The best times. The worst best times.

Wednesday, January 7, 2009 by Christian.

In 1776 Adam Smith said it would happen in 200 years. In 1848 Karl Marx said it would happen in 10 years. In 2008 I say it is happening now.

      Yeah, that’s more or less what Adam Smith bleakly said would happen in about two hundred years, give or take. The father of modern capitalism and the creator of Economics as a field of study separate from Politics, History, and Philosophy, Smith saw the world we live in as a system of systems. He described the growing prosperity at the dawn of the industrial revolution as the “wealth of nations” and saw that, as with every other observable natural system, we would eventually reach a natural limit to our growth and accumulation of wealth and we would simply have to stop growing.

      Capitalism being what it is, an end of growth is an end to the world that we’ve since built for ourselves. At the end of the shift from fuedalist agrarianism to nationalist industrialism, Karl Marx was appalled by the conditions of the working class that had evolved from a not well off peasantry to a miserable and expendable mass of wage-slaves. He saw a simmering resentment held by large group of people who were very aware that they weren’t getting a fair slice of the pie and felt this would make an explosive combination when capitalism hit the Malthusian brick wall of “geometric population” consuming “arithmetic resources.”

      In America, fear of communism prompted reform. Strikes and rebellions were getting larger and more frequent, so regulations were set up to curb the worst excesses of lasse faire capitalism, in a sort of compromise with the swelling revolutionary movement. When depression struck, programs were enacted to put people to work and put money in their pockets so they could get back to consuming and keeping the system moving with an eye toward helping the least of us. I believe people have a natural inclination to fairness and those regulations and programs were a reflection of that.

      It doesn’t do justice to a long, complicated, and important story to sum up our current financial crisis by saying a lack of regulations is getting us again. The nuts and bolts of the situation is pretty hilarious in the way you can instantly see how outrageous some of these financial mechanisms were, like putting an insurance policy on a house you don’t own, as described in last night’s This American Life. But what’s even more amazing is how money is created. Check this out: You know the government doesn’t print it’s own money, that the treasury is really like a special company that has a symbiotic relationship with our government, but most of our money only exists as ones and zeros. THAT money is created out of thin air and is backed up by nothing but trust (and maybe the military).

      When you make a withdrawal, the bank gives you some of another depositor’s money and they just hope that everyone doesn’t make a withdrawal at the same time. The loans they give are backed by the money you gave them, and since (they argue) you can assume that everyone won’t come for their money all at once, the government allows them to loan out 9 times the money they actually have. That means that almost all of our money is loaned into existence. And since it hasn’t been backed by gold or silver since Nixon, the only reason all these make-believe dollars have any value is because everyone agrees it does. Everyone agrees it does because companies countries like China and Japan have so many of our dollars that if they weren’t worth anything, those countries wouldn’t be worth much either, so the countries that hold all our debts are inclined to let them ride.

      So now we have a crisis of confidence just like we did at the end of the Gilded Age of top-hat and monocle-wearing capitalism. But this time, regulations and investments like the kind used by the New Deal to put a friendlier face on capitalism, won’t work. We won’t recover from the coming depression the same way we did before because this time there’s too many of us. All these years of growth have been payed for by money that has been loaned into existence and built with a finite supply of materials, so when the next Great Depression hits, that will be IT for growth. The population will have to plateau or decline because we won’t be able to safely feed, clothe, house, and entertain more people without a new source of energy, food, and metal.

      That’s just the way compounding works. You add 3 percent of something to itself, and after awhile you start seeing big results. The mountains of coal that are supposed to supply us with 500 years of energy? It’s quality is shrinking to .0001%, which is just about to the point where it takes more energy to pull it out of the ground than it does to burn it. Sure, it’s folly to say we’ll “run out” of things like oil, coal, trees, topsoil, fresh water, copper, or zinc, but our demand has been growing exponentially, proportional to our population, while these resources are replenishing at a much slower rate, if at all..

      The old quote from Herman Melville’s Moby Dick about those days being the ‘best of times and the worst of times’ made sense then; though the world was obviously changing for the first time in memory–getting faster, smarter, and richer–it was still a dreary and dangerous place. Well, these days, where you can kill yourself from an excess of good food and we’re surrounded by outrageous consumer goods and culture producing behemoths, are surely the best days in history. But with ridiculous waste as a result of a policy of preemptive war, the mass of foreclosures, the spike in unemployment, unimaginably massive debt, man made natural disasters (oxygen deprived “dead zone” in the Gulf of Mexico and a patch the size of Texas in the Pacific where photo-degrading plastic is more abundant than life are both growing, not to mention global warming), and the rolling waves of extinctions at a rate scientists call alarming, these are also the worst times. We live with prosperity and indulgence, but like a good house filled with termites, there’s a lot under the surface that we’re eventually going to pay for. That’s why I like to say that we live in the worst of the best times.

      There are more people alive right now than all the people who have ever lived combined, so I guess now would be a good time to start a blog about these worst/best times we live in. I might never again have a chance for such a large audience.

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