The thesis Stirling and I were running from the early 2000’s was that the plan under which America’s elites were operating was Japanification. Run a bubble, and when it bursts refuse to take losses and go into stagnation.
This thesis has proved out repeatedly.
Let’s shine a light on the past. The oldest articles are in the wilds of dead blogs, but there are a few still available.
In Japan, they call it the Bright Depression. Ever since the 1980s bubble burst, the Japanese economy has never been able to rev up its engines and roar again. Slow growth or small contractions have been the rule. It hasn’t been awful. It hasn’t actually been a classic depression. But, somehow, the good times have never come back. Unemployment, never previously a problem, just won’t go away.
….
There is going to be a recovery, it has already started in Asia. Job numbers should start turning around in the spring in the US, though the number of people employed as a percentage of the population will not recover this economic cycle, and probably not for a generation.
However, Japanification doesn’t mean you don’t get some recoveries. You do, then they sputter out. Employment never really recovers, wages stagnate, and things are just generally lousy without plunging the country into an all out depression. So, yes, in that sense the country was “saved’ from a Great Depression, but choosing the worst alternative.
….
The end result of Japanifying, regressive taxation (whether direct or indirect) and attempting to restart the financial casino will not be pretty. There will not necessarily be any immediate disaster, and some numbers will look good. But the fundamental problems of the economy under Bush have not only not been fixed, they have been made worse and the evidence is being systematically buried. There won’t be another financial crisis immediately, but another one has been made inevitable.
This has all borne out.
The strategy is simple enough.
1) Give the banks money.
2) Let them avoid acknowledging as much of their losses as long as possible.
3) Allow them to gouge taxpayers for as much as possible, to dig themselves out of their own hole over a number of years.
The end result of this is going to be Japanification–at best. Not a “lost decade,” as many folks have said, but a semi-permanent wavering between slight job gains and job losses, where a good economy never, ever, comes back. And because the US, unlike Japan, is not a net exporter, it’s questionable how long Japanification can work in the US, in any case.
Fun stuff.
There is going to be a recovery, it has already started in Asia. Job numbers should start turning around in the spring in the US, though the number of people employed as a percentage of the population will not recover this economic cycle, and probably not for a generation.
However, Japanification doesn’t mean you don’t get some recoveries. You do, then they sputter out. Employment never really recovers, wages stagnate, and things are just generally lousy without plunging the country into an all-out depression. So, yes, in that sense, the country was “saved’ from a Great Depression, but by choosing the worst possible alternative.
Called shot. Accurate.
Once more, the percentage of Americans employed will not recover to pre-Great Recession levels for at least a generation, probably longer. This is a deliberate policy choice and everything Obama and Bernanke has done—from refusing to take over banks, to refusing to force lending at reasonable rates, to engaging in an inadequate stimulus, to refusing to make banks recognize their losses, to doing everything they can to encourage slashing Social Security and Medicare, has had the effect of making Japanification more and more likely.
This is just a small selection of posts. I may go through the called shot posts at the time of the stimulus, TARP, and so on, but heck, they just say the same thing.
By papering over the problem, by “extending and pretending,” Bernanke, Geithner, Congress, and Obama (Bush gets a nod, but TARP would not have passed without Obama, it is his child) ensured a generation’s worth of shitty economy for most people.
Yes, if we had chosen not to “extend and pretend,” the hit in 2009 and 2010 would have been worse, BUT the economy today would be far far better. In choosing the method we chose to do the bailouts, we also made the choice to have a shitty economy. Employment has never recovered, in terms of the percentage of the population, and will not (we’re about to hit a recession), wages are down for much of the population, and all the gains of the last economic cycle have gone to the top three to five percent.
Mind you, there was an historic stock bubble. The rich are even richer than they were in 2007. Obama and Bernanke’s policy has done what it was intended to: It has preserved, and then increased, the wealth of the rich.
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Douglas McElroy
I had so many articles from BOPNews bookmarked…all lost in time now. I learned a tremendous amount from the long-form blogging done there. I don’t know if I ever mentioned it, but I actually managed to avoid the vast majority of losses from the financial crisis because of the writing of Ian, Stirling, Hale Stewart and Barry Ritholtz. My timing was lucky – moved all our investments out of stocks in October of 2007 – but my reasons were not. My thanks for the education.
