I made the claim in the last post that Marxism and Nationalism are enjoying a resurgence at present. I would add that they may well enjoy a bright future if it happens that Liberalism broadly defined is seen to be failing. Liberalism is the ruling regime in the form of democratic capitalism, having emerged victorious from the Second World War and the subsequent Cold War. Liberalism as currently practiced has run into some difficulties with the capitalism part suffering from a form of gigantism, and democracy having come down with a case of disinterest. Like any human system, the perception of its efficacy is of primary importance. If people stop benefiting from or believing in the system of democratic liberalism they will look to alternatives.
By saying that Marxism and Nationalism will gain traction in the 21st century doesn't mean that we will repeat what occurred in the 20th century or that WWIII will be fought with the same ideological mix that WWII was fought over. ( An interesting note: WWIII is not a word according to spellchecker but WWII is.) Also, in saying these ideologies are likely to re-emerge doesn't mean I am advocating either one. What they represent is a fall back position for people when the current system, with all the hopes and dreams it promises, begins to unwind and stops working for people.
What I wanted to describe with the case of North Korea was exactly this fall back ideology, or a fall back means to provide a social order. There they have a primordial nationalism that supplanted Communism over the course of the 20th century. It turns out that communism was great as a revolutionary ideology but proved to be weak tea when it came to holding the fabric of society together. I think something similar happened in all of the communist countries. It's impossible to describe North Korea as a successful country fulfilling its own dreams and aspirations. It's likely that it will either implode or explode due to the psychological hemorrhaging of its collective cognitive dissonance in the coming years. It is only the process of re-emergence of forms of organization around ideological ruling principles I want to point out.
These forms have two aspects we can look at: modern and primordial. Modern nationalism is an expression of a primordial tendency to identify with whatever society you are born into and that your individual chance of survival depends on this identification. The tendency is for people to be willing to subsume their own identity within that of the "nation" warts and all because the "other" is having none of it. Modern forms of nationalism is the stone age mind fitting itself in modern garb (paleoconservatism). This is not a criticism as such. Nationalism is a human tendency lying around that is easy for leaders to exploit when times get tough, or when the nation feels it is under threat. It's not an accident that nationalistic behavior manifests itself during wartime.
Marxism is another matter. It is strictly a modern ideology because it is a critique of a modern system (capitalism) and a proposed self-consciously modern industrial system. It sees itself as taking the baton from capitalism when the anticipated failure of capitalism is apparent. I'm using Marxism as a blanket term which includes communism and socialism, but it's important to realize the differences among them. Contemporary Marxists still believe the prediction that capitalism will destroy itself because of its "internal contradictions. Whether Marxists have it right or not is another story, or if they have it for the right reasons. But I think they have enough that's right, class struggle for example, to offer a plausible explanation for what is happening in the economy.
But Marxism is also a moral philosophy. In this way it has a powerful primordial element which transcends its modern foundation that will appeal in a time of scarcity. Governments will respond in one way or another to falling economic participation and a Marxist upwelling would seek to influence what that response is. But as is commonly said about Marxism is that it's long on analysis and short on prescription, meaning, as I see it, the practical program runs against human's natural tendency to accumulate and to horde. Communes, for example, are generally short lived. The only durable forms of communal living outside the family are religious. All moral philosophies and ethical systems run into the same problem.
Both of these ideologies are present in the world and increasingly active. In the midst of the death throes of the European Union, you are starting to see both nationalism and Marxism increasing in popularity. Greece is having a critical election right now and the left wing Syriza, a radical left party, threatens to default on Greek debt if they take power, which is a real possibility. On the far right side you have nationalistic parties on the rise in France, Britain, Belgium, and anywhere else you care to look as a reaction to the troubles of the EU. This is all just a prologue for what's to come given that the EU can't pay for itself.
Managing decline is a tricky prospect. A lot depends on how people generally understand what's happening. This is a function of ideology. Ideology, though, being based on how people understand what's going on, is likely to be extremely varied and based on old themes. Nationalism and Marxism are two very general descriptors which lay out familiar narratives. But an ideology based on an explanation of the decline, with a program for how to manage decline in a civil manner, might be able to ascend and form the operating principle for managed decline. That will be the subject of the next post.
Tuesday, December 30, 2014
Friday, December 26, 2014
A Non-Comedic Tour of Ideology
When thinking about "ideology boxes", to stay consistent with the idea of a box it's a good idea to talk about the parameters of ideology as a category of thought. There are two ways to approach this. The first is that ideology is a shifting, mutable concept that reflects the times in which it is active, even as it encompasses more time-durable concepts from morality or religion. The second is that ideology is specific to political beliefs, and that recognizing when something in the world; a phenomenon, a fact, a belief, is not in itself ideological is useful to figuring out what an ideology is. This is a point I made in the last post that I want to drive a little further by using a couple of real life examples to show what I mean by it, as well as to showcase a peeve I have about how the media talks about things.
North Korea has been in the news for the past week, which is something I don't need to tell anybody, having been implicated by the FBI in the cyber attack against Sony pictures. The attack preceded the impending release of "The Interview", what looks to be a mediocre film with perhaps some mildly amusing bits occurring in some places during it. As we all know, the plot centers around the assassination of North Korea's leader, Kim Jong-un, a comedic device the North Korean's apparently did not find humorous (the DPRK is, you could say, accidentally funny). The effect has been a geo-political dust-up and some discussion in the U.S. about a basic tenet of a free society. All well and good, but it's not what I'm going to talk about.
What it did was spur me to revisit the subject of North Korea to form some perspective on the country itself and how we in the U.S. are talking about it. North Korea is often referred to as a communist nation, or socialist, which is, maybe, kind of accurate. They call themselves that, after all. During my You Tube investigation, I found a BBC program featuring a journalist who disguised himself and his cameraman as tourists. The two of them took the official state tour of North Korea for non-dignitaries and made a 30 minute program about it. The tour itself as presented by the official North Korean tourism ministry is, as you can imagine, a bizarre look at the happy mask over the Orwellian nightmare that is the DPRK. But there were a few scenes in which they managed to show a glimpse of the true conditions almost all people who live there endure, which led the journalist to ask: What ideology does this represent? What is positive program here? Of course, it's a rhetorical question. There is none beyond the personal power of Kim Jong-un.
It made me think that describing the DPRK as a "communist" country really isn't very accurate or useful in understanding what the government is or to explain how it acts. If you consider all the totalitarian regimes that sprang from the communist revolutions, they turned into something resembling the form of government that prevailed before the revolution. North Korea carried over some major old world, pre-modern elements that now serve to legitimize the current regime. These basic elements of the DPRK are a slightly morphed and extremely brutal monarchy supported by an official state ancestor worship. Kim il-Sung, in their official account of things, is still the leader of that country even though he's been dead for twenty years. This does not represent any tenet of communism that I know of. Ancestor worship is a form of societal organization that can be traced literally to the stone age. So the ruling ideology shifted from a left wing communist to a right wing nationalist one heavily reliant on prevailing myths about the war with the U.S..
Of course, ancestor worship isn't peculiar to North Korea. Japan has the same belief, at least until recently, about their emperor. Mao, whose governance most closely resembles that of North Korea, eventually morphed himself into a Godhead like the emperors before him. So these ancient forms of divinely sanctioned rule go way back. Remember what Marx said about religion? There is nothing in North Korea outside the completely unbelievable claims they make about themselves that has anything to do with Karl Marx or of communism. If anything it's used as a gauge to measure the likelihood a person may live or die after each and every conversation they have with someone in authority. Though, probably even a slip up on doctrine might be forgivable and the real live/die outcome is based on whether you've heaped enough praise on the Dear Leader. And it's useful to remember that it's not possible to praise him too much.
A healthy, sane person finds North Korea a repellent subject, so the next part will feel light hearted and fun in comparison. But to sum up on the Kim dynasty and North Korea's comi-tragedy, one point I want to make is that ideology is a lens through which to make things sensible, and to know what does or doesn't fit the description makes a big difference in how you think about something. Marx's ideal economic form was not to be controlled by a divine leader with supernatural talents whose only use for the national industry is to build extravagant monuments to himself. This affects both how we view North Korea and how we view Marx.
Exhibit B is something I just found mildly revealing about how media people, especially more general interest figures, think about the economy. It is an interview with Jeremy Grantham by Charlie Rose. Jeremy Grantham is a very interesting person. He is an institutional investor for Grantham, Mayo, van Otterloo, which manages some $112 billion in assets. Call him a capitalist par excellence. He is also able to speak to the subjects found in this blog better than I can. In the clip posted below, which is about three and a half minutes long, Grantham describes to Rose what is happening to the economy based on the resource argument and the rising cost of oil.
What I find interesting is how Rose tries to understand what Grantham is talking about through the lens of politics. Rose bleats out Paul Krugman's and Ronald Reagan's names midway through to get a response from Grantham and Grantham shrugs him off. Grantham, of course, is saying nothing, or doesn't want to, about politics and Rose has a hard time with it.
It's worth reading through the relevant parts of Grantham's newsletter to his investors which is here. In this link are several others to the full newsletter.
All of this typing I have done is to demonstrate a need to think clearly at least about ideology. The world is changing along lines that will be expressed through ideology. Two things pop into the cranial box. The first is that a resurgence of nationalism is already happening. Vladimir Putin is a right wing nationalist, as can be seen by his adoption of the Russian Orthodoxy. Ahmadinejad appealed to a conservative nationalism. But I also see Marxism to make a comeback, and Latin America is the place to look for that. Can't say it will be a big hit in the U.S. but then again, Marx has a big advantage in his ready made class analysis and the Law on the Declining Rate of Profit, all of which fit rather well in today's political wackiness.
North Korea has been in the news for the past week, which is something I don't need to tell anybody, having been implicated by the FBI in the cyber attack against Sony pictures. The attack preceded the impending release of "The Interview", what looks to be a mediocre film with perhaps some mildly amusing bits occurring in some places during it. As we all know, the plot centers around the assassination of North Korea's leader, Kim Jong-un, a comedic device the North Korean's apparently did not find humorous (the DPRK is, you could say, accidentally funny). The effect has been a geo-political dust-up and some discussion in the U.S. about a basic tenet of a free society. All well and good, but it's not what I'm going to talk about.
What it did was spur me to revisit the subject of North Korea to form some perspective on the country itself and how we in the U.S. are talking about it. North Korea is often referred to as a communist nation, or socialist, which is, maybe, kind of accurate. They call themselves that, after all. During my You Tube investigation, I found a BBC program featuring a journalist who disguised himself and his cameraman as tourists. The two of them took the official state tour of North Korea for non-dignitaries and made a 30 minute program about it. The tour itself as presented by the official North Korean tourism ministry is, as you can imagine, a bizarre look at the happy mask over the Orwellian nightmare that is the DPRK. But there were a few scenes in which they managed to show a glimpse of the true conditions almost all people who live there endure, which led the journalist to ask: What ideology does this represent? What is positive program here? Of course, it's a rhetorical question. There is none beyond the personal power of Kim Jong-un.
It made me think that describing the DPRK as a "communist" country really isn't very accurate or useful in understanding what the government is or to explain how it acts. If you consider all the totalitarian regimes that sprang from the communist revolutions, they turned into something resembling the form of government that prevailed before the revolution. North Korea carried over some major old world, pre-modern elements that now serve to legitimize the current regime. These basic elements of the DPRK are a slightly morphed and extremely brutal monarchy supported by an official state ancestor worship. Kim il-Sung, in their official account of things, is still the leader of that country even though he's been dead for twenty years. This does not represent any tenet of communism that I know of. Ancestor worship is a form of societal organization that can be traced literally to the stone age. So the ruling ideology shifted from a left wing communist to a right wing nationalist one heavily reliant on prevailing myths about the war with the U.S..
Of course, ancestor worship isn't peculiar to North Korea. Japan has the same belief, at least until recently, about their emperor. Mao, whose governance most closely resembles that of North Korea, eventually morphed himself into a Godhead like the emperors before him. So these ancient forms of divinely sanctioned rule go way back. Remember what Marx said about religion? There is nothing in North Korea outside the completely unbelievable claims they make about themselves that has anything to do with Karl Marx or of communism. If anything it's used as a gauge to measure the likelihood a person may live or die after each and every conversation they have with someone in authority. Though, probably even a slip up on doctrine might be forgivable and the real live/die outcome is based on whether you've heaped enough praise on the Dear Leader. And it's useful to remember that it's not possible to praise him too much.
A healthy, sane person finds North Korea a repellent subject, so the next part will feel light hearted and fun in comparison. But to sum up on the Kim dynasty and North Korea's comi-tragedy, one point I want to make is that ideology is a lens through which to make things sensible, and to know what does or doesn't fit the description makes a big difference in how you think about something. Marx's ideal economic form was not to be controlled by a divine leader with supernatural talents whose only use for the national industry is to build extravagant monuments to himself. This affects both how we view North Korea and how we view Marx.
Exhibit B is something I just found mildly revealing about how media people, especially more general interest figures, think about the economy. It is an interview with Jeremy Grantham by Charlie Rose. Jeremy Grantham is a very interesting person. He is an institutional investor for Grantham, Mayo, van Otterloo, which manages some $112 billion in assets. Call him a capitalist par excellence. He is also able to speak to the subjects found in this blog better than I can. In the clip posted below, which is about three and a half minutes long, Grantham describes to Rose what is happening to the economy based on the resource argument and the rising cost of oil.
What I find interesting is how Rose tries to understand what Grantham is talking about through the lens of politics. Rose bleats out Paul Krugman's and Ronald Reagan's names midway through to get a response from Grantham and Grantham shrugs him off. Grantham, of course, is saying nothing, or doesn't want to, about politics and Rose has a hard time with it.
It's worth reading through the relevant parts of Grantham's newsletter to his investors which is here. In this link are several others to the full newsletter.
All of this typing I have done is to demonstrate a need to think clearly at least about ideology. The world is changing along lines that will be expressed through ideology. Two things pop into the cranial box. The first is that a resurgence of nationalism is already happening. Vladimir Putin is a right wing nationalist, as can be seen by his adoption of the Russian Orthodoxy. Ahmadinejad appealed to a conservative nationalism. But I also see Marxism to make a comeback, and Latin America is the place to look for that. Can't say it will be a big hit in the U.S. but then again, Marx has a big advantage in his ready made class analysis and the Law on the Declining Rate of Profit, all of which fit rather well in today's political wackiness.
Tuesday, December 23, 2014
Ideological Boxes
At some point it is inevitable that this blog will veer into some kind of comment about politics. Not yet. Not today. I've talked a lot about economics and what's going on in the Market as a proxy for politics because it's more quantitative and is a more fundamental force because of its interaction with the natural world. In other words, it's where the rubber of society meets the road of physical reality. Economics and the operation of the Market has additionally been a huge feeding ground in the development of modern political ideologies, especially in the twentieth century, but at present we have a staid .
Political ideology can be seen as a philosophical set of principles which form the basis for reasoned and consistent political action. A durable ideology includes a plausible description of a reality that informs the political animal. I'll define "a plausible description of reality" as beliefs and convictions about how the world works and how it should work. Thus armed, the political animal engages the world in a manner consistent with being an animal.
It's important to make a distinction between politics, political ideology, and the intellectual feedstock which informs ideology. A good statement on this I read a while back comes from James Howard Kunstler who had this to say about capitalism: I don't really see capitalism as an ideology...I see it more as a set of laws and principles around the allocation and management of surplus. This to me is a refreshingly boring statement. By boring I mean sober. He hadn't smoked anything before he said it. And by "smoked" I mean the statement didn't spring from an overly-impassioned or rigidly adhered to determination of capitalism's existence based on a political ideology. Kunstler is not a closeted Marxist.
This is not to say that capitalism doesn't inform political ideology or that its tenets aren't used as a political platform. By saying this, Kunstler is pointing to an historical observation that hinges on what he means by "surplus". Traditionally capitalism is defined, as Marx observed, as surplus capital. It's why he coined the term "capitalism". The term is purely descriptive based on this feature. Kunstler, however, did not say "surplus capital", he said "surplus". All the extra stuff left over once the producing's done that can be reinvested to produce more stuff. Money represents this stuff, as I've said before, but it is not the stuff. The amount of money rose with the amount of stuff.
