We humans like to think of ourselves as so much more sophisticated than “lower” animals. In affluent times and places we can afford to worry about silly things like what movies will win Oscar awards, whether our body looks good at the gym, or where we will take our next family vacation.
But our existence still depends on this fundamental equation: survival = food + water + shelter.
In leaner times, like those we’re heading into, the above equation becomes sharply apparent.
Food production today is highly dependent on oil. Oil powers our farm implements, oil and natural gas are ingredients in commercial pesticides and fertilizers, and oil transports food to market. Today food travels as far as 10,000 miles from where it’s produced to where it’s consumed, which would be impossible without oil. Oil vastly increases agricultural productivity. So it’s because of our largess of oil that the human population has been able to grow as large as it has. One might say that humans eat oil. We can, of course, produce food without oil – barring such evil manifestations as crops that are genetically engineered to require the use of petroleum-based pesticides – but without oil food production will be much lower.
Water is a resource we take for granted. We act as though there is no limit to the supplies of water, and that there are no repercussions to our profligate consumption of it. We’re building cities in places without adequate water supplies – Phoenix and Las Vegas come to mind – and we’re using up vast reservoirs of non-replenishable “fossil” water, such as the Ogallala Aquifer in the American Midwest. Just as we’re failing to plan for economic “rainy days,” we’re failing to regulate our water usage to prepare for a literal lack of rainy days. We seem to think that the replenishable water supply patterns will remain unchanged, an especially optimistic expectation if the Earth’s climate is truly in the midst of major change. But the water situation is even worse in some other places than in America . Water delivery is partly dependent on energy, just as food production is. It takes energy to pump water from the ground, to transport it to where it’s consumed, and even to treat it. Of course, food production is vitally dependent on water.
I hardly need mention the importance of oil except to say that for the first time in history, the demand curve is passing the supply curve. Moreover, the supply curve will soon be heading downward and we’ll find ourselves perpetually chasing this ever dwindling supply downhill. When demand merely exceeds supply the price of oil will increase. But when demand exceeds supply and the supply starts to diminish, then prices will really go up, enough to destroy economies or render impractical the transportation of food and water to some places. But the gap between supply and demand means more than just higher prices. It also means shortages. Those who can afford to buy oil will usually have their needs satisfied, albeit at higher cost. But those who cannot pay the price will do without. Occasionally, even those who can afford to buy oil will be forced to do without because from time to time there simply won’t be any oil to buy on the global market, at any price. Imagine going to your local gas station and seeing a sign out front reading “Sorry, no gas.” Imagine going to your local grocery store and seeing empty shelves because the trucks that deliver goods to the store had no diesel fuel. Imagine having to bundle up in two layers of sweaters inside your house because you have to make half your normal allotment of home heating oil last the entire winter. These hypothetical scenarios will become reality and will occur with increasing frequency as time goes on.
What’s going to happen when people have to vigorously compete for food, water, and energy in order to survive? I think it’s going to get vicious. My opinion of humanity holds that in the face of such adversity, it will be every man for himself. Countries will compete against countries. States will compete against states. Cities will compete against cities. Governments will even compete against their citizens. Civilization, in the sense of the word “civility,” will be no more. Perhaps genetically engineered terminator seeds, depleted uranium, and exotic diseases are secretly intended to reduce the human population to alleviate resource competition.
Clearly, the U.S. invasion of Iraq is one of the opening salvos in the coming resource wars. And the U.S. ’s belligerence toward Iran is undoubtedly due to Iran’s possession of vast oil and natural gas resources. Bear in mind that a country need not seek control of vital resources with the intention of consuming them. The country that controls resources can use those resources either as a lever to compel other countries to behave a certain way, or to buy other resources or finished goods, such as weapons and integrated circuit chips.
The End of Money
The 1970s was the apotheosis of the “American Dream.” Wedged between the preceding decade of civil unrest and the subsequent decade of recessions, rapidly rising homelessness, and mass layoffs, the 1970s was a comparatively idyllic decade. It certainly had its problems – stagflation, for instance – but even while living during that time I felt it was a special decade. Life was good; people were happy, friendly, and mellow; TV shows and movies were cheerful; civil liberties were at their peak; government power was at its lowest ebb; the country was affluent and at its peak of industrial prowess. It’s not a coincidence that the tallest buildings in America were built during the 1970s. Those buildings were icons of American industry and power. Although the Vietnam War raged during the first half of the 1970s, it was in the process of winding down and came to an end by the middle of that decade. The cessation of the Vietnam War was as much a reflection of the peoples’ desire to “live and let live” as it was a military defeat. Military conscription also ended in that decade, and even the cold war cooled off because of détente.
