Coronavirus augurs the inevitable collapse of a global economy in ‘overshoot’
It is a commonly observed fact that overloaded systems are sensitive to small perturbations.
The world’s economy is strained by at least two tremendous burdens: one is the increasing costs of production of mineral resources (don’t be fooled by the current low prices of oil: prices are one thing, costs are another).
Then, there is pollution, including climate change, also weighing on the economy. These two factors define the condition called “overshoot,” when an economic system is consuming more resources than nature can replace. Sooner or later, an economy in overshoot has to come to terms with reality. It means that it can’t continue to grow: it must decline.
These considerations can be quantified. It was done for the first time in 1972 with the famous report The Limits to Growth sponsored by the Club of Rome. Widely discredited at the time, today we recognize that the model used for the study correctly identified some key trends of the world’s economy. The study found that the double burden of resource depletion and pollution would bring economic growth first to a halt and then cause it to collapse, probably at some moment during the first decades of the 21st century. Even with optimistic assumptions on the availability of natural resources and of new technologies, the calculations showed that the collapse could at best be postponed, but not avoided. Later studies confirmed these results: collapse turns out to be a typical feature of systems in overshoot, a phenomenon called the “Seneca Cliff”, derived from a sentence of the ancient Roman philosopher Lucius Annaeus Seneca.
The coronavirus, in itself, is a minor perturbation, but the system is poised for collapse and the pandemic could trigger it. We already saw how the world’s economy is fragile: it nearly collapsed in 2008 under the relatively small perturbation of the crash of the US subprime mortgage market. At that time, it was possible to contain the damage but, today, the fragility of the system has not improved and the coronavirus pandemic may be a stronger perturbation. The collapse of entire sectors of the economy, such as the tourism industry (more than 10 percent of the world’s gross product), is already under way. It may be impossible to stop collapse from spreading to other sectors.
So, what exactly is it going to happen to us? Are we destined to leave an era of unprecedented prosperity to one defined by poverty? Will the coming crisis turn out to be so bad that it pushes us back to the Middle Ages?
It is true that all major epidemics in history have seen a robust rebound after the collapse. Consider that, in mid-14th century, the Black Death killed perhaps 40 percent of the population of Europe but, a century later, Europeans were discovering America and starting their attempt to conquer the world. It may be that the Black Death was instrumental in this rebound: the temporary reduction of the European population freed up the resources necessary for a new leap forward.
Could we see a similar rebound of our society in the future? Why not? After all, the coronavirus could be doing us a favor by forcing us to abandon the fossil fuels we use today. The current low market prices are the result of a contraction in demand and could be the straw that breaks the back of the oil industry. That will leave space for new and more efficient technologies. Today, solar and wind energy has become so cheap that it is possible to think of a society fully based on renewable energy. It won’t be easy, but recent studies show that it can be done.
That doesn’t mean that we can avoid a collapse in the near term. The transition to a new energy infrastructure will require enormous investments, which will likely be absent during the period of economic contraction we expect for the near future. But, in the long run, the transition is unavoidable and there is hope for a rebound toward a new economy based on clean and renewable energy, no more plagued by the threats of depletion and climate change.
Ugo Bardi is a member of the Club of Rome and he teaches chemistry at the University of Florence, in Italy. He is the author of the book “Before Collapse” (Springer 2019).
Illustration by Steven Castelluccia.