Caerus

Virtually the whole world is feeling the effects of the war Russia has started on Ukrainian soil. Rising energy prices, groceries becoming much more expensive and people desperate because in all likelihood they will no longer be able to pay their gas bills this winter. More and more people are hitting rock bottom financially. The war in Ukraine has been the catalyst for a lot of financial and humanitarian misery affecting people all over the world. The worst and saddest example being the people in third world countries that are experiencing famine because vital Ukrainian wheat supplies can’t get transported to them because the Russians are blocking the ports that are used to export the grain.  

Now, obviously, I am by no means an economist, but in my opinion, this war could leave a big, lasting impact on the way the Western world in particular has structured its economy. Indeed, the first cracks in this system already started right after/during the corona crisis, when the demand for various products increased again so fast that production was not sufficient and long delivery times were created for various products. Even then, energy was becoming increasingly expensive. When Russia invaded Ukraine last year, it marked the final blow and the start of whooping inflation that continues to this day. 

It is worrying to realise that a group of a limited number of people, can exert such influence on the world economy and virtually personally cause this misery. It is a testament to the fact that humanity at its core still functions as it did hundreds of years ago, when a select aristocracy held so much power and influence that economic relationships and hence the lives of many people were determined by this group. Similar reflections of these ancient aristocracies can be found in the present day. To cite a few examples: of course, Russian President Vladimir Putin, a man who rules as an autocrat over Russia and thus also over the rich energy resources it possesses. If this individual decides to turn off the gas tap to Europe next winter, hundreds of millions of people will have a big problem. Besides political bosses, other influential figures have also emerged in this age of digitalisation, such as Elon Musk, who, as a wealthy businessman, regularly scares stock market traders via Twitter and thus single-handedly influences share prices. Reuters (2021), gives several examples of this influence in the article cited below. Mainly cryptocurrencies are being very sensitive to his tweets.

The crisis in Ukraine and shortages in supplies all over the world because of the war are illustrating that capitalism in its current form is reaching its limits. This assertion is based on the logical principle that continued economic growth (which means increasing consumption of goods), is no longer possible in the long run if whatever has to produce the raw materials for this production (in our case, of course, the Earth), is finite. Our own Earth is finite. Many minerals and raw materials are known to simply run out of supplies within a few years, or are no longer economically viable enough to dig up. And since the Earth is a closed system, these will not be replenished either. The conclusion of the above is, in the long run, production will be less possible and it will no longer be able to increase. The economy can then no longer grow, its maximum capacity will have been reached. The consequence then, of course, is inflation. People's demand keeps rising (especially if the population keeps growing), but supply stays the same. Prices rise. All basic economic principles.

Currently, we are not in such a desperate situation yet thankfully, but it does give us a taste of what may come if a specific threshold is reached in the future, that if we go over it, the Earth might not be able to sustain advanced, 21st century human life anymore. You see the situation on a small scale now, due to an actual shortage of energy because Russia is not supplying 100% of its capacity and the geopolitical situation is unpredictable right now. Expensive energy is also making almost all other products more expensive. 

The only ways I can think of to stop this trend is a radical change in consumer behaviour and/or an overhaul of the dominant economic 'belief'.

1. Changing consumer behaviour: What needs to happen is that consuming materialistic goods should no longer be central to people's lives. Today, it is. This happens in a kind of circle of economic activity: We work, earn money and then spend it on materialistic goods other than necessary goods like food. We need to break this circle. The concept of 'working' should not automatically take centre stage with the ultimate goal of consuming goods that are not vital. If this can be (semi) successfully implemented, a greater proportion of human consumption will consist of renewable goods (growing/living organisms), which are inexhaustible if people use them naturally. Thus, a version of capitalism can continue to exist, since the goods offered are renewable and the economic cycle could repeat itself indefinitely. The question is how to do this, without such a system taking on communist traits, because the most common and accessible way to achieve this is to have an umbrella organisation limit consumption per individual/control this, thus limiting your Western/liberal values like freedom. So people themselves should be made aware that consumption needs to be limited, so that they voluntarily make more sustainable choices. 

2. Revisiting the ‘religion of economics’: A former teacher of mine had a quote that intrigues me to this day: 'Economics is a belief/religion'. I can largely agree with this statement. Firstly, because economics, like religion, is something devised and worked out by people themselves and has no universal laws and truths, as, for example, mathematics has them to my knowledge. After all, the value of the number five is the same everywhere in the universe. However, the frameworks within which the economy operates are devised by humans and are also highly dependent on the behaviour of entities operating within these frameworks. People's behaviour can only be predicted to a very limited extent. This raises the question of the extent to which economic laws can be taken seriously. It is not an exact science. Yet it is something humanity has built its life around. The things people do most in their lives/what their lives actually revolve around have almost exclusively economic motives. After all, we do not work and study for fun, but because we want to obtain resources that enable us to satisfy 'needs'. For people, the existence of economics is the incentive that ensures that everyone does their bit for society and everyone can fulfil their needs. Just as for many, belief in a certain supernatural figure is a motivation to be a 'good' person or to stay alive at all, whatever that means. These parallels make it that I consider economics a 'belief' to a limited extent. It is a guiding factor in almost everyone's life on earth. 

A review of the value/determination/influence of this belief is necessary in my opinion. It should be less defining in a person's life. Things like a moral and emotionally 'good' life should be much more central instead of the constant incentive of having to work for money purely to be able to participate in society.

With the current state that our world is in, primarily due to the nearly unimaginable challenge that climate change is for humanity, a drastic revision of capitalism as a worldwide economic system is needed. Doing nothing will ultimately result in environmental catastrophe, which automatically means that humanity will also suffer a lot of really terrible things. In my opinion, events like large scale (world) wars about food and water supplies are not unthinkable in the future. However, diminishing and completely replacing capitalism with other (completely new) economic principles will be impossible, since it is a system that is completely intertwined in literally all aspects of our lives. Our lives are almost ‘based’ on it. A step in the right direction will be for humans to start living in closer harmony with nature and the environment again, using natural processes and technology to both the planet’s and our own advantage.    

References

Reuters. (2021, November 8). How tweets by Tesla’s Elon Musk have moved markets. Reuters. https://www.reuters.com/business/finance/how-tweets-by-teslas-elon-musk-have-moved-markets-2021-11-08/