Trade-off sistema financeiro cadeia de fornecimento de contágio cruzado

O especialista explica em detalhes como o próximo choque irá destruir a economia global.
Athit Perawongmetha / Getty Images.
A zona do euro está em um caminho para uma recessão profunda. Como uma das economias maiores e mais avançadas do mundo, a sua centralidade para um sistema de cadeias de fornecimento globais altamente interligadas é considerada como adquirida.
Explora o crescente risco sistêmico que se forma nos sistemas financeiros e comerciais globais. Usando a análise de sistemas complexos, ele explica que, dentro de algumas semanas do próximo grande choque econômico, como um grande fracasso bancário ou um país que sai da zona do euro, o contágio se espalharia rapidamente pelas cadeias de fornecimento globais, causando um "colapso econômico global irreversível".
Korowicz adverte que, na próxima crise, "nem a riqueza nem a geografia são uma proteção." As nossas co-dependências evoluídas significam que estamos todos juntos ".
Nós lemos o artigo e o reduzimos a seus pontos-chave.
Ver como: uma página slides.
As 5 principais tendências disruptivas que moldam o transporte e a logística pela equipe de pesquisa de BI Intelligence.

Trade Off: contágio cruzado de cadeia de fornecimento de sistema financeiro: um estudo no colapso sistêmico global.
Este novo estudo explora as implicações de uma grande crise financeira para as cadeias de fornecimento que nos alimentam, manter a produção em funcionamento e manter nossa infra-estrutura crítica. Utilizo um cenário que envolve o colapso da zona do euro para mostrar que a crescente complexidade socioeconômica pode espalhar rapidamente uma falha irrecuperável da cadeia de suprimentos em todo o mundo.
Este estudo considera a relação entre uma crise sistêmica global, monetária e de solvência e suas implicações para o fluxo de bens e serviços em tempo real na economia globalizada. Ele descreve como o contágio no sistema financeiro poderia desencadear o contágio semi-autônomo nas cadeias de suprimentos globalmente, mesmo quando os compradores e os vendedores estão vinculados por solvência, som de dinheiro e intermediação bancária. O contágio cruzado entre o sistema financeiro e as redes de comércio / produção se reforça mutuamente.
Argumenta-se que, para entender o risco sistêmico na economia globalizada, deve-se ter em conta a crescente complexidade (interconexão, interdependência e rapidez dos processos), a des-localização da produção e a concentração dentro dos principais pilares da economia globalizada. aumentou a vulnerabilidade global e abriu a possibilidade de um colapso rápido e em grande escala. O "colapso" neste sentido significa a perda irreversível de complexidade socioeconômica que transforma fundamentalmente a natureza da economia. Essas questões cruciais não foram reconhecidas pelos decisores políticos nem são refletidas no pensamento ou na modelagem econômica.
À medida que a economia globalizada se tornou mais complexa e cada vez mais rápida (por exemplo, logística Just-in-Time), a capacidade da economia real para capturar e transmitir globalmente a falha da cadeia de suprimentos e, depois, o contágio, tornou-se maior e potencialmente mais devastador em seus impactos. Em uma economia mais complexa e interdependente, são necessárias menos falhas para transmitir falhas em cascata através de sistemas socioeconômicos. Além disso, temos normalizado aumentos maciços na condicionalidade complexa que sustenta as sociedades modernas e nosso bem-estar. Assim, temos problemas para ver, não importa planejar essas eventualidades, enquanto o risco de ocorrência aumentou significativamente. A causa principal mais poderosa de tal evento seria um choque financeiro em grande escala inicialmente centrado em algumas das partes mais complexas e comerciais da economia globalizada.
O argumento de que uma crise financeira-bancária-monetária em larga escala e globalizada é provável surge de duas fontes. Em primeiro lugar, a partir do resultado e da gestão da super expansão do crédito e dos desequilíbrios globais e do crescente estresse na zona do euro e no sistema bancário global. Em segundo lugar, do risco manifesto de estarmos no auge da produção global de petróleo, e que a produção em tempo real acessível começará a diminuir nos próximos anos. No último caso, o apoio ao crédito de bancos de reserva fracionários, sistemas monetários e ativos financeiros são fundamentalmente incompatíveis com restrições de energia. Argumenta-se que nos próximos anos existem múltiplas rotas para uma quebra em larga escala no sistema financeiro global, compreendendo colapsos bancários sistêmicos, falhas no sistema monetário, crédito e vaporização de ativos financeiros. Esta ruptura, no entanto, e sempre que vem, é provável que seja rápida e desordenada e possa sobrecarregar a capacidade da sociedade de responder.
Consideramos um cenário para dar uma dimensão prática para entender o contágio da cadeia de suprimento, uma ruptura do euro e uma crise bancária sistêmica entrelaçada. Um simples argumento e modelagem irão apontar para a probabilidade de uma crise de segurança alimentar em dias nos países diretamente afetados e uma expansão inicialmente exponencial das falhas de produção em todo o mundo, começando dentro de uma semana. Isso reforçará e espalhará o contágio do sistema financeiro. Argumenta-se também que quanto mais a crise continuar, maior a probabilidade de sua irreversibilidade. Isso pode durar apenas três semanas.
Este estudo baseia-se em idéias simples tiradas da ecologia, da dinâmica dos sistemas e do estudo de redes complexas para enquadrar a discussão da economia globalizada. Os eventos da vida real, como os bloqueios de combustível do Reino Unido (2000) e o tsunami japonês (2011), são usados ​​para esclarecer a vulnerabilidade comercial moderna.
Imagem em destaque: papel rasgado. Autor: Billy Alexander. Fonte: sxc. hu/photo/1369352
David Korowicz é um físico que estuda as interações entre economia, energia, mudanças climáticas, segurança alimentar, cadeias de suprimentos e complexidade. A macroeconomia convencional não depende da tarefa de entender a sociedade e uma paisagem de risco em mudança. Outras ferramentas são necessárias. David foi um pioneiro em recorrer a idéias de campos como ecologia, complexidade e.
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& quot; Trade-Off & quot ;: Um estudo no colapso sistêmico global.
E agora uma coisinha para todos que constantemente tem uma sensação incômoda de que a qualquer momento o mundo está a uma curta distância das asas de uma borboleta longe da completa desintegração sistêmica: segundo David Korowicz da FEASTA e seu mais recente artigo: : Sistema financeiro de cadeia de abastecimento - Contagion cruzado: um estudo no colapso sistêmico global ". Isso pode ser o caso.
Sem mais delongas, nós entregamos o microfone ao autor:
Este estudo considera a relação entre uma crise sistêmica global, monetária e de solvência e suas implicações para o fluxo de bens e serviços em tempo real na economia globalizada. Ele descreve como o contágio no sistema financeiro poderia desencadear o contágio semi-autônomo em cadeias de abastecimento globalmente, mesmo quando os compradores e os vendedores estão vinculados por solvência, som de dinheiro e intermediação bancária. O contágio cruzado entre o sistema financeiro e as redes de comércio / produção se reforça mutuamente.
Argumenta-se que, para entender o risco sistêmico na economia globalizada, deve-se ter em conta a crescente complexidade (interconexão, interdependência e rapidez dos processos), a des-localização da produção e a concentração dentro dos principais pilares da economia globalizada. aumentou a vulnerabilidade global e abriu a possibilidade de um colapso rápido e em grande escala. O "colapso" neste sentido significa a perda irreversível de complexidade socioeconômica que transforma fundamentalmente a natureza da economia. Essas questões cruciais não foram reconhecidas pelos decisores políticos nem são refletidas no pensamento ou na modelagem econômica.
À medida que a economia globalizada se tornou mais complexa e cada vez mais rápida (por exemplo, logística Just-in-Time), a capacidade da economia real para capturar e transmitir globalmente a falha da cadeia de suprimentos e, depois, o contágio, tornou-se maior e potencialmente mais devastador em seus impactos. Em uma economia mais complexa e interdependente, são necessárias menos falhas para transmitir falhas em cascata através de sistemas socioeconômicos. Além disso, temos normalizado aumentos maciços na condicionalidade complexa que sustenta as sociedades modernas e nosso bem-estar. Assim, temos problemas para ver, não importa planejar essas eventualidades, enquanto o risco de ocorrência aumentou significativamente. A causa principal mais poderosa de tal evento seria um choque financeiro em grande escala inicialmente centrado em algumas das partes mais complexas e comerciais da economia globalizada.
O argumento de que uma crise financeira-bancária-monetária em larga escala e globalizada é provável surge de duas fontes. Em primeiro lugar, a partir do resultado e da gestão da super expansão do crédito e dos desequilíbrios globais e do crescente estresse na zona do euro e no sistema bancário global. Em segundo lugar, do risco manifesto de estarmos no auge da produção global de petróleo, e que a produção em tempo real acessível começará a diminuir nos próximos anos. No último caso, o apoio ao crédito de bancos de reserva fracionários, sistemas monetários e ativos financeiros são fundamentalmente incompatíveis com restrições de energia. Argumenta-se que, nos próximos anos, há múltiplas rotas para um colapso em larga escala no sistema financeiro global, compreendendo colapsos bancários sistêmicos, falhas no sistema monetário, crédito e vaporização de ativos financeiros. Esta ruptura, no entanto, e sempre que vem, é provável que seja rápida e desordenada e possa sobrecarregar a capacidade da sociedade de responder.