Capitalism emerged as the Industrial Revolution literally picked up steam, setting the conditions from which capitalism could emerge. As we all well know, the Industrial Revolution was really an energy revolution. Surplus energy allowed the formation of surplus capital. It isn't an accident that capitalism is new on the historical scene and, by extension, neither is it an accident that modern political ideologies (the biggies of Fascism, Marxism, Communism, Nationalism, Socialism, Libertarianism, Progressivism, etc.) emerged as well over the course of the modern era starting about 200 years ago*. This is a distinct phase of history with distinct political characteristics driven by the interpretations of contemporaneous participants (political animals). Except for maybe Nationalism, all of the above ideologies had a sophisticated position towards and critique of capitalist production.
Every relevant contemporary ideology takes a position on or incorporates capitalism. Capitalism is the water all us fishes swim in. The question of whether it works or is the best system rarely gets asked publicly any more, and is never asked among the ruling elite. The question for all of us in the non-ruling non-elite is whether capitalism as a going concern can really survive the loss of surplus. As the banquet of natural resources get munched down the depletion curve is it possible for a system that is growth dependent to be viable? I say categorically "no". Is this position ideological? Not now, not today. But I think it will be, and the first stirrings are already happening. For example, Naomi Klein in her latest book "This Changes Everything" raises the question in light of climate change. A fair number of Libertarian Market animals believe capitalism is already dead, killed by John Maynard Keynes and the Federal Reserve. My position is that it is a Type II diabetic staggering on to the next sugar buzz.
My position is not ideological partly because it has no current political expression. It is an observation and a prediction. Markets will go on for as long as there is human society, but capitalism will not return in my lifetime once it has left in my lifetime. As the prospects darken for capitalism, the response to it will have major implications for the ruling ideologies, and even the non-ruling ones. New ideologies will form from the interpretations of the most active political animals and these interpretations will likely be varied. But the non-ideological force behind them all, whether they will choose to acknowledge it or not, will be the profoundly impersonal non-human rest-of-existence acting on our most cherished means of production.
So, let's call my position a pre-ideological one. I am deliberately and consciously non-committal regarding political positions in this blog. That may not always be the case but that's what I do now. Somewhere some lunkhead said once "everything's political". I know what was meant by it and he did not mean every tiny motion anywhere in the universe is political. However, this kind of thinking leads to the mentality that the only thing worth doing or considering is political. Things become political when their import is recognized by the society. Climate change is not inherently political. It is the non-human world intruding into the human world. The same holds for resource depletion. Ideologies which do not account for this are doomed to fail, as are societal systems based on the expectation of growth. Capitalism and democracy are the two foundational institutions of the Western liberal tradition. Democracy can live without capitalism and the reverse seems to be true. But can democracy survive the aftermath of the failure of capitalism? I think it depends on how prepared people are. Forming an ideology around this probable outcome is a good place to start.
*Of these listed ideologies, the two that use(d) capitalism systematically as a basis for their respective ideologies are Libertarianism and Fascism, Libertarianism being the purest expression of a capitalistic ethic of probably any ideology.
Political ideology can be seen as a philosophical set of principles which form the basis for reasoned and consistent political action. A durable ideology includes a plausible description of a reality that informs the political animal. I'll define "a plausible description of reality" as beliefs and convictions about how the world works and how it should work. Thus armed, the political animal engages the world in a manner consistent with being an animal.
It's important to make a distinction between politics, political ideology, and the intellectual feedstock which informs ideology. A good statement on this I read a while back comes from James Howard Kunstler who had this to say about capitalism: I don't really see capitalism as an ideology...I see it more as a set of laws and principles around the allocation and management of surplus. This to me is a refreshingly boring statement. By boring I mean sober. He hadn't smoked anything before he said it. And by "smoked" I mean the statement didn't spring from an overly-impassioned or rigidly adhered to determination of capitalism's existence based on a political ideology. Kunstler is not a closeted Marxist.
This is not to say that capitalism doesn't inform political ideology or that its tenets aren't used as a political platform. By saying this, Kunstler is pointing to an historical observation that hinges on what he means by "surplus". Traditionally capitalism is defined, as Marx observed, as surplus capital. It's why he coined the term "capitalism". The term is purely descriptive based on this feature. Kunstler, however, did not say "surplus capital", he said "surplus". All the extra stuff left over once the producing's done that can be reinvested to produce more stuff. Money represents this stuff, as I've said before, but it is not the stuff. The amount of money rose with the amount of stuff.
Capitalism emerged as the Industrial Revolution literally picked up steam, setting the conditions from which capitalism could emerge. As we all well know, the Industrial Revolution was really an energy revolution. Surplus energy allowed the formation of surplus capital. It isn't an accident that capitalism is new on the historical scene and, by extension, neither is it an accident that modern political ideologies (the biggies of Fascism, Marxism, Communism, Nationalism, Socialism, Libertarianism, Progressivism, etc.) emerged as well over the course of the modern era starting about 200 years ago*. This is a distinct phase of history with distinct political characteristics driven by the interpretations of contemporaneous participants (political animals). Except for maybe Nationalism, all of the above ideologies had a sophisticated position towards and critique of capitalist production.
Every relevant contemporary ideology takes a position on or incorporates capitalism. Capitalism is the water all us fishes swim in. The question of whether it works or is the best system rarely gets asked publicly any more, and is never asked among the ruling elite. The question for all of us in the non-ruling non-elite is whether capitalism as a going concern can really survive the loss of surplus. As the banquet of natural resources get munched down the depletion curve is it possible for a system that is growth dependent to be viable? I say categorically "no". Is this position ideological? Not now, not today. But I think it will be, and the first stirrings are already happening. For example, Naomi Klein in her latest book "This Changes Everything" raises the question in light of climate change. A fair number of Libertarian Market animals believe capitalism is already dead, killed by John Maynard Keynes and the Federal Reserve. My position is that it is a Type II diabetic staggering on to the next sugar buzz.
My position is not ideological partly because it has no current political expression. It is an observation and a prediction. Markets will go on for as long as there is human society, but capitalism will not return in my lifetime once it has left in my lifetime. As the prospects darken for capitalism, the response to it will have major implications for the ruling ideologies, and even the non-ruling ones. New ideologies will form from the interpretations of the most active political animals and these interpretations will likely be varied. But the non-ideological force behind them all, whether they will choose to acknowledge it or not, will be the profoundly impersonal non-human rest-of-existence acting on our most cherished means of production.
So, let's call my position a pre-ideological one. I am deliberately and consciously non-committal regarding political positions in this blog. That may not always be the case but that's what I do now. Somewhere some lunkhead said once "everything's political". I know what was meant by it and he did not mean every tiny motion anywhere in the universe is political. However, this kind of thinking leads to the mentality that the only thing worth doing or considering is political. Things become political when their import is recognized by the society. Climate change is not inherently political. It is the non-human world intruding into the human world. The same holds for resource depletion. Ideologies which do not account for this are doomed to fail, as are societal systems based on the expectation of growth. Capitalism and democracy are the two foundational institutions of the Western liberal tradition. Democracy can live without capitalism and the reverse seems to be true. But can democracy survive the aftermath of the failure of capitalism? I think it depends on how prepared people are. Forming an ideology around this probable outcome is a good place to start.
*Of these listed ideologies, the two that use(d) capitalism systematically as a basis for their respective ideologies are Libertarianism and Fascism, Libertarianism being the purest expression of a capitalistic ethic of probably any ideology.
Friday, December 19, 2014
Thinking Inside the Box
So what I try to get at with this blog is to describe contemporaneously the "Really Big Thing" (RBT) in human endeavors. I innately approach this RBT in a way akin to finding pieces in a puzzle, except that the puzzle changes as I am putting it together. This is the wily effect time has on cognitive puzzling. I submit that one needs to be, in fact, has a moral responsibility to be, a Dynamic Cognitive Puzzler (DCP). But that's a bit of an aside. Time changes the structure of the puzzle, and of the puzzler, in many ways. An event (disaster, decision, happy outcome) alters and largely conditions or determines what is possible thereafter, and time has a way of cementing these events so that they cannot be undone. An act of murder is a clear case in point. A less clear but still relevant case is if a nation determines that taking a Cold War-like stance against another power is a good idea. Acts of generosity, malice, stupidity, brilliance, or whatever all change the puzzle.
Attempting to puzzle out the RBT means defining what it is and giving it contours so that you have an idea of what the puzzle looks like. It's like looking at the picture on the cover of the box, except, of course, you want a dynamic picture of what's inside the box. And then you have to think inside that box. The RBT is my box, the box I invented as I wrote the first paragraph. The picture on the outside shows me two main features (at least) of what's inside. The first is that events are historical in nature. The second is that the dimension of time, as a physical feature ruled by the Laws of Thermodynamics, determines these events cannot be undone.* That my box consists of these two things is enough justification to call it RBT.
By forming a Dynamic Cognitive Puzzle (also DCP) you give yourself a perspective on events and a frame with which to make events comprehensible. A third bonus is that it's possible to anticipate, not to predict as such, but to anticipate what is coming. So I may, for example, see the role of energy in an economy as fundamental. Energy has well-known Laws regarding it's nature and behavior (Thermodynamics). Then I consider a particular historical period, say the contemporaneous industrial era, and piece together a little dynamical puzzle. So I throw these things into the box; energy is fundamental, a fundamental feature of energy is that goes in one direction (Time's Arrow) by dissipating through heat loss (it makes sense and I can explain some other time), and then I apply it to industrial production as an historical condition. Then I shake the box (unnecessary).
What comes out should look something like recent headlines. Admittedly, that is a big claim and could possibly be seen as self-serving, or self-congratulatory, or some other self-thing. But the blog I write is for the purpose of presenting and advocating a particular and clearly defined perspective. It's a perspective that reveals what other, say mainstream or commonly held, perspectives do not reveal or do not encompass. Take this headline sent to me by a friend:
A Critical Source of U.S. Jobs has Lost its Mojo
The headline itself isn't especially remarkable, but does point to a basic truth that losing mojo can have critical outcomes. Inside, however, is an astonishing fact that surprised me some but is shocking in what it implies. It is this: If one excludes all the jobs created from the fracking boom since 2007, U.S. job growth is negative. NEGATIVE! Here's the chart:
It means that the only reason the U.S. is outperforming other advanced economies like Japan and Europe post-crisis is because we have enough shale oil around which to form a Fed-fueled financial bubble to make the overall U.S. numbers look comparatively good. It's not really our freedom, or superior economic policies, or the go get 'em attitude that makes U.S. performance better. Or, to be less strident, the particular DCP of a person that has these causal first principles inside might be up for reconsideration. These no longer serve as an effective means by which to judge the reality this way of thinking purports to describe.
What this chart also tells me is that there is no other New Big Thing (NBT) coming out of the American economy. This fits inside my box because, even if the shale revolution has produced jobs, it is too costly in energetic and financial terms to leave anything meaningful for the rest of the economy to use. In fact, it is probably more likely to be draining mojo from the rest of the economy by acting as a paper factory.
This next is another exhibit for how an outcome, even if not predicted, is not surprising if you have an energy perspective. The story is about mishedging the bet on future oil prices, and that it is coming back to haunt new producers of shale oil.
Oil-Led Slump Spurring Fastest Investor Exit Since 2007
This fits the finance-is-connected-to-the-hip-of-oil story that makes this about more than just oil. It is a systemic risk story once it combines with the global ponzi finance story. I anticipate that it will erode the credibility of the America-is-the-lone-superpower story, and will actually erode the credibility of America as a superpower as it shakes out.
All that I've typed out so far in a purposely roundabout way has hopefully been a purposeful sort of roundabout. Perspective is essential in comprehending current events. The quality of your Dynamic Cognitive Puzzle box has to be maintained, upgraded, and honestly assessed regarding it's effectiveness. It's not enough to say things are changing. It's not enough to fit events into what you already think. Getting a reasonable understanding of the nature of the change that's accurate is both possible and essential. And fun. Besides, what else are you gonna do?
*This has two considerations. The first is that, truly, there are no take-backs. If you apologize to someone for calling him/her an idiot, it still happened. The second is the implication that there is no time travel, at least in the fun sci-fi way. Time's Arrow goes in one direction.
Attempting to puzzle out the RBT means defining what it is and giving it contours so that you have an idea of what the puzzle looks like. It's like looking at the picture on the cover of the box, except, of course, you want a dynamic picture of what's inside the box. And then you have to think inside that box. The RBT is my box, the box I invented as I wrote the first paragraph. The picture on the outside shows me two main features (at least) of what's inside. The first is that events are historical in nature. The second is that the dimension of time, as a physical feature ruled by the Laws of Thermodynamics, determines these events cannot be undone.* That my box consists of these two things is enough justification to call it RBT.
By forming a Dynamic Cognitive Puzzle (also DCP) you give yourself a perspective on events and a frame with which to make events comprehensible. A third bonus is that it's possible to anticipate, not to predict as such, but to anticipate what is coming. So I may, for example, see the role of energy in an economy as fundamental. Energy has well-known Laws regarding it's nature and behavior (Thermodynamics). Then I consider a particular historical period, say the contemporaneous industrial era, and piece together a little dynamical puzzle. So I throw these things into the box; energy is fundamental, a fundamental feature of energy is that goes in one direction (Time's Arrow) by dissipating through heat loss (it makes sense and I can explain some other time), and then I apply it to industrial production as an historical condition. Then I shake the box (unnecessary).
What comes out should look something like recent headlines. Admittedly, that is a big claim and could possibly be seen as self-serving, or self-congratulatory, or some other self-thing. But the blog I write is for the purpose of presenting and advocating a particular and clearly defined perspective. It's a perspective that reveals what other, say mainstream or commonly held, perspectives do not reveal or do not encompass. Take this headline sent to me by a friend:
A Critical Source of U.S. Jobs has Lost its Mojo
The headline itself isn't especially remarkable, but does point to a basic truth that losing mojo can have critical outcomes. Inside, however, is an astonishing fact that surprised me some but is shocking in what it implies. It is this: If one excludes all the jobs created from the fracking boom since 2007, U.S. job growth is negative. NEGATIVE! Here's the chart:
It means that the only reason the U.S. is outperforming other advanced economies like Japan and Europe post-crisis is because we have enough shale oil around which to form a Fed-fueled financial bubble to make the overall U.S. numbers look comparatively good. It's not really our freedom, or superior economic policies, or the go get 'em attitude that makes U.S. performance better. Or, to be less strident, the particular DCP of a person that has these causal first principles inside might be up for reconsideration. These no longer serve as an effective means by which to judge the reality this way of thinking purports to describe.
What this chart also tells me is that there is no other New Big Thing (NBT) coming out of the American economy. This fits inside my box because, even if the shale revolution has produced jobs, it is too costly in energetic and financial terms to leave anything meaningful for the rest of the economy to use. In fact, it is probably more likely to be draining mojo from the rest of the economy by acting as a paper factory.
This next is another exhibit for how an outcome, even if not predicted, is not surprising if you have an energy perspective. The story is about mishedging the bet on future oil prices, and that it is coming back to haunt new producers of shale oil.
Oil-Led Slump Spurring Fastest Investor Exit Since 2007
This fits the finance-is-connected-to-the-hip-of-oil story that makes this about more than just oil. It is a systemic risk story once it combines with the global ponzi finance story. I anticipate that it will erode the credibility of the America-is-the-lone-superpower story, and will actually erode the credibility of America as a superpower as it shakes out.
All that I've typed out so far in a purposely roundabout way has hopefully been a purposeful sort of roundabout. Perspective is essential in comprehending current events. The quality of your Dynamic Cognitive Puzzle box has to be maintained, upgraded, and honestly assessed regarding it's effectiveness. It's not enough to say things are changing. It's not enough to fit events into what you already think. Getting a reasonable understanding of the nature of the change that's accurate is both possible and essential. And fun. Besides, what else are you gonna do?
*This has two considerations. The first is that, truly, there are no take-backs. If you apologize to someone for calling him/her an idiot, it still happened. The second is the implication that there is no time travel, at least in the fun sci-fi way. Time's Arrow goes in one direction.
Wednesday, December 17, 2014
Father Insurance
Globalized Civilization has phased into a different fundamental condition defined by the increasing difficulty and expense of it's sources of energy. This has made it costlier to grow in physical terms as well as to maintain past investment. The impact of low economic growth or none at all, which comes about only through growing debt and credit, will be on the very credit markets which enable economic activity in the first place. Imagine a snake eating its own tail. The broad expectation of future growth, i.e., that this new debt would become a thing with a financial return, will someday be put on the chopping block once the expectation of a shrinking economy takes hold.
