Given the unstable and unsustainable nature of our modern global financial, monetary, and economic system, a coming collapse is more likely than most experts suspect. Taken together, the factors informing the terminal crisis of US hegemony amount to a gigantic game of musical chairs. My hope is that this book will help you gain the necessary perspective so you can find a perch when the music stops.
Notes
1 Playfair, William, An Inquiry into the Permanent Causes of the Decline and Fall of Powerful and Wealthy Nations (London: W. Marchant, 1805), 4–5.
2 Braudel, Fernand, The Wheels of Commerce (New York: Harper & Row, 1982), 229–30.
3 Hayek, F. A., New Studies in Philosophy, Politics, Economics and the History of Ideas (London: Routledge & Kegan Paul, 1978), 197.
4 http://www.bloomberg.com/news/articles/2015-11-02/here-s-how-much-qe-helped-wall-street-steamroll-main-street.
5 https://mises.org/library/our-current-illusion-prosperity.
6 http://www.pewtrusts.org/en/research-and-analysis/issue-briefs/2016/03/household-expenditures-and-income.
7 Wiedemer, Robert, “The Untold Damage of Buyback Billions,” Aftershock Investor Report, March 5, 2015.
8 Boettke, Peter J., Why Perestroika Failed: The Politics and Economics of Socialist Transformation (London: Routledge, 1993), 21.
9 Gur, Ofer, “Soviet Economic Growth: 1928–1985,” Rand/UCLA Center for Study of Soviet International Behavior (May 1988).
10 Samuelson, Paul, and William D. Nordhaus, Economics, 13th ed. (New York: McGraw-Hill, 1989), 837.
11 See Lane, Frederic C., Profits from Power (Albany: State University of New York Press, 1979), 7.
12 Lenin, V. I., “The State and Revolution,” The Collected Works of V. I. Lenin, trans. Stepan Apresyan and Jim Riodan (Moscow: Progress Publishers, 1964), 25. Available at http://www.marx2mao.com.
13 Boettke, Why Perestroika Failed, 5.
14 Harrison, Mark, “Soviet Economic Growth since 1928: The Alternative Statistics of V. I. Khanin,” Europe-Asia Studies 45, no. 1 (1993): 158.
15 Ibid.
16 Yeats, William Butler, Michael Robartes and the Dancer (Churchtown, Dundrum, Ireland: Chuala Press, 1920).
17 Role, Raymond E., “Le Mura Lucca’s Fortified Enceonte,” Fort 25 (1997): 90.
18 Bailey, Jonathan B. A., Field Artillery and Firepower (Annapolis: Naval Institute Press, 2004), 147. Note that Bailey reports that San Giovanni fell within three hours, rather than eight hours as usually reported.
19 Long, Gordon T., “Paul Craig Roberts: The Cancer of Financial Repression (And Why You Can’t Do Anything about It),” Zero Hedge, February 22, 2015.
20 Warner, Jeremy, “Only Mass Default Will End the World’s Addiction to Debt,” Telegraph, March 3, 2015.
21 Dawson, John W., and John J. Seater, “Federal Regulation and Aggregate Growth,” Journal of Economic Growth, January 2013.
22 Krieger, Mike, “American Middle Class ‘Wealth’ Worse than Every Nation but Russia & Indonesia,” Zero Hedge, November 7, 2014.
23 Taylor, P. J., “A Metageographical Argument on Modernities and Social Science,” GaWC Research Bulletin 29 (September 4, 2000).
24 Ibid.
Chapter Two
The Megapolitics of a Changing World
The idea of the future being different from the present is so repugnant to our conventional modes of thought and behavior that we, most of us, offer a great resistance to acting on it in practice.
—Lord Keynes
A crucial but seldom-asked question for you as an investor and thinking citizen is, what determines the direction of social change? The central conceit of democracy is that this is determined largely by human choice as evidenced by shows of hands. Obviously, human desires play some role in determining the direction in which history moves, but probably much less than we tend to think.
The State of Nature
Even a cursory review shows that one of the rarest of all historic curiosities is a government actually controlled by its customers. A more detailed analysis confirms that even governments ostensibly chosen through popular franchise are anything but popular, hence the Gallup report that popular approval of the US Congress dipped to an all-time low of 9 percent in 2013. Among other things, the extraordinary unpopularity of the Congress, and indeed the government itself, reflects the eclipse of the “one-size-fits-all” mass society. In the diverse American economy of the twenty-first century, there is literally little consensus in favor of the legacy policies of government. A Gallup poll from March 2015 showed that Americans named “dissatisfaction with government” as the most important problem facing the country.1
Having said that, these poll results are more curiosities than determinants of future developments. In my view, the ultimate determinants of human action are the megapolitical factors that inform the current state of nature. The direction of change can be more easily deduced by recognizing these informing factors than by assessing public opinion surveys, much less peering into crystal balls.