Consideramos um cenário para dar uma dimensão prática para compreender o contágio da cadeia de abastecimento: uma ruptura do euro e uma crise bancária sistêmica entrelaçada. Um simples argumento e modelagem irão apontar para a probabilidade de uma crise de segurança alimentar em dias nos países diretamente afetados e uma expansão inicialmente exponencial das falhas de produção em todo o mundo, começando dentro de uma semana. Isso reforçará e espalhará o contágio do sistema financeiro. Também se argumenta que quanto mais a crise persistir, maior será a probabilidade de sua irreversibilidade. Isso pode durar apenas três semanas. Este estudo baseia-se em idéias simples tiradas da ecologia, da dinâmica dos sistemas e do estudo de redes complexas para enquadrar a discussão da economia globalizada. Os eventos da vida real, como os bloqueios de combustível do Reino Unido (2000) e o tsunami japonês (2011), são usados ​​para esclarecer a vulnerabilidade comercial moderna.
Pense no papel de 78 páginas em anexo quando Nassim Taleb se encontra com Edward Lorenz e Malcom Gladwell se encontra com Arthur Tansley e Herman Muller se encontra com Werner Heisenberg e Hyman Minsky encontra William Butler Yeats, e o grupo resultante passa a noite bebendo ópio e fumando ópio, enquanto se envolve Disputa ilegal no 5º sub-porão do Moulin Rouge, cerca de 1890.
O produto final é espantosamente localizado e deve ser lido por cada pessoa, mesmo remotamente perto da política de configuração (e é por isso que não será).
Outro trecho bastante notável que trata do sistema financeiro de fornecimento de cadeia de contágio cruzado:
Algo desencadeia uma crise inter-relacionada da crise da zona do euro e da crise bancária, diz um default espanhol, que espalha o pânico e o medo em outros países vulneráveis ​​da zona do euro. Isso desencadeia um momento de Minsky quando os especuladores desalavancados no sistema bancário e bancário das sombras são forçados a desenrolar posições em um mercado unilateral (vendedores somente). O contágio do sistema financeiro passa de um ponto crítico em que os governos e os bancos centrais começam a perder o controle e o pânico gera um (feedback positivo) o aprofundamento e a ampliação do impacto global. No nosso modelo trópico da economia globalizada, o centro da chave bancária e do sistema monetário sai da sua faixa de equilíbrio, atravessa um ponto de inflexão e é afastado por feedbacks positivos para algum estado novo.
Isso liga diretamente a outro hub keystone, fluxos de produção. Bancos fracassados, temores de reemissão de moeda, temores de mais inadimplência, colapso das Cartas de Crédito e pânico crescente acabaram rapidamente com o comércio nos países mais afetados. À medida que a semana avança, as fábricas fecham, as comunicações são prejudicadas, o estresse social e o pânico do governo aumentam. Após uma semana, quase todas as empresas estão fechadas, há um risco crescente para a infra-estrutura crítica.
Quase imediatamente o comércio interno e as importações param nos países mais afetados e há prejuízos em um número crescente de outros países. O comércio é prejudicado globalmente através de uma crise de crédito. Isso prejudica as exportações de alguns dos países com maior comércio central, com algumas das dependências JIT mais eficientes do mundo. Isso reduz os insumos para a produção e o comércio em países que inicialmente foram fracamente afetados pelo contágio financeiro direto. Globalmente, a propagação do contágio comercial depende da complexidade, centralidade e tempos de inventário e uma vez que um limiar crítico é passado se espalha exponencialmente até que o efeito seja amortecido por um colapso global de produção em grande escala (implicando outro centro de referência, economias de escala são direcionadas fora do equilíbrio).
O contágio comercial e suas implicações alimentam o contágio do sistema financeiro, ajudando a causar mais desintegração. Os efeitos interagentes e mutuamente desestabilizadores dos centros de referência que saem do equilíbrio destroem o equilíbrio da economia globalizada, iniciando um colapso sistêmico.
O crescente deslocamento de risco em um sistema cada vez mais vulnerável está aumentando o risco de falha do sistema. Uma vez que o contágio do sistema financeiro atravessa um determinado limite, a desestabilização da economia globalizada será extremamente difícil de prender; Este ponto pode ser em apenas dez dias. Uma vez que ocorra um grande colapso do sistema, a escala, a histerese, a entropia, a perda de funções críticas, a falha de recursão e o desvio de recursos garantem que os recursos associados ao estado dinâmico anterior da economia globalizada nunca possam ser recuperados.
O que se segue explica por que os planejadores centrais deste mundo, todos bem conscientes das implicações do que acaba de ser dito, lutarão literalmente até a morte para evitar que o sistema global reconquista seu estado natural equilibrado, que por 30 anos eles tem avançado cada vez mais longe em outro para perpetuar o maior tempo possível, um status quo instável, que beneficiou um número desproporcionalmente menor de participantes sistêmicos e liderou o sistema muito além do seu nível de ponto de inflexão. Infelizmente, o sistema acabará por recuperar o equilíbrio: é isso que a natureza dita. Quando isso acontece, uma maneira politicamente correta de dizer o que acontece é que "o estado dinâmico anterior da economia globalizada nunca pode ser recuperado", enquanto um enquadramento menos eficiente seria "todo o inferno se libertará".
O autor continua:
Nós delineamos como o risco de um grande choque decorrente de décadas de expansão do crédito e desequilíbrios está crescendo. Nós também vimos que poderíamos esperar um choque semelhante dos efeitos do pico de petróleo na economia. O que unifica ambos é um colapso catastrófico decorrente de uma perda de confiança na dívida e da solvência dos bancos e dos governos. O que seria único é a escala do choque e sua capacidade de atingir o coração do sistema financeiro mundial. Mas as implicações não são apenas dentro do sistema financeiro e monetário. Eles afetariam imediatamente o comércio de bens e serviços reais. À medida que nossas economias se tornaram mais complexas, des-localizadas e de alta velocidade, as implicações nas cadeias de suprimentos podem ser rápidas e devastadoras.
Existem três pontos gerais que merecem destaque. Juntos, eles apontam para a probabilidade de que a crise, sempre que isso acontecer, possa ser muito grande e a sociedade despreparada.
O primeiro é a paralisia temporal:
À medida que os sistemas financeiro e monetário se tornam mais instáveis, os riscos associados a fazer algo significativo para alterar ou alterar o aumento do curso (ver também a discussão sobre aprisionamento na seção final). Além disso, a diversidade de atores nacionais, opinião pública, actores institucionais e percepções trabalha contra um consenso coerente sobre a ação. Portanto, a tentação é deslocar o risco imediato tomando uma ação mínima para evitar uma crise iminente. Isso aumenta o risco sistêmico. Alguns passos na crise em evolução podem ser tratados, por exemplo, um padrão grego. No entanto, cada nova iteração da crise provavelmente será maior e mais complexa do que a anterior, enquanto o sistema se torna cada vez mais resiliente.
Uma segunda questão é o que pode ser chamado de armadilha de reflexividade:
As ações tomadas para prevenir uma crise, ou os preparativos para lidar com as conseqüências de uma crise, podem ajudar a precipitar a crise. Portanto, para evitar a precipitação, a preparação deve ser baixa e abaixo do radar do público e dos mercados. Isso limita a extensão e o alcance da preparação, aumentando o risco de uma resposta caótica e lenta.
O ponto final é sobre cisnes negros e amp; sistemas frágeis:
O estresse crescente em nossa economia globalizada muito complexa significa que é muito menos resiliente, veja a discussão na seção 3.1 e na figura 2. Assim, um pequeno choque ou um evento imprevisível poderia estabelecer uma cadeia de eventos que poderiam impulsionar a economia globalizada ao longo de uma ponto de inflexão, e em um processo de feedback negativo e colapso.
Não se pode prever como esse colapso financeiro e monetário ocorrerá, ou quando. No entanto, nesta seção estamos considerando um cenário, idealmente, que, à luz do que sabemos das condições econômicas esboçadas anteriormente, parece ao menos razoável. Este cenário deve ser considerado um aviso, mas também um guia mais geral sobre como o contágio cruzado da cadeia de fornecimento pode operar em qualquer colapso financeiro / monetário.
Todo mundo que tenha curiosidade sobre o modo como o jogo final europeu (não pode) se desempenha (especialmente todos os burocratas no BCE e no Bundesbank) deve ler o que se segue. Porque não é bonito. Aqui está um instantâneo:
Globalmente, os sistemas monetários se tornariam cada vez mais opacos. A falta de dinheiro, os bancos operacionais, a re-emissão monetária, a inflação e as expectativas de hiper-inflação se tornariam uma realidade em muitas economias avançadas dentro e fora da Zona Euro. A deflação da dívida, em seu sentido formal, começaria a morrer - ninguém (mesmo que pudesse) pagaria dívidas, nem haveria crédito. A produção seria cada vez mais fechada, enquanto as sociedades complexas obtiveram uma lição rápida sobre a extensão da dependência do sistema.
A percepção de desintegração socioeconômica contínua alteraria as respostas comportamentais, como raios de confiança e taxa de desconto social.