More germane to the topic, I’ve been reading ‘Railroaded’ by Richard White. It’s pretty dense, although I suspect most readers here will likely do better with it than I. His thesis is that the Transcontinental Railroads built in the late 19th century paved the way for much of what we consider to be core aspects of modern American society. The parallels with the recent financial crisis are striking, and appalling – massive, arcane, incompetent corporations run for the benefit of a few insiders who corrupt the political, judicial and journalistic systems in order to loot the commons for their own personal gain. Costs are socialized, profits privatized. There is even a man who in his own time was likened to a vampire bat, a la Matt Taibbi’s ‘vampire-squid’ characterization of Goldman-Sachs.
I’m not yet half way through and I have to take it in modest doses – if you take it too seriously it’s enraging and depressing. I keep stopping to read some unbelievable passage to my wife. My take-away is likely going to be a bit more bleak than I think the author intended. It’s hard to look at glaring evidence of how we haven’t learned anything in 150 years (or worse, in some ways, that we actively turned our back on what lessons were learned), and keep a positive frame of mind. Likely many of you are already familiar with this history, but I had never dug into the details before to this degree – my high school American history was a pretty bad white-wash. Between Howard Zinn and Railroaded I feel like I’m getting a better picture. It’s crystalizing my thoughts and you may find it revealing as well. The anti-trust reforms of the early 20th century were in response to the depredations of the railroad tycoons. But hundreds of thousands of lives had to be blighted, over decades, for it to happen. We have not yet begun to pay the butcher’s bill required to reform, even in part, what is wrong with America right now…
Paul Sanborn
Interesting thesis, Ian. Another angle to explore is what the Japanese / U.S. examples tell us about the prospects for having a different kind of intentional “degrowth” that tries to recognize social justice and distributional concerns. Although resource and environmental constraints will make nongrowth / degrowth inevitable, what if anything can be done to make it less horrible for the 99%?
EGrise
So if there was a plan by the elites for Japanification of the US, I’m guessing it was a short-term plan to save the hides/fortunes of rich people.
My personal experience with business elites is that they are either incapable of or uninterested in thinking beyond 1-2 years into the future, five at the outside, but there could very well be smarter sharks in the financial ocean with the ability to look at a farther horizon. Do you suppose there’s a long-term plan as well? And if so, what is it?
Brian Woods Snr.
@ Douglas McElroy : Thanks for the HT about ‘Railroaded’ . Appears to be along similar lines to Upton Sinclair’s ‘The Jungle’ – about the meat processors of Chicago (1906) – harrowing, disturbing and enraging.
SWRichmond
Japanification cannot work for the US; the US has a global empire to maintain, which Japan did / does not. The US issues the “Reserve Currency”, which Japan did / does not. There is no “Japan Scenario” for the US…though I do not doubt that is what they are aiming for. The global chaos we are now witnessing is the result: the end of empire, the end of the USD system, and the last gasp of murderous neocons of left and right trying to kill off the entire planet in order to maintain power.
No surprises.
Ian Welsh
Bernanke thinks long term. His academic output was “how do we avoid FDR in a 1929 scenario” basically, he knew he what he was doing.
EGrise
Makes sense. So no FDR for us, bracing for a Mussolini!
realitychecker
It has long been my belief that the long-term grand plan of the corporate oligarchy is to re-position itself for a future based in and about Asia. That is where the markets are entering the stage where growth will be fast and easy as middle-class consumers become a large group going forward.
By contrast, the American marketplace is fully mature, every known niche exploited, and growth going forward will therefore be slow, and so unappealing to the corporate mentality that always demands the fastest growth attainable.
If this view has the merit I believe it has, then one should expect the corporate players to do and support whatever best allows them to extract all available capital from this market system and re-deploy it to Asia. It would not be rational for them to show any concern at all for the people or the mess they will be leaving behind In America. So far, all the data seems to be in support of this process.
Too bad we’ve become so wussified that we will let the wretches get away with it. In a perfect world, they’d be getting killed and having all their assets seized.
