by John Michael Greer
The hard work of rebuilding a post-imperial America, as I suggested in last week’s post, is going to require the recovery or reinvention of many of the things this nation chucked into the dumpster with whoops of glee as it took off running in pursuit of its imperial ambitions. The basic skills of democratic process are among the things on that list; so, as I suggested last month, are the even more basic skills of learning and thinking that undergird the practice of democracy.
All that remains crucial. Still, it so happens that a remarkably large number of the other things that will need to be put back in place are all variations of a common theme. What’s more, it’s a straightforward theme—or, more precisely, would be straightforward if so many people these days weren’t busy trying to pretend that the concept at its center either doesn’t exist or doesn’t present the specific challenges that have made it so problematic in recent years. The concept in question? The mode of collective participation in the use of resources, extending from the most material to the most abstract, that goes most often these days by the name of “the commons.”
The redoubtable green philosopher Garrett Hardin played a central role decades ago in drawing attention to the phenomenon in question with his essay The Tragedy of the Commons. It’s a remarkable work, and it’s been rendered even more remarkable by the range of contortions engaged in by thinkers across the economic and political spectrum in their efforts to evade its conclusions. Those maneuvers have been tolerably successful; I suspect, for example, that many of my readers will recall the flurry of claims a few years back that the late Nobel Prize-winning economist Elinor Ostrom had “disproved” Hardin with her work on the sustainable management of resources.
In point of fact, she did no such thing. Hardin demonstrated in his essay that an unmanaged commons faces the risk of a vicious spiral of mismanagement that ends in the common’s destruction; Ostrom got her Nobel, and deservedly so, by detailed and incisive analysis of the kinds of management that prevent Hardin’s tragedy of the commons from taking place. A little later in this essay, we’ll get to why those kinds of management are exactly what nobody in the mainstream of American public life wants to talk about just now; the first task at hand is to walk through the logic of Hardin’s essay and understand exactly what he was saying and why it matters.
Hardin asks us to imagine a common pasture, of the sort that was common in medieval villages across Europe. The pasture is owned by the village as a whole; each of the villagers has the right to put his cattle out to graze on the pasture. The village as a whole, however, has no claim on the milk the cows produce; that belongs to the villager who owns any given cow. The pasture is a collective resource, from which individuals are allowed to extract private profit; that’s the basic definition of a commons.
In the Middle Ages, such arrangements were common across Europe, and they worked well because they were managed by tradition, custom, and the immense pressure wielded by informal consensus in small and tightly knit communities, backed up where necessary by local manorial courts and a body of customary law that gave short shrift to the pursuit of personal advantage at the expense of others. The commons that Hardin asks us to envision, though, has no such protections in place. Imagine, he says, that one villager buys additional cows and puts them out to graze on the common pasture. Any given pasture can only support so many cows before it suffers damage; to use the jargon of the ecologist, it has a fixed carrying capacity for milk cows, and exceeding the carrying capacity will degrade the resource and lower its future carrying capacity. Assume that the new cows raise the total number of cows past what the pasture can support indefinitely, so once the new cows go onto the pasture, the pasture starts to degrade.
Notice how the benefits and costs sort themselves out. The villager with the additional cows receives all the benefit of the additional milk his new cows provide, and he receives it right away. The costs of his action, by contrast, are shared with everyone else in the village, and their impact is delayed, since it takes time for pasture to degrade. Thus, according to today’s conventional economic theories, the villager is doing the right thing. Since the milk he gets is worth more right now than the fraction of the discounted future cost of the degradation of the pasture he will eventually have to carry, he is pursuing his own economic interest in a rational manner.
