The Revolution is Upon Us: The Age of Crisis and the End of Homo Economicus

The present economic collapse is likely only the opening salvo of a much longer and broader age of crises. This period will produce changes at least as profound as those that marked the transition from feudal society to capitalism. It will change virtually everything about the way we live our lives. It will, in short, constitute a revolution.

This revolution, while recognizable in form, will be entirely new in origins. It will not be a revolution that operates according to our own timetables or agendas. It’s a revolution that will be dictated to us by the dynamic relationship between humans and the planet upon which we live.

The present economic downturn is taking place in the context of an extraordinary and extraordinarily convergent series of crises. Some of these, such as climate change, have recently begun to receive widespread media attention and enter into mainstream consciousness. Others, such as impending food and water crises, continue to percolate under the surface. Any one of these crises alone would be daunting. Collectively, they pose the greatest challenge humanity has ever faced. The reality and severity of these crises will form the backdrop that informs and limits our future social and economic development.

The economic crisis is not necessarily a result of any one or even all of these crises. But it offers the prospect of clearing the intellectual and ideological terrain in a manner that allows us to begin the difficult work necessary to honestly and effectively confront the much greater challenges now at our doorstep. To understand the immediacy of that challenge, a brief digression into recent scientific developments is necessary.

The year 2007 was a watershed in the science of climate change. That was the year in which a dramatic increase in the rate of Arctic ice melting blew up existing models of climate change. Arctic ice always melts and recedes during the summer, but 2007 was extraordinary. An area the size of Britain disappeared in less than a week. The speed and extent of the melt shocked climate scientists, exceeding what even the most pessimistic of the models predicted. Said Mark Serreze, an Arctic ice specialist with the U.S. National Snow and Ice Data Center, “It’s amazing. If you asked me a couple years ago when the Arctic would lose all of its ice, then I would have said 2100, or 2070 maybe. But now I think that 2030 is a reasonable estimate.”

Clearly, something was wrong with the models. Early models of climate change assumed fairly constant rates of change commensurate with atmospheric concentrations of greenhouse gases, but scientists discovered other mechanisms had not been factored in. For example, arctic ice, being white, reflects 80% of the sunlight striking it back into space. Open blue water, on the other hand, absorbs 80% of the solar energy reaching it. As the ice melts, more open water leads to more energy absorption and more heat, which in turn causes more and faster melting in a positive feedback loop.

The incorporation of feedback loops has significantly increased the power of the models to more accurately predict climate charge. Other such loops include those related to glacial calving and methane release. Studies of glaciers and ice packs reveal that, as ice melts on the surface, water begins to flow in streams through glacial crevasses and down to bedrock, acting as a lubricant. This causes increased “calving” as more and larger icebergs break off at the glacier’s mouth. Flowing water also accelerates the disintegration of ices sheets, such as those in Antarctica and Greenland. Melting of the Greenland ice pack would raise global sea levels by about 23 feet, and of the West Antarctic Ice Sheet, another 16 or so feet. This would inundate coastal cities and produce hundreds of millions of climate refugees.

An even more ominous development looms. Studies show that increasing sea temperatures spur the release of methane, a greenhouse gas more than 20 times as potent as carbon dioxide, from deposits trapped below the ocean’s surface. As the water gets warmer, the rate of methane release increases. This is especially true at the poles, where temperatures are rising fastest and methane deposits are heavily concentrated in seabeds and permafrost.

The sobering results of studies incorporating new climate change models have produced a change in thinking among climate scientists and invoked a new sense of urgency. James Hansen, the chief NASA climate scientist, recently warned that we must limit the concentration of carbon dioxide in the atmosphere to 350 parts per million (ppm), “ . . .if humanity wishes to preserve a planet similar to that on which civilization developed and to which life on earth is adapted.” We’re currently at a level of 387 ppm and that level is increasing at roughly 2 ppm per year. Hansen now says we must end the burning of coal by 2030.

