The Independent has published a good article highlighting the vulnerabilities inherent in the global economic system. It has lots of nice quotes from economists saying many of the same things we say in our own presentations: that globalization has made the system so interconnected that hitting it at a critical point (they call them “nodes”; we call them “weak points”; Derrick Jensen calls them “bottlenecks and fulcra”) can cause the whole thing to tumble.

Some highlights (all emphasis ours):

The financial crisis began as turmoil in one small segment of the US mortgage market. Within months it had morphed into a global meltdown affecting almost everyone on earth.

“The speed at which these events unfolded was unprecedented,” said the World Economic Forum’s 2009 report on global risk. “It has demonstrated just how tightly interconnected globalisation has made the world and its systems.”

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Network theory suggests that complex diversified systems can often bring greater stability. But only to a point. … In network theory, one key finding is that complex interconnected systems organise themselves around key nodes. If one of these is hit, the whole house of cards can collapse. This is one reason the damage done by the subprime crisis to major global investment banks had such a devastating impact. And while specialisation in global supply chains has brought significant efficiency gains, it has also brought vulnerability. Disruption to a key node in the supply chain can cause dramatic and unpredictable turbulence in the whole system.

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In his book “The Black Swan”, which examines the impact of major unexpected events, Nassim Nicholas Taleb noted that the appearance of stability in complex systems can be illusory:

“Random insults to most parts of the network will not be consequential since they are likely to hit a poorly connected spot. But it also makes networks more vulnerable… Just consider what would happen if there is a problem with a major node.

“True, we have fewer failures,” he wrote. “But when they occur… I shiver at the thought…”

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And beyond the immediate catastrophe, an overriding risk from both the financial crisis and any pandemic is that it causes a worldwide retreat from globalisation, with profound long-term consequences for the world economy.

In its 2007 report on global risks, the World Economic Forum imagined the consequences of a simultaneous pandemic and global liquidity crisis – a scenario that was purely speculative then but which now seems eerily prescient.

The result, it said, would be “a backlash against globalisation, which in turn compounds the hit on global demand.”