The other villagers, faced with this situation, have a choice of their own to make. (We’ll assume, again, that they don’t have the option of forcing the villager with the new cows to get rid of them and return the total herd on the pasture to a level it can support indefinitely.) They can do nothing, in which case they bear the costs of the degradation of the pasture but gain nothing in return, or they can buy more cows of their own, in which case they also get more milk, but the pasture degrades even faster. According to most of today’s economic theories, the latter choice is the right one, since it allows them to maximize their own economic interest in exactly the same way as the first villager. The result of the process, though, is that a pasture that would have kept a certain number of cattle fed indefinitely is turned into a barren area of compacted subsoil that won’t support any cattle at all. The rational pursuit of individual advantage thus results in permanent impoverishment for everybody.
This may seem like common sense. It is common sense, but when Hardin first published “The Tragedy of the Commons” in 1968, it went off like a bomb in the halls of academic economics. Since Adam Smith’s time, one of the most passionately held beliefs of capitalist economics has been the insistence that individuals pursuing their own economic interest without interference from government or anyone else will reliably produce the best outcome for everybody. You’ll still hear defenders of free market economics making that claim, as if nobody but the Communists ever brought it into question. That’s why very few people like to talk about Hardin’s tragedy of the commons these days; it makes it all but impossible to uphold a certain bit of popular, appealing, but dangerous nonsense.
Does this mean that the rational pursuit of individual advantage always produces negative results for everyone? Not at all. The theorists of capitalism can point to equally cogent examples in which Adam Smith’s invisible hand passes out benefits to everyone, and a case could probably be made that this happens more often than the opposite. The fact remains that the opposite does happen, not merely in theory but also in the real world, and that the consequences of the tragedy of the commons can reach far beyond the limits of a single village.
Hardin himself pointed to the destruction of the world’s oceanic fisheries by overharvesting as an example, and it’s a good one. If current trends continue, many of my readers can look forward, over the next couple of decades, to tasting the last seafood they will ever eat. A food resource that could have been managed sustainably for millennia to come is being annihilated in our lifetimes, and the logic behind it is that of the tragedy of the commons: participants in the world’s fishing industries, from giant corporations to individual boat owners and their crews, are pursuing their own economic interests, and exterminating one fishery after another in the process.
Another example? The worldwide habit of treating the atmosphere as an aerial sewer into which wastes can be dumped with impunity. Every one of my readers who burns any fossil fuel, for any purpose, benefits directly from being able to vent the waste CO2 directly into the atmosphere, rather than having to cover the costs of disposing of it in some other way. As a result of this rational pursuit of personal economic interest, there’s a very real chance that most of the world’s coastal cities will have to be abandoned to the rising oceans over the next century or so, imposing trillions of dollars of costs on the global economy.
Plenty of other examples of the same kind could be cited. At this point, though, I’d like to shift focus a bit to a different class of phenomena, and point to the Glass-Steagall Act, a piece of federal legislation that was passed by the US Congress in 1933 and repealed in 1999. The Glass-Steagall Act made it illegal for banks to engage in both consumer banking activities such as taking deposits and making loans, and investment banking activities such as issuing securities; banks had to choose one or the other. The firewall between consumer banking and investment banking was put in place because in its absence, in the years leading up to the 1929 crash, most of the banks in the country had gotten over their heads in dubious financial deals linked to stocks and securities, and the collapse of those schemes played a massive role in bringing the national economy to the brink of total collapse.
By the 1990s, such safeguards seemed unbearably dowdy to a new generation of bankers, and after a great deal of lobbying the provisions of the Glass-Steagall Act were eliminated. Those of my readers who didn’t spend the last decade hiding under a rock know exactly what happened thereafter: banks went right back to the bad habits that got their predecessors into trouble in 1929, profited mightily in the short term, and proceeded to inflict major damage on the global economy when the inevitable crash came in 2008.