Hugh
Re stagnation, one of the things that annoys me each month is having to listen to well paid, knowing fools in the media opine about the latest jobs report from the Bureau of Labor Statistics and then draw what are invariably false and deceptive conclusions from them. We are told that the US economy added 292,000 jobs in December. Woohoo! Beats all expectations. Shows another month of solid growth. The stability of the US economy. There’s only one small thing, a detail really. None or virtually none of those jobs actually exist or were “created” in December. As I repeat each month, what the BLS reports as its “official” numbers are seasonally adjusted, that is trendline, numbers. They represent a smoothing of the data to make a prettier line. They do not represent reality. It is rather like having a boat tied up to a dock. The boat sinks and is under ten feet of water for 5 days. It is then hauled ten feet up the shore where it is repaired over 5 days before being returned to its mooring. Don’t adjust and you see the boat going down, pulled up, and returned to where it was. Look at the trendline and nothing happened. It averages out that the boat was at sea level the whole time.
What really happened in December was that seasonally unadjusted, as in what really happened in December, only 11,000 jobs were created. That’s all , public and private sector combined. Private sector alone, because the private sector is supposed to be the great engine of economic growth, only 102,000 were created. There are two points to make here. The first is that December is always a static month for job growth. Think about it. Businesses have already hired everybody they need for Christmas in October and November. The second is that those 292,000 jobs are actually an expectation of job growth in the February to June hiring period. As in they don’t exist yet. This dissonance will be even more striking when the January numbers come out. The BLS is almost certain to report another month of 200,000+ job growth when, in fact, all those Christmas hires will be dumped and the economy will have lost something like 2.3 million jobs.
We are currently in a global economic slowdown which is being ignored by pretty much all our elites. This slowdown is itself embedded in a recession that began in 2007 and never really lifted for the bottom 80% of Americans. This too is ignored by our elites. Instead we are fed “don’t believe your lying eyes” propaganda about the economy being ever upward and onward by people who either can’t or won’t read a simple table or understand a simple graph. I don’t know. If they had they might have noticed that 465,000 fewer private sector jobs were created in 2015, the year they kept trying to sell us as the year when real recovery took hold, as compared to 2014.
As for those 292,000 jobs that don’t exist and, if China or Europe or we crash or the Middle East blows up, will never exist, even if they did, the reality is that virtually all of them would be crap, another fact that our elites would no doubt lose in their self-serving cheerleading.
Tony Wikrent
To Douglas McElroy: I have not read Railroaded, and from your comment, I probably won’t. However, I think the transcontinental railroads were only part of what created the modern United States. And even if it were ONLY the railroads, I wonder if White gives proper credit to the US Army Corps of Engineers and more importantly, the Army Corps of Topographical Engineers? After the Lewis and Clark expedition, there were nearly 50 other Army expeditions which explored and mapped the West, including investigating, selecting, and surveying the routes for the transcontinental railroads. Because they were the only centers of civil engineering expertise in the early nineteenth century, Army engineers were detailed to assist private railroads in designing and building routes, bridges, and buildings. And one of the best historians of technology, Merritt Roe Smith, has repeatedly stressed that modern business management was founded on the expertise of Army officers detailed to work with the railroads. It was Army officers who had the experience of managing the logistics of moving vast amounts of men and material across huge distances, so early railroad management copied wholesale from the Army. In fact, if I recall correctly, something like 3/4 of all railroad executives and managers up until the Civil War were former Army officers. If White does not mention these facts, then I would consider his book next to worthless.
But, back to my point that it was not just the transcontinental railroads. I strongly recommend Leonard P Curry’s 1968 book, Blueprint for Modern America: Nonmilitary Legislation of the First Civil War Congress. Besides the Pacific railroad, this Congress gave us: Land Grant colleges, a transcontinental telegraph system, a highly protective tariff, our first national currency, and the Homestead Act. The next Congress gave us the Dept of Agriculture.
So the interesting point to make is that there had been attempts throughout the 1850s to get similar legislation passed, but it had been repeatedly blocked by Sothorons. In other words, it was not until the Southern slaveholders abandoned their political power in Congress to fight their absurd war of secession, that the nation was able to move forward with a nation-wide application of technologies that had been developed two decades earlier! The situation with Republicans (irony of ironies!) and conservatives blocking progress today is frighteningly similar.
