How much globalization can the World digest? Have we reached the limit? What is the limit, if any? Is globalization piloted and induced, or is it just a spontaneous and inevitable result of economic (and human) development? These are not easy questions to tackle. However, with the aid of complexity - which is a meta-KPI combining a multitude of conventional indicators into a single scalar measure - we can gain insight into the dynamics of globalization. Based on data from the World Bank, we have measured and analyzed the evolution of complexity of the World as a system. The analysis (see the end of this blog for a complete list of parameters) has embraced 600+ parameters, spanning the period 1970-2010 and covering the following facets of our global society:
Economy
Industry
Agriculture
Energy
Society
Ecosystem
Transportation
Telecommunications
Military/Defence
Education
Crime
Health System
etc.
In other words, the analysis was not focused on the economy alone. One point we would like to make is that today's crisis is seen almost exclusively as a crisis of the economy. True, the economy is in a state of crisis but this is more than just a crisis of the economy. There are aspects of the society, such as the loss of values, morals, decadent and wasteful lifestyles, that have fuelled the crisis, and are continuing to do so, and yet almost all analysis focuses on the economy, with particular attention on finance. True, finance has provided fast and deadly mechanisms which spread the effects of the crisis to every corner of the globe, making the system increasingly fragile. However, it is the World as a whole that want to analyze, not just one of its facets.
The main question we wish to address is this: what is the maximum sustainable level of globalization? In order to answer this question we must first devise a means of "measuring the degree of globalization". The idea is to use the complexity of the World as a proxy. Since complexity combines all the indicators listed below into one, it appears to be a good proxy.
The evolution of the World's complexity over the past 40 years is illustrated below. A growing and evolving system increases its complexity over time (see for example Earth's biosphere) but the important thing is to stay away from critical complexity. This is because close to critical complexity all systems become uncertainty-dominated and possess very feeble and unstable structure. So, the important thing is for the blue and green curves in the graph below not to cross. The bad news is that:
Apparently, both curves have already peaked
The slopes suggest they may soon cross
In practice this implies that we have indeed reached the peak of complexity (which, when seen from a biological perspective is as a measure of "total activity" or potential within a system), fact which took place around 2008-2009. Once we're beyond the peak, we assist the destruction of complexity.
A closer look at the peak allows us to attempt a forecast: if the trend continues without major endogenous/exogenous traumas, then
the World, as a system, will become critically complex around 2016
Details of the peak are illustrated below.
This means that while there may still be pockets where things function quite well, the World as a system will:
become very difficult to comprehend
become very difficult to govern
be highly fragile and unstable
be is a state of "paralysis"
dominated by uncertainty and turbulence
An interesting aspect of the evolution of complexity is that approximately around 2002-2003, the growth rate of complexity has increased dramatically. At that time, the slope has increased very significantly, as if we were assisting the formation of a huge global bubble. The slope, in fact, may be seen as the rate of globalization. In the last decade or so it has accelerated substantially. Maybe too much.
The question at this point is the following: is the peak of complexity just a local bump, after which the system will continue to grow again (and globalize more) or are we on a path of inevitable decline, like all ancient civilizations which were unable to cope with their own (critical) complexity? In other words, is it going to be "A" or "B"?
The aspect of the curves reflecting the evolution of complexity and critical complexity suggests that it is "B". The shape of the curves is similar to those of aging closed (from a thermodynamic point of view) systems. A few examples are illustrated below.
First, a theoretical "clean" case - a system is "born", it grows, it evolves, it reaches a peak of development (complexity), then, as it ages, it gradually loses efficiency, functionality, and finally reaches a state of zero complexity. Rigor mortis. Sounds familiar, doesn't it?
This is a more realistic case, with a less serene aging process:
Finally, a more traumatic demise with sudden and catastrophic collapse:
Clearly, planet Earth is not a thermodynamically closed and adiabatic system (it receives approximately 12.2 trillion watt-hours per square mile per year, and a few tonnes of meteorites, so the Second Law of Thermodynamics doesn't apply) but the aspect of the above curves does resemble the evolution of the World's complexity.
Evidently, the conclusions of this study are based on the assumption that the current global trends will continue. Based on the how our politicians have responded to the crisis this doesn't seem to be a strong assumption to make! More soon.
