Are Empire and Democracy Compatible?

The status quo claims Empire "supports" democracy. But what if Empire is intrinsically incompatible with democracy?

Let's take a quick look at the American Empire.

I use the word "Empire" because to avoid it would be artifice. What word other than Empire describes a nation with a commercial, diplomatic and military presence in most of the planet's nations?

I use the term without ideological spin: for the purposes of this analysis, it is not a structure to deny, deplore or glorify but one which must be carefully described as a unique and thus key context of all global issues, even those which on the surface appear to have little connection to military matters.

It is important to preface any discussion of Empire by noting that those serving their nation honorably in the U.S. Armed Forces are not always well-served by their civilian leadership. The reason citizens serve is to defend the nation, which is the Constitutionally mandated, legitimate purpose of the Armed Forces.

Yet we must not blind ourselves to the reality that the military can also be deployed to serve illegitimate purposes which are presented ("sold") as legitimate to the American public and servicemembers. The citizens who take the oath of service are sworn to uphold the Constitution and to obey their civilian leadership's orders. If the civilian leadership is pursuing agendas other than true national defense--for instance, a commercial and diplomatic Empire--then the U.S. military can be ordered to pursue missions which have little or nothing to do with national defense and everything to do with protecting and extending the interests of the Power Elites which dominate the civilian leadership of the nation.

Those who serve in the U.S. Armed Forces at mid-rank levels of responsibility are aware of the U.S. military's global reach. The average citizen might not know that the U.S. maintains bases in 63 countries and has personnel stationed in approximately 150 nations.

The entire world has been divided into six military zones (Africa was recently set up with its own command), with separate U.S. commands which each control extensive communications, intelligence, war-gaming and planning resources.

These facilities include a total of 845,441 different buildings and equipments. The underlying land surface is of the order of 30 million acres. According to Gelman, who examined 2005 official Pentagon data, the US is thought to own a total of 737 bases in foreign lands. Adding to the bases inside U.S. territory, the total land area occupied by US military bases domestically within the US and internationally is of the order of 2,202,735 hectares, which makes the Pentagon one of the largest landowners worldwide (Gelman, J., 2007).

Approximately 369,000 active duty personnel out of a total of 1.4 million serve overseas. Many U.S. military postings are small (a few hundred personnel) and are not combat missions but peacekeeping, medical/logistics, intelligence, support of alliances such as NATO, etc.

The U.S. also maintains Reserve forces (National Guard, etc.) of which about 145,000 are on active duty, and employs an unknown but substantial number of civilian employees (contractors) overseas as well.

Though the Intelligence Community (C.I.A., N.S.A., N.R.O.-National Reconnaissance Office, etc.) and the Pentagon (D.I.A., Naval Intelligence, etc.) have some overlapping functions and hence some rivalries, in the larger context the Armed Forces and the Intelligence Community should be viewed as pieces of a truly global Empire which is under the control of the civilian government of the U.S.

No other nation or even alliance has an equivalent global reach. In effect, every region and every nation in the world is a "point of interest," as the U.S. has interests-- commercial, diplomatic and "soft power"--in every nation larger than a small city.

If the U.S. influence were limited to a global military system, it would not be much of an Empire. But the Pentagon and Intelligence forces are merely one branch of a much larger structure which includes a vast diplomatic network--equally as impressive as the military reach--and pervasive commercial interests, of which Coca-Cola, McDonalds and Kentucky Fried Chicken are simply the most visible.

Many American commercial interests are hidden from view behind limited partnerships, wholly owned local corporations, joint ventures and the like; financial and banking interests are similarly cloaked. There is also some overlap of military and corporate interests, as U.S. weapons systems are lucratively sold to foreign governments for commercial, diplomatic and military gain.

U.S.-based global corporations receive the majority of their profits from overseas operations; thus the commercial importance of maintaining a neoliberal capitalist-centric world of open trade and finance--the U.S. Empire--should not be underestimated.

One mechanism of influence and control used by corporations worldwide is interlocking directorships, in which certain influential people serve on numerous corporate boards, in effect knitting various interests and strategies into a network.

The U.S. Empire can profitably be viewed in this same light. American interests need not own operations outright; the Empire's structure is not one of coercion (except when persuasion and subterfuge fail) but of interlocking interests.

Although it tends to raise ideological hackles, it would be remiss not to observe that the U.S. Intelligence Community is not entirely a passive network; on occasion it has engineered coups, uprisings, protests, etc. and retains the capability to do so--at the command of the civilian government of the U.S.

Oil and empire are both global, and both are intertwined. What's the point of constructing an empire if it cannot secure global energy supplies for the home nation? If all wealth is in effect stored energy, as I contend, then the only real wealth other than food and water is energy.

To the degree a crisis anywhere on the planet affects oil, or any other critical interest of the U.S., then the U.S. Empire will act as a potentially decisive negative or positive feedback, regardless of the location.

Since the middle class is the foundation of the State (by paying the taxes and providing political support for the status quo), then questions of democracy, markets and empire directly affect the squeezing of the middle class.

While this discussion may seem far afield from practical responses to the intersecting crises we face, it is actually of paramount importance. For if the American State/Empire over-reaches globally, and the Plutocracy over-reaches domestically, then the middle class must either respond in its own defense or collapse beneath rising taxes.

The State and ruling Elites will defend the status quo very robustly and perseverently, overriding or simply ignoring middle class attempts to limit its power.