These other programs were as crucial as the railroads. For example, it was the USDA that introduced winter wheats from Ukraine and Russia to the Great Plains. It was USDA scientists who discovered photoperiodicity, which completely transformed plant science and agriculture.
Another example of government promotion of economic development: preparation and publication in 1859, at government expense, of The Prairie Traveler: A hand-book for overland expeditions. With maps, illustrations, and itineraries of the principal routes between the Mississippi and the Pacific, by Army officer Randolph B. Marcy.
I have compiled a chronology of government programs and policies that built the US economy:
http://real-economics.blogspot.com/2015/01/hawb-introduction-how-america-was-built.html
I have written one of my favorite episodes up just a couple weeks ago: HAWB 1863 – Admiral Benjamin Franklin Isherwood and the Development of Thermodynamics – How America Was Built:
http://real-economics.blogspot.com/2015/12/hawb-1863-admiral-benjamin-franklin.html
I am now trying to find an agent or publisher or foundation to get this material published. Any help would be appreciated.
Tony Wikrent
I think it would be very useful to consider the question of motive. What was Bernanke’s motive? Was he really just a today for some nebulous oligarchy which was determined to prevent another “share the wealth” New Deal? Or is it simply that Bernanke is thoroughly indoctrinated in the economic nostrums of neo-liberalism, and is steered by an internalized belief that market mechanisms are ALWAYS superior to government and the mess of legislating in a democracy, for husbanding and allocating society’s resources?
Let’s put it starkly: was their ill intent on the part of Bernanke and Obama and other elites in their deciding to save the financial system at the cost of foreclosing much of the economic future for all people except the rich elites?
The only way I accept a judgement of ill intent is if they were acting to enforce economic austerity as a means of reducing population. There is a history of USA elites supporting eugenics, and there have certainly been no shortage of elite institution purveying the idea that the world is overpopulated. Was the financial crash used to impose austerity and bludgeon Americans into accepting a lower standard of living, thus lessening aggregate demand for scarce natural resources? Even to accept a decrease in life expectancy, which we now see among the poorest whites?
My belief at this time is that Bernanke and Obama and others are guided by their neo-liberal beliefs, which were drilled into them in college and post-graduate schools. I think it is exactly the same problem as you find with the historical example of the elites of the Confederacy. Any rational person could tell them that secession would lead to a war that devastated the south. William T. Sherman, for example: http://www.dailykos.com/story/2014/11/23/1346878/-Southern-Delusions-and-the-Burning-of-Atlanta
Michael Hudson is one of the few scholars I’ve read who makes clear that the Southern elites were driven by their inability to conceive of a different economic system than slavery. In his 2010 book America’s Protectionist Takeoff: The Neglected American School of Political Economy, Hudson writes, “Southern plantation owners sought to support their slaves at a low enough cost to maintain the South’s dominant export position in cotton and tobacco. Creditors on the Northeast Seaboard also supported deflation. The result was a deflationary agrarianism aimed at countering the growth of northern industrial power…. Actually, westward expansion was a Democratic Party policy to extend slavery and plantation agriculture. In an epoch when protective tariffs were the principal source of revenue for the federal government (that is, until the 16th Amendment created the federal income tax in 1913) the South based its cotton and tobacco production on foreign markets, seeking to feed its slaves with low-priced grain from the West. The Whig and Republican industrial program called for concentrating industry in the Eastern urban centers, whose population would be fed by farms that would find their major market at home, not abroad. But industrialization threatened to bid up food prices, eroding the competitiveness of plantation agriculture. This prompted the Democratic Party to urge free trade, small government and credit aimed mainly at export financing not industry. The slave states in particular decried industrialization and urbanization as culturally decadent rather than the key to economic progress. At issue was the kind of cultural, social and political structure America would develop and national trade policy would act to bring about.”
It was not so much that the Southern elites were intending to shatter the Union and fight a war; rather, they were simply unable or unwilling to think of a better future without an economy based on slavery. Similarly, it is my judgement at this time that Bernanke and Obama and other elites were not intending to steer the USA and the world into what Joseph Stiglitz has called the Great Malaise
http://www.project-syndicate.org/commentary/great-malaise-global-economic-stagnation-by-joseph-e–stiglitz-2016-01
as much as they are simply too dumb and uninspired to conceive of an alternative future in which “free markets” and financialization do not dominate.
