[FoRK] Definancialisation, Deglobalisation, Relocalisation

Eugen Leitl eugen at leitl.org
Tue Jun 16 12:25:08 PDT 2009


(go to the URI for slides with bullet points)

http://cluborlov.blogspot.com/2009/06/definancialisation-deglobalisation.html

Tuesday, June 16, 2009

Definancialisation, Deglobalisation, Relocalisation

This talk was presented at The New Emergency Conference in Dublin, on June
11, 2009.


1. Good morning. The title of this talk is a bit of a mouthful, but what I
want to say can be summed up in simpler words: we all have to prepare for
life without much money, where imported goods are scarce, and where people
have to provide for their own needs, and those of their immediate neighbours.
I will take as my point of departure the unfolding collapse of the global
economy, and discuss what might come next. It started with the collapse of
the financial markets last year, and is now resulting in unprecedented
decreases in the volumes of international trade. These developments are also
starting to affect the political stability of various countries around the
world. A few governments have already collapsed, others may be on their way,
and before too long we may find our maps redrawn in dramatic ways.

2. "Sustainability" -- what's in a word?

In a word, unsustainable. So what does that mean, exactly? Chris Clugston has
recently published a summary of his analysis of what he calls "societal
over-extension" on The Oil Drum web site. Here is a summary of his summary,
in round numbers. I don't want to trifle with his arithmetic, because it's
the cultural assumptions behind it that I find interesting. The idea is that
if we shrink our ecological footprint by an order of magnitude or so, that
should make the whole arrangement sustainable once again. This is expressed
in financial terms: here we are lowering the GDP of the USA from, say $100
thousand per capita per annum, to, say $10 thousand. Clugston draws a
distinction between making this reduction voluntarily or involuntarily: we
should make it easy on ourselves and come along quietly, so that nobody gets
hurt. I find the idea that Americans will voluntarily lower their GDP by a
factor of 10 rather outlandish. We keep the same system, just shut down 9/10
of it? Wouldn't that make it a completely different system? This sort of
sustainability seems rather unsustainable to me.

3. My plan

I would like to offer a more realistic alternative. Everybody should have one
US Dollar, for purely didactic purposes. This way, all Americans will be able
to show their one dollar to their grandchildren, and say: "Can you imagine,
this ugly piece of paper was once called The Almighty Dollar!" And their
grandchildren will no doubt think that they are a little bit crazy, but they
would probably think that anyway. But it certainly would not be helpful for
them to have multiple shoe-boxes full of dollars, because then then
grandchildren would think that they are in fact senile, because no sane
person would be hoarding such rubbish.

4. An unpalatable alternative

Clugston offers an alternative to the big GDP decrease: a proportionate
decrease in population. In this scenario, nine out of 10 people die so that
the remaining 10% can go on living comfortably on $100 thousand a year. I was
happy to note that Chris did not carry the voluntary/involuntary distinction
over to this part of the analysis, because I feel that this would have been
in rather questionable taste. I can think of just three things to say about
this particular scenario.

First, humans are not a special case when it comes to experiencing population
explosions and die-offs, and the idea that human populations should increase
monotonically ad infinitum is just as preposterous as the idea of infinite
economic growth on a finite planet. The exponential growth of the human
population has tracked the increased use of fossil fuels, and I am yet to see
a compelling argument for why the population would not crash along with them.

Second, shocking thought this seems, it can be observed that most societies
are able to absorb sudden increases in mortality without much fuss at all.
There was a huge spike in mortality in Russia following the Soviet collapse,
but it was not directly observable by anyone outside of the morgues and the
crematoria. After a few years people would look at an old school photograph
and realise that half the people are gone! When it comes to death, most
people do in fact make it easy on themselves and come along quietly. The most
painful part of it is realising that something like that is happening all
around you.

Third, this whole budgeting exercise for how many people we can afford to
keep alive is a good way of demonstrating what monsters we have become, with
our addiction to statistics and numerical abstractions. The disconnect
between words and actions on the population issue is by now is almost
complete. Population is very far beyond anyone's control, and this way of
thinking about it takes us in the wrong direction. If we could not control it
on the way up, what makes us think that we might be able to control it on the
way down? If our projections look sufficiently shocking, then we might
hypnotise ourselves into thinking that maintaining our artificial human life
support systems at any cost is more important than considering its effect on
the natural world. The question "How many will survive?" is simply not ours
to answer.

