Wednesday, June 17, 2009

On the coming neo-feudalism

It does seem as if the vast majority of people in the United State of America are going to become like medieval serfs, living at what feels in the post-gilded-age new realities like subsistence, watching a small slice of society from a distance as they jet in and out of the country, monopolize the ski resorts, continue to live in big houses with two or three thousand square per person, and so on.

The Baby Boom doesn’t have enough money to retire (quaint notion) and will be working till they drop, which will actually extend their lives.  The Gen X’ers will continue to live on scraps.  The Millennials are idealistically waiting their turn to be heroes while trying to find a way to support themselves in a workforce that is top-heavy with whining Boomers and cagey Gen X’ers.  Most of us will work for large or small corporations at a wage that is enough to support a modest lifestyle, but holidays will be spent close to home.  We will worry that we may be next to join the ranks of the unemployed, many of whom and whose stories we know—stories of lost jobs, houses, children’s sense of security in forced moves to strange communities.  The health consequences of the current crisis are no doubt predictable.  In a PBS special on other countries’ health programs, a German was asked if unemployed people lose their health benefits there.  Of course not, he said.  They are under great stress and risk to their health.  They need health benefits more than anyone. 

For a developed nation, America is a barbaric place.

Demand will not recover.  The Stimulus, piling upon preexisting terrifying trillions in deficits courtesy of Bush, will not work.  Spending will be cut to satisfy our external creditors.  The sheer weight of the debt will slow the economy.  The narrow U3 unemployment rate will rise into the double digits and stay there through the president’s term.  The “real” under- and unemployment rate U6 will hit twenty percent, and stay in the high teens. 

The poor and disenfranchised may even take to the streets at some point.  Americans are pretty timid now, worried that they’ll be called terrorists and disappear in the night or be put on the no-fly list.  Habeas corpus is gone.  Last September Hank Paulson said we may need martial law.  The government has been preparing for it.  There are empty prison camps standing ready, according to reliable reports.  (Many were built by Halliburton, allegedly.)  The Katrina experience showed us what to expect:  mercenaries will disarm the public; impose martial law; tell you to stay in your house or get shot.  FEMA’s National Level Exercise scheduled for late July is supposedly a counter-terrorism drill, but I would bet it involves practicing how to impose martial law.  Some believe the true purpose of the exercise itself will be to disarm the public.  Lots of luck with that.  That might provoke the first shots of a revolution.  But perhaps that is the intent, to show force and discourage any further dissent.  Like Iran now.  Like China twenty years ago.

Will President Obama be able to prevent this?  I don’t think so.  His government has thrown trillions at financial institutions, but we don’t even have workfare or income support for the long-term unemployed, and not everyone is even covered by unemployment insurance.  There are 25 million people in the U6 category today.  What happens when there are 50 million?  Will the government help them, or try to lock them all up?  We have a higher percentage of our population behind bars than any other developed country.  Will the fortunate just sit in their houses and hope that the Xe guys (formerly Blackwater—great name for a mercenary outfit) will protect them and their property from roving gangs? 

Americans have lost confidence in their government and themselves.  Their elected representatives do not listen to them.  The President is an agent of the status quo.  He has enabled the largest wealth transfer to a privileged elite in American history during the financial crisis, at the expense of the American taxpayer for years to come.  Does any American believe the new financial regulations will break the grip of the rich upon the resources of the nation?  Will we all come together all can-do, gung-ho style and pitch in together and the income distribution suddenly become more equal as it did in World War II and pull ourselves out of this? 

It ain’t happening.

These problems, of course, are replicated in many other countries, including our ostensible long-term rival and enemy, China.  Which is why the next ten years are a breeding ground for fascism around the world, and for the seeds of war.  We went into Iraq to build military bases to protect “our” oil, if push comes to shove.  But our military policies are backward-looking to the last war, as John Robb and others point out.  We will look pretty stupid when someone pulls off what Robb calls a systempunkt right here at home while we’re blowing billions in Afghanistan.  We don’t require our kids to get educated well.  Obama is backing off a single-payer health insurance plan, the one preferred by the American people and the one that makes the most sense from an insurance point of view.  The American social contract is broken.

