Wednesday, July 28, 2010

The Next Golden Age, Part I

The Next Golden Age will blossom without the burden of the Savior State and its Elites and fiefdoms.

I recently received this insightful challenge to address the positive future that potentially lies beyond devolution and collapse:

Good morning sir, I love your writing I read it everyday. You focus so much on the coming collapse and not at all the inevitable rebirth and the beginning of the next 80-year cycle. Would you spend some time speculating about the new golden age beginning in 2021 or so? Your glass half empty pessimism is sometime overwhelming.
Thank you,

Sgt C., U.S. Marines

Thank you, Sgt C., for suggesting the challenge of imagining not just collapse (all too easy) but a positive rebirth from the ashes of the present unsustainable status quo.

In a way, I've already tried to address this with my book Survival+, but with the focus on individual, household and community actions. What I will attempt in this occasional series is to describe future large-scale changes: financial, cultural and material.

1. The reduction of complexity and the end of marginal return. The chief characteristic of the U.S. economy and society is marginal return: ever-larger sums of money, energy, human effort, etc. are dumped into a "problem" while the return on that prodigious investment diminishes to less than zero.

The reasons are not complex: one is complexity itself, fed by entrenched fiefdoms protecting their payrolls and perquisites, the pernicious effects of the entitlement mentality and an organizational bureaucratic sclerosis which can be defined as a focus on process over results.

In the post-collapse-of-the-status-quo future, all the wasted motion will be lost. It will no longer be affordable, so it will go away.

Results will matter, process won't--the reverse of today's cultural worldview. Nowadays, by following procedure you CYA--protect yourself from criticism--and also evade responsibility for the outcome.

My favorite illustration of this may be apocryphal. Someone goes to Thomas Edison's laboratory and asks about the enterprise's regulations. "Regulations?" Edison is said to have retorted. "We're trying to get something done here." Precisely.

The ultimate luxury and waste is a CYA focus on procedure to avoid responsibility for poor results (or negative results). That luxury will be gone.

Let me illustrate the reduction in complexity and process with one example we can all relate to: going to the doctor. In the New Golden Age, everyone will pay for healthcare with cash. There may well be some limited forms of catastrophic coverage, but the entire mindset of entitlement ("healthcare is a right," etc.) will be gone.

You choose the doctor, and he/she agrees to offer care for a sum (just like in the "old Golden Era" of the 1950s). You receive the care/treatment, and then pay the doctor in cash or equivalent.

Currently, it is estimated 40% of the $1 trillion we spend on Medicare/Medicaid is squandered on shuffling paperwork/electronic files and fraud. Another 40% does not actually help the patient or is needless (defensive medicine, tests given for profit only, etc.). The opportunities for fraud in the sprawling bureaucracy are endless.

Now compare it to the Next Golden Age. Where is the opportunity for fraud when care is paid for in cash? A "bad check" slipped in lieu of real money? Perhaps, but in general the staggering waste and fraud of the current system vanishes.

How much of this transaction is "overhead," paper-shuffling, filing of insurance claims, arguing over who pays for what, etc.? Very little. If the doctor overcharges (i.e. charges more than other equivalent services) then his/her business will decline.

What about poor people who can't pay for care? In at least some cases, "poverty" is at root mismanagement, carelessness and perhaps a self-destructive worldview. These people will either learn to manage their money better or they will have to wait for whatever care is offered by charity.

In today's environment of Savior State entitlement, that sounds harsh. But the reality is the Savior State will implode or devolve to irrelevancy, regardless of whether your like it or not (see below for the inescapable reasons why).

Charity was and continues to be a vibrant, important part of American society. To belittle it as unequal to the task is to misunderstand the reality that the Savior State is unsustainable. The material wealth of the nation--the actual output--will be declining, and the Savior State, which only knows how to grow and wrest an ever larger share of the national income, will implode.

In the New Golden Age, our rights will be simple: life, liberty and the pursuit of happiness. The Savior State will have dissolved in insolvency or shrunk down to irrelevancy. There may be all sorts of entitlements offered and promised, but no one will be offering those services for free.

This reality will be familiar to those who have declared bankruptcy. Bankruptcy eliminates all the wasted motion in an organization; all the support staff, the layers of management, the meetings--all that disappears because there is no longer any money to sustain that wasted motion. In a household, the unsustainable mortgage, fancy car payments, etc. are all gone, and debt-serfdom has been thrown off.

