The Disruptive Years Ahead

We stand at the brink of a great change. It is not given to every generation to face a major shift; we are facing several piled one on top of the other. The times ahead will be confusing, difficult, and more than ever each of us will be called to keep our reason intact and to act virtuously.

The End of an Economic Model

Carroll Quigley, in The Evolution of Civilizations, speaks of what allows a civilization to avoid terminal decline. In it, he points out that the West has had three different economic models, the first two of which ran their course and ossified into a degenerate form that was taking Western civilization onto the path of decline, but which were wrenched out and into a new growth path, revitalizing our culture. The third, industrial capitalism, ran its course around the same time he wrote this book, and degenerated in the 1970s — a period, as John Ralston Saul noted in Voltaire’s Bastards, and The Unconscious Civilization, is an economic disruption akin to a low-grade depression. It was replaced by its degenerate form, which has ossified and forced the West again into decline, of finance capitalism, which is now being exposed as a web of treachery, scam and deceit, such as Karl Denninger has reported in his “Market Ticker” on a near-daily basis.

Finance capitalism has (as with many things) been neither an unalloyed evil nor an unalloyed good. It has led us into massive personal debt, an expectation of ever-rising asset values in the face of all experience, an implicit Marxism of bailout expectation (21.03.2008 posting, “Bailout Nation”, subscription required)as posted by Bill Fleckenstein at his Fleckenstein Capital blog, and as in his new book, Greenspan’s Bubbles: The Age of Ignorance at the Federal Reserve, or in the works of William Bonner (Financial Reckoning Day, Empire of Debt and Mobs, Messiahs and Markets, amongst others. We, in other words, have our backs against the wall, and expect someone else to pay to “make us whole”.

Is this not what someone like Garth Turner, MP (Lib.-Halton), has been warning of? Forget, for a moment, whether this is a story being “spun” for partisan advantage or not — even as a rowboat goes over the high waterfall and is in flight down to the rocks of the whirlpool below there will be those who tell the story in one way or another for a temporary advantage. Listen to the roar: around that bend, the water falls. We are on our way over the edge.

The End of Cheap Energy

Take a look at how we build cities: endless kilometres of sprawl over the countryside. As James Howard Kunstler noted in The Geography of Nowhere, Home from Nowhere, and The Long Emergency, we have built out a continental infrastructure that is wholly and completely based upon ubiquitous, cheap energy. Some locales may well do better than others if energy is less regularly available, less affordable, etc., as Kunstler noted in The City in Mind. None, though, will be untouched.

Canadians may not think much about energy availability: “aren’t we the great petro-power of the future?” Well, yes, we have substantial stocks of expensive-to-extract energy left. We needn’t — NAFTA claims aside — be left immobile and freezing in the dark for want of energy in a world where it is in decline. But it will not continue to be cheap. From Matthew Simmons, the West’s foremost oil economist, to Kenneth Deffeyes, leading petroleum geologist and expert on the question of peak supply conditions, to Paul Roberts, observers from all sides of the political spectrum conclude the same thing: we are experiencing the oil peak now. (Similar conclusions exist for natural gas, which is post-peak in North America.) In other words, from here on in, we are at supply limits that manifest themselves in two ways: rising prices as the available supply is matched, via the price mechanism, to the demand which, in exceeding it, is brought into conformance by raising the stakes and having some bidders choose not to play, and at a now-declining output, which reinforces this mechanism without let-up: a return to the supply shocks of 1973 and 1979, but this time without a “return to normal”.

The suburbs, the mall culture, the endless driving for everything, the not-in-my-backyard-ism of modern society: all of this is unaffordable. Ultimately, this cannot be patched (for instance, by allowing basement suites, granny flats, and adding transit services). We will need to make choices about where to concentrate — recall the interurban rail lines spreading out from cities, the “heavy streetcars” of their day, and how all development was within 300-400 m of a stop, the distance a person, loaded with bags, could handle on foot. Much of suburbia and exurbia will end up being abandoned, and mined for resources: this will be the slum clearance of 2030-2050 and beyond.

The End of the Pax Americana

Although I may, with ease, recall the fear of annihilation that pervaded the early 1960s, what with the building of the Berlin Wall, the Cuban Missile Crisis and the like, we have in fact, whether in North America, in Western Europe or in the Antipodes, benefitted immensely from the long “peace” of the Cold War and the post-Soviet Union collapse period of the 1990s and early 2000s. American predominance, and its projection of power (there are nearly 800 American bases overseas, and the United States is the only world power able to project itself within days in force anywhere on the planet), has allowed the rest of the West to “coast”.

This is coming to an end as well. We in the West — Canadians, Australians, British, French, etc. — have, of course, been called upon to act on the ground in recent years in multiple theatres. That is because, as Thomas P. M. Barnett pointed out in The Pentagon’s New Map, military capabilities today fall into two classes: those that can quickly dispatch an enemy, and those that, over a long period of time, pacify the conquered, settle it, restore civil order, train their replacements, etc. (much as with Canada’s role in Kandahar). Most countries can afford only one military, and this is the one that is chosen; a very few can aspire to the one that can conquer a theatre half-way around the planet in a few days.

But a military capable of bringing relative peace to the planet depends on mass logistics, chief amongst which are cheap energy and sound government finances. The United States — as with the rest of us — is losing the first, and does not have the second. They have not gone through the wrenching adjustments needed to ground public finance into the realm of the affordable — an exercise Canadians will again have to go through as this combination of effects bears its weight upon government revenues and expenditures (at the same time that the demographic transition of the baby boomer generation hitting prime medical-care years hits) — and as Washington’s failing financial regime finally comes to grips with reality (either through the destruction of the US dollar as the world’s reserve currency, sanity reigning in Congress and the White House, or both) the US’s forward presence and massive fleet and air force capabilities that lead to effective global policing will end. As with Britain (when it went through its successive waves of retreat from the world in the face of its “imperial overstretch”, as Paul Kennedy dubbed it in The Rise and Fall of the Great Powers a decade ago, so, too, America.

Couple that with the fact that, in the twenty-first century, the advantage is to the defender, not the attacker, as outlined in the megapolitical analyses of James Dale Davidson and Sir William Rees-Mogg, Blood in the Streets and The Great Reckoning (two books whose investment advice was only spottily correct but whose historical and megapolitical analyses were prescient). This does not just mean that jihadis and terrorists can run amok, and that suicide bombers will be a fact of life. It means that there will be thrust and counter-thrust as the eternal game of great power jockeying takes place — and that continental-scale countries will ultimately fall apart.

What to Do?

In the one sense, there is little “to do”, other than at the personal level. We may yet create a fourth method of economic vitality — the West is near unique in its ability to do this, historically — but in the span of our lifetimes we must live through the unsettling of society brought about by the choices we made as a society in the twentieth century. Personally, one can choose to live more locally, and more lightly, upon the land — the only sane answer to $200 … $300 … $400 per barrel oil (and similar increases in petrol, natural gas, and electricity prices) is to equip oneself to use far less of it, both directly and indirectly in the food and product choices that one makes. If the potential for violence is increasing, one can move to areas of lower potential for it.

But the world we grew up in, and that the promise of our RRSPs, our investments, and our governments, is coming to an end. It will be a time of great turmoil and disruption, and of reinvention, simultaneously.

There is one thing you can be sure of, though: no one currently in a leading role in politics has any answers for this. The future will come from new leaders, willing to see the world as it is and not through ideologically-blinkered eyes. As, of course, will it come to those who shed these blinders personally, as well.

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