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EXTRACTED: Power is nothing without control: how to lose an empire

EXTRACTED: Power is nothing without control: how to lose an empire.

Sunday, March 23, 2014

Power is nothing without control: how to lose an empire

Image from an advertising campaign for Pirelli in the 1990s.

Empires seem to be a typical human structure that reappears over and over in history. The problem is that empires are often so efficient that they tend to overexploit and destroy even theoretically renewable resources. The final result is a destructive cascade of feedbacks: not only the empire gradually runs out of resources, but it also runs out of the capability of controlling them; with the two effects reinforcing each other. Power is nothing without control. And, usually, control seems to run out before power.

In practice, empires in trouble tend to fragment into independent blocks or statelets before actually disappearing as economic systems. It is the result of the increasing costs of control, which are not matched any more by the diminishing flux of natural resources. We have seen this phenomenon in recent times with the fragmentation and the disappearance of the Soviet Union. We may be seeing it today with the modern worldwide empire we call “Globalization.” The recent events in Ukraine seem to show that the system, indeed, has troubles in controlling its periphery and may soon fragment into independent blocks.

Of course, it is still too early to say whether what we are seeing today in Ukraine is just a bump in the road or a symptom of impending systemic collapse. As usual, however, history may be a guide to understand what lies ahead. In the following post, I examine the collapse of the Roman empire in light of considerations based on control and resources. It turns out that, even for the ancient Romans, power was nothing without control.

Peak gold: how the Romans lost their Empire

by Ugo Bardi

A Roman “Aureus” minted by Emperor Septimius Severus in 193 CE. At nearly 8 grams, the Aureus was truly an imperial coin – the embodiment of Rome’s wealth and power. (image from Wikipedia).
In this post, I argue that precious metal currency was a fundamental factor that kept together the Roman empire and gave to the Romans their military power. But the Roman mines producing gold and silver peaked in the first century CE and the Romans gradually lost the capability of controlling their resources. In a way, they were doomed by “peak gold.”

When I heard for the first time that the Roman Empire fell because of the depletion of its silver and gold mines, I was skeptical. Compared to our situation, where we are facing the depletion of fossil fuels, the Roman case seemed to me to be completely different. Gold and silver don’t produce energy, they don’t produce anything useful. So, why should the Roman Empire have fallen because of something we might call “peak gold”?

And yet, as I delved into the matter, I noticed how evident was the correlation of declining gold and silver availability with the decline of the Roman Empire. We have scant data on the production of Roman mines, mainly located in Spain, but it is commonly believed that production peaked at some moment during the first century CE (or perhaps early 2nd century CE). Afterwards, it rapidly dwindled to nearly nothing, even though gold mining never completely stopped (1).

As you can see in the figure, the loss of precious metal production was reflected in the silver content of the Roman currency. The Romans didn’t have the technology needed to print paper bills, so they just debased their silver currency, the “denarius,” by increasing its copper content. By mid 3rd century, the denarius was nearly  pure copper: “fiat money” if there ever was one. During that  period, gold coins were not debased, but they basically disappeared from circulation. (graph above from Joseph Tainter (2)).

As I argued in a previous post, the progressively dearth of precious metals  correlates well with the various events that took place during the declining phase of the empire and with its eventual disappearance. Of course, correlation doesn’t mean causation but, here, the correlation is so strong that you can’t think it is just a question of chance. With time, it appeared clear to me that there were also clear links between several factors in the collapse of the Empire.

In general, complex systems tend to fall in a complex manner and the Roman Empire did not simply fall because of the lack of its primary energy source which, at that time, was agriculture. Energy (and power) is useless without control and for the Romans controlling the energy generated by agriculture requires capital investments for troops and bureaucracy. Both were affected by the decline of the production of precious metals. In time, the reduced military effectiveness of the empire disrupted the ability of controlling the agricultural system. That condemned the Empire to collapse.

This is a hugely complex story that can’t possibly be exhausted with a mere blog post. Nevertheless, the problem is very general and it can be condensed in a single sentence: “power is nothing without control” So, I believe it is possible to lay down in a relatively short space the main elements of the interplay between gold, military power, and food in Roman times. Let me try.

– The Romans and gold

Ultimately, what creates and keeps together empires is military force. The Roman Empire was so large and so successful because it was, possibly, the mightiest military force of ancient times. The Romans had been so successful at that not because of special military innovations. The recipe for their success was simple: they paid their fighters with precious metal currency. The combined technology of gold mining and coin minting had allowed the Romans to create one of the first standing armies in history. Still today, we call our enlisted men “soldiers”, a term that comes from the Roman word “Solidus;” the name of the late empire gold coin.

Not only money could create a standing army, it could also swell it to large sizes. Enlisting in the legions – the backbone of the army – was reserved to Roman citizens, but anyone could enlist in the “auxilia“, “auxiliary” troops. In the figure, you see Roman auxilia (recognizable by their round shields) presenting the severed heads of Dacians to Emperor Trajan during the Dacian campaign of the 2nd century CE. Normally, Romans were not supposed to cut off enemies’ heads, it was seen as uncivilized, but the auxilia were notoriously a little unruly (note how the Emperor, on the left, looks perplexed). But, by the time of the Dacian wars, the auxilia had become a fundamental part of the Roman army and they were to remain so for the remaining lifetime of the Empire.

Gold and silver were essential elements in the hiring of troops for the Romans and that was especially true for foreign ones. Put yourself in the caliga (sandals) of a German fighter. Why should you put your framea (lance) in the service of Rome if not because you were paid? And you wanted to be paid in serious money; copper coins would not do. You wanted gold and silver coins that you knew could be redeemed anywhere in Europe and especially in that gigantic emporium of all sorts of luxury goods that was the city of Rome, the largest of the ancient world. And, by the way, where did these luxury items come from? Mostly, were imported. Silk, ivory, pearls, spices, incense, and much more came from India and China. Importing these items was not just an extravagant hobby for the Roman elite, it was a tangible manifestation of the power and of the wealth of the empire; something that was an important factor in convincing people to enlist in the auxilia. But the Chinese wouldn’t send silk to Rome in exchange for worthless copper coins – they wanted gold and they obtained it. Then, that gold was lost forever for the Empire which, basically, could produce only two things: grain and troops, neither of which could be exported at long distances.

This situation explains the gradual military decline of the Roman empire. With the decline of the precious metal mines, it became more and more difficult for emperors to recruit troops. The lack of a strong central power caused the empire to become engulfed in civil wars; with the army mainly engaged in fighting chunks of itself and the empire splitting in two parts: the Eastern and the Western. During this phase, the number of troops was not reduced, but their quality strongly declined. After the military reform by Emperor Diocletian during the third century CE, the Roman army was formed mainly of limitanei; not really an army but a border police unable to stop any serious attempt on the part of foreigners to puncture the borders. To keep the empire together, Emperors relied on the “comitatenses” (also with other names) mobile crack troops which would plug (or try to plug) the holes in the border as soon as they formed.

The combination of limitanei and comitatenses worked in keeping the barbarian out of the Empire for a while. But the hemorrhage of gold and silver continued. So, during the last decades the empire, the paradigmatic Roman troops were the “bucellarii” a term that means “biscuit eaters”. The name can be taken as implying that these troops fought for food. Of course that may not have been always true, but it is a clear indication of the dearth of money of the time. There are also reports of troops paid in pottery and in some cases with land – the latter use may have been a factor in creating the feudal system that replaced the Roman empire in Europe.

In a way, as we see, the Romans were doomed by their “peak gold” (and also “peak silver). By the loss of their precious metal supply, the Romans lost their ability of controlling their troops and as a result of their resources. And power is nothing without control.

