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Andrew Sheng

How do you explain what Charles Dickens called “the best of times” and “the worst of times”? We live with massive societal inequalities. The rich have never had it so good, and the middle class has rarely been so discontented.
We are suffering through years of heatwaves, and wars in Europe and the Middle East. Stock markets are at record highs while bond markets are creaking under rising interest rates. Are we seeing the effects of imperial overreach or simply overstretched asset valuations?
There is a consistent theme across centuries and civilisations. Societies thrive when their values, economies and institutions remain anchored to physical reality, but they decay when elites drift into self-referential systems of paper wealth, prestige and power.
Climate change, fossil fuels, water, food and energy are anchored physically to the laws of thermodynamics. Meanwhile, human perception and agency – the willingness to intervene in human affairs and nature – can be detached from reality by ego, hubris and euphoria.
There are three laws of thermodynamics. First is the law of energy conservation: energy cannot be created or destroyed, only transformed. The second involves entropy: in any spontaneous process, the total entropy, or disorder, of the universe will always increase. The third involves absolute zero: as the temperature of a system approaches absolute zero, the entropy of the system approaches a minimum constant value. This means absolute zero cannot be reached.
Strictly speaking, the laws of thermodynamics do not apply to human social systems. Human perceptions or valuations can be inflated or understated, while human agency changes the game. Just as artificial intelligence models hallucinate, people’s perception or valuation of assets goes from mild inflation to periodic hallucination and great crashes.


The view that the Soviet system collapsed because it violated the “hard budget constraint” originated with Hungarian economist Janos Kornai. He saw market economy firms go bankrupt when they consistently lost money. This imposes discipline and drives efficiency.
In the Soviet socialist system, state-owned enterprises and governments operated under “soft budget constraints” because the state would bail out losers. This continued until the state itself became bankrupt, defaulted or collapsed. Hard budget constraints are thermodynamic limits on fiscal excesses.
Cambridge political economist Helen Thompson was among the first to draw parallels between the geopolitics of war and energy, highlighting that Russia’s invasion of Ukraine is really about food, energy and rare earth minerals. Political, military, financial and social power run on energy. Without energy or money, the system declines or stops.
Western historians have argued that empires rise through creative adaptation and shared purpose, then rot as elites become self-serving, overextending militarily while their economic core hollows out. As complexity increases, new laws and bigger bureaucracies cost more money, resources or energy than the system can bear. When elites fail to respond to crises as there are no more surpluses left, the system collapses.
These insights are not uniquely Western. The 14th century Arab scholar Ibn Khaldun captured the full life cycle in a single concept: asabiyyah, or shared cohesion and purpose. Empires rise lean, grow fat on luxury and bureaucracy, then starve as taxes crush the productive base and elites lose the will to adapt. Ancient India’s Kautilya, also known as Chanakya, put it bluntly in the Arthashastra: wealth is the foundation of power. Surplus comes first; everything else follows. Paper prestige cannot feed an army or sustain an empire.

Chinese traditions frame the challenge as alignment with nature. Do not force what cannot succeed: act with reality, not against it. With the experience of the rise and fall of many dynasties, pragmatism becomes a survival strategy: test small, adjust, scale and never mistake names for substance.
Across all these traditions, one lesson remains: moral order and physical order are one. Hard budget constraints, justice and shared purpose are not luxuries; they lower enforcement costs, sustain trust and conserve energy. When the moral anchor fails, thermodynamic collapse follows.
Today, the global order displays late-stage symptoms. Governments are running debt burdens that outstrip real output, and meanwhile financial engineering outpaces productive engineering. Narratives and memes amplify faster than facts while markets value acceleration over substance.
We are not witnessing the end of history. We are essentially watching the thermodynamic bill come due. Every financial transaction, every institution, every army runs on real energy and resources. Dickens’ novel David Copperfield summed it up best: “Annual income twenty pounds, annual expenditure nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.”
Humans prosper when we stay grounded in reality. We fall when we believe hubris can rewrite the laws of nature. Markets that are concentrated and overstretched in valuation are fragile, and their bursting will have systemic implications. Facing such reality is not a policy choice but admitting the hard knocks of life.


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Banking & finance

The end of history? No, the world’s thermodynamic bill is coming due

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US Treasury Secretary Scott Bessent talks to members of the media outside the White House in Washington, DC, on August 20. Photo: EPA / Pool

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President Xi Jinping, right, shakes hands with Spanish Prime Minister Pedro Sanchez during a meeting at the Diaoyutai State Guesthouse in Beijing on April 11, 2025.  Photo: EPA-EFE

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Turkey’s President Recep Tayyip Erdogan, Saudi Arabia’s Crown Prince Mohammed bin Salman and Pakistan’s Prime Minister Shehbaz Sharif meet in Mecca. The countries signed a joint defence agreement on August 7. Photo: Turkish Presidency Press Office/AFP

US President Donald Trump and Saudi Crown Prince Mohammed bin Salman are seen in Riyadh on May 13, 2025. Trump said recently that a nuclear deal with Saudi Arabia depends on the kingdom recognising Israel, throwing the agreement into turmoil. Riyadh has long insisted on a pathway to a Palestinian state. Photo: AFP

For states, being part of everything doesn’t mean being part of nothing

The United Nations General Assembly Hall in New York on March 25. Governments increasingly face the same demand: prove the depth of your commitment by closing the door on everyone else. Photo: Zuma press wire / dpa

The Pax Silica summit in Washington in June this year brought together countries seeking to strengthen AI supply chains. Photo: Handout

Nato Secretary General Mark Rutte with European Commission High Representative for Foreign Affairs and Security Policy Kaja Kallas at an EU summit at the Egmont Palace in Brussels, Belgium, on February 3, 2025. Photo: Reuters

India’s Foreign Minister Subrahmanyam Jaishankar shakes hands with Iran’s Foreign Minister Abbas Araghchi at the Brics foreign ministers’ meeting in New Delhi on May 14. Photo: Reuters

Opinion

World Opinion

When energy, technology, money and power are linked, governments can’t escape the laws of nature


When energy, technology, money and power are linked, governments can’t escape the laws of nature.


War and conflict

India

China

Russia

Hungary

Ukraine

Expresses the views, ideas and conclusions of the author. (Eg. Enough of Crazy Rich Asians, think of crazy poor Hongkongers.)


The end of history? No, the world’s thermodynamic bill is coming due

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}When energy, technology, money and power are linked, governments can’t escape the laws of nature

When energy, technology, money and power are linked, governments can’t escape the laws of nature