Finalmente, o contágio cruzado da cadeia de suprimentos do sistema financeiro é um feedback negativo que reafirma a condução da economia globalizada para longe de seu estado estável e para um novo colapso.
Concedido o acima é apelidado de desfecho do pior caso, mas é inevitável, a menos que as autoridades admitism que seja uma possibilidade distinta e preparem ativamente um plano de contingência, o que, no entanto, é um pouco autodestrutivo, porque, como a crise da Eurozona demonstrou o mero a admissão da realidade é suficiente para propagar o sistema para um nível totalmente novo de insustentabilidade, e assim por diante, até que o sistema ultrapasse um limiar final além do qual não há salvaguarda. O próprio autor reconhece isso:
Nós não gostamos de pensar em nós mesmos como animais potencialmente irracionais de rebanhos (que serão os de Jones). Procuramos estruturas narrativas que se propõem a explicar nossa boa sorte, idealmente de maneiras mais planas. Reinhardt e Rogoff a chamaram de Síndrome Desta vez É Diferente, pois cada idade procurou desviar os avisos argumentando que somos mais inteligentes agora, mais bem organizados ou vivendo em um mundo diferente. Assim como os vendedores de uma casa de alta qualidade se convencerão de que foram suas habilidades de decoração de interiores não uma bolha inflável que lhes deu o bom negócio.
É claro que avisos podem continuar chegando, e quase por definição, das franjas. Ao avaliar os riscos que desafiam o consenso, as pessoas são mais propensas a adiar a autoridade, que geralmente se vê como representante do consenso. Além disso, como uma espécie com fortes apegos à afirmação em grupo, estar errado em um consenso é muitas vezes uma opção mais segura do que estar certo, mas enfrentando vergonha social, ou especialmente se for descoberto estar errado mais tarde.
Muito melhor para dizer: "Olhe, não me culpe, ninguém viu isso chegar, mesmo os especialistas conseguiram errar!"
Mas, mesmo que possamos apreciar um aviso, a inércia do status quo geralmente garante que a atuação em tais avisos é difícil. Em geral, escolhemos o caminho mais fácil no curto prazo, e o caminho mais fácil é aquele com o qual somos familiares e adaptáveis. Preferimos adiar uma decisão de consequências difíceis e altas agora, mesmo que isso significasse consequências muito maiores algum tempo no futuro. No entanto, se cada passo no caminho da menor resistência for um passo à frente do que idealmente deveríamos ser, os riscos associados a fazer qualquer coisa aumentam à medida que a divergência é muito maior. Eventualmente, o blefe pode ser chamado, mas ainda não, e espero que o relógio de outra pessoa.
O consenso geralmente pode ser correto e as vozes marginais podem ser enganadas. O ponto para o gerente de risco é tentar atravessar os pontos cegos cognitivos e sociais primeiro reconhecendo-os. Isto é particularmente verdadeiro se os riscos (impacto de tempos de probabilidade) considerados são muito altos.
Infelizmente, é muito claro que aprendemos quase nada de geral sobre gerenciamento de riscos como prática social decorrente da crise financeira. Nós simplesmente adotamos um novo consenso, com um reconhecimento questionável de que não vamos deixar esse tipo de crise acontecer novamente. No entanto, o argumento neste relatório seguinte é que estamos enfrentando crescentes riscos de transformação de civilização em tempo real, sem qualquer gerenciamento de risco.
O que nos leva à conclusão:
Estamos presos a uma situação complexa inimaginável e a um sistema de dependência cujo futuro parece estar em risco crescente. Para evitar catástrofes, devemos nos preparar para o fracasso.
Estamos entrando em um momento de grande desafio e incerteza, quando os sistemas, ideias e histórias que moldaram nossas vidas em um mundo estão dilacerados, mas antes que novas histórias e dependências tenham tido tempo de evoluir. Nosso desafio é deixar ir e sair.
Nossa preocupação imediata é o planejamento de crise e choque. Agora deve ficar claro que isso é muito mais extenso do que apenas se concentrar no sistema financeiro. Inclui como podemos avançar se uma reversão às condições atuais se mostrar impossível. Isso também precisamos de planejamento e preparação de transição. Mesmo que esteja sujeito ao lock-in e à armadilha de reflexividade, isso será mais eficaz se funcionar de baixo para cima, bem como de cima para baixo.
Finalmente, nem a riqueza nem a geografia são uma proteção. Nossas co-dependências evoluídas significam que estamos todos juntos nisso.
Todo mundo que deseja saber o que acontecerá a menos que todos estejam cientes do que pode acontecer, deve ler o documento em anexo.
Trade-Off: Sistema Financeiro Supply-Chain Cross-Contagion: um estudo em colapso sistêmico global (pdf)

Da complexidade em cascata ao colapso sistêmico: uma caminhada através do Equivalente da Sociedade de um Ataque cardíaco & quot;
Há mais de um ano, David Korowicz, da FEASTA, surpreendeu o mundo com sua análise fascinante intitulada "Trade-Off: Contágio financeiro da cadeia de suprimentos do sistema financeiro: um estudo sobre o colapso sistêmico global", no qual ele apontou uma luz muito necessária sobre link "pontos de estrangulamento da sociedade moderna hiper-complexa: uma investigação forense em um experimento de pensamento" Minsky Moment "deu errado, um cruzando o limiar de instabilidade sistêmica e culminando com sociedade, economia e o mundo moderno como sabemos que moer a uma parada e pior.
Uma vez que a análise de Korowicz é precisamente o resultado final que aguarda o mundo apanhado num estado de negação implacável que até se recusa a contemplar o "Plano B", o que dissemos então é que "todos que desejam saber o que acontecerá a menos que todos estejam cientes de o que pode acontecer "deve ler o referido estudo em colapso sistêmico global. Antes de continuar, insistimos com todos os leitores que são fascinados pelo tópico de cruzar os limiares da instabilidade social e sistêmica para ler a análise original, se ainda não o fizeram.
O documento original levou a uma erupção em opiniões e respostas tanto nas páginas de Zero Hedge como em outros lugares, a uma questão que recebeu receita crônica praticamente nenhuma atenção da mídia (por uma confiança óbvia que preserva as razões em um mundo no qual a confiança ignorância planejada é felicidade Temos o prazer de apresentar o seguimento de Korowicz, "Choques Catastróficos através de Sistemas Socioeconômicos Complexos - Uma Perspectiva Pandêmica", que "fornece uma visão geral do efeito de uma grande pandemia na operação de sistemas socioeconômicos complexos usando alguns modelos simples. . Discute os laços entre o absenteísmo inicial da pandemia eo contágio da cadeia de suprimentos, e a evolução e taxa de propagação do choque. Discute o colapso sistêmico e as dificuldades de reiniciar os sistemas socioeconômicos ".
De um jeito que apenas Korowicz pode, o autor resume o estado de equilíbrio social cada vez mais precarizado de equilíbrio social sistêmico e como um impulso mais determinado longe de uma linha de tendência (ou de volta para reversão média como aqueles que podem ver diretamente através dos bancos centrais, aumentando o desespero para preservar o status quo legado do mundo "apenas mais um dia") poderia resultar no fim da sociedade moderna.
A saber: "As semelhanças da integração global significam que riscos diversos podem levar a consequências de choque comuns. Os sistemas que transportam choques são também os sistemas de que dependemos para o nosso bem-estar e o funcionamento de empresas, instituições e sociedade, de modo a emprestar a Marshal McLuhan A média é a mensagem. Uma das principais conseqüências de um choque genérico é a interrupção do fluxo de bens e serviços na economia. Isso tem implicações diversas e profundas - incluindo crises de segurança alimentar, interrupções de negócios, críticas os riscos de infra-estrutura e as crises sociais. Isso, por sua vez, pode destruir rapidamente a confiança voltada para o futuro em uma economia com grandes conseqüências para a estabilidade financeira e monetária, que dependem, em última instância, da garantia da produção econômica real. Mais geralmente, pode implicar falhas em cascata multi-redes e delocalizadas levando a um colapso na complexidade social ".
O que se segue é uma metodologia de "pensamento experimental" que é usada para analisar as implicações socioeconômicas de uma grande pandemia. Em outras palavras, um passo a passo passa de como a sociedade transita do estado de equilíbrio atual instável, representado pelo mais alto nível de entropia sócio-econômico-monetária, para o equivalente da sociedade a um ataque cardíaco: um colapso linear na entropia social Uma vez que os limiares paramétricos são violados, levando a falhas e à parada de todos e cada um dos processos que dependem da complexidade incremental e evolutiva. É aqui que os pressupostos epistemológicos sobre o futuro da sociedade podem ser simples e subjetivamente reduzidos a simples heurísticas: "otimismo" e "pessimismo". O primeiro afirma que, mesmo em um completo colapso sistêmico, o sistema pode eventualmente se reagrupar e eventualmente retornar ao seu mais recente nível de complexidade mais alto. O último. não.
