Thursday, June 25, 2009

More on Devolution

Readers expanded on the notion of devolution, prompting me to further my own thinking.

The recent entry on devolution ( Devolution: 20 Predictions) sparked substantive reader commentaries. Astute reader Monnie M. noted that the global supply chains on which we depend are very fragile, and thus a "Black Swan event" which triggers a systemic collapse is not just possible but likely.

I agree that any number of breakdowns could trigger a domino effect, or even a positive feedback (runaway self-reinforcing loop) situation in which each breakdown of a subsystem reinforced the breakdown of a related subsystem.

For example, a major disruption in oil supplies triggers sharp increases in food and food shortages, which add to the social disorder triggered by the oil shortage, etc.

On the other hand, as I have noted here before in my Survival+ series, the system also has negative feedback loops which act to restabilize the system. This interplay of reinforcing and counteracting feedbacks is why I see devolution as not just likely but a mechanism which is already in play. To use another analogy, it is akin to "death by a thousand cuts."

Devolution can also be seen as positive in the sense it is an evolution of an unsustainable system. After mulling over readers' feedback, I think what devolution means to me is a slide down the complexity scale: the piecemeal dissolution or erosion of highly complex systems to simpler forms.

The reason this is painful is that all the people who are feeding at the trough of the complex status quo (think of the 16% of the U.S. economy devoted to sick-care, oops, I mean "healthcare") will resist any decline in their share of the national income with every fiber of their beings.

Thus the system becomes ever more brittle and vulnerable as gradual adaptation is rejected in favor of holding the status quo together with duct tape, accounting trickery (see "California legislature borrows $10 billion from next year, claims to have balanced the budget") and more loans. Having rejected adaptation to resolve the overly complex, financially unsustainable status quo, those feeding at the trough guarantee its devolution: each system breaks down in piecemeal fashion, in effect falling down the stairs of complexity in jarring fashion until it reaches a sustainable level.

We cannot predict the exact timing of this descent, but we can safely predict the bottom level of sustainability is far below current levels. Thus auto/truck sales reached 17 million vehicles a year in the U.S. in the bubble boom times. and now they've fallen down the staircase to 9 million. Sustainability might be 6 million units or even less.

Those feeding at the trough of each industry/State fiefdom will find the reduction in complexity and funding painful, but "unsustainable" means just that. Change of some sort cannot be denied, and so the choice is adaptation, devolution or collapse.

On to readers' comments:

freeacre ( Freeacre & Murph)

"Devolution." Awesome post! I loved it! Maybe it will also lead to:

1) People begin to pick up hitch hikers again. Riders chip in for gas.

2) Neighbors begin to babysit one another's kids or barter the service for foodstuffs or help with gardening, etc.

3) Unemployed teachers are hired by neighborhoods to teach their children in exchange for room and board and a small amount of money.

4) Zillions of RV's are aquired cheap and are parked on public and private land with little regulation. Yurts and assorted hand-made homes are built like crazy. People organize local security teams, like the Guardian Angels.

5) Everybody gardens and barters food, goods, services. If they don't have their own place, they use abandoned ones.

6) People start partying and getting to know each other in block parties and pot lucks, entertain each other making own music for free.

7) Powers That Be try to impose more and more regulation, but are overwhelmed with non-compliance. People just walk away from their debt, credit cards, cell phone contracts, don't renew their drivers licenses, change their names to whimsical substitutes and nicknames. It gets harder and harder for government to keep track of people. Kids make an art form out of computer hacking and misdirecting ruling class and authoritarian telecommunications.

8) The gov't. declares a war and nobody shows up...

9) People get together around bon fires and have ceremonies to "set themselves free."

10) Then, re-named and part of a newly formed tribe, they go on walk-abouts to spread the word....

This could get real interesting....

Frank P.

Good article... and it gives rise to a few other thoughts you might want to consider in part II.

* * *

How about a huge increase in swap meets organized by charities et al. out of which will arise tax evading barter systems.

Cash becomes king, as does hard money, in almost all small transactions and services.

Capital where it still exists will go underground along with whole segments of the real economy.

Local organized crime, other than public servants, will expand.

Vigilantism will likely respond (have you checked out gun/ammo sales lately?)

Corruption in local government will soar rather than be mostly conscribed to county/state/fed levels.

Protection services both illicit and legal will likely be a growth industry. (Do you know a good stock in barrier-fencing?) Banks, grocery and drug stores posting armed security guards at the doors (i.e. like most of Latin America)

Guard dogs become much more common with an upswing in breeder activity.

As Jim Rogers put it, 'capital flight controls will be implemented while the establishment universally opens off shore accounts'

Boat sales have plummeted but will increasingly become home to the displaced. also local piracy will increase.

