The Last Recession? Or Our Best Opportunity for Hope?
The Last Recession? Or Our Best Opportunity for Hope?
by Jerry Silberman
As the drama of the bursting bubble of Wall St. gives way to a slower, but
steady and painful, economic decline, the first and most important question
we should ask is "Should we try to blow another bubble, or should we reject
bubble culture values for something entirely different?"
If we agree that we need a new culture, this leads to the question "Can we
take advantage of the opportunity afforded by this collapse, by the exposure
of a failed system, to establish new "rules for the house" (the root meaning
of "economy" from the Greek)?"
If the house, metaphorically, is Planet Earth the way we have enjoyed it for
millennia, then making the choice now to change to a sustainable economy is
the best way to turn the apparent lemon of this economic contraction into
the best lemonade in history.
The current economic contraction has been developing for almost 20 years,
and for the last four or five has appeared inevitable to anyone not under
the spell of the "free market" fantasy. It is the result of an economic
system which was able, briefly, to ignore and disregard its natural limits
and restraints. Finite resources were seen as infinite entitlements.
Politicians, businessmen, and intellectuals of all stripes and ideologies
shared a complete failure to understand the material basis for their
apparent prosperity, arrogantly claiming to be its controlling agents,
rather than understanding a unique and lucky combination of cheap energy,
political alignments, and misunderstood technology as the basis for their
dizzying growth. The few economists and others trying to call attention to
its faults were drowned out by those focused on the immediate financial
Free market economists preached faith in the "market+technology" as the
solution to all social ills, and with the zeal of the Inquisition and the
power of the the US military swept away all opposition. Despite the humanist
traditions of western religions, including Christianity, money became the
mark of righteousness rather than corruption, and calls for humility,
service, and modesty earned more ridicule than the crucified Jesus endured
from the rabble of Jerusalem.
For the last 20 years, there has been no ideology or political force able to
challenge this blind faith in the "grow-for-broke" materialism of the US led
global economy. In a contest for real power in the world, those favoring
sustainable, long-term solutions have been overwhelmed by the very
well-funded hucksters of the short-term miraculous economy.
The difficulty of shifting over to a sustainable economy is that it requires
a change of values. The technology is already there. The resources are at
hand, all around us, many of them locked up in gaudy constructions and
machines, which will be exhibits in the museums of the future of our
species-wide intoxication. As we begin to sober up and realize we don’t need
this "stuff" to make our lives meaningful or secure, we have yet to begin
transitioning to an economy that values not convenience, but community and
One thing that may make this transition easier is that, whether we like it
or not, this is the final recession of this system. Along with the peak of
oil production, now visible in our rear view mirror, capitalist expansion is
done. The slope down will not be uniform, there will be upticks along the
way, and regional variations, but the peak is past. There is only one way to
go, and it’s down.
This has been predicted before, beginning with Marx in the mid-1800’s and by
many others, often technology believers of the socialist sect. They have
always turned out to be wrong.
Why then, do I claim confidence in making this statement now?
Because the systemic feedback loops of the interconnected global economy
have begun to change direction. The processes that required growth are now
reversing and gaining moment to destroy what they have grown. While national
trajectories will vary based on local conditions, the stitching together of
a just-in-time world economy in the last two decades has left few regions or
cultures independent enough to be unaffected. No longer does any country
integrated in the global market place have the luxury of collapsing or
prospering on its own.
There are two key processes which now are combining to terminate the system,
one is physical, the other is the rationale of the system itself.
Diminishing returns on depleted resources
In high tech societies, ever-greater inputs are required to maintain
production at constant levels, and geometric increases are necessary to
increase production. Whether mining iron ore from mountainside, petroleum
from a well, or corn from a field, the energy cost continues to rise per
unit of production. When one product depends on another, the increased costs
are multiplied together in the final product. The price of corn, for
example, is a product of the cost of seed, machinery, fuel, water,
fertilizer, and pesticides, and labor. The depletion of phosphorus and
natural gas are pushing up the price of fertilizer and pesticides, while
industrial farming’s depletion of the soil increases the demand for these
chemicals per bushel of harvested grain. There is a constantly diminishing
return on energy invested, so the cost of production continues to increase
at an accelerating rate. Several key resources for industrial agriculture
have probably passed their peak production, including petroleum and
phosphorus, and water is being mined and consumed in ways which are
Financial return on investment
The modern capitalist system is based on the premise that tomorrow’s economy
will be larger and more productive than today’s. Investments are made on the
basis of expected returns. The original investment is expected to grow,
whether as increased stock and bond values, or just by accumulating
interest. If real growth doesn’t exceed the rate of monetary inflation, then
there is no incentive to invest. When the system appears not to be growing,
the prudent capitalist neither lends, invests in new equipment, nor produces
goods or services, the purpose of all that activity is to multiply his
money. The creation of goods and the provision of services are means, not
The principle of diminishing returns obviously stands the financial premise
on its head. It predicts that for each additional quantity of money
invested, fewer products will be produced. No "rational" investor would
deliberately invest in diminishing returns.