É assim que a Korowicz o enquadra:
Nós imaginamos que depois de uma onda pandêmica, as pessoas estão novamente disponíveis para o trabalho. Mas as pessoas não podem, no entanto, tornar-se produtivas imediatamente, porque outras entradas também são necessárias. Mas esses insumos estão paralisados ​​porque dependem de outros insumos e assim por diante. Mais amplamente, podemos definir o fracasso da recursão como: "a incapacidade de uma economia complexa para retomar facilmente a produção e o comércio após um colapso significativo, porque em uma economia complexa e interdependente, a produção e o comércio devem retomar para que a produção e o comércio retomem".
Além disso, mesmo se um governo quis reconstruir, pode ser muito complexo para orquestrar a retomada de cima para baixo. Isto é, em primeiro lugar, porque a economia evoluiu por autoorganização, ninguém já teve, nem poderia juntar seus elementos em primeiro lugar. Em segundo lugar, mesmo que isso pudesse ser feito, os sistemas de comando, controle e fornecimento que poderiam fazê-lo seriam os mesmos sistemas que foram prejudicados.
Ao longo do tempo, a entropia se tornaria um problema à medida que os motores se ferrassem, os reagentes se contaminassem e a manutenção esperada e os reparos não são feitos. Isso tudo aumentaria o custo e os insumos necessários para a retomada. Em uma sociedade mais complexa, a taxa de degradação pode ser maior por razões termodinâmicas.
No geral, estamos dizendo que quanto mais tempo um sistema socioeconômico gasta no regime crítico, maior a probabilidade de sofrer um colapso sistêmico completo e perda da função básica. Além disso, quanto mais tempo ele gasta neste estado, mais difícil será retornar ao seu estado pré-pandêmico.
Este é um equivalente de uma sociedade complexa de um ataque cardíaco. Quando uma pessoa tem um ataque cardíaco, há um breve período durante o qual o RCP pode reviver a pessoa. Mas além de um certo ponto em que houve falha em cascata em sistemas de suporte de vida co-dependentes, a pessoa não pode ser revivida. Isso significa que o sistema socioeconômico poderia ser mudado irremediavelmente e o trabalho da sociedade e do governo seria administrar a crise e traçar um caminho fundamentalmente diferente.
A extensão de nossas dependências complexas contemporâneas do sistema global e nossa habituação para um longo período de crescimento econômico e de complexidade amplamente estável significam que um colapso sistêmico apresentaria desafios profundos e existenciais.
É precisamente esse inevitável desenlace final, e o fato de que sua mera contemplação simplesmente reconhece que nada de sociedade pode fazer para se preparar para um resultado terminal, razão pela qual a sociedade moderna está repleta de distrações pré-ordenadas que procuram evitar que a grande maioria Contemple uma narrativa de alguma forma que se assemelhe ao acima exposto e por que ninguém está disposto a admitir a contemplação de um "Plano B", como apenas o fato de que "pessoas muito sérias" - aquelas cujas ações resultaram no atual e precário ambiente sistêmico - estão pensando sobre a potencialidade "e se", desencadeiam eventos em movimento que culminaram com todo o sistema finalmente falhando sob sua própria complexidade.
O que, é claro, é precisamente o motivo pelo qual apresentamos a peça completa, pois todos devem estar cientes do que o desfecho do pior caso pode ser e se verá em um mundo no qual a cabeça da cabeça se esgueirou uma religião.
Catastrophic Shocks Through Complex Socio-Economic Systems: A Pandemic Perspective (pdf), source FEASTA.
The globalised economy has become more complex (connectivity, interdependence, and speed), de-localized, with increasing concentration within critical systems. This has made us all more vulnerable to systemic shocks. This paper provides an overview of the effect of a major pandemic on the operation of complex socio-economic systems using some simple models. It discusses the links between initial pandemic absenteeism and supply-chain contagion, and the evolution and rate of shock propagation. It discusses systemic collapse and the difficulties of re-booting socio-economic systems.
Consider the following scenarios:
A highly contagious pandemic outbreak in South-East Asia (of comparable or greater human impact than the 1918 influenza outbreak). A disorderly break-up of the Eurozone and global financial system implosion. A ‘perfect storm’- during a time of major global financial instability - there are terrorist attacks on North African oil installations (partially driven by social unrest arising from record food prices) & a category 5 hurricane hits a major population/ industrial/ oil producing regions of the US east coast.
These are all examples of potential global shocks, that is hazards that could drive fast and severe cascading impacts mediated through global systems. Global systems include telecommunications networks; financial and banking networks; trade networks; and critical infrastructure networks. These systems are themselves highly interdependent and together form part of the globalised economy. The interest in global shocks and how they manifest themselves has grown in recent years (WEF 2012, 2013; Helbing 2013,; Buldyrev et. al. 2010).
First it useful to acknowledge that the hazards referred to in the opening scenarios are increasingly likely. Potentially new pandemic strains are being encouraged by increasing human pressure on the biosphere, while mass global air transport could aid rapid global transmission. Ecological constraints, presently pre-eminent amongst them are food and oil flows and increasingly the effects of climate change are growing. Stresses in the credit backing of our financial and monetary systems are arguably increasing, with the additional vulnerability that such systems are the primary vector through which major ecological constraints in energy and food would be expressed (Korowicz 2011).
One of the primary issues for this paper are, given any significant hazard, how does the impact spread through the globalised economy and in what way are we vulnerable to the failure of interconnected systems. To answer this we need to understand how complex societies are connected and how they have changed over time.
The globalised economy is an example of a complex adaptive system that dynamically links people, goods, factories, services, institutions and commodities across the globe. Such systems can be represented by a‘state’ that is not in equilibrium, but defines a set of ordered characteristics that exist within a range of deviations from a mean and persist for a period of time. For example, the state is characterized by exponential growth in Gross World Product of about 3.5% per annum over nearly 200 years within a range of several percentage points. This had correlated with emergent and self-organizing growth in socio-economic complexity which is reflected in the growth of the:
Number of interacting parts (nodes): This includes exponential population growth; the 50,000+ different items available in Wal-Mart; the 6 billion+ digitally connected devices; the number of cars, factories, power plants, mines an so on. Number of linkages (edges) : This includes the 3 billion passengers traveling between 4000 airports on over 50 million flights each year; the 60,000 cargo ships moving between 5000 ports with about a million ship movements a year; the average number of media channels (internet sites, TV channels, twitter feeds) per person times the population; and the billions of daily financial transactions. Levels of interdependence between nodes: The growing number of inputs necessary to make a good, service, livelihood, infrastructural output or the function of society as a whole. The speed of processes (or time compression): This includes the increasing speed of financial transactions; transportation; digital signaling; and Just-In-Time logistics. If we consider the globalised economy as a form of singular organism, we can understand this process as an increasing metabolic rate. Efficiency: increasing competition and global trade arbitrage driving down inventories; and globalised economies of scale. Concentration: The emergence of ‘hubs’ within the globalised economy - a small number of very highly connected nodes whose function (or loss of function) have a disproportionate role in the operation of the globalised economy . For example, banks are not connected at random to other banks, rather a very small number of large banks are highly connected with lots of other banks, who have few connections to each other. These arrangements are sometimes known as scale-free networks. We can also see concentration in critical infrastructure, and trade networks. De-localization: The conditions of personal welfare; business or service output; or country’s economic output is smeared over the whole globalised economy. The corollary is that if there is a major failure of the systems integration in the globalised economy, a localised community may have extreme difficulties meeting its basic needs.
Economic and complexity growth have in many ways reduced risk. Localized agricultural failure once risked famine in isolated subsistence communities, but now such risk is spread globally. It has made critical infrastructure such as sewage treatment and clean water available and affordable. Global financial markets enable an array of risks, from home insurance and pensions to default risk and export credit insurance, to be dispersed and potential volatility reduced. Indeed, what is remarkable is just how reliable our complex society is given the number of time sensitive inter-connections.
Another way of saying all this is that our society is very resilient, within certain bounds, to a huge range interruptions in the flow of goods and services. Within those bounds our society is self-stabilizing. For example supply-chain shocks from the Japanese tsunami in 2011, the eruption of the Icelandic Eyjafjallajokull volcano in 2010 or the UK fuel blockades in 2000 all had severe localised effects in addition to shutting down some factories across the world as supply-chains were interrupted. However the impacts did not spread and amplify, and normal functioning of the local economy quickly resumed.
But we know from many complex systems in nature and society that a system can rapidly shift from onestate to another as a threshold is crossed (Scheffer 2009). One way a state shift can occur is when a shock drives the system out of its stability bounds. The form of those stability bounds can increase or decrease resilience to shocks depending upon whether the system is already stressed prior to the shock.
The commonalities of global integration mean that diverse hazards may lead to common shock consequences. The systems that transmit shocks are also the systems we depend upon for our welfare and the operation of businesses, institutions and society, so to borrow Marshal McLuhan’s phrase, the medium is the message. One of the primary consequences of a generic shock is an interruption in the flow of goods and services in the economy. This has diverse and profound implications - including food security crises’, business shut-downs, critical infrastructure risks and social crises. This can in turn quickly destroy forward-looking confidence in an economy with major consequences for financial and monetary stability which depend ultimately on the collateral of real economic production. More generally it can entail multi-network and de-localised cascading failure leading to a collapse in societal complexity.
