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.

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6 Responses to Delaying Global Economic Collapse: Extend-and-Pretend

  1. Joe Clarkson says:

    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.

    Indeed. But the extreme, even horrific, stresses that will result from this “adjustment” (such a euphemistic understatement) make any discussion of the psychological reaction of the people affected highly speculative.

    Because what you don’t make explicit is the reduction in human population this adjustment implies. Relocalised economic systems can only exist when a population is within a non-industrial transportation distance (walking, horse and wagon, etc) of the resources that population needs to support their lives. This does not include anyone in a city, so the four billion people who now live in cities die.

    Two billion people do not live in cities, but are not farmers. Whether these people can find someplace to scratch out a living is doubtful because much of the farmland that still exists is occupied by the two billion people, mostly in the Global South, who make their living from small family farms. In the Global North, most farmland is a sterile wasteland that can produce nothing without industrial inputs.

    Of those two billion people who now live on small farms, the vast majority are now dependent on non-local inputs for production. Of the 4.6 billion acres of farmland in the world only 250 million, or about 5%, are farmed organically, and many of those acres are on the few large industrialized organic farms in the Global North.

    This means that only about 100 million people, at most, are now truly prepared to live in a relocalized economy. Coincidentally, this number may also be the realistic carrying capacity, or sustainable human population level, for a non-industrialized planet. It was last seen at the end of the Bronze Age.

    Making room for more small farmers who can live off their own labor is the only thing that could raise the number of humans that will survive the adjustment. This is the project that everyone should be working on. It’s the only thing that will mitigate the dieoff.

    But this requires creating a lot more fertile soil that doesn’t need synthetic inputs and also creating all the infrastructure needed for people to live on a small farm. This infrastructure could be either single family farm dwellings or small village dwellings within walking distance of farmed land.

    The most efficient process would be to facilitate the conversion of existing small farms from commercial farms to subsistence farms, since the farm infrastructure already exists and the only thing missing is fertile soil and the on-farm nutrient cycle required to keep the soil fertile. Projects doing this are happening all over the world, again mostly in the Global South, but at a tiny scale. I suspect that the scale will remain tiny until the adjustment is well underway, but by then there will few resources available for investment in small farms.

    The impact of the adjustment will fall hardest on those in the Global North where almost everyone is totally dependent on high-energy industrialism for their lives. Since there is no effort being made, or even suggested, to change this dependency, almost everyone in the Global North will die prematurely from starvation or violence. The adjustment will be very ugly.

  2. Paul Heft says:

    I’m concerned that we are not looking forward to an “economic adjustment to a much simpler, more egalitarian, and more collaborative set of relocalized economic systems”, but rather something more akin to feudalism or slavery. Desperate masses may give up their freedom to corporations or warlords who can grab resources, organize production, and protect their minions from the less fortunate, starving millions. This seems much more likely to me than egalitarian collaboration, perhaps in most regions of the world. When resources are scarce, there’s no rule that power will spread out evenly.

  3. Dave Pollard says:

    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.

    This is my description of the end state, not the transition process. This is the only end state that will enable there to be any humans left at all, and extinction of our species is certainly very possible. My recent study of civilizational collapses suggests that this end state will only be reached in centuries, perhaps even millennia.

    I have long ago given up trying to guess what the long transition to that end-state (or to our extinction) might look like. It quite well might include starvation, horrific conflicts and suffering, feudalism and slavery. It certainly won’t be quick, uniform, manageable, coordinated, or smooth. I’m leaving that guessing-game up to the many dystopian cli-fi writers to speculate about. I don’t particularly want to try to imagine it, because most of the transitions I can imagine are pretty grim. But I don’t find imagining them, or any decline from complexity to chaos and possible extinction to be particularly useful. It’s not as if we can do anything about it.

  4. Paul Heft says:

    Dave, thanks for making the distinction regarding timelines.
    “It’s not as if we can do anything about it.” Right!

  5. Joe Clarkson says:

    It’s not as if we can do anything about it.

    We can’t prevent the collapse of industial civilization, but perhaps people could prepare to live like everyone will live after the collapse. It’s not guaranteed to work, but it would be better than doing nothing, wouldn’t it?

    My recent study of civilizational collapses suggests that this end state will only be reached in centuries, perhaps even millennia.

    Aside from the fact that your study of civilizational collapses cannot have included any civilization remotely like the one that now supports eight billion people around the globe, the classic correction for populations in extreme overshoot is a decline that is much more rapid than the increase.

    Since about 85% of human population overshoot has occurred since in the 224 years since 1800, it’s perfectly plausible that the collapse of that population could happen much more rapidly. Take a look at the resolution of the St Matthew’s Island reindeer overshoot. The exponential boom in population took 19 years, the dieoff took less than two years. Human exposure to the bounty of fossil fuels is very similar to the bounty of lichen the reindeer found when they were first introduced to the island.

    I think it is perfectly plausible that the bulk of the collapse of civilization and dieoff could happen in 10 or 20 years, even without a nuclear or biological war. Modern industrial civilization is likely much more fragile than people think.

    David Korowicz did a wonderful job of summarizing global collapse risk in his 2011 paper “Fleeing Vesuvius: Overcoming the Risks of Economic and Environmental Collapse”. From the conclusion of his paper: “The integration and speed of processes (financial information, capital movement, supply-chains, component lifetimes, etc.) within the globalised economy suggest that a collapse will be much faster than those that have gone before.”

    The “end state”, way out on the asymptote of simplification, may take centuries, but the bulk of simplification will probably happen extremely quickly. I suspect that even those of us who are in our 70’s have a fifty-fifty chance of seeing it happen. I certainly hope so.

  6. Dave Pollard says:

    I think your timeline is reasonable, Joe. It’s longer than the Great Depression or either WW, and twenty years is enough time for several roller coaster dives with brief respites in between. Enough that the drastic and permanent nature of this collapse will finally sink in. My sense is that humans are capable of making a lot of dramatic adjustments in less than 20 years, but that it’s next to impossible to convince them to make any such adjustments in preparation for the likelihood of collapse. Preparing for disaster does not seem to be in our nature. As for whether we 70-somethings will ‘see it’, I guess that depends on what you call ‘it’. A Great Depression-level crash in our lifetimes is probably a good bet, along with the kind of huge and desperate migrations that come with such events. How and how quickly human population will nose-dive is harder to project, and my guess is it will take longer than we might expect. We could actually get human population down a long way towards the 1B level that some collapse watchers are predicting by 2100, simply through drastic reductions in birth rates, and I’d guess that most of the starvation will take place in countries that are already experiencing collapse — mostly in the Global South. Of course, wars and diseases will likely play a part, but the death toll from them is anyone’s guess.

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