Tuesday, October 23, 2007

Shrinkage

My previous post evoked a fascinating response by M_David, who has mentioned in the past that he is an oilman working in Alaska. I always welcome a voice of experience, and some moderation, in response to my apocalyptic-leaning tendencies.

Mr. David offered the following response to my suggestion that a world of declining energy stores would lead to the demise of our basic economic order:

[I] don't see this either. There
should be more middle class, less upper class, and both would be less wealthy. Wealth in the sense of "class" is relative. Middle class just defines how the wealth is distributed. And when everyone starts getting squeezed, look for the voters to redistribute wealth via taxes. The New Deal and all that. Remember, labor should make a comeback under peak oil.

In summary, the only issue I have with this post is the assumption that oil just "peaks" and everyone keels over overnight. No way. The hump of the peak is long, and conservation kicks in as the price elevates. Give me $500/bbl oil and I'll show you a hullva lot of conservation and energy innovation. No, it's most likely a long, slow, non-alarmist road, people migrating back to city-centers, smaller homes, less consumption...IOW, a better life


As I've suggested a number of times in previous posts, I think that the form of life that we are increasingly going to have to lead will be in greater accordance with a life of virtue, a life of moderation and in greater keeping with the governance of nature. Here I wholeheartedly agree with the concluding sentiments of the response - in sum, we will of necessity live "a better life."

I am far less sanguine about the peaceful transition from our current condition to this "better life." I think there is a growing possibility of severe social and personal pain and dislocation, of societal upheaval and even political chaos. These are not conditions that we have ever experienced and seem implausible, even incredible. But, the bleak scenario we may face is not because human beings - and Americans especially - can't live this better way of life, but because we have organized our lives in ways that make any such easy transition implausible if not impossible.

There are obvious ways in which this is so: take, for instance, the example of banking. The modern capitalist system is built on the health of a banking system. The health of a banking system rests most deeply upon a foundation of economic growth: no one would lend out money at modest interest if they believed first, that there was great risk of default, and second, if the money returned in the future (even with interest) was worth less than money in the present. Our banking system hums along in the backdrop of economic growth; in a backdrop of economic contraction, the banking system would become dysfunctional. Some bankers might succeed by making good bets on individuals, but the systemic backstop that the future will be brighter than the present would disappear (this is the same principle by which we do better betting on the market than necessarily on individual stocks; we can afford to have some losers in our portfolios in the backdrop of a rising market. Just as a rising market makes everyone look like financial geniuses, so too a growing economy makes our high-finance Hampton banker boys look brilliant).

Beyond such specific examples, however, there is a deeper cause for concern which is tied most fundamentally to the very plausibility of the modern liberal system. Modern liberal society is premised on growth - constant, unrelenting growth. Liberal democracies have always and everywhere come under severe stress, and very often have disintegrated under conditions of prolonged economic contraction. Much of modern history records not the stability and "normality" or naturalness of liberal democracy, but its profound fragility. America has come to believe that liberal democracy is its birthright, even that it is the natural condition of mankind. There is much evidence to contradict this belief: liberal democracy has in most cases been a difficult political arrangement to maintain, perhaps above all because it requires belief in its fundamental justness from the populace. In the absence of the prospects of limitless growth, the populace of many liberal democracies have rejected the justness of liberal democracy, and their societies have unravelled, at times descending into conflict, civil war and chaos.

Why should this be so? In a nutshell, liberal democracy contains an internal contradiction: liberalism is a political theory of basic economic inequality; democracy is premised upon the belief in political equality. Democracy exerts an egalitarian pressure upon liberalism, to which liberalism must offer some compensation. The earliest theorists of liberalism understood well that they were commending a theory of economic inequality: in the justly famous Chapter 5 of the Second Treatise on Government, John Locke argued that liberal society allowed and even encouraged increasing economic differentiation between the "industrious and rational" and the "quarrelsome and contentious." Advanced liberal societies permitted the exacerbation of the position between these two sorts of humans: the rights of liberal society required defense of the State, above all, to prevent the assault on wealthy "estates" (or property) by the larger "quarrelsome and contentious" classes. Locke foresaw the potential of proto-Marxist temptations among the poor to deprive the wealthy of property. In the end, the promise of State protection of property was not sufficient: liberal society cannot last if there is a persistent desire on the part of the lower classes to encroach on rights of property. A repressive (Western) liberalism has generally not proven successful.

