(Please note that I am letting this post run until Sunday, 15th Oct.)
For many years I have both read George Monbiot’s writings, especially those published by The Guardian newspaper, and deeply respected his insight, intelligence and analysis of the world in which we now live.
So when I heard of his latest book, published by Verso Books both sides of the ‘pond’, it was ordered immediately. It was a book I badly wanted to read. I was not disappointed.
So what is Mr. Monbiot’s message?
To answer that question let me lean on a forthcoming talk being given by him in Edinburgh in eight days time. For he is speaking at a Scottish Green Party event on October 20th.
Here’s the thrust of what is to be covered at that meeting:
What does the good life—and the good society—look like in the twenty-first century?
A toxic ideology rules the world – of extreme competition and individualism. It misrepresents human nature, destroying hope and common purpose. Only a positive vision can replace it, a new story that re-engages people in politics and lights a path to a better world.
Join us for an evening of discussion with George Monbiot as he talks about his new book: ‘Out of the wreckage: a new politics in an age of crisis‘. New findings in psychology, neuroscience and evolutionary biology cast human nature in a radically different light: as the supreme altruists and cooperators. George argues that we can build on these findings to create a new politics: a ‘politics of belonging’.
So what does this mean for social and environmental justice campaigning in Edinburgh? How do we create a politics of belongings here in Scotland? There will be plenty of opportunity for George Monbiot and the audience to share their insights.
Doors open: 6pm
George Monbiot will speak from 7-7.30pm and there will then be a Q&A, plus a chance buy books, mingle and browse stalls.
This event is jointly hosted by Global Justice Now and the Scottish Green party.
To my mind, this book not only addresses, full on, the madness (my word) of these present times but also offers strong, positive recommendations as to how we, as in the societies of all the major nations, can turn it around and offer a decent future for future generations. That’s why I am so strongly recommending it.
For George Monbiot, neoliberalism should best be understood as a “story”, one that was conveniently on offer at precisely the moment when the previous “story” – namely Keynesianism – fell to pieces in the mid-1970s. The power of stories is overwhelming, as they are “the means by which we navigate the world. They allow us to interpret its complex and contradictory signals”. The particular story of neoliberalism “defines us as competitors, guided above all other impulses by the urge to get ahead of our fellows”.
It should be said at once that we are desperately in need of new ideas for a society and a democracy where trust in all established institutions is at a record low and even a Tory prime minister admits the country doesn’t work for everyone. Monbiot’s ideas are clear, well-reasoned and sometimes compelling. Many will mock his attempt at a “story of hope and restoration”; even some of his Guardian colleagues call him “George Moonshine”. Human beings, his critics will say, are inherently selfish and self-maximising. Give them the opportunity to freeload off others’ efforts and they will take it.
Such objections are easily dismissed. Yes, there’s a self-interested streak in all of us but, as Monbiot observes, we also have instincts for co-operation and sensitivity to others’ needs. Think of the hundreds who volunteer to run food banks and of the thousands more who donate to them. Think of those Europeans who, at great risk to themselves, sheltered Jews from the Nazis during the Second World War. The altruistic instinct can be kindled in almost anybody. It is suppressed, however, in a society that rewards the selfish but penalises – and brands as “mugs” – those who are more mindful of our needs, and the planet’s. That society has led to loneliness, high levels of mental illness and increasingly discordant political discourse. Shouldn’t we at least try developing a society that does more to nurture the better angels of our nature?
Better still, settle down with a cup of tea, put your feet up for fifteen minutes and listen to this:
This book struck me as the most important book I have ever read in my lifetime. Why? Because it gets to the heart of what is happening today. But it offers even more than that. For instead of a shrug of the shoulders or eyes turned skywards from a friend when one mutters about the fact that we are living in ‘interesting times’, George Monbiot offers hope and guidance.
Take the very last two paragraphs from the final chapter of his book.
Coming Home to Ourselves
Through restoring community, renewing civic life and claiming our place in the world, we build a society in which our extraordinary nature – our altruism, empathy and deep connection – is released.
When we emerge from the age of loneliness and alienation, from an obsession with competition and extreme individualism, from the worship of image and celebrity and power and wealth, we will find a person waiting for us. It is a person better than we might have imagined, whose real character has been suppressed. It is one who lives inside us, who has been there all along.
“- our altruism, empathy and deep connection -”
I see these persons every day of my life. Via the pages of this blog.
Yes, I am referring to all of you who wander in and out of this place, who demonstrate your compassion, your love and your dedication to the dogs and all the other animals of this world.
All you good people who stick with this blog know that the majority of the posts are to do with dogs or cats in one form or another.
Yet, I am cognizant of the fact that no one can completely hide, metaphorically speaking, in the warm fur of our favourite dog or cat and let the rest of the world go tits up. From time to time I read an article or an essay that touches on something fundamentally important to a civil society and am compelled to share same with you.
Regulars know that I am a great admirer of the writings of essayist George Monbiot. He is a very regular contributor to The Guardian newspaper. Just a few days ago, Mr. Monbiot published an essay that really does need to be read as widely as possible. It is called Missing Link and is republished here with George Monbiot’s very kind permission.
21st July 2017
How a secretive network built around a Nobel prizewinner set out to curtail our freedoms
By George Monbiot, published in the Guardian 19th July 2017
It’s the missing chapter: a key to understanding the politics of the past half century. To read Nancy MacLean’s new book Democracy in Chains: the deep history of the radical right’s stealth plan for America is to see what was previously invisible.
The history professor’s work on the subject began by accident. In 2013 she stumbled across a deserted clapboard house on the campus of George Mason University in Virginia. It was stuffed with the unsorted archives of a man who had died that year, whose name is probably unfamiliar to you: James McGill Buchanan. She writes that the first thing she picked up was a stack of confidential letters concerning millions of dollars transferred to the university by the billionaire Charles Koch.
Her discoveries in that house of horrors reveal how Buchanan, in collaboration with business tycoons and the institutes they founded, developed a hidden programme for suppressing democracy on behalf of the very rich. The programme is now reshaping politics, and not just in the US.
Buchanan was strongly influenced by both the neoliberalism of Friedrich Hayek and Ludwig von Mises and the property supremacism of John C Calhoun, who argued, in the first half of the 19th century, that freedom consists of the absolute right to use your property – including your slaves – however you may wish. Any institution that impinges on this right is an agent of oppression, exploiting men of property on behalf of the undeserving masses.
James Buchanan brought these influences together to create what he called “public choice theory”. He argued that a society could not be considered free unless every citizen has the right to veto its decisions. What he meant by this was that no one should be taxed against their will. But the rich were being exploited by people who use their votes to demand money that others have earned, through involuntary taxes to support public spending and welfare. Allowing workers to form trade unions and imposing graduated income taxes are forms of “differential or discriminatory legislation” against the owners of capital.
Any clash between what he called “freedom” (allowing the rich to do as they wished) and democracy should be resolved in favour of freedom. In his book The Limits of Liberty, he noted that “despotism may be the only organisational alternative to the political structure that we observe.” Despotism in defence of freedom.
His prescription was what he called a “constitutional revolution”: creating irrevocable restraints to limit democratic choice. Sponsored throughout his working life by wealthy foundations, billionaires and corporations, he develop both a theoretical account of what this constitutional revolution would look like and a strategy for implementing it.
He explained how attempts to desegregate schooling in the American South could be frustrated by setting up a network of state-sponsored private schools. It was he who first proposed the privatisation of universities and the imposition of full tuition fees on students: his original purpose was to crush student activism. He urged the privatisation of Social Security and of many other functions of the state. He sought to break the links between people and government and demolish trust in public institutions. He aimed, in short, to save capitalism from democracy.
In 1980, he was able to put the programme into action. He was invited to Chile, where he helped the Pinochet dictatorship to write a new constitution, which, partly through the clever devices Buchanan proposed, has proved impossible to reverse in its entirety. Amid the torture and killings, he advised the government to extend its programmes of privatisation, austerity, monetary restraint, deregulation and the destruction of trade unions: a package that helped trigger economic collapse in 1982.
None of this troubled the Swedish Academy, that, through his devotee at Stockholm University, Assar Lindbeck, in 1986 awarded James Buchanan the Nobel Memorial Prize for economics. It is one of several decisions that have turned this prize toxic.
But his power really began to be felt when Charles Koch, currently the seventh richest man in the US, decided that Buchanan held the key to the transformation he sought. Koch saw even such ideologues as Milton Friedman and Alan Greenspan as “sellouts”, as they sought to improve the efficiency of government rather than destroying it altogether. But Buchanan took it all the way.