But the Roman empire did not fall just because it was invaded by foreigners or because it split in multiple sectors. It experienced a systemic collapse that wasn’t just a military one: it involved the whole economy and the social and political systems as well. To understand the reasons of the collapse, we need to go more in depth in the way the Roman economic system worked.

– The Romans and energy

The energy of the Roman Empire came from agriculture; mainly in the form of grain. At the beginning of their history and for several centuries onward, it seems that the Romans had little or no problems in producing enough food for their population. That makes sense considering that in Roman times the population of Europe was less than one tenth of what it is today and hence there was plenty of free space for cultivations. Reports of food problems in the Empire appear only with the 1st century CE and truly disastrous famines appear only with the 5th century CE – when the Western Roman Empire was already in its terminal phase. “Peak food”, apparently, came much later, about 3-4 centuries, than “peak gold”.

The very existence of a “peak food” for the Roman empire is somewhat puzzling: agriculture is, in principle, a renewable technology that had been able to feed the Roman population for several centuries. During the last period of the empire, there is no evidence of a population increase; on the contrary, it is clear that it declined. So, why couldn’t agriculture produce enough food?

The problem is that producing food doesn’t just involve plowing some land and sowing crops. Agricultural yields depend on the vagaries of the weather and, more importantly, agriculture has the tendency of depleting the land of fertile soil as a result of erosion. To avoid this problem, the ancient had a number of strategies: one was nomadism. From Caesar’s “De Bello Gallico” we learn that, as late as in the 1st century BCE, European populations still practiced a nomadic life style. They would do that in order to find new, pristine land and planting crops in the rich soil that they could produce by slashing and burning trees. That was possible because continental Europe, at that time, was nearly empty of people and entire populations could move unimpeded.

The Romans, instead, were a sedentary population and they had the problem of soil depletion. As population grew, erosion became a problem, especially in a mountainous region such as Italy is (3). In addition, some urban centers – such as Rome – became so big that they were impossible to supply using just local resources. With the 1st century BCE, the situation led to the development of a sophisticated logistic system based on ships that carried grain to Rome from the African provinces, mainly Libya and Egypt. It was a major task for the technology of the time to ensure that the inhabitants of Rome would receive enough grain and just when they needed it. It required large ships, storage facilities and, more than all, a centralized bureaucracy that went under the name of “annona” (from the Latin world “annum“, year). So important it was this system, that Annona was turned into a full fledged Goddess by imperial propaganda (you can see her in the image above, on the back of a coin minted at the time of Emperor Nero – from Wikipedia). For us, turning bureaucracy into a divine entity may appear a bit farfetched but, perhaps, we are not so far away from that.

Despite its complexity, the Roman logistic grain system was successful in replacing the insufficient Italian production and it permitted to feed a city as large as Rome, whose population approached (and perhaps exceeded) one million inhabitants during the heydays of the empire. But it was not Rome alone which benefited of the grain transportation system and the system could create a relatively high population density concentrated along the shores of the Mediterranean sea. It was this higher population density that gave to the Romans a military edge over their Northern neighbors, the “barbarians”, whose population was limited by a lack of a similar logistic system.

But what actually moved grain from the shores of Africa to Rome? In part, it was the result of trade. For instance, grain shipping companies were in private hands and they were paid for their work. But grain itself didn’t move because of trade: the provinces shipped grain to Rome because they were forced to. They had to pay taxes to the central government and they could do so either in currency or in kind. It seems that grain producers paid usually in kind and Rome didn’t ship anything in return (except in terms of troops and bureaucrats). So, the whole operation was a bad deal for provinces but, as usual in empires, opting out of the system was not allowed. When, in 66 CE, the Jews of Palestine decided that they didn’t want to pay taxes to Rome any more, their rebellion was crushed in blood and Jerusalem was sacked. In the end, it was military power that kept the system under control.

The Roman annona system may not have been fair, but it worked fine and for a long time: at least a few centuries. It seems that the African agricultural system was managed by the Romans with reasonable care and that it was possible to avoid soil erosion almost until the very end of the Western Empire. Note also that the annona system doesn’t seem to have been affected – in itself – by the debasing of the silver denarius. This is reasonable: grain producers had no choice; they couldn’t export their products at long distances and they had only one market: Rome and the other major cities of the empire.

But the system that fed the city of Rome appears to have declined and finally collapsed during the 5th century CE. We have some evidence (3) that it was in this period that erosion turned the North African shores from the Roman “grain belt” into the desert we see nowadays. Possibly, the disaster was unavoidable, but it is also true that warfare does a lot of damage to agriculture and this is surely true for the North African region, object of extensive warfare during the last period of the Roman Empire. More in general, the strain to the economic system generated by continuous warfare may have led producers to overexploit their resources, privileging short term gains to long term stability. Were it not for these events, it is likely that the agricultural productivity of the land could have been maintained for a much longer time. But that was not the case.

With the North African land rapidly turning into a desert, King Genseric of the Vandals (see his face on a “siliqua” coin in the figure), ruling the region, halted the shipping of grain to Rome in 455 CE, then proceeding to sack the city in the same year. That was the true end of Rome, whose population shrunk from at least a few hundred thousands to about 50,000. It was the end of an age and never again would the North African shores be exporters of food.

– The fall of the Roman empire

Complex systems tend to fall in a complex manner and several interlocked factors played a role together first in creating the Roman empire, then in destroying it. At the beginning, it was a technological innovation, coinage of precious metals, that led the Romans to develop a military might that allowed them to access a resource which would have been impossible to exploit otherwise: the North African agricultural land. But, as it is often the case, the exploitation mechanism was so efficient that eventually it destroyed itself. Lower productivity of the precious metal mines reduced the efficiency of the Roman military system and this, in turn, led to fragmentation and extensive warfare. The increasing needs of resources for war were an important factor in destroying the agricultural system whose collapse, in turn, put an end to the empire.

The dynamic interplay of the various elements involved in the growth and the fall of the empire can be seen in the figure below, from a previous essay of mine.  In the diagram, the source of energy is agriculture, but it is just an element of a complex system where various entities reinforce or dampen each other.

The diagram is patterned after the one originally created by Magne Myrtveit for our society described in the 1972 “Limits to Growth” study. This, as other studies of the same kind, provide a nice, aggregated view of the trajectory of an economic system which tends to overexploit the resources it used. As models, however, they are not completely satisfactory in the sense that they don’t include the question of control. It is a cost which needs to be paid and the gradually declining flow of resources makes it difficult. As a result, empires rarely collapse smoothly and as a whole, but rather tend to fragment and engage in internecine wars before actually disappearing. That was the destiny of the Roman Empire which experienced the general rule that power is nothing without control.

The Romans and us

It has always been fashionable to see the Roman Empire as a distant mirror of our civilization. And, indeed, we see that the points of contact are many. Just think of the sophisticated Roman logistic system: the navis oneraria which transported grain from Africa to Rome are the equivalent of our super-tankers transporting crude oil from the Middle East to Western countries. And think how China and India are playing today exactly the same role they were playing in the remote Roman times: they are manufacturing centers which are gradually soaking the wealth of the empire that we call, today, “globalization”.

This said, there is also an obvious difference. The Roman energy system was based on agriculture and hence it was theoretically renewable, at least until the Romans didn’t overexploit it. Our system is based on fossil fuels, which are obviously non renewable resources. Hence, we tend to be more worried about the depletion of our energy resources rather than that of gold and silver which – it seems – we could safely remove from our financial system without evident problems.