Instead, Locke argued that it was the promise of economic growth that would induce even the poorest in society to accept the terms of liberal inequality, that would assuage the democratic egalitarian pressures. A growth society promises improvement of condition even to the poorest person: hence, Locke wrote (and repeated the claim) that the poorest day laborer in England (a growth economy) was wealthier than the richest Indian chief in America (that is, a subsistence, or non-growth economy). Locke's was the earliest version of Reagan's adage that "a rising tide raises all boats"; in this respect, there is very little fundamental philosophical difference between Ronald Reagan and John Rawls: both share the liberal belief that substantial economic inequality is acceptable even to the poorest of a liberal society so long as the poorest believe that they stand to benefit in some comparative proportion along with the wealthiest classes. The American story of the self-made man, the Horatio Alger story, the pioneer or Western settler or hard working immigrant who makes good, is a deep pre-condition of the success of American liberalism. However, while this myth is often attacked as a form of false consciousness by thinkers on the Left, it is the deeper validity of the story - not true in all particulars, but largely true on a societal level that our economic system has always promised a better life to future generations - that has uniquely contributed to the remarkable stability of the American liberal system.

As we enter the most heated stage of the election season, notice that for all the purported difference between the candidates of the same and opposite parties, that there is uniform agreement that the object of politics in America is growth. Whether conscious or not, every politician in America is aware that a condition of non-growth would be tantamount to political suicide, and worse, might induce political dislocation.

People will not gladly or easily accept sure knowledge of a future of decrease. The idea that we will gradually and easily slip into a "better future" in which the stock market continuously loses value; in which our houses grow less valuable year after year; in which our purchasing power, via our dollar, buys less every passing day; in which our children can expect to make less money, to have a "less successful" future than previous generations; in which we will have to adjust our expectations to accept work of a more manual nature, for less money, and with less leisure - that we will go gladly into that "better life" without a tumultuous political upheaval and a vicious fight over the valuable scraps that remain is implausible if not pure fantasy and dangerous wishful thinking.

Already the "elites" are deserting the nation. Dick Cheney has his retirement money in Old Europe bonds. A story today on Bloomberg.com reports that a leading investor is converting his entire holdings to the Chinese yuan, and that he predicts a future of economic decline in the U.S. across all asset classes except agriculture (there will be less food). What for the elites is a good investment strategy is a sure sign of social instability. Our elites are so blinkered by money-making that they fail to see that they are breaking the most fundamental terms of the contract, but the economic future that we face leaves very few options for maintaining the contract. The patriotic and communal sense of obligation that helped Americans live through the Depression have been undermined and overthrown by the individualism and mobility induced by hyper-capitalism and advanced liberalism.

I hope I am wrong. But I wouldn't build any grandiose plans around that hope.

3 comments:

Peter Y. Paik said...

Thanks for this post - it sounds as though our Lockean complacency is about to be given a rude Hobbesian jolt. I agree with you that it seems unlikely that our country will gracefully and maturely accept a life without instant gratification or perpetual desire after ever more useless consumer items. What happens when those enticing objects that people have been encouraged to slave away for suddenly disappear?

You're right to point out that our society has allowed to languish the very qualities needed for managing this shift to scarcity peacefully: the virtues which have to do with restraint - frugality, chastity, patience, endurance. Furthermore, many of our fellow citizens have been habituated into denigrating the government, which obviously plays the most important role in securing the conditions that make commodious living possible.

I fear that we might descend into a war of all against all, but it will be a war fought by each person as an economic mercenary on his own behalf.

Scott D said...

Your scarcity and no-growth comments help me think about Rene Girard's rivalry and violence work. In our surplus and growth society, we may still compete over success and status. However, in a no-growth situation the battles are over needed resources. It is at this juncture sacred violence and scapegoating are helpful in generating a form of peace. Perhaps the gods are more necessary under such conditions and surplus allows or spawns our secularism.

A strand of Girardians explore how deepening "ontological density" assists in resisting or diminishing the rivalry (also called negative mimesis). More than a few in this crew are Catholic and have given me a much greater appreciation of Pope Benedict's insights into our age.

This process, I believe, is similar to Josh Mitchell's recognition of Plato's Gift, knowledge of the Good, to provide divine patterns, not corrupted mortal ones and strengthen one's resolve against injustice and suffering. Did not Plato face trial during the siege of Athens, a period of scarcity and no growth?

__________________________
In explaining liberalisms acceptance of "inequality," I suggest you consider including "liberty" or "liberty that results in inequality." It's more palatable to sensitive democrats ears. That's how much we hate inequality, we won't follow the logic that explains it.

Anonymous said...

I am far less sanguine about the peaceful transition

I think we agree some here. My point was only that if we screw it up, it won't be due to externals or economics, but due to politics or stubborness. And you seem to be leaning towards the latter here.

I remember in the book "Rising Sun," a pol wanting to use the world conservation in a speech was told by his advisors this word is like death to Americans. The pol was like, "Why? Conservation means you are richer, you don't waste and become more powerful, more weathy, and have more options. Ever dollar you save in cutting expenses is more to go vacation with." The advisors scoffed, but I think Americans can come around here, change rapidly. Look, for example, at how fast we have changed our views on drunk driving, smoking, homosexuality, premarital sex. When gas hits $20/gal, we might see a culture shift. I agree the spoiled, old set-in-their-ways boomers will have a hard time changing, though.

But thanks for the cogent response. Between you, Hirsh, and Dreher, I am getting more afraid every day ;-).