Thursday, February 28, 2008

Carolyn Baker reviews Reinventing Collapse

"A key psychological factor in the individualization of oppression, deeply embedded in the American psyche, is the notion that in the face of utter powerlessness, blaming oneself provides the last semblance of empowerment, i.e., "It's my fault; I caused it; if only I hadn't...." This is not unlike the internal psychological mechanisms that engage within a child during and after abuse in which the child unconsciously blames him/herself for the abuse because not to do so confronts the child with an intolerable, overwhelming sense of powerlessness.

"Noting that Americans find it difficult to imagine failure collectively in terms of the nation itself and prefer to insist that all failure is individual in nature, Dmitry concedes that collapse will be different for each person, but that one way to bridge the gap between "individual" and "collective" might be to notice the pre- and post-collapse conditions of the Soviet Union and compare them hypothetically with those of the United States. The ultimate intention here is to invite the reader to ask him/herself to what extent each important thing in one's life is "collapse-proof" and then after several pages of deepening and refining many of the concepts of his "Post-Soviet Lessons" series, Dmitry makes a stunning request: to consider how to make that "important thing" collapse-proof, or come to terms with how to live without it."

Read the rest of the review on Carolyn's site.

Wednesday, February 27, 2008

C-Realm Podcast

Episode 79: The Red Queen

First up Dmitry Orlov and Albert K. Bates explore visions of a post-collapse America, and later KMO talks food, consciousness, and the forces of darkness with Neil Kramer of the Cleaver.

Friday, February 22, 2008

The Five Stages of Collapse

[Update November 2011: In light of the unfolding global sovereign debt fiasco, I have issued an update. Thanks to the tireless efforts of our elected and unelected representatives to artificially extend the lives of bankrupt financial institutions, collapse is turning out to be less of a waterfall and more of an avalanche.]
[Update May 2010: Two years after its publication, this article has been read by 54000 or so people, and is still being read by an average of 1500 people each month—on this site alone. Based on this steady level of interest, and on how effective of this taxonomy of collapse has proven to be in mapping out the events of the intervening two years, I have decided to give it a book-length treatment, which I will announce on this site once the publication date becomes known.]

[Update January 2013: The book, The Five Stages of Collapse: Survivors’ Toolkit, now has a publication date of May 1st, 2013. Please order it directly from this web site.]

Elizabeth Kübler-Ross defined the five stages of coming to terms with grief and tragedy as denial, anger, bargaining, depression, and acceptance, and applied it quite successfully to various forms of catastrophic personal loss, such as death of a loved one, sudden end to one's career, and so forth. Several thinkers, notably James Howard Kunstler and, more recently John Michael Greer, have pointed out that the Kübler-Ross model is also quite terrifyingly accurate in reflecting the process by which society as a whole (or at least the informed and thinking parts of it) is reconciling itself to the inevitability of a discontinuous future, with our institutions and life support systems undermined by a combination of resource depletion, catastrophic climate change, and political impotence. But so far, little has been said specifically about the finer structure of these discontinuities. Instead, there is to be found a continuum of subjective judgments, ranging from "a severe and prolonged recession" (the prediction we most often read in the financial press), to Kunstler's "Long Emergency," to the ever-popular "Collapse of Western Civilization," painted with an ever-wider brush-stroke.

For those of us who have already gone through all of the emotional stages of reconciling ourselves to the prospect of social and economic upheaval, it might be helpful to have a more precise terminology that goes beyond such emotionally charged phrases. Defining a taxonomy of collapses might prove to be more than just an intellectual exercise: based on our abilities and circumstances, some of us may be able to specifically plan for a certain stage of collapse as a temporary, or even permanent, stopping point. Even if society at the current stage of socioeconomic complexity will no longer be possible, and even if, as Tainter points in his "Collapse of Complex Societies," there are circumstances in which collapse happens to be the correct adaptive response, it need not automatically cause a population crash, with the survivors disbanding into solitary, feral humans dispersed in the wilderness and subsisting miserably. Collapse can be conceived of as an orderly, organized retreat rather than a rout.