Previously the dynamics of such a scenario was studied when the initial shock was caused by a systemic banking collapse and monetary shock. This coupled the exchange of goods and services causing financial system supply-chain cross contagion and a re-enforcing cascade of de-localizing multi-system risk (Korowicz 2012).
In this paper a similar methodology is used to look at the socio-economic implications of a major pandemic. After a very brief review of other researchers work (section 2), some real life examples of partial systems failure are reviewed (section 3). This allows us to make make some estimates of shock spreading rates. In section 4 the links between pandemic absenteeism and supply-chain contagion is discussed and related to societal complexity. In section 5 we look at how contagion spreads, the rate, and the relationship to complexity.
In section 6 we look at some of the multi-system interactions. In 7, we look at why after a major collapse, the pre-shock socio-economic state may not be recoverable. Finally there is a short conclusion. This paper aims to broadly outline how very simple models can shed light on catastrophic shocks in complex socio-economic systems. A significantly more detailed discussion on several issues may be found here,(Korowicz 2012).
2. Socio-economic Impact of a Major Pandemic.
We are interested in the socio-economic implications of a major influenza pandemic whose initial impact would be direct absenteeism from illness and death, and absenteeism for family and prophylactic reasons.
The pandemic wave (we will only consider one) lasts 10-15 weeks. We assume this causes an absenteeism rate of 20% or 40% over the peak period of 2-4 weeks, and a rate above 20% for 4-8 weeks when the peak is 40%. This represents our initial impact. Our question is then what happens next.
There are two general perspectives to studying such impacts. The first focuses on the impact on a specific industry or service, often with a view to Business Continuity Planning (BCP). Unsurprisingly, the question of how a health service would manage a pandemic when its own operation is compromised is of recurrent interest (Bartlett and Hayden 2005; Itzwerth et al. 2006). Or for example the effect of worker absenteeism on the movement of freight in a coupled US port-rail system (Jones et al. 2008). This analysis is important for local preparations however it suffers from having to isolate the system under consideration from the environment to avoid the analysis becoming too open and complex.
The alternative track is to use macroeconomic modeling to look at the impact on an economy as a whole. This type of modeling might be useful for low impact pandemics where the economy remains in its historical range of conditions, for example the impact of the 2003 SARS outbreak ( Knapp et al. 2004; Keogh-Brown and Smith 2008).
However when considering major pandemics (McKibbin and Sidorenko 2006; Keogh-Brown et al. 2010) it is highly questionable if such conventional macroeconomic modeling works, or would be very mis-leading. This is firstly because such models are built out of, and parameterized within the context of long run macroeconomic stability. A major pandemic could be highly de-stabilising, causing, as we shall see, cascading systemic disruption and failure.
Secondly, such models are blind to the issue of rising complexity and the speed of processes, which we argue here are essential for understanding major shocks. Finally, they have little to say about the dynamics of the impact, how it spreads through time and cascading failure. This is of most interest to actual risk manageent.
One way to understand and even parameterize the structure and behavior of complex socio-economic systems is to empirically study occasions when there has been some systemic failure.
In September 2000 truckers in the United Kingdom, angry at rising diesel duties, blockaded refineries anad fuel distribution outlets (Public Safety and Emergency Preparedness Canada 2005; McKinnon 2006; Peck 2006). The petrol stations reliance on Just-In-Time re-supply meant the impact was rapid. Within 2 days of the blockade starting approximately half of the UK’s petrol stations had run out of fuel and supplies to industry and utilities had begun to be severely affected. The initial impact was on transport - people couldn’t get to work and businesses could not be re-supplied. This then began to have a systemic impact.
The protest finished after 5 days at which point: supermarkets had begun to empty of stock, large parts of the manufacturing sector were about to shut down, hospitals had begun to offer ‘emergency only’ care; automatic cash machines could not be re-supplied and the postal service was severely affected. There was panic buying at supermarkets and petrol stations. It was estimated that after the first day an average 10% of national output was lost. Surprisingly, at the height of the disruption, commercial truck traffic on the UK road network was only 10-12% below average values.
There were clear indications that had the fuel blockades gone on just a few days longer large parts of UK manufacturing including the automotive, defense and steel industries would have had to shut down. In the end this was a point hazard with systemic impacts, so once government became aware of the systemic risks they forced the truckers’ hands and they desisted. Still the event concentrated minds. The UK was within days of a severe food security crisis and widespread socio-economic breakdown.
Lest one think this is an issue for only the most complex societies - a week-long truckers strike in September 2012 in South Africa again saw emptying petrol station and ATM machines within a week of the disruption. And hospitals reliant on burning coal for power had to fall back on reserve stocks (Boesler 2012).
While the UK fuel blockade was probably the most dramatic and well-documented example of supply-chain failure, we also got glimpses of what can happen the following Icelandic volcano eruption in 2010, and the tragic events surrounding the Japanese tsunami and Thai flooding in 2011. From these examples we see that failure of production or supply from one area can shut down factories on the other side of the world within days of the initial interruption. A report from the think-tank Chatham House on the impacts of the Icelandic volcano and subsequent interviews with businesses about its impact and their preparedness came to the general conclusion (Lee et. al. 2012) :
“ One week seems to be the maximum tolerance of a Just-In-Time economy ”…..before major shut-downs in business and industries would occur.
Further, after such a disruption, things would not just return to normal. Again, from the Chatham House study:
And a quote from a desk study on the impact of a one week long absence of (just) trucks in the UK economy, things would not just return to normal (McKinnon 2006):
“.. . After a week, the country would be plunged into a deep social and economic crisis. It would take several weeks for most production and distribution systems to recover ”
So the indications for the UK are that over the first week of the disruption, contagion across supply-chains and businesses rises relatively slowly. But very soon after that socio-economic disruption rapidly become very severe. And then even if the primary cause can return to normal, the economy takes weeks to recover. The studies do not consider what would happen if the primary disruption were to continue for many weeks.
4. Interdependence, Liebig’s law, and Cascading.
One of the defining features of rising complexity is growing interdependence. That is, the output of a person, a service provider, a factory, a piece of critical infrastructure, or a complex society as a whole depends upon ever more inputs, be they tools, intermediate products, consumables, specialist skills and knowledge or collective societal infrastructures. And those outputs in turn become further inputs through the dispersed networks of the globalised economy.
Some of these inputs may not be necessary to the output of a factory, a service or economy. However, there will also be more critical inputs that the output cannot proceed without. Some of these are easily substitutable through other replacements, suppliers, people or stores that are easily accessed. What we are left with are critical inputs with low substitutability. This is shown in figure:1. We can also see that some of the least substitutable critical inputs are labeled hubs. Hubs are things like electricity, fuel, water, and financial system functionality - things generally referred to as critical infrastructure. They are societal services and functions upon which all society depends. This is represented by the dotted line.
What Liebig’s law shows is that you do not need to lose everything to stop a business, service or function or society - just the right bit. This helps to explain why a loss of only 10-12% of commercial vehicles had such a big impact during the fuel blockades.
As our economies have become more complex we have been, on average, adding more inputs into our lives, into goods and services, into the functioning of our societies. Secondly more of those are critical with low substitutability.
Let us now apply Liebig’s law to pandemic absenteeism. The people affected by a pandemic are part of the supply of inputs to any system’s function. There may be many people contributing to one output of a business, service or function. We assume that most employees are either unnecessary for the period of the pandemic, can telecommute, or are easily substituted. But there is a smaller number of sub-functional roles occupied most likely by those with specialist skills who are critical with low substitutability. If any one of them is unavailable, the sub-functional role fails and with that, the output of the whole organization/ function. We can then say that the complexity of the output is the number of specialist, low substitutability sub-functions, this we can take as a measure of complexity C.
Firstly, with the loss of this output good or service (especially if it is critical with low substitutability) other businesses and services may be affected potentially causing cascading affects through complex socio-economic networks as a whole. The dual absenteeism-output cascade is shown in figure:3.
Secondly we can see the effective absenteeism in society is the initial absenteeism due to the pandemic plus the sum of indirect cascading absenteeism. Further the lack of inputs stopping production would add further indirect absenteeism. This positive feedback means the number of economically inactive people in the society is potentially far greater than the absenteeism rate. This tends not to be reflected in macroeconomic modeling which is blind to complexity risk and cascading affects.
In society there is always a level of absenteeism and a percentage of goods and services that can’t be delivered for whatever reason. You do not get the spread of supply-chain contagion as complex societies are efficient at finding alternative suppliers, and some inventories are carried to help when there is a hiatus. Further most factories don’t produce very critical things or there is lots of substitutability. One wont miss a brand of toothpaste in the supermarket when there are 20 brands available.
To initiate a cascading failure one first needs appropriate scale, from a major hub failure or large enough absenteeism. Secondly, one requires that what is affected has what is sometimes known as centrality, meaning how critically connected it is to other parts of a socio-economic network. Thus the effects of a pandemic or hub failure in a weakly connected country, Mali say, would be unlikely to spread supply-chain failure widely.
Thus we can conclude that there might be point above which supply-chain contagion takes off, and below which the society is still operational and recovery can occur. This point depends upon the initial pandemic absenteeism rate and the society’s complexity at the epicenter of the pandemic. This point, in the languageof complex systems is a critical transition, Ic, measured as the initial number of ‘infected’ supply-chain nodes, which when crossed, causes a positive feedback of supply-chain contagion.