If we grow corn organically, we are understanding that our harvest of corn
represents the effect of solar energy on the continually recycling elements
of air, water and soil. We recognize that we are part of that cycle of life,
and we return to the cycle anything we borrow from it for our own
enrichment. We can go on from generation to generation without diminishing
returns. Neither can we indefinitely increase the production from a given
acre of land after rather quickly arriving at a plateau of sustainable
production based on the specific conditions of that acre. A sustainable
process, then is not a good investment from a capitalist point of view.
Growing corn industrially, where barrels of non-renewable fossil fuels are
burned for every acre harvested, and tons of nitrogen and phosphorus are
swept with the soil down the Mississippi to be lost on the bottom of the
Atlantic has, for a few decades, allowed us to produce more corn per acre.
Its been a good investment. Ultimately, however, these practices will leave
us with an unproductive desert. Over a longer time frame, the net production
by organic methods will be greater, although no money will accumulate.
Speaking generally, as we bump up against the limits of resources, there
will be no incentive to invest. As long as those economic decisions are made
based on the expectation of increased monetary return, investment will
continue to decrease as resources deplete. There will be nowhere for
investor’s dollars to go, the markets will crash at an accelerating rate,
and nothing short of a government takeover to socialize the losses could
stop the bleeding.
But, if depletion of resources increases their value, won’t that stimulate
the market to invest in their production or an "economic" substitute? I.e.
Won’t expensive oil just encourage the production of more oil or
No, for two basic reasons.
1.The cost of production will always increase as fast, if not faster than
the value of the commodity. (At this stage of depletion and given the
capital intensity of modern industry, reduced labor costs drops out of the
equation as a significant factor). I.e. Dredging oil out of the far corners
of the earth may not be a safe risk for investment dollars, no matter the
price at the pump.
2.As general depletion expands, the consumer demand for all goods will
continue to decrease, because money to spend (wages) will continue to fall
behind the rate of inflation.
"Depletion economics" makes no sense at all under market theory, but it
suggests that any "recovery" within the market economy model will be
short-lived, and will promptly sag under rapidly increasing prices for
The fact that the system is in terminal decline does not mean that its
negative impact on the world, from the point of view of future human
generations, will necessarily decrease. Although less oil may be pumped,
deforestation, a low tech method of gaining some amount of combustible fuel,
could increase. This is one example of why a change in values is so
So what’s our alternative?
Shift our values to a sustainable model, where growth is not a primary goal
or an unqualified good. Let’s make our "investment" decisions based on what
will be sufficient to meet our human needs for physical security, social
justice, and cultural enrichment. Central to this model is the determination
that all our strategies, and the goals we seek, must be within the limits of
our resources such that projected over the uncountable generations, they
must not deprive us of the ability to sufficiently meet our basic human
needs. As outlined above, the principles and practices of capitalism cannot
deliver this kind of model.
Some things may need to grow, such as the number of skilled organic farmers,
carpenters, wind turbine engineers, nurses, herbalists, railroad conductors,
musicians, and bicycle mechanics. Other things which are already beyond the
limits may need to be abandoned or reduced. My suspicion is we won’t need
them. We won’t need skyscrapers, private automobiles, armies of financial
analysts, stockbrokers, realtors, public relations flacks, or soldiers. (Not
that any of these people would be unemployed; the muscle power needed to
replace the machines we can no longer sustain will provide honest employment
Don’t Bail Out this System – Let Us Bail Out of It, Altogether
We have already seen the federal government generate $1 trillion in an
effort to blow another bubble. There will be additional requests for bail
outs and "economic stimulus". The instinct that led the overwhelming
majority of Americans to oppose the Wall St Bailout of early October is the
foundation on which to organize. We must demand that all future efforts at
solutions build new values of economic justice, sustainability, and
sufficiency into all policies and appropriations.
Let’s make this recession the last, by changing the rules for the future we
all deserve. The Green For All initiative led by Van Jones, and the
Transition Town movement originating in Great Britain but now gaining
interest in the US, are two of the most exciting efforts at sustainable
solutions. Check them out at http://www.greenforall.org and
With unfootnoted thanks to (alphabetically) Colin Campbell, Herman Daly,
Richard Heinberg, Rob Hopkins, Van Jones, Howard Odum, Joseph Tainter, and
I get a kick out of all these grandiouse schemes to remake human nature. Rather than act as sovereign individuals, we should take lessons from the ants and the bees. The Obama Gang would be pleased. Castro is lookng better.
Anybody that thinks we have had a free market in the US since 1913 is an economic illiterate. A central bank and fiat currency is not part of a free market, (yes I know we were on a quasi gold standard until 1971) Any govt intervention in the economy is not a free market, minimum wage laws are not part of a free market, when you get it through your head that the govt caused the problems were in right now then the obvious answer is they won’t be able to fix it.
Circuit City files for bankruptcy protection
Monday November 10, 6:32 pm ET
By Michael Felberbaum and Vinnee Tong, AP Business Writers
Circuit City seeks bankruptcy protection amid pressure from vendors ahead of the holidays
consumers who aren’t spending, Circuit City Stores Inc. filed for
bankruptcy protection Monday as it heads into the busy holiday season
with hopes that the move will help it survive.