MacLean says that Charles Koch poured millions into Buchanan’s work at George Mason University, whose law and economics departments look as much like corporate-funded thinktanks as they do academic faculties. He employed the economist to select the revolutionary “cadre” that would implement his programme (Murray Rothbard, at the Cato Institute that Koch founded, had urged the billionaire to study Lenin’s techniques and apply them to the libertarian cause). Between them, they began to develop a programme for changing the rules.
The papers Nancy Maclean discovered show that Buchanan saw stealth as crucial. He told his collaborators that “conspiratorial secrecy is at all times essential.” Instead of revealing their ultimate destination, they would proceed by incremental steps. For example, in seeking to destroy the Social Security system, they would claim to be saving it, arguing that it would fail without a series of radical “reforms”. (The same argument is used by those attacking the NHS over here). Gradually they would build a “counter-intelligentsia”, allied to a “vast network of political power” that would eventually become the new establishment.
Through the network of thinktanks that Koch and other billionaires have sponsored, through their transformation of the Republican Party, and the hundreds of millions they have poured into state congressional and judicial races, through the mass colonisation of Trump’s administration by members of this network and lethally effective campaigns against everything from public health to action on climate change, it would be fair to say that Buchanan’s vision is maturing in the USA.
But not just there. Reading this book felt like a demisting of the window through which I see British politics. The bonfire of regulations highlighted by the Grenfell Tower disaster, the destruction of state architecture through austerity, the budgeting rules, the dismantling of public services, tuition fees and the control of schools: all these measures follow Buchanan’s programme to the letter. I wonder how many people are aware that David Cameron’s free schools project originated with an attempt to hamper racial desegregation in the American South.
In one respect, Buchanan was right: there is an inherent conflict between what he called “economic freedom” and political liberty. Complete freedom for billionaires means poverty, insecurity, pollution and collapsing public services for everyone else. Because we will not vote for this, it can be delivered only through deception and authoritarian control. The choice we face is between unfettered capitalism and democracy. You cannot have both.
Buchanan’s programme amounts to a prescription for totalitarian capitalism. And his disciples have only begun to implement it. But at least, thanks to Maclean’s discoveries, we can now apprehend the agenda. One of the first rules of politics is know your enemy. We’re getting there.
I found it very difficult to write these closing thoughts; as is obvious as you read this sentence!
Looking up quotations online under the headings of fairness or equality brought up many that could have worked here. Yet they seemed too trite, too obvious, too remote from the reality of what Mr. Monbiot describes here today.
So let me leave you with this: US income inequality is the highest it’s been since 1928. (Source: Pew Research.) But worse than that, US wealth inequality is even greater than income inequality. (Source: Pew Research.) (I’m certain that this is not exclusive to the USA.)
A fair question one might think. Because this blog is primarily about what we humans should be learning from our dogs. Well, I do see a connection, a message of learning for us. Stay with me for a while.
Here’s a silly story that made me laugh when I first came across it.
A man in a casino walks past three men and a dog playing poker.
“Wow!” he says, “That’s a very clever dog.“
“He’s not that clever,” replies one of the other players.
“Every time he gets a good hand he wags his tail.“
This clever dog couldn’t hide his happiness and had to share it by wagging his tail. OK, it was a little bit of fictional fun but we all recognise that inherent quality in our dogs, how they share so much of themselves in such an easy and natural fashion.
Now if one was being pedantic one would say that sharing is not the same as equality. Yet I see them as two separate seats in life’s common carriage.
Many lovers of dogs know that when they lived a life in the wild, slowly evolving from the grey wolf, they replicated, naturally, the pack characteristics of wolves. As in the pack size was around 25 to 30 animals. Yes, there was a hierarchy in the pack but that really only presented itself in the status of three animals: the female ‘alpha’ dog; the male ‘beta’ dog; the ‘omega’ dog that could be of either gender. Ninety percent of the pack were animals on equal standing. If only that was how we humans lived.
Let me emphasize this: “A homeless camp in Los Angeles, where homelessness has risen 23 percent in the past year, in May 2017.”
Here are two small extracts from that article:
Author: Shervin Assari Research Investigator of Psychiatry, Public Health, and Poverty Solutions, University of Michigan
As someone who studies poverty solutions and social and health inequalities, I am convinced by the academic literature that the biggest reason for poverty is how a society is structured. Without structural changes, it may be very difficult if not impossible to eliminate disparities and poverty.
About 13.5 percent of Americans are living in poverty. Many of these people do not have insurance, and efforts to help them gain insurance, be it through Medicaid or private insurance, have been stymied. Medicaid provides insurance for the disabled, people in nursing homes and the poor.
Four states recently asked the Centers for Medicare and Medicaid Services for permission to require Medicaid recipients in their states who are not disabled or elderly to work.
This request is reflective of the fact that many Americans believe that poverty is, by and large, the result of laziness, immorality and irresponsibility.
First, in response to Colin saying “That pic really says it all doesn’t it!”, I replied:
No question. Indeed, one might ‘read’ that picture at many levels. From the level of providing a smile for the day all the way through to a very profound observation on life itself.
Colin then replied to me:
I ‘ll go straight for the profound perspective! As I recently noted on another blog, I cannot recall anybody from history who became famous for their material possessions. In fact, I recently read an article written after an individual had surveyed a few thousand gravestones… and they drew the same conclusion. There was not a single epitaph which alluded to a material possession. Dogs know all that intuitively, so why does our superior (?) mind have trouble grasping such a simple perspective?
I then responded by saying that I thought it would make a fabulous introduction to today’s post. The heart of which I am now coming to.
Here in our local city, Grants Pass, there is a Freethinkers and Humanists group. They meet once a month. Jerry Reed from that group some time ago recommended to me reading the book The Spirit Level authored by Richard Wilkinson and Kate Pickett.
Jerry and I were exchanging emails in the last couple of days and he reminded me of that book.
There it was sitting on my bookshelf with a bookmark in at page 62. For reasons that escape me, I had become distracted and forgotten to stay with the book. Despite me being very interested in the proposition.
I said as much in an email reply to Jerry. He then replied to my email with this:
Hey, that happens to me a lot too, very frequently. So, I frequently settle for a video that might capture the essence of the book in considerably less time, while also maintaining my attention much better.
So, if you want a video about what Wilkinson has to say, here’s the one I recommend:
Here is that video. It is a little under 17 minutes long. Please watch it.
Published on Oct 24, 2011
http://www.ted.com We feel instinctively that societies with huge income gaps are somehow going wrong. Richard Wilkinson charts the hard data on economic inequality, and shows what gets worse when rich and poor are too far apart: real effects on health, lifespan, even such basic values as trust.
I haven’t got anything profound to say by way of closing today’s post.
But what I will say is that if our societies, especially in certain countries not a million miles from home, more closely emulated the sharing and caring that we see in our dogs then that really would be wonderful.
Why can’t we leave nature to do what’s best for our world!
Now, I would be the first to ‘tut-tut’ a little over my sub-heading. For here I am sitting in front of a computer in a room in a reasonably-sized home that undoubtedly has denuded the natural world formerly underneath the present foundations.
Plus, as the property boundary shown on the above picture confirms, about 50% of our acreage is no longer wilderness.
Ergo, it is impossible for humans to live on this planet without there being consequences that conflict with the natural order of the wild.
But homes to live in are one thing. A planned madness for the Lake District in Northern England is another thing altogether.
The attempt to turn the Lake District into a World Heritage site would be a disaster
By George Monbiot, published in the Guardian 9th May 2017
If this bid for power succeeds, the consequences for Britain will be irreversible. It will privilege special interests over the public good, shut out the voices of opposition and damage the fabric of the nation, perhaps indefinitely. No, I’m not writing about the election.
In the next few weeks Unesco, the UN’s cultural organisation, will decide whether or not to grant World Heritage status to the Lake District. Once the decision is made, it is effectively irreversible.
Shouldn’t we be proud that this grand scenery, that plays such a prominent role in our perceptions of nationhood, will achieve official global recognition? On the contrary, we should raise our voices against it. World Heritage status would lock the Lake District into its current, shocking state, ensuring that recovery becomes almost impossible.
Stand back from the fells and valleys and try to judge this vista as you would a landscape in any other part of the world. What you will see is the great damage farming has inflicted: wet deserts grazed down to turf and rock; erosion gullies from which piles of stones spill; woods in which no new trees have grown for 80 years, as every seedling has been nibbled out by sheep; dredged and canalised rivers, empty of wildlife and dangerous to the people living downstream; tracts of bare mountainside on which every spring is a silent one. Anyone with ecological knowledge should recoil from this scene.
The documents supporting the bid for world heritage status are lavishly illustrated with photos, that inadvertently reveal what has happened to the national park. But this slow-burning disaster goes almost unmentioned in the text. On the contrary, the bid repeatedly claims that the park is in “good physical condition”, and that the relationship between grazing and wildlife is “harmonious”. Only on page 535, buried in a table, is the reality acknowledged: 75% of the sites that are meant to be protected for nature are in “unfavourable condition”.
