Wednesday, June 21, 2006

Decline and fall

By: Fritz_Gerlich
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And Jesus said unto them, See ye not all these things? verily I say unto you, There shall not be left here one stone upon another, that shall not be thrown down.
You amaze me, America. You are entering the maelstrom, but you don't even see it. You live a life of entitlement that you take entirely for granted, unaware that it is shortly to end, to be replaced by one of insecurity and stress if not of want and strife. If your children are young, the dreams you have for them almost certainly will not come true, because they will come of age in a different, much harsher, world. The electronic wealth you have accumulated may be safe from rust and the moth, but it will, through the magic of global finance, vanish even faster than your possession that are not. Your Christians foolishly scan the skies for signs of the coming Rapture, never noticing that history tightens its coils around their ankles, preparing to jerk them into a future as chaotic as the one their prophet foretold for the city that rejected him.

We are in the final halcyon days of denial, utterly incapable of perceiving, as a society, what historians will marvel that anyone could possibly miss. Not a single one of the large trends presently shaping the world points to a sustainable future--especially for us. There’s More... Expand PostThe bad news has already started to come in, and common sense tells us it will accelerate and accumulate. Within two years you will remember this prediction, and wonder uneasily if I was right. Within five years you will have the sinking feeling that I was. Within ten, you will know that I prophesied truly.


Energy. The world is beginning to run out of cheap hydrocarbons, which means that it is beginning to run out of hydrocarbons, period, because some who can now get it will lose that access because of rising cost. This effect will slowly gain momentum, as the remaining hydrocarbons get farther, deeper, poorer quality, and the needed investment mounts.

Despite brave talk about alternative energy and new energy, there is no relief on the horizon. Wind and solar are nice adjuncts but obviously incapable of supplying any serious part of the coming deficit in hydrocarbons. Fuel cells and fusion are speculation, at best so far in the future as to be irrelevant to the decades ahead. Nuclear power is in principle abundant, but faces great political resistance and requires huge lead times. Coal is also abundant, but imposes very high environmental costs. The real limitation of both nuclear and coal is that they are not adaptable to the vast transportation needs of society, ours or global. The whole vast transporation network, from ships to aircraft to motor vehicles and (in this country) railroads, was designed on the premise of unlimited cheap petroleum. It cannot by any stretch of the imagination be powered by uranium or coal. Without that transportation network, nothing else in society, ours or global, works as it is supposed to.

Dropping hydrocarbon production will affect the whole world. But the country with the farthest to fall in that regard is the United States, which has 6% of the world's population and uses 25% of its petroleum. In past decades, Americans sometimes defended this disproportion by claiming that they produced more for the world. But while that may have been true in 1955 or 1965, it is definitely not true now, except in agriculture and defense. The American demand for energy is predominately consumptive in nature, especially with respect to our vast dependence on automobiles. There were and are alternatives to private automobile transportation, but we rejected them decades ago. Because of that long-ago policy choice, we now feel that our dependence on automobiles is an entitlement that cannot and must not be changed. As vice president Cheney said: "The American way of life is not negotiable." The reeking arrogance of that statement is an ill omen indeed, for this country and for the world.

Food. The impending hydrocarbon crisis poses a more direct threat to survival than simply not having gas to put in our cars. World food production is critically dependent on manufactured fertilizers whose principal resource base is natural gas. As North American and world natural gas supplies draw down--North America is in depletion now, i.e., past its peak production--the same thing happens with those fertilizers that is already happening with gasoline. Only now, it's not transportation problem we're talking about, which can be solved/compensated to some degree in other ways, but a decline in the world's ability to produce the food necessary to feed a population of more than six billion--a population that could never have existed in the first place without abundant cheap natural gas to turn into fertilizer.

Climate change is another threat to world food production. Although a marked warming trend is now beyond dispute, experts are appropriately reluctant to predict the incidence or degree of its effects on agriculture. But there are ominous signs. Europe suffered record heat and drought in the summer of 2002, severely damaging its agricultural output. Australia, a major wheat producer, is in the sixth year of a punishing drought. China's harvests have fallen well below targets in recent years, forcing cereal importation. If severe drought were to strike China for two years in a row, it would likely face a genuine emergency. The United States has been drawing down the Midwestern Oglalla Aquifer for over a century to irrigate crops. This stored water has been a major source of America's awesome food-producing ability. But the aquifer is a non-renewable resource at the rate we are depleting it, and it must fail sometime. How long it has left is not known. If the Plains suffered prolonged drought as the aquifer began to run dry, the world's champion food producer would suddenly slump, with grave consequences for itself and world markets.