Possibly a negative immigration rate.

Surge in smuggling of all goods especially foodstuffs and fuel.

Both major political parties will likely fail, existing alternate parties will become dominant players.

Inner sectors of larger cities may become 'dead' zones while small town life will be preferred.

Road blocks may become a common event as will restrictions on travel. (via recently enacted administrative law by USDT)

Small proprietorships will increase as box stores and malls close. (many in the underground economy however)

Speed trap towns will increasingly employ police forces to collect fines on the spot in cash or impound vehicles (basically a form of extortion/hostage taking)

Wild game stocks depleted. (White tail deer had to be reintroduced into Mississippi after the Great Depression)

* * *

Several years ago we traveled to central Asia. Our hotelier in Bukhara told us that government officials come around once a month to collect tax. Its really a shakedown as they took everything leaving him with $10 per month to live on. In Bishkek its common to see old women on the road side with a bathroom scale to weigh passersby for a fee. They had nothing.

I've lived most of my life 'in the country' and I don't mean the burbs. Spent 18 years in rural Alaska and now live in the vicinity of Mount Rainier. In both cases surrounded by trackless miles of unpopulated forest. Most writers' reference points are urban or burban. When fishing SE AK it would be relatively easy to isolate oneself in the waterways' nooks and crannys and avoid other contact for days, even weeks at a time. Subsistence life is hard but abundant. America is still an undeveloped country by population density per sq-mi. I expect to see a rise in squatters especially along streams and rivers here in the NW.

Monnie M.

Interesting piece.

My prediction: It won't happen like this because we'll have an episode, possibly a "Black Swan" event, that will trigger a sudden, overnight systemic collapse.

Such an event could be an EMP attack, a more conventional terrorist attack, or a mechanical failure(s), causing a massive power outage whcih leads to a cascading systemic collapse.

Imagine what a successful terrorist attack just of the magnitude of 911 would do to us now.

It could be a failed Treasury auction (or several within a couple of weeks) leading to a blatant and drastic purchase of these bonds by the Fed, possibly after a Chinese/Russian/European/Middle Eastern boycott of Treasury purchases, and/or throwing much or all of their T-bond holdings on the market. This would cause a bond market collapse and a run on the dollar.

It could be an announcement from China or Middle East that the dollar is no longer the world's main reserve currency, or that the dollar will no longer be accepted at all as payment for oil and possibly other critical commodities. Again, a run on the dollar, a rush into precious metals, and certainly a major move into a barter/black market economy.

It could take the form of widespread public riots following extreme shortages of food and fuel (exacerbated by price controls in a hyperinflationary environment) leading to a declaration of martial law.

It could be a major natural disaster (hurricane or earthquake) or a pandemic disease and quarantine declaration causing a nationwide panic and a buying/hoarding spree.

It could be an Israeli attack on Iran and Iran's closure of the Straits of Hormuz, followed instantly by a surge in the price of oil and a rush to fill car fuel tanks before supplies were exhausted and/or the price exploded.

It could be a federal announcement that welfare checks are being withheld or delayed as a result of an extreme cash flow shortage, or (more likely) a realization that the buying power of those checks has been drastically lowered by hyperinflation without a COLA applied to those government transfer payments, leading to mass rioting and martial law.

It could be the announcement of a "bank holiday" triggering a massive panic and social upheaval.

All of these are plausible possibilities. I'm sure there are several others that I cannot imagine.

I think that you may underestimate the extreme fragility of our system and the thin veneer of our civilization. Consider the effect of our "just in time" ordering, payment, and delivery systems. Ponder the world's very thin food reserves. Think about the rising violent crime rate, the rapidly increasing number of people implementing survivalist planning, and the increase in nonsensical behavior (such as the seemingly very stable, respectable, and responsible SC governor going unannounced to Argentina to see his paramour).

I'd say the gradual drop down to a less functional level you describe is the LEAST likely scenario.

Dave E. (Dave Eriqat)

Fantastic piece! I agree with everything in it, even though I tried to find fault. I especially agree about the emphasis being placed on maintaining the status quo for the insiders, at the expense of the populace. But will they succeed? As you indicate, tax revenue will likely plummet. Eventually, it may fall below what's needed to maintain the status quo, forcing governments to start disbanding to some extent. I could envision entire departments, such as sanitation, being closed and their duties privatized or terminated altogether.

Here's another "prediction" to add to your collection: More beat up cars. I was out driving around after writing you earlier, marveling at all the shiny new cars on the road. When I was a kid, few people had brand new cars. In fact, such an event was a neighborhood event! And there were lots of beat up old cars around.

Thank you, readers, for these insightful commentaries.

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