Being Strangeled by the Invisible Hand

File:Industriehalle 1950er P4400145-HDR.jpg

In my previous posts I have explained the reasons why I think our civilization is going to collapse. In this post, I want to present a few considerations about how this is likely going to happen.

I think the collapse will not happen suddenly. The reason for the collapse is that the resources of our planet are finite. The economic system that has developed leads to an uneven distribution of assets and power.

For some time, the growth of the world economy has created a situation in which, in many parts of the world, the economy seemed to create a win-win situation. The rich where getting richer, but the not so rich where also getting richer. At the same time, civil liberties expanded in many countries, leading to the emergence of liberal democratic states. The “invisible hand” postulated by Adam Smith seemed indeed to increase the wellbeing of many people. This age of win-win societies, however, depended on the abundance of the resources.

Since the resources are limited, however, the world economy is ultimately a zero sum game. The gains of sum are the losses of others. The bulk of the losers had been, for a long time, the people of the future, so they were invisible for a long time and it was possible to pretend (or actually believe) that the development could go on like that forever and that everything was going to be better and better. The invisible had seemed to provide enough for everybody (except some poor people in some remote countries, that is…).

But every future turns into the present at some time. When resources become scarce, the time of the win-win economy are over. The invisible hand is beginning to strangle us.

The development towards a win-lose-economy, where the rich become richer and the poor become poorer, has already started in many parts of the world. Some of the signs of this development are:

  • Actual power is being concentrated in the hands of smaller groups, as democratic institutions are hollowed out. Democracies are bit by bit turning into oligarchies, sometimes with a democratic facade, while states that entered the phase of strong economic growth late, like China, skip the democratic stage altogether. This development is backed up by corresponding developments in political and economic philosophy.
  • Social redistribution systems are being cut back or destroyed in many places.
  • Public property is being privatized.
  • Societies are dissociating from their governments and are fragmenting into different groups. The older, larger consensus-based political parties are disintegrating into smaller and often more extremist ones.
  • Middle classes are disappearing in many countries, the rich grow richer, the poor poorer and the gap between the richest and the poorest widens.
  • Small businesses are swallowed up by larger ones or driven into bankruptcy.
  • Countries, businesses and private households have increasing debts.
  • Poorer countries are getting poorer. Some countries that where relatively prosperous before are becoming poor and plummet to a lower level.
  • The poorest countries are disintegrating into war and chaos, in many cases giving rise to different kinds of extremism.
  • Larger and larger numbers of people are trying to leave the worst-affected areas and try to enter the richer areas.
  • Environmental resources (land, water, ecosystems) are increasingly being destroyed.
  • Meanwhile, some richer countries are still getting richer (but within these, as noted above, the distribution of wealth is increasingly uneven).

As a result, the collapse of civilization is not happening everywhere at the same time. It has already happened in some places. Some areas and some groups and people have started to slip or will find themselves on a way down sooner or later. The collapse is probably still several decades away in some other places. Riches and power are being concentrated into smaller and smaller areas and into fewer and fewer hands. As economies crash and people become poor, however, there will no longer be markets for many mass consumer products. As a result, businesses are going to crash and the production of many products we are taking for granted today, like cars, mobile phones, computers, household equipment etc. etc. will become uneconomical, as will the production of components (like electronic parts) contained in those products.

At the moment, there might still be some potentials of “economic growth”, e.g. streets and dams that can be built, forests that can be cut down etc., with other words: things that can be destroyed to make profit, but this is going to come to an end. As a result, industries will become bankrupt in more and more places. More and more places that where prosperous before will start looking like the abandoned parts of cities like Detroit. The industrial civilization will shrink, leading to a feedback loop of less employment, more poor people, more companies falling out of business, and more states and societies becoming unstable, eventually plunging into upheavals, revolutions (without any positive outcome, since there are no more resources), and wars. Infrastructures like electricity production – and all the systems depending on it, like food and water distribution, the internet etc. – will collapse and fail in more and more places. Finally, the few rich people will lose their riches and their power.

There is going to be a world after the collapse, but thinking about what is going to happen then will be a topic for later articles.

Civilization as we know it will be gone. And we will not have a second chance to build one, because the resources required to do so will largely be destroyed.

(The picture, showing an abandoned factory building, is from https://commons.wikimedia.org/wiki/File:Industriehalle_1950er_P4400145-HDR.jpg.)

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5 comments

  1. WrenchMonkey47 · · Reply

    There is nothing here with which I can find any significant reason to disagree.

