If most of the pundits are right - recall that they were ALL WRONG so far - the big stimulus, the big bailouts etc should get us back in about 2 years to the world we left in 2007. Credit will be easy. House prices will rise. Jobs making stuff will come back. The world we knew will be back......
How do these words feel to you? That is what the pundits are saying.
They have been wrong so far. Why? What do they not see? I think they have no sense of history and no sense that when systems fail, they do not come back again. Humpty Dumpty!
History is perspective - you have to have deep perspective to make sense of what we are living through. The earliest that they go back to is 1929 and even then they have a very limited view. It is clear that most know nothing about the period. They assume that Roosevelt fixed the Depression quickly. This is not what happened.
The crash was in 1929. The real crunch came in 1933 - 4 years later. The bottom was in 1937. Much of what Roosevelt did, pushing up wages, providing make work jobs actually made the depression worse in that it did not allow labor to find a clearing level. It was rearmament and later conscription that finally brought back full employment.
You have to go back a thousand years to get the ability to see patterns. There are huge natural cycles of boom and bust that have been documented by David Hackett Fischer. Here is a great link to a lot of the book The Great Wave. I think that we are at the end of perhaps the the greatest of these boom/bust cycles that Fischer describes.
He finds that prices tended to rise throughout this long period, but most of their increase happened in four great waves of inflation - which he calls the price-revolutions of the thirteenth, sixteenth, eighteenth, and twentieth centuries. The four waves shared many qualities in common. All had the same movements of prices and price-relatives, falling real wages, rising returns to capital, and growing gaps between rich and poor. They were also very similar in the structure of change. Each of them started silently, developed increasing instability, and ended in a shattering crisis that combined social disorder, political upheaval, economic collapse, and demographic contraction. These crises happened in the fourteenth, seventeenth, and late eighteenth centuries.
They were followed by long periods of comparative equilibrium: the Renaissance, the Enlightenment, and the Victorian era. In all of these eras prices fell and stabilized, wages rose, and inequalities diminished. Then another great wave began and the pattern repeated itself, but not in precisely the same way. Fischer quotes Mark Twain: history doesn't repeat itself, but it rhymes. Through all of these movements, Fischer explores the linkages between economic trends, social tendencies, political events, and cultural processes. He finds that long periods of price-equilibrium were marked by a faith in order, harmony, progress, and reason. By contrast, price-revolutions created cultures of despair in their middle and later stages.
If we are indeed at the end of the greatest of these cycles so far, then there is nothing that the state can do to take us back.
But of course the state and the pundits have to do their best. But I think that all of this "help" will fail. That it will make the end even more difficult, because we will postpone the inevitable.
I do not blame the state or the pundits. They have to do their best.
Imagine that you live by a great river that has levees to keep back the floods. A 100 year storm arrives. The levee is weakened. The state funds the patching of the levee. It has to. It cannot sit by and see the levee fail and not try and help. Politics and civility demands that they try. But if the flood is big enough, the levee has to break and the plain has to be flooded.
We can see now the vast power of the correction that confronts us. It is not good enough to rely on the State to save us. They will try but if the flood is what I think it is - they must fail.
This is why I think that we have to have our own plan. Such a plan cannot aspire to going back to 2007. It has to assume that the central system will break and that each community is largely on its own.
We have to look at the fundamentals. Food, Shelter, Energy and a trusted means of value exchange (Can be Money but does not have to be)
In the 2007 world, nearly all of these came from an external source. We used money to buy them all. In so doing, we ended up with almost no time.
My bet is that a local system will re-balance the mix by substituting Time for Money. A few examples:
- I heat mainly with wood. Getting the wood to me is very labor intense. My use of the wood is very labor intense. I trade my time/labor for cash. The resource is local and all the money that is involved stays in the local system. Oil works in reverse. It is all about cash and not time and all the cash leaves the local system.
- I shop mainly locally for food. This takes more time than going to the supermarket. The supplier has a very low tech, low mechanized system for producing the food. We both trade time for money. He has a better margin. Nearly all the money stays locally. The food quality is better. I am healthier. The opposite of the current system
- I have a 4 year old car. I intend to keep this car for a long time. Over time, the key service that I require will be service for the car. Most of what I pay for that service remains here on PEI. In Cuba, cars are still running that are 40 years old and there is an expert repair system locally.
- Many Islanders know that they can exchange labor and time for goods and services. We pay cash for everything else. In the 1930's there was no cash. A robust system of labor/time exchange grew up. We could help this along.The internet could help a lot
You might have heard of Slow Food - Here is Stowe Boyd on the related idea of "Slow Money".
It's a slow money movement, where the outputs of one local economic transaction is the input for another local economic transaction, binding the parts closely together, and making the whole stronger, and the local environment richer.
It's not just comfort, Jeff: it's tribalism. We want to keep the money close to home, as long as possible, because the people closest to us are the ones most likely to care about us, and to take us into their circles.
So when we make economic choices, it's no longer just cost, or convenience. Just as we have rejected the ease and convenience of littering -- which was commonplace in my childhood -- we need to move past the superficial benefits of cheap goods distributed by global corporations. Even when the products are equal, the impacts of having the money stay local create an exponential impact. The local accountant gets work, the local marketing firm, the local packaging plant, the local farmer: all are benefited. And it comes back to us, in a richer and more dynamic local environment. We get the second and third order benefits.
The alternative is that local economies become thin, like soil that has had decades of pesticides and inorganic fertilizers piled on it: the microorganic life that makes soil rich is all gone. Then, without the enormous inputs of fertilizers and pesticides, there is no crop. If we let the organic richness of local business die off, we will be a fragile as overfarmed pasture, and what is left could blow away after a single season of drought.
And we are headed into a bad patch, where the downturn could crush small business everywhere. So we need to redouble our efforts to act local, even as we are aware of the global problems. Think Slow Money.
We will never go back to 2007. Humpty Dumpty cannot be put back together again. If we can accept this, then we can work to create the new more quickly.
More later - I want to talk soon about Money itself