5. What's actually happening


Back to what is actually happening right now. There seems to be a wide range
of opinion on how to characterise it, from recession to depression to
collapse. The press has recently been filled with stories about "green
shoots" and the economists are discussing the exact timing of economic
recovery. Mainstream opinion ranges from "later this year" to "sometime next
year." None of them dares to say that global economic growth might be
finished for good, or that it will be over in "the not-too-distant future" --
a vague term they seem to like a whole lot.

There does seem to be a consensus forming that last year's financial crash
was precipitated by the spike in oil prices last summer, when oil briefly
touched $147/bbl. Why this should have happened seems rather obvious. Since
most things in a fully developed, industrialised economy run on oil, it is
not an optional purchase: for a given level of economic activity, a certain
level of oil consumption is required, and so one simply pays the price for as
long as access to credit is maintained, and after that suddenly it's game
over. François Cellier has recently published an analysis in which he shows
that at roughly $600/bbl the entire world's GDP would be required to pay for
oil, leaving no money for putting it to any sort of interesting use. At that
price level, we can't even afford to take delivery of it. In fact, at that
price level, we can't even afford to pump it out of the ground, because the
tool pushers, roughnecks and roustabouts that make oil rigs work don't drink
the oil, and there would no longer be room in the budget for beer.

And so, the actual limiting price, beyond which no economic activity is
possible, is certainly a lot lower, and last summer we seem to have
experimentally established that to be around $150/bbl. which is something
like 25% of global GDP. We may never run out of oil, but we have already run
out of money with which to buy it, at least once, and will most likely do so
again and again, until we learn the lesson. We will run out of money to pump
it out of the ground as well. There might still be a few gushers left in the
world, and so there will be a little bit of oil left over for us to fashion
into exotic plastic jewelry for rich people. But it won't be enough to
sustain an industrial base, and so the industrial age will effectively be
over, except for some residual solar panels and wind generators and
hydroelectric installations.

I think that the lesson from all this is that we have to prepare for a
non-industrial future while we still have some resources with which to do it.
If we marshal the resources, stockpile the materials that will be of most
use, and harness the heirloom technologies that can be sustained without an
industrial base, then we can stretch out the transition far into the future,
giving us time to adapt.

6. Key points

I know that I am running the risk of overstating these points and
oversimplifying the situation, but sometimes it is helpful to ignore various
complexities to move the discussion forward. I do believe that these points
are all true, roughly speaking.

   1. Global GDP is a function of oil consumption; as oil production goes
down, so will global GDP. At some point, the inability to invest in oil
production will drive it down far below what might be possible if depletion
were the sole limiting factor. Efficiency, conservation, renewable sources of
energy all might have some effect, but will not materially alter this
relationship. Less oil means smaller global economy. No oil means a
vanishingly small global economy not worthy of the name.  2. We have had a
chance to observe that economies crash whenever oil expenditure approaches
1/4 of global GDP. Attempts at economic recovery will cause oil price spikes
that break through this ceiling. These spikes will be followed by further
financial crashes and further drops in economic activity. After each crash,
the maximum level of economic activity required to trigger the next crash
will be lower.  3. Financial assets are only valuable if they can be used to
secure a sufficient quantity of oil to keep the economy running. They
represent the ability to get work done, and since in an industrialised
society the work is done by industrial machinery that runs on oil, less oil
means less work. Financial assets that that are backed with industrial
capacity require that industrial capacity to be maintained in working order.
Once the maintenance requirements of the industrial infrastructure can no
longer be met, it quickly decays and becomes worthless. To a large extent, of
oil means end of money.


Now that the reality of Peak Oil has started to sink in, one commonly hears
that "The age of cheap oil is over". But does that mean that the age of
expensive oil is upon us? Not necessarily. We now know (or should have learnt
by now) that once oil rises to over 25% of global GDP, the world's industrial
economy stalls out, and as soon as that happens, oil ceases to be
particularly valuable, so much so that investment in maintaining oil
production is curtailed. The next time industry tries to stage a comeback (if
it ever does) it hits the wall much sooner and stalls again. I doubt that it
would take more than just a couple of cycles of this market whiplash for all
the participants to have two realisations: that they cannot get enough oil no
matter how much they pay for it, and that nobody wants to take their money
even for the oil they do have. Those who still have it will see it as too
valuable to part with for mere money. On the other hand, if the energy
resources needed to run an industrial economy are no longer available, then
oil becomes just so much toxic waste. In any case, it is no longer about
money, but direct access to resources.

