A New End: A New Beginning (Part 2)
There are numerous indicators that suggest the big change is coming.
- Multiple trends are converging - Huge, extraordinary, global trends, any number of which would be enough to derail our present way of life, are converging to precipitate a historic big transition event. A partial list would include:
- The global financial system is collapsing. During the next 10 months, it appears that wave after wave of blows will strike the system (see this Feb. 15th piece by Dave Martin about the next big shock), raising the very real possibility that it will experience large-scale failure sometime before the end of the year.
- We have reached the beginning of the end of petroleum. Global production has been flat for the last three years. Senior oil company executives are now saying that they will not be able to pump more. Supply will likely begin to decrease significantly after we move across the peak. Prices will increase again if the demand holds up. This is important because our present way of life is built upon petroleum.
- The global climate system is changing – some say it is getting much warmer, others now suggest a mini-ice age within the next decade. In any case, probably increased irregularities in local climates will result with attendant problems in agriculture, natural disasters, and economies.
- The cost of food is increasing rapidly as a result of global shortages not seen in 40-50 years. This could be exacerbated by increasing energy costs and climate changes.
- The effects of larger solar eruptions hitting the earth through a tear in the magnetosphere will disrupt global communications, weather, perhaps satellites, and even organic life over the next 3-4 years.
- Problems are much larger than government – These kinds of problems are much greater than anything that contemporary governments have ever had to deal with before. Peak oil, climate change, and the financial meltdown by themselves have the potential to significantly overwhelm the capabilities of government. If bureaucracies can’t deal with the aftermath of a natural disaster like Katrina, something ten or more times that damaging would leave most people fending for themselves. If these extraordinary, disruptive events end up being concurrent, then the whole system is at risk.
- The problems are structural - They’re systemic. Perhaps the best source for beginning to understand the deep, interdependent nature of all of this is by taking the Crash Course at Some of these issues, especially the financial, oil, and food problems are also a product of how we live, our priorities, and our paradigms. We are creating the problems because of our values and principles. Without extraordinary, fundamental changes in the way we see ourselves and the world, we will keep getting what we are getting.
- Leaders think the old system can be “rebooted” – Almost everyone in leadership positions in the Obama administration and in other countries, wants to make the old system well again. Jim Kunstler has said it well: “Among the questions that disturb the sleep of many casual observers is how come Mr. O doesn’t get that the conventional process of economic growth — based, as it was, on industrial expansion via revolving credit in a cheap-energy-resource era — is over, and why does he keep invoking it at the podium? Dear Mr. President, you are presiding over an epochal contraction, not a pause in the growth epic. Your assignment is to manage that contraction in a way that does not lead to world war, civil disorder or both. Among other things, contraction means that all the activities of everyday life need to be downscaled including standards of living, ranges of commerce, and levels of governance. “Consumerism” is dead. Revolving credit is dead — at least at the scale that became normal the last thirty years. The wealth of several future generations has already been spent and there is no equity left there to re-finance.”
That is why:
- We’re not dealing with the structural issues - All of the biggest efforts are attempts to reinflate the financial bubble, and keep the mortally wounded institutions alive. The knee-jerk reactions come from the same people who helped to design and feed the present system. These people are also deluded – they think (or act like) they know what they are doing. They don’t realize that:
- The situation is so complex that no one really understands it – The Global Business Network’s Peter Schwartz, reporting on a conversation with the Financial Time‘s Martin Wolf said that Wolf’s key point was that the nature and scale of the credit crisis is so novel that it’s not clear we know what we’re doing when we try to stop it. He is deeply worried. Steve Roach of Morgan Stanley said at the World Economic Forum annual meeting at Davos that he agreed with Wolf: we are in uncharted waters. Nassim Nicholas Taleb, author of The Black Swan: Impact of the Highly Improbable, says the financial system is so complex that it is impossible for anyone to understand it . . . and because of that complexity it is inevitable that it will exhibit significant, unanticipated behaviors (his Black Swans) that careen across the planet.
- The issues are global – Japan’s exports fell by 46 percent in January, and Hong Kong’s economy contracted 2.5 percent in the last three months of 2008. Foreign investors closed 45,000 factories in China in the last 8 months and China closed 20,000 itself. Those closed factories mean products aren’t being shipped.
