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. Last Updated: 07/27/2016

A Disastrous Script to Follow

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Most Hollywood disaster films follow a pretty standard plot line: A scientist identifies some kind of threat to society, typically the result of some kind of government or business activity. Biological experiments and major construction projects are common examples.

Alas, the hero's warnings go unheeded and business moves forward as usual. For his efforts, the "dissident" hero is ridiculed and shunned. Soon afterward, the first mishap occurs, which raises some initial alarm. Government officials or business leaders begin to have doubts about their own activities. Because the accident was minor and the threat appears to have passed, however, they again become confident and careless.

Our hero, in the meantime, remains convinced that more calamities will follow, and giving up on his futile efforts to convince anyone, makes the necessary arrangements to save himself and those close to him from the catastrophe that soon comes crashing down on everyone else.

This scenario has been repeated in hundreds of films dealing with myriad disasters, including floods, earthquakes, toxic chemicals, asteroids, sharks, aliens, mutants and even avalanches. The only disaster that has yet to be dramatized on celluloid is an economic crisis.

This is strange, as economic crises usually follow this same Hollywood pattern: Specialists critical of official policy issue predictions of impending doom that are systematically ignored or dismissed out of hand. When the first shock waves finally hit the economy, those in power ultimately decide that it is not their policies that are to blame. They find the explanation, instead, in their own hesitation to follow their policies to their full and logical conclusion.The only solution, therefore, is to go full speed ahead.

It should come as no surprise that, instead of averting or alleviating the crisis, this approach only aggravates it in the end.

The current instability in global financial markets corresponds to the early rumblings of impending disaster in Hollywood films. For those who anticipate even more serious troubles, this instability represents only the first of what will soon become a succession of increasingly severe problems. For those grave and solemn people involved in making the world's economic and political decisions on a daily basis, the recent spate of market instability is nothing more than a chance, isolated incident, that is easy to deal with without recourse to any changes in fundamental course.

Similarly, the current real estate recession in the United States is not, by itself, catastrophic for either the U.S. or global economies. The problem, though, is that these events have deeper causes. They are symptoms of much more serious trouble -- a warning sign that basic problems in the economy's structure that nobody has been willing to confront for years are finally surfacing.

Following the Hollywood formula, we can come up with a rough idea of how things will proceed from here. The U.S. mortgage crisis will be resolved one way or another, and banks will ride out the crisis. But this will mean cutting back on business and individual loans, meaning Americans will buy less, meaning a drop in production where U.S. output is already far below that of Asia, and China in particular. It is difficult to say how the Chinese leadership will respond to a drop in demand for its goods, but jailing or shooting some high-ranking official for allowing the economy to slip wouldn't come as a surprise. The response from markets is easier to predict: Demand for oil and raw materials will fall.

The flow of petrodollars that today supplies Russia's stabilization fund, the state budget and corporate accounts will begin to dry up. The world's free trade economy will have to revert to protectionist measures, reducing the World Trade Organization to a mere club of squabbling nations. This would be followed by major political convulsions.

This could turn into a very scary movie.

Boris Kagarlitsky is the director of the Institute of Globalization Studies.