    Since the exact conditions of the future can’t be known too much in advance and since there is always the possibility of unforeseen, unexpected events, any precise prediction is basically impossible.

    That being said, I think your forecast has a high degree of accuracy and I certainly share your general viewpoint.

    I do think there will likely be a point where feedback loops are created that will accelerate the rate of collapse globally. As with global warming – the hotter it gets, the faster it gets hotter – there will probably be a similar progression – the more things fall apart, the faster the collapse of global civilisation.

    It’s not unlike the ripple effect of environmental state shifts. Every local sate shift affects nearby environments ultimately producing an expanding wave of local state shifts, which become a regional state shift and, eventually, a global state shift. And since I’ve mentioned the climate change factor, that’s something else that will exacerbate the situation and hasten the collapse on a global scale.

    Personally, I doubt that human “civilisation” will last into the next century.

    Just my opinion

    “It’s easy to imagine a future in which growing numbers of cities have their frail and long-neglected infrastructures knocked out by disasters and then are left to rot, their core services never repaired or rehabilitated. The well-off, meanwhile, will withdraw into gated communities, their needs met by privatized providers.”
    Naomi Klein, The Shock Doctrine

    Just change “well-off” to “ruling class” and “gated communities” to “fortress cities” and you get of good idea of what the not-too-distant-future will probably look like.

  2. […] ours. There is reason to believe that this civilization is not going to last (see Civilization and Being Strangled by the Invisible Hand). When it disappears, both the storage capacity and the bandwidth of the culture-reality interface […]

  3. I wonder if you think there is a meaningful distinction between power and wealth? If so, I might suggest that the former is always zero sum and the later is not.

    As for the future, what resources do you see failing?

    1. To your first question: I think wealth and power is not the same but they are strongly correlated. Wealth can be used and often is used to gain and increase power. Power can be used to increase wealth. As a result, both tend to be concentrated in the hands of the same groups and people.
      I don’t have the time at the moment to address the other question in the detail it deserves. Just a few points at this moment: I see biological resources failing, things like fish stocks, forests etc. There is a lot of evidence that a mass extinction triggered by us is on its way. Ecosystems and biodiversity are dwindling. Secondly, the ability of the environment to take up our wastes is diminishing, especially the capacity of the atmosphere to take CO2, but there is also two much nitrogen and phosphorus being released into water bodies. These are just examples. Several metals and mineral raw materials will only last for a few years or decades, and even if the real amount available should be ten times as much as we think now, that does not change much. There is only a limited amount of the stuff available (see for example https://www.newscientist.com/article/mg19426051-200-earths-natural-wealth-an-audit/). And as long as no recycling is done, a lot of this ends up as pollution.
      I don’t think we can afford any longer to treat these resources as external to the system and to pretend that there is an infinite amount of them available. This has been the standard approach of economic theory for more than 200 years, but it is no longer working once we approach the limits. Economists could pretend for a long time that growth is good and that the economy is not a zero sum game, that everybody can become richer. However, in the long term, economy is more like a zero sum game than not. The gains of today are the losses of tomorrow.
      I am quite pessimistic. I see possibilities of how to solve the problems, but those in power are probably not going to do it. My suggestion would be to create organizations that would buy up resources like ecosystems and even raw materials, in order to remove them from the economy. New money should be created to finance them (i.e. the laws about central banks would have to be changed). This would simulate the demand of future generations who do not appear in todays’ markets. Non-sustainable activities would become uneconomical as a result. You can think of this as simulating a time machine by which future generations send money to buy up resources. The market forces would then turn the economy into a sustainable, non-growing steady-state economy.
      That growth is reducing can be seen already, but the illusion of the possibility of growth is driving a lot of capital into speculative schemes. When there are no real opportunities for growth again, markets should enter a volatile state where one speculation bubble is following the other, and that is what is happening. The low interest rates are also a symptom of growth coming to an end. But this is not a “crisis”, it is the beginning of the end of the growth we had for the last 200 years. We are reaching the end of what is possible. It is an illusion to think that we could continue by going into space. Doing that would be more expensive and technically challenging than turning our economy into something sustainable. Terraforming earth would be easier than terraforming mars, but what is happening is the other way around: we are on our way of “martiforming” earth instead. Anyway, the end of growth makes a redesign of economy necessary, but most economists and politicians do not understand that yet, and I think ideological thinking will prevent them to do the necessary things early enough. With a very high probability, as a civilization we are doomed.

  4. […] result, nature has come up with mechanisms of adaption: evolution and creativity. We should look at the real dangers of our world instead of fearing – or hoping for – some […]

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