World-System (1960-2500) Unstable System Cycles in Latin America

 

In an earlier post (here and here), I found that the best forecasting model for Argentina was the LA20 Model (Latin America Regional Economy). Out until 2100 (the furthest out the IPCC is willing to go on Global Emission Scenarios), it looks as if Latin American Integration would provide a desirable future, at least for Argentina (here). This post explores what happens after 2100, out to 2500. Of course, no one knows the future (especially out to 2500), but the LA20 Model is a computer program that can be run out to any date. Sometimes it is insightful just to see what happens!

The LA20 Model is unstable and cyclical (the eigenvalues and AIC statistics are presented in the graphic above for the Business as Usual BAU model).  In the Phase Plot, above, time moves from left to right and cycles increase in magnitude and severity.** Although the short-term future might look endurable, the long-term future is not. Luckily, a lot (maybe everything) can change after 2100, especially in the face of Environmental Crisis.

Another reason to look at long-run cycles in Latin America is that cycles (particularly Kondratiev Waves or K-Waves) are discussed extensively and qualitatively in World-Systems Theory. It is refreshingly concrete to see actual historical cycles tested with a statistically estimated model. However, a future of unstable cycles is probably one reason why Latin American Integration has been so problematic.

Notes

** And will require that bailouts increase in magnitude and severity.

LA20 BAU Measurement Matrix:

The State Space of the LA20 model has three components that explain 99% of the variation in the indicators: LA1=(Overall Growth), LA2=(LU-Q-EG) an Unemployment Controller and LA3=(N+L-CO2-Q) a Population Controller. LA1 reinforces the conclusions of Balanced Growth Theory (all major parts of the Economy have to grow together). LA2 balances Unemployment (LU) against overall production (Q) and Energy Use (EG)--reducing LU requires increasing energy-intensive production. LA3 is a Malthusian-Environmental component balancing Population (N) and Labor Force (L) Growth against Emission (CO2) intensive production (Q).

The unstable LA20 BAU model has cyclical periods under a decade but no effective damping time (table above). 

The stable LA20 BAU model also has cyclical periods under a decade but damping times of about 150 years.

NOTE: Periods in both models are longer than those assumed by Kondratiev Waves or K-Wave models (45-60 years). LA2 could be expanded to a Marxian Economic component with (0.901 L - 0.272 Q - 0.239 EG - 0.144 L) where the standard Marxian Economic component is (Q - wL) assuming fixed Ricardian wages. Most of these ideas (Malthusian, Marxian Economic, Balanced Growth Theory and Kondratiev Waves or K-Wave) can be combined in Systems Theory models. However, the result for LA does not mean that the ideas can be generalized to all regions, countries and time periods (see Unified Growth Theory).

You can experiment with the LA20 BAU model here. Suggestions are given in the code for how to stabilize the model.

Ex. 1.0 Can you find a way to eliminate cycles once the model has been stabilized? 

The solution to this Exercise can be found in the LA_TECHP model which I will describe in a future post. 

Descriptions of the how the Dynamic Component State Space models are constructed are given in the Boiler Plate.

World-System (1950-2100) The New "Axis of Evil" BAU Scenario

 

In a prior post (here) I found that most scenarios for the "New Axis of Evil" (Russia, China and India) led to collapse of the system, except for one: the BAU (Business as Usual) Scenario. In one interpretation of the BAU scenario, the AXIS is allowed to dominate the World System and the US without interference from other countries. Although the scenario seems unlikely and might well lead to World War III, in this post I will take it seriously and see what happen between the present and the year 2100.

In another interpretation of the BAU Scenario, the AXIS is necessary to drive exponential growth of the World-System and of the Hegemonic leader (the US). I like the Functionalist explanation. Functionalism suggests we focus on the World-System, which I think is the right focus. In this post, I will present a model that demonstrates the Functionalist explanation for the New Axis of Evil.

The Functionalist explanation hypothesizes that the Axis-of-Evil is necessary to stimulate military spending and growth of all participants.

Politicians, on the other hand, seem to have no concept of a World-System which leads to a Contradiction: are there systemic considerations that affect the AXIS? The graphic above shows the non-system view: exponential growth forever, the US1 and the World System (W1) driven independently by the Axis.

The graphic above shows the US1 growth system forecast when driven by the AXIS model. The function of the AXIS is to stabilize the system, at least in terms of US growth.

The same is not true for World System growth (W1) in the graphic above. In other words, US growth, given AXIS input, is at the expense of the World System.

You can run the AXIS_of_Evil models here.