Thus it is not at all clear that democracy and Empire, that is, geopolitical hegemony, are compatible. Nor is it clear that centralized State planning (socialism) and democracy are compatible, either (please see The Road to Serfdomby F. A. Hayek).

Why? Socialism always contains the potential for "the tyranny of the many" which concerned many of the United States' Founding Fathers. If 51% of the citizenry are receiving benefits or "free" services from the government, they can essentially dominate the minority productive class via the ballot box.

Put another way: the percentage of people who will gladly accept free money or services is virtually 100%, while the percentage of those willing to risk their time and capital for productive enterprise is considerably less than 100%. Thus the less-productive benefactors of government largesse can extract ever-higher taxes from the remaining productive members of the society, until the productive members either collapse into penury as in the late Roman Empire, or they opt out of supporting the unsustainable burdens imposed on them by the tyranny of the State's more numerous benefactors.

In his book Capitalism, Socialism, and Democracy , economist Joseph Schumpeter argued that capitalism collapses from within as democratic majorities vote for the creation of a welfare state. This so burdens entrepreneurship that the capitalist infrastructure which supports the State and its dependents collapse.

Ironically, perhaps, the structure of Empire remains the same regardless of the ruling ideology: neoliberal Capitalist or Socialist (democratic or autocratic) or totalitarian: a small ruling Elite benefits enormously from the Empire, and bestows sufficient benefits on the home nation's citizenry to buy their passive complicity.

In all cases, the Empire is managed by a centralized-State Elite which is untouched by any feedback/influence instigated by the citizenry.

Democracy is thus ontologically at odds with Empire; democracy can exist in the home nation of the Empire but the citizenry do not control the Empire managed in their name. Secrecy, subterfuge and propaganda are thus essential elements in legitimizing the Empire in the eyes of the domestic citizenry and in gaining their compliance/support.

The forces drawing outsized benefits from the Empire have the wealth and influence (concentrations of power) to dictate the State's global decisions. In any Empire, the citizenry effectively have no say over the policies of their State; propaganda is deployed to stir up patriotism when the rubber-stamp of popular approval is deemed necessary.

Congress no longer declares war, as dictated by the U.S. Constitution; it empowers an Imperial Executive branch with open-ended "resolutions" while the citizenry are pummelled into submission with endless propaganda.

Another way of understanding this dynamic is to analyze the cost-benefit of Empire. U.S.-based global corporations receive the majority of their profits from overseas operations. In recent years, U.S. corporate profits were about $1.4 trillion, so we can estimate that close to $1 trillion of that profit was generated overseas. (Note that overseas production greatly increases corporate profits on goods sold in the domestic market.)

Given that the U.S. Empire works to keep cheap oil, commodities, manufactured goods and labor flowing to the domestic economy, we might also estimate that the Empire funnels at least $1 trillion in direct financial benefits to the domestic economy.

The Pentagon budget is approximately $650 billion a year, or roughly equal to the Social Security budget. The core Defense budget is about $515 billion for fiscal 2009, with another $70 billion for the Global War on Terror (GWOT) and additional funds for Veterans and active wars in Iraq and Afghanistan.

According to the U.S. Department of Defense, these funds include providing world-class health care for 9.2 million eligible Service members, families, and retirees and maintaining 545,000 facilities at 5,300 sites in the U.S. and around the globe. Source: www.defenselink.mil

Other highlights include $389 million to establish a new U.S. Africa Command, and $184 billion for weapons systems procurement, research and development. That is a staggering sum which is divided up amongst a handful of large defense contractors, all of whom have facilities spread over the U.S. so the largesse can benefit all 535 members of Congress. These elected officials view the Defense budget as a stupendous opportunity to bring jobs to their district even if the Services do not want the weapons being procured.

Given the large number of citizens benefitting from this spending (9 million active and retired personnel and their families, millions more working in weapons R&D and manufacture, the Veterans Administration, the civilian Pentagon workforce, etc.) and the enormous profits to be made from supplying the Pentagon, we can safely state that the Elites controlling these sums have asymmetric stakes in the game (a topic covered in depth in Survival+) and thus tremendous incentives to support the Empire's status quo.

From the point of view of those benefitting from the Empire's direct maintenance costs, then $650 billion appears to be returning $2 trillion in direct benefits: $1 trillion in corporate America's overseas profits and another $1 trillion "discount price for global empires" in commodities and manufactured goods: a healthy return on investment. (Recall that the U.S. dollar is simply paper we print yet it has the magical property of being tradable for oil and other tangible goods. I consider that the "discount price for global empires.")

Critics ask what else might be funded if the Pentagon budget was slashed from Empire levels to nuclear deterrence and self-defense levels (say, $300 billion less than the current $650 billion); but social spending (or deficit reduction) would not benefit the State and corporate Elites extracting huge benefits from the Empire and thus they will defend their Imperial share of the national income at all costs.

Democracy has little role in the Empire's spending or policies until such time as the cost-benefit falls to the point that the Empire costs more to maintain than it reaps for the Elites and brings home to the domestic populace. Until then, the populace has significant incentives (defense jobs, cheap oil, commodities and manufactured goods) to remain passive and those Elites and dependents benefitting from the Empire have every incentive to actively support the status quo.

Excerpted from Survival+: Structuring Prosperity for Yourself and the Nation.


If you want more troubling/revolutionary/annoying analysis, please read Free eBook now available: HTML version: Survival+: Structuring Prosperity for Yourself and the Nation (PDF version (111 pages): Survival+)

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The Immense Suffering Caused by Financial Devolution

While the mainstream financial press crows about the "end of the recession" and the rising stock market, the suffering caused by financial devolution gets short shrift.

