Stability begets instability: The challenges of the post-2008 world
Most people value stability in their lives. And, this makes perfect sense. Stability usually means an adequate, secure income; an established group of friends and family members with whom we are close; an identity in our communities based on our jobs, community involvement, and personal networks; physical safety in our daily lives, that is, no war or extreme violence where we live; and relative psychological calm that reflects that stability.
But humans value other things such as variety and novelty. In short, we can get bored. And, in order to address our boredom, we must actually seek out instability in our lives. We proceed to upset the very stability which we believe makes us comfortable and safe by engaging in activities that subject us to physical, financial and emotional risk such as sports, gambling or new relationships.
There is, of course, the disruption of our routine that comes from external events, from things that we do not necessarily choose: the loss of a job, a divorce, the death of a loved one, or injury due to accident. External events can also be positive: an unsolicited job offer, an unexpected romance, or the miraculous recovery of a loved one.
As it is with individuals, so it is with nations and complex social systems such as corporations and markets which reflect these same seemingly contradictory desires for stability, but also variety and novelty. It seems the social mood cannot go long without experiencing some interesting disruption: a war, an economic boom or a bust, a change of political parties, a change in fashion, a disruptive technology.
As moderns we are taught that constant change is good and a sign of progress. It should not seem strange that all this change can undermine our personal stability. We frequently trade excitement for stability as individuals, as nations, even as part of complex systems such as international corporations in order, we hope, to gain more power over our lives, more convenience, or a higher level of stability.
What we don't bargain for is that stability itself can ultimately be the biggest disruptor in our lives and the life of our society. Holding on to stability when adjustments are necessary can be not only disruptive, but occasionally fatal.
When it comes to health, an obvious example is the smoker who does not wish to alter his or her routine, even in the face of a physician's warning. A stable ritual that involves a pack of cigarettes a day can easily end in disease and premature death, a rather pronounced discontinuity.
A long-held job can seem secure even as technology and competitors are undermining its viability. The longer one stays, the more safe it seems. Then comes the day of the unforeseen layoff and the disruption is enormous--from a regular paycheck to nothing.
A long marriage that dissolves can surprise outside observers who had assumed they were looking at a relationship that was rock-solid.
Stability over even longer periods can come to an unexpected end as well. The post-World War II era was characterized in general by cheap energy, a benign climate, and a remarkable geopolitical stability (meaning borders were generally stable).
The break-up of the Soviet Union was heralded as great achievement of the NATO powers. But this break-up has led to almost continuous upheaval in and among the countries which previously made up the Soviet empire. The break-up seemed at least to make the neighboring countries of the former Soviet Union and more specifically, Russia, more secure because of the weakness of the new independent states--until now! Witness Ukraine.
We are finding increasing challenges to longtime geopolitical arrangements elsewhere as well. Perhaps the most topical development is the so-called Arab Spring which led to the overthrow of tyrannical regimes in many Arab countries. The result has been ongoing chaos in the Middle East and North Africa. Governance in Libya, Tunisia, and Egypt remains unsettled as groups continually vie for ascendancy, sometimes through violent means.
War in Syria and Iraq underline how non-state forces such as ISIS can successfully vie for and control land in recognized nation-states.
Long periods of absolutist or one-party rule prevented many of these countries from adjusting gradually to emerging realities. Often under such circumstances, the adjustment comes all at once, and it is big.
But the upset does not stop there. The Spanish region of Catalonia now demands its independence. The Schengen Agreement which allows for free travel across borders among European Union members and other signatories such as Norway and Switzerland is now in danger of unraveling as the refugee problem created by the war in Syria has made the agreement seem like a dangerous luxury.
The reabsorption of Crimea into the Russian Federation and the ongoing conflict with Ukraine do not bode well for settled borders.
In sub-Saharan Africa, the Democratic Republic of Congo has been in almost continual upheaval since 2000. Angola remains unsettled after a long civil war. Both had long periods of relative stability under colonial rule or dictatorship (in Congo). The inability to make more gradual changes needed for successful self-governance led to chaotic struggles for power that continue to this day.
Finally, in Asia a recently initiated contest over hegemony in the South China Sea between the United States and China seems nowhere near a conclusion.
As for the increasingly rapid changes in worldwide climate, they need little discussion as they have been much in the public mind recently as a result of the Paris climate talks. The benign climate which gave the world bountiful harvests to feed a rapidly growing world population is now history.
An obvious challenge to the food supply from a disturbed climate came in 2008 with spiking food prices and resulting food riots, particularly in Asia. We can only count on a temporary reprieve as climate change continues its inexorable march. We need to be particularly worried that the trajectory of climate change may soon leave its gradual upward course and experience a nonlinear spike that could bring rapid change.
The cheap energy--mostly fossil fuels--that brought us climate change also brought humans unprecedented (but very uneven) prosperity. Energy seems cheap now. But its low price reflects the pressure of previous record high oil prices on the world economy from 2011 through 2014. That pressure is in part responsible for the current economic slowdown (some say recession) that is evident worldwide which reduced demand growth for oil and led to its price slump.
All the oil producers are pumping oil as fast as they can. There is little spare capacity available. When combined with drastic cuts in investment in exploration and development which will reduce future supplies, the lack of spare capacity spells considerably higher oil prices when demand recovers. I am doubtful of those who predict a decade of low oil prices (which, in my view, could happen only if we have a depression that lasts that long).
Which brings us to the current excitement in the financial markets. Central banks and governments have not recognized that the end of cheap energy, the end of a benign climate and the end of geopolitical stability imply radical restructuring for the way in which we govern ourselves. Instead, we have been treated to extraordinary attempts to return us to business-as-usual.
Governments have propped up failing banks and engaged in huge deficit spending hoping to spur renewed, self-sustaining economic growth. Central banks have induced record-low interest rates in most places in order to encourage borrowing. Despite these extreme measures, worldwide economic growth has remained subdued, and now, even that subdued growth is waning.
In addition, the central banks have labored to push stocks and bonds higher in a misguided effort to increase economic activity. By preventing the needed adjustment in those markets so that they would be priced to our new realities, they have only made the ultimate adjustment more likely to be sudden and catastrophic.
Because most governments do not recognize the central role of energy in the economy--it's not just another commodity--they have failed to see how quickly we must proceed with a transition away from fossil fuels and toward a renewable energy economy. Future supplies of fossil fuels are endangered by low investment. Sufficient alternatives have not been put in place because of the false hope that we will soon return to business-as-usual as it was prior to 2008.
The remarkable stability that many of us have experienced in our lifetimes is coming to an end. Change can challenge us and can actually make us more resilient human beings: more creative and more capable. But that can only happen if we embrace the challenges that come along with that change.
So far, the vast majority of elected officials, corporate and nongovernmental organization managers, and community leaders have focused on trying to re-establish a stability out of the past. That effort can only lead to greater discontinuities in the future making the process of adaptation to new realities all the more difficult.
Image: Caricature of French President Armand Faliero, depicted flying over Paris on the occasion of the opening of the International Aviation tour. 1911. Artist Henri Aurrens (1873-1934). Wikimedia Commons.
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