Smoking Fires

It seems like the news comes all at once, when it comes. Predictably, there is the usual anecedotes about people rioting over game consoles on Black Friday, much like dwellers in the slums of Paris drinking spilled wine from the filthy gutter in A Tale of Two Cities. I guess the new twist this year is that some enterprising person actually thought to bring a can of pepper spray and let loose with it, getting my vote for "best evolutionary adaptation to a hostile environment." If this isn't good enough, we also have another sports molestation scandal with plenty of "juice" brewing, Chevy Volts catching fire, Miley Cyrus calling herself a "stoner," pick something.

No, there is plenty of real consequence going on in the world over the weekend, with sobering long-term consequences for the failing world system. The first item is the open and official anger in Pakistan over the killing of 24 Pakistani soldiers by a NATO helicopter, including a Major, something which has tossed gasoline onto the embers of an already-smoldering fire. The second big item on the radar is the resurgence of the Arab Spring, becoming the "Arab fall" as both nationalism and radicalism drive Arabic countries farther away from the sphere of the West. The Occupy Wall Street movement keeps hanging on, defying orders to clear their temporary living places. And, rounding up the hit parade is the continuing Eurozone crisis, where the latest big news was the failure of Germany's bond sale.

Each one of these alone would be a serious problem, but together, they are more signs that the high water mark of modern, global, industrial, civilization is now solidly in the rearview mirror. The chaos in the Arab world is likely to only increase as the true "clash of civilizations" begins -- the Western-backed military dictatorships on one hand versus the Islamist nationalists who have no real incentive to sell cheap oil to the West. What do we have to give them for it, anyway? Increasingly worthless currency? A non-stop flood of semi-pornographic pop culture broadcasting? Even if someone wanted to sell the oil, it would mean trying to get it out of the ground and then to a shipping terminal via vulnerable pipelines. Pakistan is obviously taking a different route, deliberately divorcing itself from NATO, the military expression of Western power.

Domestically, the fact that German bonds aren't finding buyers means that the question of the Western economy is no longer in doubt. There is no confidence in it. The only option is for Germany to begin to monetize its debt, which is when the economy and debt begins to eat itself. When this happened in the 1920s, Germany produced Hitler. Now that it's happening in 2011, we can probably expect Germany to shed the rest of Europe and start going its own way. The problem is, how can this happen once the price of oil doubles or even triples because of events elsewhere in the world? It seems more destined to collapse in on itself.

The Occupy Wall Street movement represents something else entirely. Domestic internal opposition to Western governments, especially in America, has in modern times largely been channeled through the political parties. The Tea Party largely was co-opted by the Republicans, but the OWS movement doesn't seem to have been scooped up by the Democrats in spite of their attempts to become "friendly" toward it. While it doen't really amount to much at the moment, it could very easily become a lightning rod if we see another crash, if the 15% unemployed begin to rally behind it, if gas spikes to seven or eight dollars a gallon (which would effectively collapse the U.S. economy overnight), or if the world market stops buying Treasury bonds, or half a dozen other scenarios. A movement which doesn't really have leaders and doesn't have anything much in common, except a jaundiced view of domestic politics, could grow very quickly and militantly, given the right circumstances.

In the coming weeks and months, I think we'll keep seeing more news items like these, but without much discussion of the significance behind them. The reality of the situation has been beyond the scope of the media, except in a few cases, and the willingness of governments to really tackle them. At a minimum, they are harbingers of a coming, drastic change of modern lifestyles, something that a world system which relies on keeping people comfortable and happy cannot come to grips with. At a maximum, they will in the end mean suffering and disorder on a scale that has not been seen before in human civilization.