For the time being, the reckoning of past and present debt fueled investment, not to mention speculation, has been successfully pushed off into the future through the negative feedback of central bank intervention and government deficit spending since 2008. When I say "central bank" I mean all of them, without exception, among the major economies. In this way a national government through all its parts serves as the largest possible financial insurance company a nation can muster. So when a banking system has undergone a speculative credit boom which leads to a debt crisis, the government of that same nation generally feels it has to get involved. As often as not, this leads to a sovereign debt crisis, even if the sovereign chooses not to get involved.
Why intervene? Because at the end of the day, when all the daily functions of society are accounted for, the government is not separate from the banking system. The fortunes of the government are so bound to the fortunes of the banks that it is impossible to distinguish between them as far as their interests lie. For some reason the phrase "privatized gain, socialized risk" just popped in my head. It is the way of the world at this historical moment. The proof is in the pudding, as someone pointed out once for some reason, as the total public (government) debt for the globe exceeds $100 trillion according to a Bloomberg article from March, 2014. That was in March, for God's sake. It's even higher now. This figure does not include central bank "easement" since 2008 amounting to around $15 trillion. This debt is what makes the public/private financial world go round.
These numbers cause the word "risk" to enter my head. It's a word market playas use a thousand times a day. It's a word that produces questions such as "What could possibly go wrong?" "how could I lose?". The way one might answer this type of question depends on beliefs about how the world works. A belief can be based on whether the system is stable or unstable. The answer, of course is, yes, it is. A good place to begin to find an answer is in Hyman Minsky's Instability Hypothesis. Essentially it says that instabilities are formed during and are caused by what happens in the stable periods. Call it a psychological cycle of greed and fear, where confidence born of stability leads to greed and ends with fear. The market from this perspective is irrational and, hence, unstable over the long term. What it means is punctuated crises are built into the system.
If you subscribe to this perspective, then it is no wonder that, according to an IMF working paper, since 1970 there have been 147 banking crises worldwide. Furthermore, there have been 68 sovereign debt crises and 217 currency crises. And the IMF should know because they have either caused these crises and/or have had to bail out many of these crisis nations. What's more, they seem to happen in waves and move around geographically. I think we are moving into a new period of punctuated crisis.
I also think others are thinking this way as well. That the Citibank composed "Swaps Regulatory Improvement Act" (who can argue against improvement?) just passed for the second time through the House of Representatives makes me think, as does Yves Smith, that the banks are just a wee bit worried about the financial situation of oil frackers. This Act is a "reform" of parts of the Dodd Frank bill set to go into effect in 2015 that would bar the federal government from bailing out the shadow banking derivatives market. This probably means that Wall Street banks have ponzied up the high risk junk debt used to finance drilling in the Bakken and Eagle Ford. Now we have a fat new source of systemic risk. Guess Wall Street better ask Dad to cover his gambling addiction. It's unfortunate that the total value of American banks booked derivatives is $303 trillion dollars.
One main function of derivatives is to act as an insurance policy for investment by spreading out risk. It's a very complex system devised largely by MIT trained math and physics smart guys who apparently have nothing better to do than build high tech pyramids of fake value. But that last isn't even quite true. It does have value because it can make a poor prospect like the shale oil revolution seem like a boom for a time. Doing this has enabled the entire economy to function in a way that feels normal by covering with debt the rising cost of resource extraction and the slow erosion Diminishing Returns and Entropy have on value. One of these days we will be talking about "Too Big To Bail" ponzies in the system, when the God of Insurance can't come through anymore.
This is the Maximum Power Principle at work. Oil and money are the means to maximize production as the source and representation of energy. That it (money, power) overextends itself is natural. But Nature isn't just cute baby animals and gorgeous landscapes. It is not reasonable. It just has laws that can never be broken, unlike American laws.
For the time being, the reckoning of past and present debt fueled investment, not to mention speculation, has been successfully pushed off into the future through the negative feedback of central bank intervention and government deficit spending since 2008. When I say "central bank" I mean all of them, without exception, among the major economies. In this way a national government through all its parts serves as the largest possible financial insurance company a nation can muster. So when a banking system has undergone a speculative credit boom which leads to a debt crisis, the government of that same nation generally feels it has to get involved. As often as not, this leads to a sovereign debt crisis, even if the sovereign chooses not to get involved.
Why intervene? Because at the end of the day, when all the daily functions of society are accounted for, the government is not separate from the banking system. The fortunes of the government are so bound to the fortunes of the banks that it is impossible to distinguish between them as far as their interests lie. For some reason the phrase "privatized gain, socialized risk" just popped in my head. It is the way of the world at this historical moment. The proof is in the pudding, as someone pointed out once for some reason, as the total public (government) debt for the globe exceeds $100 trillion according to a Bloomberg article from March, 2014. That was in March, for God's sake. It's even higher now. This figure does not include central bank "easement" since 2008 amounting to around $15 trillion. This debt is what makes the public/private financial world go round.
These numbers cause the word "risk" to enter my head. It's a word market playas use a thousand times a day. It's a word that produces questions such as "What could possibly go wrong?" "how could I lose?". The way one might answer this type of question depends on beliefs about how the world works. A belief can be based on whether the system is stable or unstable. The answer, of course is, yes, it is. A good place to begin to find an answer is in Hyman Minsky's Instability Hypothesis. Essentially it says that instabilities are formed during and are caused by what happens in the stable periods. Call it a psychological cycle of greed and fear, where confidence born of stability leads to greed and ends with fear. The market from this perspective is irrational and, hence, unstable over the long term. What it means is punctuated crises are built into the system.
If you subscribe to this perspective, then it is no wonder that, according to an IMF working paper, since 1970 there have been 147 banking crises worldwide. Furthermore, there have been 68 sovereign debt crises and 217 currency crises. And the IMF should know because they have either caused these crises and/or have had to bail out many of these crisis nations. What's more, they seem to happen in waves and move around geographically. I think we are moving into a new period of punctuated crisis.
I also think others are thinking this way as well. That the Citibank composed "Swaps Regulatory Improvement Act" (who can argue against improvement?) just passed for the second time through the House of Representatives makes me think, as does Yves Smith, that the banks are just a wee bit worried about the financial situation of oil frackers. This Act is a "reform" of parts of the Dodd Frank bill set to go into effect in 2015 that would bar the federal government from bailing out the shadow banking derivatives market. This probably means that Wall Street banks have ponzied up the high risk junk debt used to finance drilling in the Bakken and Eagle Ford. Now we have a fat new source of systemic risk. Guess Wall Street better ask Dad to cover his gambling addiction. It's unfortunate that the total value of American banks booked derivatives is $303 trillion dollars.
One main function of derivatives is to act as an insurance policy for investment by spreading out risk. It's a very complex system devised largely by MIT trained math and physics smart guys who apparently have nothing better to do than build high tech pyramids of fake value. But that last isn't even quite true. It does have value because it can make a poor prospect like the shale oil revolution seem like a boom for a time. Doing this has enabled the entire economy to function in a way that feels normal by covering with debt the rising cost of resource extraction and the slow erosion Diminishing Returns and Entropy have on value. One of these days we will be talking about "Too Big To Bail" ponzies in the system, when the God of Insurance can't come through anymore.
This is the Maximum Power Principle at work. Oil and money are the means to maximize production as the source and representation of energy. That it (money, power) overextends itself is natural. But Nature isn't just cute baby animals and gorgeous landscapes. It is not reasonable. It just has laws that can never be broken, unlike American laws.
Friday, December 12, 2014
Your Money or Your Life
Since I first mentioned likely problems of the falling price of oil, the price has dropped even further. It is at this moment trading at $58.02. down 3.2% since the market opened today. Traditionally, this would be welcomed without reserve since it is a tautology that lower energy prices generates extra income to be spent for nearly everyone involved, which happens to be in fact nearly everyone. Even babies benefit. And though this particular observation about low prices still holds true, the current episode of falling oil prices, dramatically I might add, is almost wholly bad from a market perspective, completely negating the benefits and then some.
There is a building yammer in the financial press as journalists unwind the implications of this rare occurrence. A glance at some headlines from the past couple of days give us a flavor:
IEA cuts 2015 demand growth forecasts, warns on social unrest
Fed Bubble Bursts in $550 Billion of Energy Debt: Credit Markets
The Silent Crash in Commodities- A Warning Sign
This is all pretty grim stuff. Of course, you'll see alongside these headlines something like:
Schwarzman: Energy a 'Wonderful Opportunity"
This last actually doesn't contradict the point I make about falling oil (and every other commodity), Schwarzman just believes in eternal economic growth, so naturally this is an opportunity. In the short term he could still very well be correct to buy up shares of energy companies, the right ones anyhow, and make a fortune because if there is any lesson to be had it's that energy and other commodities need to be priced much higher than they are now so that suppliers can remain in business.
Charles Hugh Smith has had for a couple of weeks now a series of blogs on the problems and risks to the financial system from low energy prices. This subject has a ton of different components and wending your way through all the moving parts takes some time. It's worth reading because he treads where many financial analysts fear to go, which is in the dark shadows of the quasi-legal credit markets which support new American oil production and describes it well. The key phrase he uses is the "financialization of oil", which is to say that Wall Street and the Oil Patch are bound together through debt and collateral. The collateral of course is oil. The debt for this oil often comes in the form of a junk bond, meaning high interest loans that are at high risk for default. But it goes well beyond this.
The bonds used to fund oil projects themselves become collateral for other bonds issued somewhere else. This is because the bond itself is considered an asset and so has a trade value which can be used to support a new loan. In this way, a bond is not so different from money, and in fact, lending is the primary means by which money is introduced into the financial system. The banks try to earn a profit from this market of credit and bond accumulation and trading by playing the yield (interest rate) differentials as well as through fees paid to issue the loan.
So far we're in the realm of the normal. What's different now, well, there's a lot that's different now, but one major difference is the magnitude of the debt held by participants in a magnificent web of creditors and debtors who all have to be "good" to cover their individual nodes of credit in the system. The "dominoes" in Charles Hugh Smith's little essay refers to what's called "counterparties" who have to pay off their debt when asked to. When someone, like a bank or oil company, has 10x or a 100x the amount in loans issued to the amount they have in collateral, then they will probably have to sell something in order to cover what they owe someone else. What is happening now is the original collateral, oil, has lost 40% of it's value since June. A predictable outcome to all of this, which is going on right now as a result, is the high interest, high risk junk bonds are trading at values as low as sixty cents on the dollar. These could very well be on there way to zero cents on the dollar. We shall see.
Even what I've described so far is still within the realm of a fixable norm. If it were simply a phenomenon exclusive to this isolated shale revolution, and there was no other problem with global oil production, then it's impact would be isolated. But because it is tied in with other aspects of global finance, such as currency markets, and revenue for the national governments around the world who export oil (a relative few actually do), it becomes a global problem with huge geopolitical risks.
As for currency risk, a counterintuitive impact is the risk of a stronger dollar (strong=good), but what has been the case for a while now is that the dollar, as the world's reserve currency, is becoming increasingly unavailable to markets around the world who need them to buy things and to pay off dollar denominated debt. This is caused by simple supply and demand. There are fewer dollars in the system and so the increased demand for them drives up its value, making it "stronger". This could end up as what's called a "liquidity crunch" in foreign markets, where there is not enough dollars to go around. In an historical note, a liquidity crunch was in process in the 2008 credit collapse and prompted action by the President and Congress to, in effect, print more dollars. It is the same reason the Fed had been "printing" money up until earlier this year, and might do again before too long.
In a previous post, I posed the question: How many failed states does it take to make a failed world? Nobody knows, of course, but the oil price collapse is testing the limits. Oil revenue which funds all sorts of government programs is dropping well into the red for all sorts of countries. Nigeria, Venezuela, Russia, and Iran, are flirting with the risk of joining the ranks of failed states. Some 370 million people live in these countries. They are all oil exporters. We, as American patriots, maybe wouldn't mind seeing an overthrow of the current regimes in these countries, but nothing is guaranteed once social upheaval is on the dinner plate. Think Iraq or Libya. Or even Egypt, which filled our hearts with so much hope and promise, and is now back to a military dictatorship with no prospect of ever joining the league of free nations. That may sound overly bummerish but I don't see how that ever happens.
What is happening is that the nexus of oil, money, and debt is revealing itself to the market. It's not too simple to say that money is energy, and oil is the most valuable source of energy for the globalized industrial economy. Money and oil share a lot of characteristics, one being they need to be believed in for the market to function. Debt is future money, which is future oil, and a whole lot of future oil needs to leave, or never enter, the future economy because there is no future money in it. Giving that up will be traumatic, though I'll leave on a somewhat optimistic note in that leaving lots of oil in the ground will help future humans a lot by taking the edge off the consequences of a warming planet. What might preclude that benefit is how well we humans deal with trauma.
There is a building yammer in the financial press as journalists unwind the implications of this rare occurrence. A glance at some headlines from the past couple of days give us a flavor:
IEA cuts 2015 demand growth forecasts, warns on social unrest
Fed Bubble Bursts in $550 Billion of Energy Debt: Credit Markets
The Silent Crash in Commodities- A Warning Sign
This is all pretty grim stuff. Of course, you'll see alongside these headlines something like:
Schwarzman: Energy a 'Wonderful Opportunity"
This last actually doesn't contradict the point I make about falling oil (and every other commodity), Schwarzman just believes in eternal economic growth, so naturally this is an opportunity. In the short term he could still very well be correct to buy up shares of energy companies, the right ones anyhow, and make a fortune because if there is any lesson to be had it's that energy and other commodities need to be priced much higher than they are now so that suppliers can remain in business.
Charles Hugh Smith has had for a couple of weeks now a series of blogs on the problems and risks to the financial system from low energy prices. This subject has a ton of different components and wending your way through all the moving parts takes some time. It's worth reading because he treads where many financial analysts fear to go, which is in the dark shadows of the quasi-legal credit markets which support new American oil production and describes it well. The key phrase he uses is the "financialization of oil", which is to say that Wall Street and the Oil Patch are bound together through debt and collateral. The collateral of course is oil. The debt for this oil often comes in the form of a junk bond, meaning high interest loans that are at high risk for default. But it goes well beyond this.
The bonds used to fund oil projects themselves become collateral for other bonds issued somewhere else. This is because the bond itself is considered an asset and so has a trade value which can be used to support a new loan. In this way, a bond is not so different from money, and in fact, lending is the primary means by which money is introduced into the financial system. The banks try to earn a profit from this market of credit and bond accumulation and trading by playing the yield (interest rate) differentials as well as through fees paid to issue the loan.
So far we're in the realm of the normal. What's different now, well, there's a lot that's different now, but one major difference is the magnitude of the debt held by participants in a magnificent web of creditors and debtors who all have to be "good" to cover their individual nodes of credit in the system. The "dominoes" in Charles Hugh Smith's little essay refers to what's called "counterparties" who have to pay off their debt when asked to. When someone, like a bank or oil company, has 10x or a 100x the amount in loans issued to the amount they have in collateral, then they will probably have to sell something in order to cover what they owe someone else. What is happening now is the original collateral, oil, has lost 40% of it's value since June. A predictable outcome to all of this, which is going on right now as a result, is the high interest, high risk junk bonds are trading at values as low as sixty cents on the dollar. These could very well be on there way to zero cents on the dollar. We shall see.
Even what I've described so far is still within the realm of a fixable norm. If it were simply a phenomenon exclusive to this isolated shale revolution, and there was no other problem with global oil production, then it's impact would be isolated. But because it is tied in with other aspects of global finance, such as currency markets, and revenue for the national governments around the world who export oil (a relative few actually do), it becomes a global problem with huge geopolitical risks.
As for currency risk, a counterintuitive impact is the risk of a stronger dollar (strong=good), but what has been the case for a while now is that the dollar, as the world's reserve currency, is becoming increasingly unavailable to markets around the world who need them to buy things and to pay off dollar denominated debt. This is caused by simple supply and demand. There are fewer dollars in the system and so the increased demand for them drives up its value, making it "stronger". This could end up as what's called a "liquidity crunch" in foreign markets, where there is not enough dollars to go around. In an historical note, a liquidity crunch was in process in the 2008 credit collapse and prompted action by the President and Congress to, in effect, print more dollars. It is the same reason the Fed had been "printing" money up until earlier this year, and might do again before too long.
