The best lack all conviction, while the worst
Are full of passionate intensity.16
William Butler Yeats was referring not to ISIS carrying out its pitiless atrocities under “shadows of the indignant desert birds” but to his intuition of “a rough beast . . . slouch[ing] towards Bethlehem to be born,” which resonates with the headlines.
In February of 2015, Politifact.com presented reports indicating that ISIS and its supporters post as many as 200,000 social media messages online daily. Their hyperactive use of the Internet for propaganda pays off with astonishing success in recruitment from around the world. The BBC reports that as many as sixty British teenaged girls have flown to the Mideast to join ISIS as jihadi brides.
You are a witness to the spasms of a world system sputtering toward collapse. During major transitions in civilization, it is common that institutions of power that no longer suit the underlying circumstances of their time become dysfunctional. Equally, the leaders of a failing system tend to compound the challenges it faces by cleaving to outdated techniques for asserting power that tend to backfire and aggravate the vulnerability of the system. Just as the late medieval church could not turn back the assault on feudalism launched with gunpowder weapons by threats of excommunication, so air strikes and the “big battalions” will not stem the tide of devolution that is eroding big government everywhere.
This is evident in the fact that the US response to the unraveling of nation-states in the Middle East and Central Asia has been to launch a sequence of ill-conceived military interventions, including attempts at regime changes in Afghanistan, Iraq, Libya, and Syria. The United States also sought to shore up the government of Yemen. These costly wars have been a disaster. The United States quite literally spawned the Islamic State. As detailed in an August 2015 article in The Times of Israel, ISIS is led by more than one hundred of Saddam Hussein’s former officers, including ex-generals who have created structure and discipline among the jihadist group, developing what some call a “proto-state.” US intervention in Iraq clearly let the Islamic State genie out of the bottle.
Rather than stabilizing fraught situations, US interventions only seemed to accelerate the process of collapse, opening the way for the Islamic State to seize control of portions of Iraq, Syria, and Libya, while a resurgent Taliban made gains in Afghanistan, dominating territory on the outskirts of Kabul. And in Yemen, the US-backed government fell to Houthi rebels. Trillions of dollars and many thousands of lives later, chaos reigns supreme.
We live in an obsolete system, though of course obsolete systems can endure long after their “use by” dates. The global financial crisis of 2008 highlighted the dysfunction of systemic leadership carried over from the “Modern Age”—the common nickname for the recent period of history from the end of the fifteenth century through the late twentieth—when the returns to violence were high and rising.
The Start of the Modern Age
The start of the modern era was announced “with a bang” in 1494, when Charles VIII, king of France, invaded Italy with new high-compression bronze siege cannons. (Although usually given second billing, the effectiveness of French artillery was enhanced by the handiwork of brothers Jean and Gaspard Bureau, who supplanted the large rocks previously fired by cannons, with iron cannon balls cast to fit snuggly in the barrel of the cannons.)
The first impact of the high-compression siege cannon firing iron cannon balls was felt at the Tuscan fortress of Fivizzano, which “was quickly reduced to gravel and its garrison ruthlessly slaughtered.”17 But the signal demonstration of the effectiveness of the new weapons was the destruction of the Neapolitan fortress of Monte San Giovanni, whose eleventh-century walls fell after eight hours of bombardment, having previously withstood a siege of seven years.18 This dramatically highlighted the dominance of “the big battalions.” Military historian Max Boot put it this way:
The cost of both a state-of-the-art fortress and the forces needed to besiege it properly was steep. When Charles VIII’s successor, King Louis XII of France, asked what would be necessary carryout his planned invasion of Milan in 1499, one of his advisers replied bluntly, “money, more money, and again more money.” The petty lords of Europe did not have enough money. To compete in the gunpowder age required the resources of a super-Lord, a king, ruling over a large kingdom providing substantial revenues. Thus the dictates of the battlefield—or the siege site—gave a powerful impetus to the development of sovereign states.
