The Coming World Crisis, John

John

An essay outlining the reasons for capitalist collapse within this century.

Read Time9 Minutes, 22 Seconds

In this essay I am going to outline why the collapse of the post-WW2 order, and of capitalism itself, is both inevitable, and going to happen within our lifetimes. Whether it will lead to communism is debatable, but it will certainly collapse. There are three main reasons for this, listed in order of importance. The first is climate change, and the implications that this has for society and the world economy. The second is automation, and the way in which capitalism cannibalises itself in order to keep profits high. The last is the world debt, and the potential this has to destroy the financial system and thus the basis for the world economy.

To begin with, climate change. Assuming if you are reading this, you are at least mildly intelligent and thus accept the reality of climate change, it is hard not to see the consequences of this on capitalism. I will list a few I think are the most important here. To begin with, there is the fact that resources we rely upon are becoming scarce. According to a UN scientific report, for the first time ever economies are shifting to energy sources that are less energy efficient. This is because, whilst there is still plenty of fossil fuel, it is increasingly difficult to extract it, and so the amount of energy required in the creation of more energy is rising – energy efficiency falls. This means that oil prices ought to rise, which will mean that the creation of commodities which rely on fossil fuel energy (almost all of them) will become more expensive, and profit falls whilst prices rise, and consumers buy less. This process should have begun around 20 years ago, but the only reasons why it hasn’t are because oil rent states have been flooding markets with cheap oil in order to compete with each other – leading to the accumulation of vast debt, which I will cover later. This is unsustainable – at some point in the near future, expect prices of basic industrial commodities to greatly rise – faster than wages. This will lead to mass poverty as basic good become unaffordable, like clothing, heating and electricity. Yet this is only the start. More dangerous is the effect climate change has on food.

Reduced rainfall in the global south due to climate change is mitigable by increased food exports from the north, but only until 2050. In the most optimistic scenario by 2080 food production will have decreased in all areas of the globe except China and north-western Europe, with catastrophic decreases in Africa and Central America of around 30%. The most pessimistic scenario sees catastrophic decline across the entire planet by 2080. This does not even factor in population growth. (See above) The pessimistic scenario is more likely, seeing as, if current trends of consuming 11 billion barrels of oil/year continue, we have to have completely stopped using fossil fuels by 2037 according to IPCC estimates. This, to me, is highly unlikely, especially seeing as oil rent states have a vested interest in actively preventing such drastic action. To achieve such a reduction, we would need to reduce our fossil fuel reliance per year 5 times faster than we currently do – and this is only to stop catastrophic climate change, not climate change full stop. This leads to a smaller food supply and increased food prices, only exacerbated by the use of biofuels to make up for higher oil prices – 40% of American corn is used in biofuel rather than food. What all this will lead to is a greatly increased rate of famine, higher food prices across the globe, and mass starvation in the global south. This will create a refugee crisis of unprecedented scale, as the richer and soon-to-be more fertile global north is inundated by starving migrants. This refugee crisis will only be worsened by many areas being made downright uninhabitable as sea levels rise and desertification accelerates. If we want an idea of how this will play out, then we need only look at history. A temperature drop of around 3 degrees over a 150 year period during the 8.2 Kiloyear event saw northern Europe abandoned by hunter-gatherers and early farming communities in Anatolia succumb to civil strife. Meanwhile, a temperature drop of only around 1 degree helped propel Slavic and Baltic tribes into German territory and Germans into the Roman Empire, to an extent causing the end of that entity. We can expect the same thing to happen in the future, expect coming from the south rather than the north, and involving hundreds of millions, not hundreds of thousands, of people. Accommodating such a huge number of refugees will be likely impossible and will create a social crisis akin to that suffered by the Roman Empire – and we all know how that ended.

The final impact of climate change I will be discussing is that increased oil prices mean that control of oil choke points is becoming ever more important in geopolitics. This is leading to a naval arms race not seen since the late 1930’s – with China, the USA, the UK, India, Japan and Korea building up their aircraft carrier fleets, and new powers attempting to control oil choke points, such as the Chinese military base in Djibouti and Indian plans for a base in the Malacca Straits. This has the potential to lead to a war that none of us will survive if it goes nuclear – but even if it doesn’t, it will lead to an increase in regional conflict, and wars tend to lead to domestic social crisis if you look at the experiences of WW1 and WW2 – both of which saw a surge in socialist activity in affected countries.