Longtime correspondent Azvitt recently submitted these links to stories on the human toll of financial devolution. While these articles show the mainstream media is covering the emotional toll of bankruptcy, foreclosure and loss of income, what is missing is the recognition that widespread suffering will not be going away "because the recession is over."

A surge in corporate profits and thus in the stock market does not mean millions of jobs will suddenly open, or that the collateral/equity which has been lost will return.

The mass media's lack of context is willful. Not only is it "un-American" to dwell on "the negative," it's also bad for business because confidence and euphoria is what causes consumers to spend, spend, spend and advertisers to buy, buy, buy those adverts which support the media.

While sorting through an old trunk of my father's belongings, we found a stack of yellowing newspapers from the 1930s, collected when he still a lad. (He had two newspaper routes and once told me he made more money than his father did selling insurance.) The top paper was from Thanksgiving day, 1936, and the headline blared, "Prosperity Index Rises."

Yes, they had phony "proof the Depression is over" stories then, too. In fact, the most salient point about the mass media in the 1930s is how rarely it addressed the Depression directly. The effort was all to create an illusion of normalcy and positive spin. This cheerleading was undoubtedly considered the media's "patriotic duty."

The Depression was to run another five years from this headline announcing that the "Prosperity Index Rises." And it only ended because the Federal government borrowed trillions of dollars (in today's money) and put millions of people to work in a vast global war machine.

As a personal aside, I would like to note that I have been down to my last $100 twice: in the Great Recession of 1973-74, and again in the Next Great Recession of 1980-82. My partner and I paid our employees with credit card advances in tough spots in the early 80s, and I ended up mortgaging my free-and-clear house to pay off our subcontractors. Nobody lost a dime working for us or doing work for us, but we lost almost $100,000 in the process of completing a couple million-dollar project.

We exited with our personal integrity intact, and that was worth more than the money lost. I know this not a popular viewpoint but personal integrity is all we really "own" and control.

So as for mental anguish, stress, breakdown, desperation, depression, self-pity, confusion, loss of self-worth, sense of profound failure, and all the rest of that unique torture known as "financial worries," I know them all first-hand. Hence my sympathy for all those experiencing serious financial travails now.

Suicide calls rise (Loudoun County, VA)

Study: Foreclosures Causing Major Mental Depression (live science)

Internet friends log on to suicide note (Albuquerque, NM)

Financial stress taking a toll on the mental health of individuals (Naples, FL)

Halo Group, Inc. Addresses Rise in Suicide Rate among Military Personnel

The stress that is involved with multiple deployments is often worsened by financial problems they face upon their return.

As I See It: Daniel, Part One

The effects of mass layoffs (a single company firing 50 or more people) are seldom the stuff of headline news. But they can be especially pernicious for small communities with few if any employers large enough to take up the slack. The Bureau of Labor Statistics reported that "employers took 2,763 mass layoff actions in June that resulted in the separation of 279,231 workers." ("Separation" being a boring word for a life-changing experience.) But each worker has a story. Some find work and move on. Some descend into poverty and addiction. For many, their homes, families, and futures are put in jeopardy. And some, like Daniel, lose them all.

One of the most profound truths I have ever encountered was Greider's observation that "Everyone's values are defined by what they will tolerate when it is done to others."

National Suicide Hotline Inundated by Economically Distressed (ABC News)

Police: Death ruled suicide (San Mateo County, CA)

Bank purchases apartment complex (Amarillo, TX)

Sterquell crashed his Lexus on April 1 in what officials ruled a suicide. Creditors who have sought payment for months filed a petition April 21 to force AHF into bankruptcy. The foundation filed for voluntary bankruptcy May 11.

Too poor to parent? Critics say when the state takes kids away, the real problem is poverty (Detroit, MI)

Thank you, Azvitt, for the sobering links.

NOTE: With the U.S. dollar down this looks less than prescient, but here is my bullish column on the dollar's longer term prospects on AOL's Daily Finance site:The Dollar: Sunrise or Sunset?


If you want more troubling/revolutionary/annoying analysis, please read Free eBook now available: HTML version: Survival+: Structuring Prosperity for Yourself and the Nation (PDF version (111 pages): Survival+)

"Your book is truly a revolutionary act." Kenneth R.

Of Two Minds is now available via Kindle: Of Two Minds blog-Kindle

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Mobilizing a City to Store Rainwater

Correspondent K.R. describes a city in India mobilizing to store rainwater.

We in First World post-industrial economies assume less-developed nations should "learn from us" and "follow our lead." Maybe we could learn a few valuable lessons from them as well. The First World methodology is generally this: choose the most expensive technological solution, lard it up with regulatory bureaucracy, file a passel of lawsuits to bog it down, and then either try to sell it at enormous profit to consumers or let a governmant agency implement it, guaranteeing delays and cost-overruns paid for by taxpayers.

Since less-developed countries don't have that much money to burn, they have to resort to cheaper, quicker, low-tech solutions to large-scale problems like drought and rainwater collection.

Correspondent K.R. filed this report from Bangalore, India:

Regarding your article Emergency Water and Waste Disposal (August 15, 2009), I thought I might bring something to your notice which, I believe, may eventually help the human race survive after all.

The city of Chennai in India had a prolonged and severe water shortage a few years ago. Being coastal, groundwater tapping quickly ran out as the water started getting brackish after a few days of pumping. It became so bad that a large part of the city was being supplied with water from towns over 100 kms away by tankers. Given the level of corruption, you can guess the amount of money made by unscruplous "businessmen" and politicians in that period.