Under Chapter 11 protection, the nation’s second-biggest electronics retailer can keep operating while it develops a reorganization plan. Its Canadian operations also filed for similar protection.
The company also said it cut 700 more jobs at its Richmond, Va.,
headquarters, after announcing a week ago that it would close 20
percent of its stores and lay off thousands of workers.
In court documents, Chief Financial Officer Bruce H. Besanko cited
three factors: erosion of vendor confidence, decreased liquidity and
the global economic crisis.
"Without immediate relief, the company is concerned that it will not
receive goods for Black Friday and the upcoming holiday season, which
could cause irreparable harm to the company and its stakeholders,"
Besanko said in the filing.
Its shares fell 14 cents, or about 56 percent, to 11 cents on Monday before being halted.
Circuit City, which has had only one profitable quarter in the past
year, has faced significant declines in traffic and heightened
competition from rival Best Buy Co. and others. The company laid off
about 3,400 retail employees last year and replaced them with
lower-paid workers, a move analysts said could backfire, hurting morale
and driving away customers.
While the retail industry overall is facing what’s expected to be
the weakest holiday season in decades, Circuit City’s struggles have
intensified as nervous consumers spend less and credit has become
At a hearing in Richmond, U.S. Bankruptcy Judge Kevin Huennekens
granted Circuit City interim approval to secure $1.1 billion in
debtor-in-possession loans while it is in bankruptcy protection.
Those funds, needed to stock merchandise and pay employees, replace a
$1.3 billion asset-backed loan the company had been using.
Circuit City also was granted interim approval to abandon 150 leases
at locations where it no longer operates stores, which it said costs
$40 million annually.
The company, which said it had $3.4 billion in assets and $2.32
billion in liabilities as of Aug. 31, is hoping to exit court
protection by early summer 2009, putting it in a position to find a
buyer for the chain or operate as a standalone business.
Final approval of the motions will be addressed at a Dec. 5 hearing.
Anybody that thinks we have had a free market in the US since 1913 is an economic illiterate. [/quote]
Anyone that thinks there has ever been a free market is an economic illiterate. Humans, and any institution they create, are by default incapable of being the fundamental actor required by a free market.
For that matter, it is impossible for a free market to exist in this universe, as one of the requisite traits of a free market ‘actor’ is that they are timeless, eternal, and always invest for the long haul. (Even Austrian Economists regard the issue of time as perhaps the biggest fundamental obstacle to a free market)
The sad reality is, because humans are the actors of our "Free Market", constant intervention by a government (a non-external collaboration of humans) is required to keep our "Not-even-close-to-a-free-market" as something that looks "vaguely-like-a-free-market".
History has shown time and again the moment this intervention is removed, that the "Not-even-close-to-a-free-market" is quickly dissolved by the humans who are the ‘actors’ and replaced with something best described as ‘kleptocracy’.
As such, those who advocate a lack of government in the "Free Market", wittingly or not, are ironically advocating something quite different than the free market. Such is life.
Alas, we have yet to perfect a government that brings the market as close as reasonably possible to a "Free Market", without also taking steps to corrupt it — not surprising since a government, being made of humans, can never be external to the Market. Much less one that successfully evades the inevitable Tragedy of the Commons that arises in any "Free Market", perfect or not.
So, we muddle on with the closest approximation we can muster.
(Of course, all this neglects that there are aspects of human life that cannot be fulfilled by a Free Market at all, and as such, the Free Market can never be the perfect origination of all human accomplishment. But that is a whole different discussion.)
Oi shakes me ‘ead an’ sips me drink…
Falling Gas Prices Jump-Start GM SUV Sales
Automaker Puts Texas Plant On Overtime Amid Other Closures
Monday, November 10, 2008
Despite the down economy, falling gas prices have driven consumers back
to the sport utility vehicles they once gave the cold shoulder.
Workers at General Motor’s Arlington, Texas, SUV assembly plant began
working overtime this month and are scheduled to remain on overtime for
the rest of the year.
The plant, which employs 2,500 workers, is now the only GM factory
building full-size sport utility vehicles like the Chevrolet Tahoe, GMC
Yukon and Cadillac Escalade.
Although sales of the vehicles are still down overall, they have
rebounded in recent weeks as gas prices have fallen and cash-strapped
automakers have slashed prices. The vehicles have proven to be a solid
source of revenue for GM.
"We’re still on overtime," plant spokeswoman Wendi Sabo told The Dallas
Morning News. "Nothing has changed."
GM is also placing a high-stakes bet on its SUV line overseas, opening a
new $300 million plant Friday near St. Petersburg, Russia.
The plant will produce GM SUVS, the Chevrolet Captiva and Opel Antara,
which have become status symbols in Russia, reported Edmunds.com.
Chevrolet is the sales champion in Russia, with 190,553 cars sold last
year alone, allowing GM to claim a 10.9 percent market share there.
Likewise, Opel is in Russia’s top 10 in sales, recording a whopping 238
percent sales growth in 2007, according to GM figures.