Next, the impact of automation. Increasing automation is inevitable in capitalist society, as it is the only way to continue capital accumulation in a competitive market (when increasing the working day without increasing the wage is not an option due to labour protections). The falling rate of profit, which based on current trends will reach 0% around 2060, requires automation in order to be staved off (see above). However, automation is no longer creating new jobs like it used to. Whilst unemployment is at a low in Britain right now, this is only because a large portion of the population are working on zero-hours contracts or other exploitative practices – so ‘real’ employment figures have never recovered from the Thatcher years. This is the same across the west. Furthermore, for the first time we are starting to see jobs in the services sector become automated – beginning with things like self-driving delivery vehicles, but increasingly even white-collar jobs like managerial work, teaching and finance. This will create an unemployment rate never dreamt of during the depths of the Great Depression – which, besides from the inevitable social crisis this causes, will lead to economic crisis as people are no longer able to buy commodities (especially as climate-change induced shortages lead to higher prices). The consumer base of capitalist society will simply cease to exist – companies will have nobody to sell their products to. Solutions like UBI simply do not work, because they lead to one of two possible outcomes. If funded out of money printing, we will face Venezuela-style hyper-inflation (which was also mostly caused by paying for social programs out of new money), or, if funded by taxation, we have an absurd situation in which companies are effectively paying people to buy their commodities – in which case no new profit is being made and so competition will see profits fall, and fast. A handy flow-diagram is provided below. Capitalism cannibalises itself through automation, destroying the very conditions it relies upon to survive.

Finally, the worlds debt. The world’s debt pile is hovering near a record at $244 trillion, which is more than three times the size of the global economy, according to an analysis by the Institute of International Finance. This is because for the last few decades we have made up for the falling rate of profit and falling real incomes by simply borrowing money. This was only made worse by the 2008 crisis, which saw governments inject trillions into the world economy in order to prop up the banks, and interest rates lowered to zero or even negative percent in order to incentivise investment and lead the economic recovery. Whilst this succeeded in preventing a second Great Depression in the short-term, it has stored up enormous problems for us in the long-term. Even if this process is repeated during the next crash, predicted for around 2020 by JPMorgan, it cannot be repeated forever. When companies go under in the next recession, they will be unable to pay off their enormous debts. This will mean that the moneylenders will be forced to demand their money back from other debtors in order to stay afloat themselves, and if the other debtors can’t do that, then the entire financial system collapses as the moneylenders go out of business. This means that in a matter of months the whole global economy could go into catastrophic meltdown. Nearly every major corporation, bank or government, and ever-increasing numbers of individual households, are in debt, to varying degrees. If the financial system collapses, then almost all of these entities will no longer have any money. Corporations will go bust, households will lose their homes, and governments will be unable to pay for the social programs and bail-outs needed to prevent the inevitable consequences. This is even more dangerous in the era of monopoly capitalism, in which if the parent company goes bust all of its subsidiaries will do too – creating a knock-on-effect that could see dozens of companies go under just for one company defaulting on its debts. In my opinion, such a financial collapse could be the catalyst that sets off the other problems I have identified, which have been prevented solely by excessive borrowing.

To conclude, capitalism’s collapse is not just inevitable, but will happen within our lifetime. What really matters is how we deal with the collapse. As far as I see it, there are three options. The first is a nuclear war, which would see everything made irrelevant. The second is eco-fascism, as westerners react to the refugee crisis with a turn to the far-right. The final option is socialism. I would argue that, excluding nuclear war, socialism is the most likely. This is because the mass unemployment created by such a collapse, and the weakening of government power as they are overwhelmed by refugees and can no longer afford their own maintenance, will create an unprecedented worldwide revolutionary scenario. In a situation in which the vast mass of people have absolutely no stake in the current system, and there is little fear of state repression as governments crumble, and the internet sees mass, spontaneous communication a fact of life, revolution is literally inevitable – unless we retreat to nuclear holocaust or a primitive form of eco-fascism. It truly is ‘socialism or barbarism’.

Sources:

https://www.bloomberg.com/markets/fixed-income

https://www.independent.co.uk/news/long_reads/capitalism-un-scientists-preparing-end-fossil-fuels-warning-demise-a8523856.html

http://paulcockshott.co.uk/publication-archive/Talks/politicaleconomy/Main_feedback_loops_in_world_system.pdf

https://www.preventionweb.net/files/1090_foodproduction.pdf

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