[A-List] Definancialisation, Deglobalisation, Relocalisation

[Bill Totten]

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

by Dmitry Orlov

cluborlov.blogspot.com (June 16 2009)

Note: The original HTML version of this contains a chart for each of the
27 numbered sections. See
http://cluborlov.blogspot.com/2009/06/definancialisation-deglobalisation.html

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 ten rather outlandish. We
keep the same system, just shut down 9/10ths 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 thir 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 ten people die so
that the remaining ten percent 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 though 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 per barrel. 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. Francois Cellier has recently
published an analysis in which he shows that at roughly $600 per barrel
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 per barrel 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.

6.1. 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.
6.2. We have had a chance to observe that economies crash whenever oil
expenditure approaches 1/4th 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. 6.3. 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 [end
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 1/4th 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 they 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.

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

http://www.billtotten.blogspot.com
http://www.ashisuto.co.jp