The world economy has become dependent upon fragile supply chains, and global heating is making these crucial resources even more vulnerable, argues John Clarke

The IMF recently drew attention to how ‘global trade has been held back by disruptions at two critical shipping routes.’ Both the scale on which the passage of goods is being impacted and the reasons why these routes are facing major restrictions have major implications for world trade, supply chains and global economic stability.

The disruption of Red Sea traffic and passage through the Suez Canal, ‘through which about 15 per cent of global maritime trade volume normally passes’ has been covered by media outlets across the world. The IMF notes that ‘the volume of trade that passed through the Suez Canal dropped by 50 per cent year-over-year in the first two months of the year, and the volume of trade transiting around the Cape of Good Hope surged by an estimated 74 per cent above last year’s level.’

The rerouting of ships around the southern tip of Africa means ‘increased delivery times by 10 days or more on average, hurting companies with limited inventories.’ The IMF circumspectly avoids mentioning the link between this trade disruption and the genocide that is unfolding in Gaza, but the conclusion that the situation in the Red Sea may not be exceptional is hard to avoid. In the context of global rivalry, conflict situations that disrupt the flow of trade are increasingly likely.

Climate impacts

Problems with another vital route have not received the same level of attention but they point, perhaps even more clearly, to the intensifying threat of global ‘supply shocks.’ The IMF tells us that ‘a severe drought at the Panama Canal has forced authorities to impose restrictions that have substantially reduced daily ship crossings since last October, slowing down maritime trade through another key chokepoint that usually accounts for about 5 per cent of global maritime trade.’

This reduced capacity to move ships through the Panama Canal is a serious problem in its own right. the ‘transit trade volume through the Panama Canal fell by almost 32 per cent compared with the prior year.’ Moreover, a significant 5% of maritime global trade usually makes its way through this canal on the way to final destinations.

What makes the situation even more serious, however, is that the problems with the Panama Canal are related to drought conditions. In the context of accelerating climate impacts, the onset of drought is now a very serious consideration throughout the Americas, and we can’t separate the economic impacts of this development from their human consequences. The disruption of maritime trade is but one manifestation of a very much broader threat to the normal functioning of entire economies.

Some sections of the media have been ready to suggest that major episodes of drought in South America can simply be attributed to the El Niño effect. While this is certainly a very major factor, it is also readily apparent that drought impacts are both ongoing and intensifying in ways that can’t be solely attributed to any short-term cause.

Last November, it was reported that Lake Titicaca, on the border between Peru and Bolivia, was being impacted by drought to an unprecedented degree. Though things have worsened dramatically over the last two years, a long-term process is underway. Local Indigenous communities are experiencing harsh impacts and, as the Guardian reported: ‘Fishing, agriculture and livestock farming are all suffering in the Titicaca region.’

One local resident who was interviewed stated that: ‘We used to fish here, but now you can’t do it any more. There used to be fish here, seaweed, seaweed for the birds of the lake, but now there’s nothing. Everything is dry, white and very sad.’ Those monitoring water levels noted that the rainy season in the area has been growing shorter since 2013.

In December, an article in Vox pointed out that the ‘current El Niño is poised to be costly. Peru’s government is expecting to spend more than $1 billion to cope with the extremes this year stemming from the severe weather this year and ongoing climate change impacts — a huge sum for a country with a gross domestic product of $242 billion, nearly a hundred times smaller than that of the US.’

Such weather extremes are making it impossible for subsistence farmers to survive and this is increasing the flow of people into the cities where they will have very limited access to jobs, housing, and health care. ‘Unless the pace of warming decreases, Bolivia is poised to see a 22 per cent increase in food insecurity by the 2050s.’

CNN reports that ‘Mexico City, a sprawling metropolis of nearly 22 million people and one of the world’s biggest cities, is facing a severe water crisis as a tangle of problems — including geography, chaotic urban development and leaky infrastructure — are compounded by the impacts of climate change. Years of abnormally low rainfall, longer dry periods and high temperatures have added stress to a water system already straining to cope with increased demand. Authorities have been forced to introduce significant restrictions on the water pumped from reservoirs.’

The article also informs us that ‘around ‘60% of Mexico is experiencing moderate to exceptional drought, according to a February report. Nearly 90% of Mexico City is in severe drought — and it’s set to get worse with the start of the rainy season still months away.’

Unrelenting dryness

A 2022 study by Nature Climate Change considered the ‘unrelenting dryness’ facing the US West. It concluded ‘that Earth’s warming climate has made the western drought about 40 per cent more severe, making it the region’s driest stretch since A.D. 800. And there’s a very strong chance the drought will continue through 2030.’

Agriculture in the region is facing a dramatic loss of soil moisture, with no sustained improvement foreseeable. ‘The problem is, unlike in the past, the underlying climate is so much hotter, and the drought-hole so much deeper, that erasing the soil moisture deficit wrought by 20-plus years of aridity will be harder than ever.’

The Canadian province of Alberta, with a government that champions fossil-fuel interests and that is hardly known for its climate activism, has had to establish a Drought Command Team that ‘will work with major water users in sectors like agriculture and industry to “secure significant and timely reductions”.’

This newly created body is responding to a situation where ‘drought threatens to reach so many parts of society and the economy … Shortages could force more ranchers to downsize their cattle herds. Some oil and gas companies have begun facing crackdowns on their water use, and more may come as sharing negotiations pick up.’

The proliferation of drought and a range of other climate impacts are creating a web of factors that are generating economic disruption and the process is intensifying rapidly. This has wide ranging implications for all systems of production and distribution. In 2020, Maritime Policy and Management suggested that the advance of climate change meant that ‘global supply chains will be massively disrupted, beyond what can be adapted to while maintaining current systems.’

As Michael Roberts points out, the acceleration of consumer price inflation in 2020-22 ‘was caused by a sharp fall in the supply of basic commodities and intermediate products which drove up prices of these suddenly scarce goods. This was compounded by a breakdown in the global supply chain of goods transported and trade internationally.’

Prompted by the effects of the pandemic and compounded by the Russian invasion of Ukraine, the ‘supply shocks’ that were generated at that time led to a global cost-of-living crisis, a sustained drive by central banks to force up interest rates and major social struggles in a number of countries.

It appears that the shocks and disruptions that were unleashed in 2020 were only indications of bigger impacts to come. Such instability will arise from a range of causes but climate change is likely to be the most disruptive force of all. To a degree that we have yet to fully appreciate, capitalism’s inability to create a sustainable relationship with the natural world is going to shape our lives and the struggles we take up in the years that lay ahead.