This great national property has degenerated into a sheepwrecked wasteland. And the national park partnership, that submitted the bid, wants to keep it this way: this is the explicit purpose of its attempt to achieve world heritage status. It wants to preserve the Lake District as a “cultural landscape”. But whose culture? Whose landscape? There are only 1080 remaining farms in the district. Should the entire national park be managed for their benefit? If so, why? The question isn’t raised, let alone answered.
I can see the value and beauty of the traditional shepherding culture in the Lake District. I can also see that the farming there, reliant on subsidies, quad bikes and steel barns, now bears little relationship to traditional practice. As the size of landholdings has increased, it looks ever more like ranching and ever less like the old system the bid describes. The bid’s claim that farming there is “wholly authentic in terms of … its traditions, techniques and management systems” is neither intelligible nor true. Remnants of the old shepherding culture tend to be represented ceremonially, as its customs are mostly disconnected from the farm economy.
Shepherding is not the only cultural legacy in play. The other is that the Lake District is the birthplace of the modern conservation movement. Inspired by the Picturesque and Romantic movements, much of our environmental ethic and the groups representing it, such as the National Trust, originated here. Attempts to preserve natural beauty in the district began in the mid-18th century, with complaints against the felling of trees around Derwent Water. Today, the national park cares so little for this legacy that, as the bid admits, “there are no data available” on the condition of the Lake District’s woodlands.
The small group favoured by this bid sees environmental protection as anathema. Farmers’ organisations in the Lake District have fought tooth and nail against conservation measures. They revile the National Trust and the RSPB, whose mild efforts to protect the land from overgrazing are, with the help of a lazy and compliant media, treated like bubonic plague. As one of these farming groups exults, world heritage status “gives us a powerful weapon” that they can wield against those who seek to limit their impacts. If the plan is approved, this world heritage site would be a 230,000-hectare monument to overgrazing and ecological destruction.
This is not the only sense in which the bid is unsustainable. Nowhere in its 700 pages is Brexit mentioned. It was obviously written before the referendum, and has not been updated. Yet the entire vision relies, as the bid admits, on the economic viability of the farming system, which depends in turn on subsidies from the European Union.
Without these payments, there would be no sheep farming in the Lake District: it operates at a major loss. European subsidies counteract this loss, delivering an average net farm income of £9,600. Unsurprisingly, people are leaving the industry in droves: the number of farms in the national park is declining by 2% a year. And this is before the payments cease.
What is the national park partnership, that prepared this bid, going to do – march people onto the fells at gunpoint and demand they continue farming? Or does it hope that the government, amid the massacre of public investment that will follow Brexit, will not only match but exceed the £3bn of public money currently being passed to UK farmers by the European Union? Your guess is as good as mine. This omission alone should disqualify the bid.
The failure to mention this fatal issue looks to me like one of many attempts to pull the Herdwick wool over Unesco’s eyes. The entire bid is based on a fairy tale, a pretence that the rural economy of the Lake District hasn’t changed for 200 years. If Unesco grants world heritage status on these grounds, it will inflict irreparable harm on both our natural heritage and its own good standing.
The hills, whose clothes so many profess to admire, are naked. The narrative we are being asked to support is false. The attempt to ensure that the ecological disaster zone we call the Lake District National Park can never recover from its sheepwrecking is one long exercise in woolly thinking.
When one reads this one is left with a feeling of great sadness. A sadness that our ‘movers and shakers’ can’t resist the urge to meddle. Can’t understand the beauty that is found in nature in the raw.
Earlier on I illustrated how our own property has ‘interfered’ with the wilderness of this most beautiful Oregonian countryside. But as I hope to show you with the following photographs taken on our property back in 2014 that wild beauty can be hung on to in some measure.
I have sent a message to Unesco asking if the views of the public are being taken into account and, if so, how those views are to be communicated to Unesco. If you wish to contact them then the details are on this page: http://whc.unesco.org/en/world-heritage-centre/
Any replies from Unesco will be posted here.
UPDATE 0815 PDT May 22nd.
My email yesterday to Unesco was ‘bounced back’ as an invalid email address (despite me using the email address on the Unesco website!!).
But following George Monbiot’s reply to me, giving me the name of James Bridge (firstname.lastname@example.org) at Unesco, I have now sent Mr. Bridge the following email:
Dear Mr. Bridge,
I write as a British citizen, born a Londoner in 1944, to protest in the strongest possible terms to the proposal to turn the English Lake District into a World Heritage Site. This is your Tentative List reference http://whc.unesco.org/en/tentativelists/5673/.
Would you please provide me with the details of where or whom within Unesco I can write setting out in detail my objections to this proposal?
Your soonest reply would be very much appreciated.
I won’t hold my breath over getting a quick reply.
For those looking for answers to the crisis in liberal democracy, this may well be it.
In yesterday’s post Tensions abound in many societies I offered a viewpoint that the ‘left’ arguing with the ‘right’ in politics was utterly inappropriate. Simply for we, as in the people who live on this planet, have to start working together if we wish to have a future for mankind on Planet Earth.
Yesterday’s post also referred to Inductive and Deductive Reasoning with me proposing that the future had to be built on a universally acknowledged relationship between ’cause’ and ‘effect’. A relationship that was built on a clear axiom, or theorem; as we see all around us in both the physical and natural worlds.
This idea does take a little time to filter through and I would be the first to say that I had to spend quite a while reflecting on the idea to fully understand the difference, the power, of deductive reasoning. Plus how something that was a behaviourial ‘law’ could be seen as much as an axiom as is, for example, the calculation of the speed of light, or the relationship of gravity to mass.
His thesis is that there is a direct relationship between “… about how well dispersed economic decision-making power is and how much control and financial security people have over their lives.“
That relationship is the core message of his essay.
In other words, as I see it, there is an axiom, a theorem, that governs the relationship between the leadership process of a country and the degree to which that country’s society could be classed as a democratic society.
If 2016 brought Brexit, Donald Trump and a backlash against cosmopolitan visions of globalisation and society, the great fear for 2017 is further shocks from right-wing populists like Geert Wilders in Holland and Marine Le Pen in France. A new mood of intolerance, xenophobia and protectionist economics seems to be in the air.
In a world of zero-hour contracts, Uber, Deliveroo and the gig economy, access to decent work and a sustainable family income remains the main fault line between the winners and losers from globalisation. Drill into the voter data behind Brexit and Trump and they have much to do with economically marginalised voters in old industrial areas, from South Wales to Nord-Pas-de-Calais, from Tyneside to Ohio and Michigan.
These voters’ economic concerns about industrial closures, immigrants and businesses decamping to low-wage countries seemed ignored by a liberal elite espousing free trade, flexible labour and deregulation. They turned instead to populist “outsiders” with simplistic yet ultimately flawed political and economic narratives.
Much has been said about the crisis of liberal political democracy, but these trends look inextricably linked with what is sometimes referred to as economic democracy. This is about how well dispersed economic decision-making power is and how much control and financial security people have over their lives. I’ve been involved in a project to look at how this compares between different countries. The results say much about the point we have reached, and where we might be heading in future.
Our economic democracy index looked at 32 countries in the OECD (omitting Turkey and Mexico, which had too much missing data). While economic democracy tends to focus on levels of trade union influence and the extent of cooperative ownership in a country, we wanted to take in other relevant factors.
We added three additional indicators: “workplace and employment rights”; “distribution of economic decision-making powers”, including everything from the strength of the financial sector to the extent to which tax powers are centralised; and “transparency and democratic engagement in macroeconomic decision-making”, which takes in corruption, accountability, central bank transparency and different social partners’ involvement in shaping policy.
What is striking is the basic difference between a more “social” model of northern European capitalism and the more market-driven Anglo-American model. Hence the Scandinavian countries score among the best, with their higher levels of social protection, employment rights and democratic participation in economic decision-making. The reverse is true of the more deregulated, concentrated and less democratic economies of the English-speaking world. The US ranks particularly low, with only Slovakia below it. The UK too is only 25th out of 32.
Interestingly, France ranks relatively highly. This reflects its strong levels of job protection and employee involvement in corporate decision-making – the fact that the far right has been strong in France for a number of years indicates its popularity stems from race at least as much as economics.
Yet leading mainstream presidential candidates François Fillon and Emmanuel Macron are committed to reducing France’s protections. These are often blamed – without much real evidence – for the country’s sluggish job creation record. There is a clear danger both here and in the Netherlands that a continuing commitment to such neoliberal labour market policies might push working class voters further towards Le Pen and Wilders.