Still, there remains the fundamental problem that power is useless without control. The control system of the globalization empire works on similar principles as the older Roman one. It is based on a sophisticated financial system which, eventually, works because it is integrated with the military system. In the globalized army, soldiers, just like the Roman ones, want to be paid. And they want to be paid with a currency that they can redeem with goods and services somewhere. The dollar has, so far, played this role, but can it play it forever?

Eventually, everything that humans do is based on on some form of belief of what has value in this world. The Romans saw gold and silver as stores of value. For us, there is a belief that bits generated inside computers are stores of value – but we may be sorely disappointed – not that there will ever be a “peak bits” as long as there are computers around, but surely a major financial collapse would not just impoverish us, but most of all it would disrupt our capability of controlling the energy resources we need so desperately.

So, when oil pundits line up oil reserves as if each barrel were a soldier ready for battle, they tacitly assume that these reserves are available for use of the global empire. That’s not necessarily true. It depends on the degree of control that the empire will be able to exert on producers. That depends on the financial system which may well turn out to be the weak link of the chain. Without control, power is useless.

The Roman empire was lost when the financial system ceased to be able to control the military system. When the Romans lost their gold, everything was lost. In our case, it may well be that we will lose our ability to control the military system before we actually lose our ability to produce energy from fossil fuels. If the dollar loses its predominance in the world’s financial system, then producers may be tempted to keep their oil for themselves or, at least, not so enthusiastic any more in allowing the Empire to access it. What’s happening today in Ukraine may be a first symptom of the impending loss of global control.

1. “Mining in the Later Roman Empire”, J.C Edmondson, The Journal of Roman Studies, 79, 1989, 84,http://www.jstor.org/stable/301182
2. Tainter, Joseph A (2003. First published 1988), The Collapse of Complex Societies, New York & Cambridge, UK: Cambridge University PressISBN 0-521-38673-X,
3“The Roman Empire: Fall of the West; Survival of the East”, James F Morgan, Bloomington 2012


Guest Post: The Merger Of State And Commerce | Zero Hedge

Guest Post: The Merger Of State And Commerce | Zero Hedge.

Submitted by Stephen Merrill, editor of the Alaska Freedom News. He served in the Navy Judge Advocate General’s Corps and as a Navy Reserve Intelligence Officer

The Merger of State and Commerce

The Leviathan’s Thumb

Many observers of the US economy have come to the realization there are now few truly free markets left within 21st Century Western capitalism.

It seems all investments today are controlled to unfair advantage in some large way by the governments and financial firms operating the markets, especially the market in money itself.  The newly-invented powers of the central banks to buy anything, to fund any bailout, can reach into any area of the economy, either to grant large favors or to inflict great pain, typically with the cooperation of the too-big-to-jail banks that own the Federal Reserve and its policies.

The precious metals market is a good example of the Fed and its henchmen inflicting pain.  The Western paper gold market has been the long-used tool of Leviathan to bludgeon the world’s only true money.

In one of the Fed’s generous ways the second US housing bubble has been inflated from a river of counterfeit money and a wet-blanket of negative interest rates.  The QE Forever giveaway to the Fed’s banker friends through buying toxic mortgages at full price charges on.

A Swinging Pendulum

It is nothing at all new for a nation to defy the basic economic principle that allows for ever increasing wealth benefiting all layers of society.  In a word it is liberty.

The underlying concepts of capitalism were best set out by British author Adam Smith.  Smith postulated it is the magic of the invisible hand of a free market that best distributes economic resources and best energizes the people and industry and innovation.   Smith’s signature work The Wealth of Nations was written well over two hundred years ago.

The magic of Smith’s free market proved to be the model for the first sustained, rapid economic growth in global history, since at least the early Roman Empire.  It seems, whatever its academic merit in Ivy League halls, general economic liberty has clearly proven to be the best way to serve all society, given how humans themselves are created, as individuals each seeking a good life and secure family.

European medieval economics between the Romans and  the 18th Century Industrial Revolution showed how the vulture practices of monarchs and nobility eliminated even the hope for economic growth or of ever fostering a middle-class, while stifling innovation at every turn.  The private institutions empowered by law in that time were the lesser nobility and the Catholic Church.

With the Enlightenment period led by writers like Adam Smith, John Locke and Edmund Burke, the grip of elitism in commerce in Britain and France and beyond began to be replaced by private enterprise and capital quite completely.   Individual rewards for productivity and innovation and risk-taking became the driving force for economic decision-making, no longer centered on the whim of the lord or his knights as things have largely returned to in today’s fascist economy.   It was the belief in bottom-up capitalism in its rawest form.

The Europeans had suddenly become a juggernaut of innovation and growth after many centuries of stagnation.  The United States later in the cycle became the signal success of free-market capitalism.

In the wake of this revolution in society, the 19th Century saw the fastest economic growth in human history, all fueled by economic liberty.  For the first time a large prosperous middle-class of workers came into existence in many countries, no longer just the rulers lording over the peasants.

The same economic revolution is happening across most of Asia during our 20th and 21st Centuries.  Just one example, tiny city-state Singapore has proven once again the amazing achievements for all citizens from unbridled capitalism.  Singapore has risen from post-WWII devastation to the top of the world economic ladder without ever asking for or accepting foreign aid from any nation.  Singapore is the heir of Ancient Athens, the first free city, the founder of monetary silver.

Adam Smith’s Lassie Faire capitalism has become though the ancient, barbaric relic in our modern fiat money Western world economy, especially in America.  No living American has experienced an economic system that can be fairly described as general capitalism.

The US has now what is called a “mixed economy” involving many “public-private partnerships” and “professional self-regulation” and “social programs”.  These are modern phrases that explain the slow return to feudal ways.

Monopolies of political power or of markets yield huge profits for the few over generations without much having to change a thing.  Monopoly power is a distant mirror of feudal nobility.  It operates in both the public and the private sector and so often in direct combination with each other.  Power not only corrupts: power wins, power stagnates, power destroys.

The Money-Changers Above the Law

Then there are the market traders in a fiat, debt-fueled world.

Whenever free markets can be conned, fixed or disrupted there is a lot of money to be made in the process. There always has been short-term gain for those insiders who manage to fleece the public by harming the secure, uninterrupted flow of goods and services and finance and information.

Most economic transactions, at their base, rely on a large element of trust.  Deceit punishes trust to self-advantage.  Deceit harms the economic market itself, beyond the impact of the con-jobs in play.  A marketplace chocked with deceit is a fraud itself, the absence of the rule of law.  Only the law can fully deal with deceit in order to allow a free marketplace to even exist.

The more hidden processes used by modern bankers and traders to obtain unearned wealth is little different in its societal effects than robbing a convenience store is, or robbing hundreds of thousands of convenience stores actually, given the numbers typically involved in white collar crime at the highest levels.

The counterfeiting of the private-public central banks, that strangles the middle class to further enrich the wealthy, is daily theft on the grandest scale.  Counterfeiting by central banks now affects almost every investment decision.

In the end, it is little different than the peasants always giving a one-third share of their crops to the royal duke just because the King says so.

The Rule of the Cartels on Main Street

This collectivist syndrome in the United States is far from limited to the Congress-buying Wall Street cartel and the subject of finance.  The same general form of corruption permeates an increasing number of professions and businesses.  Even tattoo artists and legal process servers have earned their guild status by law in many states, hoping to, like others do, choke off low-price competition in their field.

The national health-care industry seems to have become almost a single cartel empowered by federal spending.  The Obamacare spending bonanza is designed to pay off every big healthcare interest in sight and the health-insurance industry to boot.