That is to say, actions performed by individuals (and those dubious “legal persons” called corporations) in the pursuit of their own private economic advantage garnered profits over the short term for those who engaged in them, but imposed long-term costs on everybody. If this sounds familiar, dear reader, it should. When individuals or corporations profit from their involvement in an activity that imposes costs on society as a whole, that activity functions as a commons, and if that commons is unmanaged the tragedy of the commons is a likely result. The American banking industry before 1933 and after 1999 functioned, and currently functions, as an unmanaged commons; between those years, it was a managed commons. While it was an unmanaged commons, it suffered from exactly the outcome Hardin’s theory predicts; when it was a managed commons, by contrast, a major cause of banking failure was kept at bay, and the banking sector was more often a source of strength than a source of weakness to the national economy.
It’s not hard to name other examples of what I suppose we could call “commons-like phenomena”—that is, activities in which the pursuit of private profit can impose serious costs on society as a whole—in contemporary America. One that bears watching these days is food safety. It is to the immediate financial advantage of businesses in the various industries that produce food for human consumption to cut costs as far as possible, even if this occasionally results in unsafe products that cause sickness and death to people who consume them; the benefits in increased profits are immediate and belong entirely to the business, while the costs of increased morbidity and mortality are borne by society as a whole, provided that your legal team is good enough to keep the inevitable lawsuits at bay. Once again, the asymmetry between benefits and costs produces a calculus that brings unwelcome outcomes.
The American political system, in its pre-imperial and early imperial stages, evolved a distinctive response to these challenges. The Declaration of Independence, the wellspring of American political thought, defines the purpose of government as securing the rights to life, liberty, and the pursuit of happiness. There’s more to that often-quoted phrase than meets the eye. In particular, it doesn’t mean that governments are supposed to provide anybody with life, liberty, or happiness; their job is simply to secure for their citizens certain basic rights, which may be inalienable—that is, they can’t be legally transferred to somebody else, as they could under feudal law—but are far from absolute. What citizens do with those rights is their own business, at least in theory, so long as their exercise of their rights does not interfere too drastically with the ability of others to do the same thing. The assumption, then and later, was that citizens would use their rights to seek their own advantage, by means as rational or irrational as they chose, while the national community as a whole would cover the costs of securing those rights against anyone and anything that attempted to erase them.
That is to say, the core purpose of government in the American tradition is the maintenance of the national commons. It exists to manage the various commons and commons-like phenomena that are inseparable from life in a civilized society, and thus has the power to impose such limits on people (and corporate pseudopeople) as will prevent their pursuit of personal advantage from leading to a tragedy of the commons in one way or another. Restricting the capacity of banks to gamble with depositors’ money is one such limit; restricting the freedom of manufacturers to sell unsafe food is another, and so on down the list of reasonable regulations. Beyond those necessary limits, government has no call to intervene; how people choose to live their lives, exercise their liberties, and pursue happiness is up to them, so long as it doesn’t put the survival of any part of the national commons at risk.
As far as I know, you won’t find that definition taught in any of the tiny handful of high schools that still offer civics classes to young Americans about to reach voting age. Still, it’s a neat summary of generations of political thought in pre-imperial and early imperial America. These days, by contrast, it’s rare to find this function of government even hinted at. Rather, the function of government in late imperial America is generally seen as a matter of handing out largesse of various kinds to any group organized or influential enough to elbow its way to a place at the feeding trough. Even those people who insist they are against all government entitlement programs can be counted on to scream like banshees if anything threatens those programs from which they themselves benefit; the famous placard reading “Government Hands Off My Medicare” is an embarrassingly good reflection of the attitude that most American pseudoconservatives adopt in practice, however loudly they decry government spending in theory.
A strong case can be made, though, for jettisoning the notion of government as national sugar daddy and returning to the older notion of government as guarantor of the national commons. The central argument in that case is simply that in the wake of empire, the torrents of imperial tribute that made the government largesse of the recent past possible in the first place will go away. As the United States loses the ability to command a quarter of the world’s energy supplies and a third of its natural resources and industrial product, and has to make do with the much smaller share it can expect to produce within its own borders, the feeding trough in Washington DC—not to mention its junior equivalents in the fifty state capitals, and so on down the pyramid of American government—is going to run short.