In a previous post, I posed the question: How many failed states does it take to make a failed world? Nobody knows, of course, but the oil price collapse is testing the limits. Oil revenue which funds all sorts of government programs is dropping well into the red for all sorts of countries. Nigeria, Venezuela, Russia, and Iran, are flirting with the risk of joining the ranks of failed states. Some 370 million people live in these countries. They are all oil exporters. We, as American patriots, maybe wouldn't mind seeing an overthrow of the current regimes in these countries, but nothing is guaranteed once social upheaval is on the dinner plate. Think Iraq or Libya. Or even Egypt, which filled our hearts with so much hope and promise, and is now back to a military dictatorship with no prospect of ever joining the league of free nations. That may sound overly bummerish but I don't see how that ever happens.
What is happening is that the nexus of oil, money, and debt is revealing itself to the market. It's not too simple to say that money is energy, and oil is the most valuable source of energy for the globalized industrial economy. Money and oil share a lot of characteristics, one being they need to be believed in for the market to function. Debt is future money, which is future oil, and a whole lot of future oil needs to leave, or never enter, the future economy because there is no future money in it. Giving that up will be traumatic, though I'll leave on a somewhat optimistic note in that leaving lots of oil in the ground will help future humans a lot by taking the edge off the consequences of a warming planet. What might preclude that benefit is how well we humans deal with trauma.
Tuesday, December 9, 2014
Martian Expectations
A monstrously huge symbol of our long-standing cultural expectations has been in the news recently with the successful first test mission of the Orion space contraption over this past weekend. As far as expectations of this kind, this one may be primo, and almost without rival given the magnitude of the questions we hope to answer. Not only that, it represents the spirit of exploration and adventure in a very basic way: We get an idea to go somewhere no one has ever been before; it is intrinsically dangerous as outer space is the least forgiving environment of all; and, though the mechanisms involved in traveling deeper into space are amazingly intricate and complex, the underlying story is simple in that it is a journey. Of course, the cherry on top is the possible resolution to question of whether life exists outside of our modest little sphere, and there seems to be a reasonable expectation that it happened at some point on Mars.
For anyone involved in the mission it can only be the realization of the ultimate personal dream and the most exciting thing they could possibly be doing. For them, the question of it's value is moot. To question it is to simply not understand its grand significance. To doubt it's feasibility is to doubt the entire human spirit to overcome tribulation and achieve ever greater things. The scientists and engineers on the Orion team are some of the brightest bulbs out there and their achievements are also humanity's, bringing us all into the narrative. A trip to Mars represents the culmination of an active centuries-old mythos of human expansion.
That humanity has, in fact, ever expanded over the centuries, or millennia, doesn't preclude calling it a myth. Myth in this sense is used the way an anthropologist would use it, in the same way I use "narrative". Whether it's true or not cannot be proven, but has rather a plausibility based on enough evidence to make it seem true. By definition, though, it cannot be "true" for the fact that it plays into our historical sense and on our expectations of the future, which cannot be proven "true" at all. So, based on the stories of the past telling us of a trajectory towards the future doesn't prove that this or that will happen. We just expect that it will.
Going to Mars is probably technically feasible. I think the world's top scientists and engineers can figure how to do it. Two questions, at least, that are not asked about it that come to my mind are: Is it scientifically necessary to send humans and what do we get out of it materially? On the first question, the cost-benefit of sending people or robots definitely favors robots for the simple reason robots don't have mothers. Someday, maybe, but not today. I suspect at least some part of the motivation for necessitating a return trip is so that the people who go there can bring things back with them. If there is some fossilized life form contained within some Martian rock then scientists would have a Rosetta Stone of Martian natural history.
The second question is the more important in terms of the mission's ultimate justification. What do we get from it as a means to further ever greater expansion? One way to approach this comes from an insight by John Michael Greer thinking about the same thing. He said, and I paraphrase: "Death is not the opposite of life. Space is the opposite of life. Death is the natural end of life and that which has lived must die. Space is what has never been alive and so is the opposite of life." Space can't support life. That we still wonder about life on other planets, meaning we have no proof of it, says something about the absolute necessity and primacy of Earth. This is not just hippy talk. It is first order logic given the incomprehensibly vast anti-life zones of Space.
No trip to Mars and no settlement on Mars could ever sustain itself. All the systems of life support could only be manufactured on Earth at a net loss to Earth and it's materiel. What possible economic return could ever be had from a colony on Mars? Apart from perhaps a few souvenirs which could be auctioned off at Sotheby's, I think there is exactly zero. The whole point hitherto of Earth-based colonization has been to build self-sustaining, economically viable colonies to expand the mother country's trade network, resource base, and population. In other words, they were investments expecting a return. Mars would provide no such return. It would be a one way money and material flow towards an economic wasteland. In the deepest meaning of the word, it would be investing in a "dream".
With the trend lines here on Earth heading where they are, it might behoove us to re-examine our impulses to further expansion. Not out of a sentimental, cuddly feeling for the home turf, but waking up to the zero-sum condition of the cost of human expansion and who bears the cost. With the absolute number of vertebrates living on Earth cut in half since 1970, and with the climate poised to set more record high temperatures, the cost of our own success has been pushed onto nature. In the final accounting, however, there is no difference between ourselves and nature.
For anyone involved in the mission it can only be the realization of the ultimate personal dream and the most exciting thing they could possibly be doing. For them, the question of it's value is moot. To question it is to simply not understand its grand significance. To doubt it's feasibility is to doubt the entire human spirit to overcome tribulation and achieve ever greater things. The scientists and engineers on the Orion team are some of the brightest bulbs out there and their achievements are also humanity's, bringing us all into the narrative. A trip to Mars represents the culmination of an active centuries-old mythos of human expansion.
That humanity has, in fact, ever expanded over the centuries, or millennia, doesn't preclude calling it a myth. Myth in this sense is used the way an anthropologist would use it, in the same way I use "narrative". Whether it's true or not cannot be proven, but has rather a plausibility based on enough evidence to make it seem true. By definition, though, it cannot be "true" for the fact that it plays into our historical sense and on our expectations of the future, which cannot be proven "true" at all. So, based on the stories of the past telling us of a trajectory towards the future doesn't prove that this or that will happen. We just expect that it will.
Going to Mars is probably technically feasible. I think the world's top scientists and engineers can figure how to do it. Two questions, at least, that are not asked about it that come to my mind are: Is it scientifically necessary to send humans and what do we get out of it materially? On the first question, the cost-benefit of sending people or robots definitely favors robots for the simple reason robots don't have mothers. Someday, maybe, but not today. I suspect at least some part of the motivation for necessitating a return trip is so that the people who go there can bring things back with them. If there is some fossilized life form contained within some Martian rock then scientists would have a Rosetta Stone of Martian natural history.
The second question is the more important in terms of the mission's ultimate justification. What do we get from it as a means to further ever greater expansion? One way to approach this comes from an insight by John Michael Greer thinking about the same thing. He said, and I paraphrase: "Death is not the opposite of life. Space is the opposite of life. Death is the natural end of life and that which has lived must die. Space is what has never been alive and so is the opposite of life." Space can't support life. That we still wonder about life on other planets, meaning we have no proof of it, says something about the absolute necessity and primacy of Earth. This is not just hippy talk. It is first order logic given the incomprehensibly vast anti-life zones of Space.
No trip to Mars and no settlement on Mars could ever sustain itself. All the systems of life support could only be manufactured on Earth at a net loss to Earth and it's materiel. What possible economic return could ever be had from a colony on Mars? Apart from perhaps a few souvenirs which could be auctioned off at Sotheby's, I think there is exactly zero. The whole point hitherto of Earth-based colonization has been to build self-sustaining, economically viable colonies to expand the mother country's trade network, resource base, and population. In other words, they were investments expecting a return. Mars would provide no such return. It would be a one way money and material flow towards an economic wasteland. In the deepest meaning of the word, it would be investing in a "dream".
With the trend lines here on Earth heading where they are, it might behoove us to re-examine our impulses to further expansion. Not out of a sentimental, cuddly feeling for the home turf, but waking up to the zero-sum condition of the cost of human expansion and who bears the cost. With the absolute number of vertebrates living on Earth cut in half since 1970, and with the climate poised to set more record high temperatures, the cost of our own success has been pushed onto nature. In the final accounting, however, there is no difference between ourselves and nature.
Tuesday, December 2, 2014
Expectations, Great and Small
Any prediction of a collapse, or of a crisis, made with plausible evidence, inevitably invites the follow-up question of when. You see this a lot with market prognosticators as they form their views based on some model or historical precedent, and confidently declare that a crisis is brewing. Many of these predictions have fallen flat throughout history, especially since 2008, and many of these prognosticators have had to eat, not only crow, but real monetary losses as well, since they so often are players on the market who take their own advice. Of course, market creatures are short term thinkers and maybe look out ten or so years, at best, and rarely. And there is a good reason why this is the case; there is almost no way of knowing what market conditions will be in ten, or five years. Or next year. None of this is to disparage the virtue of the market because of its short-sightedness. All of us live this way to varying degrees.
For this to work, and to obviate the necessity for uncertain, longer term thinking, there has to be an expectation that the future will look like the past. For most of an individual human lifetime, this is a reasonable expectation, and what's true for an individual human can be scaled up to as large an operation as society. Even in the current time, characterized by rapid and increasingly rapid change, there is, at its heart, an expectation of stability, of the normal course of things. In economics, there is a theoretical description of what that looks like, which says there is a baseline trajectory by which an economy unfettered by government intervention will grow at. I call this the "metaphysical rate of growth". Apart from that, as is easy to see, what's good for the economist is good for the politician, of either or any party. The expectation of growth dwells within every politician, and that same cultural expectation also determines the measure of their collective worth.
All of this is to say that an expectation of economic growth is thoroughly entrenched in the way the modern person and culture thinks. Me? I'm different. I'm a bummer that way, and my job is to make more bummers in the world. Now, I say bummer for a couple of reasons. The first is that, to the extent people's emotional states are bonded to a future that growth represents, like Mars colonization, holographic vacations, or space tourism, all of which would require many, many more years of growth, an end of growth would be giving up a certain style of identity centered on future expectations. A much more grim bummer-prospect emerges from the same logic that future whiz-bang, technologically based recreation won't happen, and that is that the present isn't sustainable. Current growth is becoming current opposite of growth as we speak, and it's effects can be seen around the world.
In the quick and dirty explanation I gave in the last post on why I think the seventies was the peak of U.S. power, the main point I wanted to get across is that it was the time at which the Law of Diminishing Returns hit the scene. Before that there was what you might call "organic" growth, meaning the resource base and the build-up of previous capital could support high annual growth rates without an increase in the rate of debt accumulation. If the contemporary debt and deficit is to have any meaning, I think it derives from the expansion of a system destined never to pay for itself. This is not to say that government debt is necessarily a bad thing. It is, in fact, built into how the global system works. However, that the, essentially, incalculably massive amount of debt, which globally for public and private debt holds at a whopping $223 trillion as of last year, and, if you believe shadow banking numbers, the total dollar value of derivatives alone is $710 trillion, is so high that you have to wonder if the debt has any meaning at all.* A useful approach is to think of this debt as an expectation of the future. Apparently people believe the future someday will be on the order of 3-13x bigger than it is today, in terms of GDP and all the oil, coal, iron ore, etc., etc., etc. supplied to support it. What's more, the economy needs to be this much bigger to cover the debt and all these derivative contracts.
Debt can be carried over indefinitely and doesn't so much need to be payed off, especially government debt, but as we've seen, new debt needs to be created, increasingly via the government, in order to squeeze more growth out of the system. Additionally, the ratio between debt and GDP is widening, so you can only expect the differential will continue. From this perspective, it is clear what we are now witnessing is the death of the global system that emerged from the death of the previous system that occurred in the seventies. So what happens next?
Describing what happened in the past is hard enough, and people don't always agree on what happened. Trying to figure out what happens as information wends its way through a human mind, gets interpreted, and then acted on by that human is tough even under laboratory conditions. To say what will happen when trouble of historic proportions is thrown into the mix is nearly impossible. What is clear is that snafus baked into the cake of history are approaching. These can be defined and responded to with thoughtful intelligence and a shared sense of responsibility. On that I'll refer you back to the first three sentences of this paragraph. But, that these snafus can be defined, generally, because it does involve real things we can measure, surmise, and anticipate, then we should be able to, at least, dampen our own individual shock and surprise as the system unwinds. It's a small step, but it is not a small thing.
Somebody somewhere said once: You can either predict what will happen, or when it will happen, but never both. It's impossible to know when a trigger event will occur, or to account for all the events of a complex cause and effect web. What can be known is whether the conditions are ripe for a dramatic change. What I've talked about are two phase changes in the economic life of the industrial world. The 1970's represented the first, and we are experiencing one today. These take time to unfold. Years. Decades, even. We are now in a second phase change that extends from the first. The difference now is that this one takes us on a path down the slope of resource scarcity and an unwinding of the expectations built up from the collective experience of anyone involved in the system as an active participant. And by active I mean alive and buying things.
This system is global. I'll say it again. There is no true delineation between the French economy, the Japanese economy, and the American economy. They are different nodes of one giant financial system that impacts nearly every bit of surface area on the planet. Financial systems periodically collapse. In this way we moderns are no different from anyone in the past. The difference comes from our expectations of the future. In a similar vein, the costs of the system are global. Climate change, species extinction, soil run-off, mineral depletion, energy depletion, are all worsening, degrading the planetary systems economic life depends on. It is happening in a way that jeopardizes the stability of the system well before people really notice why.
*Derivatives are, of course, what gave the housing bubble a particularly nasty flavor and may have been what made it possible. Looked at another way, the housing bubble was simply a manifestation of a much larger global financial bubble that was (is) made possible with derivatives. Add those numbers up and compare it to global GDP of about $72 trillion and you get the sense of how much debt and speculation (or betting) is needed to keep this thing running.
Some updates on the fracking biz in America responding to falling prices.
Capex (investment) for 2015 is starting to fall.
A warning to investors that a lot of debt held by fracking companies is high risk.
Junk Bonds
And one on the high price to achieve climate stability.
Money is consumption
For this to work, and to obviate the necessity for uncertain, longer term thinking, there has to be an expectation that the future will look like the past. For most of an individual human lifetime, this is a reasonable expectation, and what's true for an individual human can be scaled up to as large an operation as society. Even in the current time, characterized by rapid and increasingly rapid change, there is, at its heart, an expectation of stability, of the normal course of things. In economics, there is a theoretical description of what that looks like, which says there is a baseline trajectory by which an economy unfettered by government intervention will grow at. I call this the "metaphysical rate of growth". Apart from that, as is easy to see, what's good for the economist is good for the politician, of either or any party. The expectation of growth dwells within every politician, and that same cultural expectation also determines the measure of their collective worth.
All of this is to say that an expectation of economic growth is thoroughly entrenched in the way the modern person and culture thinks. Me? I'm different. I'm a bummer that way, and my job is to make more bummers in the world. Now, I say bummer for a couple of reasons. The first is that, to the extent people's emotional states are bonded to a future that growth represents, like Mars colonization, holographic vacations, or space tourism, all of which would require many, many more years of growth, an end of growth would be giving up a certain style of identity centered on future expectations. A much more grim bummer-prospect emerges from the same logic that future whiz-bang, technologically based recreation won't happen, and that is that the present isn't sustainable. Current growth is becoming current opposite of growth as we speak, and it's effects can be seen around the world.
In the quick and dirty explanation I gave in the last post on why I think the seventies was the peak of U.S. power, the main point I wanted to get across is that it was the time at which the Law of Diminishing Returns hit the scene. Before that there was what you might call "organic" growth, meaning the resource base and the build-up of previous capital could support high annual growth rates without an increase in the rate of debt accumulation. If the contemporary debt and deficit is to have any meaning, I think it derives from the expansion of a system destined never to pay for itself. This is not to say that government debt is necessarily a bad thing. It is, in fact, built into how the global system works. However, that the, essentially, incalculably massive amount of debt, which globally for public and private debt holds at a whopping $223 trillion as of last year, and, if you believe shadow banking numbers, the total dollar value of derivatives alone is $710 trillion, is so high that you have to wonder if the debt has any meaning at all.* A useful approach is to think of this debt as an expectation of the future. Apparently people believe the future someday will be on the order of 3-13x bigger than it is today, in terms of GDP and all the oil, coal, iron ore, etc., etc., etc. supplied to support it. What's more, the economy needs to be this much bigger to cover the debt and all these derivative contracts.
Debt can be carried over indefinitely and doesn't so much need to be payed off, especially government debt, but as we've seen, new debt needs to be created, increasingly via the government, in order to squeeze more growth out of the system. Additionally, the ratio between debt and GDP is widening, so you can only expect the differential will continue. From this perspective, it is clear what we are now witnessing is the death of the global system that emerged from the death of the previous system that occurred in the seventies. So what happens next?