Once the city got back onto its feet, a rule was passed to make it mandatory for every new (residential) construction to incorporate rainwater harvesting without which the builder would not get permission to build. Older dwellings too thought it fit to retro-fit since the painful memory of the shortage era was still fresh in people's minds.

Today, I believe this city is becoming some kind of a model for other cities to make homes significantly self-sufficient in terms of water and it permits civic authorities to plan expansion of capacity and supply in a more gradual and sustainable manner.

It's also worth noting that many of these innovations happen best when it is local in design and implementation instead of costly, overdesigned, imported equipment which does not meet local needs much of the time.

I have carried endless buckets of water from the tanker to our underground storage. I have been around to supervise the Rain Water harvesting system at our home in Chennai.

Just thought I'd let you know that humans somehow manage to back off from the brink and innovate their way out of trouble most times and this gives me hope that, despite all the doomsday predictions, we will continue to adapt and survive! :)

K.R. added this comment on another topic where the First World might learn something from its less-developed brethren:

There is one other thing. A lot of your posts have to do with dealing with the problems of the poor. While reading one of your posts on dumpster diving to make do, I was wondering about the sea of difference between the concept of poor in the developed West and back home in the East.

As part of a social service group, I have spent a couple of days among the poor in an urban slum in my city. The official definition of the Poverty Line in India is $1 per day as family income. There are around 60% of our population living below that poverty line. But statistics seldom bring such poverty to life.

Most of us have been brought up with the rule that nothing must be left when we have finished a meal. We carry over everything. And what is found to be in excess, we give it to the maid at home who uses it for her family. It is quite unthinkable for us to dump out a completely unopened pack of anything simply because it has gone out of date. In fact it is very rare for anything to go out of date as we buy only for a few days and consume every thing with care! Today, even though I might be senior executive in a software company earning as much as an American in the U.S., it is still unthinkable to leave something on the plate when the meal is finished! :)

I was thinking about an interesting solution to the rampant greed among the business and political leaders in the West. As well as the growing dehumanisation amongst them. Why not make it mandatory for each one of your Investment Bank top management and maybe your Administration bosses, the FED chairman, Treasury Secretary and maybe the whole of Congress come down to the worst slums in India (or China or any of these countries) and live like one of the locals for a single week.

I guarantee you. Their outlook on life would change forever. The flip side of it is, some of them may simply not make it through the week!

Thank you, K.R. A number of readers submitted links and further reading on water collection and disposal of human waste. Dennis H. recommended Jenkins Publishing and The Humanure Handbook: A Guide to Composting Human Manure "It's available as a free pdf download at various places online and for not much at Amazon," Dennis writes. (Thanks to Warren for the same suggestion.)

Ben D. recommended two books: The Humanure Handbook: A Guide to Composting Human Manure and Rainwater Collection for the Mechanically Challenged.

A reader who prefers to remain anonymous sent in these links from his/her site "Getting Started In Emergency Preparedness" which provides a 16-part "course" on emergency prep. Here is the 3-part primer on water storage:

Storing Water part 1

Storing Water part 2

Storing Water part 3

the site includes many links to other sources of information.

Thank you, readers, for the great information and recommendations.

NOTE: With the U.S. dollar down again today this looks less than prescient, but here is my bullish column on the dollar's longer term prospects on AOL's Daily Finance site: The Dollar: Sunrise or Sunset?


If you want more troubling/revolutionary/annoying analysis, please read Free eBook now available: HTML version: Survival+: Structuring Prosperity for Yourself and the Nation (PDF version (111 pages): Survival+)

"Your book is truly a revolutionary act." Kenneth R.

Of Two Minds is now available via Kindle: Of Two Minds blog-Kindle

Thank you, Carol M. ($10), for your much-appreciated donation to this site. I am greatly honored by your support and readership.

Thank you, Michael A. ($20), for your very generous donation to this site. I am greatly honored by your support and readership.

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Rant or Revelation: My Money's on Revelation

Correspondent Michael Goodfellow's rant reaches revelation.

Frequent contributor Michael Goodfellow and I correspond on a great number of issues. Having worked in technology and software his entire career, he brings an engineer's sensibility and rigor to many issues. Recently he wrote a commentary which he titled "A Charles Smith Moment" which leaves rant and enters revelation in my view.

He suggested I introduce it with the phrase "this is what I get when he's in a bad mood..." but I think you'll find a succinct indictment here:

A "Charles Smith" Moment

Unfair to you to call it that, but when reading this item about Iraq off Cato,

Time to Leave Iraq

(and these links on Social Security/Medicare and the Federal budgetSSA Trustees Report and Tax Policy Center)

I had that feeling that the whole country is just a Ship of Fools headed into the rapids and there's nothing I can do about it.

It's not just that I disagree with the neocons -- their values, their goals, their plans and their politics. It's that they don't even seem to care. They don't clarify their goals or strategy, they don't learn from their mistakes and they don't even want to look at whether Iraq is a success or failure. It's as if they don't even believe what they say.

They just want to act out some WWII-inspired fantasy of turning countries into democracies and being the world's policeman. But now Iraq is just "so 2005", so ignore it, wrap it up, and off to Afghanistan! And both wars have so much momentum that even the President can't seem to slow them down or divert them, let alone call them off. He'd rather let both wars be huge failures than take any short-term political heat. Again, it's as if no one, even the other party, cares what we accomplish. Thousands of American soldiers die, tens of thousands of Iraqis die, trillions are spent, and for the politicians, pundits and public, it's just "whatever!"