Stupor Committee

One of the signs, I think, of a civilization entering a Dark Age is the number of "WTF moments" that come up on a regular basis, when things happen that don't make sense, when you know the wheels are coming off. Step back some 1600 years and imagine yourself as an average person in the latter days of Imperial Rome: "Hey Sulla, did you hear that we're giving up Britain because we can't defend it any longer?" "WTF do you mean we can't defend something, Flavius? We're Romans!" Or, if you prefer, imagine being a Mayan during their collapse: "WTF do you mean we can't grow crops in the same soil we've been using for generations?" And so on.

We have quite a few of those ourselves on a regular basis now, but I think the cherry on top of the WTF sundae is the so-called "Deficit Reduction Super Committee" and the kabuki theatre surrounding it right now. Putting it in a little perspective, the DRSC is supposed to cut 1.2 trillion dollars over the next ten years. Doing the math, that's 120 billion dollars a year in cuts. Compared to a deficit which is at least 1.3 trillion dollars a year, it's essentially nothing. It's like being shot with 11 bullets instead of twelve. If this isn't a WTF? moment, I don't know what is.

Of course, there's the usual talk around deficit reduction, where everyone wants their turf guarded, when the special interests don't want to see their slice of the public pie cut. The problem here, of course, is that the pie itself is mostly air sandwiched between two crusts, the filling long ago having been removed and the lid of the pie carefully replaced so that no one would notice. It's now a system running on promises -- the promise of enough money coming into the treasury, the promise that people who have bought bad debt will get repaid, the promise that there is enough leadership and will to somehow patch a failing system that's running out of time. Everyone in the country wants their own benefits from it, but no one asks what it'll cost or if they should give up a little bit, along with everyone else.

So WTF? is anyone thinking that cutting out 120 billion a year in spending is going to make much of a difference in the ballooning debt and rapidly sinking dollar. And WTF? comes to mind when anyone thinks that it matters if these guys manage to agree to anything that will close that gap, while ignoring the rest of the monster deficit. It's like hiking 500 feet up the side of Mt. Everest and claiming that it's been conquered.

Speaking of Britain, we're a little like the Romans living there in 408 A.D. At some point, the nation is going to have to face bankruptcy and it's anyone's guess as to what happens then -- I think the conversation might be "WTF do they mean 'you're on your own'?"

The Jobs Picture

Ed left a good comment on my previous post, but it was unfortunately eaten by Blogger.  Since it is another insightful comment, I wanted to make sure it was posted:

"Off topic, but responding to the comment on my comment, I'm becoming interested in how peak oil will interact with what seems to be the increasing trend to eliminate jobs through automation (the mainstream bloggers I know alert to the latter are Stuart Sandiford (sp?) at Early Warning and Tyler Cowen at Marginal Revolution, and I don't think they have digested the implications).

Labor saving devices at the beginning of the industrial revolution put craftsmen and agricultural smallholders out of work, but allowed households to improve their material quality of life through acquiring relatively cheap mass produced goods that they didn't have access to before.  Current labor solving technology does not really increase the goods and services available to a household, you still get one washing machine even if it now can be produced with two thirds fewer workers.  It makes these products cheaper, but there is no increase in production that will absorb the redundant workers.
Essentially the end result is the same number of goods produced with cheaper inputs, instead of more goods produced with cheaper inputs.  WIthout factoring in peak oil, in principle this should not be difficult for societies to adjust to, you just put most of the population on some form of welfare, which doesn't have to be that high because it now costs much less to have a middle class standard of living (but watch for population constraints).  In practice this takes a huge cultural adjustment.

Will rising resource costs halt or reverse the trend towards automation?  Or will have it have no effect on automation, but put the world in a Malthusian crisis where "surplus" members of society have to be eliminated?  I'm not sure, but again we are dealing with a wind down that will be difficult but tolerable as opposed to a nightmare."

This has been a line of inquiry that has interested me for a while, as well.  I think the key point is a lack of effective management of social trends in modern society.  We don't have the political will to identify the crisis and the need to plan for the coming transition is sorely absent from any kind of conversation on what direction society is taking. 