7. A reasonable set of objectives

Now, I expect that a lot of people will find this view too gloomy and feel
discouraged. But I feel that it is entirely compatible with a positive vision
of the future, so let me try to articulate it.

First of all, we do have some control. Although we shouldn't hold out too
much hope for industrial civilisation as a whole, there are certainly some
bits of it that are worth salvaging. Our financial assets may not be long for
this world, but in the meantime we can redeploy them to good long-term
advantage.

Secondly, we can take steps to give ourselves time to make the adjustment. By
knowing what to expect, we can prepare to ride it out. We can imagine which
options will be foreclosed first, and create alternatives, so that we do not
run out of options.

Lastly, we can concentrate on what is important: preserving a vibrant
ecosphere that supports a diversity of life, our own progeny included. I can
imagine few short-term prerogatives that should override this - our highest
priority.

8. Managing financial risk

It will take some time for these realisations to sink in. In the meantime, we
will no doubt keep hearing that we have a financial crisis on our hands. We
must do something to shore up the banks, to deal with the toxic assets, to
shore up our credit ratings and so forth. There are people who will tell you
that this was all caused by a mistake in financial modelling, and that if we
re-regulate the financial sector, this won't happen again. So, for the sake
of the argument, let's take a look at all that.

Financial management is certainly not my speciality, but as far as I
understand it, it is mostly about assessing risk. And to do that, financial
managers make certain assumptions about the phenomena they are trying to
model. One standard assumption is that the future will resemble the past.
Another is that various negative events are randomly distributed. For
instance, if you are selling life insurance, you can be certain that people
will die based on the fact that they have been born, and you can be
reasonably certain that they will not all die at once. When someone dies is
unpredictable, when people in general die is random, most of the time. And so
here is the problem: the world is unpredictable, but classes of small events
can be treated as random, until a bigger event comes along. It may seem like
an obscure point, so let me explain the difference in a graphical way.

9. This is (pseudo)random

Here is a random collection of multicoloured dots. Actually, it is
pseudo-random, because it was generated by a computer, and computers are
deterministic beasts incapable of true randomness. A source of true
randomness is hard to come by. Even very good random noise generators can
have higher-order effects. Small events are frequent, and therefore we can
treat them as random, larger events are less frequent and rather
unpredictable, and some of the really large events put an end to the careers
of the statisticians trying to model them, and so we never find out whether
they are random or not. To a layman, this is random enough, but eventually
you run out of randomness and hit something very non-random.

10. This is not random but predictable

Like this. Now this is not random, even to a layman. This is like oil
expenditure going to 1/4 of global GDP. That certainly wasn't random. But was
it unpredictable? We had a few years of monotonically increasing oil prices,
and the high prices failed to produce much of a supply response in spite of
record-high drilling rates, investment in ethanol, tar sands, and so on. We
also have some good geology-based models that accurately predicted oil
depletion profile for separate provinces, and had a high probability of
succeeding in the aggregate as well. So this is definitely not random, and it
is not even unpredictable. So, at a higher level, what sort of mathematics do
we need to accurately model the inability of our financial and political and
other leaders and commentators to see it, or to understand it, even now? And
do we really need to do that, or should we just let this nice brick wall do
the work for us. Because, you know, brick walls have a lot to teach people
who refuse to acknowledge their existence, and they are very patient with
students who need to repeat the lesson. I am sure that the lesson will sink
in eventually, but I wonder how many more full-gallop runs at the wall it
will take before everyone is convinced.

11. His models mostly work

One person I would like to have a close encounter with the brick wall is this
fellow, Myron Scholes, the Nobel Prise-winning co-author of the Black-Scholes
method of pricing derivatives, the man behind the crash of Long Term Capital
Management. He is the inspiration behind much of the current financial
debacle. Recently, he has been quoted as saying the following: "Most of the
time, your risk management works. With a systemic event such as the recent
shocks following the collapse of Lehman Brothers, obviously the
risk-management system of any one bank appears, after the fact, to be
incomplete." Now, imagine a structural engineer saying something along those
lines: "Most of the time our structural analysis works, but if there is a
strong gust of wind, then, for any given structure, it is incomplete." Or a
nuclear engineer: "Our calculations of the strength of nuclear reactor
containment vessels work quite well much of the time. Of course, if there is
an earthquake, then any given containment vessel might fail." In these other
disciplines, if you just don't know the answer, then you just don't bother
showing up for work, because what would be the point?