People say Europe will be a museum in a decade, a lot of pretty castles and tourist attractions and mamoni hanging around at cafes.  America might be like a ski resort, with some beautiful neighborhoods in the cities and trailer parks outside where the workers and retired people live.  The Chinese will buy up real estate and companies and immigrate in large numbers, as they did to Vancouver from Hong Kong, having bought enough members of Congress to get their way.  They won the financial war, fair and square.  They might even teach us how to make state capitalism work, as the Japanese taught us how to make quality automobiles.

Or we could try democracy, for a change.


  1. Democracy. What a quaint notion.
    An interesting experiment while it lasted.

  2. New to your blog. Love it!

  3. The revolution will stop when the mercenaries decide that the elite do not have enough money to fund forces that would be able to confront the resistance. Remember the wealthy do not create wealth, they merely transfer it.

    When the mercenaries realize that the threats to their survivial outweigh the wages they are offered, it is game over for the elite. Maybe they will collectively realize that the can take the wealthy's assets by force with the force the wealthy attempt to invoke. Remember despite spending billions in Iraq, the US cannot even control it.

    Maybe it would be easier to control the masses by giving them make-work jobs. Why do Austrians hate make-work jobs? They do not create wealth, but they transfer it, and suppress outrage since it gives people the illusion of doing something productive. I like make-work jobs, it is my idea of bread (the wages from the job) and circuses (the job itself). I hope the US tries to quell the masses with bread and circuses instead of outright oppression. (Too bad, I do not like the current form of "circuses" ... I never watched a full episode of "American Idol")

  4. Aki -

    Probably both the rich jobs and make-work jobs can add value. Revolutions occur when inequality becomes greater than some innately tolerable level for a society. Even though in the Depression the New Deal make-work jobs did not equalize the income distribution, they were "bread." The mystery to me is whether it takes a war to equalize the income distribution again--or whether a war would even do it this time, as the rich are quite international in their orientation. I am glad you think that violent revolution can be avoided.


  5. Regarding the distribution of wealth... I do not care about it that much anymore. If people like Warren Buffett lose about 10 billion dollars worth of wealth, it doesn't mean that much to me. The problem is the confluence of economic power and political power; this link should be broken.

    I do not see any meaningful way to increase employment besides make-work jobs and reducing competition via import certificates and restricting immigration. Make-work jobs are a transfer of wealth because it transfer income from those who pay that taxes to those who get the make-work jobs. I hope the US chooses the bread and circuses path instead of oppression. (Of course, as I implied before, perhaps the circuses are already too effective at suppressing political interest. People are more concerned about American Idol instead of politics.)

    Regarding income distribution. One potential political force that would destroy the wealthy's economic power is protectionism because it would reduce the marketplace for their products and restrict their supply of labor. In the McKinley era, the elite supported protectionism because capital wasn't mobile, and the farmers had to sell their goods in unprotected markets while they bought protected goods do do their farmwork. I think the equalization of wealth during the 50s was the result of the destruction of the productive capacity of the world AND world socialism. (Ironic that Reagan Democrats bought the anti-communism rhetoric from Reagan. World socialism actually benefited them since it reduced the supply of labor in the global labor market.) The destruction of capital reduced the amount of capital in the world so the US had no competitors and most of the capital.

  6. We're on the same page...but the question without answer is whether or not it has to come to catastrophe before the people wake up?

    The only reason there hasn't been a revolt is due to there being nothing to revolt for.

    I have cracked that nut with 'A Simple Plan'

    It's time we abolished slavery, permanently!

    Let no human make their livelihood from the sweat of another human's brow!

    There is a way to abolish the employer/employee contract without returning to 'primativism'.

    Better, we can abolish taxes while we're at it! because all 'socially necessary work' benefits society!

  7. great post! compliments from the museum switzerland ;-)

  8. Beautiful, sad, & sensible. Greetings from Spain.

  9. Long time reader, first time yacker. Yes Benign, its all a bit wacko out there these days eh. Our American history lovingly spoon feed to us in public school is really tatty and ragged in this harsh light. Did anyone really believe the aristocratic poor cousins we call our founding fathers, really ever intend to full fill their promises. The civil war was about slaves umm or was it a labor dispute, child labor in the north and slave in the south, kids still cost more than self replicating slaves. The blue bloods will be made hole and safe by the toil of our hands or the diminish-ment of our prospects.