And it isn't limited to the wars. On health care, the Republicans are patting themselves on the back for derailing ObamaCare, but neither side is facing reality. We can't afford existing Medicare. The baby boomers start hitting 65 in a couple of years. Time is up for dealing with that crisis. Even if the Republicans stop health care legislation, they still have that to deal with. And not in some "future generation", but during their term of office. What can they possibly be thinking?

But what can the Democrats be thinking? It's not as if there's any cost control in the ObamaCare plan. They seem surprised that CBO keeps scoring the plan as expensive. Can't any of them do arithmetic? 45 million uninsured times $2000 a year (a very cheap insurance policy) is $90 billion a year, or about a trillion dollars in ten years. CBO is only scoring the first five years of the plan, since it phases in. Still, any back-of-the-envelope calculation would have told them the tab was going to be in that ballpark. And this is on top of the Medicare problem, Social Security, Cap and Trade, and the financial crisis. How does anyone think we can afford all of that?

In fact, the one thing that does seem to unite both parties is a complete disinterest in what the legislation will actually do. They just want to let the usual special interest groups fight it out, write a thousand pages of incomprehensible regulatory gibberish, and call it done. Just don't ask us to read it!

The same was true during the financial crisis. The whole attitude of Congress was "Keep this away from me! I don't understand any of it! You, Federal Reserve, here's a blank check. Just solve this problem and don't even tell us what you are doing."

Again, this isn't a matter of values or priorities. It's beyond incompetence. It's a complete disinterest in the results of their actions. I would call it panic, but that requires a certain alertness. This is some kind of psychosis.

So I look at the entire political system and I think how unreal it all is, and how tired. Republicans are running on intellectual fumes -- neocons and old warhorses like McCain; anti-gay, anti-immigrant, anti-trade sentiment and populist know-nothings like Palin. No awareness of where the country is right now, and no willingness to stick to any principles at all.

I still like the libertarian arguments on Reason and Cato, but they have their problems as well. First, they are a tiny minority. Second, they mostly criticize the system without offering practical, politically possible steps in the right direction. And third, they are hopeless nerds. I watch those guys on video and I think "This guy couldn't sell me ice cream on a hot summer day! And I'm someone who agrees with him!"

I could never take the Democrats seriously either. From the various bailouts to all their plans for the economy, health care, environment, it has the same feel of unreality as the Republicans. As if they just don't want to know whether any of these plans can possibly succeed, or whether we can afford to even try. They just want to act out their fantasies, where they save the Earth, bring healing to the poor and end racism.

I wrote to one guy on global warming that the only thing that matters is what gets invented in a lab somewhere. If we can build better batteries or solar panels, do carbon capture or geoengineering, then we can make a difference. But the hair-shirt conservation measures have no real effect. And you can prove that with statistics about efficiency and the savings they could possibly get.

If you actually cared about global warming, you'd want to know what works. (and build nuke plants, which is apparently being shot down by the Obama administration.) But he doesn't even want to talk about that. It's just "if we don't pass cap and trade, the oceans will rise and the Earth is doomed." And if you don't agree with him, you are an evil "denier." It's not even a reasoned argument. Where am I supposed to go with that?

Like you, I expect a train wreck at some point. Unlike you, I don't expect chaos. Instead, it will just be a hunker-down, "do something, anything!" government-orchestrated mess. More of the same, with increasing instability and poverty. I don't think that knowing how to grow veggies or collect rainwater will make any difference at all.

The thing to remember is that most of the third world has worse governance than we do, worse financial problems, fewer natural resources and a less educated population. Still, from Argentina to Poland to India, they just limp along. Anarchy does not break out. I see no reason for it to do so here either. It will just suck.

Thank you, Michael. Such clarity is a rarity these days.

Those of you who have slogged through my free eBook (shameless plug)Survival+: Structuring Prosperity for Yourself and the Nation will recall parallel descriptions of fantasy, disinterest and psychosis.

The entire structure of response and policy is what I term simulacrum, facsimiles of solutions, pseudo-solutions which as Michael points out, are being "sold" with the sort of half-heartedness of those who know full well they are props and facades and thus utterly illusory.

No nation can borrow 13% of its GDP without consequences, but rather than face our situation with what I term an adult understanding of triage and trade-offs--that you can't get everything you want right now, that priorities must be assessed and difficult trade-offs made--we as a nation have entered the delusion that we can just borrow the money to put off any hard choices.

Wars going badly? Borrow another trillion to "stay the course"--whatever that means. As Michael notes, the policy has always been incomprehensible, switching from finding WMDs to fostering democracy to stopping terrorism in Mosel before it gets to Miami to the ideological-flavor-of-the-month.

Sick-care unsustainable and broken? Borrow another trillion, write a 1,000 pages of gobblydigook to placate and pander to the special interests involved, solving nothing and doing nothing to actually cut costs, and then "declare victory": Mission accomplished!

It rings hollow because it is hollow: nothing of substance has been accomplished because as I put it, those with asymmetric stakes in the game are pouring every dime and every ounce of energy into the game to protect their share of the swag, while we citizens and "consumers" are expiring from death by a thousand cuts--none deep enough to spark concerted action.

While the government and corporate Elites protect their fiefdoms, the citizenry are distracted by trash-talk radio and TV, courtesy of a mass media owned lock, stock and barrel by six corporations.

