Our rapidly heating planet is the fundamental crisis for humanity and will have repercussions on all human systems. The rising cost of living is already a consequence of the climate crisis, high prices are and will continue to be imposed on people because overall supply is falling. And they will always tell us that it is necessary to save the banks, because otherwise the whole economy collapses. They will guarantee the collapse of society to save the banks, once again. But this time it is not the same as previous financial crises, writes Joao Camargo, a climate activist in grassroots movement Climaximo in Portugal, an environmental engineer and climate change researcher at the University of Lisbon.
The criminal profits of large multinational corporations in 2022 might seem to indicate a reversal of the historical trend for global profit decline of recent decades, but they are only a hiccup and a massive assault enabled by the privileges of the monopolists of global capital. The fall in profitability continues and the climate crisis is already and will continue to be the main factor in the current and future financial crises.
The inflationary spiral we are still living in was triggered by the oil companies’ choice to use their monopoly over the energy system to offset their falling profits during Covid lockdowns. This comes after decades of hooking the economy on fossil fuels in an absolute alliance with the political mainstream, with the complacency and sometimes even agreement of green and left-wing parties. All agreements have been torn up by now, only barbarism remains. However, on top of this assault produced by the imposition of unparalleled high prices, other imbalances beyond the control of the capitalist elite have begun to manifest themselves.
The economic and financial models are not designed for the climate crisis.
In 2022, Pakistan was submerged by the biggest floods in its history, with a third of the country under water, with over 30 million people displaced to other places and other countries. Pakistan is one of the world’s largest producers of cotton and textiles. The prices of textiles, of almost all kinds of clothing, have soared. Parts of Pakistan are still underwater. The abundance of cotton and textile production on a global level has been squeezed, prices have increased and it will not necessarily be possible to return to previous levels without further disruption.
Maize, wheat, and rice crops were affected by drought in the United States, Europe, and China. In California, the smallest rice area since the 1950s was planted in 2022 and the harvest will be about half that of a “normal” year. In the United States the winter wheat harvest has fallen by 25%. Some of this production could recover by 2023 if we do not experience a scorching summer in the Northern Hemisphere, but so far the historic drought on the Eurasian continent and in North America continues.
Agriculture in the mega-artificialized plastic prairie of southern Spain suffers drastic production declines and drives up the price of vegetables and legumes. The Alqueva Dam in Portugal and the absurd amount of criminal crops currently grown in the Alentejo region are now at the limits of viability. Although we have experienced the worst drought in Europe since the 16th century and the worst drought in the history of China in 2022.
We already live on another planet, not the one where all the exploitative relations, the institutions, and the banking and financial system that sustained the growth of capitalism were created.
To fight rising inflation, central banks and battalions of economists trained in the schools of suicidal capitalism chose to do what they learned: raise interest rates, to take money out of the economy, and make it squeeze. Everyone who had a loan saw the value of their loan increase, while the prices of all goods increased too. Many companies that had loans — everyone, therefore — also saw their operating costs increase, which will increase wage compression, eventually leading to layoffs and, in some cases, bankruptcy.
Silicon Valley Bank went bankrupt as a result of rising interest rates and because it was a bank that specialized in debt, with a large amount invested in long-term US government treasury bonds, considered probably the safest investment in the world economy. What happened to Silicon Valley Bank and the others will happen again and again in the future.
As the likelihood of the price of fossil fuels controlled by private multinationals dropping significantly is so slim and as climate disasters such as droughts, floods and forest fires are taking away the general capacity to produce goods and services on a global scale, the climate crisis will continue to express itself directly as a cost of living crisis. This means that growing debts will, in increasing amounts, go unpaid. This means more banks going bust. But maybe it’s possible to cover all this with insurance, no? – No!
If you consider an area like flood-prone Pakistan or a state like California, one of the most important agricultural areas in the United States whose annual fires are now permanently devastating vast areas and even cities, which insurance companies will ever be able to insure all the damage caused? – None!
All the weaknesses that already existed before — weak health systems, energy monopolies, unavailable, poorly built housing stock, touristification of cities, lack of quality public transport, and precarious mass employment — will be exacerbated. Health systems are on the verge of collapse, people can’t pay rents, can’t commute to work without exorbitant costs, and stop paying bills and debts. And banks threaten, evict, sue, but there is no money to save them. The result? A financial crisis. Not paying the people directly, the states pay, again the last guarantor of the financial system, reducing public services and social capacity, increasing public debts, and being pressured to sell public assets.
With a global temperature increase of 1.1ºC to 1.2ºC we are already in a general financial crisis of general lack of income from capitalism, despite the neo-liberal parroting that we live in the best of all worlds. Quality of life is in decline across the world because of the climate crisis and the system we live in, which refuses to solve it.
The profitable investments of the last seven decades no longer exist. That is why we see so much excitement and hype with artificial intelligence, cryptocurrencies, and other intangible assets.
They are the search for yield that today has to be based primarily on divestment and on products whose verifiability is low. The time when investing in cement, cars, factories, roads, and construction had guarantees of profit (even if brokered and favoured by the state, based on the idea of guaranteed future growth and profitability) is over.
What is left is chaos and alienation.
The climate crisis will be the mother of all financial crises, because it is the fundamental crisis of the human species and will have repercussions on all human systems. The preponderance of the financial world in our societies means that this is also where we will see the world burn, economically and politically.