Debt. Back in the 1950's and 1960's, when we were Europe's great market, we still produced all kinds of valuables, including most manufactured ones, for sale around the world. We were the only major producers of some, such as jet aircraft. Then the Japanese surged up in automobiles, steel, appliances and electronics, and we abandoned or reduced our investment in those. We did a lot of the pioneering work in computers, but that manufacturing quickly moved offshore. Software had its day in the 1980's and 1990's, but now that market is mature and sedate. For several decades the U.S. had a dominating presence in the "financial industry"--banking, insurance and the like--but the rapid globalization of capital soon took away much of our puissance there. Virtually all textiles and light consumer goods are now produced abroad; that is the magic of Wal-Mart. And, as everybody knows, even such culturally-specific activities as telephone services are now being rapidly moved to call centers in India.

There is only one economic pursuit that America still excels at: consumption. Look carefully and honestly at your community. What is its economic base, i.e., what provides most of its jobs? Although there are exceptions, the answer for most communities is: government, construction, retail and services. However necessary those things are, none is a primary wealth-producing activity. They are adjuncts to an economy resting on some firmer base.

America's once-firm economic base--considered awesome and invulnerable in my childhood--has been largely eroded away. We've depleted our oil and gas, cut down our forests or closed them to logging, destroyed our many hundreds of thousands of small farms by policies encouraging "agribusiness," and closed our factories and shipped the jobs they once offered overseas. In return, we've gained a burgeoning low-wage retail sector, a gross and glutted residential construction sector, a sclerotic and largely irrational health care sector, and a cowed, defensive public sector. Great CEOs no longer lead companies in inventing new products and creating markets for them, but by mergers, acquisitions, and liquidations. Fortunes are made, not by finding or inventing new sources of wealth for the community or nation, but by financial manipulation or "celebrity" qualities (not restricted to entertainment and sports; successful CEOs, lawyers, journalists, etc., are now essentially celebrities of a specialized kind).

What this historic shift from Global Producer to Global Consumer has meant is that we have also transformed ourselves from Global Creditor to Global Debtor. The numbers are so large they are almost meaningless; and besides, they change constantly. The United States is literally hemorrhaging its once-vast wealth across the oceans to other nations, and their governments, in two ways. One is through uncontrolled consumption by business and, ultimately, consumers. This produces a vast, seemingly ucontrollable trade deficit. The other is through uncontrolled borrowing by the federal government, which produces vast debt to the governments of nations that buy the treasury securities that are our debt instruments. China, Japan and Taiwan are chief among those nations.

These great macroeconomic debts are reflected within the national economy by our negative savings rate (we not only save nothing, we spend more than we earn), and our staggering levels of credit card and mortgage debt. Probably our indulgence about personal debt has a lot to do with our political acceptance of government debt. A politician who told us, flat out, that we are digging our own collective grave by accumulating massive public debt and that we have to do something drastic to stop it might also make us worry about the wisdom of our home equity loans and zero-down ARMs. So we listen to, and vote for, the guy whose soothing tones implies that all's right with the world.

But it isn't. The rest of the world may be in a temporary quandry about what to do about us; they need us as a bottomless market, and they use our dollars as their reserve currency, so if they suddenly pull the rug from under us they will hurt themselves, too. But if history teaches anything, it's that lies aren't durable. We call them lies precisely because they don't hold up as well as what we call truth. It is often said (in America, anyway) that communism failed and we prevailed because our system is founded on a clear-sighted, tough-minded understanding of reality, while communism was a bizarre ideology that tried to deny reality. Very well--if truth won out in that great contest, why will it not win out when the world sits down to consider whether it really serves everybody's interest to keep feeding an America that no longer works? That borrows the world's wealth to keep on spending without limit? That hogs a quarter of the world's shrinking energy budget, not to benefit the world but for its own ever-greater consumption? Where is reality in this? It is not on our side.

