*Instability: The probability of extinctions in ecological systems or the probability of bankruptcies in economic systems.
*Diversity: The number of species or economic entities in the system.*Connectivity: Species or economic entities that effect with each other are "connected." Thus, if one were using a matrix model for the system, the sum of the absolute values of the coefficients in the transition matrix would provide a simple measure of connectivity.
This is a general principle from ecosystem theory. It rests firmly upon the laws of nature and is mathematically provable.However, more complicated definitions of the terms in the above statement can also be used and for some definitions, that will not be a true statement. -- The left-wing has often followed that approach, because the above statement directly contradicts Marxist theory: They prefer the "Diversity Stability Hypothesis," instead. Although, the latter theory has repeatedly been proven wrong, both in theory and practice, it rests on the Marxist doctrine of internationalism and they are unwilling to admit that such a central concept for Marxism, can be wrong. In addition, there are also many others for whom internationalism is one of their core beliefs. Consequently, there is substantial resistance to the above statement.
Nevertheless, it is true under most reasonable definitions for its terms.Thus, the problem is that the world economy has too much connectivity.
This is not a new nor an unknown problem. Over the last decade, several books, articles, and studies have been written on it. Some of them have observed that this may, also, have been the cause of the Great Depression and that by the late 1990s the connectivity of the world economic system had exceeded what it was just before the beginning of the Great Depression.One solution to this problem is to reduce free-trade. Another is to break the global marketplace into several trading blocks, with free-trade within each block but restrictions to trade among them. The latter is the approach recommended by Samuel P. Huntington, in his book, The Clash of Civilizations and Remaking the World Order, although, he is more concerned with social and political issues than economics. -- That book provided many of the central ideas for the foreign and domestic policies of the Bush Administration. -- However, such profound changes to the world's economic system can not be implemented in a short time nor by U.S. alone. Nevertheless, the global economic collapse, that is expected to follow from the contemporary free-trade policies of the leading nations, may leverage the changes that are needed to the global order. In fact, the connectivity will naturally decrease as international trade collapses but the problem will recur with the following recover, unless the various countries recognize the cause of the problem and make the necessary changes to the world's order.
In contrast, policies such as stimulus packages, bank-bailouts, regulation of markets, and so on... do not address the underlying problem and, therefore, can not be expected to have more than a temporary effect.