Is the current chaos in the financial sector the beginning of a global systemic collapse? Two of my favourite American authors certainly seem to think so.
Thomas Homer-Dixon, the author of the excellent “Upside of Down“, goes as far as to claim “Global capitalism teeters on the brink” in an opinion piece for the online publication GlobeandMail.com. He sees three factors making him believe “the crisis is the product of systemic problems in the world’s economy”:
“The first is the sheer productivity of modern global capitalism. The world’s businesses, spurred by global competition and a never-ending race to boost productivity and keep costs down, excel at producing a steadily rising flood of goods and services. To ensure that these goods and services are bought and that factories and businesses keep humming, the global economy needs a constant infusion of liquidity provided by cheap debt.
Second, in the past three decades, a neo-conservative ideology that asserts markets are infallible and, as a result, disparages any kind of state regulation has come to dominate thinking about economic matters, especially in the United States.
Third, enormously powerful computers and software, along with fibre-optic communication, have allowed financial wizards to conduct business transactions in the blink of an eye around the world and to create financial instruments – derivatives, swaps, structured investments and the like – of mind-boggling complexity. For all intents and purposes, these new instruments have blurred the boundaries of what we call money. Several decades ago, central bankers could sensibly talk about and, if necessary, control the money supply. Now, what counts as money isn’t at all clear, and many things that look and behave like money can’t be regulated.”
Richard Heinberg (“The Party’s over“ and “Peak Everything“) goes a few steps further in an article written for online magazine HopeDance, stating “that 2008 will go down in history as the year the Second Great Depression began“.
“Get ready for bank runs, a stock market collapse, and, perhaps, a money panic“, says Heinberg. “Such things have happened before (in 1833, 1837, 1857, 1907, 1920, and 1929), but this time it’s different. Now the problem is not just financial mismanagement; there is a deeper instability: the global economy is based on a fundamentally unsustainable exploitation of depleting natural resources, and that whole system is teetering.”
Quoting fellow “peakists” Michael Klare and Colin Campbell, Heinberg makes the point that due to depleting natural resources the complex financial system is in for a big shock.
Heinberg is pretty gloomy but also sees a silver lining: “If we hope to survive as a species, and if there is to be hope for millions of other creatures, we need to shrink the human enterprise. Economic contraction may be bitter medicine, but it’s part of the cure for what ails our planetary home“. We need to manage this economic contraction in an intelligent way, is the author’s recommendation:
“Intelligent management would start with an explicit commitment to redesign the global economy to run with less. We would assess ecosphere resources and identify a humane, equitable path toward gradual reduction in population and total consumption levels. We would focus on those aspects of life that bring us increasing satisfaction without requiring more inputs of energy and materials. We would re-acquaint ourselves with the values and virtues of community, self-sufficiency, and modesty. We would redesign our cities to eliminate cars, while developing renewable energy sources and educating a new generation of ecological farmers.”