Ticking Time Bombs

As I write, Annapolis city docks are underwater. Again. It’s one of many ticking time bombs.

Here’s Annapolis city docking flooding during the annual International Sailboat Show (October 11-13). Flooding happens with increasing frequency. According to a NOAA Report, Annapolis has experienced a 925 percent increase in average annual nuisance flooding events during the past 50 years, the greatest increase recorded for any US city. “Encroaching Tides,” a 2014 report from the Union of Concerned Scientists, predicts that Annapolis will experience nearly 200 annual flood days by 2030 and 350 annual flood days by 2040.

I mentioned this to a friend a few years back. He wasn’t bothered. “I don’t plan to be around then.” This attitude is endemic according to John Kay, a professor at the London School of Economics and a financial consultant. He attributes it to financialization.

Financialization is where a growing class of professionals make money on other people’s money. But they tend to narrow the lens to individual return, what investors make. Ticking time bombs out in the future are ignored. I don’t plan to be around then. I’ll be gone, you’ll be gone.[1]

Take the federal government’s unfunded liabilities—payments it owes and has promised its citizens, without the funds to fulfill those obligations. It’s at least $122 trillion. The fed’s only solution is refinancing, borrowing more to cover ever-increasing shortfalls. But this is unsustainable, a ticking time bomb. Not a problem. I’ll be gone, you’ll be gone.

State governments follow suit. They face a collective $5 trillion in unfunded liabilities, mostly from promises made to government retirees. Add the trillions in unfunded liabilities in privately and publicly held companies, again, mostly from unfunded promises made to retirees. When these companies declare bankruptcy, taxpayers pick up the tab for some of their liabilities.

Add to this leveraged debt—liabilities where debtors have undetermined revenues (likely insufficient) to service loans. According to Morgan Stanley, US government debt is estimated at $90 trillion, household debt $80, non-financial corporate debt $60, financial institutions’ debt $40, and GSE (government-sponsored entities) $40 trillion. US debt stands at 310 percent of GDP. Global debt stands at 286 percent of GDP. It’s unsustainable, a ticking time bomb set to go off in the 21^st century. But this isn’t our problem. I’ll be gone, you’ll be gone.

Widen the lens to Africa. Capitalism has lifted more people out of poverty than any other economic system. A 2015 World Bank study found that for the first time ever, less than 10 percent of the world’s population was living in extreme poverty. Between 1990 and today, the number of people living in it fell by more than one billion.

That’s factually true. But widen the lens. The UN’s threshold for living in extreme poverty is $1.25 a day. But the number of Africans living above the $1.25 a day threshold has only been reduced by only 8 percent since 1990. Nor is $1.25 a day livable (it’s closer to $7.40 a day). Africa represents 80 percent of the world’s population living in extreme poverty. And they’re mostly young. Africa is a ticking time bomb. Glad it’s not our problem.

Add to this the environment. Much of Western economic growth is essentially rich countries exporting ecological damage to the global south. Global fish stocks have been depleted upwards of 90 percent since 1950 due to pollution and overfishing. Over 80 percent of the world’s natural forests have been deforested. Another ticking time bomb.

So is climate change. The Economist reports that fossil fuel burning in 1900 (almost entirely coal) produced about 2 billion tons of carbon dioxide. By 1950, it was three times that much. Today, carbon dioxide emissions are close to 20 times that much.

The rapid rise of carbon dioxide emissions contributes to global warming, rising sea levels, and environmental degradation. Our posterity is at risk of being choked to death. It’s unsustainable, a ticking time bomb set to go off in the 21^st century.[2] But again, not my problem. I’ll be gone, you’ll be gone. So much for our posterity.

“What do I care about posterity?” Groucho Mars joked. “What has posterity ever done for me?” Ticking time bombs are no joke. The solution is not to stop developing, or stop economic growth. Then the poor will be stuck where they are perpetually. The solution is to take seriously Adam Smith’s first book, The Theory of Moral Sentiments, published in 1759. Smith says virtuous people sustain virtuous capitalism, working for the wealth of the nations.

William Wilberforce was born in 1759. He was part of the Clapham Sect (1790-1833), a movement that helped abolish the English Slave Trade. When Clapham began its work, most Brits viewed the slave trade as not my problem. Wilberforce felt differently.

Historians say Wilberforce “pricked the conscience of England” by widening the lens, pointing out negative side effects. “You can look away,” he said, “but never again say you did not know.”

We can look away from capitalism and financialization’s negative side effects. We can ignore our ticking time bombs. But after today, you can never again say you didn’t know.

[1] John Kay, Other People’s Money: The Real Business of Finance (Public Affairs, 2015)

[2] “The Past, Present, and Future of Climate Change,” The Economist, September 21, 2019