12. We love their lies

The point certainly wouldn't be to reassure people, to promote public
confidence in bridges, buildings, and nuclear reactors. But economics and
finance are different. Economics is not directly lethal, and economists never
get sent to jail for criminal negligence or gross incompetence even when
their theories do fail. Finance is about the promises we make to each other,
and to ourselves. And if the promises turn out to be unrealistic, then
economics and finance turn out to be about the lies we tell each other. We
want to continue believing these lies, because there is a certain loss of
face if we don't, and the economists are there to help us. We continue to
listen to economists because we love their lies. Yes, of course, the economy
will recover later this year, maybe the next. Yes, as soon as the economy
recovers, all these toxic assets will be valuable again. Yes, this is just a
financial problem; we just need to shore up the financial system by injecting
taxpayer funds. These are all lies, but they make us feel all right. They are
lying, and we are buying every word of it.

13. Fastest way to lose all your money

Let's face it, these are difficult times for those of us who have a lot of
money. What can we do? We can entrust it to a financial institution. That
tends to turn out badly. Many people in the United States have entrusted
their retirement savings to financial institutions. And now they are being
told that they cannot withdraw their money. All they can do is open a letter
once a month, to watch their savings dwindle.

We can also invest it in some part of the global economy. I know some
automotive factories you could buy. They are quite affordable right now. A
lot of retired auto workers have put all of their retirement savings into
General Motors stock. Maybe they know something that we don't? (Actually,
that's part of a fraudulent scheme perpetrated by the Obama administration,
to pay off their banker friends ahead of GM's other creditors.)

Well then, how about a nice gold brick or two? A bag of diamonds? Some
classic cars? Then you could start your own personal museum of
transportation. How about a beautifully restored classic luxury yacht? Then
you could use the gold bricks to weigh you down if you ever decide to end it
all by jumping overboard.

Here's another brilliant idea: buy green products. Whatever green thing the
marketers and advertisers throw at you, buy it, toss it, and buy another one
straight away. Repeat until they are out of product, you are out of money,
and the landfills are full of green rubbish. That should stimulate the
economy. Market research shows that there is a great reservoir of pent-up
eco-guilt out there for marketers and advertisers to exploit. Industrial
products that help the environment are a bit of an oxymoron. It's a bit like
trying to bail out the Titanic using plastic teaspoons.

Another great marketing opportunity for our time is in survival goods. There
are some web sites that push all sorts of supplies to put in your private
bunker. It's a clever bit of manipulation, actually. Users log in, see that
the stock market is down, oil is up, shotgun shells are on sale, so are
hunting knives, and if you add a paperback on "surviving financial
armageddon" to your shopping cart you qualify for free shipping. Oh and don't
forget to add a large tin of dehydrated beans. Fear is a great motivator, and
getting people to buy survival goods is almost a matter of operant
conditioning: a marketer's dream.

If you want to help save the environment and prepare yourself for a life
without access to consumer goods, then doing so by buying consumer goods
doesn't seem like such a great plan. A much better thing to do is to BUY
NOTHING. But that is not something you can do with money. But there are
useful things to do with money, for the time being, if we hurry.

14. How to lose all your money (but have something to show for it)

Most of the wealth is in very few private hands right now. Governments and
the vast majority of the people only have debt. It is important to convince
people who control all this wealth that they really have two choices. They
can trust their investment advisers, maintain their current portfolios, and
eventually lose everything. Or they can use their wealth to reengage with
people and the land in new ways, in which case they stand a chance of saving
something for themselves and their children. They can build and launch
lifeboats, recruit crew, and set them sailing.

Those who own a lot of industrial assets can divest before these assets lose
value and invest in land resources, with the goal of preserving them,
improving them over time, and using them in a sustainable manner. Since it
will become difficult to get what you want by simply paying for it, it is a
good idea to establish alternatives ahead of time, by making resources, such
as farmland, available to those who can put them to good use, for their own
benefit as well as for yours. It also makes sense to establish stockpiles of
non-perishable materials that will preserve their usefulness far into the
future. My favourite example is bronze nails. They last a over a hundred
years in salt water, and so they are perfect for building boats. The
manufacturing of bronze nails is actually a good use of the remaining fossil
fuels - better than most. They are compact and easy to store.

