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Aug. 23, 2011, 12:01 a.m. EDT
By Paul B. Farrell, MarketWatch
SAN LUIS OBISPO, Calif. (MarketWatch) "â? There is a global economic boom coming, but unfortunately, that boom comes only after a systemic collapse of the global economy, markets and capitalism "â? a collapse that may well eliminate billions of people from the planet. Shocking? Cruel? Brutal? Yes.
But folks, that is the coded message in many recent warnings from environmental economists who finally realize that nothing will wake up the public. Nothing but a catastrophic system failure. Only then, a path to reform, recovery, a new boom.
WSJ Columnist Evan Newmark argues for his stance on bullish markets. It's a good time to buy and to focus on the long-term, he says. (Photo: Reuters.)
But wait, you ask: If the consequences are worse than an asteroid slamming into Earth, why don't we just plan ahead? Avoid the Black Swan? Why wait for some "creative destruction"? to wipe out capitalism, reduce the global population to 5 billion? Why? Because our human genes are not good at planning ahead for catastrophes. Our brains are designed for fight-or-flight. Otherwise we procrastinate. We respond best when our backs are against the wall. Then we rally the troops, go to war, so to speak.
Until we reach that point, we focus on everyday stuff, like jobs, the kids, short-term buy-sells and ideological stuff like today's anti-science, anti-intellectual political rhetoric. Free-market capitalism. Don't tread on me. Stuff like that keeps us in denial about the future. No, we don't plan, don't act until a crisis. Not till the asteroid is about to hit. Even then, we pray for divine intervention to rescue us. Or a Churchill to emerge, take charge of the impossible challenge, get people energized and focused on a common cause. Then we'll charge ahead, solve the problem. Until then, our brains can only think short-term.
And yet, the facts about the coming catastrophe are so obvious. Just apply a little grade-school math and economic common sense: Our planet's natural resources can reasonably support about 5 billion people. That's a fact. Another: Today we have 7 billion. That's a problem, 2 billion too many. We're consuming commodities and natural resources at a rate of 1.5 Earths, according to estimates by the Global Footprint Network of scientists and economists.
Armed with cheap steel, China is gaining ground in the renewable energy industry, while American companies are lagging in the sector. (Photo: Reuters.)
Flash forward: This scenario gets scarier than a horror film, very fast. United Nations demographers warn the Earth's population will reach 10 billion in just one generation, around 2050. That's two times the 5 billion the Earth can reasonably support. But the equation gets even scarier: Those 10 billion people will demand lifestyle improvements. That increases their consumption of scarce resources by 300% per person. Bottom line: 10 billion people will be consuming the equivalent of six Earths. Very bad news.
"You really do have to wonder whether a few years from now we'll look back at the first decade of the 21st century,"? writes Thomas Friedman, a New York Times columnist and author of "Hot, Flat, Crowded,"? "when food prices spiked, energy prices soared, world population surged, tornados plowed through cities, floods and droughts set records, populations were displaced and governments were threatened by the confluence of it all "â? and ask ourselves: What were we thinking? How did we not panic when the evidence was so obvious that we'd crossed some growth/climate/natural-resource/population redlines all at once?"?
Friedman quotes Paul Gilding, the veteran Australian environmentalist-entrepreneur, who described this moment in a new book called "The Great Disruption: Why the Climate Crisis Will Bring On the End of Shopping and the Birth of a New World."?
"The only answer can be denial,"? says Gilding. "When you are surrounded by something so big that requires you to change everything about the way you think and see the world, then denial is the natural response. But the longer we wait, the bigger the response required."?
Gilding's "Great Disruption"? is an eye-opener. But have no illusions that his or any book will be the wake-up call that will force us to plan ahead for a catastrophe. A former chief executive of Greenpeace, he admits screaming for 30 years to get the public's attention. He now confesses that his efforts had little impact. Why? The world is too deep in denial.
So, finally, he gave up. Nothing was working: "We tried. We failed."? Today his message is simple and blunt: "It's time to stop worrying about climate change. Instead we need to brace for impact."? Yes, an economic asteroid is closing fast.
What will trigger "The Crash"? he sees coming? "If you grow an economy or any system up against its limits, it then stops growing and either changes form or breaks down "? As our system hits its limits, the following pressures will combine, in varied and unpredictable ways, to trigger a system breakdown and a major economic crisis (or series of smaller crises) that will see us slide into a sustained economic downturn and a global emergency lasting decades."?
As Gilding sees it, the coming crash is "not a doom and gloom prediction, but an inevitable physical reality."? And yet, paradoxically, while the faint-hearted panic, this "perfect storm"? also signals sell and buy opportunities for savvy investors.
Shocks. "A series of ecological, social and economic shocks driven by climate change, particularly melting polar regions, extreme weather events"?changes to agricultural output"?severe economic stresses"?deep concern [among] the public and the global elites"?government intervention"? a sense of global crisis."?
Food. "Increasing demand and lower agricultural output driven by climate change ...sustained increases in food prices"?economic and geopolitical instability and tension"?developing countries blaming the West for causing climate change."?
Water. "A deeply degraded global ecosystem will further reduce the capacity of key ecosystem services, water, fisheries and agricultural land "? impact food and water supply "? political stability "? global security."?
Paul Farrell writes the column on behavioral economics. He's the author of nine books on personal finance, economics and psychology, including "The... Expand
Paul Farrell writes the column on behavioral economics. He's the author of nine books on personal finance, economics and psychology, including "The Millionaire Code," "The Winning Portfolio," "The Lazy Person's Guide to Investing." Farrell was an investment banker with Morgan Stanley; executive vice president of the Financial News Network; executive vice president of Mercury Entertainment Corp; and associate editor of the Los Angeles Herald Examiner. He has a Juris Doctor and a Doctorate in Psychology. Collapse
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