The provision of education in the United States has long been the fiefdom of rigged markets and systems.

The socialism model rules primary and secondary education almost alone.  Even 40-years of abject failure in effectively educating students has failed to dent the nationwide taxpayer spending spree for this state-imposed monopoly rule in the most crucial work there is for society.  Alaskans today pay over $18,000 per student for K-12 education.  Test scores are well below those of students from some third-world countries.

A mix of public and private institutions rule US higher education as a single-minded oligarchy.  This cartel is primarily empowered by federal spending in the form of student loans.  The younger generations are saddled now with a trillion dollar in debt to repay college tuition and fees that no longer deliver a good job.

The lawyer guild has controlled its market for professional services in every state in the union for generations.  Market-fixing remains one of the central goals of bar association rules:  ditto for the physician guild.

Part private business organization, part government institution, part professional guild, part bank regulator, entirely self-interested, the creature from Jekyll Island, the Federal Reserve, has become the go to mechanism for replacing free markets with aristocratic privilege.  He who issues the money controls the nation the phrase goes.

The Unifying Force

But the ultimate overarching rigged system in the US is the effective monopoly by two private political cartels sharing the same basic agenda, the Democratic Party and the Republican Party.  As a consequence of these two faces of modern fascism, the nation and its liberty has been for sale for more than two generations now.

This welfare-warfare party, one bent on ever expanding centralized power, has owned the Congress and most of the Presidents going back to WWI and the founding of the Federal Reserve.  The success in keeping the “two-party system” in place has had far more to do with the special privileges granted by law to Democratic and Republican candidates than to any good reason for a lack of meaningful political competition.

What is the fundamental error of governance made in all of this modern injustice?

It is the practice of the government surrendering open elections and free markets to officially anointed regulatory systems that then form an unchallengeable oligopoly within their bailiwick.

In the case of public regulation rather than a guild system, the regulated industry invariably become the effective master of the industry regulators, like Democrats and Republicans have for instance in US politics.  Within any regulated business, the temptation of well-heeled collegiality from industry always wins over government regulators eventually or, more often, the people that appoint the regulators.

With professional guilds in power its officials take over entirely for the government in controlling the business and its participants.  Professional guilds as a rule disconnect their own disciplinary code and market-rigging from the courts as much as possible, the place where everyone else is required to go for such matters.

Self-regulation for a profession invariably becomes mostly a program for less competition for guild members.  It freezes the present elite in their power and position, a never ending goal of humanity it seems.

In a wider sense, the officially anointed protector of the public safety, whether it is the state bureaucrat or a private guild official, over time becomes an enabler of reduced accountability for wrongdoing, a way to keep standards low for the industry or service by locking out competition and even the law, to the extent possible.

The US economy has regressed to feudal ways like these in such force that a variety of private guilds, cartels, unions and oligopolies exercise, officially or in practice, many of the powers of government itself, especially those powers assumed by but never granted by a constitution to the government.  It has all become a part of the “the law”.

The Revolution Looms Anew

Today’s economic model was best summed up by dictator Benito Mussolini in one short sentence: “Fascism … is the perfect merger of power between the corporations and the state”.

But tyranny also has its life-cycle within the balance between the past and the future.  Once the past becomes far too much of a millstone for the future generations to carry any longer, governments fall and debt and servitude recede.

Empires can fall largely without violence and allow a new, freer system to emerge, as most of the satellite states of the Soviet Union achieved.   Or the legacy of fallen empire becomes violent chaos followed by renewed oppression, like the French Revolution.

This bottom-up style revolution is happening to nations across our 21st Century.  The future lies in the balance.  The bell tolls for all Western nations, too.

So, in the United States, it seems, liberty will have its chance again before too long.

Economic Growth: A Social Pathology

Economic Growth: A Social Pathology.

The pathological pursuit of economic growth is central to the way in which our societies are run, and forms a major barrier to reaching a sustainable state for humanity. That such growth endangers our very survival by degrading and exhausting the environment upon which we are dependent upon, and per capita wealth above a given amount has been shown to not improve general well-being, is irrelevant to the dominant worldview. In addition, over 200 years of such growth has embedded many institutions and path-dependant infrastructure which provide large inertial forces to any move away from the pathology of growth. The movement to a no growth reality will require fundamental changes to belief systems and social practices, together with wastage or reassignment of significant parts of our path-dependent infrastructure. Such change will be strongly resisted by those that benefit from the status quo, such as the currently powerful and wealthy.

Economic growth, especially growth that is characterized as increases in Gross National Product (GNP)1, does not correlate with improvements in social welfare. Even Simon Kuznets, who is credited with the development of this measure, never intended for GNP to be used as a gauge of overall social welfare, noting that “Distinctions must be kept in mind between quantity and quality of growth, between costs and returns, and between the short and long run. Goals for more growth should specify more growth of what and for what2”. GNP can be better characterized as a measure of market-based expenditures, and does not judge whether a given expenditure increases or decreases social welfare, with expenditures to wage war being judged the same as expenditures to feed the population. It also does not take into account impacts on social and ecological sustainability, such as social breakdown and soil degradation. A number of competing measures have been developed such as the Index for Sustainable Economic Welfare (ISEW)3, the Genuine Progress Indicator (GPI)5, and Gross National Happiness (GNH)6 to correct for the shortcomings in the GNP measure. These measures have had only a limited impact so far though, and GNP still reigns supreme as the hegemonic measure of societal success, as witnessed by the constant references to it (and the related Gross Domestic Product7 measure) by political and economic leaders and the media. A consistent pattern that has been seen is that after a given level of GNP per head, additional growth does not tend to produce increases in these alternate measures8. Also, surveys directly asking people about their level of happiness have tended to show the same breakdown in correlation between GNP increase and improved happiness above a certain level of GNP per head9.

The theoretical and epistemological bases of mainstream economics, of which GNP is an artefact, are challenged by attempts to integrate economic and ecological considerations. These see the economy as being an open system, embedded within the closed system which is earth. In this picture the economy is reliant upon ecological sources for inputs (e.g. raw materials, soil, plants and animals, oxygen), and ecological sinks for waste product outputs (e.g. nitrogen run-off into rivers, carbon dioxide into the air). Mainstream neo-classical economics does not factor in the measurement of such things, generally treating inputs as infinite or infinitely substitutable, and the impact of waste products as unquantifiable “externalities”. As long as the economy was not large in relation to the overall ecology, such shortcomings tended not to matter, but over the past 200 years of exponential growth the economy has become much larger in relation to its ecology. Authors such as Georgescu-Roegen10, Daly11, and Victor12 argue both for a fully integratedEcological Economics (or a Bioeconomics as Georgescu-Roegen prefers), and the acceptance that continued exponential growth threatens the sustainability of human society through the depletion of non-renewable ecological sources, and the overuse of renewable ecological sources and sinks.

These views are reinforced through the study of specific effects of economic growth upon the ecology which humanity relies upon for continued existence. The most studied of the ecological sink issues is Climate Change, caused by the heat trapping gases (predominantly carbon dioxide, but also methane and others) expelled into the atmosphere as a side effect of human economic activity. As scientists have deepened their understanding of the dynamics involved, the resulting ecological changes have been seen to increase in both scale and rapidity with actual events tending to outstrip the models used to predict them13. A number of ecological source issues have also been identifies such as the depletion of non-renewable hydrocarbon fossil fuels14, the long term impact of industrialized agriculture upon food production15, and the over-exploitation of fish stocks16. The “Limits to Growth”17 study commissioned by the Club of Rome in 1972 also captured many such constraints with the viewpoint that human society was close to exceeding the carrying capacity of the earth (which it was judged to have done before the end of that decade18).

