Revolutionary Thinking This May Day

May Day, 2009

I'm no Bolshevik. But I think we need some revolutionary ideas right now. So on this May Day, traditionally the day of celebration of the International Workers Day and the Russian nod to socialism, I offer the following.

Seeing

I've noticed a pattern in the way my mind works on wicked problems. After thinking consciously about the problem for a long time, considering the various aspects explicitly, I let the thoughts go from conscious mind. But my subconscious mind is much more tenacious. After letting go of the explicit thoughts I seem to go into a kind of funk. Not really a depression, as such, but a kind of retreat from active participation in many everyday living sorts of things. I do get a bit moody, I confess. I also suffer from what I suspect are psychosomatic symptoms, aches and pains that seem to migrate around my body from joints to muscles to guts (my doctors fail to find any organic evidence of disease!) This can go on for months.

And then out of seemingly nowhere I find myself thinking about a scenario. It comes in the form of a story. I don't have a conscious experience of constructing the story, or choosing the characters. It is nothing like a fantasy or imagined episode. It just comes out as a story. Then I think about it consciously. I mull over the meaning of the story and try to extract the significance. After awhile I realize that my subconscious mind has been working on the problem all the time. And it has produced an idea for a solution. It is quite amazing to realize that so much mental effort goes on below the surface of consciousness.

Readers of this blog know that I have spent a fair amount of time questioning the model of modern technological civilization that has produced our world. The reason is simple enough. Whatever we have been doing to build our modern society, it has had what we now realize are massively threatening unintended consequences. We are on the brink of disaster of the kind prior civilizations have faced but now on a global scale. We are facing collapse (the kind Jared Diamond has written about). And, since we have poisoned the water, air, and soil getting here, we are going to take a lot of other species down with us.

I realize there are no small number of people who still have difficulty coming to this same conclusion. Most people do not have the kind of time in their daily lives that I have had to examine the range and depth of evidence. Even among those who do dedicate themselves to understanding the problems, usually they focus on only one obvious problem, e.g. climate change, and tend to miss the larger picture, the complex multiple issues and how they are all interrelated. Activists and commentators grapple with single points and I've even seen them argue with one another about which problem is more important, as if finding the solution to the most important problem will solve all the others.

You know I've been writing about all of this for some time now. I've even offered analysis and opinions about what might be done from time to time. There are some answers that are clear from the nature of the problem (like overpopulation, for example) that I have suggested. But these have been in bits and pieces, here and there. Lately, my blogging activities have centered around somewhat more academic themes as these have been the easiest to concentrate my conscious mind on. All the while things were fulminating below the surface. Now a story has emerged. I suppose you could say I've had a vision.

We have a choice to make. We can continue along trying to resurrect the economy of prior days where people got jobs making stuff or providing services that other people were convinced were neat due to advertising and they were lured into borrowing money to buy. Every transaction counted as raising the GDP. Wow! Good for good old capitalism. Bad for poor old planet (and ultimately us). Or we can knuckle down and make changes that involve discipline, sacrifice, and vision of what the future can be. The latter is not a pleasant thought because it calls on us all to give up some of our treasured beliefs. If we choose the former, as seems to be the default position right now, we will crash and burn. There is no escaping this. There is no magic that can allow a system (our economy) to grow ad infinitum on a finite planet. To hold out hope otherwise is to be delusional.

The latter choice is going to involve actions that will drive Republicans and Libertarians crazy. They are the voice of the first option. By their lights free markets and capitalism will solve everything if we only let them. That isn't science, that is religion. And it is going to go the way of Zeus and Krishna (to name only a few) worship. The market god is not going to save us. Righteous capitalists are not going to save us. In fact nothing can really save us, if save means keeping things pretty much as they have been in the recent past. Democrats and progressives aren't going to like it any better. Most Dems believe in the market as well, at least in principle, and they certainly believe in progress; we will all have more and better stuff in the future. But what I am suggesting is that there can be no progress in the immediate future. There will need to be contraction and restraint in order to compensate for the exhuberance, hubris, and excesses of the past two hundred years or so. Maybe some day in the more distant future mankind may reach a steady-state equilibrium within the Ecos while having a comfortable, technologically appropriate civilization. But getting to that day will be arduous for us in the near term.