    Revolution you say, me thinks not, Americans no longer have the stomach/capacity for such action (funny thing people die, like the popular presidents, um civil agents of change etc). It has been breed out of the population by years of electrons smacking their now dim minds via the MSM media. What about the Gun toting general population you say, well if their not shooting friends (see past government official hit some friend in the face) its them selves or for gang bangers is spray and pray marksmanship. Any way the Black water boys are or would be used for personal executive protection, where not unlike the WWI pensioners revolt any revolutionary's would be put down with todays next Patton and company or entire U.S. Army.

    Does the West have a bad karma thing going on in regards to China, I would have to say yes. After hundreds of years of interference for profit at the hands of religious mobs and fun times like, east trading company, the betrayal of Western friendly forces after WWII etc. Hell the Japanese kicked out the Jesuits and Catholics for 600 years, but needed to face the new world and look at them now, trapped by their own geography, left to export their dearth to other locations (not unlike all developed countries) this world is getting very small these days eh. No more easy pickings, lithium in Tibet and one special ore in the Congo that all advanced technology requires, hell we needed to invent black boxes to make enough monies just to stay in control, military might is insufficient against the competition these days, hay bushie.

    skippy...RGR 1,75 HAAF...some big backward steps seem to be on the horizon...survival instincts tested soon...

  10. Re serfdom: In May 2006, the Harper's Magazine cover story was "The New Road to Serfdom: An Illustrated Guide to the Coming Real Collapse" by Univ of St. Louis/Missouri economist Michael Hidson. Essenital reading. It's online in pdf, justGoogle it.

  11. I'm a first time reader: This was a great post.

  12. post-apocalyptic, dude
    first timer, reverb

  13. Learn some history! You don't want democracy! Democracy ALWAYS ENDS BADLY.

    We never were suppose to be a democracy, and we weren't till Lincoln screwed it all up and turned us into one.

    People need to get Republic through their dense skulls

  14. There will be no revolution. The populations of Mexico and Brazil have had more reason to revolt than we have. They don't. We won't. We will be spending all of our energy just to get by day-to-day.

    The world's oligarchs have this figured out. Since Bush was elected, it looked like the plan was to Mexicanize the USA and its troublesome, unpredictable middle class. The lastest economic theft is just another step down that road.

  15. Don't count on China to take over the world. They have at least as many problems as does the U.S. with a level of income disparity that makes the U.S. look like a socialist utopia. The hundreds of millions of low-wage Chinese workers have been fed the "Big Lie" that if they work hard they will acheive a middle-class Western lifestyle. What do you think they're going to do when they find out that their 14 hour days have gone to enriching a small sliver of the power elite?

  16. The day there is official repression and Xe goons controlling citizens is the day I am free to start digging into my stash of ammo to throw a monkey wrench into the faces of the oppressors.

    I daresay there are many (though not enough) that think this way so that it really wouldn't go as smoothly as TPTB might hope.

  17. This is so emotionally overwrought it sounds like it was written by a teen girl after her first love affair ended.

    Please lets get serious. I've been hearing about the FEMA camps since the Reagan administraiton. When the Repubs are in the left goes crazy about the coming martial law, when the Donks get in the right-wingers pick right up where they left off. Both are way off base.

    There is not giant roundup coming. There is no plan to impose martial law for the simple reason there is no need to.

    Yes, we do have a lot of people in prison. That's because we have a large underclass in the USA, much of it recently imported. Many come here to work, but are not prepared to make their way and end up running afowl of the law. Others come with crime in mind.

    30% of federal prisoners are illegal immigrants according to studies.

    People who work hard, get an education and apply themselves to almost any vocation will not be 'serfs', they will be productive citizens.

    As for Democracy, I think we have entirely too much of that, which is what is getting us into a lot of the financial problems that are the root cause of the scenarios you are talking about. Better to go back to the original design of the USA: a Republic of Republics and return to the limited government of our past.