Deciphering the “Laws of Nature”
Hence this thought exercise begins with a question that Lord Rees Mogg and I sought to answer. What exactly are “the laws of nature”? Not an easy question. You can’t read them in a statute book. They are not inscribed on stone tablets for your inspection. To understand the laws of nature, you have to think for yourself. Are “the laws of nature” or “the law of the jungle” fixed for all time? Or do they fluctuate with circumstances?
Think about it.
The physical strength of individuals does not change markedly from generation to generation. Still, you probably wouldn’t like the chances of a middle-aged American in hand-to-hand combat with a battle-tested hero of the ancient world, like Achilles. It requires a bit of imagination to bring Achilles to life from the pages of Homer’s Iliad, but bear with me. Can you imagine yourself prevailing in such a situation?
I can.
Give you an automatic .40-caliber Glock pistol, and I would bet on you to win a confrontation with Achilles.
As this fanciful example illustrates, the laws of nature that govern the physical force of individuals, or the coalitions groups they are able to form, are not fixed, but fluctuate with various boundary forces such as technology.
Technological innovations in weaponry have obvious megapolitical implications for altering the costs and rewards of projecting power. And when you examine them closely, so do other aspects of technology, such as the characteristics that dictate the scale at which enterprises can be most profitably organized. And don’t overlook the fact that there are other boundary forces such as climate, microbes, and topography that factor in determining the costs and rewards of violence.
Putting Nature in the Background?
It would be a rank misrepresentation to contend that there is a popular consensus to minimize the role of nature among the various boundary factors that inform the “laws of nature.” That said, while nature has not been explicitly discounted, there is ample evidence that we have tended, as a civilization, to push nature to the background as a kind of static setting against which we play out our destinies. If anything other than our decisions in the economic and political realms determines our fate, we suppose it to be technology, hence the prevailing conceit that climate change is determined by human action rather than natural fluctuations.
The “Longue Durée”
In 1958, historian Fernand Braudel wrote an important plea for taking the “the long view” in attempting to understand history. I agree with his view, which has important implications for the current intellectual hysteria over supposed global warming and other climate woes. Well before anyone had invented the concept of anthropogenic global warming, Gustaf Utterstrom observed in “Climatic Fluctuations and Population Problems in Early Modern History” that adverse climate change brought cooler weather to Europe beginning in the fourteenth century, with devastating effects including the Black Death. More generally, Utterstrom chided economists for
overlooking the importance of climatic fluctuation in history, including major events in Sweden over the last few thousand years—such as a change in land elevation due to the melting of inland ice—that radically altered how humans live.2
Global Warming in Historic Context
At a time when the current American imperium is fiscally exhausted and exhibiting declining returns across a wide range of activities, an abrupt turn toward a colder climate could be a trigger of dramatic change, as it frequently has been in the past.
One of the more pernicious consequences of Al Gore’s trumped-up fuss about global warming is its shrouding of all questions of climate in a deep fog of political correctness. (As I detail in later chapters, much of the climate record trumpeted to support claims that the world is getting warmer is simply bogus.) Yet thanks to Gore and his accomplices, rational discourse on questions of climate has been stifled. If you are among the few whose “climate-brain” has not been lobotomized by overexposure to Al Gore’s terror of good weather, it may not be too late for you to prepare for an unexpected and potentially dramatic climate change in coming decades that could help precipitate an economic collapse—if the system lasts that long.
Perhaps it would be more bracing to think in terms of a “rapid decline in complexity” as part of a transition to a new and freer world, instead of thinking of it as “collapse.” Take your pick. But to avoid an overdose of repugnance at the thought “of the future being different from the present,” it may be crucial to stretch your perspective beyond our conventional modes of thought.
For a better perspective on the real risk that climate change poses to economies, you need to forget almost everything you may think you know about the history of climate and its impact on civilization. Unless you studied geology, or you share my gamey taste in reading, you are liable to have internalized something like Al Gore’s cartoon view of climate—that it was stable and benign until humans happened along and began to change it.
Wrong.
Climate is dynamic, always changing, and almost entirely outside of human control. Even during the Holocene period over the last twelve thousand years, when the climate has been extraordinarily favorable to human habitation, there have been long centuries when it took a turn for the worse and our ancestors faced a heightened challenge to survive. Looking back, most of these periods of climate lapses, or protracted colder periods, are known variously as the “Dark Centuries,” “Greek Dark Ages,” “Bronze Age Collapse,” or simply “Dark Ages.”
Over the longer term, the Earth’s climate has been anything but benign. For most of the past 100,000 years, the areas of the northern hemisphere that were the most economically advanced through the twentieth century—including Great Britain and the most industrialized areas of North America—were buried beneath miles of ice. Where Chicago, Detroit, Glasgow, and Stockholm now stand, glaciers more than a mile deep buried everything in sight.