Describing what happened in the past is hard enough, and people don't always agree on what happened. Trying to figure out what happens as information wends its way through a human mind, gets interpreted, and then acted on by that human is tough even under laboratory conditions. To say what will happen when trouble of historic proportions is thrown into the mix is nearly impossible. What is clear is that snafus baked into the cake of history are approaching. These can be defined and responded to with thoughtful intelligence and a shared sense of responsibility. On that I'll refer you back to the first three sentences of this paragraph. But, that these snafus can be defined, generally, because it does involve real things we can measure, surmise, and anticipate, then we should be able to, at least, dampen our own individual shock and surprise as the system unwinds. It's a small step, but it is not a small thing.
Somebody somewhere said once: You can either predict what will happen, or when it will happen, but never both. It's impossible to know when a trigger event will occur, or to account for all the events of a complex cause and effect web. What can be known is whether the conditions are ripe for a dramatic change. What I've talked about are two phase changes in the economic life of the industrial world. The 1970's represented the first, and we are experiencing one today. These take time to unfold. Years. Decades, even. We are now in a second phase change that extends from the first. The difference now is that this one takes us on a path down the slope of resource scarcity and an unwinding of the expectations built up from the collective experience of anyone involved in the system as an active participant. And by active I mean alive and buying things.
This system is global. I'll say it again. There is no true delineation between the French economy, the Japanese economy, and the American economy. They are different nodes of one giant financial system that impacts nearly every bit of surface area on the planet. Financial systems periodically collapse. In this way we moderns are no different from anyone in the past. The difference comes from our expectations of the future. In a similar vein, the costs of the system are global. Climate change, species extinction, soil run-off, mineral depletion, energy depletion, are all worsening, degrading the planetary systems economic life depends on. It is happening in a way that jeopardizes the stability of the system well before people really notice why.
*Derivatives are, of course, what gave the housing bubble a particularly nasty flavor and may have been what made it possible. Looked at another way, the housing bubble was simply a manifestation of a much larger global financial bubble that was (is) made possible with derivatives. Add those numbers up and compare it to global GDP of about $72 trillion and you get the sense of how much debt and speculation (or betting) is needed to keep this thing running.
Some updates on the fracking biz in America responding to falling prices.
Capex (investment) for 2015 is starting to fall.
A warning to investors that a lot of debt held by fracking companies is high risk.
Junk Bonds
And one on the high price to achieve climate stability.
Money is consumption
Friday, November 28, 2014
The Seventies: What, Besides Disco, Went Wrong?
In the last post I made the claim that the American empire topped out in the seventies as the cost of energy rose. It's misleading, though, to look at the price of oil over this time because it doesn't include other costs that were absorbed through other entities, such as U.S. government spending, or through the expansion of the dollar. It's these twin deficits born by American beneficiaries that reflect what is, in essence, the increased demands of the energy system as a whole. This would include military spending, which occurred with the expansion of American military presence around the world, and oil infrastructure like supertankers and pipelines. But it also includes the need for more dollars available to the market for global trade to function, as almost every single commodity on the global market is priced in dollars. The reason the U.S. has run continuous trade deficits since the seventies is because dollars are produced through credit. It's akin to running a four-decade long bar tab and never settling up, with the added counter-intuitive aspect in which the bartender uses the credit represented in your bar tab to make mortgage payments on your house. This last part is why any discussion of money always has a gloss of weirdness. It is an abstract representation of real wealth and not the wealth itself.
As the long as the flow of money has a parallel activity in the maintenance and functioning of wealth, then the money can be said to be good. When the parallels diverge. in other words, when the representation of money rises without a corresponding rise in wealth, then the system gets into trouble. What has been the case since the seventies is that the money system has grown faster than the wealth system, which is evident in the amount of total debt and why the percentage of debt compared to GDP is so monumental. Now we've entered the territory of bad money defined as debt that cannot be repaid. Why? Because the story of the past few decades has told us that wealth doesn't just simply grow in accordance with the growth in the money. To answer this second "why" question it's necessary to talk about what oil is and does.
Oil is a form of natural wealth. In fact, it is the single most important form of natural wealth in the current globalized industrial economy. This is because oil is a concentrated energy source that enables every other form of wealth, natural or otherwise, to come into being. Oil has advantages over every other important energy source, like coal, methane, sunlight, or nuclear in that it has properties, such as it's especially high concentration favorable to all others except nuclear, and it is a liquid which makes it good for storing and transporting, for use in engines, and for extracting from the ground. For all these reasons it is considered the ur-(original) resource. It makes all other forms of wealth much easier to generate than all other sources do. So when oil's costs rise, and they have been rising remorselessly, the cost of everything else rises along with it.
The oil shocks of the seventies destroyed the Keynesian global money system established at the end of World War II. This is not the view of conventional economists, so if you're at a party populated by these or other market creatures, expect pushback. With that said, the inflation brought on by rising oil led to an event not thought possible at the time called stagflation, which simply means that there was a condition of simultaneous rising prices alongside stagnant economic growth. The remedy for this, among other things, was the system of debt based money and the necessary expansion of credit, which served to cause the current crisis, by backing the dollar with commodities rather than with gold. You could say this was the beginning of globalization, or at least a major advance of it, characterized primarily by globalizing markets in currency, credit, and labor. This system is why it now seems like everything is made in China.
So the rise in debt is a measure of decline. If you go back to Tainter's observations, it is increasing societal complexity in order to solve problems. Doing this comes with added costs, fixed costs like infrastructure, that need to be maintained. Think of the container ships that bring goods from China to the U.S. They are both massive and numerous. Or all the new factories that had to be built in China to supply American markets. Because of these new investments, globalization only works if energy is cheap, which it had been for the entirety of the eighties and nineties when globalization came into being. However, when the price rose from something like $15 in 2000 to $148 in 2007, the globalized system began to falter, causing a massive debt unwind, beginning with the sell-off of oil. The system of globalization could not function with such high prices and ultimately manifested itself in a credit crisis starting with mortgages, and then everything else. The entire system of globalized finance was at risk of complete failure.
Increasingly complex systems require an increase in available energy. The increase in available energy effectively stopped sometime in the mid-2000's. The cost of new energy, as seen in North American fracked oil and other non-conventional methods, have not provided the economy with a significant increase in available energy. The reason is that the cost, in energy terms, is too high for getting a new barrel of oil. Here is the point at which you see available energy as the heart of the problem for the system. Each new barrel of oil comes with a lower net energy that can be used outside the system to get the new barrel of oil. By this I mean for the use of society. You may have an increase in the number of barrels on the market, but each barrel now is either less energy dense, as is the case with biofuels, or that the extraction of that barrel cost something like 30% of the energy the oil in the barrel embodies. Either way, you are looking at a reduced available energy and it directly explains the higher cost.
So the narrative goes like this: Since the original oil shocks of 1973 and 1979, the response has been to globalize the economy by off-shoring jobs to save money on labor, to make global arrangements for the free flow of credit and investment to enable a build up of the necessary infrastructure for globalization, and to expand the role of floating currencies like the dollar to create money on demand. This enabled a resurgent economy throughout the eighties and nineties because of the efficiencies of labor and money (with increased energy), helped along by instantaneous transfers of capital to anywhere in the world with computers. Globalization added fixed costs that become burdensome to maintain once the cost of energy had risen to the point that globalization no longer serves as a solution to the problems that began with the first energy shock. So what happens next?
Americans and other Westerners like to talk about the "power of innovation", or believe that the only limit is the imagination, or the will to do something. Hard to prove either way. But I wonder what new system could salvage our current lifestyles here in the rich countries. Aside from the doubtful new energy sources waiting in the wings to replace fossil fuels, what other system could we possibly innovate to replace globalization? How much bigger can it possibly get, given that the system is compelled to grow? Is there a yet-to-be- innovated "super-" or "mega-" globalization out there in the future? Seems unlikely, given the nature of energy supply. Innovation rides on the back of efficiency in money and labor productivity. The entire project of globalization has been built with the collapse of oil prices in the early 80's. The energy shock of the 2000's had a different and permanent cause from the two in the seventies, which was geological rather than political. The question of what the future holds will be a matter of what we can do without and still live dignified lives. It is no longer about having more.
As the long as the flow of money has a parallel activity in the maintenance and functioning of wealth, then the money can be said to be good. When the parallels diverge. in other words, when the representation of money rises without a corresponding rise in wealth, then the system gets into trouble. What has been the case since the seventies is that the money system has grown faster than the wealth system, which is evident in the amount of total debt and why the percentage of debt compared to GDP is so monumental. Now we've entered the territory of bad money defined as debt that cannot be repaid. Why? Because the story of the past few decades has told us that wealth doesn't just simply grow in accordance with the growth in the money. To answer this second "why" question it's necessary to talk about what oil is and does.
Oil is a form of natural wealth. In fact, it is the single most important form of natural wealth in the current globalized industrial economy. This is because oil is a concentrated energy source that enables every other form of wealth, natural or otherwise, to come into being. Oil has advantages over every other important energy source, like coal, methane, sunlight, or nuclear in that it has properties, such as it's especially high concentration favorable to all others except nuclear, and it is a liquid which makes it good for storing and transporting, for use in engines, and for extracting from the ground. For all these reasons it is considered the ur-(original) resource. It makes all other forms of wealth much easier to generate than all other sources do. So when oil's costs rise, and they have been rising remorselessly, the cost of everything else rises along with it.
The oil shocks of the seventies destroyed the Keynesian global money system established at the end of World War II. This is not the view of conventional economists, so if you're at a party populated by these or other market creatures, expect pushback. With that said, the inflation brought on by rising oil led to an event not thought possible at the time called stagflation, which simply means that there was a condition of simultaneous rising prices alongside stagnant economic growth. The remedy for this, among other things, was the system of debt based money and the necessary expansion of credit, which served to cause the current crisis, by backing the dollar with commodities rather than with gold. You could say this was the beginning of globalization, or at least a major advance of it, characterized primarily by globalizing markets in currency, credit, and labor. This system is why it now seems like everything is made in China.
So the rise in debt is a measure of decline. If you go back to Tainter's observations, it is increasing societal complexity in order to solve problems. Doing this comes with added costs, fixed costs like infrastructure, that need to be maintained. Think of the container ships that bring goods from China to the U.S. They are both massive and numerous. Or all the new factories that had to be built in China to supply American markets. Because of these new investments, globalization only works if energy is cheap, which it had been for the entirety of the eighties and nineties when globalization came into being. However, when the price rose from something like $15 in 2000 to $148 in 2007, the globalized system began to falter, causing a massive debt unwind, beginning with the sell-off of oil. The system of globalization could not function with such high prices and ultimately manifested itself in a credit crisis starting with mortgages, and then everything else. The entire system of globalized finance was at risk of complete failure.
Increasingly complex systems require an increase in available energy. The increase in available energy effectively stopped sometime in the mid-2000's. The cost of new energy, as seen in North American fracked oil and other non-conventional methods, have not provided the economy with a significant increase in available energy. The reason is that the cost, in energy terms, is too high for getting a new barrel of oil. Here is the point at which you see available energy as the heart of the problem for the system. Each new barrel of oil comes with a lower net energy that can be used outside the system to get the new barrel of oil. By this I mean for the use of society. You may have an increase in the number of barrels on the market, but each barrel now is either less energy dense, as is the case with biofuels, or that the extraction of that barrel cost something like 30% of the energy the oil in the barrel embodies. Either way, you are looking at a reduced available energy and it directly explains the higher cost.
So the narrative goes like this: Since the original oil shocks of 1973 and 1979, the response has been to globalize the economy by off-shoring jobs to save money on labor, to make global arrangements for the free flow of credit and investment to enable a build up of the necessary infrastructure for globalization, and to expand the role of floating currencies like the dollar to create money on demand. This enabled a resurgent economy throughout the eighties and nineties because of the efficiencies of labor and money (with increased energy), helped along by instantaneous transfers of capital to anywhere in the world with computers. Globalization added fixed costs that become burdensome to maintain once the cost of energy had risen to the point that globalization no longer serves as a solution to the problems that began with the first energy shock. So what happens next?
Americans and other Westerners like to talk about the "power of innovation", or believe that the only limit is the imagination, or the will to do something. Hard to prove either way. But I wonder what new system could salvage our current lifestyles here in the rich countries. Aside from the doubtful new energy sources waiting in the wings to replace fossil fuels, what other system could we possibly innovate to replace globalization? How much bigger can it possibly get, given that the system is compelled to grow? Is there a yet-to-be- innovated "super-" or "mega-" globalization out there in the future? Seems unlikely, given the nature of energy supply. Innovation rides on the back of efficiency in money and labor productivity. The entire project of globalization has been built with the collapse of oil prices in the early 80's. The energy shock of the 2000's had a different and permanent cause from the two in the seventies, which was geological rather than political. The question of what the future holds will be a matter of what we can do without and still live dignified lives. It is no longer about having more.
Saturday, November 22, 2014
A Word on Collapse Narratives
To be sure, predictions of doom have always been with us humans. But then again, so has doom, in one form or another, punctuated our shared history and made history an interesting subject. Trying to match doomsayer to doom event throughout history would make for a fascinating book, but I'm not the one to write it. I'll just consider it self-evident that humans carry an ongoing concern about an event that reliably occurs from time to time.
I think generically people harbor the fear of a collapse of social order however it is caused. What people don't recognize and therefore don't fear, is societal collapse. That is, when the activities of the society produce the conditions which become the very cause of the collapse, like an underground river eroding support for the land above. It's not going too far to say that it is a natural occurrence because the ultimate cause is reducible to natural laws which play out over long stretches of time.
In the world we live in today, this comes in two related forms simultaneously. Climate change and resource depletion, including and especially of energy, both have the potential to cause society to collapse. I only say potential because it has yet to happen, but really it is inevitable due to the "nature" of it. What humanity does as a collective to respond to the collapse matters a lot, but the collapse itself is inevitable. So I'll need to define what I mean and what I don't mean, by collapse.
I've mentioned Joseph Tainter in a past post but I'll expand on what I said. He is an archeologist who wrote "The Collapse of Complex Societies" published in 1987. His definition of collapse is simply a loss or reduction of societal complexity. It's a rather clinical definition, necessarily, because he is generalizing all collapses. But don't be lulled into complacency by this innocent-sounding terminology because societal collapse is a frightening event to experience. If you want to learn more then this here video has most of what you need to know.
Tainter mentions a lot of subjects that should sound familiar to the currently living. Rising taxes, rising debt, rising cost of doing things, and attendant problems that arise from these trends like falling living standards for most people. Complexity is a central theme of this blog and this is where it comes from. It is abstract but that doesn't make it any less real, it just means that it is hard to notice
unless you take a wide view. A simple way to start pulling the threads of what a complex society is to compare the complexity of a small city-state with that of a large empire, say Sparta and the Roman Empire. Rome had many more layers of administration, much wider trade systems, much larger military, and much more infrastructure to maintain than Sparta ever did. Thus, Rome was more expensive to operate and to maintain, and as the complexity increased over the centuries, so did the costs, which weakened its ability to respond to crises, such as German attacks, or bad harvests.
The collapse phase of Rome was centuries long. There's no record I know of that says anybody ever talked about it or understood at the time what was happening. I suspect the Roman peasants, squeezed by tax collectors to fund the growing demands of the elites, had a hunch when they eventually threw in their lot with the Germanic hordes late in the game, but they were illiterate.
The most important tidbit to mentally stow away is that it happens over historical time. The experience of a collapsing society is one of generations, with the inflection point only seen after decades in hindsight.
So how does the experience of Rome apply today? A lot of conflicting views have been advanced as to why Rome collapsed and haven't we learned something in the meantime? To answer the second question first, maybe we have learned, certainly we've learned, but maybe we haven't learned this. The British Empire was the first global empire, and the U.S. took responsibility for it once the British could no longer do so. It's not enough to talk about Britain, though, because there were many maritime global empires which sprang from Western Europe from the 15th century on. So it's more accurate and more complete to say it was a Western Empire, of which the U.S. is the latest and greatest manifestation of a long, singular period of history. All of the European empires have crumbled leaving the U.S. the last one standing.
Now it's possible to talk about inflection points. There are different inflection points for the different empires and all the points are in themselves stretches of time. The British Empire began its decline in the second half of the 19th century. Spain began its decline in the early 17th century. The whole of Western Europe began it's decline at the onset of WWI, after the imperial competition had reached a zero sum situation when the world held no more fruitful lands to conquer. The Great War was about a rising Germany, at the time probably the most powerful country in the world and late to the race for empire, found it would need to take from the other empires in order to fulfill it's ambition. Thus the zero sum game was played.