Complacency and fatalism reign supreme, and the Elites are loving it because a confused, doped out, distracted, apathetic, complacent, fatalistic populace is easily duped and manipulated.

What Michael foresees as our future is what I term devolution. We differ on two points, which Michael already knows from our voluminous correspondence. So I want to be sure to note that I am not reading this into Michael's commentary--these are my thoughts.

I think we will devolve to "tipping points" or phase shifts where systems will break down. This won't necessarily lead to chaos but it will lead to something beyond complacency and fatalism. It could be negative or it could be positive; that choice is ours.

I believe that the loss of wealth, the extremes of income inequality and the credit/debt implosion are all phase shifts which have already occurred, but the status quo Power Elites and citizenry alike are in denial, hoping that some miracle of additional borrowing will re-set the clock back to the era of bogus "prosperity."

Those hopes will be proven futile because simulacrum is not reality and delusion is not a practical substitute for actual solutions.

I differ somewhat with Michael on solutions, as I think all solutions come from the margins. While I hope for technological solutions, I am skeptical because our consumerist mindset is fixated on the notion that "buying something new" will somehow solve all our problems.

Mo offense to Prius owners, but I suspect we've all been sold a bill of goods on its benefits. The entire cost of a vehicle, or any manufactured object, is called its lifecycle costs. This means calculating the cost in money, energy and resources of everything required to manufacture the vehicle--not just the steel, but the cost of pumping water to make the steel, mine the ore, etc.

Now a Prius has two components which simply do not exist in a stripped down ICE (internal combustion engine) vehicle: a large battery pack and extremely complex electronics for switching between electric and ICE drive.

Batteries require a stupendous amount of costly resources to manufacture. Until batteries are made of sand (silicon) or equivalent materials and do not require highly complex processes, they will remain costly. They are also toxic and therefore costly to recycle/ dismantle properly.

Thus I suspect that if you include the full lifecycle costs of manufacturing a Prius, the cost of maintenance and the fuel it burns (or the electricity used to recharge its batteries) and the disposal/recycling of its components, and weigh them against a high-mileage cheaper vehilce like a Honda Civic or subcompact Ford/GM, the Prius is probably less efficient and less environmentally sound than the cheap ICE vehicle.

"Buying something new" might not be the answer at all except at the margins--transformers that lose less energy, electronic power converters which are suddenly mandated to be efficient rather than energy hogs, etc. etc. Perhaps the Consumerist Gods will fail to be the "solution."

Just as technology changes at the margin, so too does behavior. I have to disagree with Michael about growing veggies, because as I have said before, "a garden and a homecooked meal are revolutionary acts." These simple acts are revolutionary because they upend the oppressive regime of agribusiness, packaged/fast food and the sick-care system--all parts in a seamless system of ill-health, derangement, torpor and chronic disease which can be treated with enormously expensive and mostly needless medications and procedures.

This is what I term an integrated understanding of the entire system of growing and consuming food and health. Agribusiness, fast food, high salt, high fat and high sugar processed "foods" (poisons is a more accurate term), chronic illness and various derangements, and an immensely profitable sick-care system are all one. There can be no "solutions" without an integrated understanding that simple behaviors are the heart of any and all real solutions. Buying something "new" is a simulacrum "solution" marketed to reap profits.

The solution to sick-care starts not with 1,000 pages of legislation, paid for with trillons of dollars of borrowed money but with an understanding of the causal connections between gardening, vegetables/food, cooking rather than consuming, self-reliance, goal-directed activity and responsibility for one's health.

The market will create the proper incentives to conservation and wise choices if it is given a chance. When gasoline is $10 a gallon (and it will be), then people will change their behaviors as common sense dictates. When peaches cost $10 a pound, then all the fruit that drops to the ground to rot now will be collected before it rots.

I read somewhere about a town in Alaska (I forget the source) which lost its electrical service and had to rely on costly generators for some time. The cost was passed onto consumers. As if by magic, electrical consumption dropped 40% overnight. No new devices were required; the Consumerist Gods were shedding tears and wailing mightily, for the "solution" was behavioral.

Yes, technology promises many innovations, but how we live offers much cheaper, easier and more environmentally sound solutions without waiting around for mechanical/electronic saviors promoted by the Consumerist Gods.

I would like to end with a mindful haiku from resident haiku poet Jed H.:

End of an Era
A Culture of Corruption
End of the Empire.

Here it is with Jed's notes:

END of an Era ( i.e., the Boom-times: 2000- 2007 a la 1920s )
A Culture of Corruption
END of the EMPIRE ! ( i.e., US of A is on its Downhill Slide, like Romans ! )

Thank you, Jed, for a poetic summation of "the end of an era."


If you want more troubling/revolutionary/annoying analysis, please read Free eBook now available: HTML version: Survival+: Structuring Prosperity for Yourself and the Nation (PDF version (111 pages): Survival+)

"Your book is truly a revolutionary act." Kenneth R.

Of Two Minds is now available via Kindle: Of Two Minds blog-Kindle

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The Travails of Small Business Doom the U.S. Economy

Over time, the travails of small business will doom the U.S. economy.

One of the recurring themes here is the largely zero-coverage-by-the-MSM erosion of small business in the U.S. via hamhanded over-regulation and over-taxation. Correspondent Robert D. provided this first-hand account of why businesses either never get off the ground or fail shortly after opening.

You often mention the excessive burdens placed on small business by our friends in City Hall, the various State Capitals and D.C. I thought I might add my anecdote to the mess.