The End of the Modern Age
That impetus continued to play out for five centuries before petering out in the last quarter of the twentieth century. Lord Rees-Mogg and I took the view that the Modern Age ended with the death of the Soviet Union in 1991. That epic collapse showed that the “big battalions” now mattered less than they had over the previous five centuries.
But just as every eleventh-century tower did not collapse when Charles VIII opened fire on Monte San Giovanni, so many of the obsolete institutions of the Modern Age still stand. Everywhere on the globe, economies are cluttered with a legacy of dysfunction from the dying nation-state.
Not the least of these legacy issues is the heritage of a debt supercycle dating to 1945, when British hegemony came to an end and the systemic leadership of the United States was inaugurated. The thoroughgoing financialization of the economy by big banks has had far-reaching effects. As former US assistant secretary of the treasury Paul Craig Roberts put it, big banks “are converting the entirety of the economic surplus to paying interest on debt.”19
The legacy of metastasizing debt is only a part of the overhang from the modern era of nation-states that is destined to be unwound. It is also part of the institutional legacy of fiat money issued through a banking system regulated by central banks. The full story is not yet told, but as the Telegraph of London put it, “How might the present explosion in debt end? The only thing that can be said with certainty is ‘badly.’”20
The Unfree Economy Costs You $125,000 per Year
A related legacy of the obsolete nation-state system is an unfree economy lumbered with innumerable crony capitalist distortions. As a result, many sectors are characterized by declining marginal returns—another way of saying that accelerating inefficiency plagues the economy.
Recent research concludes that the proliferation of regulation has deleterious effects on economic activity. An estimated growth rate reduction of about 2 percent per annum implies a massive compound loss of annual income due to crony capitalism. A 2013 study published in the Journal of Economic Growth concludes that increased regulation since 1949 had cost the economy $37 billion in lost annual GDP as of 2011, implying that the average American (man, woman, or child) would have an additional $125,000 to spend per year, if not for the fluorescence of crony capitalist rip-offs.21
It would come as a surprise to most victims of this grand larceny to learn that they have been robbed of more than they ever had. In this respect, a faltering education system that leaves many incapable of understanding counterfactuals may temporarily help shore up stability. But ignorance is rarely bliss.
A Legacy of Debt and Dysfunction
To the extent that regulation has dampened growth, the greatest cost of this compound slowdown has undoubtedly been visited on those at the bottom of the income ladder. Evidence of how far the bottom 50 percent of America’s wealth distribution has fallen comes from Credit Suisse in its 2014 Global Wealth Databook. As interpreted by Mike Krieger, the data show that the bottom half of America’s wealth distribution ranks dead last among forty major economies, with 1.3 percent of national wealth. Russia, at 1.9 percent, was the only other major economy of those forty that came close.22
But the comparison is even more dismal than Krieger lets on. When the comparison is extended to the sixth decile, the United States ties with Russia at dead last for the smallest percentage of wealth owned by the bottom 60 percent of the population. In both countries, the bottom 60 percent owns only 3.4 percent of the total holding
s of wealth according to Credit Suisse. The United States ranks below other countries with famously unequal holdings of wealth; Indonesia (5.6 percent), Brazil (5.8 percent), and Mexico (8.8 percent) all rank considerably above the United States in percentage terms. In other words, a clear majority of Americans are riding the down escalator. Not only is the annual wage of 80 percent of the workforce not growing, but it is in fact collapsing to the lowest levels since the Lehman crisis.
This has troubling implications for your future. For one thing, it says that the majority of Americans appear to be unable to compete economically and create wealth in the twenty-first century. The same Credit Suisse wealth assessment that showed the bottom 60 percent of Americans trailing the world in their share of total wealth, however, also showed that the United States led the world in the number of millionaires and in total wealth creation. According to Credit Suisse, average wealth in the United States in 2014 was 19 percent above the 2006 precrisis peak and 50 percent above the 2008 postcrisis low. Since 2008, $31.5 trillion has been added to US household wealth, which is equivalent to almost two years’ GDP.