The U.S., I think, probably reached it's point of diminishing returns in the early 70's. It is when the costs of the entire system of industry, geopolitics, military, and the bread and circuses of social programs rose dramatically. The inflation blowout during that decade was resolved through heavy borrowing and the advent of the petrodollar system that required trade and fiscal deficits to work. The 70's was when the increments of growth began to diminish and the cost of obtaining that growth started to rise. This process is no where better understood that in the debt to GDP ratio, either nationally or globally.
In the wake of the 2008 financial smackdown this process of increasing debt to get diminishing GDP growth has gone into overdrive. Hence my gloominess about the future prospects of growth or even particularly happy times. But it all takes time to unfold. People do respond to slow the process down. As Tainter mentions, this normally involves adding complexity to the system. Of course, that new complexity in time grows to be a bigger burden. Societies pile on more complexity because it adds efficiency to the system, but efficiency itself runs into diminishing returns. So call it a trap, but one that is natural to fall into because people see "problems" they want to "solve". They do not think in terms of predicaments, because doing so means accepting there is no solution that can be applied to get things back to the way they were. Only adapting to new conditions remains, and, though adaptation sounds like a nice word, adapting to conditions constrained by the nature of the predicament means there are only bad and less bad choices available.
I think generically people harbor the fear of a collapse of social order however it is caused. What people don't recognize and therefore don't fear, is societal collapse. That is, when the activities of the society produce the conditions which become the very cause of the collapse, like an underground river eroding support for the land above. It's not going too far to say that it is a natural occurrence because the ultimate cause is reducible to natural laws which play out over long stretches of time.
In the world we live in today, this comes in two related forms simultaneously. Climate change and resource depletion, including and especially of energy, both have the potential to cause society to collapse. I only say potential because it has yet to happen, but really it is inevitable due to the "nature" of it. What humanity does as a collective to respond to the collapse matters a lot, but the collapse itself is inevitable. So I'll need to define what I mean and what I don't mean, by collapse.
I've mentioned Joseph Tainter in a past post but I'll expand on what I said. He is an archeologist who wrote "The Collapse of Complex Societies" published in 1987. His definition of collapse is simply a loss or reduction of societal complexity. It's a rather clinical definition, necessarily, because he is generalizing all collapses. But don't be lulled into complacency by this innocent-sounding terminology because societal collapse is a frightening event to experience. If you want to learn more then this here video has most of what you need to know.
Tainter mentions a lot of subjects that should sound familiar to the currently living. Rising taxes, rising debt, rising cost of doing things, and attendant problems that arise from these trends like falling living standards for most people. Complexity is a central theme of this blog and this is where it comes from. It is abstract but that doesn't make it any less real, it just means that it is hard to notice
unless you take a wide view. A simple way to start pulling the threads of what a complex society is to compare the complexity of a small city-state with that of a large empire, say Sparta and the Roman Empire. Rome had many more layers of administration, much wider trade systems, much larger military, and much more infrastructure to maintain than Sparta ever did. Thus, Rome was more expensive to operate and to maintain, and as the complexity increased over the centuries, so did the costs, which weakened its ability to respond to crises, such as German attacks, or bad harvests.
The collapse phase of Rome was centuries long. There's no record I know of that says anybody ever talked about it or understood at the time what was happening. I suspect the Roman peasants, squeezed by tax collectors to fund the growing demands of the elites, had a hunch when they eventually threw in their lot with the Germanic hordes late in the game, but they were illiterate.
The most important tidbit to mentally stow away is that it happens over historical time. The experience of a collapsing society is one of generations, with the inflection point only seen after decades in hindsight.
So how does the experience of Rome apply today? A lot of conflicting views have been advanced as to why Rome collapsed and haven't we learned something in the meantime? To answer the second question first, maybe we have learned, certainly we've learned, but maybe we haven't learned this. The British Empire was the first global empire, and the U.S. took responsibility for it once the British could no longer do so. It's not enough to talk about Britain, though, because there were many maritime global empires which sprang from Western Europe from the 15th century on. So it's more accurate and more complete to say it was a Western Empire, of which the U.S. is the latest and greatest manifestation of a long, singular period of history. All of the European empires have crumbled leaving the U.S. the last one standing.
Now it's possible to talk about inflection points. There are different inflection points for the different empires and all the points are in themselves stretches of time. The British Empire began its decline in the second half of the 19th century. Spain began its decline in the early 17th century. The whole of Western Europe began it's decline at the onset of WWI, after the imperial competition had reached a zero sum situation when the world held no more fruitful lands to conquer. The Great War was about a rising Germany, at the time probably the most powerful country in the world and late to the race for empire, found it would need to take from the other empires in order to fulfill it's ambition. Thus the zero sum game was played.
The U.S., I think, probably reached it's point of diminishing returns in the early 70's. It is when the costs of the entire system of industry, geopolitics, military, and the bread and circuses of social programs rose dramatically. The inflation blowout during that decade was resolved through heavy borrowing and the advent of the petrodollar system that required trade and fiscal deficits to work. The 70's was when the increments of growth began to diminish and the cost of obtaining that growth started to rise. This process is no where better understood that in the debt to GDP ratio, either nationally or globally.
In the wake of the 2008 financial smackdown this process of increasing debt to get diminishing GDP growth has gone into overdrive. Hence my gloominess about the future prospects of growth or even particularly happy times. But it all takes time to unfold. People do respond to slow the process down. As Tainter mentions, this normally involves adding complexity to the system. Of course, that new complexity in time grows to be a bigger burden. Societies pile on more complexity because it adds efficiency to the system, but efficiency itself runs into diminishing returns. So call it a trap, but one that is natural to fall into because people see "problems" they want to "solve". They do not think in terms of predicaments, because doing so means accepting there is no solution that can be applied to get things back to the way they were. Only adapting to new conditions remains, and, though adaptation sounds like a nice word, adapting to conditions constrained by the nature of the predicament means there are only bad and less bad choices available.
Friday, November 14, 2014
Elusive Alternatives.
At the end of the last post I said the ongoing economic crisis is really an energy crisis masquerading as an economic one. By talking about empire as a manifestation of the Maximum Power Principle I merely wanted to connect fundamental bio-physical realities to grand scale human behavior. From this point it's possible to generalize about all sorts of other grand scale human projects based on this underlying logic. If humanity is going to address the global crises of energy, environment, and economy in a decent and civilized manner, this is a good place to start, because it all comes down to taming our appetites for consumption, status, and expansion. Our appetites start at this level.
The most important feature to remember about the American led global system of exchange and power (political) relations is that it must grow, materially and nominally as represented by GDP numbers, and enters a crisis phase when the growth slows or stops. The global economy is in a crisis now because it has essentially stopped growing and has even started to shrink. Economists, policy makers, politicians, and other creatures of the market are flummoxed about it. No one has publicly aired the view that maybe the jig is up on economic growth. The different economies around the world have tried various strategies to revive the patient, but none are successful and only make the problem worse.
There is a fundamental reason for this. Economists see their discipline as distinct and independent of other fields of study. This might be because they see it simply as a field of study as opposed to a representation of a distinct reality. A physical scientist, on the other hand, who looks into the place of the economy in a broader spectrum would see it as a system nested within larger systems. So the economy is nested within society which is in turn nested within the biosphere. A smaller system cannot grow to be bigger than the system which encompasses on. The space all life occupies is a thin layer of favorable conditions on the surface of the planet which operates according to it's own laws. This fact is not accounted for in the discipline of economics even though it is the biggest system relevant to human economic life.
The effect of this is that economics cannot explain in it's own terms what is causing the economic crisis. Having said that, it can still describe what is happening. So it's very useful to understand what is happening in the economy as it is a manifestation of the underlying energy crisis. Because the Earth can cough up only so much fossil fuel, the cost of that fuel goes up. Eventually it will be infinitely expensive. The trick is to find alternatives to replace fossil fuels. The problem is that the signal sent by the market seems to be that there is no replacement that will keep this system going.
This is evident in the failure of alternatives like solar and wind to find a lift-off point of investment. The only way it ever gets done, like in Germany, is through very large government subsidies. Even so, the market still does not give the signal that a revolution in energy sources is at hand. Why that is the case is a long story, but the alternative energy market, with the historically enormous incentives of cheap credit and high oil prices, doesn't gain traction without subsidies. The way I read this is that the future will be smaller, less energetic, and more expensive. Not a recipe for economic growth.
This is the essence of the energy crisis impact on the economy. We are forced to change fuels but our means to do it (the market system) doesn't want to go there. The market will not pick these alternative sources because they cannot replace fossil fuels. We, as a human society, will have to adapt to the limitations of these other fuels. And that means accepting a reduced capacity to do the work fossil fuels do for us. The only question is by how much.
Now for some headlines.
Further disincentives for alternative energy.
Which will whipsaw energy prices at some point.
The only ones who can afford electric cars.
Running out of capital.
The most important feature to remember about the American led global system of exchange and power (political) relations is that it must grow, materially and nominally as represented by GDP numbers, and enters a crisis phase when the growth slows or stops. The global economy is in a crisis now because it has essentially stopped growing and has even started to shrink. Economists, policy makers, politicians, and other creatures of the market are flummoxed about it. No one has publicly aired the view that maybe the jig is up on economic growth. The different economies around the world have tried various strategies to revive the patient, but none are successful and only make the problem worse.
There is a fundamental reason for this. Economists see their discipline as distinct and independent of other fields of study. This might be because they see it simply as a field of study as opposed to a representation of a distinct reality. A physical scientist, on the other hand, who looks into the place of the economy in a broader spectrum would see it as a system nested within larger systems. So the economy is nested within society which is in turn nested within the biosphere. A smaller system cannot grow to be bigger than the system which encompasses on. The space all life occupies is a thin layer of favorable conditions on the surface of the planet which operates according to it's own laws. This fact is not accounted for in the discipline of economics even though it is the biggest system relevant to human economic life.
The effect of this is that economics cannot explain in it's own terms what is causing the economic crisis. Having said that, it can still describe what is happening. So it's very useful to understand what is happening in the economy as it is a manifestation of the underlying energy crisis. Because the Earth can cough up only so much fossil fuel, the cost of that fuel goes up. Eventually it will be infinitely expensive. The trick is to find alternatives to replace fossil fuels. The problem is that the signal sent by the market seems to be that there is no replacement that will keep this system going.
This is evident in the failure of alternatives like solar and wind to find a lift-off point of investment. The only way it ever gets done, like in Germany, is through very large government subsidies. Even so, the market still does not give the signal that a revolution in energy sources is at hand. Why that is the case is a long story, but the alternative energy market, with the historically enormous incentives of cheap credit and high oil prices, doesn't gain traction without subsidies. The way I read this is that the future will be smaller, less energetic, and more expensive. Not a recipe for economic growth.
This is the essence of the energy crisis impact on the economy. We are forced to change fuels but our means to do it (the market system) doesn't want to go there. The market will not pick these alternative sources because they cannot replace fossil fuels. We, as a human society, will have to adapt to the limitations of these other fuels. And that means accepting a reduced capacity to do the work fossil fuels do for us. The only question is by how much.
Now for some headlines.
Further disincentives for alternative energy.
Which will whipsaw energy prices at some point.
The only ones who can afford electric cars.
Running out of capital.
Monday, November 10, 2014
Going Deep on U.S.-Russia
It's tempting for people when trying to comprehend a complex situation, or an apparently simple situation with a complex set of causes, to reduce the complexity into a single simple frame. It might be through overestimating the power of the actors involved, as is the case with the more conspiratorial minded among us, hallucinating all-powerful world governments and such. An "us vs. them" mindset falls into the oversimplification mode, which will overlay a warfare construct onto the reality of an event and provide an inviting ontological easement for brains beleaguered by too many moving parts. A number of well-intentioned but failed policies, for example, have begun with a warfare approach, like the "war on drugs' or "war on poverty". That people habitually oversimplify in the normal flow of consciousness is a fair assessment, and it allows the bearer of that consciousness to unload the burden of consciousness with a more streamlined flow for the unconscious to have. This is the state of things.
The aim of this blog post is for the above paragraph to make sense.
In the last post I ended with what I consider the drivers of the conflict between Russia and the United States. There are many classifiable drivers for this conflict, involving geostrategic, geopolitical, and geofinancial dictates, based on the logic of the immediate situation nested within longer term goals. These three geoclassifications serve one another and constitute the realm of the geoelite. But rather than put "geo-" in front of every word, I will state that the conflict heating up between the U.S. and Russia cannot be properly understood without first understanding how these three forces operate and serve each other in the ambitions of the main benefactor, the United States.
To put it another way, the United States is an empire and it behaves as such. In every important way, the necessities of maintaining an empire are played out in the expansionist policies of the United States. The reason is simple: Empires must expand in order to maintain themselves. Once an empire has stopped expanding it faces a crisis of maintenance and begins the decline towards it's ultimate collapse. After the Cold War the U.S. saw the world as full of promise for the reason that it had no rivals. An enormous global power vacuum opened up after the collapse of the Soviet Union and the U.S seized the opportunity to fill the vacuum.
Some people have a problem with talk of an American empire. Others do not. It is a word that has become fraught with moral judgements, or with a sense that empire is a pre-modern political form that took American values of liberty, democracy, and political freedom to transcend through the example of it's history. Others, such as Dick Cheney, Robert Kagan, or much of the world's population outside the U.S., have neither a problem with the term nor feel that a hegemonic imperial power is anything unique. It just happens to be America at this juncture. With that said, the way I use "empire" is mainly descriptive and I find it useful because the meaning is familiar and places it into a history that reaches beyond World War II. It's also not too hard to think about what an empire is for, as opposed to, say, what a superpower, or a hegemon is for. Otherwise, there is not a shred of difference among them.
But there are some differences, some aspects of American society that are unique to history. The rights that form the basis of our laws, the rule of law itself, and universal suffrage found in the United States and it's inner circle of allies are triumphs of the modern age. The modern age itself, however, is singularly unique in the material well being of those who live in it. I say "however", because it has also allowed us moderns to push this material basis for empire (society, economy) into the background noise of our unconscious, and that comes with psychological and other costs. In the enumeration of modern achievements the biophysical basis for it's existence has been undervalued so totally that we, formally and systematically, believe that we have transcended it. Or just forgotten. By using "empire" I also hope to draw this biophysical basis back into the mix.
The thrust of this argument is that Empire is a manifestation of the Maximum Power Principle acting through the medium of the human mind. The Maximum Power Principle is a physical principle used in ecology and other physical systems to describe the behavior of a thermodynamic system. It has been proposed as the Fourth Law of Thermodynamics, which is an interesting side note. These systems could include ecosystems, economies, or as the process of competition among species in evolution. It is an energy principle which states that an organism will maximize it's consumption of useful energy to maximize it's (re)production. It explains why an invasive species can dominate an ecosystem, even to it's own eventual detriment, if there is no natural predator or other limiting factor to it's growth. The fruit flies in your first grade science experiments, for example, whose population swelled only to die off when the food ran out demonstrated the Maximum Power Principle. If you are a living organism then the Maximum Power Principle applies to you.
Here's Howard Odom's quote from Wikipedia: "The maximum power principle can be stated: During self-organization, system designs develop and prevail that maximize power intake, energy transformation, and those uses that reinforce production and efficiency."
The Maximum Power Principle has the added benefit of operating subconsciously. In a human system, this means that decisions made by the conscious mind are necessarily within and constrained by the legal limits of the organizational properties dictated by useful energy. Whether the system prevails or not depends on the competition. A system that is more efficient at maximizing it's energy intake, it's transformation into productive forms will out compete less efficient systems. Sounds like capitalism to me. But it also describes how empires work.
You could consider the U.S. as a capitalistic empire and there would be no contradiction from this perspective. The contradiction in the system lies between democracy and empire and, by extension, capitalism. Democracy becomes an effort to apply an inefficiency onto a power maximizing social tendency. But that's another story. A capitalistic empire has a built in, self-reinforcing mechanism with the two pillars of financial and military power in the service of political power. It's true that all states operate this way and always have. Once you add the imperial element, the character changes, and what changes the character is the growth imperative. because that makes it qualitatively different from other societies.
