Archive for December 22nd, 2010

Uncharted Territory

We live in an exciting era, one of vast cultural change, political transformation, and economic turmoil.   Yet as we near 2011, it feels different, as if we’re entering territory even more uncharted, confusing, and dangerous than in the past.  Even as technology soars and it seems that daily life remains wired (or Wifi) and normal, the list of uncertainties is large.

1.  Oil.   As I noted, we are emerging from the oil century, where very cheap energy allowed a massive increase in production and enhanced mobility.  The IEA believes oil production peaked in 2006, meaning we could be facing tremendous increases in oil prices soon, especially if the economy perks back up.  Even in recession oil is inching back towards $100 a barrel.  What will a perpetual oil crisis look like?  How will the world respond, and how different will the reactions be on different parts of the planet?

2.  Dollars.  The tremendous growth of public and private debt in the US threaten the role of the dollar as the main global reserve currency.  Already shifts towards Euros and Yen are taking place, with the dollar helped by the fact those other currencies have their own problems.   Gold has increased in value, and unless there is some sign that the US can both decrease debt and reduce its current account deficit, it’s only a matter of time before the dollar loses significant value.    That may not be a bad thing, if it’s a moderate loss of value.    In a worst case scenario, it could be hyperinflation.  Of course, Japan has gone into tremendous debt and its suffering deflation.  That’s a possibility too!

3.  Climate Change.   The propaganda war waged by big business in the US has made skepticism of global climate change the norm, but world wide scientists are convinced it’s happening, and we’ve already seen examples.   Weather has gotten more extreme and dangerous, and this is likely to continue.  What will that do to the world economy, to political stability, and world food supplies?   Again, estimates range from complete havoc to relatively minor adjustments.   And it’s not just heat, but extreme cold and harsh winter weather can be an outcome of climate change.

4. Terrorism.   It never warranted the fear that overtook the population after 9-11, but it’s also more dangerous than the apathy the issue of terrorism evokes now.   The most dangerous type of attack would be one that hits oil supplies, but the possibility of nuclear terror as well as simply high profile attacks is real.   There are also home grown radical groups that could strike, it’s not just Islamic or third world terror that is a threat.   Except for terrorism that hits oil supplies, most scenarios suggest limited and minor physical destruction in any terror attack.  Even nuclear terror would be contained to a relatively small area.   Yet the cultural, economic and psychological ramifications could be tremendous.  Terrorism is most effective when it causes the victim of the attack to engage in self-destructive behaviors, something that we experienced after 9-11 as we got involved in a war in Iraq which weakened us, and we opened up the spigots of cheap credit which helped bring about the economic crisis.   What we do in response to terrorism is potentially more dangerous than the attack itself.

5.   Global depression.  Beyond concerns about the dollar noted above, the world economy could remain enmeshed in a global depression driven by high debt levels across the industrialized world, higher energy costs, and no clear engine of growth to pull us forward.   If this persists, crises and war would become more likely in the third world, while the first world would experience growing unrest and instability.

6.  Political jihad.   At a time when our problems are greatest, our politicians seem inept.   To be sure, President Obama does seem willing to try to work with Republicans and look for common ground to solve problems, but in both the GOP and the Democratic party strong forces want to simply fight war with the other side.   At some level this is OK — feverish rhetoric and political theater are the norm, so long as at the end of the day the two sides recognize that they have to do something to address the problems, even if it doesn’t fit their ideological druthers.   Too often, though, deluding themselves that standing in “principle” means never compromising, democracy gets sabotaged by extremists.   The rhetoric on the right seems more poisonous, as talk radio and Fox News skew coverage in a way that to me is clearly propagandistic.  MSNBC does so on the left, but without as much efficacy.   Right now, it’s still more spectacle than reality, but we’re close to a line where democracy could become dysfunctional if people start seeing the other side as evil, un-American or akin to traitors.    This would be a bad time for that to happen.

7.  Regional conflicts.   Tensions in Korea, the Mideast, Iran, and elsewhere could create a crisis that could have disastrous ramifications.   Given the other problems we face, we’d be best advised not to meddle in other peoples’ conflicts.  Unfortunately, the US like any great power has a hard time reconciling a loss of power with a need to reduce commitments.  We have to rebalance our commitments with our capabilities to avoid getting dragged into something very dangerous and self-defeating.

All that said, the future isn’t necessary going to be suffering and pain!   Technology is growing by leaps and bounds, and the globalization that makes us vulnerable to China’s choice of what to hold as a reserve currency also makes China vulnerable to any impact a US economic collapse would have on world markets.   We’re in this together, and as long as leaders can see that, they can avoid taking the path of fear and scapegoating.

In Europe the EU is a shining example of how cooperation and recognition of mutual self-interest yields results far superior to the myopic self-interest of the first half of the 20th Century.   They’ve also been quietly positioning themselves for effective reaction to both environmental and energy crises.   If they can make subsidiarity real, and recognize that new technologies mean more power can be devolved back to individuals and localities, and not centralized in Brussles or even state governments, they can model a new kind of political organization, one that might suggest a successor to the increasingly obsolete sovereign state.

If worst case scenarios are avoided, and cooperative innovation embraced, we can chart a future in which we overcome these challenges.  The key is to let go of past ways of thinking about the world, and recognize that we’re entering a new era where a new kind of thinking about politics, self-interest, and human values is necessary.   Are we up to that challenge?  Can the US play a leading role, or will we try to hold on to old ideals, kicking and screaming as reality brushes aside the old order?  I guess that’s up to us.