An Interesting “Collapse” Hypothetical
Dr. Paul Craig Roberts, the famous Reagan administration economist and now an embittered and cranky paleoconservative social critic, penned a short but intriguing American “collapse” scenario set in the near future. Some of what Roberts writes fits neatly with the thesis in Joseph Tainter’s The Collapse of Complex Societies:
….As society broke down, the police became warlords. The state police broke apart, and the officers were subsumed into the local forces of their communities. The newly formed tribes expanded to encompass the relatives and friends of the police.
The dollar had collapsed as world reserve currency in 2012 when the worsening economic depression made it clear to Washington’s creditors that the federal budget deficit was too large to be financed except by the printing of money. With the dollar’s demise, import prices skyrocketed. As Americans were unable to afford foreign-made goods, the transnational corporations that were producing offshore for US markets were bankrupted, further eroding the government’s revenue base.
The government was forced to print money in order to pay its bills, causing domestic prices to rise rapidly. Faced with hyperinflation, Washington took recourse in terminating Social Security and Medicare and followed up by confiscating the remnants of private pensions. This provided a one-year respite, but with no more resources to confiscate, money creation and hyperinflation resumed.
Organized food deliveries broke down when the government fought hyperinflation with fixed prices and the mandate that all purchases and sales had to be in US paper currency. Unwilling to trade appreciating goods for depreciating paper, goods disappeared from stores.
Several interesting things here. First, the demagogic front men who are currently engaging in op-ed tirades against public pensions in order to loot them to ostensibly plug state budget deficits will, if successful, use that precedent to go after private pensions, IRAs, 401(k), mutual funds, Social Security, Medicare, Home mortgage interest deduction – any remaining big pot of money in the hands of the middle-class has a big target on it. Secondly, food shortages historically were the spark that set off the French and Russian Revolutions.
When hubris sent America in pursuit of overseas empire, the venture coincided with the offshoring of American manufacturing, industrial, and professional service jobs and the corresponding erosion of the government’s tax base, with the advent of massive budget and trade deficits, with the erosion of the fiat paper currency’s value, and with America’s dependence on foreign creditors and puppet rulers.
The Roman Empire lasted for centuries. The American one collapsed overnight.
Rome’s corruption became the strength of her enemies, and the Western Empire was overrun.
America’s collapse occurred when government ceased to represent the people and became the instrument of a private oligarchy. Decisions were made in behalf of short-term profits for the few at the expense of unmanageable liabilities for the many.
Overwhelmed by liabilities, the government collapsed.
Connectivity, contra Roberts, is good. Corruption, on the other hand, is not. Free markets are generally efficient, so long as you do not expect them to automatically create public goods of a certain scale or be perfectly self-regulating. They require a scrupulously impartial rule of law in order to not become corrupted by abusive players seeking rents. Unfortunately, a scrupulously impartial rule of law is incompatible with technocracy, where expert administrators are granted arbitrary discretion without democratic accountability, the prevailing ethos in the EU supranational bureaucracy, to cite a real world example. The late, unlamented, Soviet nomenklatura would be another, more sinister, historical one.
The primary problem with the American political economy is that in the last 10-15 years, elite, moderately liberal technocrats have made common cause with the elite, moderately conservative rentiers of the financial and corporate world to form an incipient oligarchy. One sees their fellow Americans paternalistically as children. The other sees us as sheep to be sheared. It’s a common enough ground on which to unite and it is the reason you see a very liberal Democratic Obama administration and a Pelosi-Reid Congressional leadership counterintuitively putting corporate regulation in impenetrable shadows not seen since before the Stock Market Crash of 1929 as if they were the minions of Jay Gould and J.P. Morgan.
Don’t expect mainstream Republicans in Congress to die on any hills fighting for the free market either – they aspire to be the party of no-bid contracts to the Democratic party of government by clout.
Alderman Paddy Bauler would be proud.
July 29th, 2010 at 12:08 pm
Jesus that SEC disclosure dodge is bad news. I knew Chris Dodd had loaded it with goodies for the financial sector but that’s on an entirely higher level of corruption.
July 29th, 2010 at 12:40 pm
An old professor of mine used to joke that the entire concept of <i>The Decline and Fall of the Roman Empire</i> betrayed typical ethno-centric bias.