In point of fact, it’s already running short. That’s the usually unmentioned factor behind the intractable gridlock in our national politics: there isn’t enough largesse left to give every one of the pressure groups and veto blocs its accustomed share, and the pressure groups and veto blocs are responding to this unavoidable problem by jamming up the machinery of government with ever more frantic efforts to get whatever they can. That situation can only end in crisis, and probably in a crisis big enough to shatter the existing order of things in Washington DC; after the rubble stops bouncing, the next order of business will be piecing together some less gaudily corrupt way of managing the nation’s affairs.
That process of reconstruction might be furthered substantially if the pre-imperial concept of the role of government were to get a little more air time these days. I’ve spoken at quite some length here and elsewhere about the very limited contribution that grand plans and long discussions can make to an energy future that’s less grim than the one toward which we’re hurtling at the moment, and there’s a fair bit of irony in the fact that I’m about to suggest exactly the opposite conclusion with regard to the political sphere. Still, the circumstances aren’t the same. The time for talking about our energy future was decades ago, when we still had the time and the resources to get new and more sustainable energy and transportation systems in place before conventional petroleum production peaked and sent us skidding down the far side of Hubbert’s peak. That time is long past, the options remaining to us are very narrow, and another round of conversation won’t do anything worthwhile to change the course of events at this point.
That’s much less true of the political situation, because politics are subject to rules very different from the implacable mathematics of petroleum depletion and net energy. At some point in the not too distant future, the political system of the United States of America is going to tip over into explosive crisis, and at that time ideas that are simply talking points today have at least a shot at being enacted into public policy. That’s exactly what happened at the beginning of the three previous cycles of anacyclosis I traced out in a previous post in this series. In 1776, 1860, and 1933, ideas that had been on the political fringes not that many years beforehand redefined the entire political dialogue, and in all three cases this was possible because those once-fringe ideas had been widely circulated and widely discussed, even though most of the people who circulated and discussed them never imagined that they would live to see those ideas put into practice. There are plenty of ideas about politics and society in circulation on the fringes of today’s American dialogue, to be sure. I’d like to suggest, though, that there’s a point to reviving an older, pre-imperial vision of what government can do, and ought to do, in the America of the future. A political system that envisions its role as holding an open space in which citizens can pursue their own dreams and experiment with their own lives is inherently likely to be better at dissensus than more regimented alternatives, whether those come from the left or the right—and dissensus, to return to a central theme of this blog, is the best strategy we’ve got as we move into a future where nobody can be sure of having the right answers.
Restoring the Commons
[John Michael Greer]
GEAB N°71 is available!
Until now the course of the crisis has been accurately described according to the five phases identified by our team from May 2006 (GEAB n°5) and completed in February 2009 (GEAB n°32): release, acceleration, impact, decanting and global geopolitical dislocation, the last two stages developing simultaneously. In the last issues and in particular the GEAB n°70 (December 2012), we commented extensively on the ongoing processes of the two last phases, a decantation from which the world-after painfully emerges on the rubble of world geopolitical dislocation.
But we had underestimated the decanting period’s duration which we have gone through for more than four years, a period during which all the crisis’ players have worked to a common goal, to gain time: the United States, whilst making every effort to prevent the appearance of alternative solutions to the dollar, in spite of the catastrophic situation of all its systemic fundamentals, to prevent its creditors from abandoning it (discrediting other currencies including the Yen from now on, tenacity against the attempts to disconnect oil from the dollar, etc…); the rest of the world, in setting up skilful strategies consisting of maintaining its assistance towards the United States to avoid a sudden collapse from which it would be the first to suffer, and at the same time constructing alternative and of decoupling solutions.
At the end of this long period of the system’s apparent “anaesthesia”, we consider it necessary to add a sixth phase to our description of the crisis: the last impact phase which will occur in 2013.