The complete list of parameters is:
Agricultural machinery, tractors
Fertilizer consumption (% of fertilizer production)
Fertilizer consumption (kilograms per hectare of arable land)
Agricultural land (sq. km)
Agricultural land (% of land area)
Arable land (hectares per person)
Arable land (% of land area)
Land under cereal production (hectares)
Permanent cropland (% of land area)
Forest area (sq. km)
Forest area (% of land area)
Land area (sq. km)
Agricultural machinery, tractors per 100 sq. km of arable land
Cereal production (metric tons)
Crop production index (1999-2001 = 100)
Food production index (1999-2001 = 100)
Livestock production index (1999-2001 = 100)
Surface area (sq. km)
Cereal yield (kg per hectare)
Trade in services (% of GDP)
Communications, computer, etc. (% of service imports, BoP)
Income payments (BoP, current US$)
Imports of goods and services (BoP, current US$)
Insurance and financial services (% of service imports, BoP)
Goods imports (BoP, current US$)
Service imports (BoP, current US$)
Royalty and license fees, payments (BoP, current US$)
Imports of goods, services and income (BoP, current US$)
Transport services (% of service imports, BoP)
Travel services (% of service imports, BoP)
Foreign direct investment, net outflows (% of GDP)
Private current transfers, payments (BoP, current US$)
Workers' remittances and compensation of employees, paid (current US$)
Current account balance (BoP, current US$)
Net errors and omissions, adjusted (BoP, current US$)
Foreign direct investment, net (BoP, current US$)
Private capital flows, total (BoP, current US$)
Portfolio investment, excluding LCFAR (BoP, current US$)
Changes in net reserves (BoP, current US$)
Net capital account (BoP, current US$)
ICT service exports (BoP, current US$)
ICT service exports (% of service exports, BoP)
Communications, computer, etc. (% of service exports, BoP)
Income receipts (BoP, current US$)
Exports of goods and services (BoP, current US$)
Insurance and financial services (% of service exports, BoP)
Goods exports (BoP, current US$)
Service exports (BoP, current US$)
Royalty and license fees, receipts (BoP, current US$)
Exports of goods, services and income (BoP, current US$)
Transport services (% of service exports, BoP)
Travel services (% of service exports, BoP)
Foreign direct investment, net inflows (BoP, current US$)
Foreign direct investment, net inflows (% of GDP)
Portfolio equity, net inflows (BoP, current US$)
Workers' remittances and compensation of employees, received (current US$)
Workers' remittances and compensation of employees, received (% of GDP)
Market capitalization of listed companies (current US$)
Market capitalization of listed companies (% of GDP)
Listed domestic companies, total
Stocks traded, total value (current US$)
Stocks traded, total value (% of GDP)
Stocks traded, turnover ratio (%)
Net bilateral aid flows from DAC donors, Australia (current US$)
Net bilateral aid flows from DAC donors, Austria (current US$)
Net bilateral aid flows from DAC donors, Belgium (current US$)
Net bilateral aid flows from DAC donors, Canada (current US$)
Net bilateral aid flows from DAC donors, European Union institutions (current US$)
Net bilateral aid flows from DAC donors, Switzerland (current US$)
Net bilateral aid flows from DAC donors, Germany (current US$)
Net bilateral aid flows from DAC donors, Denmark (current US$)
Net bilateral aid flows from DAC donors, Spain (current US$)
Net bilateral aid flows from DAC donors, Finland (current US$)
Net bilateral aid flows from DAC donors, France (current US$)
Net bilateral aid flows from DAC donors, United Kingdom (current US$)
Net bilateral aid flows from DAC donors, Greece (current US$)
Net bilateral aid flows from DAC donors, Ireland (current US$)
Net bilateral aid flows from DAC donors, Italy (current US$)
Net bilateral aid flows from DAC donors, Japan (current US$)
Net bilateral aid flows from DAC donors, Korea, Rep. (current US$)
Net bilateral aid flows from DAC donors, Luxembourg (current US$)
Net bilateral aid flows from DAC donors, Netherlands (current US$)
Net bilateral aid flows from DAC donors, Norway (current US$)
Net bilateral aid flows from DAC donors, New Zealand (current US$)
Net bilateral aid flows from DAC donors, Portugal (current US$)
Net bilateral aid flows from DAC donors, Sweden (current US$)
Net bilateral aid flows from DAC donors, Total (current US$)
Net bilateral aid flows from DAC donors, United States (current US$)
Net official flows from UN agencies, IAEA (current US$)
Net official flows from UN agencies, IFAD (current US$)