A few years ago my wife, 2 kids, 3 dogs, 1 cat, 2 gerbils and I moved to a picturesque small town on the Pacific Coast with a large historic district where my wife had a job offer at the local hospital.

I found work as a chef at the population center 1 hour+ commute each way by car, ferry and shoe. After a couple of years of 10-12 hour days plus the commute I was getting burned out. So when the new owner of a local boutique hotel asked for proposals for a restaurant to replace the failing "Gifte Shoppe" in his ground floor commercial space, I jumped on it. We shook hands on a sweetheart deal lease-wise as long as he did not have to contribute to any build-out costs.

That's when the fun began.

I sketched some plans and had them drawn up by an architect ($1000).

I submitted them for review to the County building Dept. ($300).

Everything was OK, except for the bathrooms. They were not ADA compliant. Newly built bathrooms must have a 5' radius turning space for a wheelchair. No problem. I tried every configuration I could think of to accomodate the larger bathroom space without losing seating which would mean losing revenue. No luck. I would have to eat into my storage space and replace it with a separate exterior walk-in cooler($5,000). I would also have to reduce the dining room space slightly so I had to plan on banquettes along the exterior wall to retain the same number of seats (banquettes vs. separate stand alone tables ($5,000) Revised plans ($150). Re-review ($100)

Next came the Utility Dept. It seems the water main was insufficient even for the current use, a 24 suite hotel, and would need to be replaced ($10,000).

Along comes the Historical Preservation Society, a purely advisory group of starched collar, pince nez wearing fuddy-duddies (well, not literally) to offer their "better take it or else" advice, or maybe lose the Historic Status tax break for the hotel.

It seems that the mushroom for the kitchen exhaust fan would be visible from the street, so could I please relocate it to the rear of the building? Pretty please? Extra ducting and more powerful fan ($5,000).

Hello Fire Dept! My plans showed a 40 seat dining room, 2 restrooms , a microscopic office, and a kitchen. My full staffing during tourist season was 4 servers, 1 dishwasher and 1 seasonal cook-total occupancy 47, myself included.

The Fire Inspector said the space could accomodate 59. "But I only have 40 seats. I want luxurious space around the tables." I pleaded. "No. It goes by square footage. 48 seats, 4 servers, 3 cooks,one dishwasher, 1 person in the office and 2 people in the restrooms." "Why would I need 4 cooks for 40 seats when I am capable of doing that alone? And if the cooks are cooking, the servers are serving, the officer is officing, the diners are dining, then who the H#$% is in the bathrooms?"

"Square footage. Code!" And therefore it went from Class B to Class A, requiring a sprinkler system for the dining room and a third exit ($10,000) in addition to the existing front door and the back kitchen door. It would have to be punched through the side wall and have a lit EXIT sign.

Could it be behind the screen shielding the patrons from viewing the inside of the bathrooms every time the door opened? Oh, no! It might not be visible. The door would have to be located where 4 guests at the banquette plus their opposite companions were seated-loss of 20% of seating unless I squeezed them into smaller tables destroying the whole planned luxurious ambience.

Pro Forma:

$250K sales.
$75K Food and Beverage purchases
$75K Labor cost
$75K Expenses
$25K net before taxes.
Result of above experience=Fugget Aboud It!!!

Loss to community-$100K income plus tips +$20K Sales tax.

Another "Gifte Shoppe" went into the space and closed a month after the end of tourist season. When we left town 2 years later to go sailing the Caribbean, the space was still vacant.

I might add that I had advice in all this from a retired executive who volunteered his time (small donation to Toys 4 Tots gratefully accepted) through a group that connected us. He said that in his opinion that my project budgeted at $200K would cost upward of $1 million in NYC and perhaps SF due to higher permits and fees.

Thank you, Robert, for this eye-opening report.

On the face of it, each of these mandated upgrades resolves a potential problem: access for the disabled, insufficient water supply, fire hazards, etc. etc. Each of these codes was put in place by well-meaning public servants and engineering professionals.

The only problem is there is no consideration of costs or marginal returns in the codes and regulations. If a business can't afford an ADA bathroom, then it can close--period, end of story. The visible benefits--enforcement of codes--trumps the invisible losses of what the business provided in employment, sales taxes, livelihood, etc.

There is no weighing of the high costs of meeting codes and the potentially marginal benefits generated--the business either meets codes are it shuts down.

I have sat in on earthquake safety and code revision meetings, so I know how the process works. A group of well-paid public servants and top engineers in the field gather around a table and brainstorm how they can reduce the risk of something bad happening to John Q. Citizen.

To contribute (and polish one's sense of accomplishment), naturally there are numerous possible improvements to existing codes and regulations. But since codes have been around for about 100 years, and have constantly been revised and tightened, there's not much left to "improve" except at the far margins.

So if two exit doors (egress) are good, then three is even better--and we can calculate the time needed to escape from a room. This is obviously a good idea because getting trapped in a conflagration is bad and every effort should be made to avoid that. As for cost, well, the third door is such a marginal cost compared to the value of the entire business--who can complain?

Right. Until you add up five or ten of these marginal projects.

I also understand the value of prescriptive codes--no judgment required, here are the calculations and here are the results.

OK, but when did common sense get pushed out the door in favor of essentially unintegrated codes and regs? Every municipality favors "green building" and so on, but try to install a used window or door--no way. It's not to code. So "re-use"--the greenest "technology" because it does not require enormous quantities of energy be expended manufacturing and transporting some new object--is out.