Here are some of those revolutionary thoughts about what I see as needing to happen. The need is brought about by the declining amount of energy that will be available to do useful work in the future. The decline appears to have already started, which I claim is at the base of the financial and economic crisis we find ourselves in (see the articles posted under the Biophysical Economics topic on the sidebar). Since there is no gigantic magic bullet in the area of energy production solutions (lots of little not-so-magic possible partial solutions) we will not be able to avoid the literal contraction of our economy and what we currently think of as wealth production. What we need to do is avoid a catastrophic collapse where people will starve and/or kill one another to survive. Even the USA and the developed countries could end up looking like Darfur if we don't take revolutionary steps to salvage civilization. So, some radical ideas...

Getting Rid of Banks

One of the first things that has to go is banks. Local and regional credit unions are a more sustainable model for lending. One major difference will be that lending must be restricted to projects that show a high energy return on energy investment (EROEI), like home improvement of energy efficiency or trading in a gas-guzzler for an electric hybrid. The objective of all investment is increasing the net energy available to society without harming the environment.

Banks as they currently exist are no longer viable means for borrowing from savings. They have become a means for borrowing against a presumed future of earnings. They have become gambling casinos in which patrons risk all but don't feel at risk by believing in their hearts that they will surely be better positioned to pay back that loan in the near future. Well that might have been the case back when oil production was expanding and EROEI was still high. It is no longer true now. All investment must in some way reflect the need for increasing our high EROEI sustainable energy production capacity. Borrowing $100k to start a new T-shirt company is not an option.

What large scale investment banking is to go on in the future should be done by nationalized credit authority under very strict guidelines. Those guidelines should also reflect the objective of increasing net energy while not robbing from the environment.

Credit cards need to follow the Dodo bird into extinction. People have generally proven beyond a shadow of a doubt that they do not know how to resist temptation and buy stuff they believe they will pay for in the not-too-distant future (see my articles on Sapience). It's too easy. And it only encourages people to spend needlessly on junk that ends up in a garage or basement one day. Consumer goods purchasing should come from savings or cash flow, not credit.

But the single biggest aspect of banking that needs to be curtailed is fractional reserve banking. This practice, long believed to be a spur to innovation and entrepreneurship creates phoney money, the illusion of more money in circulation than actually exists. By allowing some fraction of deposits to be loaned out to borrowers who make purchases, there is an appearance of more money in the system than is actually there. I have advocated that the money supply should be tied strictly to the amount of energy available to do useful (productive, non-harming economic) work. This would ensure that the money available to handle transactions would match the economy's capacity to create real wealth. It would, in short, prevent inflation and financial bubbles (taken together with the cap on profits, below). The real money supply, M0 and some of M1, should be regulated in this fashion, hence no financial instruments of any kind, can be used as a temporal substitute, which would distort the apparent money supply.

This extends to speculative forms of investing, such as in the stock market. A major problem that capitalism supposedly solves is aggregating capital (reserve wealth) efficiently for the purpose of investing in expanding production or new kinds of production (improvements or new products). In an era of declining net energy, which is not far off, the need for investment in expansion is moot. Investments need to be made in conservation and efficiency improvements along with maintenance of existing infrastructure to extend its useful life. But the contraction of commerce mandated by contracting energy supply will put an end to entrepreneurship except in areas deemed needed for those just mentioned. In a contracting economy, or a steady-state economy that might eventually obtain, there is no need to invest just to create jobs. There can be no return on investment from a strictly financial point of view, only from an energetic one (EROEI).

Banking, in the end, should revert to its age old function of storing temporary excess wealth (like a granary of old) to save for times of need. In the form of a credit union, based on a community of savers, small, short-term loans from this pool would be used for repairs, increasing efficiency, and as a means of synchronizing work processes (as, for example, loans to cover planting in an agricultural, seasonally pulsed system). Thus borrowing is against savings, not against the future, speculative growth in wealth.

Profits Redefined

In fact profits, excess of wealth production over current accumulated costs, should be understood very differently in a contracting economy. This is simply because they are temporary gains that should be put to savings. In a steady-state economy there can be no long-term profit taking without doing harm either to the environment or to other people. It is a zero-sum game and any boost in productivity has to be recognized as a compensation for the inevitable losses elsewhere or at future times.

To get from where we are now to where we grasp that profits are ephemeral we need to establish profit caps now. A cap of, say 2% per year, with windfall profit taxes kicking in for anything over that amount, will allow businesses to transition to contraction mode, especially if profits are steered to savings. We could even consider eliminating income taxes as a way to pay for government services (except for the excess over 2%). This would necessitate the installation of a progressive sales tax (see The Fair Tax Act for an example of what might work).

