Five Stages of Collapse (1)

I have just finished a book called The Five Stages ofCollapse by Dimitry Orlov. He has some strange ideas, about the functioning of capital and markets, but some parts of the book are really interesting. He says that the collapse of a society comes in five stages.

1. Financial Collapse
   Financial institutions become insolvent. Savings are wiped and access to financial capital is lost.

2. Commercial Collapse
   Faith that the market will provide what we need is lost, as supply chains breakdown. Widespread shortages will be common.

3. Political Collapse
   Faith in the government is lost. The political establishment loses legitimacy and relevance.

4. Social Collapse
   Trust in other people is lost. Social institutions run out of resources and fail through internal conflict.

5. Cultural Collapse
   Faith in the goodness of humanity is lost. Families disband and compete as individuals. People lose the capacity for kindness, generosity, compassion, hospitality, honesty, charity. Every man for himself, in a dog-eat-dog world.

I am not sure about the order of the stages that he outlines. He says that financial collapse leads to commercial collapse. He suggests that when the financial systems breaks down, importers and exporters will be unable to get loans, so international trade will come to a halt and international shipping will be laid up everywhere.

I am not sure that this is correct. The financing of international trade through letters of credit was one of the first forms of financial activity to develop. I expect that if existing financial institutions collapse, traders and merchants will find other ways to finance their activities and make international exchanges.

I expect that international trade is more likely to be disrupted through wars and other political struggles.

Orlov also describes the challenges that will occur during each stage of collapse. This is probably more important than the causal connections between the various stages of collapse.