It's remarkably easy for employees of the city or county to "do their job" enforcing regs because the implicit assumption is that their own paychecks will continue coming regardless of how few businesses survive.

As public-sector employees are beginning to discover, that is not true. Since small business employs 80% of the nation's private-sector workforce and pays most of the business and payroll taxes, then strangling small business means tax revenues plummet and the city and county go broke.

Though most will deny it, I suspect there is a deeply seated anti-small business value system now at work in the U.S. While large corporations are wined and dined with huge tax credits--please come to our state, we'll pay you millions to move!--small business is left to shift for itself, receiving nothing but pandering PR about how "we value small business" served up with ever-higher taxes and regulatory burdens.

Beneath the phony hype about "valuing small business" lies a more corrosive assumption--that a business is a license to print money, and so whatever costs are dumped on small business, hey, they can afford it, they're rich.

Would you borrow $250,000 to start a business which might, if you're lucky, net 10%? That's your wage, pal, not the net-net--you have to pay taxes on that $25K, too--starting with 15% self-employment. But then the business might fail, and you lose the $250K and have to declare bankruptcy.

A business isn't a license to print money--it's a license for cities, counties and states to print tax revenues. The entrepreneur may or may not print money, but since 75% of all new businesses fail within a few years (and that's in good times; now the failure rate will probably run to 95%), the odds are they will lose all their invested capital and be broke, not wealthy.

So what could cities, counties, states and communities do to actually help small businesses succeed? The most important step would be to consolidate all the permits, reviews, etc. into one office which was empowered to grant exemptions on marginal return regulations and which lowered permit costs to a trivial sum (total permits to open a new business, under $100 for everything).

What are the costs to the community if not every restaurant has ADA bathrooms? Is a gutted downtown "worth" the costs of requiring every cafe have an ADA (American Disability Act) compliant bathroom? How about allowing the new cafe two exits instead of three? How much would that endanger the community? Would that endanger it more than an empty town center with no cafes at all?

These are value judgments which means they are ultimately political. When major corporations face some onerous regulatory burden, they often dodge it by going over the heads of locals and buying the good graces and kind services of state or national legislators. Small business doesn't have this kind of money and clout.

That means local officials will have to step up if they want to retain and nurture real businesses that hire real people and pay real taxes. Maybe realizing their own jobs depend on small business, too, will provide some motivation.

Codes and regs which make sense as individual ideas become straitjackets when layered on top of one another with no integration via a common-sense, cost-benefit, marginal-value analysis. The choice is clear: either nurture small business and enable its survival or cities, towns, counties and states will see their tax revenues drop in a death-spiral: the more they drop, the higher the taxes they place on surviving businesses, which then speeds their decline into insolvency, which further lowers tax revenue, and so on.

If you don't think this is already happening, go count the number of empty storefronts in your area--and then recount them in a year. The results will be telling.

The second most important "innovation" municipalities and states could do is only tax net profit. Toss out all the junk fees and permits and business license taxes on gross income; if there's no net, then why should the State collect more than the poor folks slogging their guts out trying to keep the doors open?

Here's another revelation: there are lots of simulacrum businesses on the books which generate no revenues, pay no taxes and which don't actually employ anyone. Counting them in the same column as real businesses is not just a disservice, it's misleading.

Amidst the decline of real businesses, facsimile businesses still abound in California. BusinessWeek crowed this week that there were 11% more new business filings in the state over the past two years (never mind 80% of them were probably filed before Lehman Brothers blew up in 2008). Later, in an unintended irony, they profiled a few new Silicon Valley startups which are supposed to lead the state and nation out of hard times. After all, this is where H-P, Apple, eBay, Google and PayPal all started.

One of the representative "bright lights" was a recent college grad in flip-flops pitching his software idea for selling art over Facebook, based on what users were "favoriting." Yes, art, the market for which has imploded, and Facebook, you know, that amazing national industry which employs all of 900 people (guesstimate).

I hate to be the one to state the obvious, but this is a facsimile "innovation," a facsimile business and it will not be an engine of employment or growth.Yes, there are real scientists working on biofuels and energy conservation and nanotech in the Valley, and any of these technologies might turn into a legitimate business. (If so, it will soon exit the state for lower-tax climes.)

But most of the Web3.0 ideas can be boiled down to this: come up with a "hot idea" and sell it to a desperate-for-"innovation" corporation. All these Web3.0 schemes ultimately reduce down to living off the same income stream: advertising. That is a modestly thriving business but you're not going to create another Apple or Google sharing that one rather modest revenue stream with thousands of other firms.

It's easy to set up a simulacrum "web" business; all you need is a cubicle or living room and an Internet connection. You won't have employees or pay taxes because you have no revenue. If you fail, no biggie--you didn't borrow $250,000 to launch, you used OPM (other people's money) or scraped by for a few months to see if you could get angel investors.

That's all well and good, but it's the height of blindness to confuse Facebook-based schemes with real businesses, and to strangle all the real businesses while you pin all your hopes on the next Google mushrooming out of nowhere.


If you want more troubling/revolutionary/annoying analysis, please read Free eBook now available: HTML version: Survival+: Structuring Prosperity for Yourself and the Nation (PDF version (111 pages): Survival+)

"Your book is truly a revolutionary act." Kenneth R.

Of Two Minds is now available via Kindle: Of Two Minds blog-Kindle

Thank you, Pamela P. ($5/month), for your extremely generous subscription to this site. I am greatly honored by your support and readership.

Thank you, Judd H. ($40), for your stupendously generous donation via mail to this site. I am greatly honored by your support and readership.

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