With much proof that incremental economic growth above a given point does not increase social welfare, and the many arguments that such growth may also directly imperil the sustainability of human society, it could be expected that calls for “no-growth” or even “de-growth” would have entered general discourse and challenged the hegemony of the growth paradigm. Instead, the current focus of those in power is how to maintain, or even to accelerate, growth rather than to contemplate a post-growth paradigm. What are the factors which hold back our societies from accepting, and embracing, these new pathways to both sustainability and social welfare? If a patient was to ignore such input about her survival and happiness, such resistance could be deemed pathological – a symptom of underlying psychological problems. What are those underlying issues stopping humanity from responding effectively to such input?

The exponential economic growth that has become both an underlying societal assumption, and an overriding imperative for government policy, is a relatively recent phenomenon within the history of human society. The history of human civilization prior to the Eighteenth Century is one of repeated developments of complex societies, followed by repeated collapses of those societies. Morris19developed an index of social development and noted that only three civilizations could be identified as reaching the low 40’s on his index, those of the Song Dynasty, the Roman Empire, and modern civilization. One thousand years separate the first two, and over fifteen hundred years the latter two. As Morris puts it “If someone from Rome or Song China had been transplanted to eighteenth-century London or Beijing he or she would certainly have had many surprises … Yet more, in fact much more would have seemed familiar … Most important of all, though, the visitors from the past would have noticed that although social development was moving higher than ever, the ways people were pushing it up hardly differed from how Romans and Song Chinese had pushed it up.19” The development of complex societies relied upon the production of a surplus of food, and other forms of energy, above that required for basic existence. This surplus allowed for specialized occupations, such as artisans and soldiers, and an increased level of social complexity. Such societies are an “anomaly in history”, having only existed in the last 6,000 years, while “throughout the several million years that recognizable humans are known to have lived, the common political unit was the small, autonomous community”20. The size and complexity of such societies was limited by the available bio-mass (predominantly food, fodder for animals, and wood) and the efficiency of the mammals utilized (humans, horses, oxen etc.) in converting that bio-mass into useful energy. The reality of these limitations can be seem even in the “cradle of democracy”, Ancient Greece, where the freedom and material comfort of a limited number of men was supported by a large cohort of non-citizens, such as slaves and serfs, whose surplus energy could be utilized for the benefit of the few21. Increased complexity can be seen as a problem solving strategy20, with additional available energy as a pre-requisite, through greater levels of differentiation, specialization, and integration. Tainter proposed that the decreasing returns of additional complexity are a fundamental limitation on societal longevity20, as would be a lack of the incremental energy required to support ongoing increases in complexity, and the resultant lack of ability to deal with new challenges.

The utilization of non-renewable hydrocarbon energy sources such as coal, oil, and natural gas within the past 200 years, allowing access to the product of previous historical ecologies, was a discontinuity that allowed human society to escape limitations on its size, complexity, and growth rate. By way of example “Hunter gatherer societies … contain no more than a few dozen distinct social personalities, while modern European censuses recognize 10,000 to 20,000 unique occupational roles, and industrial societies may contain overall more than 1,000,000 different kinds of social personalities”22. This phenomenal increase in societal scale and complexity was highly path dependent, in physical infrastructure, economic configurations, and hegemonic ideology, as human societies evolved to optimize their fit within the new circumstances of greatly enhanced access to energy. This process accelerated in the post-war period as oil, with its high energy density and ease of transport, was increasingly exploited. The outcome is a socio-economic configuration in the industrialized countries which is highly sensitive to the continuous availability of complex interconnections between specialized sub-systems, high quality energy, and ongoing growth. This is reinforced by a ruling ideology which assumes growth as a given, and treats the ongoing accumulation of wealth and physical goods as highly desirable and socially positive.

The sheer scale and complexity of modern industrial societies creates many barriers to fundamental changes. These changes would need to occur at differing scales, and to many heterogeneous sub-systems, with the cascading effects of such changes through the complex adaptive systems which typify modern societies. For example, a rise in the fuel taxes in the United Kingdom in 2000 lead to a blockade of fuel depots by protesting haulage drivers. Within days the UK economy was close to collapse, with supermarkets running out of food and even essential services such as hospitals at risk23. Globalization has greatly increased such issues by both linking multiple industrial societies together and facilitating the industrial development of other societies. Complex systems can be both highly resilient to some changes, and highly reactive to others, depending upon the nature of those changes and amount of resilience within the system. Walker et al. consider that industrialized societies have been actively reducing their resilience through human-induced ecological degradation and the drive for economic efficiency which leads to the elimination of redundant sub-systems and interconnections24. The impact of the latter was shown in the effects of the Japanese earthquake of 2011 and the South East Asian floods of the same year upon global supply chains, as highly integrated just-in-time global delivery processes were severely impacted25. Complex systems can also switch between different stable equilibrium states when a threshold condition of the current equilibrium has been breached, undergoing a “regime shift”24, as with the financial panic and economic recession of the 2008/2009 period. An open question is whether or not the current global industrialized human society has the level of resilience necessary to undergo the fundamental changes necessary for its long term survival without collapsing into a new equilibrium which exhibits a much lower level of social welfare.

Over the past two centuries of plentiful high quality energy very large investments have been made in physical and social infrastructure which may be either invalidated completely, or otherwise greatly diminished in value by a move away from economic growth. The financial system which underpins the functioning of modern economies is one of these, as at its very core is the assumption of exponential growth. The majority of what is counted as financial wealth is actually constituted of claims upon future economic growth, and without such growth such wealth would be shown to be illusory and evaporate. The value of any private corporation is predominantly dependent upon its future profit flows, and the growth of those flows relative to the current period. The higher the rate of growth the higher the company value, hence the lower “price to earnings ratio” (the ratio of the value of a listed company to its current earnings) of low growth companies such as utilities to high growth companies such as new high technology start-ups. Without continued economic growth the ability of a company to grow earnings would be severely constrained, and the realization of this would lead share prices to fall to reflect this new reality. The charging of interest on loans is also dependent upon economic growth as increased economic activity is required to produce the incremental cash flows required to pay back the interest26. The dislocation of the as currently constituted financial system from a cessation of economic growth would be severe, and the effects of such a dislocation would greatly impinge upon society’s ability to both function and make required investments in sustainable alternatives. The very direct effects of financial dislocation upon the real economy were shown during the 2008/2009 financial crisis when global supply chains were temporarily impacted by reductions in international trade finance, resulting in some companies not being able to fund international trade shipments27. From a systems perspective the present financial system can be seen as a positive feedback loop, which when functioning well drives continued growth and when functioning badly enhances systemic collapse. “Reinforcing feedback loops are self-enhancing, leading to exponential growth or to runaway collapse over time. They are found whenever a stock has the capacity to reinforce itself.28” Capital is just such a self-enhancing stock, for example through the payment of interest which can then be reinvested to earn more interest.