Wars and rumors of wars. Ah, but we have the big battalions on our side. We are not just a superpower, we are a hyperpower, the hyperpower, the Global Hegemon. So in the end, we can get what we need, can't we? Take oil: we're fighting in Iraq now . . . well, not to get oil, officially anyway, but to plant democracy that will somehow, in some vague way, ensure that we can get oil in the future. We have "global interests," and also a military with global reach, to protect those interests.

This is the saddest delusion of all, the one that really seals our fate. One need look no farther than Iraq for proof. After all the shock 'n' awe, after whipping the pants off of Saddam's already pantless army, losing 2,500 lives and spending around half a trillion borrowed dollars, after three years of steadily dropping confidence in a president who once had the highest American Idol rating in history, not a single barrel of Iraqi oil is on the world market that was not on it before the war. Indeed, less. The price of oil has more than doubled since the invasion of Iraq. The oil that was to painlessly pay for both the war and Iraqi reconstruction has become a vast slush fund for Iraqi warlords and gangsters--that part of it, that is, that makes it past the constant sabotage of pipelines, refineries and loading facilities by anybody with an interest in stopping it.

Our military has not only failed in Iraq to improve our access to a pig's share of the world's oil, and not only failed to install a stable and durable democracy--it has been strained almost to the breaking point in trying. That is possibly the single most important fact about the Iraq war, and the one that will hurt the "global hegemon" the most. In Iraq, the limits of American war-fighting capability are clear for anyone to see. The Americans can bomb the bejesus out of anybody. But against an enemy they can't defeat from the air, they must fight against the clock. Not only the political and economic clocks (how long will support for the war last? how deeply can we go into debt to pay for it?) but, above all, the military clock: how long dare we tie up most of our assets in a bogged-down war with no promise of any early end? What if something else happens elsewhere? What if this war threatens to spread to nearby nations?

Iraq, like Vietnam, is simply an insurgency that won't end. We have staked "victory" on ending it--an impossible goal. In Iraq, as in Vietnam, we are trying to impose from without what a foreign nation either does not want or is not able to sustain. What we see from our American perspective is "democracy," what they see is centuries of division and distrust and endless opportunities for sectarian, tribal and individual aggrandizement. If there was ever any hope of our overcoming those centrifugal forces, it was lost when we failed to secure the country promptly at the start of the occupation. It has been all downhill from there. It is very difficult to see what else could be needed to prove that the most Bush can hope for in Iraq is a Potemkim democracy.

Then let them which be in Judaea flee into the mountains. None of the fundamentals is right. Military might is our one high card, and it only confirms us in our delusions and misleads us into blunders. Once America led the world in military might, industrial production, wealth equality, international influence, and moral suasion. All of them have been lost, except for high-tech aspects of warfare.

America, you are hollowed out. You are wallowing in claims of entitlement that have only grown as the one-time justifications for them have dwindled. You are shutting out vast pieces of reality, denying such obvious facts as that your bloated way of life--the one that Mr. Cheney thinks is so sacred-- cannot possibly survive the coming years of energy depletion, food scarcity and collapsing debt structures. You are living on fond pipe dreams about your own power that the world does not share. (And if your power impresses no one, what good is it?) And you are inflated with a sense of your own righteousness that might have been earned once, by your ancestors, but is now little more than public relations spun out by an increasingly pathetic government.

Your streets are jammed with cars, your malls with customers, your idiotic television shows and your sappy civic celebrations with complacent citizens who simply cannot imagine things being any different. It would do no good to tell them. I am sorry for you, and for them. I live in the forest, my house is (or can be) heated with the wood that will always grow there, my water comes from my own well, I hunt and fish for food, I can garden on a large scale if I must, I have the tools I need to build and repair, I have the skills to survive on my own. I cannot do entirely without fuel, but I can reduce my needs to a very small amount in a time of scarcity. I have no debts. My modest personal fortune is now shifted largely into gold and similar investments that I think will be safe even in times of financial panic. My children are grown. And, perhaps most important of all, my life is well more than half lived, and in it I have seen things that taught me what a work of art is man. In that sense, I am complete, and I do not fear the future. What saddens me is that I doubt so much that the next generation is going to have anything close to the same wonderful opportunities. And it is partly my fault.