In the paper Korowicz develops an argument that the increasing complexity and interdependence of the global economy has made it more vulnerable to shocks to the system. A crisis anywhere within the system will be felt across the whole system. Moreover, the complexity and high efficiency of our modern day economy (think ‘just in time’ management of factory stocks) is such, that even a minor (financial) crisis can cause a global systemic collapse, hitting a nations health care, energy supply and ultimately food supply. And given the present circumstances in the economy, with too much debt, shrinking earnings and a European currency that is tearing the continent apart, a collapse of the system may just be inevitable. Or, as Korowicz says it:
Collectively, it is like we are passengers travelling in an unimaginably complex plane locked onto a perilous course. Our understanding of the engine and guidance system is partial, nor do we know many of the connections between them. We may want to change course by retooling the guidance system, but there’s a meaningful risk it will stall the engine, and we’ll plummet to the ground. Good risk management might argue that before repairs are done, we ensure the passengers have parachutes, but time is running out, maybe it already has.
At 78 pages it is a hefty read. But it is well written and, in a morbid fascination kind of way, riveting. If you have some time to kill, this is a paper you ought to read. In fact, it is a paper all those in leadership positions should read. Which they won’t, of course.
All in all, the paper argues compellingly that the days of us being able to shop for an almost endless variety of products at low prices are coming to an end. Enjoy it while it lasts.
Have a good Sunday.