The United States certainly believed that the rest of the world would have an interest in keeping its economy on artificial respiratory assistance ad infinitum but it is likely that they don’t believe it any more today. As regards the rest of the world, the final chapters of the US crisis (major political crisis, decisional paralysis, near miss of the fiscal cliff, perspective of a payment default in March, and always the incapacity to implement the least structural solution) convinced it of the imminence of a collapse, and all the players are on the look-out for the least sign of a swing to extricate themselves, conscious that by doing so they will precipitate the final collapse.
Our team considers that in the context of the extreme tensions – both domestic political and world financial tensions – induced by the next raising of the US debt ceiling in March 2013, the signs will not be lacking to cause the disappearance of US treasury bonds’ last purchasers, a disappearance which the Fed will no longer be able to compensate for, resulting in an increase in interest rates which will propel American indebtedness to astronomical levels, leaving no hope of ever being repaid to creditors who will prefer to throw in the towel and let the dollar collapse… a collapse of the dollar which will de facto correspond to the first genuine solution, painful certainly but real, for US indebtedness.
It’s for this reason also that our team anticipates that 2013, the first year of the World-Afterwards, will see a setting up of this “purifying” of US and world accounts. All the players are tending towards this step whose consequences are very difficult to predict but which is also an unavoidable solution to the crisis taking into account the United States structural incapacity to set up genuine debt-reduction strategies.
But in order to take the measure of the causes and consequences of this last impact phase, let’s reconsider the reasons for which the system lasted for so long. Our team will then analyze the reasons for which the shock will take place in 2013 afterwards.
Saving time: When the world rejoices at the US status-quo
Since 2009 and the temporary measures to save the global economy, the world has been waiting for the famous “double dip”, the relapse, as the situation continues to worsen day by day for the United States: breathtakingly high national debt, mass unemployment and poverty, political paralysis, loss of influence, etc. However, this relapse still hasn’t arrived. Admittedly, the “exceptional measures” of assistance to the economy (lowest interest rates, public expenditure, debt repurchase, etc.) are still in force. But against all expectations and contrary to any objective and rational judgment, the markets still seem to have confidence in the United States. Actually, the system isn’t based on confidence any more but on calculating the best moment to extricate themselves and the means of hanging on until then.
The time has passed when China challenged the United States to implement a second round of quantitative easing (1): the world seems to have adapted itself to the fact that this country is still growing its debt and is inescapably turning towards a payment default, provided that it’s still standing and doesn’t make too many waves again. Why don’t the other countries press the United States to reduce its deficit, but on the contrary are delighted (2) when agreement on the fiscal cliff keeps the status-quo? However nobody is fooled, the situation cannot last indefinitely, and the world economy’s main problem is really the United States and its dollar (3).
Countries’ public debt by the number of months tax receipts (4) – Source: LEAP / European Commission, ONS, FRB
According to the LEAP/E2020 team, the various players are seeking to gain time. For the markets, it is a question of gaining maximum benefit from the Fed and the US government’s largesse in order to make easy money; for the foreign countries, it’s a question of extracting their economies to the maximum from that of the United States in order to be able to shelter themselves at the time of the coming shock. Thus, for example, it’s how Euroland makes the most of it in order to strengthen itself and China takes advantage of it to sink its dollars in foreign infrastructures (5) which will always be better value than dollars when that currency is on the floor.
Acceleration of the tempo and a build-up of challenges
But this period of complicit leniency is coming to an end because of intense pressures. It is interesting to note that the pressures don’t really come from abroad, confirming our analysis above; those are rather of two sorts, internal and financial-economic.