The financial system has many of the largest and most powerful corporations in the world within it, all heavily motivated to support the ongoing economic growth which underpins their continued success. The fossil fuel industry, which is dependent upon continued hydro-carbon driven growth also has many of the largest corporations among its ranks. An example is Exxon Mobil, which has annual revenues greater than the GDP of the majority of countries in the world29. The ability of such huge corporations to function effectively is dependent upon the transportation and communication systems made possible by fossil fuel energy. With their free speech rights, power over media organizations through advertizing spend decisions, the ability to directly fund political organizations in many countries (with little or no limits in the United States after Citizens United Supreme Court ruling30), and hire lobbyists, such corporations provide very significant opposition to any movement to reduce growth and/or dependence on fossil fuels. Authors such as Oreskes & Conway31, and Hoggan & Littlemore32 have documented many of the activities used to forestall actions which may be in the public good, but would negatively affect corporate profits and freedom of action. These utilize many of the advanced socio-psychological techniques developed in the early twentieth century by such figures as Edward Bernays33 to create the consumer culture required to drive the increasing levels of demand needed in an age of ever increasing material production facilitated by fossil fuel energy, and to “manufacture consent”33 as a method of social control.

National security strategy, and the ability of a country to affect the policies of other countries for its benefit relies greatly upon relative economic size, with respect to both hard power (i.e. military threats and actual interventions) and soft power (diplomatic, economic sanctions and incentives etc.). The ability to field a significant military presence is dependent upon the ability to generate a large economic surplus which can be utilized to support such non-productive resources, and the respective power positions of countries tend to correlate to relative economic growth over time, as noted by Kennedy34. The ability to project military power is also highly dependent upon liquid fossil-based fuels for the transport and on-going operation of personnel and military equipment. With the post-WW2 proliferation of nuclear weapons limiting the viability of direct military intervention, and the recent recreation of a multi-polar world (i.e. USA, China, and a resurgent Russia), the soft levers of power have come more to the fore35. Thus, both the military and political elites will be heavily committed to continued economic growth, and will see unilateral de-growth as unilateral disarmament and an acceptance of less power relative to, and less ability to protect national interests against, other countries. The centrality of economic power to national security has been expressed publicly by Leslie Gelb35, President of the Council for Foreign Relations which is a highly influential body in the area of national security planning and foreign affairs. The importance of continued access to fossil fuel resources has also been covered by both the influential Project for a New American Century (P.N.A.C.) 36, and the well-connected Brzezinski37.

Military scenario planning for such things as the effects of climate change and fossil fuel dependence do show one possible area where a difference in elite opinion may grow, as the military and national security planning organizations take more account of scientific opinions in these areas38, 39, 40. Insurance corporations also provide another avenue through which elite opinion may be diversifying as they assess the effects of Climate Change upon their future claims and corporate viability41, 42, although the US-based insurance companies seem to be seriously lagging their counterparts in other countries43. It must be remembered though, that all of these efforts are within the paradigm of continued economic growth.

The ideological infrastructure has also been fundamentally affected by the continued exponential growth over the past two centuries. An underlying belief in the efficacy of continued economic growth, together with a near absolute confidence in human ingenuity and technology to overcome any obstacles pervade the dominant capitalist and socialist belief systems. Catton has likened the belief in technology to a “Cargo Cult”, and noted that modern technological advancement depends heavily upon the energy surplus provided by fossil fuels, and while such advances developed new and more efficient ways of utilizing fossil fuel energy they have not developed viable long term replacements for fossil fuels14. Greer also notes the dependence of renewable technologies on a fossil fuel subsidy, with the example of a solar cell “which requires large doses of diesel fuel to mine the raw materials and then ship them to the factory … larger doses of natural gas or coal to generate the electricity <to turn> raw materials into a cell” 44. To this can be added the fossil fuels needs to transport the finished cells, and to install them. The hegemonic economic paradigm of the capitalist economies, “neo-classical economics”, also assumes limitless or infinitely substitutable natural resources. For the vast majority of the past 200 years of exponential growth this was consistent with reality as the human economy was not large enough to appreciably impact the overall ecology. The momentum of exponential growth has quite recently grown the human economy to a scale where it is having significant impacts upon its ecology, but the hegemonic economic paradigm has not caught up with this reality. Areas of research such as Ecological Economics and Bio-Economics, which strive to incorporate the economy within its overall ecology, are still very much on the fringes of economics with little or no impact upon the mainstream. The inability of scientific communities to change paradigms in the face of even overwhelming evidence was noted by Kuhn45, with the eventual change being dependent upon the turnover of leaders within the respective discipline in many cases. With economists being so central to societal decision making processes this provides a major impediment to change. Cognitive Dissonance also provides a blockage to change generally, as individuals are driven to reject information that conflicts with their own beliefs, or those of the groups to which they belong46, and a number of studies have indicated the role of cognitive dissonance in the rejection of the evidence for climate change47, 48.

Industrialized human society is a complex system that has developed through adaptation to the availability of seemingly endless amounts of high quality fossil fuel energy. Two centuries of such adaptation have created a society that has a high level of fitness to its current ecological niche, but with a greatly reduced level of resilience to changed ecological circumstances and highly developed inertial tendencies. The example of a drug addict comes to mind, who knows that continued drug use will kill him but is unable to save himself. Parts of his body crave the drugs, the process of withdrawal is both emotionally and physically painful, and his drug-damaged body may not be able to survive the physical stresses of the withdrawal process. The continued drug use, or in the case of society fossil fuel use and economic growth focus, is truly a pathological, but also a very understandable response. Many organizations have focused on local initiatives in the face of such societal-level inertia and resistance, as with the Transition Town movement pioneered by Rob Hopkins49, but they risk remaining relatively marginalized with little affect on the overall direction of society. Such local initiatives could also be overwhelmed by wider societal problems as ecologically-driven crises intensify, as they are not truly independent of the overall society and its ecology. Another reaction, as with David King (the former United Kingdom Chief Scientific Advisor), is that real change will not happen until the ecologically-driven negative effects are obvious and large enough to overcome societal resistance50. Given the delayed feedback inherent in resource depletion and ecological degradation, together with the non-linear nature of complex systems such as the global ecology, it may very well be too late by then. A greater focus is required on changing the fundamental societal barriers to change, and on producing a competing positive discourse for a society that currently has an “inability to construct a narrative that links to reality”51.

References and Notes

1. Gross National Product (GNP) measures the production of goods and services, which have a market value, of a given geographic area. By definition, this excludes non marketable output such as parent provided childcare, and unpaid care of the elderly by their relatives. It also does not question whether such output is beneficial or not, thus the cost of incarcerating criminals is treated the same as the cost of educating children.

2. Kuznets, Simon (1962), How To Judge Quality, The New Republic: October 20, 1962

3. Index of Sustainable Economic Welfare (ISEW) attempts to provide a measure that corrects for the deficiencies in the GNP measure, and is attributed to Daly and Cobb with their 1989 book “For the Common Good”4. A major part of this is to correct for what Daley sees as uneconomic growth, which encroaches upon ecological and social welfare and can create defensive expenditures required to ameliorate the effects. Examples would be the costs of incarcerating criminals, the cost of commuting long distances to work, the costs of treating people injured in industrial accidents, and the costs of ameliorating the effects of anthropogenic climate change. The ISEW measure starts with the total of market purchased private consumption expenditures, and then deducts such defensive expenditures, together with measures of environmental degradation and depreciation. Non-market services, such as those provided by public capital such as public libraries, and household and volunteer services, are also calculated and added to this measure. This measure does assume a “weak sustainability” paradigm, where reductions in natural capital can be substituted for with increases in social and economic capital.

4. Daly, Hermann & Cobb, John (1989), For the Common Good, Beacon Press

5. Genuine Progress Indicator (GPI) varies in some details from the ISEW, but is not substantially different.

6. There is no standard quantitative definition of the Gross National Happiness (GNH) measure, which was first developed in Bhutan as a way of directly measuring social welfare rather than indirectly as such measures of GNP, and the ISEW and GPI do. Through surveys the following are measured: psychological wellbeing, time use, community vitality, cultural diversity, ecological resilience, living standards, health, education, and good governance. These measures are then aggregated to provide the overall GNH level (see http://www.grossnationalhappiness.com/wp-content/uploads/2012/04/Short-GNH-Index-final1.pdf for more details). This has been adapted for more general use, in some cases using already collected data rather than questionnaires, with the GNH being measured for many countries.

