The last lap

Over the past century, world wealth as it is currently measured has more or less doubled every twenty years (1). The last doubling – from $33 trillion in 1995 to $77 trillion in 2014 – was due to, or at least coincided with the developed world outsourcing its production of goods and expanding its service sector, financial services in particular. Doubling world wealth again by 2035 would mean two more Chinas and other BRICS, twice as many shops and restaurants, and Wall Street along with other stock exchanges would have to double their output. This is possible. Africa and India are still on the side-line, Wal-Mart and Starbucks are not everywhere, and the financial market is just fiat money. The world may be able to double its wealth once again, but that will surely be the last time. Anyway, it needs a huge effort of the imagination to project both Africa and India as future power-houses of world growth, in the way China has been. So it is a reasonable assumption that the recent slowdown is here to stay. And a zero growth future threatens profit driven capitalism, which cannot exist without perpetual expansion.

Having reached the limits of global growth, capital’s predatory nature obliges it to feed on itself. With no new markets to conquer, capital must prey on other capital to continue growing. Companies buy up their competitors, or put them out of business by taking their market shares in price wars. This goes on all the time, but it accelerates and accentuates when the global market stops growing for lack of new regions to invest. And the free-for-all involves nations, who try to protect their production and their jobs by raising barriers and deploying military might. The yearly average of 4% global growth needed to more than double wealth every twenty years is over. Capital accumulation can only continue by absorbing existing capital. Instead of creating new productive investments, capital is increasingly concentrated. Instead of spawning, the big fish swallow the smaller ones, until only big fish are left in the sea and they have to eat each other.

Capital expands and then concentrates. During the expansion phase, venture capital cuts across the class divide. It appears open to all, with many new fortunes being made on merit and entrepreneurship. When expansion stalls, concentration dominates and egalitarian illusions of trickle down are dissipated in a brutal take-over contest. In the past, concentration has been followed by renewed expansion and growth. That alternation has probably ended, which is just as well because planet Earth would not survive another doubling of output. When the market stops growing, corporations must fight for a larger share of the existing market. Up until now, these periods of tension and conflict announced a new expansion. When that no longer happens, there must be a change of course.

At the beginning of the century a group of researchers put together a computer program and ran a number of scenarios for the next hundred years (2). Almost all of them showed a world collapsing around the 2050s. This was before the acceleration of climate change and the post-2009 financial stress. Add them in, and the collapse could be brought forward to the present decade. The “overshoot” that might have been avoidable twelve years ago is under way, the planet’s mutation has begun. Rising oceans and increasingly violent meteorological events will affect urban dwellers as well as agricultural societies. Both populations will be obliged to move, if their homes are under water and their crops are failing. This flow of migrants/refugees, even stronger than today’s, will cross seas and continents to save themselves. The trouble is that no one seems able to predict how quickly the consequences of greenhouse gases will get out of control. Things could be incremental over a long period, or they could suddenly go mad. And the same can be said for finance, where the overload of debts could go on piling up indefinitely, or it could break the camel’s back. In the graphics mentioned above, the end of growth is often abrupt. Only the more favourable scenarios soften the fall. Pollution and finance have the same best and worst outcomes. However, considering what has happened since the graphs were published, the least catastrophic endings are probably out of reach for both climate change and debts. All the signs seem to show that humanity is about to stumble off the cliff it has mindlessly built for itself.

1. in trillions of US dollars:

2014: 77.8

1995: 33.6

1975: 15

1955: 5.4

1930: 2.2

1900: 1.1

https://en.wikipedia.org/wiki/Gross_world_product

2. Limits to Growth, the 30-year update (2004)

http://www.whole-systems.org/world3.html

And this:

U.S. gasoline consumption, averaged over four weeks, rose 3.9 per cent from a year earlier to 9.39 million barrels a day through April 15, Energy Information Administration data show. Demand this summer will increase 1.4 per cent to a record, the EIA said April 12. Americans drove 232.2 billion vehicle miles in February, up 5.6 per cent from a year earlier, Transportation Department data show.

http://www.bloomberg.com/news/articles/2016-04-24/oil-bulls-plunge-into-market-as-u-s-gasoline-demand-hits-record?cmpid=yhoo.headline