One other notable disparity in the index is between the scores of Austria and Germany, despite their relatively similar economic governance. Germany’s lower ranking reflects the growth of labour market insecurity and lower levels of job protection, particularly for part-time workers as part of the Hartz IV labour market reforms in the 1990s that followed reunification.
The index also highlights the comparatively poor levels of economic democracy in the “transition” economies of eastern Europe. The one very interesting exception is Slovenia, which merits further study. It might reflect both its relatively stable transition from communism and the civil war in the former Yugoslavia, and the continuing presence of active civil society elements in the trade union and cooperative movements. Southern European economies also tend to rank below northern European countries, as does Japan.
Poverty and inequality
The index provides strong evidence that xenophobic politics may be linked to changing levels of economic participation and empowerment – notwithstanding the French data. We found that the greater the poverty and inequality in a country, the lower the rates of economic democracy.
These findings suggest, for example, that the Anglo-American-led attack on trade unions and flexible labour policies may actually drive up poverty and inequality by cutting welfare benefits and driving up individual employment insecurity. While the OECD itself advocated these policies until recently, countries with high levels of economic democracy such as Norway, Denmark and Iceland have much lower levels of poverty than countries such as the US and UK.
Far-right populism is on the march everywhere, including the Nordic countries. But Brexit, Trump and the more serious shift to the far right in Eastern Europe have been accompanied by diminishing economic security and rights at work, disenfranchised trade unions and cooperatives, and economic decision-making concentrated among financial, political and corporate elites.
We will monitor these scores in future to see what happens over time. It will be interesting to see how the correlations between economic democracy, poverty and voting patterns develop in the coming years. For those looking for answers to the crisis in liberal democracy, this may well be it.
I shall be writing to Professor Cumbers asking if my analysis of that relationship is supported by his research.
For if it is then we do have a very clear axiom that few would disagree with. That is the political consensus this world needs now.
The power of corporations must never be permitted to override democratic choice.
The main thrust in yesterday’s post was a plea by Chip Colwell , Lecturer on Anthropology, University of Colorado, Denver for our natural lands to be given the legal status of a person. Here’s how Prof. Colwell concluded his essay (my emphasis):
In New Zealand, the Te Urewera Act offers a higher level of protection, empowering a board to be the land’s guardian. The Te Urewera Act, though, does not remove its connection to humans. With a permit, people can hunt, fish, farm and more. The public still has access to the forest. One section of the law even allows Te Urewera to be mined.
Te Urewera teaches us that acknowledging cultural views of places as living does not mean ending the relationship between humans and nature, but reordering it – recognizing nature’s intrinsic worth and respecting indigenous philosophies.
In the U.S. and elsewhere, I believe we can do better to align our legal system with the cultural expressions of the people it serves. For instance, the U.S. Congress could amend the NHPA or the American Indian Religious Freedom Act to acknowledge the deep cultural connection between tribes and natural places, and afford better protections for sacred landscapes like New Mexico’s Mount Taylor.
Until then, it says much about us when companies are considered people before nature is.
Chip Colwell was alerting us, as in humanity, that our natural resources are way, way too important for them to be considered corporate assets.
The days between a Christmas Day and a New Year’s Day are frequently a time for introspection; well they are for me! A few days to reflect on what did or did not work in the year just coming to an end and to find some clarity about the important issues for the new year.
That mood of introspection, of reflection, seems to be creeping into my blog posts this last week of 2016. For following Chip Colwell comes George Monbiot and an essay he published on the 6th December, 2016, that is republished here with Mr. Monbiot’s very kind permission.
Regarding the power of corporations there are strong echoes between Prof. Colwell and Mr. Monbiot.
The Golden Arches Theory of Decline
10th December 2016
Why is there a worldwide revolt against politics as usual? Because corporate globalisation has crushed democratic choice.
By George Monbiot, published in the Guardian, 6th December 2016
A wave of revulsion rolls around the world. Approval ratings for incumbent leaders are everywhere collapsing. Symbols, slogans and sensation trump facts and nuanced argument. One in six Americans now believes that military rule would be a good idea. From all this I draw the following, peculiar conclusion: no country with a McDonald’s can remain a democracy.
Twenty years ago, the New York Times columnist Thomas Friedman proposed his “golden arches theory of conflict prevention”. This holds that “no two countries that both have McDonald’s have ever fought a war against each other since they each got their McDonald’s”.
Friedman’s was one of several end-of-history narratives suggesting that global capitalism would lead to permanent peace. He claimed that it might create “a tip-over point at which a country, by integrating with the global economy, opening itself up to foreign investment and empowering its consumers, permanently restricts its capacity for troublemaking and promotes gradual democratization and widening peace.” He didn’t mean that McDonald’s ends war, but that its arrival in a nation symbolised the transition.
In using McDonalds as shorthand for the forces tearing democracy apart, I am, like him, writing figuratively. I do not mean that the presence of the burger chain itself is the cause of the decline of open, democratic societies (though it has played its part in Britain, using our defamation laws against its critics). Nor do I mean that countries hosting McDonald’s will necessarily mutate into dictatorships.
What I mean is that, under the onslaught of the placeless, transnational capital McDonald’s exemplifies, democracy as a living system withers and dies. The old forms and forums still exist – parliaments and congresses remain standing – but the power they once contained seeps away, re-emerging where we can no longer reach it.
The political power that should belong to us has flitted into confidential meetings with the lobbyists and donors who establish the limits of debate and action. It has slipped into the dictats of the IMF and the European Central Bank, which respond not to the people but to the financial sector. It has been transported, under armed guard, into the icy fastness of Davos, where Mr Friedman finds himself so warmly welcomed (even when he’s talking cobblers).
Above all, the power that should belong to the people is being crushed by international treaty. Contracts such as NAFTA, CETA, the proposed TransPacific Partnership and Trade in Services Agreement and the failed Transatlantic Trade and Investment Partnership are crafted behind closed doors in discussions dominated by corporate lobbyists. They are able to slip in clauses that no informed electorate would ever approve, such as the establishment of opaque offshore tribunals, through which corporations can bypass national courts, challenge national laws and demand compensation for the results of democratic decisions.
These treaties limit the scope of politics, prevent states from changing social outcomes and drive down labour rights, consumer protection, financial regulation and the quality of neighbourhoods. They make a mockery of sovereignty. Anyone who forgets that striking them down was one of Donald Trump’s main promises will fail to understand why people were prepared to risk so much in electing him.
At the national level too, the McDonalds model destroys meaningful democracy. Democracy depends on a reciprocal sense of belief, trust and belonging: the conviction that you belong to the nation and the nation belongs to you. The McDonalds model, by rooting out attachment, could not have been better designed to erase that perception.
As Tom Wolfe observes in his novel A Man in Full, “the only way you could tell you were leaving one community and entering another was when the franchise chains started repeating and you spotted another 7-Eleven, another Wendy’s, another Costco, another Home Depot.” The alienation and anomie this destruction of place promotes are enhanced by the casualisation of labour and a spirit-crushing regime of monitoring, quantification and assessment (at which McDonald’s happens to excel). Public health disasters contribute to the sense of rupture. After falling for decades, for example, death rates among middle-aged white Americans are now rising. Among the likely causes are obesity and diabetes, opioid addiction and liver failure, diseases whose vectors are corporations.
In his book The Globalisation Paradox, the Harvard economist Dani Rodrik describes a political trilemma. Democracy, national sovereignty and hyperglobalisation, he argues, are mutually incompatible. You cannot have all three at once. McDonalisation crowds out domestic politics. Incoherent and dangerous as it often is, the global backlash against mainstream politicians is, at heart, an attempt to reassert national sovereignty against the forces of undemocratic globalisation.
An article about the history of the Democratic party by Matt Stoller in The Atlantic reminds us that a similar choice was articulated by the great American jurist Louis Brandeis. “We may have democracy, or we may have wealth concentrated in the hands of a few, but we can’t have both.” In 1936, the congressman Wright Patman managed to pass a bill against the concentration of corporate power. Among his targets was A&P, the giant chainstore of his day, that was hollowing out towns, destroying local retailers and turning “independent tradesmen into clerks”.
In 1938, President Roosevelt warned that “the liberty of a democracy is not safe if the people tolerate the growth of private power to a point where it becomes stronger than their democratic state itself. That, in its essence, is fascism.” The Democrats saw concentrated corporate power as a form of dictatorship. They broke up giant banks and businesses and chained the chainstores. What Roosevelt, Brandeis and Patman knew has been forgotten by those in power, including powerful journalists. But not by the victims of this system.
One of the answers to Trump, Putin, Orban, Erdogan, Salvini, Duterte, Le Pen, Farage and the politics they represent is to rescue democracy from transnational corporations. It is to defend the crucial political unit that’s under assault by banks, monopolies and chainstores: community. It is to recognise that there is no greater hazard to peace between nations than a corporate model which crushes democratic choice.
