The Smart Money

How can anyone take free trade seriously? Clearly no one in any government or the global corporate world does. The parts of the world economy that are able to compete internationally are primarily the state-subsidized ones: resource extraction, capital-intensive agriculture, high-tech industry, weapons, etc. The irony is that research and development is paid for with taxes, while anything marketable is taken over by the private sector. This combination of public subsidy and private profit is called free enterprise. It’s a sad state of affairs when the best investment advice urges oil futures, and shares in weapons manufacturers and privatized water. But that’s where the smart money seems to be going.

After All

The false prosperity that the West has enjoyed since it began its rise to world dominance at the end of the medieval period was fueled initially by plunder. Think of the Spanish in Mexico and Peru. Think of the British in Bengal and North America.

            Once this dominance began to stabilize in the face of colonialism and the emergence of capitalism, the system ran on exploitation.  Think of the slave trade.  Think of Indian cotton, woven in Manchester and sold back to the Indians.

            Most recently, the system has been powered by unprecedented amounts of debt.

            Initially, this debt was relatively easy to come to terms with, partly by virtue of the fact that its relative size diminished in relation to that of the expanding economy, and partly through inflation, which reduced the significance of the actual amount of the debt in relation to the amount of money in circulation.

            The problem is, of course, that debt, even when created out of thin air, like a Treasury bill, is effectively a promise tied to some sort of resource.  It is based on the idea that something will eventually be produced and sold by someone in order to generate the capital required to pay the debt.

            Unfortunately there are now non-negotiable constraints on economic expansion.  Even the desperate optimism of the political and financial classes will not save the situation. After all, there is no law that the exceptional rise of the West and the asymmetrical distribution of global resources must continue.

Thinking the Unthinkable

The era of ever-increasing rates of resource extraction, manufacturing and consumption is over, done, finished, for good.  Only charlatans, fools and the willfully blind, claim to believe otherwise.

            So too is the exponential growth of technology which is running up against the finite amount of wisdom so far accumulated by the sciences.  There will be further refinements, no doubt, as the last few pieces of the puzzle of the material universe fall into place, but no more big game-changing great leaps, as there were, for example, with the harnessing of fire, the invention of moveable type, the development of steam power, or even, most recently, the emergence of the digital.

            Both phenomena are only blips on the timeline of human history in any case.  We have spent countless millennia living in static economic environments, making little or no technical progress.  The past three hundred years or so have been an anomaly.

            Thomas Malthus was right.  Economic growth in the long term is now out of the question. In a world in which the human population grows faster than the economy there will always be a looser for every winner.  Moreover, the losers will naturally suspect the winners of taking unfair advantage, if not of outright racketeering, and in most cases they will be right.  As world population peaks about midway through the present century, in the face of the inevitable competition for food, water and fuel, the losers will also be largely dead.

            The economic order is neither just nor sustainable.  Everywhere the globalizing free market squeezes the middle class, enriches small elites and broadens the membership of the excluded.  At current rates of consumption and population growth, global economic collapse is imminent.  Do the math.  It’s time to begin thinking the hitherto unthinkable.