Instability is a Chronic Condition

“In contrast to the Industrial Revolution, the process of globalization is more compressed. Its evolution will be rocky, marked by chronic financial volatility and a widening economic divide.”

GLOBAL TRENDS 2015: A Dialogue About the Future With Nongovernment Experts, National Intelligence Council, December 2000.

“In both reports globalization is seen as a driver so pervasive that it will reorder current divisions based on geography, ethnicity, and religious and socio-economic status. [referring to reports Mapping the Global Future: Report of the Intelligence Council’s 2020 Project and Global Trends 2025: A Transformed World]”

Global Trends 2025: A Transformed World, National Intelligence Council, PDF version, November 2008

 

Economists have been characterizing the negative economic effects of events like the flooding of New Orleans by Hurricane Katrina and the tsunami and power plant catastrophes in Japan this year as temporary.   Technically, this is true, when the economic effects of each such event are looked at in isolation.  But that truth obscures a larger and more important truth about the world economy.

The scale and frequency of events with disruptive consequences for the world economy are increasing.  And, due to distribution of connected economic activities across the world, the negative economic effects of events like floods, earthquakes, and major business failures now spread across a larger swath of world economic activities than in the past

Trends Behind Growing Instability

Climate Change.

Global climate change will more frequently disrupt agricultural production around the globe, as floods, droughts, and other severe weather events strike more frequently.

Ongoing Changes in the System of Nation-States. 

Global economic and political leadership has become more fragmented.  Today, there are about 192 widely recognized sovereign nations, double the number in 1950.  A number of them have become much more powerful actors in the world economy.  As examples, Brazil has risen to the status of a regional power in the Americas, formation of the European Union has increased the leverage of member nations, and China is close to achieving parity with the U.S. as a global power.

Emerging Resource Limits

We have now reached a point in time when the list of essential resources that might become temporarily or permanently scarce, and thus much more expensive, is getting quite long.  Among those resources are oil, fresh water, fish stocks important to the global food supply, arable land.  We may succeed in developing alternatives to resources currently in use as they become more scarce, but transitions from currently used resources to alternatives will not be without economically consequential disruptions of supply.

Broken System of Wealth Distribution.

The world’s system of wealth distribution is becoming increasingly damaged, so global supply and demand will continue to be disruptively out of balance.  Populations that are major losers in  the global mal-distribution of income will often be drawn into political activism that leads to the kind of political instability and political violence that now afflict the Arab world.