The shift from the profit motive is essential to managing the contraction in economic activity. One way companies could keep their profits down is to increase their labor costs (higher wages, higher set asides for insurance, etc.) This would allow them, for example, to decrease work hours or do job sharing while providing adequate pay and keep unemployment down. What government regulation would need to do is forbid companies' management from paying themselves huge salaries incommensurate with average labor wages. Bonuses (no more than 2%, of course) might be paid to employees who find ways to increase productivity insofar as EROEI is concerned. Reward innovation when it counts toward improving the whole economy, but not for increasing sales.

Unemployment and Re-education

I don't know if this is even feasible at this point because so much money has been pumped into keeping the banking and financial markets afloat that there may not be enough left to make this work. But the idea is that, during this transition period when layoffs are going to happen under the old paradigms of profit protection, we need to pay people unemployment benefits when they lose their jobs. If all those billions of dollars that were pumped into the banks and even the auto companies had been used instead to pay peoples' wages after their companies laid them off or shut down we could have actually done something constructive while watching the old moribund institutions die. We could have been training millions of people to earn their livings doing something useful, like farming and retrofitting buildings with insulation. Instead, we are striving to buoy up a failed economy, keep people in dead end jobs so that they can spend their money on useless stuff, and keep up the illusion of happiness.

Hopefully as it becomes clearer that banks and auto companies (and other for-profit institutions) cannot be saved we will simply let them die and the government will use what resources it can recoup to keep cash flowing to the unemployed (or previously gainfully employed). This cash payout should not be geared to supporting consumeristic behavior just to keep other companies from folding. People need basics, food, shelter, and even a little entertainment now and then. But the last thing we should do is encourage anyone, especially someone without a job, from buying the latest BlueRay DVD or widescreen TV, something they might have done if they continued to be employed (even if on credit!)

Eventually, as a new ethic of non-profit-based production pervades the economy (see above) organizations will turn toward hiring more people to do the jobs actually needed in a contracting or steady-state economy. They will do this to ease the time pressures on current employees, allowing everyone to do meaningful work while having leisure and family time.

Taxing to Redress Wealth Disparity and to Finance Programs

One of the most egregious conditions of our time is the huge disparity between rich and poor, both in total volume of wealth and in numbers occupying those ends of the spectrum. I'll say it plainly. The rich are simply too rich. The prevailing meme has been that the rich deserve their riches. Besides, the story goes, the pie is getting bigger because the rich invest in new commerce that raises everybody's standard of living.

Of course it is all a myth. The rich got lucky and as long as the high EROEI oil kept flowing (and volumes growing) the general wealth kept expanding. The rich didn't make it happen. They just happened to be standing in the right place at the right time. All those stories about high school drop outs futzing with computers and creating super profitable enterprises are really the stories we would like to believe in because there is always a chance that any one of us could achieve the same heights of wealth. Bollox. The truth is that the vast sea of energy hungry consumers made it happen to fulfill their desire for convenience and status. I'll grant the entrepreneur who recognized the demand and managed to position to take advantage of it was clever alright. But so what? There are lots of clever people out there who simply never got a chance to have the same circumstances.

I advocate a steep tax on accumulated wealth. This would include property taxes, estate taxes, income taxes on salaries in excess of what is reasonable (see above), and taxes on un-earned income. No one has a right to live in a forty room mansion (with servants) in an ethical sense. We have entered an era where we have to use our wealth wisely as a society. We cannot afford for some portion to be tied up in expensive and wasteful luxuries. Those mansions could be turned into hospitals and living quarters (I know, shades of Dr. Zivago and the Bolsheviks again). How many nobles in England still occupy their familial castles? Many have been turned into museums or tourist sites just to pay for maintenance of historically relevant architecture.

Sorry rich people, but you let your greed get away from you. Your conspicuous consumption is going to trigger considerable resentment as the economy becomes noticeably smaller. Being rich cannot be a means of escape from the harsh realities society will face.

The Unfolding Story

There are other measures that need to be taken but the above are a good starting place and have tremendous leverage. I will be writing more about additional revolutionary ideas in the future.

Oh yes, the story. It continues to emerge and evolve. Some new characters have shown their faces. Some more ideas are coming out. But the basic plot has been determined.

