Since financial crisis first broke out in London in 1825, immediately followed by financial crisis in the United States in 1837, every few decades banks collapse; recession sets in; people are unemployed; and then strangely an industrial revolution takes place drawing the world into a higher orbit of scientific, technological and economic progress.

The crisis of 1825-1937 saw the closure of 60 large British banks and almost 500 American banks.  The crisis of 1930, a century later, witnessed total collapse of stock markets and the international trading system. In comparison, the mini crisis of 2008 has only seen the closure of Lehman Brothers and sacking of several thousand workers from other banks, while top managers have continued to enjoy massivepay packages. We may not have yet seen the last page of this century’s crisis. The 100-year itch and more importantly our slavery of habits that cause large financial crisis will probably ensure a major, major global financial collapse sometime between 2020 and 2030.

The causes of crisis in every century have been exactly the same – speculation in land and stock markets by men who want to get rich fast, enthusiasm of bankers to lend for buying fictitious or inflated assets beyond their reserves, incompetence of politicians who first want to share the loot and then go into hiding behind regulations, and the tendency of decision makers and opinion makers to believe that they know it all, mistaking greed for good, arrogance for analysis, and partying for progress. This is what was evident in London and New York of 1820s and 1830s. Was it any different from London, New York and Paris of the 1930s and is it any different from the present day London, New York, Paris, Tokyo, Beijing, San Paolo, Moscow, and New Delhi?

These crises take place at the end of an industrial revolution. The first crisis took place when the first industrial revolution, beginning in the 1760s was reaching a flat curve in the 1820s. About three decades after the crisis, the second industrial revolution started in the 1870s. It reached its limits in the first decade of the 20th century, followed by a war and economic collapse of the 1930s and another war. Again about three decades later, third industrial revolution, driven by computers, began to unroll in the 1970s. It is reaching its limits since Moore’s law will hit the dead end in a decade or two and some countries will find nothing novel about peta-flop computers. Of course, there will be a million applications on a smartphone instead of a quarter million now, but a smartphone will be still a smartphone, a bit smarter.

Like the first two industrial revolutions, the third revolution has created its wealthy and privileged – and its poor and marginalised. Like the first two industrial revolutions, the third industrial revolution has created charmed circles of bankers, politicians and entrepreneurs – and brokers and speculators.  And like the first two industrial revolutions, the third revolution has created its greed and discontent.  Therefore, bankers give themselves large salaries and friends huge loans. Politicians decide who should be the friends of bankers. And friends become friends if they benefit from each other, leaving sentiments like love, warmth, care, anger behind for socially outdated folks.  Before they know, their appetite empties their bank accounts and a circus of defaults brings down banks, in the process closing businesses and throwing those people out of jobs who do not have political connections. Economists use complicated statistical models to analyse recession and stagflation since they cannot concede that they are merely describing stupid arrogance.

However, just as a collapse is likely in the next couple of decades, the emergence of fourth industrial revolution is also inevitable, two or three decades after the collapse. By then hopefully, nanotechnology will make scarce material abundant; genomics will make disease disappear; and ceramic will conduct electricity turning everything impossible into possible.

If financial collapse is followed by, in a couple of decades, a higher industrial revolution, is it good in the long run?

It might have been in the past but it will be a different story in this century.

In the 1820s, population of the world was 1 billion and it did not matter. Despite colonisation, London and New York were connected with one another and that was about all. The rest of the world was free from their banking follies (though not from their political mischief). In the 1930s, the population of the world was just over 2 billion and London and New York were now connected to the entire continent of Europe.  The rest of the world had weak linkages with the City and Wall Street financial institutions.  In the 2020s or 2030s the population of the world will be 8 billion and the entire world will be linked into a close circuit with no immunity for one and all.

The 19th century collapse of the British and American economies was mirrored in the 20th century collapse of the Western economies.  In the 21st century, there will be collapse of the entire global economy in a real sense, including Africa, Asia and Latin America along with Europe, Australia and North America.

The consequences of the next collapse will be therefore catastrophic. There are only two possibilities that can save us from a disaster. First, if unexpected breakthroughs usher in the fourth industrial revolution earlier than revealed in the past pattern, laws of economics may change and a game played with old rules may become redundant.  Second, if unexpected breakthroughs in the mental framework of leaders and catalysts force us question the established values and priorities, we may give up the self-destructive trajectory.