The enterprise which emerges is stripped down to its productive core. If it isn't, then it will wither and go extinct. No group, enterprise or State can live beyond its real output for long. The U.S. has been using the artifice of its currency, the hegemony of the U.S. dollar, and its soaring borrowing, to paper over the yawning gap between what the nation produces and what it spends. Eventually, reality intrudes and spending declines to match output.

There is a great freedom of movement, purpose and innovation in a stripped-down enterprise. The bankruptcy blows off all the dead weight and sclerosis, the obsession with process/procedure and keeping up appearances. After a household, enterprise or nation loses its useless complexity, it can be energized by the freedom of no longer supporting the impossible burdens.

Indeed, the argument presented in the excellent book The Upside of Down: Catastrophe, Creativity, and the Renewal of Civilization is that productive people simply grow tired of supporting an economy suffering from terminal marginal return. Empires don't collapse as much as they are abandoned by the productive citizenry who must shoulder the rising burdens. At some point the "benefits" of Empire no longer outweigh the Empire's costs and constrictions.

2. The end of the entitlement mentality. Being entitled is taken as a wonderful thing in today's crumbling status quo, but upon examination we find that entitlement is intrinsically bound up with resentment and passivity/complicity. The act of feeling entitled brings with it a latent resentment: against others who may be getting more, and against the authorities who now wield power over the entitled.

If the Empire stripmines productive citizens and other lands, the entitled don't care; they are focused on "getting what's mine" and whatever evils and costs are perpetrated to obtain the swag that flows to the entitled are ignored, marginalized or dismissed as irrelevant.

Everyone wants something for free, but few seem to notice that whatever is given free is squandered, unappreciated, and endless demands for more soon follow.

The entitlement mentality is a prison of resentment, self-absorption and complicity in the "project" of enlarging the Central State and its Power Elites' share of the resources, output, wealth and income of the nation and the world.

One of the key benefits of the disappearance of the entitlement prison is that people will start realizing the benefits of believing they have something positive to contribute to their community and nation. That is a powerful self-affirming idea. People will begin to feel better about themselves.

Why will the Savior State implode/shrink to irrelevancy? Here are five inherent reasons which cannot be "solved" or massaged away:

A. The accident of favorable demographics goes away as the citizenry age. Endless entitlement paid by "somebody else" or future generations seemed plausible when there were 10 workers for every retiree. At two workers for every retiree, it is revealed as impossible. You cannot support 100 million retirees on the backs of 100 million workers, as well as a global Empire and various vast fiefdoms such as the National Security State-within-a-state, a parasitic shadow banking sector, etc.

B. Exponential growth cannot be sustained. The Savior State must grow by 3-5% annually while the economy will fluctuate around zero growth or even decline. Please go to Chris Martenson's site and view The Crash Course for the end result of exponential growth.

C. The hegemony of the U.S. dollar is not permanent. In the current status quo, the U.S. issues endless trillons of government bonds denominated in dollars, and the rest of the world is more or less beholden to accepting this phantom promise in exchange for real goods. Once the forward value of the promise is eroded, then this prop under America spending more than it makes will crumble.

D. The underlying economy produces goods and services worth a certain amount in dollars, gold, quatloos, oil or whatever measure you choose. The status quo requires that the nation spend trillions of dollars more than the nation's output to support the Savior State, its Elites/fiefdoms and its global Empire. At some point gravity will take precedence over fantasy and the nation will have to live within its means. The Savior State already requires 11-12% of the GDP be borrowed every year to maintain the flow of swag/redistribution of the nation's income to favored hands. That percentage will rise as the underlying economy devolves and "the end of work" shrinks the taxpaying workforce.

E. The entire project of the Savior State was dependent on cheap, abundant energy. When that goes away, so does the Savior State.

What replaces the Savior State? Nothing. There may well be a Central State devoted to smaller, less complex projects such as national defense (as opposed to global Empire), but the Savior State which sends checks to 100 million citizens and supports vast complex systems like Medicare will no longer function.

Most people seem to feel the implosion of the Savior State is something to dread, yet the nation survived quite well without a Savior State or global Empire circa 1781-1941. The Savior State only arose because of three specific circumstances: favorable demographics, World War II and the vast supply of oil which happened to exist within the national borders. Its passing cannot be stopped so why mourn it?

In losing the false god of the Savior State, we will turn once again to community for security, to productive focus on results rather than procedure, and on resilience rather than exploitation.

Sgt C., I apologize for not replying, but I am too cheap to pay $20 for a digital signature--please use an unsecured email system to email me next time. Thank you.

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