Why not <i>The Rise and Emergence of the German Empire</i> or <i>Hooray for the Huns</i>, he would crack.
So who are the onrushing Huns in this scenario whom we should celebrate, assuming that the tides of history, as suggested above, are indeed about to send the Soccer Mom on her merry way?
July 29th, 2010 at 4:06 pm
Duncan: There are some from of this part of the Blogosphere that would answer you "China" They think that the US’s big mission should be to manage the rise of China into something we can live with (think: Chinamerica).
July 29th, 2010 at 4:18 pm
Societal Anxiety…
Anciety comes in two basic forms. Mild anxiety warns us of danger; when it is appropriate, we refer to it as “Signal Anxiety.” Higher levels of anxiety can overwhelm our coping mechanisms; when this happens we refer to it as……
July 29th, 2010 at 5:18 pm
"It’s a common enough ground on which to unite … ."
Tell it …
July 29th, 2010 at 11:47 pm
[…] at zenpundit.com […]
July 30th, 2010 at 4:54 pm
Assuming there is such a thing as 5GW, how could it be used against the Oligarchy?
July 30th, 2010 at 11:11 pm
"Assuming there is such a thing as 5GW, how could it be used against the Oligarchy?" (Lexington Green).
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I would suggest studying the tactics of Putin. I’m not joking. There’s a reason he so hated in the mainstream Western press. He fought the Anglo-American banking elite ("Russian" chapter) and was pretty successful. While doing this, he greatly improved the lives of middle class and working class Russians.
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Putin even put some of these Oligarchs into a cage.
July 31st, 2010 at 6:18 am
Hmmm…..Seerov is right. Siloviki are more officials of the state than a class per se and ordinary Russians were better off ( albeit this came from gas /oil export prices but no one really cared why)
July 31st, 2010 at 4:16 pm
No doubt, the Amish will do just fine, if all this happens…..
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There is an inherent weakness in current economics as it’s taking shape via global connectivity and the technological rush to abstracts. The central theme in the above scenario seems to be related to the loss of the capacity to produce…products. It’s an old theme I’ve written about before, but not for some time. Our present economy is founded upon ever more abstraction (a service-oriented economy + Internet-based economy + "capital" economy….), or is abstraction-based. Abstract = "drawn away" or, as the online etymology dictionary puts it, "withdrawn or separated from material objects or practical matters." Such a separation leads to the inability to manage practical matters. In this case, management of the practical matters is left in other hands.
July 31st, 2010 at 4:18 pm
Well, one would except the political/military "genius" to operate outside of strategic theory with strategic theory retrospectively catching up in time . . . That’s a Clausewitzian perspective following the general theory, which beats imo the reified concepts or the offspring of failed reified concepts currently in vogue . . .
The Russians are masters at operational art and by connection strategy, not that their policies always succeed. Still in comparison with what we have "achieved" over the last ten years . . .
Seerov-
Nice comment on Putin. Do you have any comment on Svechin?
July 31st, 2010 at 5:17 pm
"the EU supranational bureaucracy"
The most zealous enforcer of competition laws and free-market ideology. The problem of the EU is not the Eurocrats, it’s the democratically elected leaders of the traditional nation-states who protect rent-seekers.
July 31st, 2010 at 6:11 pm
"Do you have any comment on Svechin?" (seydlitz)
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I don’t know much about him, but that he was theorist for the Red Army. Putin is interesting because he fought a different kind of war. He fought a war in the shadows, that required extreme patience, nerve, and cunning. Someone needs to write a book explaining how he did it? This book probably won’t be out for a while, because the Oligarchs are still hard at work trying to undermine Russia, and counties in Russians Sphere of influence. So Putin may not want to give up all his secret Judo moves? The Russians should think about writing a book for American readers that tells of Putin’s war with the Oligarchs. This book would come at a perfect time, as more and more Americans grow tired of the finance oligarchy in the US.
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"Siloviki are more officials of the state than a class per se and ordinary Russians were better off ( albeit this came from gas /oil export prices but no one really cared why)" (zen)
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I see the Siloviki as almost modern Monarchs. IOW they attempt to keep the Russian people from being exploited by powerful financial interests (like the 1990’s). It is true that gas prices are greatly responsible for improvements in the Russian standard of living, but at least this petrol money goes back to ordinary Russians and not to the Oligarchs.
