IEET > Rights > Economic > Vision > Fellows > Jamais Cascio > FreeThought > Futurism > Technoprogressivism
Cycles of History
Jamais Cascio   Dec 19, 2008   Open the Future  

A new economic superpower undermines established economic leaders. The collapse of complex financial instruments turn a boom into a bust. Banks fail in waves. Unemployment reaches up to 25% in some areas. A global depression holds on for more than two decades. Class warfare breaks out. Transportation networks stall—along with industries dependent upon them—as the main “fuel” for transportation disappears. Pandemic disease exacts a terrible toll. Religious fundamentalism skyrockets. Totalitarianism rises around the world.

I’m describing the 1870s-1890s. Hopefully, I’m not also describing the next couple of decades.

Historian Scott Reynolds Nelsen argues in the Chronicle of Higher Education that today’s financial crisis bears a much closer resemblance to the Panic of 1873 and the resulting Long Depression than to the more familiar Great Depression of 1929. He writes:

But the economic fundamentals were shaky. Wheat exporters from Russia and Central Europe faced a new international competitor who drastically undersold them. The 19th-century version of containers manufactured in China and bound for Wal-Mart consisted of produce from farmers in the American Midwest. [...] The crash came in Central Europe in May 1873, as it became clear that the region’s assumptions about continual economic growth were too optimistic. [...]

As continental banks tumbled, British banks held back their capital, unsure of which institutions were most involved in the mortgage crisis. The cost to borrow money from another bank — the interbank lending rate — reached impossibly high rates. This banking crisis hit the United States in the fall of 1873. Railroad companies tumbled first. They had crafted complex financial instruments that promised a fixed return, though few understood the underlying object that was guaranteed to investors in case of default. (Answer: nothing).

Among the results of the 1873 Panic & Long Depression (lasting until 1896) were the labor movement and religious fundamentalism in the US, modern anti-semitism in Europe, and (according to Hannah Arendt) the origins of totalitarianism.

As for transportation networks and pandemic, they were actually connected issues. In 1872, equine influenza took hold in the US, infecting close to 100% of all horses, with a mortality rate ranging from 1-2% to 10%. The “Great Epizootic of 1872” froze horse-drawn transportation (even leaving the US cavalry on foot), which in turn stalled trains because of the lack of coal transport.

As a preview of peak oil it’s admittedly shallow, but the similarities are there. The damage to transportation and industry in 1872 was a significant multiplier to the financial crisis; a modern collapse of transportation—even if equally temporary—would be potentially even more devastating.

Our understanding of and tools for managing the global economy are better now than in the 1870s, and there are enough divergent drivers to make the overall parallel more instructive than spooky. But while we may be missing some of the factors that made the Long Depression so bad, we have plenty new elements that threaten to make the current situation even worse: climate disaster, networked terrorism, and much more deeply-linked economic interdependence between states.

If we generalize a bit from the 1870s-1890s, a handful of key issues emerge as likely to have echoes today:

  • Aggressive self-interest on the part of states, despite clear potential to damage the overall economic/political structure;
  • Desperate need to find scapegoats;
  • Embrace of religious extremism as a way of finding support and solidarity;
  • Heightened conflict between economic classes and political movements.

    None of these will be particular surprising to observers of our present condition. Those of us in the foresight game have included some or all of these in many of our more unpleasant scenarios. Nonetheless, it’s sobering to see stark evidence that a previous, similar economic crisis had these exact kinds of results.

  • Jamais Cascio is a Senior Fellow of the IEET, and a professional futurist. He writes the popular blog Open the Future.



    COMMENTS

    This is the beginning of the Peak Oil permanently worsening global depression. It is unlike any other period of human history. It is the beginning of the end of civilization.

    Independent studies conclude that Peak Oil production will occur (or has occurred) between 2005 to 2010 (projected year for peak in parentheses), as follows:

    * Association for the Study of Peak Oil (2007)

    * Rembrandt Koppelaar, Editor of “Oil Watch Monthly” (2008 to 2010)

    * Tony Eriksen, Oil stock analyst (2008)

    * Matthew Simmons, Energy investment banker, (2007)

    * T. Boone Pickens, Oil and gas investor (2007)

    * U.S. Army Corps of Engineers (2005)

    * Kenneth S. Deffeyes, Princeton professor and retired shell Geologist (2005)

    * Sam Sam Bakhtiari, Retired Iranian National Oil Company geologist (2005)

    * Chris Skrebowski, Editor of “Petroleum Review” (2010)

    * Sadad Al Husseini, former head of production and exploration, Saudi Aramco (2008)

    * Energy Watch Group in Germany (2006)


    Independent studies indicate that global crude oil production will now decline from 74 million barrels per day to 60 million barrels per day by 2015. During the same time, demand will increase. Oil supplies will be even tighter for the U.S. As oil producing nations consume more and more oil domestically they will export less and less. Because demand is high in China, India, the Middle East, and other oil producing nations, once global oil production begins to decline, demand will always be higher than supply. And since the U.S. represents one fourth of global oil demand, whatever oil we conserve will be consumed elsewhere. Thus, conservation in the U.S. will not slow oil depletion rates significantly.

    Alternatives will not even begin to fill the gap. And most alternatives yield electric power, but we need liquid fuels for tractors/combines, 18 wheel trucks, trains, ships, and mining equipment. The independent scientists of the Energy Watch Group conclude in a 2007 report titled: “Peak Oil Could Trigger Meltdown of Society:”

    “By 2020, and even more by 2030, global oil supply will be dramatically lower. This will create a supply gap which can hardly be closed by growing contributions from other fossil, nuclear or alternative energy sources in this time frame.”

    http://www.energywatchgroup.org/fileadmin/global/pdf/EWG_Press_Oilreport_22-10-2007.pdf

    With increasing costs for gasoline and diesel, along with declining taxes and declining gasoline tax revenues, states and local governments will eventually have to cut staff and curtail highway maintenance. Eventually, gasoline stations will close, and state and local highway workers won’t be able to get to work. We are facing the collapse of the highways that depend on diesel and gasoline powered trucks for bridge maintenance, culvert cleaning to avoid road washouts, snow plowing, and roadbed and surface repair. When the highways fail, so will the power grid, as highways carry the parts, large transformers, steel for pylons, and high tension cables from great distances. With the highways out, there will be no food coming from far away, and without the power grid virtually nothing modern works, including home heating, pumping of gasoline and diesel, airports, communications, and automated building systems.

    This is documented in a free 48 page report that can be downloaded, website posted, distributed, and emailed: http://www.peakoilassociates.com/POAnalysis.html

    I used to live in NH-USA, but moved to a sustainable place. Anyone interested in relocating to a nice, pretty, sustainable area with a good climate and good soil? Email: clifford dot wirth at yahoo dot com or give me a phone call which operates here as my old USA-NH number 603-668-4207. http://survivingpeakoil.blogspot.com/

    Yes, the production of oil will decline.  But so will the demand. 

    This is because the strength of the dollar will decline.  All currencies - and all commodities - will decline.  The cause is Peak Globalization.  The war economy is finding it more difficult to impose its will.  Local currencies will soon be the most secure investment.

    Remember, oil was worthless before the economy was large enough to make use of it.  It had nothing to do with the supply of oil.

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