It’s the Bitter End of an Economic Era — But We’re Resisting Entering the Next One
Image Credit: Human Development Report 2022, UNDP
There are statistics, and then there are statistics. That define an era and an age. Here’s one of those: living standards are declining in 90% of countries.
My lovely wife went home for Thanksgiving — to the little town she grew up in, just outside the big, bustling city. And she came back with a slew of modern day horror stories. There were the friends who could barely afford to eat. They were down to diluting soup with water. There was the friend who’d been laid off, spent a year looking for work, and had to take a job at a major salary cut. The couple who’d had to move out of their childhood town — too expensive for young people to raise a family in now. And the old friend whose career prospects had tanked, after being laid off, turned to substances, and now had to go to rehab. A litany of woes — very real ones, because, well, my friends, our economies are in dire shape.
Why do I tell you all that? There are two two-word phrases I’d use to describe this decade. Here’s one: “financial stress.” Skyrocketing prices, bills going through the roof…real incomes falling. These are tough times, reminiscent, in places and in ways, of a depression. And what do depressions breed?
But “financial stress” is hardly the only two word phrase that sums up this bleak decade. There are so many more. How about… “fascist billionaires”? Then the ones that make up our everyday lexicon now, like “climate change.” The ones we don’t want to talk about, because, well, where do we begin: “mass extinction.” There are those looming over us like the sword of Damocles — “democratic decline” and “runaway inequality.”
Why is so much going wrong out there? Why is it that the 2020s are shaping up to be history’s worst decade, easily, since the 1930s?
The answer a good economist might give you would go something like this. In the 1930s, depression bred fascism. Depression stretched from corner to corner of the globe, wrapping it in a suffocating embrace. And in their rage, misery, and despair, people began to believe the Big Lies demagogues told, about how it was all scapegoats’ fault. And the road to all that, a good economist would say, was paved with nationalism and isolationism, which hardened stagnation into properly implosive depression.
You don’t have to look very hard to see precisely the same mechanisms at work in the world today. We don’t describe it as a “depression” anymore — but what else should we call it when, for example, the vast majority of people are living right on the edge? When the average bank account has one months’ cost of living in it? Or when living standards are declining in 90% of countries?
In the 1930s, the great John Maynard Keynes discovered, depression was caused by “imbalances.” That meant that some nations owed too much to others — more than they’d ever be able to repay. A gaping hole emerged at the heart of the global economy. Today, that’s just as true — only not so much at the level of nations, but within them. The average person in today’s societies lives off on a merry-go-round of debt. And incomes flatline, and prices rise, increasingly, that debt is lifelong. Think of how rare it is in most of our societies to own anything outright — from a car to a home. We’ve become debtor societies all over again, just like the 1930s — only this time, not to each other, but to the super-rich, effectively, who go on getting richer and richer….
How? Well, because they’re the ones who the interest on that towering mountain of debt effectively ends up in the hands of. And they’re the ones who benefit from rising prices, too, while the rest are hurt by them. So just like in the 1930s, we have a situation of “imbalances” — this time, not between countries, but between classes or social groups within them. It’s not really true, anymore, that such a thing as a “middle” or “working” class really exists, in the old meaning of the word — now there’s a vast underclass of debtors, who’ll spend their entire lives in unpayable debt. Some are slightly higher up the ladder of consumption than others — but very, very few are anything like genuinely independent. Or, if you like,
Now. That only gets us so far. Why did these things called “imbalances” emerge — and why did nations turn to protectionism and isolationism, which only made them worse? The answer to that question goes surprisingly deep. Right to the heart of history.
Think about the 1920s for a moment. What was happening in the world? Well, our world hadn’t been born yet — that’d come after the war. At the same time, though, the age of empires was ending. In other words, the world — our civilization — was in a period of dramatic historical transition. And that transition was badly managed. Bungled. Instead of transformation, nations resisted it. The result, ultimately, was depression and world war. Sound a little familiar?
That’s abstract — really abstract. Let me try to make it clear. You probably don’t know how imperial economies really worked. They’re lost in the mists of time. They were strange beasts, almost alien to us. Then, rich Western nations, and some in the East, too, had “colonies.” Now, colony was a formal term — a term of political economy. There was a point to call a place a “colony.” It meant that the “colony” would export its goods to the “mother country” — and the mother country would be the one that booked the profits.