7. Gross Domestic Product (GDP) measures the local economy, rather than all output attributable to inhabitants of a given geographic area and differs from GNP in that it does not include measures of net income from sources outside the geographic area (earnings by residents from abroad minus earnings by foreign nationals from the geographic area). GNP will tend to be higher than GDP for net external creditors, and lower for net external debtors.

8. Anielski, Mark (2007), The Economics of Happiness: Building Genuine Wealth, New Society Publishers

9. Layard, Richard (2005), Happiness: Lessons From a New Science, Penguin Press

10. Georgescu-Roegen, Nicolas & Bonaiuti, Mauro (2011), From Bioeconomics to Degrowth: Georgescu-Roegen’s ‘New Economics’ in Eight Essays, Routledge

11. Daly, Herman (1996), Beyond Growth, Beacon Press

12. Victor, Peter (2008), Managing Without Growth, Edward Elgar Publishing

13. Hansen, James (2009), Storms of My Grandchildren: The Truth About the Coming Climate Catastrophe and Our Last Chance to Save Humanity, Bloomsbury USA

14. Catton, William (1982), Overshoot, Illinois Books

15. Roberts, Paul (2008), The End of Food, Houghton Mifflin

16. Ellis, Richard (2003),The Empty Ocean, Island Press

17. Meadows, Meadows, Randers & Behrens (1972), Limits to Growth, Signet

18. Meadows, Randers, & Meadows (2004), Limits to Growth: The 30-Year Update, Chelsea Green

19. Morris, Ian (2011), Why the West Rules – For Now: The Patterns of History and What They Reveal about the Future, McClelland & Stewart

20. Tainter, Joseph (1988), The Collapse of Complex Societies, Cambridge University Press

21. Euben, Ober & Wallch (1994), Athenian Political Thought and the Reconstruction of American Democracy, Cornell University Press

22. Costanza, Sequra & Martinez-Alier (1996), Getting Down To Earth: Practical Applications of Ecological Economics, Island Press

23. N/A (2005), Impact of September 2000 Fuel Price Protests on UK Critical Infrastructure, Public Safety Canada. Accessed on July 22nd, at ttp://www.publicsafety.gc.ca/prg/em/ccirc/2005/ia05-001-eng.aspx

24. Walker, Brian & Salt, David (2006), Resilience Thinking: Sustaining Ecosystems and People in a Changing World, Island Press

25. Yang, Jun (2011), Worst Thai Floods in 50 Years Hit Apple, Toyota Supply Chain, Bloomberg. Accessed on July 24th 2012, at http://www.bloomberg.com/news/2011-10-20/worst-thai-floods-in-50-years-hit-apple-toyota-supply-chains.html

26. Keen, Steve (2011), Debunking Economics – Revised and Expanded Edition: The Naked Emperor Dethroned?, Zed Books

27. Coulibaly, Sapriza, Zlate (2011), Trade Credit and International Trade during the 2008-09 Global Financial Crisis, Board of Governors of the Federal Reserve System: International Finance Discussion Papers, Number 1020, June 2011

28. Meadows, Donella (2008), Thinking In Systems: A Primer, Chelsea Green Publishing

29. Coll, Steve (2012), Private Empire: Exxon Mobil and American Power, Penguin Press

30. Blumenthal, Paul (2012), Citizens United Constitutional Amendment Floated By Senate Democrats, Huffington Post. Accessed on July 26th athttp://www.huffingtonpost.com/2012/07/24/citizens-united-constitutional-amendment-senate-democrats_n_1700269.html

31. Oreskes, Naomi & Conway, Erik (2010), Merchants of Doubt: How a Handful of Scientists Obscured the Truth from Tobacco Smoke to Global Warming, Bloomsbury Press

32. Hoggan, James & Littlemore, Richard (2009), Climate Cover Up: The Crusade to Deny Global Warming, Greystone Books

33.Bernays, Edward (2004), Propoganda, Ig Publishing

34. Kennedy, Paul (1989), The Rise and Fall of the Great Powers, Vintage

35. Gelb, Leslie (2010), GDP Now Matters More Than Force: A U.S. Foreign Policy for the Age of Economic Power, Foreign Affairs November/December 2010

36. http://www.newamericancentury.org/

37. Brzezinski, Zbigniew (2007), The Great Chessboard: American Primacy and its Geostrategic Imperatives

38. Gartner, John (2012), US Military Not Retreating on Clean Energy, Forbes

Accessed on July 26th, 2012 athttp://www.forbes.com/sites/pikeresearch/2012/05/11/u-s-military-not-retreating-on-clean-energy/

39. Hirsch, Bezdek & Wendling (2005), Peaking of World Oil Production: Impacts, Mitigation & Risk Management, Science Applications International Corporation (S.A.I.C.). Accessed on July 26th, 2012 athttp://www.netl.doe.gov/publications/others/pdf/Oil_Peaking_NETL.pdf

40. Boykoff, Jules (2011), US military goes to war with climate sceptics, The Guardian. Accessed on July 26th, 2012 athttp://www.guardian.co.uk/commentisfree/cifamerica/2011/may/20/climate-change-climate-change-scepticism

41. N/A (2012), Climate change concerns raised by insurance industry, Canadian Broadcasting Company. Accessed on July 26th, 2012 at http://www.cbc.ca/news/canada/new-brunswick/story/2012/02/23/nb-climate-change-insurance-836.html

42. Boykoff, Jules (20110, Why the Insurance Industry get climate change, The Guardian. Accessed on July 26th, 2012 at http://www.guardian.co.uk/commentisfree/cifamerica/2011/jun/28/climate-change-climate-change-scepticism

43. Schiller, Ben (2012), Insurance Companies face Increased Risks from Warming, Yale University. Accessed on July 26th, 2012 athttp://e360.yale.edu/feature/insurance_companies_face_increased_risks_from_warming/2519/

44. Greer, John Michael (2008), The Long Descent: A User’s Guide to the End of the Industrial Age, New Society Publishers

45. Kuhn, Thomas (2012), The Structure of Scientific Revolutions: 50th Anniversary Edition, University of Chicago Press

46. Cooper, Joel (2007), Cognitive Dissonance: 50 Years of a Classic Theory, Sage Publications

47. Kahan et al. (2012), The polarizing impact of science literacy and numeracy on perceived climate change risks, Nature Climate Change

48. Lorenzoni, Nicholson-Cole & Whitmarsh (2007), Barriers perceived to engaging with climate change among the UK public and their policy implications, Global Environmental Change 17 (2007) 445-449

49. Hopkins, Rob (2008), The Transition Handbook: From Oil Dependency to Local Resilience, Chelsea Green

50. Witnessed by the author during a panel discussion at the “Planet Under Peril” conference in London, United Kingdom, March 26-29, 2012.

51. Kunstler, James (2012), Too Much Magic: Wishful Thinking, Technology, and the Fate of the Nation, Atlantic Monthly Press

charles hugh smith-System Reset 2014-2015

charles hugh smith-System Reset 2014-2015. (source)

Resets occur when the price of everything that has been repressed, manipulated or obscured is repriced.