A simple model of supply-chain failure can be based upon the idea that the more supply-chains are disrupted or infected, the greater the chance that further supply-chains will be infected (Korowicz, 2012). This is limited ultimately by the number of connected parties, L. This has the form of the logistic equation where we can associate the time constant with the average time a society can operate using its stock inventories, Ti. The number of infected nodes is:
Even this very simple model reproduces the main features of real events and studies seen in section 3 - the impact on society does not rise linearly with time but starts to accelerate as more inventories are drawn down. From what we have seen, the sub-critical time is about a week for the UK. In section 2 the scenario for a major pandemic would have had greater than 20% initial absenteeism for 4-8 weeks, clearly this would be very deep into the critical acceleration regime. Of course this assumes the initial absenteeism brought the supply-chain failure above the critical transition. There are good grounds for thinking this would be so by considering that a loss of 12% of trucks was already bringing the UK along the sub-critical acceleration curve.
For pandemics in less complex societies we would expect a higher critical transition point, and a longer period before critical acceleration occurs.
6. External Cross-Network Contagion.
We imagine a pandemic outbreak occurs in South-East Asia, say. The main vectors through which a shock could propagate outside the region are pandemic contagion, financial system contagion, and supply-chain contagion. How they transmit that contagion depends upon the network structure and centrality of the effected region with respect to the external world. We might also assume that the spread would require an initial external impact greater than some critical value for external contagion to occur, this is in correspondence with the critical transition level Ic in section 5. Further we would expect the shock to spread at different rates (banking shock could travel faster than supply-chain contagion because the operational speed of the financial system is greater than the inventory turn-over time). We would also expect different periods for each networkbefore critical acceleration occurs, with the fastest system dominating.
The local spread of the infection would in broad terms spread out in geographical space at the speed of human transport. There would also be the spread through airport linkages. Here the global spread of the pan-demic is across a different topological space related to the density of linkages between airports and the shortest paths between any airports (Woolley-Meza et. al. 2011).
Some countries’ role in trade is far more important to the globalised economy than others. The more important the initially impacted region is, the greater is the likelihood of spreading supply-chain contagion globally. Kali & Reyes (2007) measured countries' influence on global trade, not only by trade volumes, but the influence a country has on the global trading system. They used an Importance Index to rank their influence. For example, they find that Thailand, which was at the centre of the 1997-1998 Asian financial crisis ranked 22nd in terms of global trade share, but 11th on their level of importance. In another study, Garas et. al. (2010) used an epidemic model to look at the potential any country had to spread a crisis. One of their data sets is based upon international trade in 2007. It uses a measure of centrality to identify countries with the power to spread a crisis via their level of trade integration. Like the previous paper, the centrality in the network does not necessarily correspond to those countries with the highest trade volumes. There are 12 inner core countries, which are listed in no particular order are: China, Russia, Japan, Spain, UK, Netherlands, Italy, Germany, Belgium-Luxembourg, USA, and France. The data sets used by both groups combine Belgium and Luxembourg data, both sets of authors have classified them together and separately respectively.
Hidalgo & Hausmann (2009) used international trade data to look at two things - the diversity of products a country produces, and the exclusivity of what they produce. An exclusive product is something made by few other countries. Most countries in the world are non - diversified and make standard products. The most complex countries are diversified and make more exclusive products. More exclusive products have less substitutability.
It can also be assumed that even a standard product, bread say, requires many more critical inputs in a complex country than in a less complex one.
Financial system contagion outside the initially impacted region could be through banking networks, the bond market, the shadow banking system, currency volatility and confidence. Again the structure of financial networks and the centrality of the region with respect to financial assets and liabilities would determine the extent of any shock. A additional issue is how vulnerable or resilient the external financial system is at the time of the shock.
If a multi-network failure were to spread globally the ability of the external world to help the initially impacted region would be undermined. In this case there would be global systemic collapse.
We saw indications in the empirical studies of failure in section 3 that once supply-chain failure starts to go critical, the removal of the primary cause does not allow the immediate resumption of socio-economic activity. Por quê?
The disruption could have pushed companies into bankruptcy, and purchasing power in the economy would be lost as trade collapsed. Failures in critical infrastructure including payment might also occur. More generally there would be an intertwined supply and demand collapse.
More broadly, if an economy was shattered, and its forward looking viability looked both precarious and uncertain one would expect a collapse in the value of a country’s currency. Rather than helping exports (which would be very little because the economy’s productive capacity had collapsed), it would hinder imports of emergency supplies and make debt in external currencies much more difficult to service. The economic damage and reduced economic prospects may then cause tightened credit conditions, spiraling bond yields and systemic bank failure.
There are also issues that are most pertinent for more complex societies. We imagine that after a pandemic wave people are again available for work. But people cannot however become productive immediately because other inputs are also needed. But those inputs are stalled because they rely upon other inputs and so on. More broadly we may define Recursion failure as: “the inability of a complex economy to easily resume production and trade after a significant collapse because in a complex and interdependent economy, production and trade must resume in order for production and trade to resume”.
Further even if a government wanted to rebuild, it may be too complex to orchestrate resumption from the top down. This is firstly because the economy has evolved by self-organization, nobody has ever had, nor could they have put its elements together in the first place. Secondly, even if it could be done, the systems of command, control and supply that might do it would be the very systems that had been undermined.
Over time entropy would become an issue as engines rust, reagents become contaminated, and expected maintenance and repairs are left undone. This would all add to the cost and inputs needed for resumption. In a more complex society the degradation rate may be higher for thermodynamic reasons.
Overall, we are saying the longer a socio-economic system spends in the critical regime, the more likely it is to undergo a complete systemic collapse and loss of basic function. In addition, the longer it spends in this state, the more difficult it may be to ever return to its pre-pandemic state.
The extent of our contemporary complex global system dependencies, and our habituation to a long period of broadly stable economic and complexity growth means a systemic collapse would present profound and existential challenges.
To make the systems we depend upon more resilient ideally we would want more redundancy within critical systems and weaker coupling between them. Localization and de-complexification of basic needs (food, water, waste etc) would provide some societal resilience if systems resilience was lost. We would have more buffering at all levels, that is, larger inventories throughout society.
All this is the very opposite of the direction of economic forces. The reason we have such tight inventories, tight coupling, and concentration in critical infrastructure is they bring efficiency and competitive advantage. Further, in a time of global economic stress there is a drive towards further economic efficiency. For example, during super-storm Sandy, fuel shortages were exacerbated by low inventories that were the direct result of cost cutting arising from the financial crisis (Schneyer & Gebrekidan 2012). In general we are locked into socioeconomic processes that are increasing complexity-derived vulnerability.
Increasing vulnerability coupled with increasing hazard mean that the risk of a major socio-economic collapse is rising. The commonalities of catastrophic shock outcomes across a range of hazards suggest common risk and resilience planning is urgently required. Further, because of the possibility that a permanent state shift could occur, planning needs to consider how to deal with non-reversion to pre-shock conditions.

Trade Off: Financial system supply-chain cross contagion – a study in global systemic collapse.
This new study by David Korowicz explores the implications of a major financial crisis for the supply-chains that feed us, keep production running and maintain our critical infrastructure. He uses a scenario involving the collapse of the Eurozone to show that increasing socio-economic complexity could rapidly spread irretrievable supply-chain failure across the world.
This study considers the relationship between a global systemic banking, monetary and solvency crisis and its implications for the real-time flow of goods and services in the globalised economy. It outlines how contagion in the financial system could set off semi-autonomous contagion in supply-chains globally, even where buyers and sellers are linked by solvency, sound money and bank intermediation. The cross-contagion between the financial system and trade/production networks is mutually reinforcing.
It is argued that in order to understand systemic risk in the globalised economy, account must be taken of how growing complexity (interconnectedness, interdependence and the speed of processes), the de-localisation of production and concentration within key pillars of the globalised economy have magnified global vulnerability and opened up the possibility of a rapid and large-scale collapse. ‘Collapse’ in this sense means the irreversible loss of socio-economic complexity which fundamentally transforms the nature of the economy. These crucial issues have not been recognised by policy-makers nor are they reflected in economic thinking or modelling.
As the globalised economy has become more complex and ever faster (for example, Just-in-Time logistics), the ability of the real economy to pick up and globally transmit supply-chain failure, and then contagion, has become greater and potentially more devastating in its impacts. In a more complex and interdependent economy, fewer failures are required to transmit cascading failure through socio-economic systems. In addition, we have normalised massive increases in the complex conditionality that underpins modern societies and our welfare. Thus we have problems seeing, never mind planning for such eventualities, while the risk of them occurring has increased significantly. The most powerful primary cause of such an event would be a large-scale financial shock initially centring on some of the most complex and trade central parts of the globalised economy.
The argument that a large-scale and globalised financial-banking-monetary crisis is likely arises from two sources. Firstly, from the outcome and management of credit over-expansion and global imbalances and the growing stresses in the Eurozone and global banking system. Secondly, from the manifest risk that we are at a peak in global oil production, and that affordable, real-time production will begin to decline in the next few years. In the latter case, the credit backing of fractional reserve banks, monetary systems and financial assets are fundamentally incompatible with energy constraints. It is argued that in the coming years there are multiple routes to a large-scale breakdown in the global financial system, comprising systemic banking collapses, monetary system failure, credit and financial asset vaporization. This breakdown, however and whenever it comes, is likely to be fast and disorderly and could overwhelm society’s ability to respond.
