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As I said in my article "From Despair to Hope" I expect an unrecoverable depression to engulf the world within the next two to five years. In this article I expand on the reasoning behind this conclusion.
Basically, I think the problem is worse than anyone in the American financial/economic industry is able to admit because 1) it's truly global 2) it's multifactorial to an extent not generally appreciated, 3) the USA has lost its manufacturing base that is intrinsic to any recovery and 4) there isn't enough cheap high-EROI energy left to fuel the recovery.
Whenever I get into this discussion on the net I have a hard time determining whether the arguments being raised against this position are global or Amerocentric. There is no question that the USA has a LOT of fat in its system that will make it possible for them to do more than many other nations when it comes time to mitigate a collapse (at least for a while). However, the rules for the USA do not, obviously, apply to Belgium, South Africa, Thailand, Brazil or China. Given how interdependent the world has become, events in those nations will resonate in Anytown, USA. And because we're looking at a potential deflationary collapse due to a global mark-to-market of derivatives, it's an open question how long it would take for deflation to complete America's liposuction.
The key to understanding the whole mess, IMO, is to first understand how interconnected the world and its various problems have become. That in itself makes overall analysis of the situation difficult or impossible to any degree of precision. However, if there's one thing we've learned from systems engineering it's that systems that are complex, dynamically unstable, highly efficient and highly interconnected work very well when things are going well, but fail rapidly and completely in unexpected ways when things go wrong. As a result I mistrust analyses that look at one component of the system that is modern civilization (e.g. replacing oil-driven transportation with electric transportation) and say "We can fix this part even if that part over there breaks." Maybe, maybe not. I am sure, though, that the longer things go on as they are with our civilization the more problems will occur, and over time the probability of encountering a significant insoluble problem approaches 100%. And the time frame for this appears to be much shorter than we've been assuming.
Then there is the perennial (and perennially optimistic) reference to the WPA during the Great Depression. Millions of people were put to work on infrastructure projects, and were happy to find the work, no matter what it paid. Of course labour costs will drop through the floor in any deflationary depression, but there's more to a recovery than just the cost of labour. The problem I find with comparisons to Depression-era WPA efforts lies in these facts:
- The American manufacturing base has been significantly eroded compared to 1930;
- Energy and raw material prices are much higher than they were then (oil is over 5 times more expensive in constant dollars);
- The population of the USA is almost 3 times higher;
- The per capita national debt is 6 times higher in constant dollars;
- The national debt has ballooned from 20% of GDP in 1930 to 100% today;
- The USA now imports 2/3 of its oil, compared to 0 then. This is especially significant in light of the Export Land Model proposed by Jeffrey Brown of The Oil Drum, which leads to the conclusion that the international oil market could go completely dry within 25 years.
- The derivatives market – whose value depends strictly on agreements between buyers and sellers that can vanish in an instant – is nominally valued at ten times the world's total GDP. The disappearance of this value in a global mark-to-market event could be the trigger for a world-wide deflationary crash.
All these factors create a physical and economic environment with significantly more challenges than the USA faced in 1930.
My best guess right now is that the world will, overall, reset within ten years to a level of economic activity that is less than half of today's value, and that this will become the new normal. Recovery to our current level of activity will not be possible due to the convergence of permanent ecological and energy shortfalls. Some regions may do better than that, some worse. The USA is primed to be fall into the "worse" column because of its dependence on imported oil and its eroded manufacturing base, neither of which can be rectified in the time remaining with the money remaining.
As I have said before, under the current circumstances a recovery from this crisis is not guaranteed.
As always, however, my message is that the best response to this predicament is personal awakening, consciousness raising, spiritual transformation – call it what you will. This conclusion is now spreading across the globe like wildfire. On a daily basis I see new references to this exact position. Today there were two such sunbursts. The first one was in a rather hard-edged article by Juan Santos, ominously entitled, "For the Earth to Live, Capitalism Must Die". In it he says, in part:
By the same token and the same logic, the key tasks before us lie not in saving the global economy, not in creating a "green" economy, not in inventing new ways to exploit new energies in order to continue to mine the life of the Earth, nor in any other activity that would seek to preserve this system in any form whatsoever.
The key tasks before conscious people today are the forging of a profound understanding of what has gone wrong – a sweeping and utter re-evaluation of all values that will be tantamount to a new renaissance, a conscious re-creation and co-creation of culture. Much of that work began to be undertaken in the 1960s, and has borne important fruit, like William Kotke's work, The Final Empire. It is ours to forge an authentically sustainable culture, even in the midst of this civilization's fast approaching end – by relying on and integrating the deepest, clearest and most coherent teachings of traditional indigenous cultures, of students of the ecology, and of the multivalent healing practices of both indigenous cultures and of the new therapies that have arisen in the last 50 years. Such a movement – one that is intent on restoring the Earth and fostering social justice and renewing our cultures by incorporating the values and vision of indigenous peoples – is already underway on a global scale. Paul Hawken, in his important book Blessed Unrest, calls it an "unstoppable movement to re-imagine our relationship to the environment and one another." His research shows that it is the largest movement in human history, involving some 2-3 million organizations worldwide and some 200 - 300 million people whose cultural, ethical, political and ecological creativity are already impacting billions. That the processes of renewal - of healing, rectifying and relearning - will best be fostered among those in living in direct contact with, and in a caretaking relationship with the Earth and other, non- human living beings should, I hope, be self evident.
Another person who understands the gathering momentum is Carolyn Baker. In her article Abdicating the "A" Word, Frantically Fighting for the Familiar she says this:
Unquestionably, collapse entails suffering, and there are no guarantees that any of us will survive. Many innocent members of the human and other species will perish. Wise people from the great traditions tell us that the transition cannot be made painlessly. What is also true is that it offers something extraordinary-something like what I see in small communities where people are already creating local currencies, becoming first responders for crisis situations, organizing neighborhood watches to provide food and heat for the vulnerable, maintaining winter farmers markets, celebrating the holidays in unique ways that do not focus on consumption but rather, on cooperation. At the same time that I feel pervasive despair nationally, I see unexpected people in unexpected places seizing unexpected opportunities. Who knows if they will survive? Who knows if anyone reading this article will survive? Who knows if I will survive?
But if mere physical survival is all it's about, then we are left with nothing but doom and gloom. If, however, things like cooperation, compassion, building authentic community, and living from a new paradigm, even if only for a brief period of time, occur, then civilization will have been transcended and dealt a significant death blow. Humans who participate in those ventures will have tasted something far more momentous than mere physical survival-something civilization can only obliterate, not sustain: the opportunity to savor one's inextricable connection with all aspects of the earth community. Or as Richard Heinberg reminds us, "Growth is dead. Let's make the most of it. A crisis is a terrible thing to waste."
As many spiritual teachers have noted, and as I've observed in my own life, great crisis is often the catalyst of spiritual transformation. This is what is unfolding around us now. My deepest hope is that the personal transformations so many of us are experiencing will flow together like tributary creeks into a great rushing river of change. The path ahead may be hard beyond belief, but it will be filled with wonders beyond imagining.
Shift Happens...
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Fossil Fuel