Unfortunately, what we didn’t realize at the time was that we would never again have it so good. The 1970s represented a “tipping point,” to use the popular vernacular, for the American Dream. That was when globalization really started to take off and when the serious decline of American industry began, the steel and auto industries being among the first casualties. Interestingly, the 1970s was also the decade of peak oil production in the United States, after which point we became increasingly reliant on imported oil, which greased our downward slide. What I didn’t realize until writing this was how crucial a role President Nixon played in creating this tipping point. Nixon opened the door to trade with China, a major player in today’s globalized economy. Nixon disassociated the U.S. dollar from gold, facilitating the destruction of wealth through unrelenting devaluation of the dollar. Nixon launched the war on drugs, a precursor to today’s war on terror (or is it the war of terror, I can’t tell?). Both the drug war and war on/of terror consume wealth in order to serve the imperial ambitions of the U.S. Government, but contribute nothing to the country’s production of wealth.
The 1980s was a decade in which previously accumulated wealth was systematically extracted, mainly through the mechanism of “Merger Mania.” The 1980s was a decade of marked industrial and economic decline, which was masked to a large extent by releasing into the economy some of the wealth squeezed out of these mergers, as well as by the massive accumulation of debt. The transformations of the 1980s also introduced a new component: the injection of foreign wealth into the country. Many of the assets sold in the 1980s were purchased by foreigners, especially the Japanese, a trend which accelerated toward the latter half of the decade, highlighting America’s economic decline. The 1980s also marked the inception of the mythical “service economy” theory to justify the profitable exporting of American jobs. The economy is like a pyramid. Forming the foundation of this pyramid is the one true source of wealth: natural resources – the free wealth given to us by the Earth and the Sun. Mining for minerals and energy, agriculture, fishing, and forestry are the source of all other wealth. Above this foundation are industries that utilize its products. These second level industries consist primarily of manufacturers that take raw materials and produce something of greater value. Above the manufacturers are companies that serve them, including law firms, advertising agencies, shipping companies, airlines, hotels, restaurants, and even entertainment. As wealth moves up this pyramid a little wealth, constituting salaries and savings, is retained by each level in the pyramid. The myth of the service economy, the darling theory of the 1980s, is that a country could retain the top of the pyramid and outsource the base of it. During the last three decades we have transfered much of the base of this economic pyramid to countries such as China and India and indeed, initially, the money kept flowing to the top of the pyramid which remained in the United States. But after a while, a new top of the pyramid began to form in those countries where we had shipped the base of the pyramid. Witness today not only the exodus of high tech jobs to China and India, but that in those countries pure service companies, such as advertising agencies, are also starting to flourish.
The 1990s was a period of greatly accelerating globalization and economic decline for the United States , aided and abetted by such treaties as NAFTA, GATT, and the WTO. Again, this massive decline was masked by the illusion of wealth that persisted during the huge stock market bubble of the latter half of the 1990s. Like merger mania before it, the stock market bubble attracted a lot of foreign wealth. A bit more previously accumulated wealth was extracted from rising human productivity here in the United States during the 1990s.
Finally, the 2000s so far represent an era massively dependent on inflows of foreign wealth. With our previously accumulated wealth now exhausted and little means left for fundamental wealth production, about the only thing keeping the U.S. economy afloat these days is consumer spending and deficit spending by the government, both of which are financed by growing mountains of debt, which is owed to foreigners. The United States has largely been reduced to a nation of people that sell each other hamburgers, with foreigners paying the checks. Asset sales to foreigners continue as well, the failed Chinese bid for Unocal and the not-so-failed Dubai bid to run some of our seaports being prominent recent examples.
During the last thirty years in America two persistent trends are clear: the steady depletion of existing wealth and decline in the means to produce new wealth; and the steady rise of an imperial U.S. Government.
Today, the economic imbalances in the United States economy are so vast that I cannot see how they can be corrected gracefully. Even more astonishing to me is that people keep buying financial instruments like U.S. Treasury bills. Do these investors really believe they’re ever going to get their money back? The national debt is so large that paying it down is nearly impossible, especially since there is no political will to either increase taxes or reduce spending. Obviously, the U.S. Government knows it cannot pay down the national debt, which is why it covertly relies on dollar devaluation to reduce the value of the national debt.
It’s only a matter of time before the majority of investors in dollar-denominated financial instruments open their eyes and stop buying those assets. When that happens the dollar is doomed. The government’s only recourse when it cannot borrow money will be to print dollars, which will only accelerate the dollar’s demise, possibly even inducing hyperinflation along the way.
If oil prices skyrocket because of the global supply and demand relationship and harm the U.S. economy, that could accelerate the dollar’s demise as well. I personally don’t see how the dollar can avoid substantial devaluation, either slowly or rapidly. I hope the decline is gradual.