The Maximum Power Principle describes a natural process. By saying that it describes the process of empire is to say that empire is a natural ordering of large scale human activity. It is not a moral system in the same way capitalism is not moral. Morality (or moral judgement) can be applied to each and is applied to each, but the process itself is not moral. Most people, if you ask them, would say "growth" is a good thing, and could justify it in moral terms. But it is more accurate and useful to say that growth is natural and to leave morality aside.
By looking at it this way I want to clear out the clutter of preconceived notions and judgements not because I believe a moral judgement is unwarranted, but in order to make better judgements, moral or otherwise. A capitalistic empire has a double-growth imperative which explains the behavior of the Untied States today. That it is the aggressor in this historical instance of conflict with Russia could be considered a moral judgement, but it can also be a statement of fact. I consider it a statement of fact because of the growth imperative. The way capitalistic imperialism grows is through the expansion of the markets through client states. By incorporating new client states into the system enables the imperial center to benefit from the activity of a client states economy. In fact, it benefits more from this economic activity than does the client state, which I think explains the growing divide in the wealth distribution both globally and within the U.S. The global maldistribution of wealth is not a principle cause of the crisis (in credit or investment), however, it is only a symptom. It is a symptom, of course, which causes other problems, but these are secondary.
The aggression by the United States against Russia originates from the unwillingness of Russia to become a client state of the U.S. Putin affirmed this in his Sochi address. The U.S. has a dual purpose in making Russia a client state. The first is that American and Western capital could flow freely into Russia to work more efficiently than Russian capital. The second is to neutralize Russian (real and imagined) military and commercial ambitions against smaller states that used to be a part of the Russian Empire, especially in eastern Europe. The conflict between Russia and the U.S. over Ukraine is primarily over strategic military factors. The Ukraine isn't worth much outside of it's purely geographical location. However, the Ukraine is worth much more economically to Russia than it is to the West, and by denying Russia a greater measure of control over Ukraine, and it's port in Odessa, the West can weaken Russia strategically and economically. And that is the fundamental objective for Western intervention in the Ukraine.
So why does the United States need to be so aggressive? Because it needs to grow. It may declare that it simply wishes to grow (growth is good, after all), but why is it willing to risk an open war with Russia over Ukraine? I posit that the American system is increasingly desperate to grow the global capitalist system in order to solve the financial crisis that threatens to overcome it. Because it is desperate, it is more willing to lie to mask the real purpose. This desperate bid to increase it's market share is not something overtly stated but is, rather, largely unconscious. It is a driver of the consumption machine that feeds global capitalism, serving the function plunder did in earlier empires. The imperial system depends on an increasing flow of plunder.
And this brings us back to the orient of nature. Because this system of global capital is essentially natural, in terms of energy flows through the system, then more efficient western capital will exploit Russian energy more effectively. The key is to control the resources, and Russia is the biggest store of untapped natural resources left in the world. To bring that into the fold is quite a prize for the system as a whole and gratify the need for it to expand. You can decide for yourself the moral implications of this and weigh all the factors you see fit. But nature itself isn't necessarily moral. Morality comes out of a consciousness capable of empathic imagination. By describing what is happening between Russia and the U.S. as a problem of natural impulses that are largely unconscious, a broader understanding of all the critical, material crises facing humanity right now staring us in the face can be grasped. Whatever the "problem" is, from climate change to debt to fossil fuel depletion, is made clearer through recognizing the unconscious forces behind them. Understanding these forces by plopping them into the conscious mind is truly the only way humanity can decide to avoid a global calamity.
It's important to point out that the ongoing economic crisis is really an energy crisis masquerading as a debt problem. That is a subject for some other time but that is key to understanding why the national politics really don't work anymore. Big statement, but I'll explain later.
The aim of this blog post is for the above paragraph to make sense.
In the last post I ended with what I consider the drivers of the conflict between Russia and the United States. There are many classifiable drivers for this conflict, involving geostrategic, geopolitical, and geofinancial dictates, based on the logic of the immediate situation nested within longer term goals. These three geoclassifications serve one another and constitute the realm of the geoelite. But rather than put "geo-" in front of every word, I will state that the conflict heating up between the U.S. and Russia cannot be properly understood without first understanding how these three forces operate and serve each other in the ambitions of the main benefactor, the United States.
To put it another way, the United States is an empire and it behaves as such. In every important way, the necessities of maintaining an empire are played out in the expansionist policies of the United States. The reason is simple: Empires must expand in order to maintain themselves. Once an empire has stopped expanding it faces a crisis of maintenance and begins the decline towards it's ultimate collapse. After the Cold War the U.S. saw the world as full of promise for the reason that it had no rivals. An enormous global power vacuum opened up after the collapse of the Soviet Union and the U.S seized the opportunity to fill the vacuum.
Some people have a problem with talk of an American empire. Others do not. It is a word that has become fraught with moral judgements, or with a sense that empire is a pre-modern political form that took American values of liberty, democracy, and political freedom to transcend through the example of it's history. Others, such as Dick Cheney, Robert Kagan, or much of the world's population outside the U.S., have neither a problem with the term nor feel that a hegemonic imperial power is anything unique. It just happens to be America at this juncture. With that said, the way I use "empire" is mainly descriptive and I find it useful because the meaning is familiar and places it into a history that reaches beyond World War II. It's also not too hard to think about what an empire is for, as opposed to, say, what a superpower, or a hegemon is for. Otherwise, there is not a shred of difference among them.
But there are some differences, some aspects of American society that are unique to history. The rights that form the basis of our laws, the rule of law itself, and universal suffrage found in the United States and it's inner circle of allies are triumphs of the modern age. The modern age itself, however, is singularly unique in the material well being of those who live in it. I say "however", because it has also allowed us moderns to push this material basis for empire (society, economy) into the background noise of our unconscious, and that comes with psychological and other costs. In the enumeration of modern achievements the biophysical basis for it's existence has been undervalued so totally that we, formally and systematically, believe that we have transcended it. Or just forgotten. By using "empire" I also hope to draw this biophysical basis back into the mix.
The thrust of this argument is that Empire is a manifestation of the Maximum Power Principle acting through the medium of the human mind. The Maximum Power Principle is a physical principle used in ecology and other physical systems to describe the behavior of a thermodynamic system. It has been proposed as the Fourth Law of Thermodynamics, which is an interesting side note. These systems could include ecosystems, economies, or as the process of competition among species in evolution. It is an energy principle which states that an organism will maximize it's consumption of useful energy to maximize it's (re)production. It explains why an invasive species can dominate an ecosystem, even to it's own eventual detriment, if there is no natural predator or other limiting factor to it's growth. The fruit flies in your first grade science experiments, for example, whose population swelled only to die off when the food ran out demonstrated the Maximum Power Principle. If you are a living organism then the Maximum Power Principle applies to you.
Here's Howard Odom's quote from Wikipedia: "The maximum power principle can be stated: During self-organization, system designs develop and prevail that maximize power intake, energy transformation, and those uses that reinforce production and efficiency."
The Maximum Power Principle has the added benefit of operating subconsciously. In a human system, this means that decisions made by the conscious mind are necessarily within and constrained by the legal limits of the organizational properties dictated by useful energy. Whether the system prevails or not depends on the competition. A system that is more efficient at maximizing it's energy intake, it's transformation into productive forms will out compete less efficient systems. Sounds like capitalism to me. But it also describes how empires work.
You could consider the U.S. as a capitalistic empire and there would be no contradiction from this perspective. The contradiction in the system lies between democracy and empire and, by extension, capitalism. Democracy becomes an effort to apply an inefficiency onto a power maximizing social tendency. But that's another story. A capitalistic empire has a built in, self-reinforcing mechanism with the two pillars of financial and military power in the service of political power. It's true that all states operate this way and always have. Once you add the imperial element, the character changes, and what changes the character is the growth imperative. because that makes it qualitatively different from other societies.
The Maximum Power Principle describes a natural process. By saying that it describes the process of empire is to say that empire is a natural ordering of large scale human activity. It is not a moral system in the same way capitalism is not moral. Morality (or moral judgement) can be applied to each and is applied to each, but the process itself is not moral. Most people, if you ask them, would say "growth" is a good thing, and could justify it in moral terms. But it is more accurate and useful to say that growth is natural and to leave morality aside.
By looking at it this way I want to clear out the clutter of preconceived notions and judgements not because I believe a moral judgement is unwarranted, but in order to make better judgements, moral or otherwise. A capitalistic empire has a double-growth imperative which explains the behavior of the Untied States today. That it is the aggressor in this historical instance of conflict with Russia could be considered a moral judgement, but it can also be a statement of fact. I consider it a statement of fact because of the growth imperative. The way capitalistic imperialism grows is through the expansion of the markets through client states. By incorporating new client states into the system enables the imperial center to benefit from the activity of a client states economy. In fact, it benefits more from this economic activity than does the client state, which I think explains the growing divide in the wealth distribution both globally and within the U.S. The global maldistribution of wealth is not a principle cause of the crisis (in credit or investment), however, it is only a symptom. It is a symptom, of course, which causes other problems, but these are secondary.
The aggression by the United States against Russia originates from the unwillingness of Russia to become a client state of the U.S. Putin affirmed this in his Sochi address. The U.S. has a dual purpose in making Russia a client state. The first is that American and Western capital could flow freely into Russia to work more efficiently than Russian capital. The second is to neutralize Russian (real and imagined) military and commercial ambitions against smaller states that used to be a part of the Russian Empire, especially in eastern Europe. The conflict between Russia and the U.S. over Ukraine is primarily over strategic military factors. The Ukraine isn't worth much outside of it's purely geographical location. However, the Ukraine is worth much more economically to Russia than it is to the West, and by denying Russia a greater measure of control over Ukraine, and it's port in Odessa, the West can weaken Russia strategically and economically. And that is the fundamental objective for Western intervention in the Ukraine.
So why does the United States need to be so aggressive? Because it needs to grow. It may declare that it simply wishes to grow (growth is good, after all), but why is it willing to risk an open war with Russia over Ukraine? I posit that the American system is increasingly desperate to grow the global capitalist system in order to solve the financial crisis that threatens to overcome it. Because it is desperate, it is more willing to lie to mask the real purpose. This desperate bid to increase it's market share is not something overtly stated but is, rather, largely unconscious. It is a driver of the consumption machine that feeds global capitalism, serving the function plunder did in earlier empires. The imperial system depends on an increasing flow of plunder.
And this brings us back to the orient of nature. Because this system of global capital is essentially natural, in terms of energy flows through the system, then more efficient western capital will exploit Russian energy more effectively. The key is to control the resources, and Russia is the biggest store of untapped natural resources left in the world. To bring that into the fold is quite a prize for the system as a whole and gratify the need for it to expand. You can decide for yourself the moral implications of this and weigh all the factors you see fit. But nature itself isn't necessarily moral. Morality comes out of a consciousness capable of empathic imagination. By describing what is happening between Russia and the U.S. as a problem of natural impulses that are largely unconscious, a broader understanding of all the critical, material crises facing humanity right now staring us in the face can be grasped. Whatever the "problem" is, from climate change to debt to fossil fuel depletion, is made clearer through recognizing the unconscious forces behind them. Understanding these forces by plopping them into the conscious mind is truly the only way humanity can decide to avoid a global calamity.
It's important to point out that the ongoing economic crisis is really an energy crisis masquerading as a debt problem. That is a subject for some other time but that is key to understanding why the national politics really don't work anymore. Big statement, but I'll explain later.
Thursday, November 6, 2014
The Growing Context Over Ukraine
So I had been writing a rather longish Contribution to the blaboshpere when I realized that I needed to write one in between. The struggle before me is to craft this so that it grooves with the next topic, which is to place the current U.S.-Russia imbroglio into a wider point on wise ape behavior generally.
I left off promising to dig a little further into Vladimir Putin's "Iron Curtain" speech. I said we should view Putin's words as a true and truthful statement about what he sees happening in the world and what he thinks should be done about it. I think he truly wants to avoid war with the United States, for starters, and his mentioning it shows his thinking about the possibility is advanced. I think his statements on the deterioration of the world order is accurately couched in terms of American unilateralism opportunistically ignoring or cynically enforcing rules when it suits it's interests. Lastly, he charges that since the end of the Cold War America has been trying to reshape the world in it's image and has trampled on the principle of sovereignty in the process. I can accept this, though sovereignty has always been on a sliding scale depending on how powerful you are.
Be that as it may, Putin is observing the deterioration of the global order through his own eyes. Now, the "forces of chaos" are at his doorstep strangling his country with heavy duty economic sanctions and military encirclement. Of course, the military encirclement has been ongoing with the expansion of NATO and this, coupled with the "shock therapy" economic prescription, certainly wounded the ego of the Russian ruling class, but it's hard to see that as the real or ultimate cause of the Ukraine crisis. This leads me to another point Putin makes, one that has more of the politicians touch, and that is when he characterizes Russia's own interests and behavior.
The allegations and statements that Russia is trying to establish some sort of empire, encroaching on the sovereignty of its neighbors, are groundless. Russia does not need any kind of special, exclusive place in the world – I want to emphasize this. While respecting the interests of others, we simply want for our own interests to be taken into account and for our position to be respected.
This is the bugaboo right here. The question of Russia's character having been transformed from the nation hated by it's neighbors, many of whom were more than happy to join NATO, into a peaceful, respectful regional cohabitor is a little too rich. That Russia is a mafioso-style autocratic oligarchy presented cynically as a parliamentary republic doesn't allow for much confidence from those in the liberal West. On top of that, it might be a matter of opinion, but one informed by some history, that Russia does indeed consider itself to be rather special. And, in it's way, it certainly holds a singular spot in geopolitics. After all, there aren't a whole lot of recently-made-former superpowers hanging around the global scene. Putin might be a rough analog to Charles de Gaulle, which, to my mind, would be innocent enough.
Another element of Russia's unique position is it's mixed bag of high-tech savvy coupled with lots of poverty, all stirred in with a mishmash of modern and unmodern social attitudes. You could say, not too simplistically, that Russia is a traditional society infused with a heavy dose of scientific and technological culture. At the same time, Russia has always been skeptical of the political and commercial openness which sprang from the Western Enlightenment ideals of liberalism. As a result, Russia has been regarded throughout history as backward by the West. This teleological view may be correct on it's own terms but teleology is itself a flawed Enlightenment notion. In other words, Russians don't share the view that history is necessarily going anywhere. That Communism shares this belief with capitalism doesn't mean Russians as a whole adopted it. If anything, it made them more wary of the promises of teleology. By contrast, Americans belief in the direction of progress is a powerful rationale for it's expansionary practices which have at last arrived at the Russian border.
From where I'm sitting, the world is not big enough for both Russia and the United States. One, or both, has to change in order for the two to coexist. This sounds like the revisitation of the Cold War but that's a silly analogy. The Cold War is more usefully understood as representing a particular era of competing ideologies and systems contained by MAD. What we see today is a more conventional interstate conflict between a hegemon and an unsubdued lesser power. But "conventional" ways of looking at the present are bound to be limited because the natural limits to growth on a finite planet is a new phenomenon, at least at this scale. So it is best to view this conflict as another manifestation of the global zero sum game. Putin, I believe, rightly understands that the growth of the West comes automatically at Russia's expense. Russia would lose it's natural wealth and gain little in return if he were to allow global capital to rampage through the Russian hinterland. Putin wants to rampage it on his own terms.
It's hard to say what will happen over Ukraine. Personally, I think the U.S. should allow the break-up of Ukraine and let Russia annex the Russian speaking parts of it. Of course, this has it's own serious difficulties, but I'm not going to go into that because a larger context needs to be sketched out, which will constitute the next post. I'll end with one last insight at the beginning of Putin's speech that I think is most important to remember:
As we analyze today’s situation, let us not forget history’s lessons. First of all, changes in the world order – and what we are seeing today are events on this scale – have usually been accompanied by if not global war and conflict, then by chains of intensive local-level conflicts.
History is messy and often tragic. Misapplying history and misreading the present is a real danger at any time, but especially at times of "change". Change in this context might just be a synonym for upheaval. The context in which events are occurring needs to be well and deeply conceived. Without this the wise ape simply gropes blindfolded in the dark in a room with moving furniture. To lift the blindfold, flip on the light, and nail down the furniture requires an innovative new approach, one that accounts for and encompasses all the confusing phenomena we see around us. The best hope for that is the biophysical perspective.