It’s very easy to pick out from Mr. Monbiot’s essay what the theme should be for 2017, and beyond. What each and every one of us who cares about the future and understands the huge changes that have to take place if our grandchildren are to have a viable future.
It was that compelling quotation by Louis Brandeis:
We may have democracy, or we may have wealth concentrated in the hands of a few, but we can’t have both.
Dogs ‘teaching’ man to be so successful a hunter enabled evolution, some 20,000 years later, to farming, thence the long journey to modern man. But in the last, say 100 years, that farming spirit has become corrupted to the point where we see the planet’s plant and mineral resources as infinite. Mankind is close to the edge of extinction, literally and spiritually.
I continue that theme in Part Two of my book (Chapter 7: This Twenty-First Century)
Bad news sells! Bad news also causes stress and worry. In my previous explanation, I explained that the last thing you want is a catalogue of all the things that have that power to cause you stress and worry. However, I do see three fundamental aspects of this new century that have their roots in that loss of principles that I referred to in the previous chapter. They are
1. the global financial system,
2. the potential for social disorder, and
3. the process of government.
Because they are at the heart of how the coming years will pan out.
The first aspect, our global financial system, was selected because it underpins all our lives in so many ways. When I was living in southwest England I was a client of Kauders Portfolio Services. The founder of the company, David Kauders, published a book, The Greatest Crash, in 2011. It was an obvious read for me at that time and I still have the book on my shelves here in Oregon.
David explained that whether we like it or not, our lives are inextricably caught up in the twin dependencies of the global financial system: credit and debt. As he wrote in his opening chapter:
Households can barely afford their existing debts, let alone take on more. Since households now prefer not to borrow, indeed some even choose to pay back debt, it follows that those who have already borrowed, as a group, can no longer contribute to economic expansion.
People can be divided into borrowers and savers. With existing borrowers unable to afford or unwilling to take on extra debt, can new borrowers be found instead? Those who do not need to borrow are unlikely to volunteer. Except for the young wishing to buy houses, facing the reality that house prices are beyond their pockets, where are the new borrowers?
Businesses are also under pressure. There has been an inadequate recovery from recession, business prospects are poor as households cut back their spending. Lack of bank lending is a symptom rather than a cause, for if existing businesses were to be given more credit, they would probably be unlikely to find profitable growth opportunities in a world of austerity.
Later on in the book David describes this as “the financial system limit”. In other words, the period of growth and expansion, especially of financial and economic expansion, has come to an end in a structural sense. This was his perspective from 2011.
Recently, I chose to reread The Greatest Crash. What struck me forcibly, reading the book again some four years later on, was how visible this “system limit” appeared in the world today. Everywhere there are signs that the era of growth has come to an end. Many countries are now indebted to a point that reinforces the proposition of there being a financial system limit. The United States is greatly in debt but the only thing mitigating that situation, for the time being anyway, is that the American dollar is the quasi dominant global currency.
The changing nature of the global population is also reinforcing the fact that this is the end of a long period of growth. Even without embracing the question of how much longer we can increase the number of people living on a finite planet, the demographics spell out a greater-than-even chance of a decline in consumption and economic activity. Simply because in all regions of the planet, except for India where there is still a growing youth element in the country, people are ageing. To state the obvious, ageing persons do not consume as much as middle-aged and younger persons.
Thus, the world’s economy that is just around the corner is certainly going to be very different to what it has been in the past. It is not being widely discussed. Worse than that, there is a widespread assumption adopted by many governments that a return to the “normal” economic growth of previous times is a given. Many do not share that assumption.
The second aspect that isn’t being spoken about is the potential for massive, widespread social disorder. All summed up in just three words: greed, inequality, and poverty. Just three words that metaphorically appear to me like a round, wooden lid hiding a very deep, dark well. That lifting this particular lid, the metaphorical one, exposes an almost endless drop into the depths of where our society appears to have fallen.
Even the slightest raising of awareness of where this modern global world is heading is scary. I have in mind the author Thomas Piketty who warned that, “the inequality gap is toxic, dangerous.” Then there was the news in 2015 that, “Billionaires control the vast majority of the world’s wealth, 67 billionaires already own half the world’s assets; by 2100 we’ll have 11 trillionaires, while American worker income has stagnated for a generation.”
The third and final aspect that isn’t being widely discussed is the process of government. Not from the viewpoint of “left” or “right”, Labour or Conservative, Democratic or Republican (insert the labels appropriate to your own country), that is being discussed ad nauseum, but from the viewpoint of good government. It might be a terrible generalisation but it is still a fair criticism to say that many peoples of many countries have lost faith in their governments.
There appears to be a chronic absence of open debate about the need for good government, what that good government would look like, and how do societies bring it about.
If we were a dog pack, then our leader, our female mentor dog, would have moved us all to a new, pristine territory!
So, dear reader, you can understand why a recent article over on Naked Capitalism spoke to me. It was penned by Satyajit Das, a former banker and the author of a number of books. Both Satyajit and Yves, of Naked Capitalism, were delighted to offer me permission to republish the full post.
Yves here. If you’ve read Das regularly, one of the characteristics of his writing is wry detachment. The shift to a sense of foreboding is a big departure.
By Satyajit Das, a former banker and author whose latest book, The Age of Stagnation, is now available. The following is an edited excerpt from Age of Stagnation (published with the permission of Prometheus Books)
If you look for truth, you may find comfort in the end; if you look for comfort you will not get either comfort or truth, only . . . wishful thinking to begin, and in the end, despair. C.S. Lewis
The world is entering a period of stagnation, the new mediocre. The end of growth and fragile, volatile economic conditions are now the sometimes silent background to all social and political debates. For individuals, this is about the destruction of human hopes and dreams.
For most of human history, as Thomas Hobbes recognised, life has been ‘solitary, poor, nasty, brutish, and short’. The fortunate coincidence of factors that drove the unprecedented improvement in living standards following the Industrial Revolution, and especially in the period after World War II, may have been unique, an historical aberration. Now, different influences threaten to halt further increases, and even reverse the gains.
Since the early 1980s, economic activity and growth have been increasingly driven by financialisation – the replacement of industrial activity with financial trading and increased levels of borrowing to finance consumption and investment. By 2007, US$5 of new debt was necessary to create an additional US$1 of American economic activity, a fivefold increase from the 1950s. Debt levels had risen beyond the repayment capacity of borrowers, triggering the 2008 crisis and the Great Recession that followed. But the world shows little sign of shaking off its addiction to borrowing. Ever-increasing amounts of debt now act as a brake on growth.
Growth in international trade and capital flows is slowing. Emerging markets that have benefited from and, in recent times, supported growth are slowing.
Rising inequality and economic exclusion also impacts negatively upon activity.
Financial problems are compounded by lower population growth and ageing populations; slower increases in productivity and innovation; looming shortages of critical resources, such as water, food and energy; and manmade climate change and extreme weather conditions.
The world requires an additional 64 billion cubic metres of water a year, equivalent to the annual water flow through Germany’s Rhine River. Agronomists estimate that production will need to increase by 60–100 percent by 2050 to feed the population of the world. While the world’s supply of energy will not be exhausted any time soon, the human race is on track to exhaust the energy content of hundreds of millions years’ worth of sunlight stored in the form of coal, oil and natural gas in a few hundred years. 10 tons of pre-historic buried plant and organic matter converted by pressure and heat over millennia was needed to create a single gallon (4.5 litres) of gasoline.
Europe is currently struggling to deal with a few million refugees fleeing conflicts in the Middle East. How will the world deal with hundreds of millions of people at risk of displacement as a resulting of rising sea levels?
Extend and Pretend
The official response to the 2008 crisis was a policy of ‘extend and pretend’, whereby authorities chose to ignore the underlying problem, cover it up, or devise deferral strategies to ‘kick the can down the road’. The assumption was that government spending, lower interest rates, and the supply of liquidity or cash to money markets would create growth. It would also increase inflation to help reduce the level of debt, by decreasing its value.
It was the grifter’s long con, a confidence trick with a potentially large payoff but difficult to pull off. Houses prices and stock markets have risen, but growth, employment, income and investment have barely recovered to pre-crisis levels in most advanced economies. Inflation for the most part remains stubbornly low.
In countries that have ‘recovered’, financial markets are, in many cases, at or above pre-crisis prices. But conditions in the real economy have not returned to normal. Must-have latest electronic gadgets cannot obscure the fact that living standards for most people are stagnant. Job insecurity has risen. Wages are static, where they are not falling. Accepted perquisites of life in developed countries, such as education, houses, health services, aged care, savings and retirement, are increasingly unattainable.