- The system is fundamentally out of balance – In the U.S., the rich are getting richer (at unconscionable rates). National media has reported that the government is monitoring all internal communications of its citizens – but lies and says it is not. Common sense is not included in big, sweeping federal edicts. The Transportation Security Administration, for example, wants to make pilots produce background checks on members of their family (and their business associates) in order to legally give them rides in a non-commercial, private airplanes. The Agriculture Department in its NAIS program wants all small farmers (big feedlots are exempt, of course) to put GPS/RFID tags on all of their animals: chickens, cows, horses, goats – even fish were initially included – so that the beasts can be tracked, on a day to day basis by the government, It’s also now against the law in some states, like Illinois, for farmers to save the seeds that they’ve grown – they must buy new ones each year from large seed companies.
- Most of the U.S. federal budget goes to the military – More than half of the U.S. federal budget goes to military and military-related agencies. This kind of growth, of course, is what brought down the Soviet Union. In sharp contrast to the political apparatchiks that protest that more money is needed to reverse the shrinking, aging, and decline in readiness in the Army, Navy and Air Force, few seem to understand that budget increases are a primary cause of the problems, a symptom clearly described in the new book, America’s Defense Meltdown: Pentagon Reform for President Obama and the New Congress. (by Winslow Wheeler, et al., available in late March)
- No new ideas, government can’t be responsive - If the natural solutions to these massive issues include innovation, foresight, adaptability, sustainability, and resilience, it is unlikely that a thinking American could be found who would suggest that the source for these capabilities would be our government. They’re in charge, but they have no new ideas about how this all should work. They’re also slow – and this situation needs fast, agile responses. There is an additional problem: even if they did have good ideas the government wouldn’t be able to effectively implement them because -
- Too much inertia, too many lawyers and lobbyists — There is a huge, well-funded effort in place to maintain the status quo or to shift the future to benefit one group at the expense of others. It would be impossible within the present system to initiate dramatic change when the threat was still on the horizon. Every group or organization that might be negatively affected would fight in congress and the courts to keep themselves alive regardless of what was at stake for the larger community. Only when the crisis was about to crash down on everyone – when adequate time and resources for effective response were nonexistent – might everyone pull together for the common good.
- Potential solutions take too long to implement – These issues are so gigantic that confronting and redirecting them takes a long time. One study, for example, suggested that a national crash program to find alternatives for oil would need to have been started 20 years before the peak in order for there not to be significant disruption of the underlying systems. We do not operate with either that foresight or resolve.
- Supply chains are long and thin - Globalism and just-in-time production has produced supply chains in most areas of commerce that are very long – often to the other side of the earth – and very fragile. There are many places between there and here where something can go wrong. If and when that happens, necessities will not be available and in those situations, people resort to unconventional and/or anti-social behavior.
- $600 trillion in derivatives are a house of cards — Looming over the whole financial situation is an almost unfathomable quantity of financial instruments – derivatives – which are essentially casino bets with no underlying value supporting the transaction. Warren Buffett calls them financial weapons of mass destruction that could bring the whole system down. Derivatives only work if there is confidence in the system – you believe the casino will really pay your winnings. If other things in the environment erode that confidence there is the real possibility that things rapidly reconfigure themselves.
- Cooperation is unlikely, protectionism will prevail - Instead of countries cooperating with each other to deal with these big transnational problems, we’re seeing a pulling back to protect each country’s perceived short-term interests, regardless of what the implications might be in the longer term. At the same time we’re all connected to each other in very complicated ways, so if any substantial pieces of the system don’t work it will affect all of the other ones.
- History says it’s time – Perhaps what is most compelling to me is that history strongly suggests that the time is right for an upset – they always happen about now in the historical cycles. I talk about this in my book a bit, but the short version is that big punctuations in the equilibrium of evolution have produced extraordinary, fundamental reorganizations to life on this planet on a regular, accelerating basis from the beginning of time as we know it. We make progress as a species when we are forced in one way or another to evolve to seeing ourselves and the world in new ways. Necessity is the mother of invention, etc.
(To be continued)