See how weird that is, in our eyes? Today, we don’t really have a world like that so much anymore, even if the power imbalances of that era are with us. Back then, though, the “colony” of India or what have you would send all kinds of goods and resources — textiles like cotton and leather, spices, fruit — to the empire, and the empire would be the one booking the profits from consuming that stuff, and then selling all that stuff to other rich countries.
Now. By the 1920s, this system was slowly becoming unworkable. Independence movements had begun to emerge around the world, the costs of “administering” these huge empires — basically keeping huge armies stationed in distant corners of the globe — were becoming too high to bear. An empire was an expensive thing to have, and an even more difficult one to keep. Meanwhile, slowly, the old order was cracking. Before, the world was divided up into aristocrats and peasants, more or less — but the age of empires brought with it the rise of a new merchant class. And as this merchant class rose, it grew richer, in many cases, than the old aristocracy, whose wealth basically came from land given to it by kings and whatnot.
This merchant class was the “ultra rich” of its day. And it began to speculate. Its speculation fueled a boom in speculation in general, too. If they could get rich, well, maybe so can I, reasoned the…not average Joe…just the average bourgeois guy. This was the roaring 20s. And at its end? Cue Black Friday — and the Big Bang of the Great Depression. Imbalances turned into the smoldering ruins of an economy — they became huge speculation losses, that wiped out huge chunks of the economy, while they also meant that the average person was living in debt and facing a profoundly uncertain future.
There’s a reason I take you on a brief whistlestop tour of history. So you see the Great Depression in a larger view than just “it was Black Friday, isolationism, and protectionism.” It was more than that. It was the end of an economic era.
The age of empires came to a final, bitter end — at last — then. Think about where the idea of isolationism comes from — we can make everything ourselves!! It’s just the thinking of a dying empire, really. The age of empires was coming to an end, as its economics grew obsolete, unable to really let wealth trickle down effectively to the average person, who was growing weary and desperate — hence, those floods of European refugees heading to America. It was ending as its social structure grew top heavy with the concentrated gains of the ultra rich, and corroded the nascent beginnings of modern democracy, back then, too.
The Great Depression was the result of a world that didn’t know how to make the transition it needed to make. Empires were going to have to be undone. Mother countries were going to have grant “colonies” independence. Colonies, meanwhile, were going to have grow towards democracy. Social contracts were going to have to change — and more wealth was going to have to be shared with something new, called a “middle class,” that America became famous for, not just concentrated in the hands of ultra-wealthy merchants, and old aristocrats. And replacing all that was going to have to be a consensual system of democracy governing it.
Big job. No wonder nobody much wanted to do it. Hence, it took depression and war for those changes to really begin to happen. It was only after the second world war that our civilization really did any of the above.
Now. Why am I telling you all this? Well, hopefully you have a glimmer already. We’re in almost exactly the same situation now as the world was then.
Another economic age is ending. This is the end of the industrial age. It is finished. There is no way that we can go on making the very material basics of the things we regard as civilization — food, water, agriculture, energy, household goods — in the same manner for much longer now. That’s why prices are skyrocketing — just as they did at the end of age of empires, too. In our case, all that stuff depends on varying degrees of toxicity, from “killing the planet and life on it” to just “killing the planet.” We’re now in an era of scarcity precisely because we can’t make even the most fundamental things at the same scale now — and the horizons are shrinking fast.
If you think I’m kidding, check out when the Colorado River could become a deadpool. July. Officials call it a “complete doomsday scenario.” And then? Well, among other things, “If that happens, the massive turbines that generate electricity for 4.5 million people would have to shut down — after nearly 60 years of use — or risk destruction from air bubbles.” I could go on endlessly with stories like this. In Britain, you can barely get eggs. Plenty of places in the world are now water-poor. Others are becoming energy-poor. Everyone these days is feeling money-poor, apart from the billionaires.