We consider one scenario to give a practical dimension to understanding supply-chain contagion - a break-up of the Euro and an intertwined systemic banking crisis. Simple argument and modelling will point to the likelihood of a food security crisis within days in the directly affected countries and an initially exponential spread of production failures across the world beginning within a week. This will reinforce and spread financial system contagion. It is also argued that the longer the crisis goes on, the greater the likelihood of its irreversibility. This could be in as little as three weeks.
This study draws upon simple ideas drawn from ecology, systems dynamics, and the study of complex networks to frame the discussion of the globalised economy. Real-life events such as United Kingdom fuel blockades (2000) and the Japanese Tsunami (2011) are used to shed light on modern trade vulnerability.
Featured image: Torn paper. Author: Billy Alexander. Source: sxc. hu/photo/1369352.
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12 Responses to “Trade Off: Financial system supply-chain cross contagion – a study in global systemic collapse”
In addition to which there are resource centres, community gaardens, community supported agriculture etc.
Thank you for this report, which helps in many ways with understanding the complexities (barely touched on in mass media outlet articles) which make our current circumstances dysfunctional, undesirable, and unworkable—both in the long run, sooner than we would like to think, and as we speak.
Notes from the “Supply-Chain Cross Contagion” report.
I looked carefully at the “Overview”
“…account must be taken of how growing complexity (interconnectedness, interdependence and the speed of processes), the de-localisation of production and concentration within key pillars of the globalised economy have magnified global vulnerability and opened up the possibility of a rapid and largescale collapse.”
and Section VI Risk Management, Constraints and a Conclusion.
“Lock-in can be broadly defined as an inability to deal with one problem by changing a sub-system in the economy without negatively modifying others upon which we depend. Further, doing complex surgery on a part of our economy or financial system, because they are so intertwined within the very operation of the globalised economy, can have unexpected and intrinsically unpredictable consequences.”
“The point here is that we are locked into a vast and unimaginably complex fabric of conditions that we barely understand.”
A Critical Challenges Assessment from The IPCR Initiative.
I have made a contribution to an assessment of the critical challenges ahead, and ways of generating a “constellations of initiatives” kind of solution-oriented activity, in the IPCR document “Calling ‘the better angels of our nature’: A Multi-Angle View of the Debt Crises” (Jan. 2012, 398 pages)[accessible for free from the homepage of The Interfaith Peacebuilding and Community Revitalization (IPCR) Initiative website (at ipcri )].
The detailed Table of Contents provides a quick access to a “big picture” view of both challenges and solutions, and includes the following sections:
IV. Cultures of Violence, Greed, Corruption, and Overindulgence.
V. Other Challenges Which Are Part of This Writer’s Ten Point List (see Appendix A) and Which Need to be Resolved as Part of a Sustainable Solution to the Current Debt Crises.
VI. Four Summaries of Critical Challenges Ahead.
In Section V., in the subsection on peak oil, I quote from the report “Armed Forces, Capabilities and Technologies in the 21st Century Environmental Dimensions of Security: Sub-study 1 Peak Oil–Security Policy Implications of Scarce Resources” (112 pages) [The study was produced by the Future Analysis department of the Bundeswehr Transformation Center, a branch of the German military, and an English translation was made accessible at the Energy Bulletin website by Rick Munroe].
Two of those quotes are relevant here (both from page 65 in the “Multi-Angle” document):
“…it is not possible to rule out considerable frictions on the labour market. New economic sectors, jobs and market opportunities can indeed develop in the wake of post-fossil transformation. This economic upheaval could, however, initially result in significant transformation unemployment. It is regarded as a special form of structural unemployment that can evolve as a result of profound changes in.
transformation countries. Most importantly, a devaluation of employees’ human capital may occur because the change in structure causes thus far fully adequate qualifications to be replaced by other qualification requirements. Depending on its scope and duration, transformation unemployment could develop into a major economic problem.”
“On the other hand, it cannot be ruled out that the people’s confidence in state institutions as well as politics would be considerably shaken. This confidence is likely to dwindle even more in societies in which it is already weak – in particular if it is becoming obvious in crisis regions that governments have in the past failed to develop suitable solution strategies and provide orientation for society during this period of transition.”
The “Multi-Angle” document is a mid-way point summary of “IPCR Critical Challenges Assessment 2011-2012” (at ipcri/Critical-Challenges-Assessment. html ), which is an in-depth assessment of ten critical challenges. In the context of responding here to the report “Trade Off: Financial system supply-chain cross contagion – a study in global systemic collapse”, it is worth noting critical challenge #9, which is worded as follows:
“Community building associated with responding to the above eight challenges may or may not be accompanied by an exponential increase in compassion for our fellow human beings.
“In such circumstances, shortages of goodwill in times of unprecedented transition could tilt already precarious systems into further disarray, and thus erode established systems in even the most stable communities and regions. "
“IPCR Outreach 2012” and the need for an exponential increase in compassion for our fellow human beings.
The current IPCR Initiative project is “IPCR Outreach 2012”, which is making accessible through outreach brief introductory documents discussing challenges and solutions. At the IPCR webpage (ipcri/IPCR-Outreach-2012.html ), all documents being used in “IPCR Outreach 2012” are made accessible for free in pdf format. Esses documentos incluem:
“A List of Ten Critical Challenges”
“A Three Page Introduction to the ‘Multi-Angle’ Document”
“The Potential of Community Visioning Initiatives (in 500 words)”
“Much Unrealized Potential for Community Service”
“A Brief Introduction to The IPCR Initiative”
The 1 page document “A Brief Introduction to The IPCR Initiative includes the following excerpts:
“The beliefs that there is a critical need for an exponential increase in compassion for our fellow human beings—and that at no other time in history has there been more potential for such an increase—have urged and inspired The Interfaith Peacebuilding and Community Revitalization (IPCR) Initiative (ipcri ) to explore how such potential might be realized.”
“We are in uncharted territory, for there is no culture or association of societies that ever existed on planet Earth which has had to resolve the kind of challenges the next few generations of people will have to resolve. In many ways, all of us are Stakeholders, and People Needing Assistance, and most of us are going to need to become Experienced Practitioners of some kind. There can be some consolation in the fact that if most of us become Experienced Practitioners in the art of being compassionate towards our fellow human beings, we will all have a better chance of accomplishing what no civilization has accomplished before.”
I believe what I have included in this response is relevant to the discussion of your report “Trade Off: Financial system supply-chain cross contagion – a study in global systemic collapse”. I hope these comments are helpful in some way to people who are trying to facilitate solution-oriented activity at this critical time.
Eventually, the system of interdependent supply chains crashes as oil prices get too high to support it. At first, decay should be gradual, but it’s unlikely to proceed in a linear fashion. The more near term threat, however, is economic disruption, but we may at least recover from this.
there is one slightly hopeful aspect to globalised cpmplexity – it is that unleashing a war against an industrialised opponent would be counter productive – rather like an aircraft carrier launching its planes to bomb the other end of the ship.
there is also a very negative aspect to financial complexity. in ‘casino capitalist’ markets the last act of the gamblers will be to see the threat of system failure coming, and place bets against success. they will be ‘shorting civilization.’ it is in their nature to do that. people in whose nature it is not to think that way, will already be gone from the markets and trying to survive some other way.
it was long threatened that the chinese had it in their power to collapse the u s bond market. you will not need the chinese.
charles ponzi should get a posthumous nobel prize for economics. the world has been run on economic principles devised by him for many decades now. he is far and away the most influential economic thinker.
David, interesting paper, good in many respects, but the analysis has a few important blind spots or missing factors. First, the response of governments to nationalize individual companies or entire sectors, perhaps starting with the banking sector. That can make solvency, profits, and balance sheets become less relevant compared to day-to-day continued operations. (Although, counter-party risk might have to be wiped out in one swoop across an entire industry.) And second, as global supply chains disintegrate, the response of companies will be to localize production and inputs, adapting to what is available locally. This potential “de-globalization’ and local adaption process should not be underestimated for its power and scope — I think that will become one of the most visible and key aspects of the processes you analyze. Maybe you can include these two factors in a subsequent analysis.
You also might look back at the history in Russia 1992-1997, the so-called “non-payments problem” when a large share of the economy continued to operate despite the fact that many people were not paying for things and suppliers were not getting paid–somehow things kept operating in the face of widespread non-payments (although GDP collapsed by 20% or more).
David, you’ll like this piece that I wrote:
Very informative report. I find such studies more important than papers trying to predict volatility of volatility.
Have you considered that our leaders have already seen this coming, and are already doing something to control what is bound to happen next?
The first thing is not to admit it publicly – confidence is essential to the success of a Ponzi scheme, so they must avoid a loss of confidence at all costs.
Next they are going to have to “temporarily” take control of the banking sector and manage money in a totally anti-free-market way. They are going to have to “temporarily” control the people, who will be unemployed and hungry, and very very angry. This will require sweeping new police powers, suspension of democratic rights, censorship of dissenters, and so on – Homeland Security on steroids.
