Where Will the Collapse Start?

Collapse, by its very nature, is not a ‘tidy’ phenomenon with a clearly identifiable start and end date. Geology, geography and climate determine access to resources and collapse will hit the most vulnerable states first. There are three main factors that determine vulnerability today – climate impact (e.g. floods/drought), import dependence for food and energy and population growth.

The countries most at risk of collapse in the current era are highly dependent on energy/fuel imports, have high levels of foreign debt, are most affected by rising food prices and their political stability depends on subsidised food and energy prices. Knowing this it should be no surprise that Lebanon and Sri Lanka where the first dominos to fall.

In all likelihood Lebanon and Sri Lanka were just the first. Countries with large and fast-growing populations like Pakistan, Bangladesh, Turkey and Egypt are at major risk. They need to import most of their oil/fuel, are unable to produce enough food domestically, see major climate impacts now and have high levels of foreign debt.

Even countries that do have oil are at risk, though, if their politics requires counterproductive choices. Nigeria produces 1.3 million barrels of oil per day, but perversely high oil prices mean that Nigeria is running a deficit. With no refining capacity in the country Nigeria imports all petroleum products at market prices but subsidises the consumer price to keep it at 39c per litre. With a fast-growing population it cannot sustain these deficits for long.

The history of foreign investment in developing countries tells us that investors take flight once the risk of default becomes likely or contagious. Once a country is in default its ability to buy fuel or oil in global markets basically disappears.

We can check this ‘rule’ by looking at why Argentina has not collapsed (it has been in debt default nine times already) and why the Asian crisis in 1997 did not lead to any collapse. Argentina is a major food exporter and has significant oil and gas production. Its population growth rate is down to 0.5%pa. It may have been borrowing recklessly, but it does have viable export revenue and low population pressures.

Whilst all the South-East Asian ‘tiger’ economies had fast growing populations in 1997, the debt crisis was a result of aggressive growth and a bubble in real-estate investment, not borrowing to pay for oil or food imports.

In contrast, the Soviet Union and Venezuela in the 1990s are cases of collapse that do not fit the pattern. The Soviet Union collapsed due to neoliberal ‘shock therapy’ during the Yeltsin era when the old economy was dismantled and sold off cheap without any plan for a managed transition. With its immense fossil fuel and mineral reserves and massive food production potential it was always likely that the collapse would be reversed. Venezuela has the world’s largest oil reserves and was once the richest country in South America. Its collapse is mostly a result of relying entirely on oil exports without adopting mitigating strategies for times of low oil prices (in contrast to the UAE and Saudi Arabia).

What is different today compared to these older examples is that the overall external conditions have changed significantly. Climate impacts are increasing rapidly and with much more severe consequences. Mineral ore grades are decreasing constantly with big implications for energy and water use, conventional crude oil production peaked in 2005 and overall crude oil likely peaked in 2018. Global coal production has plateaued since around 2012. Only gas production is still growing. Wind and solar are growing fast, but from a very low base. As of 2021 only 4% of global energy production comes from wind and solar.

With CO2 levels in the atmosphere already the highest in 3.5million years and still growing fast the climate is destined for much more extreme conditions as a result of accelerating warming. This is already leading to widespread drought across the globe and to a higher frequency and intensity of fires, storms and floods. All these effects don’t just lead to reduced food production, they also increase capital maintenance costs (rebuilding damaged infrastructure). Climate disasters caused US$145billion damage to property, crops and infrastructure in the US in 2021.

It is not just deteriorating resource supplies and increasing capital maintenance costs that make collapse much more likely today. We have also heavily borrowed from the future, to the tune of US$300 trillion by the end of 2021. Since writing off unpayable debts (as was commonplace in earlier civilisations) is still completely out of the question due to the power of the financial sector, paying interest reduces our collective ability to adopt mitigation measures to cushion the fall. Quite the opposite, we are borrowing more and faster to keep up the pretence of economic growth and development.

If you are prepared to look closely, the strains and precursors of collapse are showing in many places. In overlong and fragile supply chains that crack from relatively small disruptions. In the lack of capacity in many industries, often as the result of deliberate capacity destruction to protect monopolies or oligopolies. We also see it in sluggish disaster responses and in fast deteriorating service levels in healthcare, education and customer service from corporations. 

The collapse is already underway, but we have not yet accepted the inevitable decline. Sri Lanka and Lebanon are seen as ‘not like us’ if they enter the consciousness of Westerners at all. East Africa, Egypt, Turkey, parts of Central Asia and some South American countries are most at risk to be the next in line. How many dominos have to fall before the penny drops?

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Peter Lanius

Peter Lanius is a physicist by training who has worked in IT, Telecoms and as an executive coach across many industries. He believes in collapsing early to avoid the rush and lives on a 20acre property in regional Australia.