Although, I swear, I would be willing to bet that a recurring topic of private conversation at Davos and other such events is that forcing austerity down the throats of Americans and Europeans is one way of easing the burden on an overpopulated planet.
Jeff Wegerson
Ian, one critical audience for your opus on political economy seems to me would be countries like first Iceland and then Uruguay, then a country with tens of millions population. What would these types of countries need to be doing in times like these and going forward to create self-sustaining potential economic havens.
Ian Welsh
Iceland and Uruguay are very different. Iceland’s huge advantage is its tiny population. Uruguay has a ton of legacy problems to overcome. I have considered doing some roadmaps “what should country X” do, but they are made immensely difficult by the legal climate of various trade deals, how money markets for nations work, and so on.
Feeler: any of my regular readers want to read about 20K of the current manuscript and provide general feedback? I’m not looking for editing, just a feel for how it reads.
Jeff Wegerson
Uruguay is an order of magnitude larger than Iceland (Iceland’s 100’sk population versus 1,000’sk population Uruguay) and the seriously difficult nations I’m sure begin in the next order of magnitude, tens of millions. But I get what you are saying about wanting to stay more theoretical and not nitpick amongst the details of specifics. I suppose mucking around the details are what your readers are good for.
As a somewhat less sophisticated one of your regular readers I would still be willing to give a “feel” read to 20k. Last year I would have been afraid of being too slow but now that I have a sense of what the actual pace is …
Ian Welsh
Ha.
Oh, the actual pace is likely to pick up. If it doesn’t, this will never happen. I had some major health and so on to deal with before.
I’ll offer specifics near the end of the book (and indeed, examples at various parts), but our problem right now is we don’t understand the principles and we think what is primarily an ethical problem is a technical one.
Robert
I’d be happy to do that Ian, it would be my pleasure as I enjoy your writing .
yancey
Ian, you are quite correct about this—-the financial strategy is neo-feudalism with a ruling elite and financial class calling the shots vis-a-vis debt peonage and public sector plunder.
Peter*
Ian , I’m trying to understand what you base your conclusion on that the economy would have been far better today if the TBTF banks had been left to fail and bring down our financial system or that more stimulus to the real economy would have produced anything more than a short lived boost followed by another crash. The ‘end of growth’ was fast approaching before the financial gambling bubble collapsed and was only maintained with consumer debt for decades because wages have been stagnant for decades also.
The Japan crash and long recession/stagnation may show there is no recovery possible but what is also very troubling is their slide into authoritarian rule with their government ignoring mass Japanese public rejection of restarting Nuke power after Fukushima and now the even more dangerous reinstituting of their imperialist military posture.
ddv
Ian , I’m trying to understand what you base your conclusion on that the economy would have been far better today if the TBTF banks had been left to fail and bring down our financial system
Not “left to fail”, put under trusteeship. It’s true that the official that this would have brought down the economy, but the official line is a steaming load of bollocks.
power after Fukushima and now the even more dangerous reinstituting of their imperialist military posture.
Don’t play dumb. The imperialism is all coming from Washington–i.e. it’s not “reinstituted” Japanese imperialism, it’s freshly instituted Japanese vassalism.
ddv
[markup fixed. pff.]
Ian , I’m trying to understand what you base your conclusion on that the economy would have been far better today if the TBTF banks had been left to fail and bring down our financial system
Not “left to fail”, put under trusteeship. It’s true that the official that this would have brought down the economy, but the official line is a steaming load of bollocks.
power after Fukushima and now the even more dangerous reinstituting of their imperialist military posture.
Don’t play dumb. The imperialism is all coming from Washington–i.e. it’s not “reinstituted” Japanese imperialism, it’s freshly instituted Japanese vassalism.
ddv
Correct. A new Raj is the goal. This also accounts for the unprecedented hoarding of assets–in anticipation of buying China out from under the Chinese, if/when they manage to engineer that possibility.