If you are one of the 14.2 million Americans who are millionaires, not to mention the 62,800 Americans whose net worth exceeds $50 million, the political arithmetic implied by Obama’s impoverishment of the middle class gives cause for alarm. While the greatest reason for the wealth and income shortfall for the middle class may well be the accumulation since the middle of the last century of crony capitalist rip-offs, the fact that so many people now seem to find it impossible to compete and recover lost wealth in the face of rigged markets is bad news. It implies that they may well tire of losing a game they apparently can’t win.
While one could easily overestimate the influence that voters exert over the direction of policy in Washington, it could also be a mistake to discount their role altogether. There is a high likelihood that disgruntled voters will fail to distinguish between the ill-gotten gains of corporatist crony capitalists who use the political process to pick your pocket and the laudable success of entrepreneurs who create wealth in the free market. If market forces amplify income dispersion in the years to come, there will be a greater risk of this confusion intensifying.
As I explore in the coming chapters, the continued necessity of work does not necessarily imply superior incomes for “the masses.” Characteristic technologies of the Information Age do not presage a surge in demand for persons of modest skill. Because the marginal costs of digital goods are vanishingly small, capacity constraints on their sale and distribution are immaterial. This means that one competitor, in principle, could fill orders from millions of customers with few or no employees. This amplifies the “winner-take-all” character of the economy, rewarding the most talented “1 percent” while leaving those in the lower deciles of talent scrambling for jobs as baristas.
The “Education Promise” Broken
At the same time, the more distributed character of the information economy undermines the value of credentials, which were so essential to securing employment in government and private bureaucracies during the heyday of big-business capitalism. The fact that you can no longer dependably secure a superior income by attaining a credential that is essentially irrelevant to your productive capacity compounds the decline in returns to education. Persons of average skills and intellect will be less likely to get ahead through schooling unless it genuinely enhances their capabilities.
One of the implied promises of the bankrupt nation-state is that an individual who gets a good education will be able to get a well-paying job. The Department of Education is still in business and paying its bills, but the “education promise” is already slipping away. The growing realization that about a third of all student loans are likely to go unpaid suggests that the returns to education have already fallen so far that, in many cases, it may no longer make sense to pay the inflated costs of a college degree. Under President Obama, the American dream of upward mobility has become a nightmare with the wealth of all but the top 20 percent sinking like a rock.
Secular Stagnation
The fact that the bottom 60 percent lack the means to spend, while the crony capitalists who enjoy the lion’s share of the gains from freebooting have a high propensity to save, leads to an “excess supply of savings” so troubling to Keynesians. Hence the consumers who might otherwise spend eagerly lack the cash flow to fuel a sustainable domestic spending boom. This helps illuminate the twenty-first-century growth slowdown, or “secular stagnation,” and its impact on the viability of the system.
Another factor that contributes to the epic deceleration of growth has been the slowdown in the growth of energy inputs as the Energy Return on Energy Invested (EROEI) has plunged over the past several decades. Analysis of the impact of declining EROEI is complicated by the seemingly paradoxical collapse in oil prices, which fell by more than 50 percent after June 2014. As detailed in coming chapters, however, I see this systemic price reversal as another warning signal of a system on the verge of collapse.
Equally, the dramatic slowdown in per capita energy consumption in the United States belies the official data proclaiming strong GDP growth. US annual total energy per capita consumption in British Thermal Units (BTUs) has not recovered but rather fallen since 2008. This is not a matter of energy efficiency but of economic decline.
It is quite a mess. But not to worry. It is not forever, I swear.