Lastly, it makes sense to work towards orchestrating a controlled demolition
of the global economy. This calls for a new financial skill set: that of a
disinvestment adviser. The first step is a sort of triage; certain parts of
the economy can be marked "do not resuscitate" and resources reallocated to a
better task. A good example of an industry not worth resuscitating is the
auto industry; we simply will not need any more cars. The ones that we
already have will do nicely for as long as we'll need them. A good example of
a sector definitely worth resuscitating is public health, especially
prevention and infectious disease control. In all these measures, it is
important to pull money out of geographically distant locations and invest it
locally. This may be inefficient from a financial standpoint, but it is quite
efficient from the point of view of personal and social self-preservation.

15. Beyond finance: controlling other kinds of risk

Coming back for a moment to the poor bankers and economists, it seems rather
disingenuous for us to treat economics and finance as a special case of
people who generate a lot of unmitigated risk. Do we have any examples of
risks we understood properly and acted on in time? Are there any really
serious systemic problems that we have been able to solve?... The best we
seem to be able to do is buy time. In fact, that seems to be what we are good
at - postponing the inevitable through diligence and hard work. None of us
wants to act precipitously based on what we understand will happen
eventually, because it may not happen for a while yet. And why would we want
to rock the boat in the meantime? The one risk that we do seem to know how to
mitigate against is the risk of not fitting in to our economic, social and
cultural milieu. And what happens to us if our entire milieu finally goes
over the edge? Well, the way we plan for that is by not thinking about that.

16. The biggest risk of all

The biggest risk of all, as I see it, is that the industrial economy will
blunder in for a few more years, perhaps even a decade or more, leaving
environmental and social devastation in its wake. Once it finally gives up
the ghost, hardly anything will be left with which to start over. To mitigate
against this risk, we have to create alternatives, on a small scale, that do
not perpetuate this system and that can function without it.

The idea of perpetuating the status quo through alternative means is
all-pervasive, because so many people in positions of power and authority
wish to preserve their positions. And so just about every proposal we see
involves avoiding collapse instead of focusing on what comes after it. A
prime example is the push to develop alternative energy. Many of these
alternatives turn out to be fossil fuel amplifiers rather than
self-sufficient resources: they require fossil fuel energy as an essential
input. Also, many of them require an intact industrial base, which runs on
fossil fuels. There is a pervasive idea that these alternatives haven't been
developed before for nefarious reasons: malfeasance on the part of the greedy
oil companies and so on. The truth of the matter is that these alternatives
are not as potent, physically or economically, as fossil fuels. And here is
the real point worth pondering: If we can no longer afford the oil or the
natural gas, what makes us think that we can afford the less potent and more
expensive alternatives? And here is a follow-up question: If we can't afford
to make the necessary investments to get at the remaining oil and natural
gas, what makes us think that we will find the money to develop the less
cost-effective alternatives?

17. How long do we have?

It would be excellent if more people had these realisations, and started
making progress toward making their lives a bit more sustainable. But social
inertia is quite great, and the process of adaptation takes time. And the
question is, is there enough time for significant numbers of people to have
these realisations and to adapt, or will they have to endure quite a lot of
discomfort?

I believe that people who start the process now stand a fairly good chance of
making the transition in time. But I don't think that it is too wise to wait
and try to grab a few more years of comfortable living. Not only would that
be a waste of time on a personal level, but we'd be squandering the resources
we need to make the transition.

I concede that the choice is a difficult one: either we wait for
circumstances to force our hand, at which point it is too late for us to do
anything to prepare, or we bring it upon ourselves ahead of time. If we ask
the question, How many people are likely to do that? - then we are asking the
wrong question. A more relevant question is, Would we be doing this all
alone? And I think the answer is, probably not, because there are quite a few
other people who are thinking along these same lines.

18. It's always personal

I think it is very important to understand social inertia for the awesome
force that it is. I have found that many people are almost genetically
predisposed to not want to understand what I have been saying, and many
others understand it on some level but refuse to act on it. When they are
touched by collapse, they take it personally or see it as a matter of luck.
They see those who prepare for collapse as eccentrics; some may even consider
them to be dangerous subversives. This is especially likely to be the case
for people in positions of power and authority, because they are not exactly
cheered by the prospect of a future that has no place for them.

