Friday 2 April 2010

Things fall apart

Yesterday I wrote about Joseph Tainter’s and Jared Diamond’s different ideas about what had caused civilisations in the past to “collapse”, or move over time to a less complex state. And I mentioned that David Korowicz has written a new paper, for Feasta, which builds on those ideas but concludes that, in the case of our present civilisation, a collapse to a much less complex state might happen very quickly.

Korowicz says this because our economy, you might say our civilisation, has evolved in such a way that we now have a large number of systems that are all essential to maintaining business as usual, but each of which depends for its proper functioning on all the others. Manufacturing of food and other consumables, making and repairing the capital equipment used to make those consumables, the electricity supply, water and sewage, oil or gas or coal production, law and order, international trade, patterns of trust in society, each of these depends on all the others to continue functioning properly. Importantly, making our everyday goods now depends on a huge number of components, each sourced from specialist manufacturers spread all around the world. Villages in the ancient Roman or Greek empires were probably largely capable of meeting their basic needs for food, water and energy, so that as more complex functions of these civilisations began to wind down, these basic systems largely continued to function. But in our world, there’s very little we can do that doesn’t rely on highly technical supplies that come from all over the world and depend on our civilisation’s most complex structures in order to provide them at all. We have lost our resilience. (The most technically sophisticated of our goods are likely to be the least resilient: computer chips, for example, are the final output of a bewilderingly complicated supply web that seems very unlikely to survive a major shock.)

The financial system might well be the place where the tears start to appear in this net of interwoven threads. The last “credit crunch” has caused some pain, but so far the masters of the universe in the City are assuming that we’ll grow our way out of it, and that in that growth new profits lie in wait. But, some time pretty soon, they’re going to realise that the world’s energy supply is not going to go on growing, and therefore the world’s economy is not going to go on growing. It might well start to shrink. Now, in a growing economy, loans can be repaid with interest; but in a shrinking one not even the original loan can be repaid. Once the financiers realise this they will quickly start to switch their investments away from shares and bonds and into “real” assets like gold and land. This means that neither companies nor governments will be able to borrow money. They will retrench, jobs will be lost, consumption will fall and so on. International trade may grind to a shuddering halt as banks are no longer in a position to intermediate. Governments will be bankrupted as they can’t raise credit to service existing debts. They may be tempted just to print more money, resulting in hyperinflation. Supply chains, particularly for the most high-tech products, will fracture. Roads and bridges will start to deteriorate for lack of maintenance funds. Extraction rates for coal, other fossil fuels and other minerals may fall rapidly as energy companies lack the money or the machinery to extract them, and companies and individuals lack the money to buy them.

Food supply may be hit particularly hard. On one level, the land will still yield food for those who have the ability to work it. But the present arrangements for working it might not work, if there’s a lack of diesel for tractors, or replacement components for machinery. City-dwellers who need to buy food might have no means of buying it – no useful work to do in return for the food they need. [I think this could result in large numbers of people abandoning cities for the countryside, resulting in an emptying-out of cities as has already happened in Detroit.]

So, that’s what I think is likely to happen – though I accept there are lots of other, plausible scenarios. Tomorrow I want to think about what we can do to prepare for it.

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