Delaying Global Economic Collapse: Extend-and-Pretend

When I’ve written about the accelerating collapse of the systems (economic, political, ecological etc) underlying our global civilization, I usually stress the particular vulnerability of our economic systems, and why I believe they will be (and are already starting to be) the first dominos to fall.

Tim Morgan has been writing about the precarious state of our economic systems since before the 2008 crash and bailout of the banking system, and his most recent article tells us where we stand now. In a nutshell:

• The economic growth of the past two centuries has occurred entirely as a result of the discovery and exploitation of cheap energy resources. These are quickly running out, and alternative energy sources and resources are much more expensive to bring on line. So-called “renewables” depend heavily on the use of hydrocarbon energy for their production, and even then they can replace, at much greater cost, only perhaps 1/5 of current total energy use.
• Governments have tried to disguise the unsustainability of our economic systems, which depend on the perpetual availability of more and more cheap energy, and our financial systems, which depend on the capacity to achieve and perpetually sustain large (double-digit) profit growth forever to stay ahead of accelerating costs for a still-growing population. They have done this disguising by the use of staggering increases in available credit, the costs of which have been artificially suppressed by keeping interest rates far below actual inflation rates, which are much higher than government published rates.
• In fact, for 90% of the population, a permanent decline in real wealth and net income is already a reality. Published “averages” that include the obscene and ever-growing wealth and income of the top 1%, are a deliberate obfuscation of the declining standard of living, and dangerous levels of indebtedness, of most citizens.
• This process of obfuscation and denial of accelerating economic decline is what Tim calls “Extend-and-Pretend”. The goal of the politicians is to prevent you from realizing your growing economic precarity, and the slow collapse of the whole economic system, until their term of office has ended, so you’ll blame it on the next administration. Since 2003, Tim says, most of the claimed economic “growth” is just “the cosmetic effect of spending borrowed money”.

He continues, describing the British situation first:

The immediate need is to walk a tight-rope between interest rates that are high enough to prop up the currency, but low enough not to burst the real estate bubble. Assurances of ‘growth’ are pure PR-exercises in an economy that can’t, nowadays, house its population, bring down colossal health-care waiting lists, or stop polluting its rivers and seas with untreated sewage. In short, the British authorities are playing extend-and-pretend. But they shouldn’t be taken too hardly to task for that, for two main reasons. First, many other countries, arguably most of them, are doing exactly the same thing. Second, there are no good alternatives to ‘extend-and-pretend’.

Likewise, the United States reported real-terms growth of $675bn last year, but the government had to run a $2.4tn fiscal deficit to enable this to happen, and is now adding public debt at the rate of $1tn every hundred days. Nobody in his or her right mind could contend that this is sustainable.

Over the past 20 years, much of the real productive capacity in most western countries has been offshored to countries with cheap labour, so this pretend-growth consists almost entirely of zero-value-added “services”, administrative charges, consulting fees, management fees, legal fees, accounting fees, user and other junk fees.

Real estate speculators, both of the extremely rich and constantly bankrupted varieties, artificially depressed interest rates, and recklessly dangerous real estate lending practices buried (wd?) in packaged derivatives (yes, we’ve learned nothing since the 2008 banking collapse), ensure, for now, the continuation of the absurd real estate bubble. In fact, Canadian PM Trudeau the Lesser even recently admitted that his administration is deliberately propping up Canadian real estate prices because older Canadians need to have access to the equity in their retirement years. I’m sure renters, young people, the homeless and the majority of Canadians who can no longer afford to buy a home (or even rent an apartment) will be pleased to hear of his largesse to older property-owners.

So most of us are facing a situation where many of our major expenses are increasing at more than 7% a year — doubling every ten years. That includes rent, property taxes, health care costs, education costs, and the cost of nutritious food. Those on a fixed income will hence face a four-fold increase in most of their living costs over a 20-year “retirement”, with no offsetting increase in their pension income. So what we are inevitably going to see is hordes of older “middle-class” citizens rejoining the labour force out of necessity, fighting for jobs with the younger generations who have no hope of ever retiring, and the still younger generations who are being crushed by the collective weight of unaffordable housing, education debts, and low-quality, dead-end, mind-numbing bullshit “gig economy” jobs. And we’re surprised that there’s a growing animosity towards refugees and immigrants, even among those for whom it isn’t stoked by racism, as their increasing numbers exacerbate the costs and shortages of housing and the competitiveness for the few decent jobs that arise.