Rising sea levels are not the only hazards of ice melt. Lester Brown, president of the Earth Policy Institute, reports that glaciers in the Himalayas and the Tibet–Qinghai plateau are melting at alarming and increasing rates. These rivers feed all the major river systems of Asia, including the Ganges, Indus, Mekong, Yangtze and Yellow. Wheat and rice production in the region depends upon these rivers.

The picture emerging is that of a delicately balanced climate and hydrological system that maintains the conditions under which human civilization has evolved. Further, scientists are beginning to realize how small changes in input conditions lead to large systemic change. The fear is growing that there are “tipping points” beyond which the system will spiral out of control. We may be crossing thresholds we can’t see, with consequences we can’t predict.

Vital functions of our civilization depend upon the burning of fossil fuels, which, as we have now confirmed, is proven to have disastrous effects. Yet, even if it were safe to continue to rely on fossil fuels, future supplies are seriously in question. Since late 2004- early 2005, oil production has been essentially flat. Since this was a period of rapidly rising demand and prices, traditional market forces don’t seem to offer an explanation. While this alone doesn’t offer conclusive proof that we’ve reached peak oil—that moment when world oil production begins its inexorable decline—it is suggestive. The president of the French oil company Total recently stated his belief that his industry would likely never produce more than the current global total of roughly 89 million barrels per day.

Control of global oil and gas reserves has been a major driver of national competition and conflict for at least the previous decade. While it’s reasonable to debate the role such control played in the American invasion of Iraq, few doubt that it was a significant factor. The emergence of crises around water and food—exacerbated by the demand for grain as a feedstock for fuel—threaten even more intense conflict in the coming decades. The summer of 2008 is instructive on this score. Rising food prices led to shortages that produced food riots in Cameroon, Egypt, Ethiopia, Haiti, India, Indonesia and Senegal, among others. The age of crises promises to be a very volatile and dangerous time.

While the depression we face may not be a direct result of the emergent ecological and social crises just discussed, there is a direct link between neo-classical economic theory and those crises. Neo-classical economics assumes that markets always get prices right. But in failing to account for the value of natural resources and biosystems as well as financial capital and physical goods, the system has produced badly distorted pricing and disastrous real world outcomes. A more fundamental flaw lies within capitalist theory itself: capitalism is based on the unlimited growth of a system that exists within a larger, quite limited ecosystem.

Our present economic collapse comes on the heels of a solid three decades in the grip of the extreme free market fundamentalism of the neoliberals. Like all fundamentalist faiths, neoliberalism reduces a complex world to a simple schematic. All of society is viewed through the prism of an economic lens. Economic growth, measured by increases in GDP, is the ultimate goal. Indeed, it’s the ultimate good. The market is the perfect mechanism to achieve this goal. And the market functions best with minimal or no interference from government or civil society. Armies of bright young economists armed with complex equations attested that this was so.

The genius of neoliberalism was in its ability to cloak market leadership of society in an aura of scientific and historical inevitability. The collapse of the Soviet Union seemed to validate Margaret Thatcher’s claim that there was no alternative.

The great economic historian Karl Polanyi observed, “The idea of a self-adjusting market implied a stark utopia.” And neoliberalism was a stunning utopia of economic determinism, one even more ambitious than that of Marx.

With all the big questions thus settled, history appeared to be at an end. There was one and only one route to prosperity and peace. All that was required was to make sure the model was correctly applied and all would be well. We all settled into our assigned roles. Capitalists retreated to the role of technocrats, eschewing risk themselves while shifting and spreading it throughout society. The rest of us were relegated to the roles not of citizens, but of consumers. Using our homes as ATMs, we filled our lives with Chinese-made goods, oblivious to the looming environmental and social costs of a runaway, unregulated consumer-driven society. Only a marginalized few questioned the basic economic structure. It was the era of homo economicus, humans in service to the economy.