  18. I don't know what form a revolution will take but i'm pretty sure that it will involve somehow democratic money.

    Lincoln had the bankers by the short hairs with the Lincoln greenbacks, which is why he was assassinated. Garfield was assassinated as well because he favored continuation of greenback money.

    The best writer on democratic money currently is Ellen Hodgson Brown.

  19. Is there work to done on the US home front ? Absolutely! However, the China fearmongering does nothing, China's GDP is just over $3 Trillion, the US is close to $14 Trillion, with the former highly reliant on exporting to the latter. Yes, it is true that China owns massive amounts (too much) US government debt, however a good portion of that has been amassed with the purpose of keeping the value of their currency low so they can export cheaply to the US!

  20. Just require that all goods and services that enter the United States meet our environmental and occupational legislation. Stop the Clinton Gore sellout of the working class and roll back the retarded Tax policy of the Bush oligarchy and we can still win.

  21. Quite a few comments and I'm going to respond in one place.

    America is most distinguished by the ideas it holds dear, and they are democracy and equality before the rule of law. Much social advancement for minorities and women has been accomplished because of deeply held beliefs about these things.

    Yes, we are a republic, but a democratic republic. If the elected representatives don't follow the will of the people (i.e., in favoring certain groups over others) then the system is failing. That's what we have now. I believe the people actually know what's good for them. The anti-democratic comments here are disturbing. Be careful what you ask for. Democracy is a rotten system, but better than any other.

    I am not in favor of violence of any kind, but the study of history teaches that when disparities become great and the will of the people is ignored, people get mad.

    Re: China - I was a bit tongue in cheek there. The Chinese (who are on a historical statistical basis a fairly peaceful people) aren't about to buy the US of A, though it would be useful if they'd continue to lend us money. So I wasn't bashing the Chinese. There saving ethos is admirable. The essence of economic growth theory is that saving can lead to higher rates of long-term growth through capital formation. We forgot.

    I'm a great fan of Michael Hudson's and recently became aware of Ellen Hodgson Brown. The fiat money system doesn't seem to be working. As I have detailed elsewhere on the site, I am also a fan of Strauss & Howe's "The Fourth Turning," a work of historical prophesy that predicts our broken social contract is leading us about ten years of mounting crisis(one every 80 years, length of a long human lifetime).

    I find our incarceration rates a symptom of a broken social contract and foolish policies like the war on drugs. We haven't learned the lessons of Prohibition.

    cheers, and thanks for commenting,

  22. Great dog! Your blog's good, too.

    I don't see how the situation here (US) can improve much for us regular folk. Suggestions on other countries that have more equitable practices and enlightened policies are most welcome!

  23. Utter tripe. I'm sorry to be so insulting, but this is classic narcissism. Thinking that you have a grasp on the 'big picture' and can 'see it all coming' is a mental defect.
    Please archive this page and come back in one year; you'll be amazed at what fruitcake drivel you've written.

  24. Ugh. This blog makes me want to slash my wrists and go sit in a warm bath...

    This kind of "The Sky is Falling" mentality has been going on WAAAY before Carter... and will continue even after the economic downturn has ended.

  25. In Zen, we say 'Everyday is a good day.'

    And so, it's not the end of the world. For the younger geneartion, I suggest the girls marry rich old men and the boys can marry rich old women. Nobody needs to become a serf. You just have to take the initiave. Stay positive.

  26. Zen master -

    Agreed! I might have said, have compassion for all the living things around you, and behave accordingly.

    The social fabric is a manifestation of our moral fiber and deepest values.

    But I'm not so sure about your marriage plan....

  27. Keep some cash, get in a T-Bill fund, open a account and find a safe place to rent that allows you to adjust your rent down with the market. read Conquer the Crash, study Socionomics.

  28. Terribly dissappointing how Obama is doing everything that made Bush a rotten potus and is actually out-Bushing Bush! What a load of teleprompting crap this idiot feeds us sheeple. Meh! Meet the new boss, same as the old boss! i guess Ron Paul wasn't crazy after all, eh?

  29. Nicely said. However, this Argentine-like imbalance is unsustainable and the upper classes
    are increasingly on very fragile soil.

