Global Threatsby Steve Elwart, Senior Analyst, Koinonia Institute
For nation shall rise against nation, and kingdom against kingdom: and there shall be famines, and pestilences, and earthquakes, in divers places. All these are the beginning of sorrows.
The Organization for Economic Cooperation and Development (OECD) is a quasi-governmental organization consisting of 34 countries. It was founded in 1961 to stimulate economic progress and world trade. Truly globalist in nature, some of the founding countries consisted of most of the European countries, the United States and Canada, with Japan joining three years later (Turkey was also a founding member). During the next twelve years Finland, Australia, and New Zea-land also joined the organization. The OCED website1 states that its purpose was to: “… work with governments to understand what drives economic, social and environmental change. … We analyze and compare data to predict future trends.” [Emphasis added].
On June 21, the OCED held a closed webcast to present their findings of what they determined were “Future Global Shocks.” Global shocks are active threats that spread across the entire planet. They may take the form of health, climate, social, or financial issues.
The impetus of the report came from the 2008 financial crisis, which demonstrated the fragility of world systems. The OCED was afraid that another shock of that type would challenge economic recovery, social systems and possibly political stability. The crisis revealed the national vulnerabilities through economic imbalances, un-stable commodity prices and currencies, large public debts and severe budget deficits.
The organization commissioned the study to investigate these vulnerabilities and recommend remedies. The report draws primarily from analysis contained in four case studies. The webcast reviewed the report, which identified the types of events that could lead to global shocks.
These disruptive events, such as earthquakes, volcanoes, financial crises and political revolutions will destabilize critical systems, producing economic disruptions that can have effects far beyond their point of origin. In today’s world of interconnectivity, these disruptions can circle the globe faster and more often than ever before. An example of a global shock would be the July 2010 wildfires in Russia, the world’s third largest wheat producer. Those fires consumed twenty percent of the nation’s wheat crop. At the time of these wildfires, there was also a record drought that had already threatened the country’s crop harvests. Because of the double threat, Russia halted its wheat exports, which resulted in an increase in the world wheat price.
While Russia was decreasing its wheat exports, massive floods were occurring in Australia, Canada and the United States that further reduced wheat supplies.
Meanwhile, in North Africa, repressive governments, access to the Internet, a “youth bulge” in its population, and relatively high unemployment pushed social stability in the area towards its “Tipping Point.”
The effects of rapid and multiple price hikes in wheat combined with the natural and man-made problems produced social unrest, which in turn spread into Egypt, Libya and throughout several countries in the Middle East and North Africa region.2
Four Global Shocks
The OCED reported on four global shocks that are probable events in our future:
The first global shock discussed in the webinar is the pandemic. A pandemic is the spread of an infectious disease through a human population across a large region. While the timing of a pandemic cannot be predicted, experts seem to agree that a viral outbreak that will reach pandemic proportions will be some form of influenza A, for which there is little or no immunity and spreads easily among populations.
Influenza virus strains are always circulating in the world, and flare up during the “flu season” in the temperate climate zones of the world. Most epidemiologists3 consider the next flu pandemic to be inevitable, but they do not know precisely when or where it will begin.
Over the past three centuries, a flu pandemic has been identified every 25 to 30 years. Three influenza pandemics occurred during the 20th century: 1918-19, 1957-58, and 1968-69. The most severe influenza pandemic of the 20th century occurred in 1918-19 when an estimated 40 to 50 million deaths were caused world-wide.
The World Health Organization (WHO) considers 2.0 to 7.4 million deaths globally as a conservative estimate of a flu pandemic, with substantial effects on both the physical and financial health of countries. The most severe impacts are concentrated in the very young and the elderly, although school children may have the highest attack rates. Persons with certain underlying chronic illnesses are also at higher risk of serious complications.
During a pandemic, shocks to supply systems are expected in transport, trade, payment systems, and major utilities.4 A separate study assuming a pandemic that causes 200,000 deaths in the Unites States, and more than 700,000 hospitalizations estimated that the economic losses would be US $550 billion across all developed countries.
Modern air travel means that an outbreak of infectious disease in one country could spread worldwide in a matter of days where in the past it would have taken months or years. The 2002 outbreak of Severe Acute Respiratory Syndrome (SARS) illustrated that one person in the densely populated city of Hong Kong, China could transmit a virus to guests staying in the same hotel, thus enabling the virus to spread quickly worldwide once they returned to their homes in airplanes. There were 8096 recorded cases with 775 deaths, a 9.6% mortality rate.5
2) Financial Crises
Well before the global financial crisis of 2008, regional and national financial crises had been increasing in number over the past twenty years. Japan, Mexico, Southeast Asia, Russia, Turkey and Argentina all suffered financial crises that were bellwethers of what was to come.
Financial experts had put forth theories about how crises develop and how they can be prevented, but there is no clear consensus. What is clear though is that the crises did not end in 2008. They will continue and be at least as bad as they have been in the past.
When an individual overleveraged borrower defaults, the spread (or contagion) of the effects of the default, while serious, is spread to a small group of people and institutions. When the borrower is a sovereign nation or major financial institution, the “financial contagion” will have far wider implications.The default will affect only a few financial institutions at first, but then spread to the rest of financial sector and other countries whose economies were previously healthy. It is very similar to the transmission of a medical disease in a pandemic.
The financial woes of the United States, Ireland, and Greece illustrate how defaults carry the risk of contagion in a globally interconnected economy. In complex systems like those exhibited by financial institutions, financial shocks can emerge from inside the system it-self, meaning that the system can collapse from within. It does not necessarily take a shock from outside forces to trigger a financial crisis and eventual collapse of the system.