There is a certain range of personalities that are most likely to survive
collapse unscathed, physically or psychologically, and adapt to the new
circumstances. I have been able to spot certain common traits while
researching reports of survivors of shipwrecks and other similar calamities.
A certain amount of indifference or detachment is definitely helpful,
including indifference to suffering. Possibly the most important
characteristic of a survivor, more important than skills or preparation or
even luck, is the will to survive. Next is self-reliance: the ability to
persevere in spite of loneliness lack of support from anyone else. Last on
the list is unreasonableness: the sheer stubborn inability to surrender in
the face of seemingly insurmountable odds, opposing opinions from one's
comrades, or even force.

Those who feel the need to be inclusive, accommodating, to compromise and to
seek consensus, need to understand the awesome force of social inertia. It is
an immovable, crushing weight. "We must take into account the interests of
society as a whole." Translated, that means "We must allow ourselves to
remain thwarted by people's unwillingness or inability to make drastic but
necessary changes; to change who they are." Must we, really?

There are two components to human nature, the social and the solitary. The
solitary is definitely the more highly evolved, and humanity has surged
forward through the efforts of brilliant loners and eccentrics. Their names
live on forever precisely because society was unable to extinguish their
brilliance or to thwart their initiative. Our social instincts are atavistic
and result far too reliably in mediocrity and conformism. We are evolved to
live in small groups of a few families, and our recent experiments that have
gone beyond that seem to have relied on herd instincts that may not even be
specifically human. When confronted with the unfamiliar, we have a tendency
to panic and stampede, and on such occasions people regularly get trampled
and crushed underfoot: a pinnacle of evolution indeed! And so, in fashioning
a survivable future, where do we put our emphasis: on individuals and small
groups, or on larger entities - regions, nations, humanity as a whole? I
believe the answer to that is obvious.

19. "Collapse" or "Transition"

It's rather difficult for most people to take any significant steps, even
individually. It is even more difficult to do so as a couple. I know a lot of
cases whether one person understands the picture and is prepared to make
major changes in the living arrangement, but the partner or spouse is
non-receptive. If they have children, then the constraints multiply, because
things that may be necessary adaptations post-collapse look like substandard
living conditions to a pre-collapse mindset. For instance, in many places in
the United States, bringing up a child in a place that lacks electricity,
central heating, or indoor plumbing may be equated with child abuse, and
authorities rush in and confiscate the children. If there are grandparents
involved, then misunderstandings multiply. There may be some promise to
intentional communities: groups that decide to make a go of it in rural
setting.

When it comes to larger groups: towns, for instance any meaningful discussion
of collapse is off the table. The topics under discussion centre around
finding ways to perpetuate the current system through alternative means:
renewable energy, organic agriculture, starting or supporting local
businesses, bicycling instead of driving, and so on. These certainly aren't
bad things to talk about it, or to do, but what of the radical social
simplification that will be required? And is there a reason to think that it
is possible to achieve this radical simplification in a series of controlled
steps? Isn't that a bit like asking a demolition crew to demolish a building
brick by brick instead of what it normally does. Which is, mine it, blow it
up, and bulldoze and haul away the debris?

20. Better living through bureaucracy

There are still many believers in the goodness of the system and the magic
powers of policy. They believe that a really good plan can be made acceptable
to all - the entire unsustainably complex international organisational
pyramid, that is. They believe that they can take all these international
bureaucrats by the hand, lead them to the edge of the abyss that marks the
end of their bureaucratic careers, and politely ask them to jump. Now, don't
get me wrong, I am not trying to stop them. Let them proceed with their
brilliant schemes, by all means.

21. Simpler approaches: investment

There are far simpler approaches that are likely to be more effective. Since
most wealth is in private hands, it is actually up to individuals to make
very important decisions. Unlike various bureaucratic and civic bodies, which
are both short of funds and mired in social inertia, they can act decisively
and unilaterally. The problem is, what to do with financial assets before
they lose value. The answer is to invest in things that will retain value
even after all financial assets are worthless: land, ecosystems, and personal
relationships. The land need not be in pristine or natural condition. After a
couple of decades, any patch of land reverts to a wilderness, and unlike an
urban or an industrial desert, a wilderness can sustain life, human and
otherwise. It can support a population of plants an animals, wild and
domesticated, and even a few humans.