Anachronistic Mental Baggage
Still another heritage of centuries of embedded statism is mental baggage—the mental paradigm, or “metageography,” that pervades our understanding, imagination, and knowledge as a society. As Peter J. Taylor put it, “A metageography is the collective geographical imagination of a society, the spatial framework through which people order their knowledge of the world. It provides the geographical structures that constitute unexamined discourses pervading all social interpretation.”23 The colorful mosaic map by which the globe is divided into nation-states is only one aspect of embedded statism inherited from the past. It is embedded in the analysis of social, economic, and political patterns and processes within states.
In this sense, the “social sciences” are an anachronism. This is easier to say than it is to grasp. But stay tuned. Sweeping change has many disorienting consequences, most of which lie outside the reach of our wishes. Just as the death of nation-states implies “the breaching of territorial boundaries,” so it also implies “a breaching of disciplinary boundaries” and new ways of understanding a changing world.24
Like Merlin’s enchanted sword, Excalibur, locked deep in the rock, with its conflicting injunctions engraved on opposite sides of the blade—“Take me up” and “Cast me away”—the Breaking Point is destined to cut both ways. We find ourselves at a moment of history pregnant with both promise and anxiety. There is the possibility of a new, freer world taking shape, in keeping with the original promise of America. I confess to writing as an unabashed fan of the Jeffersonian perspective on liberty that informed the early history of the United States. Alas, I suspect that Jefferson would be appalled at the gigantic, all-powerful nation-state that has taken root in the soil he tilled.
The message of this book, however, is one of resilience and hope. It says that you can take control of your life—even in a period of dramatic change. Of course, if you do not face the future with resilience and hope, the prospect of sweeping change could also appear to be a message of doom and gloom.
Because the United States has been the hegemonic power, economic collapse in the United States would mean a transition to a new world system, a result not seen with the collapse of the Soviet Union. Consequently, much of what we take for granted may be up for grabs during and after the Breaking Point. Lord Rees-Mogg and I brushed over this somewhat incendiary point in predicting the collapse of the Soviet Union. Yet in retrospect, the fall of the USSR was only the first tremor in a global earthquake that is also destined to bring the status quo of big government corporatism to an end.
Taking a long view, I also analyze current circumstances in terms of the Secular Cycle—a centuries-long pattern of the growth and collapse of states and empires. The Secular Cycle in turn seems to be a function of the quasi-bicentennial cycle of bad weather.
Coming chapters detail my view that “global warming” is a corporatist scam that has put hundreds of millions of dollars in former vice president Al Gore’s pockets. What Dr. Richard Lindzen, professor emeritus of atmospheric sciences at MIT, describes as “global warming hysteria” has led to costly policies that are unable to replace fossil fuels. In the meantime, such policies enrich crony capitalists at the expense of the public, increasing costs across the board and restricting the world’s poorest population’s access to energy.
Notwithstanding the noisy pretense that the theory of anthropogenic global warming is based on “settled science,” it is little more than hucksterism backed by billions of dollars’ worth of propaganda spawned at public expense. Not even the temperature data purporting to show rapid warming, as published by NASA and other official agencies, are reliable. The fraudulent data are compounded in computer models forecasting disaster. These computerized alarms are better understood as neo-Scholastic syllogisms akin to medieval “natural philosophy” rather than science.
What the Telegraph of London has called “the most extraordinary scandal of our times” extends to phony reports of sea level rise. Coming chapters debunk alarms over rising temperatures and sea levels, exposing the “eco-fascist” project to cartelize world energy. This thought exercise brings together ideas and evidence from many different realms. Along the way, we discuss the transformation of the economy from an open, dynamic free-market capitalist system to a closed, sclerotic system where the rules are rigged against you—unless you happen to be a corporatist insider. The power of law has elevated the privileged antimarket sector at your expense. Big crooks hire lobbyists in thousand-dollar suits to steal your prosperity. This involves issues of inequality, the eclipse of the rule of law, and the prospect of a latter-day version of Adam Smith’s “declining state.”
The Breaking Point Page 3
