[Updates Below] In three weeks, a new year. In three months, the likelihood of another million-plus deaths from covid (more) and, almost as certainly, a worsening war in Europe.
In three years?
The sharp slope of pandemic demand has eased (even as core demand increases). Compared to one or two years ago, many wealthy people are not quite as wealthy (but there is a continuing tendency for wealth to flow to those already wealthy). Billions in poverty or close-by are now less able to pull what they need. Flows are slowing.
The velocity of demand since 2020 was not sustainable, but there is now increasing risk of peripheral pull (aka low-margin demand) being shed as overall flows are narrowed.
Supply capacity is increasingly volatile. Food sources and flows are disrupted by natural and intentional complications (more and more). Ditto for energy flows (more and more).
There is increasing cause to anticipate more frequent and severe natural disruptions. There is no reason to expect intentional disruptions to dissipate, even if particular conflicts run their course.
Given this risk environment there is — and will be — incentives to diversify sources, nodes, and channels. But this will take time and treasure. In the meantime higher costs will further constrain fulfilling demand. Higher costs for core commodities and transportation will decrease demand for more discretionary consumption, depressing demand across several sectors. Such continuing constraints raise the likelihood of discarding lower-margin pull; increasing the likelihood of political volatility among those with much less pull capacity.
There are various and sundry efforts to arrange autarkic separation of demand and supply. Especially if widely adopted, this would undermine the potential capacity of all flows and expand the size of peripheral populations being shed (more). Aging populations in North America, Europe, and East Asia will pay more to consume less. Youthful populations everywhere will have less to spend and need to pay more for basics.
As you know — and I readily confess — I am a kind of catastrophe-kid (or now, I guess, catastrophe geezer). Yet, over the years I have often warned against assuming the worst. Large-scale complex adaptive systems are predisposed to rebalance over time. We have seen this again and again. But time-scales can vary widely — and for many inside these temporal loops achieving a positive equilibrium takes more time than they (we) have.
There are many projections for a 2023 economic slowdown or recession (here and here and here). The litany above references several potential reasons why. Time-required can often reflect how well capacity concentrations survive impact (physical, fiscal, or policy-driven). Are there potential sources of acceleration?
Given the immediate context, Europe and Britain seem unlikely candidates. Russia‘s economy will continue to suffer from sanctions. Argentina, Australia, Brazil, Canada, and Indonesia could benefit if all commodity prices increase at least as much as fossil fuels. China’s domestic demand is likely to be covid-constrained for considerable time. China, India, Japan, South Korea, and other East Asian economies will reflect some aggregate of global demand. Mexico faces similar dynamics. Turkey is a very special case.
It seems to me that much depends on wither goest American consumers, whether war and covid become more or less deadly, and whether the world’s farmers find the weather extreme or benign.
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December 16 Update: Live Science reports,
Since the COVID variant omicron emerged in late 2021, it has rapidly evolved into multiple subvariants (opens in new tab). One subvariant, BF.7, has recently been identified as the main variant spreading in Beijing (opens in new tab), and is contributing to a wider surge of COVID infections in China… BF.7 is believed to have an R0, or basic reproduction number, of 10 to 18.6 (opens in new tab). This means an infected person will transmit the virus to an average of 10 to 18.6 other people. Research has shown omicron has an average R0 of 5.08 (opens in new tab)… The symptoms (opens in new tab) of an infection with BF.7 are similar to those associated with other omicron subvariants, primarily upper respiratory symptoms. Patients may have a fever, cough, sore throat, runny nose and fatigue, among other symptoms. A minority of people can also experience gastrointestinal symptoms like vomiting and diarrhoea. BF.7 may well cause more serious illness in people with weaker immune systems.
This morning the Financial Times is reporting, “Evidence of a wave of Covid-19 deaths is beginning to emerge in Beijing despite official tallies showing no fatalities since an uncontrolled outbreak began sweeping through China’s capital this week.” (More)
The immediate risk presented by the BF.7 subvariant is potentially amplified by the threat of new mutations as several million new cases suddenly flare in the coming weeks (here and here).