from the comfort of our chair. But what do we mean by ‘a collapse of the world as we know it’? Do we refer to an apocalyptic end-of-the-world cataclysm that will suddenly wipe-out humanity from Earth? Nope. We rather refer to a societal collapse, whereby the organisation of our industrialised societies will be forced to change. This will be the result of an accumulation of events of different nature that, by occurring jointly, will aggravate the effects of each, and by doing so may provoke gradual to sudden changes to the way we live. We have in particular, identified four cyclical trends – each being of concern by itself – but which simultanous occurring could potentially seriously strain our capacity of resilience. These identified trends are the following:

- Increase in prices of energy related natural resources (oil, gas, coal and other minerals, etc). An increase of their prices are already happening due to speculation, rarefaction of the resources and increase of the demand. As Kurt Cobbs explains, “in metals, tin rose to an all-time record. Copper prices are over $4 a pound for the first time since the 2008 run-up. Base metals in general have more than doubled since the 2008 lows. Cotton reached a new, all-time high this year and hovers near record territory.” Similarly, with the current Peak Oil, many predict an increase in oil prices and other energy-related resources (If you have heard of the ‘Peak Oil’ concept but don’t necessarily understand its intricacies, we encourage you to read our previous post about it). What are the consequences of such increase in prices? At global level, an increase in the prices of energy related natural resources could potentially lead to further competition, conflicts, as well as further environmental disasters as companies increasingly try harnessing resources that are difficult to reach.

At your level, it means that your electricity, gas, fuel and other bills will increase, as will increase the prices of those appliances that require a number of different minerals (such as computers and mobile phones). Similarly the prices of any commodity which benefits from global transportation (think of your oranges from Spain, your fridge made in China, your Korean car but also your holidays in Mexico, etc) will increase in parallel with the increase in transportation costs, notably fuel and natural gas. This means you’ll spend more money for buying stuff, but also to heat/cool your house or transport yourself. The bad news is that some predict that “there will continue to be (for a while) a mild economic recovery, which will increase the demand for oil, and thus require the increased use of higher-priced oil. This will eventually require that 10 percent or so of the US GDP will go to the price of energy, which, as in the past, will lead to an economic downturn which will lead, in time, into the same cycle again.”

- Increase in prices of food-related natural resources (corn, cereals, rice, soy, fish, (drinkable) water, etc). All of industrially made/processed foods rely HEAVILY on oil, in particular in their manufacturing and transportationn which means that increase in oil prices will directly affect the prices of food-related natural resources. What are the consequences of such increase in prices? At global level, the consequences potentially include restriction on international trade (so the populations of exporting countries benefit first from their products – this is exactly what happened in 2010 when the Russia and Ukraine governments  restricted the exportation of respectively grains and wheat following the massive fires in Russia and droughts in Ukraine); increasing pressure from the agrobusinesses to use genetically-modified crops under the disguise of providing food to everyone (USDA has for instance just authorised the use of genetically modified alfafa by Monsanto); increase in the prices of meat as cattle nutrition is heavily dependent on cereals and corn; fierce global competition to buy or lease farmlands throughout the world and in particular in Africa; etc.

What does that mean to you? Well, it’s not hard to see that the price increase will be passed on to your daily products based on these natural resources. Your bread, sauces, cereals, pizzas, and all of your (many) products that use corn (adhesives, frozen food, insecticides, ketchup, cosmetics, shoe polish, tacos, syrup, etc…) will also see an increase in their prices. In few words, any increase in prices of food-related natural resources directly impacts your daily expenses. The bad news is that inflation is already happening. As the UN’s Food and Agricultural Organisation (FAO) warned few days ago  ”Global food prices rose to a fresh high in December 2010. Our Food Price Index went above the previous record of 2008 that saw prices spark riots in several countries.” The other bad news is that any substantial and long-lasting increase in the price of natural resources means that the life of those who barely survive with current prices will be directly threatened. This in turn will potentially lead to similar  ’food riots’ as experienced in 2008, including in Western countries where governments may be too indebted to subsidize the prices of essential foods.