For instance, the collapse of the Soviet Union - our most recent and my personal favorite example of an imperial collapse - did not reach the point of political disintegration of the republics that made it up, although some of them (Georgia, Moldova) did lose some territory to separatist movements. And although most of the economy shut down for a time, many institutions, including the military, public utilities, and public transportation, continued to function throughout. And although there was much social dislocation and suffering, society as a whole did not collapse, because most of the population did not lose access to food, housing, medicine, or any of the other survival necessities. The command-and-control structure of the Soviet economy largely decoupled the necessities of daily life from any element of market psychology, associating them instead with physical flows of energy and physical access to resources. This situation, as I argue in my forthcoming book, Reinventing Collapse, allowed the Soviet population to inadvertently achieve a greater level of collapse-preparedness than is currently possible in the United States.

Having given a lot of thought to both the differences and the similarities between the two superpowers - the one that has collapsed already, and the one that is collapsing as I write this - I feel ready to attempt a bold conjecture, and define five stages of collapse, to serve as mental milestones as we gauge our own collapse-preparedness and see what can be done to improve it. Rather than tying each phase to a particular emotion, as in the Kübler-Ross model, the proposed taxonomy ties each of the five collapse stages to the breaching of a specific level of trust, or faith, in the status quo. Although each stage causes physical, observable changes in the environment, these can be gradual, while the mental flip is generally quite swift. It is something of a cultural universal that nobody (but a real fool) wants to be the last fool to believe in a lie.

Stages of Collapse

Stage 1: Financial collapse. Faith in "business as usual" is lost. The future is no longer assumed resemble the past in any way that allows risk to be assessed and financial assets to be guaranteed. Financial institutions become insolvent; savings are wiped out, and access to capital is lost.

Stage 2: Commercial collapse. Faith that "the market shall provide" is lost. Money is devalued and/or becomes scarce, commodities are hoarded, import and retail chains break down, and widespread shortages of survival necessities become the norm.

Stage 3: Political collapse. Faith that "the government will take care of you" is lost. As official attempts to mitigate widespread loss of access to commercial sources of survival necessities fail to make a difference, the political establishment loses legitimacy and relevance.

Stage 4: Social collapse. Faith that "your people will take care of you" is lost, as local social institutions, be they charities or other groups that rush in to fill the power vacuum run out of resources or fail through internal conflict.

Stage 5: Cultural collapse. Faith in the goodness of humanity is lost. People lose their capacity for "kindness, generosity, consideration, affection, honesty, hospitality, compassion, charity" (Turnbull, The Mountain People). Families disband and compete as individuals for scarce resources. The new motto becomes "May you die today so that I die tomorrow" (Solzhenitsyn, The Gulag Archipelago). There may even be some cannibalism.

Although many people imagine collapse to be a sort of elevator that goes to the sub-basement (our Stage 5) no matter which button you push, no such automatic mechanism can be discerned. Rather, driving us all to Stage 5 will require that a concerted effort be made at each of the intervening stages. That all the players seem poised to make just such an effort may give this collapse the form a classical tragedy - a conscious but inexorable march to perdition - rather than a farce ("Oops! Ah, here we are, Stage 5." - "So, whom do we eat first?" - "Me! I am delicious!") Let us sketch out this process.

Financial collapse, as we are are currently observing it, consists of two parts. One is that a part of the general population is forced to move, no longer able to afford the house they bought based on inflated assessments, forged income numbers, and foolish expectations of endless asset inflation. Since, technically, they should never have been allowed to buy these houses, and were only able to do so because of financial and political malfeasance, this is actually a healthy development. The second part consists of men in expensive suits tossing bundles of suddenly worthless paper up in the air, ripping out their remaining hair, and (some of us might uncharitably hope) setting themselves on fire on the steps of the Federal Reserve. They, to express it in their own vernacular, "fucked up," and so this is also just as it should be.