Or perhaps there are many who feel personal ruin is a small price to pay for getting to see the dusky heathen untermenchen put under the boot-heel.
Peter*
@DDV
My comment wasn’t about the BS official line and the TBTF banks would probably have collapsed before any trusteeship could have been established to clean up the disaster, with more money printing.
The Land of the Rising Sun has a long Imperialist history and it is true they have been a US vassal since WW2 that allowed their economic miracle to develop, until it stalled. The US may have loosened their leash but their militarist tendencies had never disappeared they were just redirected into mercantile pursuits.
Their Authoritarian behavior towards their own people ,that started long before the US promoted the change in their constitution, may show how they will behave now that they plan to project military and political power throughout the region, again.
ddv
I have no idea what the devil you are trying to say here.
Kindly look up “vassal” in a dictionary.
Why, exactly, would the U.S. have “promoted” such a change other than to achieve that result?
Tony Wikrent
Peter – one way or another, the present financial and monetary system must be replaced with systems that actually create and allocate credit and money to the things we need. Specifically, the nearly $400 trillion in new industry, transportation systems, and energy grids needed to replace the current economies based on combustion of fossil fuels. The International Energy Agency estimated in a recent report that the world needs to spend $359 trillion between now and 2050 to avoid catastrophic climate change.
We, really, really need to break through these psychological and
ideological barriers that are preventing us from doing what needs to be
done to save this planet. We have the technology. In hand. Ready to go.
All we need is the money — and it’s not that much if you keep your
wits about you. World GDP in 2014 was US$78.28 trillion. And the growth
rate of world GDP has been around 3.4 percent annually for a number of
years. Project the growth of world GDP out to 2050, add it all up, and
you get US$ 5,630.5 trillion.
$359 trillion is only 6.4 percent of world GDP over the next 35 years.
And it will probably be less than 6.4 percent, because once we get serious about doing this, world GDP is going to boom!
We’re more likely to see growth rates of five or six percent a year.
Maybe even double digit growth rates, like China achieved for much of
the 1990s and twenty-naughts. We’re going to replace every vehicle with
an internal combustion engine. Every vehicle on the planet.
We’re going to build a whole new distribution, wholesale, and retail
system to support electric vehicles. We’re going to build tens of
thousands of kilometers of urban rail lines, in every major city on earth.
We’re going to build hundreds of thousands of wind power turbines, and
two or three billion small, independent solar power systems, all over
the world. We’re going to tear down and replace, or remodel and insulate
almost every single building and dwelling on the planet.
There is so much work that we must do, there will be massive
shortages of labor and skills. There will be plenty of work for
everybody, from the people in the funny clean suits in the big chip
plants churning out photovoltaics, to the carpenters and plumbers and
electricians doing all the replacing and remodeling.
But note two things about the presently existing financial and monetary systems. 1. They are unable to provide the financing for this massive boom, simply because the controllers do not see a rate of return large enough to eclipse their sunk costs in the fossil fuel / funny money economy. 2. This, in turn, is predicated on the BELIEF that only private banks should be allowed to create and allocate money and credit. There is no basis for that belief, other than the elites’ desire to preserve the status quo. Once governments begin to take money creation into their own hands and use it to build the $359 trillion future, it is just a matter of time until the elites are no more.
Since it is merely a BELIEF that now stands in the way of ensuring humanity’s survival, Ian is entirely correct in asserting that what we are dealing is actually an ethical problem. My quibble is that I believe it is inaccurate to ascribe malevolent intent to most of the elites. I think stupidity and lack of imagination is a more accurate diagnosis. Veblen described it as “trained incapacity.” The problem is, given climate change, we can no longer afford to wait for economic theory to change one funeral at a time.
Peter*
@Tony
I sometimes wish I could be as sanguine about the future as you seem to be, I was at one time, and believe that we can use the industrial civilization and its magics to remedy the disasters it created and save the biosphere it has doomed.
Illusions of technological ‘progress’ and human competence leading us to a better world run into the reality of a finite planet facing a system based on uncontrolled (cancerous) endless growth in population and consumption.
The greenwashing of this next stage of expansion, now that it is profitable, is moving along nicely with the Technocrats and their PR minions busy selling the Future to the confused masses as we recently saw in Paris.