These new forms of poverty are what define our age. We’re not used to them, really. We expected upwards mobility to go on…forever. But that expectation’s colliding with the reality of growing poverty. All these forms of it. In Britain, for example, fuel poverty and food poverty are now increasingly commonplace — people have to choose between “heating or eating.” In America, of course, having more than a month’s income in your bank account is a luxury, even if the social norm is never admitting it. On and on it goes. The point is that in many ways, we’re now entering a kind of depression, even if our economies are nominally “growing” — a depression at the human level and human scale, because that growth, sometimes more than 100% of it, goes to the ultra rich.
And yet we all know the transformation that has to be made now, too. We need to build a civilization that works much better economically, socially, and politically. A a) post industrial economy, which can supply the basics at a civilizational scale — food, water, energy, medicine — without killing the planet we all live in, so that b) democracy can endure, or else plummeting living standards just go on ensuring fascism spreads and grows, and to do that, c) we need to revitalize our middle and working classes so they actually are a thing, a real social entity, again, not just an embittered underclass, sulking and then raging its way into the abyss.
Just as in the 1920s, an era is ending. And yet the new one, the next one — it has yet to really begin. The world is resisting doing much of the above. As a simple example, Joe Biden’s plan to make America a world leader and net exporter in clean energy and green manufacturing — excellent. Still, just a first tentative step. We should be way, way further along that curve right about now — nations should be contesting that leadership hotly. If that’s the moon, we haven’t built a rocket yet. I mean that in an almost literal way — currently, we have no idea, none, zero, zilch, how to make our civilization’s basics, any of them, in a post-industrial way, at scale. We are completely behind the curve. Of the very transformations we need to be making.
As a simple example of that, a nation like Sweden should be leading this contest — instead, it just elected neo-fascists, who proceeded to…dissolve the Environment Ministry. Ah, good work guys. LOL. Good luck competing with America as it races to the post-industrial moon.
We’re behind the curve, because mostly, our societies are resisting making the changes that we need to make. Take Britain. You’d think it be at least copying America, under Biden — but no, instead of a vision for global leadership in green manufacturing and clean energy, it’s busy…scapegoating immigrants. LOL. Meanwhile, the nation’s paralyzed by strikes, ambulances don’t arrive, Neo-Victorian tales of poverty abound. Britain exemplifies perfectly a nation that refuses to change, at precisely the juncture that our civilization needs to transform, or else.
Just like in the 1930s, it’s lapsed into protectionism and isolationism — that’s what Brexit really is, after all. It’s torn Britain’s economy apart and destroyed its future — the equivalent of losing a war, basically. See how the dots connect? This is how you fall behind the curve of change.
And yet this is what happens at the end of eras, too. Embracing the future — as clear as it appears to be to some, even to many — is hard.Institutions fight it, hoping to preserve what they can of the status quo. Nations turn viciously conservative, seeking safety in the old poisons of hatred and ignorance and spite. Uncertainty paralyzes economies, and investment stalls and dwindles. Who wants to take a risk on…on…reinventing everything? What if it goes south? What if it just doesn’t work?
They said that as their empires were faltering, buckling, failing, and cracking, too. As the ultra rich took the gains, the average person never benefited much, the colonized were left exploited, and those who did end up the winners blew it all on speculating on worthless paper…and even after that part of the wreckage, demagogues came along, and blamed it on the hated, all over again, in a fool’s double whammy. They said all that right to the bitter end. It’s too hard to change. It’s easier to deal with troubles we know than accept the uncertainty of an unknown future. Hey — everything might be falling apart, but at least we’re safe in what we know.
Our world is in the same place now as it was then. Our civilization is resisting change, with all its might. Hence, the ultra-conservative wave sweeping the globe. It’s what happens at the end of eras — people flee backwards in time, clinging desperately to the security of imaginary nostalgia like a life raft in a stormy sea. This is my society! It only belong to us! The pure and the true!! Just like way back in the…1930s…the 1750s…the Stone Age.
It’s easy to go backwards. Until, at least, your back’s against the wall, and there’s nowhere left to go. That’s where we were in the 1930s, and that’s we are, all over again, now. We are not changing fast enough — our economies, our societies, our polities — in the obvious ways the next chapter of human civilization demands. And that’s why this is the worst decade since the 1930s.
Umair December 2022