All of the world’s government-issued currencies are in similar straits. None are firmly backed by finite, physical resources, such as gold. Consequently, all currencies have the potential to suffer from devaluation, even more so since the economies of the world’s countries are so intricately linked together. If one currency abruptly collapses, especially an important one like the dollar, they could all come crashing down.
Additionally, faith in the world’s currencies depends in part on globalization. The willingness of an investor in Japan to buy American dollars depends in part on the investor’s expectation of a continuing economic relationship between Japan and America. But in an era where global trade is increasingly challenged by oil shortages, faith in other countries’ currencies will diminish too. Countries will increasingly prefer to conduct international trade using universal mediums like gold instead of currency.
If currencies such as the dollar become worthless, even local trade may be conducted using gold or other precious metals. Such trade may, in fact, have to be conducted in black markets, since financially distressed governments will probably seek to confiscate all gold and precious metals from their citizens.
The bottom line is that government-issued currency will be a thing of the past. So how will the government continue to exist?
Acquisition of Resources
Without money or credit, government can only continue to exist through force. The United States government is particularly well endowed in this regard and has demonstrated its willingness to use force to acquire resources, and not as a last resort either.
Iraq’s oil is the first such resource to be acquired by military force. Iran’s oil and natural gas may well be the next. In the long run, the energy-rich regions of central Asia will also attract the hungry gaze of the U.S. Empire. Of course, other powerful, populous, and hungry countries, such as China and India, will also have designs on these energy-rich regions, which will probably result in significant wars. Oil from the Middle East will probably become so valuable that countries will have to provide a military escort for every tanker carrying oil across the ocean.
Domestically, energy will be controlled by the government. It will satisfy its needs first, corporations will have their needs satisfied second, and the populace will be forced to ration whatever is left.
Food is also critical to the government, comprised, as it is, of people. So it’s logical to assume that the government will at some point take control of food production. As with energy, the government will satisfy its own food requirements first, and the populace will be left to ration whatever is left.
If water becomes a scarce or unreliable resource, then we can assume that the government will take control of that as well.
In a future where money has no value, the only way a government can retain people is by providing them with food, water, and shelter. In fact, in a future world where resource competition is the order of the day, people will probably covet a government job – as a bureaucrat, a laborer, or a soldier – simply because it will mean three square meals a day and a roof over their head.
Of course, government needs more than just food, water, and shelter. Government needs weapons, vehicles, computers, communications gear, and myriad other manufactured items. Some of these things are manufactured wholly in other countries, or depend in part on components from other countries. Without money the government cannot buy these things. But it can trade precious resources, such as oil, water, and food, for them. Some critical factories, such as domestic weapons plants, may be taken over wholesale by the government for security reasons.
Government cannot operate on resources and material alone. It also needs labor. Some of that labor can be “purchased” in exchange for resources. But in order for the government to operate “profitably” it will have to employ slave labor, that is, labor it doesn’t have to pay so richly for.
We already have such a precedent. Many of the two million people already incarcerated in this country are veritable slave laborers. They “earn” anywhere from twenty-five cents to one dollar per hour, often working for major American corporations. But in some cases these poor prisoners are then charged room and board for being in prison, thus wiping out their minuscule income. In effect, since they are being forced to work without making any net income, they are slaves. It does not challenge the imagination to envision future slave laborers working in factories manufacturing everything from machine guns to computers, or working on farms to produce food, returning each night to sleep in their prison cells.
The United States military is currently exploring ways to utilize civilian prisoners to satisfy the military’s labor needs. It’s only a matter of time before they come up with a justification for doing so.
Once the framework for utilizing slave laborers – all nice and legal, of course – is established, it’s quite easy to increase the pool of potential laborers, if necessary. The government merely has to criminalize more behaviors. Caught driving your car on the “wrong” day? Three months in prison loading ammunition cartridges. Caught possessing gold coins? Six months in prison assembling computers. Caught saying “subversive” things over the telephone to your aunt? Five years on a prison farm – for the both of you – tending crops. Of course, prison sentences will likely be accompanied by asset forfeiture, that is, if you have anything the government wants. There is already a precedent today for asset forfeiture too, even for minor offenses such as hiring a prostitute or having a marijuana cigarette in your car. Heck, simply walking through an airport today with “too much” cash on your person might result in it being confiscated.
Although this essay has mainly been a description of the United States and its future, much of it is applicable to the world as a whole. Some other countries may well face worse times ahead because they lack the natural resources and/or military might that the United States possesses.
The goal of this essay is not to propose solutions to the many problems facing us, although there are solutions, but to explain the seemingly irrational behavior we see around the world. Viewing the world today in light of the foregoing essay, Bush’s actions are understandable, even though I don’t endorse them: the competitive pursuit of resources, the rolling back of civil liberties, the carefree handling of the economy.
March 11, 2006
Note: The opinion of the author may not coincide with the views of Pravda.Ru editors
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