This Good Growth will create more massive destruction, mining, manufacturing and transportation and more massive discharge of greenhouse gasses while promising reductions sometime in the future. The studies I have read can’t even predict when in the future this Big Green revolution will be able to do more than meet growing energy demand or actually reduce emissions overall only reducing the emissions from new consumption.
Few people and no leaders seem willing to even talk about what is necessary to save the planet or humanity because it requires stopping growth and overconsumption by dismantling Industrial Civilization, especially in the West.
Tony Wikrent
Peter – Oh, I am only optimistic about the long term survival of the human race, because humanity has survived numerous catastrophes (for example: the Black Death killed around half the population of Europe from 1346 to 1353) that we just barely comprehend. Short term, I’m very, very pessimistic. I agree with Ian that we are probably going to suffer a loss of one or two billion souls before people get serious about political, economic, and social reform.
I must disagree with the idea of “dismantling Industrial Civilization.” How many people would have to die to achieve that utopia? And stopping growth: well, what do you define as growth? If you define growth as a continuing accretion of “profits” to corporations and investors, then I agree we need to stop growth. But I think there are other definitions of growth. For example, we must continue to advance the frontiers of science and technology. There is never, NEVER, a steady state economy, simply because resources are finite – but resources are finite only in within a particular mode of science and technology. If you do not advance science and technology then you will definitely have the collapse Jared Diamond has written about. But it is science and technology that allows society to overcome the limits of finite resources by creating new resources, making the use of resources more efficient (less wasteful.) For example, a modern diesel powered farm tractor requires one quarter the amount of steel of a steam traction engine of the 1910s, and is moreover able to plow four to six times more acreage in a given period of time than the steam traction engine.
Reducing the carbon footprint of any economic activity to almost zero is merely an engineering problem at this point. So why aren’t we doing the engineering? Because the people who create and allocate money and credit are interested only the type of growth I think it is you abhor. How is money created? What is required to create money? One enough people understand that society can create all the money it wants and needs, then we can pay engineers to solve the engineering problem of stropping and even reversing climate change. The technology is here. It’s already developed. http://real-economics.blogspot.com/2013/11/wouldya-like-serving-of-hope-for.html
The only real shortages we have are of wisdom, compassion, and courage to challenge the status quo.
I was stupid enough to think that the financial collapse of 2007-2008 would create a massive political dynamic that would destroy the political power of Wall Street and the City of London. So, I’m very pessimistic short term.
But long-term, I have great hope that humanity will create an equitable, peaceful paradise on earth.
Peter*
I don’t think there is a utopia in our future but a controlled dismantling of Industrial Civilization and reversal of population growth would certainly be more humane and desired than the inevitable crash that all civilizations have faced. I once believed we could use our technologies with some wisdom and clean up the disasters we created while promoting a simpler and less destructive lifestyle but that was a pipe dream.
The crash, when it hits, could kill many more people than Ian estimates because so much of our societies are urban and concentrated totally dependent on fragile dependent systems to feed, clothe and shelter them.
Your example of the diesel tractor replacing the steam powered machine is telling but not for the reason you promoted, progress. The steam tractor may have used more iron and steel than modern diesel tractors do but it was powered by locally sourced fuels, coal, wood and even corn cobs, a renewable fuel source. The diesel is another modern technology that created a long list of consequences and problems produced by its growth. To fuel a diesel you need refineries and oil wells and when demand exceeded supply that oil had to be sourced from around the globe which led to the need for bigger armies and navies to maintain access to those distant resources and a CIA to overthrow governments who thought that oil belonged to them.
Many more people believe as you do, that our modern technological magic will save us from ourselves, than think as I and some others do that we should follow the First Law Of Holes, we are digging our own and many other people’s graves!
Jerome
Do you read Martin Armstrong? He’s at ArmstrongEconomics.com Am not related. But his thesis of the cycle is remarkable, and what he shows is the flight to the dollar is also a flight from public to private. This is something that the perma-bears at ZH totally miss. The stock market is not gonna take the hit here. Its the public that will, specifically the public worker pension, elderly social security, and every other safety net that’s gonna be decimated from the public debt crisis.