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Of course, the Russians understand the need to diversify their economic system. I’m interested is seeing how the coming German-Russian economic integration helps in this process?
July 31st, 2010 at 7:15 pm
I always ask about Svechin to those knowledgeable of Russian affairs. You can tell a lot as to whether a theorist favors Svechin or Triandafillov, and I favor Svechin.
I thought the manner in which the Russians handled the 2008 Georgian crisis interesting from Svechin’s perspective of operational art . . .
Looks like we’ll have to wait awhile for the Putin book.
August 1st, 2010 at 1:17 am
[…] Safranski wrote: The primary problem with the American political economy is that in the last 10-15 years, elite, […]
August 1st, 2010 at 4:45 am
[…] Here are a few highlights and rebuttals. Excerpts from “When Globalism Runs Its Course – The Year America Dissolved“, Counterpunch, 26 July 2010 (hat tip to Zenpundit): […]
August 1st, 2010 at 3:47 pm
Regarding the SEC and the FOIA, from a quick google search it seems Fox has got the details wrong (no surprise). The purpose of the exemption is to protect proprietary information obtained from firms by the SEC but also the SEC has tried to avoid FOIA requests in the past. It’s not nearly as clear cut as FOX makes it appear.
August 2nd, 2010 at 5:18 pm
[…] Quoting Mark Sanfranski (emphasis added) The primary problem with the American political economy is that in the last 10-15 years, elite, moderately liberal technocrats have made common cause with the elite, moderately conservative rentiers of the financial and corporate world to form an incipient oligarchy. One sees their fellow Americans paternalistically as children. The other sees us as sheep to be sheared. It’s a common enough ground on which to unite and it is the reason you see a very liberal Democratic Obama administration and a Pelosi-Reid Congressional leadership counterintuitively putting corporate regulation in impenetrable shadows not seen since before the Stock Market Crash of 1929 as if they were the minions of Jay Gould and J.P. Morgan. […]
August 2nd, 2010 at 10:39 pm
Odd, I was think-tanking on this very topic the other day. My task: to eek out research and speculate on peri-collapse tribe and survival network formations, ie map the Who & Where — and corresponding Why and How for each.
I enjoyed your editorializing.
August 13th, 2010 at 12:20 am
Not likely, I think. There is a natural way to downsize through Federalism.
August 20th, 2010 at 9:11 pm
Great article. Don’t see that there’s too much hypothetical about it. The process started way back with the creation of the US Federal Reserve in 1913 and the first major move into deficit financing that during WWI. This was the first crack in the opening of pandoras box providing the political class the means to pork barrel their way into office. What we have before us is the end result. America is finished as a World power and probably as an economic and political union.
August 26th, 2010 at 4:34 pm
Interesting. I live in the Southern US. There are Southern Nationalists who are looking ahead to the collapse of the Federal Government and the opportunity to reunite the old South.
August 27th, 2010 at 4:02 am
"There are Southern Nationalists who are looking ahead to the collapse of the Federal Government and the opportunity to reunite the old South."
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That is interesting. Do you think they will abandon the "red" team who won the civil war and go back to the "blue" team? I would think it would become less corporate and more organic but less green. I suppose it would just go gray and become a third party of some sort. This change must be taking place now, which could be trouble for both the republicans and democracts in the south.
October 18th, 2010 at 10:01 pm
gas prices would steadily go up and the supply dwindle and the saudis like to increase their profit margin..;
October 19th, 2010 at 4:49 pm
Interesting idea, if a tad heavy on the Mad Max meme. I do think that tax base is a very big problem. Wages have been stagnant or fallen since 1970 while at the same time fewer and fewer wage earners pay taxes. The multi-billionaires don’t pay normal taxes anyway. The real money is taxing the broad middle of the population.
As that tax base contracts there aging, demographics, job loss, global trade, and other reasons, the Federal Government will be very strained for cash. Like the middle class who used credit to prop up their falling wages, the government is doing the same thing. Printing money to by Federal debt is a very risky thing to do.
The government won’t collapse, but it will get a whole lot smaller regardless of what either party wishes.
August 14th, 2012 at 6:02 pm
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