The ideas of "structural unemployment" and "jobs that are never coming back" are probably two early warning signs of what direction we can expect things to take.  By extension, the people who held these surplus jobs also seem to be surplus, themselves.  I think the first time this was really addressed was when Walter Reuther was shown a machine that could make some union auto workers' jobs obsolete.  Reuther responded by asking how many cars those machines would buy? 

I tend to think that the same factors which reverse automation (unpayable debt, rising resource costs, etc) will simaltaneously wipe out the ability of nation-states to maintain a working entitlements system.  In turn, this will sharply cut the effective cost of labor again (which is itself largely falling -- here is the BLS report).  At some point, it will become cost-effective for those who still have some measure of wealth to hire large number of menial workers, not unlike what was the case in 19th century England where urban populations ballooned with no attendant expansion in available work. 

Also, I wrote a post on this a while back, with what I thought were three trends that people might undertake in response to having no work and few options.  I should note that I don't mean to romanticize or idealize any of them, but that they seem to be likely once the welfare checks stop coming and people need to find some way to keep a roof over their heads.

Again, thanks for the good comment, and it is something to start looking for while sifting through the news.

The Guns of August

It's been a while since I've posted anything here, mostly for the reason that every time I sat down to write something about the ongoing Euro crisis, which is probably the most significant event in world history since the fall of the Berlin Wall, things changed and I felt like it was impossible to really get a clear picture of where things were going.  However, after seeing the news percolate over the last couple of months, I think it's possible to figure out where we're going with this.  I'll skip the drum roll and the dramatic build-up and get straight to the point about it -- what we're seeing the Eurozone is the political class being unable to find a way out of the crisis because there is no way out of the crisis. 

It's a little like hanging from a tree branch on the side of a cliff, with a hundred foot drop below you and a rabid grizzly bear above you.  You can either climb up and get eaten, fall to your death below, or hope for some kind of miracle.  Or, in Europe's case, you can throw the PIIGS under the bus and destroy any lasting chance at recreating the sense of Pan-Europeanism that died with World War One, you can watch the currency get detroyed, or you can hang on and hope that some economic miracle happens between now and inevitability. 

I don't know if it's a lack of leadership, or a lack of will to simply get on with pulling the plug and figuring out what happens afterwards.  The rotation of national leaders is about as effective as changing the coach on a sports team where everything else in the franchise (and perhaps league) is horribly broken.  Do people think that ousting Berlosconi will magically make Italian debt turn into butterflies?  Do they think that new blood is going to prove any thicker than the old? 

Unfortunately, it's not all that hard to see where this is eventually going to lead.  While it probably wasn't mentioned much during the formation of the EU, one thing that has always been implicit in the idea of a united Euope is that it would effectively mean an end to the fratricidal wars which have wracked the continent for millenia.  After all, how can you go to war with someone who shares your currency, whose economy is tied to yours, and whose survival depends on your survival as well? 
Sadly, a stake the size of Transylvania is about to be plunged into the heart of this idea.  Pundits have made some light of the grumblings of Germans about Greeks and vice-versa.  People who have a poor grasp and sense of history don't really understand the size of the colliding mountains behind these small, initial sparks.  Southern Europe has always been in seen to be the ancient, cultured part, Northern Europe to be the hard-working economic giant.  What happens to the idea of European unity when bank runs ensue and it once again takes a wheelbarrow full of marks euros to buy a loaf of bread? 

The old scores to settle -- which were shelved first in the face of the Soviet Threat, then for the promise of United Europe, are bound to reassert themselves as people first look for someone to blame, then realize that the pie is shrinking and those who aren't willing use force to take their share aren't going to have any left at all.  Add to this the pressures brought on by Peak Oil, environmental damage, overpopulation, the clash of cultures, the clash of ideals, pick something, and it's not really crazy to talk to think that we'll hear the Guns of August once again in our lifetimes, maybe even this decade.