In more severely affected countries, conditions are worse. Despite talk of a return to growth, the Greek economy has shrunk by a quarter. Spending by Greeks has fallen by 40 percent, reflecting reduced wages and pensions. Reported unemployment is 26 percent of the labour force. Youth unemployment is over 50 percent. One commentator observed that the government could save money on education, as it was unnecessary to prepare people for jobs that did not exist.
Future generations may have fewer opportunities and lower living standards than their parents. A 2013 Pew Research Centre survey conducted in thirty-nine countries asked whether people believed that their children would enjoy better living standards: 33 percent of Americans believed so, as did 28 percent of Germans, 17 percent of British and 14 percent of Italians. Just 9 percent of French people thought their children would be better off than previous generations.
The Deadly Cure
Authorities have been increasingly forced to resort to untested policies including QE forever and negative interest rates. It was an attempt to buy time, to let economies achieve a self-sustaining recovery, as they had done before. Unfortunately the policies have not succeeded. The expensively purchased time has been wasted. The necessary changes have not been made.
There are toxic side effects. Global debt has increased, not decreased, in response to low rates and government spending. Banks, considered dangerously large after the events of 2008, have increased in size and market power since then. In the US the six largest banks now control nearly 70 percent of all the assets in the US financial system, having increased their share by around 40 percent.
Individual countries have sought to export their troubles, abandoning international cooperation for beggar-thy-neighbour strategies. Destructive retaliation, in the form of tit-for-tat interest rate cuts, currency wars, and restrictions on trade, limits the ability of any nation to gain a decisive advantage.
The policies have also set the stage for a new financial crisis. Easy money has artificially boosted prices of financial assets beyond their real value. A significant amount of this capital has flowed into and destabilised emerging markets. Addicted to government and central bank support, the world economy may not be able to survive without low rates and excessive liquidity.
Authorities increasingly find themselves trapped, with little room for manoeuvre and unable to discontinue support for the economy. Central bankers know, even if they are unwilling to publicly acknowledge it, that their tools are inadequate or exhausted, now possessing the potency of shamanic rain dances. More than two decades of trying similar measures in Japan highlight their ineffectiveness in avoiding stagnation.
Heart of the Matter
Conscious that the social compact requires growth and prosperity, politicians, irrespective of ideology, are unwilling to openly discuss the real issues. They claim crisis fatigue, arguing that the problems are too far into the future to require immediate action. Fearing electoral oblivion, they have succumbed to populist demands for faux certainty and placebo policies. But in so doing they are merely piling up the problems.
Policymakers interrogate their models and torture data, failing to grasp that ‘many of the things you can count don’t count [while] many of the things you can’t count really count’. The possibility of a historical shift does not inform current thinking.
It is not in the interest of bankers and financial advisers to tell their clients about the real outlook. Bad news is bad for business. The media and commentariat, for the most part, accentuate the positive. Facts, they argue, are too depressing. The priority is to maintain the appearance of normality, to engender confidence.
Ordinary people refuse to acknowledge that maybe you cannot have it all. But there is increasingly a visceral unease about the present and a fear of the future. Everyone senses that the ultimate cost of the inevitable adjustments will be large. It is not simply the threat of economic hardship; it is fear of a loss of dignity and pride. It is a pervasive sense of powerlessness.
For the moment, the world hopes for the best of times but is afraid of the worst. People everywhere resemble Dory, the Royal Blue Tang fish in the animated film Finding Nemo. Suffering from short-term memory loss, she just tells herself to keep on swimming. Her direction is entirely random and without purpose.
The world has postponed, indefinitely, dealing decisively with the challenges, choosing instead to risk stagnation or collapse. But reality cannot be deferred forever. Kicking the can down the road only shifts the responsibility for dealing with it onto others, especially future generations.
A slow, controlled correction of the financial, economic, resource and environmental excesses now would be serious but manageable. If changes are not made, then the forced correction will be dramatic and violent, with unknown consequences.
During the last half-century each successive economic crisis has increased in severity, requiring progressively larger measures to ameliorate its effects. Over time, the policies have distorted the economy. The effectiveness of instruments has diminished. With public finances weakened and interest rates at historic lows, there is now little room for manoeuvre. Geo-political risks have risen. Trust and faith in institutions and policy makers has weakened.
Economic problems are feeding social and political discontent, opening the way for extremism. In the Great Depression the fear and disaffection of ordinary people who had lost their jobs and savings gave rise to fascism. Writing of the period, historian A.J.P. Taylor noted: ‘[the] middle class, everywhere the pillar of stability and respectability . . . was now utterly destroyed . . . they became resentful . . . violent and irresponsible . . . ready to follow the first demagogic saviour . . .’
The new crisis that is now approaching or may already be with us will be like a virulent infection attacking a body whose immune system is already compromised.
As Robert Louis Stevenson knew, sooner or later we all have to sit down to a banquet of consequences.
There is no question that we are living in interesting times!
Back in the old country there was a popular saying: “There are liars, damn liars, and politicians.” I am insufficiently aware of politics in both my new home country, the US of A, and my new home state, Oregon, to know if that saying is equally pertinent to life in America as it was in Great Britain – I suspect that it is.
So what’s getting ‘my knickers in a twist’ today? Namely the state of the world economy.
There seems to be so much spin and counter-spin that getting to the truth of what is going on, economically speaking, is not straightforward.
Which is why a recent article posted by Raúl Ilargi Meijerover on The Automatic Earth jumped out at me. To my eyes, it really did cover the truth of what’s going on. And to double-check my analysis I shared it with Dan Gomez, no stranger to global finances, and he found it useful. Indeed, this was Dan’s reply: “That’s pretty much it. This should be the top of the world news every week until governments become accountable. All the other big issues of the day pale compare to the backlash from this sclerotic thinking. Good luck to all of us.”
Raúl has very kindly given me his permission to republish this. It’s not an easy read but that doesn’t detract from the value of the essay.
Why This Slump Has Legs
January 18, 2016Posted by Raúl Ilargi Meijer
We’ve only really been in two weeks of trading in the new year, things are looking pretty bad to say the least, so predictably the press are asking -and often answering- questions about when the slump will be over. Rebound, recovery, the usual terminology. When will we get back to growth?
For me personally, but that’s just me, that last question sounds a bit more stupid every single time I hear and read it. Just a bit, but there’s been a lot of those bits, more than I care to remember. Luckily, the answer is easy. The slump will not be over for a very long time, there will be no rebound or recovery, and please stop talking about a return to growth unless you can explain what you want to grow into.
I’m sorry, I know that’s not what you want to hear, but life’s a bitch and so’s the economy. You’ve lived on pink fumes for a long time, most of you for their whole lives, but reality dictates that real ‘growth’ stopped decades ago, and you never figured that out because, and I quote here (see below), you and the world you’re part of became “addicted to borrowing money, spending it, and passing this off as ‘growth’”.
That you believed this was actual growth, however, is on you. You fell for a scam and you’re going to have to pay the price. If there’s one single thing people are good at, it’s lying. It’s as old as human history, and it happens every day, so you’re no exception to any rule. You’re perhaps just not particularly clever.
How do we know a ‘recovery’ is so far off it’s really no use to even talk about it? As I said, it’s easy. Let me lead this in with a graph I saw just today, which deals with a topic the Automatic Earth has covered a lot: marginal debt, or more precisely, the productivity/growth gained from each additional dollar of debt.
Please note, this particular graph deals with private non-financial debt only, we’ll get to other kinds of added debt, but that restriction is actually quite illuminating.
Now of course, you have to wonder about the parameters the St. Louis Fed uses for its data and graphs, and whether ‘growth’ was all that solid in the run up to 2008. There’s plenty of very valid arguments that would say growth in the 1960’s was a whole lot more solid than that in the naughties, after the Glass-Steagall repeal, and after the dot.com blubber.
However, that’s not what I want to take away from this, I use this to show what has happened since 2008, more than before, when it comes to “passing debt off as ‘growth’”.
But it’s another thing that has happened since 2008, or rather not happened, that points out to us why this slump will have legs. That is, in 2008 a behemoth bubble started bursting, and it was by no means just US housing market. That bubble should have been allowed to fully deflate, because that is the only way to allow an economy to do a viable restart.
Instead, all that has been done since 2008, QE, ZIRP, the works, has been aimed at keeping a facade ‘alive’, and aimed at protecting the interests of the bankers and other rich parties. That facade, expressed most of all in rising stock markets, has allowed for societies to be gutted while people were busy watching the S&P rise to 2,100 and the Kardashians bare 2,100 body parts.
It was all paid for, apart from western QE, with $28 trillion and change of newfangled Chinese debt. The problem with this is that if you find yourself in a bubble and you don’t go through the inevitable deleveraging process that follows said bubble in a proper fashion, you’re not only going to kill economies, you’ll destroy entire societies.