Now that perfect machinery lies in pieces all around us and the global economic free fall shows no signs of ending any time soon. The fundamental reasons underlying the collapse aren’t all that difficult to discern. Central to the whole neoliberal project was the drive to rationalize all aspects of human society. Relentless efforts to cut costs and increase efficiency drove down the living standards of the vast majority, while the diminution of government and other non-commercial institutions led to increasing concentration of wealth at the very top of society. As high paying jobs in the industrial and technical sectors moved from developed countries to low wage export-based economies in the developing world, capacity soon outstripped demand and profits in the real economy began to sag. Not content with declining earnings, wealthy elites began to search for investments offering higher returns. If these couldn’t be found in the real economy, they could certainly be created in the exploding financial sector.

Once consigned to the unglamorous world of matching those with capital to invest with those with enterprises seeking to grow, finance became the powerful new engine of economic growth. No longer stodgy, bankers and brokers became sexy and glamorous. Exotic new financial instruments, called derivatives, traded on everything from commodities to weather.

This speculative frenzy was supported by a central bank only too happy to keep credit extremely cheap. Debt exploded among consumers, businesses and government alike. Creating new debt became the source of even more exotic investment vehicles, often bearing only the most tenuous of connections to underlying assets of real value, with unwieldy names such as “collateralized debt obligations” and “credit default swaps.”

All the debt and the shuffling of fictional wealth hid the underlying rot of the real economy. It was a house of cards just waiting for the slight breeze that would send it all crashing down. And a collapse in housing prices in 2008 laid bare the economic contradictions.

The fundamental contradiction underlying much that confronts us in the age of crises is an economic and social system requiring infinite growth within the confines of a finite planet. Any vision seeking to replace neoliberalism must take this contradiction into account and resolve it. The overriding market failure of our time has nothing to do with housing. It’s the failure to place any value on that which is truly most essential to our survival: clean air and water, adequate natural resources for the present and future generations, and a climate suitable for human civilization.

No such new vision is currently in sight. That this leaves everyone, neoliberals and their foes alike, in a state of uncertainty and doubt is hardly surprising. The seeming triumph of neoliberalism was so complete that it managed to inculcate itself in the psyches even of those who opposed it.

We find ourselves unsure of terrain we thought we knew well, sensing that one era has ended but unsure as to what comes next. We might do well to embrace that doubt and understand its power to free us. Our doubt allows us to ask meaningful questions again and questioning implies the possibility of real choice. Removing the intellectual straitjacket of neoliberal orthodoxy opens up the space necessary to reconsider the purpose of an economy and its proper role in a decent human society and to revisit the old debate over equity versus efficiency. It calls into question the assumption most central to homo economicus; that all humans act only to maximize their own interests.

It seems clear that the world emerging over the coming decades will look quite different from the one we now inhabit. Of necessity it will evolve in ways we can’t fully understand just yet. Old battle lines, such as the ones between capitalism and socialism, will likely fade away. Both of those models arose in a world of abundant and cheap fossil fuels and within the confines a planet with a seemingly endless capacity to absorb the wastes of our conspicuous consumption. New battle lines are already beginning to take shape.

The task of reimagining the world is urgent. The limits of the resources upon which life itself depends have become starkly apparent. Yet, oblivious to the need to change course and to do it quickly, the old elites, still powerful, desperately seek to shape the crisis to their own benefit and maintain the status quo. If they succeed, our future looks grim.

But there are signs of hope. In March, Thomas Friedman, that barometer of all things mainstream, wrote a column wondering whether 2008 might just go down in history as the year the markets and nature told us our model of unlimited growth was no longer workable. While it might be tempting to dismiss the great acolyte of corporate globalism as getting religion a day late, surely this is a sign that the ability to doubt and question is slowly seeping from its marginalized quarters back into the mainstream.

The revolution is upon us. The era of homo economicus is drawing to a close. To quote Tony Kushner, writing of a different crisis at the outset of the era now ending, “The great work begins.”
Note: This essay is partially inspired by the author’s presentation at a panel discussion, “Reaching A Planetary Crossroad: Global Oil, Climate Change and the World Economic Crisis” at the conference “The Past and Future(s) of Revolution: A Global Exploration” held at Northeastern Illinois University on March 11, 2009.