I left off promising to dig a little further into Vladimir Putin's "Iron Curtain" speech. I said we should view Putin's words as a true and truthful statement about what he sees happening in the world and what he thinks should be done about it. I think he truly wants to avoid war with the United States, for starters, and his mentioning it shows his thinking about the possibility is advanced. I think his statements on the deterioration of the world order is accurately couched in terms of American unilateralism opportunistically ignoring or cynically enforcing rules when it suits it's interests. Lastly, he charges that since the end of the Cold War America has been trying to reshape the world in it's image and has trampled on the principle of sovereignty in the process. I can accept this, though sovereignty has always been on a sliding scale depending on how powerful you are.
Be that as it may, Putin is observing the deterioration of the global order through his own eyes. Now, the "forces of chaos" are at his doorstep strangling his country with heavy duty economic sanctions and military encirclement. Of course, the military encirclement has been ongoing with the expansion of NATO and this, coupled with the "shock therapy" economic prescription, certainly wounded the ego of the Russian ruling class, but it's hard to see that as the real or ultimate cause of the Ukraine crisis. This leads me to another point Putin makes, one that has more of the politicians touch, and that is when he characterizes Russia's own interests and behavior.
The allegations and statements that Russia is trying to establish some sort of empire, encroaching on the sovereignty of its neighbors, are groundless. Russia does not need any kind of special, exclusive place in the world – I want to emphasize this. While respecting the interests of others, we simply want for our own interests to be taken into account and for our position to be respected.
This is the bugaboo right here. The question of Russia's character having been transformed from the nation hated by it's neighbors, many of whom were more than happy to join NATO, into a peaceful, respectful regional cohabitor is a little too rich. That Russia is a mafioso-style autocratic oligarchy presented cynically as a parliamentary republic doesn't allow for much confidence from those in the liberal West. On top of that, it might be a matter of opinion, but one informed by some history, that Russia does indeed consider itself to be rather special. And, in it's way, it certainly holds a singular spot in geopolitics. After all, there aren't a whole lot of recently-made-former superpowers hanging around the global scene. Putin might be a rough analog to Charles de Gaulle, which, to my mind, would be innocent enough.
Another element of Russia's unique position is it's mixed bag of high-tech savvy coupled with lots of poverty, all stirred in with a mishmash of modern and unmodern social attitudes. You could say, not too simplistically, that Russia is a traditional society infused with a heavy dose of scientific and technological culture. At the same time, Russia has always been skeptical of the political and commercial openness which sprang from the Western Enlightenment ideals of liberalism. As a result, Russia has been regarded throughout history as backward by the West. This teleological view may be correct on it's own terms but teleology is itself a flawed Enlightenment notion. In other words, Russians don't share the view that history is necessarily going anywhere. That Communism shares this belief with capitalism doesn't mean Russians as a whole adopted it. If anything, it made them more wary of the promises of teleology. By contrast, Americans belief in the direction of progress is a powerful rationale for it's expansionary practices which have at last arrived at the Russian border.
From where I'm sitting, the world is not big enough for both Russia and the United States. One, or both, has to change in order for the two to coexist. This sounds like the revisitation of the Cold War but that's a silly analogy. The Cold War is more usefully understood as representing a particular era of competing ideologies and systems contained by MAD. What we see today is a more conventional interstate conflict between a hegemon and an unsubdued lesser power. But "conventional" ways of looking at the present are bound to be limited because the natural limits to growth on a finite planet is a new phenomenon, at least at this scale. So it is best to view this conflict as another manifestation of the global zero sum game. Putin, I believe, rightly understands that the growth of the West comes automatically at Russia's expense. Russia would lose it's natural wealth and gain little in return if he were to allow global capital to rampage through the Russian hinterland. Putin wants to rampage it on his own terms.
It's hard to say what will happen over Ukraine. Personally, I think the U.S. should allow the break-up of Ukraine and let Russia annex the Russian speaking parts of it. Of course, this has it's own serious difficulties, but I'm not going to go into that because a larger context needs to be sketched out, which will constitute the next post. I'll end with one last insight at the beginning of Putin's speech that I think is most important to remember:
As we analyze today’s situation, let us not forget history’s lessons. First of all, changes in the world order – and what we are seeing today are events on this scale – have usually been accompanied by if not global war and conflict, then by chains of intensive local-level conflicts.
History is messy and often tragic. Misapplying history and misreading the present is a real danger at any time, but especially at times of "change". Change in this context might just be a synonym for upheaval. The context in which events are occurring needs to be well and deeply conceived. Without this the wise ape simply gropes blindfolded in the dark in a room with moving furniture. To lift the blindfold, flip on the light, and nail down the furniture requires an innovative new approach, one that accounts for and encompasses all the confusing phenomena we see around us. The best hope for that is the biophysical perspective.
Friday, October 31, 2014
Thoughts on Putin's Address at Sochi.
It is generally the case with people that when they hear about long term projections into the future involving a complex event, or set of broad conditions, or a distant but probable catastrophe, they drop it into a mental box labeled "not today". This can be seen especially when it is a changing circumstance that takes decades of change to play out, making it virtually unnoticed in the day to day life most of us live in. Climate change is the most well known of this type of decades-long shifting of an underlying condition, but it's true of historical events as well. For example, people who think about such things widely accept the probable outcome of China becoming an economic and military superpower a la America. Depending on how it's defined, maybe China has already achieved that status. On the other hand, maybe China will never attain that status. Whatever the truth is there isn't always a signal event to tell us a thing has happened. Sometimes, though, events send a strong signal and it's a good idea to notice them.
The trend I'm talking about is the historical emergence of a multipolar geopolitical arrangement in which the United States is no longer the lone superpower but instead is a single great power among several. Or something along those lines. This outcome would be the logical outcome of the post-war trend of relative decline of the share of total power in the world and is not a radical notion for security brains to think about. Nothing that has happened since WWII to appreciably interrupt the slow and steady drop of American power. Today might be a good day to consider that we are in this new multipolar world, or that it is rapidly dawning, and that the U.S. maybe...possibly should learn to accept it.
Dmitry Orlov posted on his ClubOrlov blog a recent speech by Vladimir Putin at the Valdai Conference in Sochi, Russia. Orlov says this is the most important speech since the "Iron Curtain" speech given by Churchill in 1946. Time will tell if this is true or not, but it is certainly of the same rhetorical species in that it draws a clear line of what Russia is willing to do and not do vis a vis the United States. A key difference is Putin is more conciliatory. It's actually a good speech, a powerful speech which speaks of many basic principles in a substantive way. Whatever one's opinion is of Putin, (he lies, of course,) but that in itself is not unusual. I think it's best to view this speech as a true statement of Putin's, and Russia's, conviction to resist the U.S. and a truthful statement about how he sees the world right now and what he himself would like to see.
Rather than summarize the speech myself I'll post the main points as they are on ClubOrlov. The entire speech is at the end of the blog post.
1. Russia will no longer play games and engage in back-room negotiations over trifles. But Russia is prepared for serious conversations and agreements, if these are conducive to collective security, are based on fairness and take into account the interests of each side.
2. All systems of global collective security now lie in ruins. There are no longer any international security guarantees at all. And the entity that destroyed them has a name: The United States of America.
3. The builders of the New World Order have failed, having built a sand castle. Whether or not a new world order of any sort is to be built is not just Russia's decision, but it is a decision that will not be made without Russia.
4. Russia favors a conservative approach to introducing innovations into the social order, but is not opposed to investigating and discussing such innovations, to see if introducing any of them might be justified.
5. Russia has no intention of going fishing in the murky waters created by America's ever-expanding “empire of chaos,” and has no interest in building a new empire of her own (this is unnecessary; Russia's challenges lie in developing her already vast territory). Neither is Russia willing to act as a savior of the world, as she had in the past.
6. Russia will not attempt to reformat the world in her own image, but neither will she allow anyone to reformat her in their image. Russia will not close herself off from the world, but anyone who tries to close her off from the world will be sure to reap a whirlwind.
7. Russia does not wish for the chaos to spread, does not want war, and has no intention of starting one. However, today Russia sees the outbreak of global war as almost inevitable, is prepared for it, and is continuing to prepare for it. Russia does not war—nor does she fear it.
8. Russia does not intend to take an active role in thwarting those who are still attempting to construct their New World Order—until their efforts start to impinge on Russia's key interests. Russia would prefer to stand by and watch them give themselves as many lumps as their poor heads can take. But those who manage to drag Russia into this process, through disregard for her interests, will be taught the true meaning of pain.
9. In her external, and, even more so, internal politics, Russia's power will rely not on the elites and their back-room dealing, but on the will of the people.
To these nine points I would like to add a tenth:
10. There is still a chance to construct a new world order that will avoid a world war. This new world order must of necessity include the United States—but can only do so on the same terms as everyone else: subject to international law and international agreements; refraining from all unilateral action; in full respect of the sovereignty of other nations.
To sum it all up: play-time is over. Children, put away your toys. Now is the time for the adults to make decisions. Russia is ready for this; is the world?
Clearly this is from a Russian perspective but that doesn't justify dismissing it as simple posturing. That's the job of American media. The language in Putin's speech was certainly more diplomatic than this summary but the summary seems faithful to the original. I would encourage you to read the speech in full.
Russia's position reminds me of a scene from a movie I saw long ago. In this clip is a description of a kind of deterrence employed by smaller nations throughout history.
Russia of course has the nuclear deterrent, but Putin is pointing to this more limited kind of deterrent, one he feels Russia is capable of fulfilling. Maybe it's become a habit for Americans to assume that a show of force is enough to cow nations into complicity but obviously this has not worked in the case of Russia. The question is how much can they make it hurt and how much hurt is the U.S. willing to take.
Americans have been fed a buffet of idiotic morsels regarding the character of Vladimir Putin. I am not in the habit of defending the grim man whose smile muscles have atrophied, but he is not Joseph Stalin or Adolf Hitler. Such stupid statements are purely for American consumption whose knowledge is of a limited scope and can't think of possibilities beyond good and evil. But even serious people have to pause for a bit to consider what is at stake for the either side in this. I've written about this before in light of diminishing returns. Put that into the context of growing global chaos, which Putin describes in some detail, and it's easy to see what's going on. He makes this statement about a third of the way through:
We sometimes get the impression that our colleagues and friends[in the West] are constantly fighting the consequences of their own policies, throw all their effort into addressing the risks they themselves have created, and pay an ever-greater price.
Is that a reasonable assessment to make about American foreign policy over the past couple of decades? One just has to think the word "Iraq" to understand it. But it goes well beyond just Iraq and Putin lists several charges against the "friends and partners" in the West that have set the world on the path to chaos. It's this Americans should examine and think clearly about the magnitude of this diminishing return.
Because someday, the diminishing returns will shift to negative returns. Actually, it is well past that point. Adding Russia to this mix of expensive endeavors with no return will have a cost directly felt by Americans because Russia is not in the same league as Iraq, or Syria, or even Iran. And the benefit is...the liberation of Ukraine? But this is an absurdity. It goes much deeper than this and it is built into the system of capital and it's insatiable demand for credit and opening markets for multinational corporations.
This, however, will require another post. I'll also consider the merit/demerit of other charges made by Putin.
The trend I'm talking about is the historical emergence of a multipolar geopolitical arrangement in which the United States is no longer the lone superpower but instead is a single great power among several. Or something along those lines. This outcome would be the logical outcome of the post-war trend of relative decline of the share of total power in the world and is not a radical notion for security brains to think about. Nothing that has happened since WWII to appreciably interrupt the slow and steady drop of American power. Today might be a good day to consider that we are in this new multipolar world, or that it is rapidly dawning, and that the U.S. maybe...possibly should learn to accept it.
Dmitry Orlov posted on his ClubOrlov blog a recent speech by Vladimir Putin at the Valdai Conference in Sochi, Russia. Orlov says this is the most important speech since the "Iron Curtain" speech given by Churchill in 1946. Time will tell if this is true or not, but it is certainly of the same rhetorical species in that it draws a clear line of what Russia is willing to do and not do vis a vis the United States. A key difference is Putin is more conciliatory. It's actually a good speech, a powerful speech which speaks of many basic principles in a substantive way. Whatever one's opinion is of Putin, (he lies, of course,) but that in itself is not unusual. I think it's best to view this speech as a true statement of Putin's, and Russia's, conviction to resist the U.S. and a truthful statement about how he sees the world right now and what he himself would like to see.
Rather than summarize the speech myself I'll post the main points as they are on ClubOrlov. The entire speech is at the end of the blog post.
1. Russia will no longer play games and engage in back-room negotiations over trifles. But Russia is prepared for serious conversations and agreements, if these are conducive to collective security, are based on fairness and take into account the interests of each side.
2. All systems of global collective security now lie in ruins. There are no longer any international security guarantees at all. And the entity that destroyed them has a name: The United States of America.
3. The builders of the New World Order have failed, having built a sand castle. Whether or not a new world order of any sort is to be built is not just Russia's decision, but it is a decision that will not be made without Russia.
4. Russia favors a conservative approach to introducing innovations into the social order, but is not opposed to investigating and discussing such innovations, to see if introducing any of them might be justified.
5. Russia has no intention of going fishing in the murky waters created by America's ever-expanding “empire of chaos,” and has no interest in building a new empire of her own (this is unnecessary; Russia's challenges lie in developing her already vast territory). Neither is Russia willing to act as a savior of the world, as she had in the past.
6. Russia will not attempt to reformat the world in her own image, but neither will she allow anyone to reformat her in their image. Russia will not close herself off from the world, but anyone who tries to close her off from the world will be sure to reap a whirlwind.
7. Russia does not wish for the chaos to spread, does not want war, and has no intention of starting one. However, today Russia sees the outbreak of global war as almost inevitable, is prepared for it, and is continuing to prepare for it. Russia does not war—nor does she fear it.
8. Russia does not intend to take an active role in thwarting those who are still attempting to construct their New World Order—until their efforts start to impinge on Russia's key interests. Russia would prefer to stand by and watch them give themselves as many lumps as their poor heads can take. But those who manage to drag Russia into this process, through disregard for her interests, will be taught the true meaning of pain.
9. In her external, and, even more so, internal politics, Russia's power will rely not on the elites and their back-room dealing, but on the will of the people.
To these nine points I would like to add a tenth:
10. There is still a chance to construct a new world order that will avoid a world war. This new world order must of necessity include the United States—but can only do so on the same terms as everyone else: subject to international law and international agreements; refraining from all unilateral action; in full respect of the sovereignty of other nations.
To sum it all up: play-time is over. Children, put away your toys. Now is the time for the adults to make decisions. Russia is ready for this; is the world?
Clearly this is from a Russian perspective but that doesn't justify dismissing it as simple posturing. That's the job of American media. The language in Putin's speech was certainly more diplomatic than this summary but the summary seems faithful to the original. I would encourage you to read the speech in full.
Russia's position reminds me of a scene from a movie I saw long ago. In this clip is a description of a kind of deterrence employed by smaller nations throughout history.
Russia of course has the nuclear deterrent, but Putin is pointing to this more limited kind of deterrent, one he feels Russia is capable of fulfilling. Maybe it's become a habit for Americans to assume that a show of force is enough to cow nations into complicity but obviously this has not worked in the case of Russia. The question is how much can they make it hurt and how much hurt is the U.S. willing to take.
Americans have been fed a buffet of idiotic morsels regarding the character of Vladimir Putin. I am not in the habit of defending the grim man whose smile muscles have atrophied, but he is not Joseph Stalin or Adolf Hitler. Such stupid statements are purely for American consumption whose knowledge is of a limited scope and can't think of possibilities beyond good and evil. But even serious people have to pause for a bit to consider what is at stake for the either side in this. I've written about this before in light of diminishing returns. Put that into the context of growing global chaos, which Putin describes in some detail, and it's easy to see what's going on. He makes this statement about a third of the way through:
We sometimes get the impression that our colleagues and friends[in the West] are constantly fighting the consequences of their own policies, throw all their effort into addressing the risks they themselves have created, and pay an ever-greater price.
Is that a reasonable assessment to make about American foreign policy over the past couple of decades? One just has to think the word "Iraq" to understand it. But it goes well beyond just Iraq and Putin lists several charges against the "friends and partners" in the West that have set the world on the path to chaos. It's this Americans should examine and think clearly about the magnitude of this diminishing return.
Because someday, the diminishing returns will shift to negative returns. Actually, it is well past that point. Adding Russia to this mix of expensive endeavors with no return will have a cost directly felt by Americans because Russia is not in the same league as Iraq, or Syria, or even Iran. And the benefit is...the liberation of Ukraine? But this is an absurdity. It goes much deeper than this and it is built into the system of capital and it's insatiable demand for credit and opening markets for multinational corporations.
This, however, will require another post. I'll also consider the merit/demerit of other charges made by Putin.
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