And that is not just morally repugnant, it also works as much against the rich as it does against the poor. It’s just that that is a step too far for most people to understand. That even the rich need a functioning society, and that inequality as we see it today is a real threat to everyone.
Recognizing this simple fact, and the consequences that follow from it, is nothing new. It’s why in days of old, there were debt jubilees. It’s also why we still quote the following from Marriner Eccles, chairman of the Federal Reserve under FDR and Truman from 1934-1948, in his testimony to the Senate Committee on the Investigation of Economic Problems in 1933, which prompted FDR to make him chairman in the first place.
It is utterly impossible, as this country has demonstrated again and again, for the rich to save as much as they have been trying to save, and save anything that is worth saving. They can save idle factories and useless railroad coaches; they can save empty office buildings and closed banks; they can save paper evidences of foreign loans; but as a class they cannot save anything that is worth saving, above and beyond the amount that is made profitable by the increase of consumer buying.
It is for the interests of the well to do – to protect them from the results of their own folly – that we should take from them a sufficient amount of their surplus to enable consumers to consume and business to operate at a profit. This is not “soaking the rich”; it is saving the rich. Incidentally, it is the only way to assure them the serenity and security which they do not have at the present moment.
Everything would all be so much simpler if only more people understood this, that you need a – fleeting, ever-changing equilibrium- to prosper.
Instead, we’re falling into that same trap again. Or, more precisely, we already have. We have been fighting debt with more debt and built the facade put up by the Fed, the BoJ and the ECB, central banks that all face the same problems and all take the same approach: save the rich at the cost of the poor. Something Eccles said way back when could not possibly work.
Anyway, so here are the graphs that prove to us why the slump has legs. There’s been no deleveraging, the no. 1 requirement after a bubble bursts. There’s only been more leveraging, more debt has been issued, and while households have perhaps deleveraged a little bit, though that is likely strongly influenced by losses on homes etc. plus the fact that people were simply maxed out.
First, global debt and the opposite of deleveraging:
And global debt from a longer, 65 year, more historical perspective:
It’s a global debt graph, but it’s perhaps striking to note that big ‘growth’ spurts happened in the days when Reagan, Clinton and Obama were the respective US presidents. Not so much in the Bush era.
Next, China. What we’re looking at is what allowed the post 2008 global economic facade to have -fake- credibility, an insane rise in debt, largely spent on non-productive overinvestment, overcapacity highways to nowhere and many millions of empty apartments, in what could have been a cool story had not Beijing gone all-out on performance enhancing financial narcotics.
Today, the China Ponzi is on its last legs, and so is the global one, because China was the last ‘not-yet-conquered’ market large enough to provide the facade with -fleeting- credibility. Unless Elon Musk gets us to Mars very soon, there are no more such markets.
So US debt will have to come down too, belatedly, with China, and it will have to do that now. because there are no continents to conquer and hide the debt behind. We’re all going to regret engaging in the debt game, and not letting the bubble deflate in an orderly fashion when we still could, but all those thoughts are too late now.
What the facade has wrought is not just the idea that deleveraging was not needed (though it always is, after every single bubble), but that net US household worth rose by 55% in the 6-7 years since the bottom of the crisis, an artificial bottom fabricated with…more debt, with QE, and ZIRP.
Meanwhile, in today’s world, as stock markets go down at a rapid clip, China, having lost control of a market system it never had the control over that Politburos are ever willing to acknowledge they don’t have, plays a game of Ponzi whack-a-mole, with erratic ‘policies’ such as circuit breakers and CIA-style renditions of fund managers and the like.
And all the west can do is watch them fumble the ball, and another one, and another. And this whole thing is nowhere near the end.
China bad loans have now become a theme, but the theme doesn’t mean a thing without including the shadow banking system, which in China has been given the opportunity to grow like a tumor, on which Beijing’s grip is limited, and which has huge claims on local party officials forced by the Politburo to show overblown growth numbers. If you want to address bad loans, that’s where they are.
Chinese credit/debt graphs paint only a part of the picture if and when they don’t include shadow banks, but keeping their role hidden is one of Xi’s main goals, lest the people find out how bad things really are and start revolting. But they will anyway. That makes China a very unpredictable entity. And unpredictable means volatile, and that means even more money flowing out of, and being lost in, markets.
The ‘least worst’ place to be for what money will be left is US dollars, US treasuries and perhaps metals. But there’ll be a whole lot less left than just about anyone thinks. That’s the price of deleveraging.
The price of not deleveraging, on the other hand, is what we see in the markets today. And there is no cure. It must be done. The price for keeping up the facade rises sharply with each passing day, and the effort will in the end be futile. All bubbles have limited lifespans.
I’ll close this with a few recent words from Tim Morgan, who puts it so well I don’t feel the need to try and do it better.
In order to set the Ponzi economy into some context, let’s put some figures on it. In the United States, total “real economy” debt (which excludes inter-bank borrowing) increased by $19.4 trillion – in real, inflation-adjusted terms – between 2000 and 2014, whilst real GDP expanded by only $3.7 trillion. Britain, meanwhile, added £1.9 trillion of new debt for less than £400bn on “growth” over the same period. I spent part of the holiday period unearthing quite how much debt countries added for each dollar of “growth” over a period starting at the end of 2000 and ending in mid-2015.
Unsurprisingly, the league is topped by Portugal ($5.65 for each $1 of growth), Ireland ($5.42) and Greece ($5.39). Britain’s ratio ($3.46) is somewhat flattering, in that the UK has used asset sales as well as borrowing to sustain its consumption. The average for the Eurozone ($3.54) covers ratios as diverse as Germany (just $1.87) and France ($4.22).
China’s $2.56 looks unexceptional until you note that the more recent (post-2007) number is much worse. Economies which seem to have been growing without too much borrowing (such as Brazil and Russia) are now experiencing dramatic worsening in their ratios, generally in the wake of tumbling commodity prices.
In the proverbial nutshell, then, the world has become addicted to borrowing money, spending it, and passing this off as “growth”. This is a copybook example of a pyramid scheme, which in turn means that the world’s most influential economic mentor is neither Keynes nor Hayek, but Charles Ponzi.
[..] How, in the absence of growth, can inflated capital values be sustained? The answer, of course, is that they can’t. Like all Ponzi schemes, this ends with a bang, not a whimper. This is why I find forecasts of a ‘big fall’ or ‘sharp correction’ in markets hard to swallow. Ponzi schemes don’t end gradually, any more than someone can fall off a cliff gradually, or be “slightly pregnant”.
The Ponzi economy simply continues for as long as irrationality prevails, and then implodes. Capital markets, though, are the symptom, not the cause. The fundamental problem is an inability to escape from an addictive practice of manufacturing supposed “growth” on the basis of borrowed money.
There may be shallow lulls in the asset markets, nothing ever only falls down in a straight line in the real world, but that debt I’ve described here will and must come down and be deleveraged.
The process will in all likelihood lead to warfare, and to refugee movements the likes of which the world has never seen just because of the sheer numbers of people added in the past 50 years.
When your children reach your age, they will not live in a world that you ever thought was possible. But they will still have to live in it, and deal with it. They will no longer have the facade you’ve been staring at for so long now, to lull them into a complacent sleep. And the Kardashians will no longer be looking so attractive either.
If you found your mind wandering somewhat as you tried to stay focussed on the essay, just go back and read the closing two paragraphs.
The process will in all likelihood lead to warfare, and to refugee movements the likes of which the world has never seen just because of the sheer numbers of people added in the past 50 years.
When your children reach your age, they will not live in a world that you ever thought was possible. But they will still have to live in it, and deal with it. They will no longer have the facade you’ve been staring at for so long now, to lull them into a complacent sleep. And the Kardashians will no longer be looking so attractive either.
As I said at the start: we are living in interesting times!
A sombre reflection on the killing abilities of man.
I was in two minds as to whether to post this today for it is certainly a grim reminder of the less desirable aspects of our species.
In the end, I decided to so do because it needs to be shared and if it changes the mindset of just one person it will have been worthwhile. I was originally seen by me on the EarthSky blogsite.
Want to see Earth’s super predator? Look in the mirror.
Our efficient killing technologies have given rise to the human super predator. Our impacts are as extreme as our behavior, says study.
Extreme human predatory behavior is responsible for widespread wildlife extinctions, shrinking fish sizes and disruptions to global food chains, according to research published in the August 21 edition of the journal Science these are extreme outcomes that non-human predators seldom impose, according to the article.
Lead researcher Chris Darimont is a professor of geography at the University of Victoria. Darimont said:
Our wickedly efficient killing technology, global economic systems and resource management that prioritize short-term benefits to humanity have given rise to the human super predator. Our impacts are as extreme as our behavior and the planet bears the burden of our predatory dominance.