The government response to this could be to offer some helpful homilies about "the wages of sin" and to open a few soup kitchens and flop houses in a variety of locations including Wall Street. The message would be: "You former debt addicts and gamblers, as you say, 'fucked up,' and so this will really hurt for a long time. We will never let you anywhere near big money again. Get yourselves over to the soup kitchen, and bring your own bowl, because we don't do dishes." This would result in a stable Stage 1 collapse - the Second Great Depression.

However, this is unlikely, because in the US the government happens to be debt addict and gambler number one. As individuals, we may have been as virtuous as we wished, but the government will have still run up exorbitant debts on our behalf. Every level of government, from local municipalities and authorities, which need the financial markets to finance their public works and public services, to the federal government, which relies on foreign investment to finance its endless wars, is addicted to public debt. They know they cannot stop borrowing, and so they will do anything they can to keep the game going for as long as possible.

About the only thing the government currently seems it fit to do is extend further credit to those in trouble, by setting interest rates at far below inflation, by accepting worthless bits of paper as collateral and by pumping money into insolvent financial institutions. This has the effect of diluting the dollar, further undermining its value, and will, in due course, lead to hyperinflation, which is bad enough in any economy, but is especially serious for one dominated by imports. As imports dry up and the associated parts of the economy shut down, we pass Stage 2: Commercial Collapse.

As businesses shut down, storefronts are boarded up and the population is left largely penniless and dependent on FEMA and charity for survival, the government may consider what to do next. It could, for example, repatriate all foreign troops and set them to work on public works projects designed to directly help the population. It could promote local economic self-sufficiency, by establishing community-supported agriculture programs, erecting renewable energy systems, and organizing and training local self-defence forces to maintain law and order. The Army Corps of Engineers could be ordered to bulldoze buildings erected on former farmland around city centers, return the land to cultivation, and to construct high-density solar-heated housing in urban centers to resettle those who are displaced. In the interim, it could reduce homelessness by imposing a steep tax on vacant residential properties and funneling the proceeds into rent subsidies for the indigent. With plenty of luck, such measures may be able to reverse the trend, eventually providing for a restoration of pre-Stage 2 conditions.

This may or may not be a good plan, but in any case it is rather unrealistic, because the United States, being so deeply in debt, will be forced to accede to the wishes of its foreign creditors, who own a lot of national assets (land, buildings, and businesses) and who would rather see a dependent American population slaving away working off their debt than a self-sufficient one, conveniently forgetting that they have mortgaged their children's futures to pay for military fiascos, big houses, big cars, and flat-screen television sets. Thus, a much more likely scenario is that the federal government (knowing who butters their bread) will remain subservient to foreign financial interests. It will impose austerity conditions, maintain law and order through draconian means, and aide in the construction of foreign-owned factory towns and plantations. As people start to think that having a government may not be such a good idea, conditions become ripe for Stage 3.

If Stage 1 collapse can be observed by watching television, observing Stage 2 might require a hike or a bicycle ride to the nearest population center, while Stage 3 collapse is more than likely to be visible directly through one's own living-room window, which may or may not still have glass in it. After a significant amount of bloodletting, much of the country becomes a no-go zone for the remaining authorities. Foreign creditors decide that their debts might not be repaid after all, cut their losses and depart in haste. The rest of the world decides to act as if there is no such place as The United States - because "nobody goes there any more." So as not to lose out on the entertainment value, the foreign press still prints sporadic fables about Americans who eat their young, much as they did about Russia following the Soviet collapse. A few brave American expatriates who still come back to visit bring back amazing stories of a different kind, but everyone considers them eccentric and perhaps a little bit crazy.

Stage 3 collapse can sometimes be avoided by the timely introduction of international peacekeepers and through the efforts of international humanitarian NGOs. In the aftermath of a Stage 2 collapse, domestic authorities are highly unlikely to have either the resources or the legitimacy, or even the will, to arrest the collapse dynamic and reconstitute themselves in a way that the population would accept.