Governments have the data and the projections, and they’re not (entirely) stupid. Extend-and-Pretend is the only game in town. Distract the citizens by setting them at each other over social issues, play with the “official” numbers until they don’t look so bad, hand-wring about issues like climate collapse and women’s bodily autonomy, but don’t actually do anything substantive about them, and foment and support endless wars to keep people’s minds off the economy. Each party is totally focused on making the other Tweedle party look even worse than they are, and preventing any third party alternatives from emerging. The theory seems to be that in four years the citizens will forget, and the revolving door back into power will be open to them again. They’re like the guys fleeing a charging grizzly bear — their only concern is to stay just a bit ahead of the other guy.

Eventually Extend-and-Pretend will no longer work. Even with the endless blame-the-victim propaganda aimed at the rapidly-growing precariat, it is already, as Lyz Lenz has described so articulately, just too obvious that the economy is falling apart, and that, for most of us, the consequences will be disastrous.

Lyz describes the victim-blaming process:

A recent Wall Street Journal article blames not only our fickle human emotions, but also social media, and just “the media” as driving our misguided sense of economic “badness.” In sum, the prevailing message is that if things feel bad it’s all your fault. Have you thought about creating a little gratitude journal for your budget? Have you thought about manifesting a more affordable home?…

But it’s more than just the price of groceries and the financial hole we are all crawling out of. It’s that everything is so precarious. We are like spiders floating over the edge of a cliff. One small gust of wind and we are gone. One medical tragedy, one unexpected pregnancy or hospitalization, one bad diagnosis, one car accident, and the detente between us and our finances goes out the window…

The economy is doing well for people who can afford to put money in the stock market, who can buy homes, who don’t have to check over their receipts at the grocery store or the gas station, who are lucky enough to hold the kinds of jobs that help pay for health care (and allow time off to access it). For everyone else, “Actually, the key economic indicators show you are wrong” is not a convincing argument, or a helpful one.

Eventually we will wake up to this reality. I suspect it will take at least the collapse of the housing bubble before that happens (which is why politicians are so desperate to keep it going). Once the disappearing middle class are joined in precarity by home-owners who find that they now have mortgages greater than the value of their homes, and home-owners whose entire net worth has vanished with the plunging value of those homes, the tactics of Extend-and-Pretend will no longer work. Then the blame game will start. It’s likely to be nasty, but fruitless. It’s not as if governments are going to be able to bail out the citizenry. They’ve blown their budgets on wars of distraction and tax cuts for wealthy political donors, and the cupboard is bare.

Based on my grandparents’ descriptions of how, across the political divides and across economic classes, people came together to deal with the grim realities of the Great Depression a century ago, I have always believed that we will actually behave a lot more positively and effectively than we might think, when economic collapse deepens to the point we have no alternative but to radically change our behaviours.

But of late, I am not so sure of that. I remember them telling me that, as the Great Depression wore on, and before WW2 again transformed the economies of the world, there was a loss of faith in the recent, essential government interventions, many of which were radical and socialist in nature. It seemed as if this willingness for collaboration and radical wealth redistribution to prevent large-scale starvation and homelessness, could only go on for so long before people would give up on it. The idea was always that this was a short-term sacrifice, a set of radical but temporary measures to get the world back on its feet. Before a return to “normal”.

What we’re talking about this time around is a global, permanent, radical economic adjustment to a much simpler, more egalitarian, and more collaborative set of relocalized economic systems. An economics of sufficiency, as Thomas Princen calls it. And probably an economics, to the dismay and possibly shame of most of us, of scavenging rather than creating everything shiny and new. Whether we’re willing to let go of our current unsustainable ways of living and accept, let alone embrace, a much more modest and more physically laborious one, with no hope that it will be better for our children and future generations, is anyone’s guess. I’m no longer as optimistic as I was.