  30. Followed the link from Naked Capitalism. This post is more evidence Yves Smith is losing her f**king mind.

  31. Some of the points made here are excellent. Demand will not recover, social disenchantment will lead to demonstrations, unemployment will be high. US history class never conveyed how terrifying and desperate the Great Depression was. Life is going to be very different. Obama and both sides of the aisle are far too beholden to the agendas of the financial elite to enact any lasting reform.

    However, other points are so far off base as to be considered idiotic.

    "The American social contract is broken."

    What social contract? Where is it in the Constitution that all Americans are guaranteed jobs or health care? Where has it been written into law that incomes should be more or less equal? The founders wrote each man is endowed with the equal right to pursue happiness, nowhere did they stipulate that happiness itself was a necessary condition.

    Government mandated and funded cheap housing worked incredibly well. I am sure cheap, plentiful health care will too.

    "The Stimulus, piling upon preexisting terrifying trillions in deficits courtesy of Bush, will not work. Spending will be cut to satisfy our external creditors."

    Bush and the GOP congress is partially to blame for the deficit, not wholly culpable. Trillions became a deficit figure when Obama passed his stimulus and his budget. Do not forget that.

    Revolution, are you mad? Revolution to what? A republic of equality like the USSR? Limousine liberals and the great unwashed nodding in their allegiance?

  32. RPB, here's from Wikipedia the generally accepted usage of "social contract":

    Social contract describes a broad class of theories that try to explain the ways in which people form states and/or maintain social order. The notion of the social contract implies that the people give up some rights to a government or other authority in order to receive or maintain social order.

    Social contract theory formed a central pillar in the historically important notion that legitimate state authority must be derived from the consent of the governed. The starting point for most of these theories is a heuristic examination of the human condition absent from any structured social order, usually termed the “state of nature”. In this condition, an individual’s actions are bound only by his or her personal power, constrained by conscience. From this common starting point, the various proponents of social contract theory attempt to explain, in different ways, why it is in an individual’s rational self-interest to voluntarily give up the freedom one has in the state of nature in order to obtain the benefits of political order.

    Thomas Hobbes (1651), John Locke (1689) and Jean-Jacques Rousseau (1762) are the most famous philosophers of contractarianism, which formed the theoretical groundwork of democracy.

    The theory of history I find most persuasive says we're just at the leading edge of a social transformation that will take 10-15 years, and will change our country dramatically.

    Good time not to be in denial. The gist of the present post is that it seems to me we're heading toward a form of state capitalism that is at odds with the more egalitarian configuration of American society during its greatest period, the so-called "American century" of the 25 years after World War II.

  33. With sufficient social organization, I believe that the future is not feudal, but rather, is praetorian.

  34. Good post. I like your site. However, you're displaying a Seeking Alpha badge without linking to your SA profile, which the SA site says is a requirement. Reason?

  35. Anon 8:58 -

    All roads lead to Rome, eh? Think I'll go watch "Gladiator" one more time. Empires tend to collapse....

  36. BB

    I understand the theory of the social contract. I was lucky enough (or boring enough) to study the concept through direct exposure to those authors. But what you are citing as the American social contract would be a paradigm shift from the foundation of our country. Nowhere in the construction of our nation did they delineate such obligations on the federal government. As I recall, we were founded on the notion that the individual was enfranchised with inalieable rights at birth; that a person was entitled to free choice with respect to religion, social status and political leaders. Nowhere did the founders intend to entitle us, as citizens, with anything other than what they thought were universal rights endowed by our creator.

    The social contract they intended to pursue, as you mention, was one where they were given the freedom chose their leaders, their lifestyle, their career and their religion.

    However, they were prudent and careful not to enable mob rule. We know this to be far more reactionary and far more tyrannical than a dictatorship. The statistics that claim that the majority of Americans are for "Universal Healthcare" or "Affordable Healthcare" are debatable. No statistical survey can truly reveal individual preference on such a contentious and convuluted issue. The problem, at large, is the type of meddling our political process will inject it what may become universal healthcare. Even if the majority favor such a policy, which I doubt to the extent of one our left leaning politicians want to impose upon us, they do not possess the capacity to rationally understand the consequences of such a system.