The human relationships that are the most conducive to preserving ecosystems
are ones that are in turn tied to a direct, permanent relationship with the
land. They can be enshrined in permanent, heritable leases payable in
sustainably harvested natural products. They can also be enshrined as deeded
easements that provide the community with traditional hunting, gathering and
fishing rights, provided human rights are not allowed to supersede those of
other species. I think the lifeboat metaphor is apt here, because the moral
guidance it offers is so clear. What has to happen in an overloaded lifeboat
at sea when a storm blows up and it becomes necessary to lighten the load?
Everyone draws lots. Such practises have been upheld by the courts, provided
no-one is exempt - not the captain, not the crew, not the owner of the
shipping company. If anyone is exempt, the charge becomes murder.
Sustainability, which is necessary for group survival, may have to have its
price in human life, but humanity has survived many such incidents before
without descending into barbarism.

22. Gift-giving as an organising principle

Many people have been so brainwashed by commercial propaganda that they have
trouble imagining that anything can be made to work without recourse to
money, markets, the profit motive, and other capitalist props. And so it may
be helpful to present some examples of very important victories that have
been achieved without any of these.

In particular, Open Source software, which used to be somewhat derisively
referred to as "free software" or "shareware", is a huge victory of the gift
economy over the commercial economy. "Free software" is not an accurate
label; nor is "free prime numbers" or "free vocabulary words". Nobody pays
for these things, but some people are silly enough to pay for software. It's
their loss; the "free" stuff is generally better, and if you don't like it,
you can fix it. For free.

General science works on similar principles. Nobody directly profits from
formulating a theory or testing a hypothesis or publishing the results. It
all works in terms mutuality and prestige - same as with software.

On the other hand, wherever the pecuniary motivation rises to the top, the
result is mediocre at best. And so we have expensive software that fails
constantly. (I understand that the British Navy is planning to use a
Microsoft operating system on their nuclear submarines; that is a frightening
piece of news.) We also have oceans full of plastic trash - developing all
those "products" floating in the ocean would surely have been impossible
without the profit motive. And so on.

In all, the profit motive fails to motive altruistic behaviour, because it is
not reciprocal. And it is altruistic behaviour that increases the social
capital of society. Within a gift-giving system, we can all be in everyone's
debt, but going into debt makes us all richer, not poorer.

23. Barter as an organizing principle

Gifts are wonderful, of course, but sometimes we would like something rather
specific, and are willing to work with others to get it, without recourse to
money, of course. This is where arrangements made on the basis of barter. In
general, you barter something over which you have less choice (one of the
many things you can offer) for something over which you have more choice
(something you actually want).

Economists will tell you that barter is inefficient, because it requires
"coincidence of wants": if A wants to barter X for Y, then he or she must
find B who wants to barter Y for X. Actually, most everyone I've ever run
across doesn't want to barter either X for Y, or Y for X. Rather, they want
to barter whatever the can offer for any of a number of the things they want.

In the current economic scheme, we are forced to barter our freedom, in the
form of the compulsory work-week, for something we don't particularly want,
which is money. We have limited options for what to do with that money: pay
taxes, bills, buy shoddy consumer goods, and, perhaps, a few weeks of
"freedom" as tourists. But other options do exist.

One option is to organise as communities to produce certain goods that the
entire community wants: food, clothing, shelter, security and entertainment.
Everyone makes their contribution, in exchange for the end product, which
everyone gets to share. It is also possible to organise to produce goods that
can be used in trade with other communities: trade goods. Trade goods are a
much better way to store wealth than money, which is, let's face it, an
essentially useless substance.

24. Local/alternative currencies

There is a lot of discussion of ways to change the way money works, so that
it can serve local needs instead of being one of the main tools for
extracting wealth from local economies. But there is no discussion of why it
is that money is generally necessary. That is simply assumed. There are
communities that have little or no money, where there may be a pot of coin
buried in the yard somewhere, for special occasions, but no money in daily
use.

Lack of money makes certain things very difficult. Examples include gambling,
loan sharking, extortion, bribery and fraud. It also makes it more difficult
to hoard wealth, or to extract it out of a community and ship it somewhere
else in a conveniently compact form. When we use money, we cede power to
those who create money (by creating debt) and who destroy money (by
cancelling debt). We also empower the ranks of people whose area of expertise
is in the manipulation of arbitrary rules and arithmetic abstractions rather
than in engaging directly with the physical world. This veil of metaphor
allows them to mask appalling levels of violence, representing it
symbolically as a mere paper-shuffling exercise. People, animals, entire
ecosystems become mere numbers on a piece of paper. On the other hand, this
ability to represent dissimilar objects using identical symbols causes a
great deal of confusion. For instance, I have heard rather intelligent people
declare that government funds, which have been allocated to making failed
financial institutions look solvent, could be so much better spent feeding
widows and orphans. There is no understanding that astronomical quantities of
digits willed into existence and transferred between two computers (one at a
central bank, another at a private bank) cannot be used to directly nourish
anyone, because food cannot be willed into existence by a central banker or
anyone else.