- Countries’ bankruptcies. What ‘bankrupt‘ means is just that: The country cannot pay back its external debts – which also means that the country can’t pay for imports, or even for the services it’s meant to provide to its population. As a reminder, Greece and Iceland had to be bailed-out by the European Union (EU) and the International Monetary Fund (IMF) precisely because the financial markets considered that they couldn’t pay their debts. Now consider this: while Ireland is facing similar problems, many believe Portugal, Italy, Spain, and even France could follow. As per the US, it was projected that it had in 2010 to issue almost as much new debt as the rest of the governments of the world combined. To put things into perspective, while Greece’s debt was around 113% of its GDP, the US’s debt is of 94% – not too far away isn’t it?…
So, concretely, what are the consequences of a country’s bankruptcy? In few words, it destroys the country’s credit rating, making it harder to get loans (and those loans come with much higher interest levels), reducing the demand for that country’s currency, and reducing other investment confidence in the country (including from businesses that may have wanted to set up shop there). Also, and as Jill Schlesinger puts it “the U.S. government has such a voracious appetite for debt that the rest of the world simply doesn’t have enough money to lend us.  So now the Federal Reserve is buying most U.S. debt, and the only reason it can do that is because it can create money to lend out of thin air — at the mint’s printing presses!” What does this lead to? Inflation, i.e. price increase. Indeed, when a country reaches bankruptcy, massive inflation is the likely outcome for the country’s consumers and businesses. All of this has an effect on the people of the country: they lose their jobs, their taxes may go up, their currency might lose value (which makes it difficult to buy imported goods), etc. In other words, if your country was to declare bankruptcy, you would be direcly affected – ask the Greeks or Irish who lost their jobs due to their state’s bankruptcy if you doubt it! In the words of another blogger, “perhaps the most visible signpost along the way to that destination is the point at which a society can no longer provide for its future and pay its current expenses out of existing resources. You know that point has arrived when a society begins neglecting its infrastructure, slashing basic services, discarding those economic sectors that cost too much to maintain, and abandoning those people who lack the political clout to make good a claim on slices of the dwindling pie. Readers here in America who don’t find this description oddly familiar are encouraged to take a good hard look out the nearest window.”  Now, if the US as a country (or perhaps some of its states) were to declare bankrupt, it could have a cataclysmic effect on the global economy. The bad news is that according to Ilargi: “We can extend and pretend only so long. We can hand over only so many years of the people’s future earnings to the banks. That is, before someone becomes suspicious of what we do. The realization that there is simply no way we can pay down our debts, whether we’re in Ireland, California or Japan, will dawn in 2011, no matter what stories are spun in capital cities and TV studios.”

- Continuous global climate disruption. You’ve all heard of the different natural disasters that occured in 2010: the earthquakes in Haiti and Chili, the devastating floods in Pakistan and China, the volcano eruption in Iceland, the draughts in Ukraine and Russia, etc… As AP puts it “Earthquakes, heat waves, floods, volcanoes, super typhoons, blizzards, landslides and droughts killed at least a quarter million people in 2010 — the deadliest year in more than a generation.” But in addition to the human toll, these natural disasters also strongly impact the national and global economy. For instance the recent floods in Australia have inundated three-quarters of the North-East Queensland, leading to “billions of dollars in lost export incomes” and “global coal price soaring“. Although scientists agree to say that a specific disaster cannot be directly linked to global warming and climate change, links between human activities and deteriorating environmental conditions are well acknowledged widely. And as a matter of fact, predictions regarding future natural disasters are not too optimistic… We invite you in this regard to (re)read our previous post on the topic: “Five daunting climate change scenarios” (here).

So, as you can see, each of these cyclical trend is not great by itself. Now imagine them happening all together – as each trend is likely to affect the others. Now put them in perspective with other points of concerns, such as the continuous population growth, pandemics, recurrent global financial crises and you suddenly get the picture – a rather frightening one.

That being said, anticipating future events is always a bet. The likelihood of happening of the anticipations mentioned here is based on past history and already visible, yet still nascent, indicators of such trends. However, linear analyses, whereby efforts to understand the present and future are based upon the patterns of the past, are not sufficient in a complex, multi-variable, fast-changing world. The aforementioned anticipations could indeed be well proven wrong, in particular if major events or a Black Swan (i.e. an unforeseen event that jolts the system) happened. Such events do not have to be spectacular such as a new 9/11, yet can quietly revolutionise your life and our societies. Indeed, any prediction has to be qualified when one considers that anticipations and predictions are precisely made so that policy makers and stakeholders can reduce the likelihood and/or impact of these events by taking the right decisions. In other words, the world as we know if may well collapse if the factors identified here were to occur – but such outcome is not inevitable. Depending on the policies taken, the changes in practices and behaviors, etc, the predictions may well be used as wake up calls…

Indeed, as humans, we seem to be sensitive to what is known as ‘optimism bias’, which is a tendency to think that large-scale problems couldn’t really be that bad, or that surely someone will come up with a silver bullet solution just in time. On my side however, I have witnessed, as an aid worker, a number of natural and man-made disasters ranging from earthquakes to floods and including wars and massacres. I intrisically know that these happen, including in Western countries. And these disasters have real catastrophic consequences, with real people dead, and real pain. As such and even though we do not believe in the inevitability of dark ages lying ahead of us, we simply think that it is our responsability to do our share in preventing them. But it is also wise to prepare ourselves for the worst, if the worst was indeed to happen. As the very conservative Britain’s chief central banker recently statedthe squeeze on living standards is the inevitable price to pay for the financial crisis and subsequent rebalancing of the world and UK economies.” This means that the world as we know it today will be a thing of the past simply because it is unsustainable, making a realignment of our lifestyles inevitable. But, as we wrote in a previous post, we can all do our small bit so that the transition doesn’t end up chaotic and violent…

What about you? Are you rather optimistic or pessimistic about the world – and your’s – future? Are you rather confident that the current crises will be overcome more or less smoothly or do you worry that your children’s standards of living will be (well) below than your parent’s ones?…


UDDATE: We’ve just read an excellent article by Mike Adams, who look at the “Twelve unsustainable things that will soon come to a disastrous end on our planet”. A must read!

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