the next decade.....a view from long waves usa

  1. 5,447 Posts.
    I'm glad this Long Waves contributor tackles the 'who pays' question.

    --- Nick Black wrote:

    Greetings; I've been in England recently and while I haven't posted, I have
    been reading the list. I've been particularly interested in the "What's
    going down.' thread. I don't see any of this in the 'not too distant
    future.' In my opinion we are there or right on the cusp. That's not to say
    there isn't a whole lot uglier period on its way.

    If we view the general human culture/resource environment as a complex
    system then it makes sense to see any given form of sociopolitical
    organization: feudalism, capitalism etc., as being simply the highest level
    of organizational complexity which can emerge from a given environment. (I
    am assuming an inherent drive for the most complex organization, rather than
    least). This framework doesn't rely on any great man theories or personal
    "choices" or anything of that kind of historiography. It simply asks, given
    a "map" of a given environment, what level of organization it will support.
    For instance, the people of Afghanistan cannot "decide" to have the
    democracy/capitalism thingy we have. Their environment won't support it.
    It takes something that looks like London or New York with all the
    associated infrastructure and a population that is educationally capable of
    making the whole machine run. From this point of view we can construct a
    "map" of the current American environment, extrapolate a little and ask what
    kind of socioeconomic organization might emerge.

    We notice immediately that the condition of the global capitalism
    infrastructure, whose capital is America, is under extreme stress from a
    number of directions. Global capitalism requires levels of openness that
    are historically very rare. We need a great many countries in general
    agreement on the way to do things. Otherwise things like money markets
    don't function smoothly. A large part of the economy of America (and
    England) is now devoted to extracting profit from these transactions and so
    it is highly sensitive to failures in this worldwide network. The trade and
    financial systems required to run this environment are under serious threat
    from two sources: countries in default and terrorism. National defaults are
    on the rise and likely to increase. It is not unreasonable to assume that
    these countries will bail on the international system, which they
    increasingly see as "America and the IMF." In terms of terrorism, while
    large scale attacks may not be repeated, a never ending series of bombings,
    airliner attacks, bio-chem attacks etc., requires a far more armored
    approach than heretofore. That is very expensive and may be unworkable. It
    is a long term issue and will fundamentally change how we in the west behave
    in our personal and business lives. So the Global Capitalism infrastructure
    from which we derive most of our income is at risk.

    Second, we see that both trade deficits and national debt are at all time
    high and arguably unsustainable. America is about to add to this burden by
    occupying the middle east on a semi permanent basis. There are only two
    solutions to this issue: raise revenues to pay for it or devalue the
    currency to pay off the nominal debt in "cheap" money. A steep slide in the
    dollar would allow America to lower its trade deficit and pay its debt in
    cheap money. Unfortunately the results of a radically weaker dollar are not
    attractive for the long term. It seems unlikely that any politician would
    suggest raising taxes to pay down the debt - not in this economy. This
    increases the likelihood of an involuntary slide and/or default. One of the requirements for the global capitalism infrastructure, in terms of America,
    is a strong dollar. If the dollar ceases to be the currency of international
    trade, the American economy will suffer major funding problems.

    Third: the fuel supply that allows us to operate this American environment
    is under threat. We have no choice but to occupy the middle east. It is
    unlikely that the populations of these countries will put up with any more
    puppet regimes. This occupation will be very expensive and destabilizing
    for the oil producing regions. No alternative source of fuel that is
    remotely as efficient is on the horizon. Roadside hydrogen-stations are
    years away, at best. There is no alternative. We either maintain control
    of the world's oil supply or the American economy as currently understood will fail. Of course, we were on our way here the day the Hubbert curve
    peaked a while back.

    Perhaps worst of all, we see extreme concentrations of wealth and resource
    ownership. The Gini coefficient is a good tool for seeing this. The US
    Lorenz curve has been sagging these last decades and now the GC is probably
    around 0.5. In practice, coefficient values range from around 0.2 for
    historically equalitarian countries, like Denmark, to around 0.6 for places
    where powerful elites dominate the economy, like Mexico.

    So if we assume that over the next ten years the American economy finds it
    increasingly difficult to manage the debt issue and a war on perhaps two
    fronts we have to assume that conditions in the economy will deteriorate
    sharply. When foreigners, who have largely financed the recent festivities,
    sell out of T.bonds or other dollar denominated instruments and go someplace
    else, it is difficult to see who will step into the breach.

    So by and large we see an environment that is highly stressed and without
    the immediate means to renew itself. So it will be unable to maintain the
    relative equilibrium of the last 50 years. Transitions from one equilibrium
    state to another are inherently unpredictable. However it is possible, with
    a degree of poetic license, to guess at general themes. What does this
    transition look like, starting now?

    Crime: As the remaining public services progressively fail due to massive
    state and fed deficits crime inevitably surges. Where unemployment reaches
    above 15% in large cities various levels of Mafia/gang organizations emerge
    as a de-facto local government. This is already true in a good many cities.
    Parts of major western cities become "police no go areas" like the favelas
    in S. America (go see 'City of God"). The towns around Paris are already
    there. Needless to say, the already failed "war on drugs' becomes a
    cartoon. In the face of despair drug abuse is a perfectly logical strategy

    Bankruptcy reaches record levels. The people that have lost everything move
    in with friends and relatives and learn to live cheap. A man with two kids
    will do damn near anything (see crime above). Acres of commercial real
    estate are left empty and boarded up. Eventually some of this gets
    squatted. Banks that are deep into real estate fail as the % of bad loans
    increases to unsustainable levels. All that money is evaporating from the
    system. (One of the reasons Gold is such a good index of value is that it
    doesn't evaporate.). Imagine Russia only with more stuff. But you can't eat stuff.

    The government becomes increasingly military in response to the
    international situation. This inevitably bleeds over into its relationship
    to the homeland. In the fight against terror anything is permitted. This
    kind of situation is naturally inimical to the openness required for the
    maintenance of global capitalism infrastructure. Remember that the first
    great wave of "globalization" was the 20s. The depression and then war that
    followed destroyed all that trade infrastructure. It's only really
    recovered in the last 20 years.

    All in all it is difficult to paint a rosy picture of the next decade. It
    is very hard to guess at what a new equilibrium will look like. Given that
    Corporations now own a great proportion of world resources it does seem
    likely that a 'Corporate Oligarchy' unconstrained as at present by powerful
    national governments, will be the dominant agent in such a new equilibrium.

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