The Megapolitics of Feudalism
In The Great Reckoning, Blood in the Streets, and The Sovereign Individual, Lord Rees Mogg and I cited many examples of how changes in megapolitical conditions in the past, some of them seemingly trivial like the invention of the leather stirrup, had far-reaching consequences in shifting the “laws of nature,” thus reorganizing societies. The stirrup came into use in Europe during the Dark Ages in the late sixth or early seventh century. By giving the lateral support to a warrior on horseback, it created a revolutionary new mode of battle: mounted combat. This helped cement the power of the landed aristocracy in feudalism. Roughly speaking, feudalism was a system in which wealthier persons within the hierarchy of poor agricultural societies exercised disproportionate military and economic power.
Personal Rather than Territorial Power
In contrast to the modern system in which the state exercises sovereignty over a distinct territory, the medieval system of rule was one of overlordship, in which a variety of lord-vassal relationships overlapped in the same territories. Professor John G. Ruggie, a political scientist at Harvard, explains that the medieval system of rule was essentially a form of anarchy. In his 1983 article, “Continuity and Transformation in the World Polity: Toward a Neorealist Synthesis,” Ruggie described the confusion and chaos in medieval rule that led to overlapping and incomplete rights of government and private authority.
Seen from the modern viewpoint, the feudal system of anarchy is hard to imagine. If the scale of governance plunges, as I suspect it may after the Breaking Point, the intricacies of that time may once again be matters of urgent concern.
For the time being, however, it may be enough to recall that serfs were vassals of the knight. The knight was the vassal of the baron. The baron, in turn, was the vassal of the viscount, as he was the vassal of the earl. The duke lorded over the earl. But the duke was the vassal of the prince. The king, in turn, was superior to the prince, while sometimes, and in some places, the king himself was the vassal of the Pope or the Holy Roman Emperor.
None of the feudal lords, not even the king, was necessarily expected to even reside in his territories, nor were they necessarily contiguous, as national territories have tended to be. Note, for example, that after the Norman Conquest, English monarchs usually did not even reside in England. King William the Conqueror himself spent 75 percent of his time after 1072 living in Normandy.
And it was only after Henry Bolingbroke returned from France to seize the throne in 1399, becoming King Henry IV, that England had a monarch who spoke English as his mother tongue. Henry put an end to the Norman line when he had Richard II murdered in 1400. It was a different world. And probably never quite as bound by tradition as people at the time preferred to believe.
The order of precedence among the European aristocracy, the descendants of feudal warlords, probably continued to puzzle hostesses at upper-class dinner parties at least through World War I. But the raw logic of that deference was established centuries earlier before the ancestors of any titled gentleman made it a regular habit to bathe. Under the medieval system of fragmented power, any local warlord who could seize or erect a castle could operate from an almost impregnable redoubt. In most cases, the agricultural production in the area surrounding the castle would have been sufficient to support a contingent of warhorses and a few armed knights—more than enough to cow the neighboring peasantry into subservience.
The Gunpowder Revolution
As always, this system was destined to change as the state of nature evolved. Power was implicitly democratized when gunpowder weapons gave peasants without expensive horses, or the leisure to practice the military arts, the capacity to defeat mounted shock cavalry of the local warlords. Although feudalism did not collapse when the first shots rang out, gunpowder weapons undermined its megapolitical foundations, at least under the conditions of jurisdictional competition that prevailed in late medieval Europe. “The discovery of gunpowder,” as Adam Smith’s contemporary William Playfair observed, was “wonderfully adapted for doing away the illusions of knight-errantry, that had such a powerful effect in making war be preferred to commerce.”3
Big Government Doomed
The argument of this book is that contemporary, big government is a similar anachronism, doomed in much the same way, as was feudalism after the invention of gunpowder weapons. My suspicion is that the speed at which history unfolds has accelerated and that the status quo will falter much faster than feudalism did. Furthermore, the underlying foundations of big government have undergone a seismic shift.
Whereas the returns to scale in organizing violence increased during the past five centuries while government grew, the new megapolitical realities reduce the returns to organizing violence at a large scale. This is why ragtag terrorists and homicidal maniacs operating on their own or in small groups can crowd into the headlines of every broadsheet newspaper in the world. The increasing vulnerability of nation-states to attack by even small bands of fanatics suggests that the coming Breaking Point will happen far faster than the centuries it took to
build up the modern nation-state system.
It was indeed a protracted process.
When examined, you can see that the Gunpowder Revolution was not a simple matter of rolling out Howitzers and AK-47s immediately gunpowder was discovered. The Gunpowder Revolution unfolded over centuries as metallurgy improved, making possible higher compression cannons and small guns that would propel heavier shot with greater force. The assembly of greater concentrations of power in mass armies, “the big battalions” as Napoleon described them, went hand-in-hand with the growth of the nation-state, financed by taxing enterprises organized at an ever-larger scale.
Centralization of Power
Whereas power was privatized and disbursed under feudalism, the megapolitical logic of gunpowder weapons pointed toward the consolidation and centralization of power in territorial states. There were great advantages to scale in equipping armies with gunpowder weapons.
The Breaking Point Page 4
