Monday, February 16, 2009

“Comparative Theory of Superpower Collapse”

From Dmitri Orlov’s blog, Cluborlov, via Global Guerillas:

… I would like my insights to be of help during these difficult and confusing times, for altruistic reasons, mostly, although not entirely. This is because when times get really bad, as they did when the Soviet Union collapsed, lots of people just completely lose it. Men, especially. Successful, middle-aged men, breadwinners, bastions of society, turn out to be especially vulnerable. And when they just completely lose it, they become very tedious company. My hope is that some amount of preparation, psychological and otherwise, can make them a lot less fragile, and a bit more useful, and generally less of a burden.

Women seem much more able to cope. Perhaps it is because they have less of their ego invested in the whole dubious enterprise, or perhaps their sense of personal responsibility is tied to those around them and not some nebulous grand enterprise. In any case, the women always seem far more able to just put on their gardening gloves and go do something useful, while the men tend to sit around groaning about the Empire, or the Republic, or whatever it is that they lost. And when they do that, they become very tedious company. And so, without a bit of mental preparation, the men are all liable to end up very lonely and very drunk. So that's my little intervention.

If there is one thing that I would like to claim as my own, it is the comparative theory of superpower collapse. For now, it remains just a theory, although it is currently being quite thoroughly tested. The theory states that the United States and the Soviet Union will have collapsed for the same reasons, namely: a severe and chronic shortfall in the production of crude oil (that magic addictive elixir of industrial economies), a severe and worsening foreign trade deficit, a runaway military budget, and ballooning foreign debt. I call this particular list of ingredients "The Superpower Collapse Soup." Other factors, such as the inability to provide an acceptable quality of life for its citizens, or a systemically corrupt political system incapable of reform, are certainly not helpful, but they do not automatically lead to collapse, because they do not put the country on a collision course with reality. Please don't be too concerned, though, because, as I mentioned, this is just a theory. My theory. [emphasis added]

We are now witnessing the struggle between the young, green administration and the financial oligarchs so reminiscent of what has happened in Russia.  This view of the historical moment is consistent with one of the outcomes envisioned by The Fourth Turning in the last post.

First we had massive denial about the stock market bubble (“It’s different this time”), then about the real estate bubble (“They’re not making any more land”) and now we have the lunatics (economists) running the asylum in massive denial that the U.S. might be broke (cf. Paul Krugman’s “Failure to Rise” stimulus-not-man-enough column).

I’ll repeat my observation that the problem is with the distribution.  America is a rich country and could easily provide basic food, shelter and health for all its citizens if it had a social contract that called for it.  Our social contract is broken.

But one thing the government does seem to be figuring out is that if the nation has too much debt, and a lot of it is private, that they better quickly write off a lot of the private debt of the zombie banks so the government can continue to borrow.  So it appears more likely we’ll see some nationalization. The collapse of the European credit sector appears even worse than ours, which suggests that the greenback will hold up a while longer and U.S. will be able to engage in another half-decade or so of self-delusion that it can borrow and spend its way out of this structural imbalance of too much debt.  The “animal spirits” update indicates an upturn, or at least stabilization, is imminent.  If the recovery is weak, we might not get another long cycle of ~8 years, but a short, impaired cycle, with the next cyclical downturn in about 2012 being even sharper.  Although the inflation this decade was in asset prices, the Oh-Oh’s are likely to require several recessions to wring the excess leverage out of the system, just as the ‘Sixties required recessions in ‘69-‘70 and ‘73-‘74 to wring some inflation out, and it took the double-dip of ‘80-‘82 to bring the last big CPI inflation “under control.”

As I used to tell my students, “make the adjustment.”


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