Net official flows from UN agencies, UNAIDS (current US$)
Net official flows from UN agencies, UNICEF (current US$)
Net official flows from UN agencies, UNHCR (current US$)
Net official flows from UN agencies, UNDP (current US$)
Net official flows from UN agencies, UNECE (current US$)
Net official flows from UN agencies, UNFPA (current US$)
Net official flows from UN agencies, UNRWA (current US$)
Net official flows from UN agencies, UNTA (current US$)
Net official flows from UN agencies, WFP (current US$)
Net official flows from UN agencies, WHO (current US$)
Net official development assistance and official aid received (current US$)
Net official development assistance and official aid received (constant 2008 US$)
Net official aid received (current US$)
Net official development assistance received (current US$)
Net ODA received (% of gross capital formation)
Net ODA received (% of GNI)
Net official development assistance received (constant 2008 US$)
Net ODA received (% of imports of goods and services)
Net ODA received per capita (current US$)
Agriculture value added per worker (constant 2000 US$)
Energy production (kt of oil equivalent)
Electricity production from coal sources (kWh)
Electricity production from coal sources (% of total)
Electricity production from oil, gas and coal sources (% of total)
Electricity production from hydroelectric sources (kWh)
Electricity production from hydroelectric sources (% of total)
Electric power transmission and distribution losses (% of output)
Electricity production from natural gas sources (kWh)
Electricity production from natural gas sources (% of total)
Electricity production from nuclear sources (kWh)
Electricity production from nuclear sources (% of total)
Electricity production from oil sources (kWh)
Electricity production from oil sources (% of total)
Electricity production (kWh)
GDP per unit of energy use (PPP $ per kg of oil equivalent)
GDP per unit of energy use (constant 2005 PPP $ per kg of oil equivalent)
Energy imports, net (% of energy use)
Alternative and nuclear energy (% of total energy use)
Fossil fuel energy consumption (% of total)
Energy use (kg of oil equivalent) per $1,000 GDP (constant 2005 PPP)
Energy use (kt of oil equivalent)
Combustible renewables and waste (metric tons of oil equivalent)
Combustible renewables and waste (% of total energy)
Electric power consumption (kWh per capita)
Energy use (kg of oil equivalent per capita)
CO2 intensity (kg per kg of oil equivalent energy use)
CO2 emissions (kg per 2000 US$ of GDP)
CO2 emissions (kt)
CO2 emissions (metric tons per capita)
CO2 emissions (kg per PPP $ of GDP)
CO2 emissions (kg per 2005 PPP $ of GDP)
CO2 emissions from solid fuel consumption (% of total)
Other greenhouse gas emissions, HFC, PFC and SF6 (thousand metric tons of CO2 equivalent)
HFC gas emissions (thousand metric tons of CO2 equivalent)
Agricultural methane emissions (% of total)
Methane emissions in energy sector (thousand metric tons of CO2 equivalent)
Energy related methane emissions (% of total)
Methane emissions (kt of CO2 equivalent)
Agricultural nitrous oxide emissions (% of total)
Nitrous oxide emissions in energy sector (thousand metric tons of CO2 equivalent)
Nitrous oxide emissions in industrial and energy processes (% of total nitrous oxide emissions)
Nitrous oxide emissions (thousand metric tons of CO2 equivalent)
PFC gas emissions (thousand metric tons of CO2 equivalent)
PM10, country level (micrograms per cubic meter)
SF6 gas emissions (thousand metric tons of CO2 equivalent)
Bird species, threatened
Fish species, threatened
Plant species (higher), threatened
Mammal species, threatened
Population density (people per sq. km of land area)
Population in the largest city (% of urban population)
Population in urban agglomerations of more than 1 million (% of total population)
Pump price for diesel fuel (US$ per liter)
Pump price for gasoline (US$ per liter)
Water productivity, total (constant 2000 US$ GDP per cubic meter of total freshwater withdrawal)
Annual freshwater withdrawals, agriculture (% of total freshwater withdrawal)
Annual freshwater withdrawals, domestic (% of total freshwater withdrawal)
Annual freshwater withdrawals, industry (% of total freshwater withdrawal)
Annual freshwater withdrawals, total (billion cubic meters)
Annual freshwater withdrawals, total (% of internal resources)
Renewable internal freshwater resources, total (billion cubic meters)
Renewable internal freshwater resources per capita (cubic meters)
Terrestrial protected areas (% of total surface area)
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