25. Belief in science and technology

One accusation I often hear is that I fail to grasp the power of
technological innovation and the free market system. If I did, apparently I
would have more faith in a technologically advanced future where all of our
current dilemmas are swept away by a new wave of eco-friendly sustainability.
My problem is that I am not an economist or a businessman: I am an engineer
with a background in science. The fact that I've worked for several
technology start-up companies doesn't help either.

I know roughly how long it takes to innovate: come up with the idea, convince
people that it is worth trying, try it, fail a few times, eventually succeed,
and then phase it in to real use. It takes decades. We do not have decades.
We have already failed to innovate our way out of this.

Not only that, but in many ways technological innovation has done us a
tremendous disservice. A good example is innovation in agriculture. The
so-called "green revolution" has boosted crop yields using fossil fuel
inputs, creating generations of agro-addicts dependent on just one or two
crops. In North America, human hair samples have been used to determine that
fully 69% of all the carbon came from just one plant: maize. So, what piece
of technological innovation do we imagine will enable this maize-dependent
population to diversify their food sources and learn to feed themselves
without the use of fossil fuel inputs?

I think that what makes us likely to think that technology will save us is
that we are addled by it. Efforts at creating intelligent machines have
failed, because computers are far too difficult to program, but humans turn
out to be easy for computers to program. Everywhere I go I see people poking
away at their little mental support units. Many of them can no longer
function without them: they wouldn't know where to go, who to talk to, or
even where to get lunch without a little electronic box telling what to do.

These are all big successes for maize plants and for iPhones, but are they
successes for humanity? Somehow I doubt it. Do we really want to eat nothing
but maize and look at nothing but pixels, or should there be more to life?
There are people who believe in the emergent intelligence of the networked
realm - a sort of artificial intelligence utopia, where networked machines
become hyperintelligent and solve all of our problems. And so our best hope
is that in our hour of need machines will be nice to us and show us kindness?
If that's the case, what reason would they find to respect us? Why wouldn't
they just kill us instead? Or enslave us. Oh, wait, maybe they already have!

26. The need to evolve

Now, supposing all goes well, and we have a swift and decisive collapse, what
should follow is an equally swift rebirth of viable localised communities and
ecosystems. One concern is that the effort will be short of qualified staff.

It is an unfortunate fact that the recent centuries of settled life, and
especially the last century or so of easy living based on the industrial
model, has made many people too soft to endure the hardships and privations
that self-sufficient living often involves. It seems quite likely that those
groups that are currently marginalised, would do better, especially the ones
that are found in economically underdeveloped areas and have never lost
contact with nature.

And so I would not be surprised to see these marginalised groups stage a
come-back. Almost every rural place has its population of people who know how
to use the local resources. They are the human component of the local
ecosystems, and, as such, they deserve much more respect than they have
received. A lot of them can't be bothered about fine manners or about
speaking English. Those who are used to thinking of them as primitive,
ignorant and uneducated will be shocked to discover how much they must learn
from them.

27. Beyond planning

So what are we to do in the meantime, while we wait for collapse, followed by
good things? It's no use wasting your energy, running yourself ragged and
ageing prematurely, so get plenty of rest, and try to live a slow and
measured life. One of the ways industrial society dominates us is through the
use of the factory whistle: few of us work in factories, but we are still
expected to work a shift. If you can avoid doing that, you will be ahead.
Maintain your freedom to decide what to do at each moment, so that you can do
each thing at the most opportune time. Specifically try to give yourself as
many options as you can, so that if any one thing doesn't seem to be working
out, you can switch to another. The future is unpredictable, so try to plan
so as to be able to change your plans at any time. Learn to ignore all the
people who earn their money by telling you lies. Thanks to them, the world is
full of very bad ideas that are accepted as conventional wisdom, so watch out
for them and come to your own conclusions. Lastly, people who lack a sense of
humour are going to be in for a very hard time, and can drag down those
around them. Plus, they are just not that funny. So avoid people who aren't
funny, and look for those who can laugh at the world no matter what happens. 


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