Global trends: A perfect storm

We find ourselves in the midst of fundamental changes brought on by trends that are, and will continue to, radically shape the world in which we live. These trends are better described as "meta" trends because as they give rise to changes that are complex, long-lasting, profound and borderless. Among other things, this long list of trends includes the growing scarcity of important resources (water, fuel and food), climate change and population growth.

These trends have many varied, overlapping, complex and highly interdependent primary, secondary and tertiary effects. The media is full of reports of how high oil prices, the water shortage, population growth and natural disasters have exacerbated the existing global food crisis. The complex nature of the trends means there are no clear singular causes, only a seemingly "perfect storm" of outcomes.

Despite the alarm, on the surface the outlook is "business as usual" (at least for those businesses and markets not adversely affected by these trends). Indeed, in many ways, climate change and the other trends represent little more than new business opportunities.

As world food shortages have exploded into a full-blown crisis, companies selling goods for agricultural production have increased their advertising. Many of these products rely on deliberately misleading advertising attesting to their alleged environmentally friendly nature (a practice dubbed "green washing").

In reality, however, many of these products would most likely intensify agricultural production practices that damage the environment. For example, selling advanced water pumps to water-strapped countries to increase crop production may help today's food crisis, but will only deepen tomorrow's water crisis.

Certainly, capitalism and open markets thrive on innovation, entrepreneurship and opportunism. There will always be individuals and organizations that stand to reap financial gains by finding an unexploited market niche, whether during times of stability or crisis. For instance, the computer and software company Apple is on one end of the spectrum, while the energy conglomerate Halliburton is on the other.

The vast majority of cases are less than straightforward. Market opportunism has shaped capitalist growth (and capitalism) throughout its history. At its best, it's a sign of a healthy and dynamic market; but at its worst, market opportunism is merely business with no regard for principles valued by society or for consequences.

An important critique of globalization is the tendency toward lawlessness of businesses on the world market. Companies and individuals exploit differences in local laws and knowledge between their host and home countries to engage in abhorrent practices to yield a global competitive advantage. This practice, unfortunately, is typical: Individual companies and businesspeople rarely claim responsibility for the outcome (whether direct or indirect) of their commercial activities.

In crisis situations, however, aggregated opportunism may ultimately exacerbate the problems we will face - problems to which very few of these opportunistic actors will be willing to freely commit resources (or profits). Most will instead look to governments (in other words, taxpayers) and grassroots movements to find and fund needed solutions.

But can governments alone be relied upon to lead the search for solutions? Sadly, this is not as clear as it should be. Much like businesses, governments and their officials can be notoriously short-sighted and strongly motivated by influential interest groups and other power-holders in society.

The trends we face are borderless, transnational and require international cooperation to solve. While policy responses can often be swift, when it comes to putting solutions to some problems in place, by design national policy is almost always meant to benefit the nation or some national power-based group.

(For instance, the external pageBBC reportedcall_made on 23 August that Peruvian policymakers had dissolved laws protecting tribal lands in the Amazon; The external pageGuardian reportedcall_made on 13 August that substantial areas of the Amazon would be cleared for oil and gas exploration. This is, of course, in addition to the areas currently being cleared for crops for the production of biofuel.)

In fact, the current controversy surrounding the "biofuels alternative" precisely demonstrates the complexity and interconnectedness of the fuel problem.

While initially heralded as the solution to high oil prices, biofuel production rapidly expanded as a result of government policy and explicit agricultural subsidies. However, the secondary and tertiary effects (driving up the costs of several related commodities, exacerbating the food crisis in some countries, and the expansion of agricultural production processes that in some countries profoundly harms the environment) were poorly explored.

Scientific American recently published an article - external pageThe Ethics of Climate Change: Pay now or Pay More Later?call_made - in which the author, John Broome, presented some of the ethical considerations economists face when evaluating the well-being of future generations using cost-benefit analyses, among other tools.

Broome notes that in the ensuing debate about which tools should be used and how, many economists have resisted taking any stance on the question of ethics. Instead, many have preferred to leave ethical decisions to the public domain.

Specialist knowledge (ideally) informs public decision-making. While leaving ethics out of the debate may simplify the discussion among economists, doing so is a failure both to assume the leading role that experts are accorded and to address properly the magnitude of decisions that will be based on their calculations.

In all fairness to the ideal of free market capitalism, many will insist that the markets will adequately respond to any such crisis. While this is the case more often than not, the opposite can also be true.

Many have argued that commodity speculators bear some responsibility for the rapid rise in fuel and other commodity prices. But there is another aspect to bear in mind: How can one continue to assume that the market will be able to adequately respond when the market itself will be increasingly disrupted by events related to climate change and natural disasters - not to mention financial instability and crises cause by market activities such as the US housing market crisis?

Assumptions about market responses are ultimately assumptions that the profit motive will move the markets to meet the demand. The profit motive is of course at the heart of the market opportunism that sustains any drive to cash in on a crisis. But if all the dire warnings about the future are true and do lead to difficult times ahead, these trends may well force the decline of free market capitalism as we have come to know it.

Capitalism requires cheap labor, cheap transportation, open markets, a reliable legal fabric and relatively cheap/abundant inputs/supplies, among other things, to function well. The 19th century theorists who extolled the virtues of free markets assumed public goods were abundant and their supply unlimited.

Today, we know different; even under the best conditions, rising costs eventually outweigh returns and diminish profitability. Larry Rohter addresses this in the New York Times piece, external pageShipping Costs Start to Crimp Globalizationcall_made, where he examines the impact of the cost of oil on world markets.

Heading off these worst-case scenarios will require a collective effort to encourage market activities that are not exclusively centered on ever-increasing profits and to engage in even more debate, not only in the public realm, but certainly among those specialists and experts who shape the decisions we make.

Difficult as it is, experts need to pick up the mantle and pitch into the messy forum of climate change and what it means for their work. They will also need to work more closely with governments and businesses to better understand the complexity of these problems and solutions. In fact, we will all need to do so for all the different aspects of our lives: as consumers, employees, businesspeople, etc. Long held concepts will have to reconsidered, reconfigured and some abandoned.

Eventually, profits and narrow political interests need to settle beside (or fall behind) the interests of cooperation, the public good and sustainability. Sustainability, once the derided buzzword of environmentalists, will increasingly shape the kind of approaches that will be needed to weather the coming changes. Would "sustainable capitalism" (whatever that might be) still be "capitalism"? Given the kind of future we face, does it matter?