What was the story, you ask? Ah, perhaps I'll share it with you another time. This post is already too long (as are most of my writings!) Let's just say it involves one very surprised elected official who likes to read blogs and knows how to use Google. He's surprised because the advisors he put in place to fix the economic picture have not produced a workable plan (and lots of even traditional economists have pointed out the flaws). He's also surprised to read a blog (oh let's say like this one) that provides a radically different world view that arises when you question the conventional wisdom. You know, the wisdom that just doesn't seem to be working any more.

Comments

[Fred Magyar]

A pleasure to have found your blog, sir. I will be stopping by in the future.

Can't wait to hear more about "The Unfolding Story"

Just the thought makes one almost dare to hope again...

[GaryA]

I readily identify with your anguish George. I suffer from bouts of Insomnia(not helped by our 18 month old sons sleeping patterns)In which I lie awake for hours pondering on the extinction facing us and I am more convinced than ever that no solution will ever come through the democratic-Capitalist system we are trapped inside,. Democracy is a sacred cow which is a huge part of the problem-not the solution. Lets face facts Democratic legitimacy rests on the assumption that a majority of human beings in whatever social group are autonomous rational beings capable of independant thought and decisions.
There is no evidence in the scientific psychological or anthropological fields to support such an assumption!

The response to that criticism is invariable well whats better- communism? Socialism? Shallow formulaic thinking.... A few years ago in one of my Insomnia bouts I came up with my (admittedly) utopian ideal...which would consist of a selected multi-tiered meritocracy from local to global level
They would be selected by those members of the meritocracy immediately above them, by a combination of psychometric tests and accumulated knowledge/wisdom/practical standards.
At the top global level would sit ‘The Guardians’- guardians of Humanities and the biospheres long term health who would set limits and criteria (constantly updated as scientific findings progress) for each successive downward-chain meritocracy to apply
They would set definite limits to human resource use for each area of the planet –convergence and ratchet downwards to a long term more equitable sustainable and just level for everyone.
The guardians would rise through the ranks from young local activists by merit of dedication talent and demonstrated reverence for all of life.
Of course the colossal problem is how do the sapient and intelligent elite rest control from the 'dictatorship of the stupid' ruining this planet? I confess apart from fantasy-driven scenarios of comitted individuals using herf guns and e-bombs to weaken and take over nodes and leverage points I cant see how realistically it can happen. Also the masses are not going to give up their overstuffed lifestyle without some form of coercion which is alien to our engrained libertarian instincts. Maybe its more moral to let it all collapse and atempt to rebuild from the ashes.
How would an Alien civilisation view us knowing we knew what was wrong, knowing what must be done? Are we condemmed to a kind of postmodern paralysis, the product of an incurable inbuilt moral cowardice?
These are the kind of thoughts I eventualy drift off to sleep struggling over. ...and your right about conscious attention having little to do with our biological existance or deeper imperatives and instincts.....

[Dboy]

"Zeus and Krishna"

When I think about Republicans, "Zeus and Krishna" are not the two mythological beings that pop into my mind.

[George Mobus]

Fred,

Thanks. We'll have to see how the story evolves!

GaryA,

It has seemed to me we suffer from several related problems with democracy as our method of governance. These are, ignorance, complexity of issues, and the fact that there are simply too many people in the society to allow the ideal of democracy, even a representative form, to work.

I imagine that in the prehistoric condition of humanity, with small tribes of approximately 150 people on average, it was relatively easy to determine who the wisest (elders) were and to entrust them with the big decisions for the tribe. A council of elders seems to have been a norm prior to agriculture taking off.

With so many people milling about today it becomes increasingly difficult to recognize who is wise enough to become a social trustee (Howard Gardener's work). Also, with so many people in such complex societies I seriously wonder if anyone is wise enough, or knowledgeable enough, to be Guardians of the world. Even if every head of every nation was as clever as we think Obama is, could they form anything like a council of elders?

I suspect that like every other evolving system we will have to go through a phase transition with creative destruction reducing our numbers and complexity to a point where sapient governance becomes feasible.

Dboy,

I did say "to name a few"!

I'd recommend you try not to think of Republicans (in the current form of the party) if possible. It just makes one crazy!

Thanks all.

George

[מכשיר שמיעה]

It only encourages people to spend unnecessarily on waste that end up in a garage or basement one day. Thanks for this one.