In Chinese language crisis and opportunity are symbolized by the same ideogram. What a perfect symbolism for the current financial crisis which will definitely strengthen the role of China and other emerging countries like Russia, India etc. Of course you need not to learn Chinese in order to understand that “sepsis (biological degradation) is the kingdom of creation” as Carl Marx mentioned 150 years ago.
I recall this phrase in order to outline that the current crisis is not a temporary illness that will pass easily with some medicines, even if those medicines cost 1.5 trillions $, which means one or two orders of magnitude more than the money necessary to provide medicines worldwide for 5 years! It seems much more like a partial biological degradation of one of the pillars of the global growth last 30 years, the glamorous financial services sector. Almost no one could imagine such a collapse few years before, although there were certain economists that were speaking for a no way coming ahead, but not in that manner as far as I know.
But what was underestimated? In my opinion, speaking technically and not financially, the main failure factor that drove to a so sudden and violent collapse was the degree of complexity achieved globally. Complexity is measured by the quantity of data required to describe a certain situation and practically, due to the totally uncontrolled free movement of “toxic” funds, the interactions between different financial institutions, governments and investors became so thick and “self growing” that the data required to describe them was practically non available (even if someone wanted to get it, which is not the case obviously). As this kind of complexity was expanding around the world it created a network of “risk transfer” from one to another institution or investor and finally the loop closed and this network was transformed in a global rope.
And this should be considered as key – message #1: in the era of globalization the complexity of our world becomes so high that leads to unpredictable results rapidly. This is not something new for everyone who is involved in environmental issues. We all know very well that climate change problem is a result of complex global interactions that gradually created an almost unpredictable result. And our main problem regarding climate change is that we are not yet in a position to coordinate globally actions against climate change because the environmental problems are still faced on a national basis, ignoring their global effects and complexity.
Key – message # 2: The governments globally found out a way to coordinate in order to prevent the collapse of the financial system. And although it is not an easy task they will finally manage it, one way or another, sooner or later. That means that global cooperation against common threats is possible even today, with the current level of globalization and international cooperation tools. We should grab this as an opportunity to outline that global cooperation is possible for environmental problems as well, first of all for the fight against climate change. We should highlight that if global action and intergovernmental coordination have already realized in order to save the financial sector they could be also realized to save the planet as well as the almost one billion hungry people of it (with much less cost by the way).
If the USA government found a way to inject markets with a trillion $ for the banks, how to hell is it incapable to finance with 50 billions $ the social health program? If the Greek government found 5 billions € available to finance banks with difficulties how to hell is it incapable to close the dumpsites in the country? I am sure you know the answer. It is simply a matter of priorities. And as the current crisis is clearly shown us priorities in our world have to be set again. That is a great field for environmental and humanitarian NGOs and ISWA should utilize it as much as possible.
There is also another Key-message (#3) from the current crisis. The golden boys that shoot our heads with “easy profits with almost no work” are for the time being “dead men walking”. And we must act in order to finish with their fake values too. It is now obvious that the paranoia for “profitability with any risk” led the world to this crisis. The same paranoia created a totally wrong view of the hard working people and pushed golden boys in top positions in a lot of companies. If there is a lesson from this crisis it is a simple and old one: there is no free lunch out there, even if you are the top investment bank in the world.
Now let’s move to the impacts to Solid Waste management industry. Obviously we can recognize some major changes for the near future:
Funds for new waste management infrastructure will be less available and more difficult to “pump” them.
Capital will be much more expensive and risks (which are always high for waste management projects) should be evaluated and priced higher.
Those two points will certainly create problems in the implementation and preparation of major Public – Private Partnership projects.
As it is obvious from the 20-10-2008 announcement of Veolia (http://www.euro2day.gr/ftcom_en/126/articles/385711/ArticleFTen.aspx) new investments will be reduced and profitability will be considered more risky even for multinational giants.
I think that we can also assume a strengthening of the already existing consolidation wave to SWM industry for the next 2-3 years.
One more obvious remark is that uncertainty is going higher in all levels, thus the business environment will become more conservative in any case.
As everyone is predicting safely consumption patterns will be modified. Certainly consumption will be reduced and waste will be less, thus operators will have less waste to handle and thousands of jobs will be lost.
Less obvious is that waste composition will change as well. Let’s have a look at what Tamar Lewin wrote in New York Times (19-10-2008) for the upcoming crisis era:
“Buying patterns too, can be predicted in economic downturns, according to Leo J. Shapiro, who has tracked consumer behavior since he was a young man in the late 1930s. “DURING a recession, laxatives go up, because people are under tremendous stress, and holding themselves back,” said Mr. Shapiro, now chief executive of SAGE, a Chicago-based consulting firm. “During a boom, deodorant sales go up, because people are out dancing around. When people have less money, they buy more of the things that have less water in them, things that are not so perishable. Instead of lettuce and steak and fruit, it’s rice and beans and grain and pasta. Except this time the price of pasta’s so high that it’s beans and rice.” A recent Nielsen report listed tobacco, carbonated drinks and eggs as especially vulnerable to recession, and candy, beer and pasta sauce as recession-proof.”
A last but not least comment about recyclables is necessary. Extraction of raw materials will be less due to reduced consumption. Their prices will go down as well (they have already been pushed down by 25-30% for some materials like cooper or aluminum). Thus recycling will be more difficult because recyclable materials will be less competitive to raw ones. This is my feeling and I hope it is going to be a wrong one.
Let’s summarize the expected impacts.
Less funds available for infrastructure. Impact High for developed countries – medium for the rest
More expensive capital and risks – reduced bankability. Impact High for all PPPs
More consolidations. Impact High to medium
Less waste – less jobs in SWM industry. Impact High for industry “giants” – medium for the rest
Changes to SW composition. It sounds logical but no impact estimation can be done
Less extraction of raw materials. Impact Medium
Less recycling. Impact Medium to low (I hope)