The global financial system will reset in 2014-2015, regardless of official pronouncements and financial media propaganda hyping the “recovery.” Despite the wide spectrum of forecasts (from rosy to stormy), nobody knows precisely what will transpire in 2014-2015, so we must remain circumspect about any and all predictions– especially our own.

Even as we are mindful of the risks of a forecast being wrong (and the righteous humility that befits any analysis), it seems increasingly self-evident that financial systems around the world are reaching extremes that generally presage violent resets to new equilibria–typically at much lower levels of complexity and energy consumption.

John Michael Greer has described the process of descending stair-step resets (my description, not his) as catabolic collapse. The system resets at a lower level and maintains the new equilibrium for some time before the next crisis/system failure triggers another reset.

There is much systems-analysis intelligence in Greer’s concept: systems without interactive feedbacks may collapse suddenly in a heap, but more complex systems tend to stair-step down in a series of resets to lower levels of consumption and complexity–for example, the Roman Empire, which reset many times before reaching the near-collapse level of phantom legions, full-strength on official documents, defending phantom borders.

In the present, we can expect the overly costly, complex, inefficient, fraud-riddled U.S. sickcare (i.e. “healthcare”) system to reset as providers (i.e. doctors and physicians’ groups) opt out of ObamaCare, Medicare and Medicaid; like the phantom armies defending phantom borders of the crumbling Empire, the vast, centralized empire of sickcare will remain officially at full strength, but few will be able to find caregivers willing to provide care within the systems.

Just as much of the collateral supporting the stock, bond and housing bubbles is phantom, many other centralized systems will reset to phantom status. As local and state governments’ revenues are increasingly diverted to fund public union employees’ sickcare and pension benefits, the services provided by government will decline as the number of retirees swells and the number of government employees actually filling potholes, etc. drops.

Local government will offer services that are increasingly phantom, as stagnating tax revenues fund benefits for retirees rather than current services. On paper, cities will remain responsible for filling potholes, but in the real world, the potholes will go unfilled. In response, cities will ask taxpayers to approve bonds that cost triple the price of pay-as-you-go pothole filling, as a way to dodge the inevitable conflict between government retirees benefits and taxpayers burdened with decaying streets, schools, etc. and ever-higher taxes.

As for phantom collateral–the real value of the collateral will be undiscovered until people start selling assets in earnest. As long as everyone is buying, the phantom nature of the collateral is masked; it’s only when everyone tries to get their money out of asset bubbles is the actual value of the underlying collateral discovered.

When assets go bidless, i.e. there are no buyers at any price, the phantom nature of the supposedly solid collateral is revealed. Price discovery is one way of describing reset; transparent pricing of risk is another way of saying the same thing.

When risk has been mispriced via state guarantees, fraud, willful obfuscation, complexity fortresses, etc., then the repricing of risk also resets the system.

Resets occur when the price of everything that has been repressed, manipulated or obscured is repriced. The greater the manipulation and financial repression, the more violent the reset. What been manipulated, obscured or repressed? Virtually everything: risk, credit, assets, labor, currency, you name it. Everything that has been manipulated by central banks and central states will be repriced.

Trust is difficult to price. Every reset erodes trust in the capacity of the centralized status quo to manipulate/repress price to its liking. Once trust in the system is lost, it cannot be purchased at any cost.


The punctuated collapse of the Roman Empire

The punctuated collapse of the Roman Empire.

The punctuated collapse of the Roman Empire

by Ugo Bardi, originally published by Cassandra’s legacy  | JUL 15, 2013


I defined as the “Seneca Cliff” the tendency of some systems to collapse after having peaked. Here I start from some considerations about whether the collapse could be smooth or an uneven process that we could define as “punctuated.” I am taking the Roman Empire as an example and showing that it did decline much faster than it grew. But the decline was surely far from smooth. 

The idea of an impending collapse of our civilization is already bad enough in itself, but it has this little extra-twist that collapse may be given more speed by what I called the “Seneca Cliff,” from the words of the Roman Philosopher who had noted first that, “Fortune is slow, but ruin is rapid“. The concept of the Seneca Cliff seems to have gained some traction over the Web and many people have been discussing it. Recently, I found an interesting comment on this point by Jason Heppenstall on his blog “22 billion energy slaves”. He summarizes the debate as:

“In the fast-collapse camp are the likes of Dmitry Orlov (who bases his assessment on his experience of seeing the USSR implode) and Ugo Bardi, who expects a ‘Seneca’s Cliff’ dropoff. James Kunstler, Michael Ruppert and any number of others can probably also be added to the fast-collapse camp.

By comparison, the likes of John Michael Greer reckon we are in for a drawn-out era of terminal decline punctuated by serious crises which, at the time, will seem rather severe to all involved but which will give way to plateaux of relative stability, albeit at a lower level of energy throughput.”

Actually, the two camps may not be in such a radical disagreement with each other as they are described. The idea of the fast (or Seneca-like) collapse does not necessarily mean that collapse will be continuous or smooth. The model that describes the Seneca effect does give that kind of output, but models are – as usual – just approximations. The real world may follow the curve in a series of “bumps” that will give an impression of recovery to the people who will experience the painful descent period.

So, collapse may very well be “punctuated: a series of periods of temporary stability, separated by severe crashes. But it may still be much faster than the previous growth had been. I discussed this point already in my first post on the Seneca Effect, but let me return on this subject and let me consider one of the best known cases of societal collapse: that of the Roman Empire.

First of all: some qualitative considerations. Rome’s foundation goes back to 753 BC; the end of the Western Empire is usually taken as 476 AD, with the dethroning of the last Western Emperor, Romulus Augustus. Now, in between these two dates, a time span of more than 1200 years, the Empire peaked. When was that?

The answer depends on which parameter we are considering but it seems clear that, whatever choice we make, the peak was not midway – it was much later. The Empire was still strong and powerful during the 2nd century AD and we might take the age of Emperor Trajan as the peak (he died in 117 AD) as “peak empire.” We may also note that up to the time of Emperor Marcus Aurelius (who died in 180 AD), the empire didn’t show evident signs of weakness, so we could take the peak as occurring in mid or late 2nd century AD. In the end, the exact date doesn’t matter: the Empire took around 900 years to go from the foundation of Rome to the 2nd century peak. Then, it took just 400 years – probably less than that – for the Empire to wither and disappear. An asymmetric, Seneca-like collapse, indeed.

We also have some quantitative data on the Empire’s cycle. For instance, look at this image from Wikipedia.

It shows the size of the Roman military over the Empire’s span of existence. WIth all the uncertainties involved, also this image shows a typical “Seneca” shape for both the Western and the Eastern parts of the Empire. Decline is faster than growth, indeed.

There are other indicators that we can consider about the collapse of the Roman Empire. In many cases, we don’t have sufficient data to say much, but in some, we can say that collapse was, indeed, abrupt. For instance, you can give a look to a well known image taken from Joseph Tainter’s book “The Collapse of Complex Societies

The figure shows the content of silver in the Roman “denarius” which by the 3rd century AD, had become pure copper. Note how the decline starts slow, but then goes on faster and faster. Seneca himself would have understood this phenomenon very well.

So, the Roman Empire seems to have been hit by a “Seneca collapse” and that tells us that the occurrence of this kind of rapid decline may be commonplace for the entities we call “civilizations” or “empires”.

It is also true, however, that the Roman collapse was far from being smooth. It went through periods of apparent stability, interrupted by periods of extremely fast descent. The chroniclers of the time described these periods of crisis, but none of them seem to have connected the dots: they never saw that each crisis was linked to the preceding one and leading to the next one. Punctuated collapse seemed to be invisible to the ancient Romans, just as it is for us, today.


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