    There exist surveys, studies and correlations that imply that because our healthcare system costs more and people live shorter lives, it is broken. However, these studies fail to take into account American lifestyle choices that are to blame for much of this cost; i.e. obesity, alcohol consumption, red meat consumption, etc. This seems to be getting us towards a similar problem we experienced with housing.

    The correlations implied that universal home ownership is worthwhile policy to be pursued because home ownership typically resulted in vast amounts of positive externalities. The population at large supported that idea as well without knowing the first thing about real estate, banking or economics.

    The same is true about healthcare. How it is provided, who provides it and how much it costs are important questions that have been supressed or mishandled by both sides of the debate. No one has discussed the current infrastructure, the motivations of those in the run system and why things costs as much as they do. These are important issues that have been wholly ignored by the popular debate. Similar to cheap housing. At the end of the day, like housing, healthcare is subject to the agency of supply and demand. I fear that we are heading towards the same type of stupidity that ignored this simple principle.

    And when government mandates, implores and coerces agents to make decisions against market forces; the consequences are limitless.

  37. RPB -

    Great comment! I need to say that the social contract I am referring to is antecedent to laws, government and "coercive" policy. It is a reflection of our values and what's in our hearts. As I replied to Zen master above:

    "Agreed! I might have said, have compassion for all the living things around you, and behave accordingly.

    The social fabric is a manifestation of our moral fiber and deepest values."

    And given that there were large stains on our social fabric and Constitution for the first half of our history as a nation, there has been progress, I would submit. And I can't say that the republicans (small r, elected rep's) have been any "better" than "the mob." I would submit rather that "the mob" instigated most of our most productive social changes. The elected rep's have always pretty much been captive to moneyed interests.

    The change I hope for is a very deep values change, grass roots, tidal, a sea-change in the hearts of people.

  38. BB

    I hope for this change too. But I've read far too much classical history and I am very bleak on the prospect of such change. People, sadly, will on the whole, act in their own interests more so than that of the society at large. It has always been that way and I suspect it will remain so.

  39. Thanks for quoting John Robb, the breakdown of the state as we know it will manifest in many different ways. When the market for US Treasuries crashes... the US is on a collision course with 'the reckoning' that has been prophesied for so long by doom/gloomers. Will be interesting to see how the bankruptcy of California will be handled... as its implications for the debt markets of every persuasion are profound.

    On an individual level... some will escape and prosper... do what you have to do to make sure you are in that group.

  40. You say... "Obama is backing off a single-payer health insurance plan, the one preferred by the American people and the one that makes the most sense from an insurance point of view."

    No, the "American people" (whoever they are) do NOT support "single payer health insurance." And "single-payer" does NOT "make the most sense." In fact, SIngle-payer will only accelerate the bankruptcy of the federal government... Not that the USA does not deserve such a fate.

    When asked, most "Americans" who have employer-paid health insurance are OK with it, and only offer minor complaints about THEIR OWN coverage.

    Also when asked, many "Americans" support some sort of last-ditch health care coverage for OTHER people -- not themselves.

    And when asked, most "Americans" DO NOT WANT to pay significantly higher taxes to support a single-payer program. They only like the idea if it's presented as some sort of "lowc cost" options, based on unrealistic assumptions about who will pay how much, and what level of rationing will kick in to limit access to care.

    Single-Payer is just another Big Government Big Lie.

  41. I enjoyed this. Keep up the good work.

  42. this is what happens when you confuse democracy with Freedom

  43. Solid post. Prophetic, really.

    I honestly would not be surprised to see a true revolution, even a war come out of the present Occupy movement.

    The parallels with the first rumblings of the French Revolution (and many other revolutions) are striking.

  44. Thanks, occupy. Rereading the post, now over two years old, made me dizzy. The same progression... further down the road.... where is the end to it?

  45. My first encounter with this site. Excellent post.

    It is time that we openly discuss how to defeat the ruling class and create a new world. Try this:
    John Spritzler and Dave Stratman, "Thinking about Revolution"

  46. Japs taught Americans to make cars??? I don't think so.