Combine environmental issues with dwindling resources and the global economic crisis, and the near term future really doesn't look so rosy. On this topic, I have been enjoying an interview at Naked Capitalism with Satyajit Das (part 1, part2, with part 3 I think still to come) who has worked for more than 30 years in the finance industry. I'm looking forward to reading his new book "Extreme Money: Masters of the Universe and the Cult of Risk." Here's an excerpt from the interview which, as much as any analysis I've read, seems like a plausible picture for our world over the next few decades:
There are problems to which there are no answers, no easy solutions. Human beings are not all powerful creatures. There are limits to our powers, our knowledge and our understanding.
The modern world has been built on a ethos of growth, improving living standards and growing prosperity. Growth has been our answer to everything. This is what drove us to the world of ‘extreme money’ and financialisation in the first place. Now three things are coming together to bring that period of history to a conclusion – the end of financialisation, environmental concerns and limits to certain essential natural resources like oil and water. Environmental advocate Edward Abbey put it bluntly: “Growth for the sake of growth is the ideology of a cancer cell.”
We are reaching the end of a period of growth, expansion and, maybe, optimism. Increased government spending or income redistribution, even if it is implemented (which I doubt), may not necessarily work. Living standards will have to fall. Competition between countries for growth will trigger currency and trade wars – we are seeing that already with the Swiss intervening to lower their currency and emerging markets putting in place capital controls. All this will further crimp growth. Social cohesion and order may break down. Extreme political views might become popular and powerful. Xenophobia and nationalism will become more prominent as people look for scapegoats.
People draw comparisons to what happened in Japan. But Japan had significant advantages – the world’s largest savings pool, global growth which allowed its exporters to prosper, a homogeneous, stoic population who were willing to bear the pain of the adjustment. Do those conditions exist everywhere?
We will be caught in the ruins of this collapsed Ponzi scheme for a long time, while we try to rediscover more traditional sources of growth like innovation and productivity improvements – real engineering rather than financial engineering. But we will still have to pay for the cost of our past mistakes which will complicate the process.
Fyodor Dostoevsky wrote in The Possessed: “It is hard to change gods.” It seems to me that that’s what we are trying to do. It may be possible but it won’t be simple or easy. It will also take a long, long time and entail a lot of pain.