To get those vital oil imports flowing again (that they can’t pay for except with funny money), they are going to have to take it by force. It doesn’t take a giant leap of imagination to think of where they will start. This explains why the Iranian nuclear situation (which is a fake problem) has been simmering since 2005, but without it going anywhere. So much demonisation of the Iranians has occurred, that it will seem patriotic to finally get on with it.
It is also clear that an attack on Iran will quickly become WW3, when our leaders will be forced to declare a “war economy”, with all the austerity and patriotic censorship of dissent that that entails. The need for troops will help find patriotic jobs for the unemployed.
So I predict the moment a sovereign default occurs, there will be a false flag event in the Straits of Hormuz, and neo-fascist control of former democracies will ensue.
Your analysis is spot on if there is no WW3, but all the signs are that WW3 is being readied to meet the crisis you describe. Of course that is the last thing we need to solve the problem, but at least “they” will still be in control.
Very informative paper. However, a few important issues are overlooked. Firstly, the flexibility of companies is a component of redundancy, which in turn makes system more resistant to a collapse. Please analyse how Greece adapts to crisis (i. e. more food from local sources). Secondly, it is not clear how supply chains are infected by financial system contagion . “The broadest affect on trade is through the letters of credit” Really ? Finally, reasons behind inertia and the tolerance for raising instability will be very interesting issues to discuss. The higher complexity will be a consequence of the current crisis since technology is not static.
Blogger joebhed said…
I have two suggestions for either preventing or rebuilding from the global financial crisis.
Both involve understanding.
1. Cartesian Economics: The Bearing of Physical Science Upon State Stewardship.
2. The Role of Money.
It’s all about the relationship between real physical science and our debt-based monetary systems.
As Nobelist Soddy said in conclusion of studying the money system: “”It’s not a system; it’s a confidence trick.””
It’s about the paper that is about to destroy the planet as we know it. But, it’s only paper.
For the Money System Common.
First of all, an opening statement. When studying economics with hard-won intellectual capital, we sometimes forget that economics concerns the behaviour of our fellow humans. There’s nothing wrong with anthropomorphizing human beings. [The fact that I have to bring in a tautology, a tautology that would be actively resisted in certain circles, speaks to that “forgettery.”]
Looking at the matter while keeping in mind that the subject is the ecosystem (or “econo-system”) of our fellow humans, there are three intello-behavioral trends that make the system less robust than it used to be. All of them can be reversed to make the system more stable. These three are:
1. A decline in prudence with a corresponding attitude that common prudence is inefficient, old-fashioned or unsophisticated. Roughly, “prudence” can be defined as sacrificing a maximal rate of complexity and productivity growth for the sake of widening the stability domain. In the abstract sense, while keeping in mind that the ideal amount of prudence is vague because the very practice assumes uncertainty in the future, the right amount of common prudence exchanges maximal growth for optimal growth over the foreseen and unforeseen future. Examples of common prudence include tying up some funds into a month’s supply of food or into a nearby warehouse with spare parts. The first restricts consumption possibilities; the second ties up working capital that could otherwise earn a return [barring speculative opportunities, which are unlikely.] The compensatory gain for both is greater robustness. Note that the new wave of financial-services regulation, as exemplified by Basel, is an attempt to both formalize and increase common prudence.
It hasn’t happened yet, but a bigger shock will bring common prudence back into fashion. Once it becomes fashionable again, the restoration of prudence will slow down growth but provide greater shock absorption. Granted that this declension-to-ascension revival is in fact muffled by the new policy option of too-big-to-fail bailouts, as (most pointedly) illustrated by the U. S. government’s bail-outs of General Motors and Chrysler, but the resources of the world’s governments are limited too; so is the public’s patience. People can change their ways before instability turns into the Apocolypse.
[As a reminder, I hope I need offer no apologies for anthropomorphizing my fellow human beings!]
2. Overregulation – yes, overregulation. This second point does clash with the above note about regulated prudence, but the finance sector is only one industry. Moreover, most derivatives [specifically, OTC derivatives] were never regulated at all. What’s somewhat misleadingly called “deregulation” is more accurately described as the increase of complexity in financial engineering outstripping the regulators’ ability to respond to it. I can assure you that finance as a whole is quite regulated: if you don’t believe me, try opening up a brokerage shop with your Uncle Jack and see how far you get before legal sanctions shut you down [and get you and U. J. into legal hot water.] In an industry where regulations are truly minimal, like affiliate-sales Websites, you and Uncle Jack can try your luck without being brought to heel in any way provided you follow the basic law prohibiting fraud and a few disclosive add-ons for consumer protection. That freedom of entry is very much not the case in financial services.
To get back to my general point: except for the special case of adversarial regulations (which I’m tempted to call “pugnacious regulations”), regulations tend to codify best practices in the industry being regulated. It’s assumed, common-sensically, that falling well below best practices is what should be actionable. Just as only a small minority of people are crooks, so it is that only a small minority of firms are crooks.
The trouble is, regulations enshrine best practices at a certain point in time. As I noted above with respect to financial services, regulators are slow to adapt to change; that’s the downside of throughness and common-sensical caution. It’s common sense to suspect that cost-cutting means corner-cutting. It’s also common sense to assume that a genuinely unorthodox new idea has something wrong with it: after all, extraordinary claims require extraordinary evidence to back them up. Regulators are human beings too, so their motives and decision-making algorithms are not at all strange to the rest of us humans. The strangeness lies in the details, not the overall conceptuals.
Unfortunately, the downside of common sense is that it sometime takes the form of “the common sense of ignorance and prejudice.” Genuinely unorthodox innovations – the products of non-glamourous non-conformity – are more likely to be stifled in regulated industries than in unregulated. Ironically, given point #1, this stifling is done for reasons of common prudence.
A firm in a regulated industry is actually easier to manage, provided that the firm can compete while observing the constraints that the regulations put upon it. [It’s easiest for untainted market-leader firms at the time the regulations are promulgated, as those firms have already implemented best practices.] The trouble is, such firms are also rigid and less flexible in responding to changing conditions. Ironically, given point #1, common prudence in legal form has led to a decrease in robustness. That’s an unavoidable cost of safety.
With regard to this component, firms can “set sail on the high seas” (as it were) as the financial institutions have done most successfully. Or, regulations can be overhauled to a) update best practices, and/or b) lessen the prior-restraint component and increase the after-the-fact punitive component. That is, give the regulated firms more latitude but apply greater punishments to firms (and those firms’ top exectives) that cause disasters. This adjustment can increase the robustness of the system before it collapses. [I should add: so can fleeing to the high seas, but only if said fredom-seeking is matched with an increase in internal restraints – i. e., common prudence.]
3. Too narrow a definition of creativity; an overemphasis on innovation at the expense of resourcefulness. The spirit of innovation introduces new products and practices. The spirit of resourcefulness finds new methods for accomplishing present goals.
Examples of resourcefulness would be: the invention of scrip in the event of a monetary collapse, launching an “eBay of barter” Website that uses computational power and a large database to get around the double coincidence of wants without money, buying farmland gone to seed – abandoned because the growing season is too short in its region – and reclaiming it as a bet on global warming, setting up a fish farm in the garage, finding a way for ordinary folks to refuel natural-gas cars in their homes safely (this one would be hard, but it would be a compelling application for cars fueled by plentiful natural gas), or the simple (if challenging) cultivation of the habit of staying calms when eveyone else is emotional so as to be a pillar of reasonableness when disaster strikes. All of these examples are far less glamourous than the new iPhone 5, but the underlying skills they exhibit are precisely the ones needed to contain a disaster. As long as there are reservoirs of resourcefulness in the human mind – and previous disasters show that this is indeed the case – the counteractions necessary to prevent a disaster from turning into an all-out collapse can be brought to bear.
To sum up: The width of the staibility domain for today’s econo-system can be increased by:
1. Firms that presently maximize complexity by living on the edge of collapse changing their ways by shifting to common prudence, particularly in the areas of storage and savings.
2. The regulatory mix can be altered to permit greater freedom of action at the cost of more punitiveness in cases of damage due to negligence or malice.
3. Innovative creativity can be de-emphasized for the benefit of resourceful creativity.
Thankfully, we humans have a knack for showing our fellow humans that we’ve been underestimated – particularly, during a crisis. The above list of three is far from exhaustive.
So, despite the unprecedented fragility of the current human econo-system, total collapse is far from inevitable. We’ll show ’em!
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Trade-off financial system supply-chain cross-contagion

Exploring Hydrocarbon Depletion.
Financial System Supply-Chain Cross-Contagion.
Financial System Supply-Chain Cross-Contagion.
Why would China be burning all that coal if not for manufacturing the chachkas that the cheap oil surpluses allow us to buy?
Take away the cheap oil, you take away much of the demand for "stuff", so consequently you take away the demand for coal. As the demand for energy deflates, the ability to pay for $80 fracking oil disappears, further forcing the economy down, a negative feedback loop.
Financial System Supply-Chain Cross-Contagion:
a study in global systemic collapse.
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3 years “collapsing now and avoiding the rush,” so these are somewhat academic questions for me, but if I knew a fast crash was around the corner I'd do some things differently.
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