Predicting what will happen in the next year is difficult. The trends in the world economy are pretty clear, but it is much harder to be certain when those trends will materialise.
The central problem for our civilisation is that we live within an increasingly global economy but lack effective tools to manage either the international economy or the planet’s environmental pressures. Any economy where making money is the central driver of what takes place is exceptionally vulnerable to experiencing the same trends that caused so much harm within more national economies in the 19th century.
Before governments began to assert a degree of control over the excesses of capitalism the logic of finance produced some dramatic outcomes. Economies grew very rapidly but the benefits of that growth were not shared equally and it came at huge cost to the environment. The rich got staggeringly richer and eventually people like the Rockefellers, Carnegies and the Vanderbilts stored up massive wealth. The poor came back to squalid overcrowded housing after long, hard hours of work. Unguided chaotic markets produced huge booms followed by massive busts.
Pollution was rife as factories dumped chemicals and waste into rivers, because there was no cost to the polluter, and no-one was looking to protect the wider environment from the ravages of whatever was most profitable for a few powerful people to do.
Guided capitalism, the free market and globalism
That situation was significantly and progressively changed as the 20th century moved forward and governments learned that capitalism could be managed and guided – populations that had won the right to vote demanded the creation of a safety net via the welfare state. But that guidance was always mainly from the nation state. The strong international controls that were set up at the end of the second world war only worked in a world dominated by the United States of America, and largely served that nation’s best interests and those of its allies.
All that changed during the free market revolution and rise in globalism which began in the early 1970s and has dominated economic thinking ever since. We are now back in the days of no effective global management and that has resulted in the re-emergence of some of the ugliest trends of early capitalism. The only real difference being that they are now being played out on a global stage.
The lack of international management
It is dangerous to try and run a global economy without genuine international management. The lack of management means that more and more money will be sucked up into the hands of the ultra-rich while the rest of us are going to find it harder and harder to live economically secure lives. Efforts to try and control global environmental disasters such as climate change, plastic pollution and loss of wildlife are hitting increasing resistance from powerful individuals, international companies and nation states that are making good money out of the old way of doing business.
The lightly regulated markets that these people operate in are incredibly vulnerable to booms and overvaluations followed by increasingly dramatic crashes. It is therefore almost certain that there will be another crash in the world economy. We just don’t know when or how dramatic that crash will be.
2008 financial crash
The last bad crash in 2008 pushed the global economic system to the very edge of total collapse. The free market traders who created the boom and bust were rescued by national governments taking on huge debts. Since then international financial markets have become even more exposed to risk as trillions of dollars have been squandered on bitcoins that are of no intrinsic value and are only of use for tax avoidance and to hide money from criminal activities. Stocks in much-vaunted companies are trading at ludicrous over-valuations, such as Tesla, which is worth more than all the other major car companies put together.
So the potential for a sudden loss of confidence in a group of high value assets is huge. Last time a collapse in one area of finance began it quickly spread to a loss of confidence in other parts of the system. That will inevitably happen again in the next crash. The difference is that there is no longer any government with the ability to take on the scale of extra debt which was needed last time round to rescue the system. Nor is there as much international collaboration. Above all there isn’t the intellectual understanding within powerful enough global financial institutions to enable a rescue effort to be organised at speed. Governments have still not recovered from the 2008 crash and the next one is likely to be even bigger.
Potential environmental and economic collapse
Put together vulnerable economic systems with an increasingly fragile environment and the potential for major collapse becomes deeply alarming.
The good news is that these people and these systems can be controlled and managed. We know that because it was achieved on a national basis in the highly successful years that followed the second world war. More importantly, there are still people and organisations trying to fight back against a world shaped in the best interests of the oligarchs which leaves the rest of us economically insecure and marginalised.
What no one can predict is the outcome of the battle between the forces trying to create a more positive future and those content to extract what they can regardless of the consequences for others or for the environment. All we can say for sure is that the battle between those powerful forces for oppression and those with a chance of creating a more optimistic future is going to dominate the coming years. We can only hope that battle is won before so much damage is done to the planet that it is hard for civilisation to survive.
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