The team’s global analysis indicates that humans typically exploit adult fish populations at 14 times the rate than do marine predators. Humans also hunt and kill large land carnivores such as bears, wolves and lions at nine times the rate that these predatory animals kill each other in the wild.
Researchers noted that in some cases, dwindling species of predatory land carnivores are more aggressively hunted for trophies, due to the premium placed on rare prey.
The result of human activity on wildlife populations is far greater than natural predation. Research suggests that socio-political factors can explain why humans repeatedly overexploit. Technology explains how: Humans use advanced killing tools, cheap fossil fuel, and professional harvesters – like high-volume commercial fishing fleets – to overcome the defensive adaptations of prey.
Humanity also departs fundamentally from predation in nature by targeting adult quarry.Co-author Tom Reimchen is a biology professor at University of Victoria. He said:
Whereas predators primarily target the juveniles or ‘reproductive interest’ of populations, humans draw down the ‘reproductive capital’ by exploiting adult prey.
During four decades of fieldwork on Haida Gwaii, an archipelago on the northern coast of British Columbia, Reimchen looked at how human predators differ from other predators in nature. Reimchen’s predator-prey research revealed that predatory fish and diving birds overwhelmingly killed juvenile forms of freshwater fish. Collectively, 22 predator species took no more than five per cent of the adult fish each year. Nearby, Reimchen observed a stark contrast: fisheries exclusively targeted adult salmon, taking 50 per cent or more of the runs.
The authors conclude with an urgent call to reconsider the concept of “sustainable exploitation” in wildlife and fisheries management. A truly sustainable model, they argue, would mean cultivating cultural, economic and institutional change that places limits on human activities to more closely follow the behavior of natural predators. Darimont said:
We should be protecting our wildlife and marine assets as an investor would in a stock portfolio.
Bottom line: According to research published in the August 21, 2015 edition of Science, extreme human predatory behavior is responsible for widespread wildlife extinctions, shrinking fish sizes and disruptions to global food chains.
Chris Darimont really put his finger on the spot in my opinion when he was quoted,”We should be protecting our wildlife and marine assets as an investor would in a stock portfolio.”
Going to close today’s post by repeating what is presented on the Welcome page of Learning from Dogs, namely:
As man’s companion, protector and helper, history suggests that dogs were critically important in man achieving success as a hunter-gatherer. Dogs ‘teaching’ man to be so successful a hunter enabled evolution, some 20,000 years later, to farming, thence the long journey to modern man. But in the last, say 100 years, that farming spirit has become corrupted to the point where we see the planet’s plant and mineral resources as infinite. Mankind is close to the edge of extinction, literally and spiritually.
Dogs know better, much better! Time again for man to learn from dogs!
Last Thursday, I published a post under the title of Oil, money, banks, guns and blood.It was such a departure from my normal style of blog post that I anticipated that it would slide by without any comment. Wrong! It had the highest readership of the week and attracted some powerful and insightful replies. So much so that I expressed the desire to reflect on those replies before responding. Thus, today’s post is my response to your comments and feelings.
First, Hariod Brawn of the blogsite Contentedness responded, in part:
Now, where are we? Val’s words are a good place to begin: “Nothing is what is seems, or will ever be the same again.” Nobody knows for sure, but piecing together fragments of world events, my instinct (fwiw) tells me that we are in the incipient stages of the collapse of the 20th.c. paradigm. Neoliberalism has failed; further than that, Capitalism has failed – we have no free markets where it counts; they’re all rigged. Politics has failed too, having been bought out by the corporates. [There are over 30,000 lobbyists in Washington alone] All that Western Governments have to offer is a doomed re-run of failed practices (same with Japan actually). Worse still, they have gone down on their knees and begged the financial sector to create a fix. The private banks have been given access to vast sums of QE cash at virtually zero interest in order to continue rigging markets (via their agents) all to their benefit whilst also creating huge market distortions in asset bubbles. Has the wealth they created trickled down? Has it hell. Whilst all this is going on, and as the film so clearly demonstrates, the Middle East looks like fulfilling its promise of the last century as being the flashpoint for warfare on a vast scale. And of course, if by some miracle we escape financial collapse, and world peace is not threatened by warfare, then the environment is going down the pan because – guess what? – our politicians have failed us once again. I have said enough on this.
Hariod then went on to recommend the films of Chris Hedges that will be featured on Learning from Dogs at a future date.
Without being informed yet … my thinking is that the world we live in is so complex, stressful and fast that we can’t absorb everything that happens. We simplify and label, in order to make sense. We chop and segment in order to understand, but we miss the full story and many have lost the ability to grasp the bigger picture…. or are too fearful of going against the expectations of others and becoming one of “them” instead of one of “us”.
Then reinforced by her comment after watching the film:
I just watched the movie Paul. It is powerful and very disturbing. As you say, it undermines what we believe is real. It also reveals the complexity – misunderstanding – manipulation – corruption – opium, oil and the struggle for power – naivety – chaos.
In the dualistic fairy tale world of good vs evil it has created a nightmare of errors.
Nothing is what is seems.
Or will ever be the same again.
Giant American global corporations, the 200 largest ones, do 100 billion dollars of tax evasion through Luxembourg alone. Each year. Many are media companies. Wonder why stories make no sense?
Juncker directed that. Now he is head of the European Commission, and insist Greece shall pay every single penny.
As it happened, my dad was among a European group of geologists working for the Afghan government, who discovered Afghanistan’s riches… In the 1970s. All hell broke loose shortly thereafter.
I write about these sorts of things, day in, day out. But most people prefer the opium of feel-good…
Patrice then went further in offering a post over on his own blog that carried the specific title of Great Bitter Lake. Let me quote a little from that:
“Bitter Lake” is about the conspiracy between American plutocracy and Saudi plutocracy. Plutocrat Roosevelt was freshly flown from Yalta, to the Great Bitter Lake, on the Suez Canal. The idea was to steal the Maghreb, and the Middle East from the French and the British, by making a theocratic alliance.
At Yalta, Roosevelt had given half of Europe to his Comrade Stalin. (Plutocrats of the world naturally unite!)
Never mind that Poland had fought the Nazis courageously the Nazis, at a time when the USA was militarily and diplomatically collaborating… with the Nazis (or maybe, precisely, the Poles had to be punished!) Roosevelt had to be strict: the French had successfully escaped from the military occupation (AMGOT) he had set-up for them.
The movie “Bitter Lake” exposes (some) of the American plutocracy led conspiracies which led to the devastation, among other things, of Afghanistan, and other constituencies, thanks to the Wahhabist Islam it unleashed on the world.
Readers of this site will be familiar with the general ambiance.
One caveat: all what is in the documentary and makes American plutocrats (Roosevelt) and their servants (Reagan) look bad, is correct. However the real situation, the real badness is way worse. (For example the secret, official USA intervention in Afghanistan was under Carter, on July 3, 1979. However the real even more secret intervention, through the Pakistani ISI was even earlier and even more vicious.
So what is my response?
It is this:
In 1887, Oscar Wilde said, referring to the differences between the British and the Americans: “We have really everything in common with America nowadays, except, of course, language.”
By way of example there is a saying back in my old country that when something is “… going to the dogs”, it means an irreversible decline in standards; the phrase usually aimed at an organisation or even a country.
Many, especially those of my age, might nod sagely and reflect that something ‘is going to the dogs‘ in terms of the wider Western world.
Let me be specific. There are destructive and dysfunctional issues in modern societies that I would list as: Selfishness; Power & Corruption; Short-termism; Materialism; Population growth; Greed, inequality and poverty. It’s not an exhaustive list!
Now many would argue the ‘whys’ and ‘wherefores’ about what precisely is wrong with Western societies in this 21st century but far fewer would argue with the underlying premise; that something is fundamentally wrong with today’s world.
Indeed, one of the things that is impossible to miss is the body language, the look on a face, the shrug of a shoulder, when one casually remarks that these are interesting times! From strangers and friends alike.
There is no question that what mankind has ‘enjoyed’ these last fifty years or so cannot be continued for very much longer. That the era since the 1960s of growth, materialism and consumption is running one very basic and fundamental resource dry. You know the one I am referring to: Planet Earth.
My hope is that the widely-felt feelings that something is fundamentally wrong with today, are the feelings man has always experienced, since time immemorial, when mankind has passed through the threshold between two eras.
My hope is that the new era, one that we quite possibly may now just be entering, a new era of sustainable living on this planet, of social and political changes to replace extreme levels of inequality, of stronger communities of like-minded persons, will be obvious to all, but especially obvious to our next generation, within the next ten years; possibly fewer than ten years.
One thing is for sure. The sharing of ideas and feelings as is the style of modern blogging is critical to the forming of the opinions that precede the changes that so many now see as unstoppable.