A good example of a “financial contagion” is the May 6, 2010 “Flash Crash.” Because of computerized trading (the “inside system”) the Dow Jones Industrial Average plunged about 900 points or nine percent of its total value in minutes. About $1 trillion in market value dis-appeared. The financial contagion from this crash was seen in the Standard & Poor’s 500 (a competing stock market). Congressional investigations indicated that while the drop was temporary and the stocks rebounded, the United States dodged a large financial bullet.6
3. Cyber Risks
It has been well documented that cyberrelated events can generate a great deal of harm and financial disruptions. Many cyber experts hold that a single cyber attack using current technology is unlikely to cause a full-scale global shock. For such a shock to occur, the attack would have to exploit a fundamental flaw in the Internet. It would also have to be a flaw that could not be easily remedied. The attack would have to disrupt a minimum amount of major hubs to spread the attack across the entire world-wide network.
One scenario for a global shock consists of several simultaneous attacks on key infrastructures by attackers with sophisticated skills, probably a nation-state as opposed to a hacking group or an organized crime ring. In this scenario as well, while there could be area or regional disruptions, a global disruption is unlikely. The Internet was designed not to have a “single point of failure,” so a damaged section of the Internet can be routed around along a different path.
However, an attack that targets about 5% of central hubs, such as telecommunication switching centers, has the capacity to make the Internet collapse, very rapidly breaking down the entire network to small, unconnected islands containing no more than 100 computers each.7
Such a scenario for a global shock due to a cyber at-tack would entail a combination of events, the proverbial “Perfect Storm.” Such a storm could occur if a cyber attack occurred while some other form of disaster or attack (such as a pandemic or physical attack) prevented technical experts from defending and patching the system or rerouting computer traffic.
In another scenario, electricity, gas, water and oil services require constant monitoring. Monitoring operations present cyber-vulnerabilities that could be exploited, potentially leading to massive disruption for households, manufacturers, retailers and public services.8
Since the 1960s many of these services have been monitored and controlled by using Supervisory Control and Data Acquisition (SCADA) computing equipment. SCADA are used for the flow of gas and oil through pipes, the processing and distribution of water, the management of the electricity grid, the operation of chemical plants, and the signaling network for railways.
Newer industrial control systems communicate using the Internet. These systems are more open to cyber attacks than older systems.9
Evaluating risks of global shocks from cyber incidents is different from natural incidents. Earthquakes occur along fault lines, floods occur along rivers and large bodies of water. Cyber attacks are not that straightforward. They come from intentional acts and target specific vulnerabilities in the system. Natural events have occurred along with some sort of predict-ability while cyber events cannot be predicted unless there is a warning by a person or organization. This is why organizations take the position that any vulnerability discovered will be exploited.
4) Geomagnetic Storms
Every eleven years, geomagnetic disturbances oc-cur that have the potential of causing a global shock of long-lasting duration.
Geomagnetic storms are the result of eruptions of plasma from the Sun’s corona, or its “atmosphere.” The storms that head toward Earth take two to three days to make the trip and when they get to Earth, they interact with the Earth’s geomagnetic field. Disturbances in the geomagnetic field can disrupt the operation of critical infrastructures relying on signals from satellites involved in the Global Positioning System. They can also overload the circuits and trip breakers of electrical systems and in extreme cases melt the windings of heavy-duty transformers, causing permanent damage.10 Due to limitations of manufacturing replacement high-voltage power transformers, affected areas could experience very long outages.
The most severe space weather event recorded in history is the Carrington Event of 1859, which disrupted telegraph networks and outages around the world as a result of the currents generated. An event of the same magnitude today could be catastrophic, with some damage estimates as high as several trillion dollars.11
Beginning of Sorrows
The webcast closed with recommendations for more study and estimates of the social and financial consequences of global shocks.
Jesus tells us in Matthew that the “beginning of sorrows” will give the world strife on a grand scale, “nation against nation, and kingdom against kingdom.” Some believe this describes normal conflicts of interest that through the centuries have led to war after war. Others believe there will be forces at work beyond the control of the nations. This is certainly the case when we move to pestilences and geomagnetic storms.
These and the other global shocks are beyond the control of kings. Other disasters (i.e. tsunamis, floods, droughts, and famine) form part of the general unsettlement that will characterize the end time. “In divers places” means that the disasters in question will be widespread, truly global, shocks.
While even the most secular of organizations realize we are entering a period we have not experienced be-fore and give estimates and make plans, we as Christians need to go a step farther. We need to pray for His coming.“Even so, come, Lord Jesus.”
Steve Elwart can be contacted at Steve.Elwart@studycenter.com
2. Apps, P. Analysis:
After the crisis, a worldwide rise in unrest. Report, London: Thomson Reuters, 2011.
3. Epidemiologists study the frequency and distribution of diseases within human populations and environments.
4. IMF. The Global Economic and Financial Impact of an Avian Flu Pandemic and the Role of the IMF, the Avian Flu Working Group 1. Washington, DC: International Monetary Fund, 2006.
5. World Heath Organization. “Summary of probable SARS cases with onset of illness from 1 November 2002 to 31 July 2003.” WHO. December 31, 2003. http://www.who.int/csr/sars/country/table2004_04_21/en/index.html (accessedJuly 2, 2011).
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Goes Flat.” Wall Street Journal, May 6, 2010.
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9. Elwart, Steven P. “SCADA for the Oil and Gas Industries.” I3P Conference & Workshop. Albuquerque: Sandia National Laboratories, 2006.
10. NOAA. Intense Space Weather Storms October 19-November 7, 2003. Washington, DC: Government, 2004.
11. Homeland Security Committee. Statement Prepared by Dr. William Radasky and Mr. John Kappenman, 111th Cong., 2nd sess., 21 July 2009. 2009: Government Printing Office, 2009.
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