On the one hand, it’s the internal political battle which threatens the house of cards. If Obama appears to be traversing a period of political grace facing a seemingly subjugated republican camp, the battle will begin again even more violently than ever starting from March. Indeed, if the republican representatives will be undoubtedly obliged to vote the increase in the debt ceiling, they will make Obama pay dearly for this “capitulation”, pushed here by their electoral base half of which in fact wants a US default considered by them as the only solution to free them from the country’s pathological debt (6). The republicans thus hope to do battle on the many issues and challenges which are shaping up: on the social side, firearms regulation (7), taking a new look at immigration and the legalization of 11 million illegal immigrants (8), health care reform, and more generally questioning the Federal state’s role; on the economic side, lowering expenditure, debt settlement (9), fiscal cliff « redux » (10), etc… All these issues are on the next few months’ agenda and the least hitch can prove to be fatal. Given the republicans’ pugnacity and their supporters’ even more so, it’s rather the hope that there is no hitch which is utopian.
On the other hand, it’s the international markets, Wall Street at the forefront, which threaten not to extend their confidence in the US economy. Since Hurricane Sandy and especially since the episode of the fiscal cliff which hasn’t fixed any problems, the pessimistic analyses and doubts are becoming increasingly strong (11). It’s necessary to keep in mind that the stock markets are stateless and, even domiciled in New York, have only one goal, profits. In 2013, the world is sufficiently extensive so that investors and their capital, just like a flight of sparrows, slip away to other skies on the slightest warning (12).
Whereas agreement on the debt ceiling in 2011 settled the question for 18 months (13), that on the fiscal cliff defers the problem for only two months. Whilst one felt the effects of QE1 for a year, QE3 had an effect for only a few weeks (14). Besides, with a diary loaded with negotiations to come, one sees the tempo accelerate significantly, a sign that the abyss is approaching and players’ nervousness along with it.
S&P performance during each quantitative easing action – Source: ZeroHedge/SocGen
March-June 2013, extreme tension: the least spark lights the blue touch-paper
In addition to these US challenges, the whole world also has many tests to pass, here again its economic challenges above all. In particular it’s Japan and the United Kingdom, key elements in the US sphere of influence, which are fighting for their survival, both in recession, with insupportable debts, household savings on the deck and with no prospect of a short-term solution. We will examine these two countries in detail later in this issue. But it’s also a Brazilian economy which is just ticking over (15); difficulty to manage inflation rates in the emerging powers; the deflation of the Canadian, Chinese and European real estate bubbles (16), etc. . . .
The challenges are also of a geopolitical nature: to quote only three examples, African conflicts among which of course France’s intervention in Mali, conflicts and indirect confrontation of the Middle Eastern powers around Syria, Israel and Iran, as well as the territorial tensions around China which we will examine during our following analysis on Japan.
All these factors, economic, geopolitical, American, global, are coming together at the same moment in time: the second quarter of 2013. Our team has identified the period running from March to June 2013 as being explosive, in particular at the conclusion of the negotiations in the United States on the debt ceiling and the fiscal cliff. The least spark will light the blue touch-paper, unleashing the second impact phase of the global systemic crisis. And there are many opportunities to create sparks, as we have seen.
So what are the consequences of and the calendar for this second impact phase? On the markets initially, a significant fall will spread out until the end of 2013. All economies being inter-connected, the impact will spread throughout the whole planet and will drag the global economy into recession. Nevertheless, thanks to other countries’ decoupling which we mentioned previously, all countries won’t be affected in the same way. Because, more so than in 2008, opportunities exist for capital in Asia, Europe and Latin America, in particular. In addition to the United States, the countries the most affected will be those in the US sphere, namely the United Kingdom and Japan primarily. And, while these countries will still struggle in 2014 with the social and political consequences of the impact, the other regions, BRICS and Euroland at the forefront, will finally see the end of the tunnel at that time.
In order to understand the formation of this second impact phase, we next review the “suicidal tendencies” of four powers of the world before: the United States, the United Kingdom, Japan and Israel. Then we will present the traditional January “Ups & Downs”, rising and falling trends for 2013, also serving as recommendations for this New Year. Finally, as in each month, our readers will also find the GlobalEurometre.
(1) One can refresh one’s memory here (Wall Street Journal, 18/10/2010) or here (US News, 29/10/2010).
(2) « Relief after the happy epilogue of the fiscal cliff » headline