As stage 3 collapse runs its course, the power vacuum left by the now defunct federal, state and local government is filled by a variety of new power structures. Remnants of former law enforcement and military, urban gangs, ethnic mafias, religious cults and wealthy property owners all attempt to build their little empires on the ruins of the big one, fighting each other over territory and access to resources. This is the age of Big Men: charismatic leaders, rabble-rousers, ruthless Macchiavelian princes and war lords. In the luckier places, they find it to their common advantage to pool their resources and amalgamate into some sort of legitimate local government, while in the rest their jostling for power leads to a spiral of conflict and open war.

Stage 4 collapse occurs when society becomes so disordered and impoverished that it can no longer support the Big Men, who become smaller and smaller, and eventually fade from view. Society fragments into extended families and small tribes of a dozen or so families, who find it advantageous to band together for mutual support and defense. This is the form of society that has existed over some 98.5% of humanity's existence as a biological species, and can be said to be the bedrock of human existence. Humans can exist at this level of organization for thousands, perhaps millions of years. Most mammalian species go extinct after just a few million years, but, for all we know, Homo Sapiens still have a million or two left.

If pre-collapse society is too atomized, alienated and individualistic to form cohesive extended families and tribes, or if its physical environment becomes so disordered and impoverished that hunger and starvation become widespread, then Stage 5 collapse becomes likely. At this stage, a simpler biological imperative takes over, to preserve the life of the breeding couples. Families disband, the old are abandoned to their own devices, and children are only cared for up to age 3. All social unity is destroyed, and even the couples may disband for a time, preferring to forage on their own and refusing to share food. This is the state of society described by the anthropologist Colin Turnbull in his book The Mountain People. If society prior to Stage 5 collapse can be said to be the historical norm for humans, Stage 5 collapse brings humanity to the verge of physical extinction.

As we can easily imagine, the default is cascaded failure: each stage of collapse can easily lead to the next, perhaps even overlapping it. In Russia, the process was arrested just past Stage 3: there was considerable trouble with ethnic mafias and even some warlordism, but government authority won out in the end. In my other writings, I go into a lot of detail in describing the exact conditions that inadvertently made Russian society relatively collapse-proof. Here, I will simply say that these ingredients are not currently present in the United States.

While attempting to arrest collapse at Stage 1 and Stage 2 would probably be a dangerous waste of energy, it is probably worth everyone's while to dig in their heels at Stage 3, definitely at Stage 4, and it is quite simply a matter of physical survival to avoid Stage 5. In certain localities - those with high population densities, as well as those that contain dangerous nuclear and industrial installations - avoiding Stage 3 collapse is rather important, to the point of inviting foreign troops and governments in to maintain order and avoid disasters. Other localities may be able to prosper indefinitely at Stage 3, and even the most impoverished environments may be able to support a sparse population subsisting indefinitely at Stage 4.

Although it is possible to prepare directly for surviving Stage 5, this seems like an altogether demoralizing thing to attempt. Preparing to survive Stages 3 and 4 may seem somewhat more reasonable, while explicitly aiming for Stage 3 may be reasonable if you plan to become one of the Big Men. Be that as it may, I must leave such preparations as an exercise for the reader. My hope is that these definitions of specific stages of collapse will enable a more specific and fruitful discussion than the one currently dominated by such vague and ultimately nonsensical terms as "the collapse of Western civilization."

Wednesday, February 20, 2008

Radio Interview

I gave an interview to Roger Wendell of KGNU Radio on Friday morning, February 29th, at 10:30 AM Eastern. We talked about my book, collapse, and what an exciting time it is to be alive.

Saturday, February 16, 2008

Surviving Financial and Social Collapse

LATOC Teleseminar: Surviving Financial and Social Collapse with Dmitry Orlov

To be held on three consecutive Thursdays: February 28th, March 6th, and March 13th at 7:00 PM Eastern Time. Each teleseminar will last approximately 60 minutes. (total time approximately 3-to-3.5 hours). Click on the image above to sign up.

Friday, February 08, 2008

Money as Metaphor

Those who feel that they have a good handle on reality often hate to hear that their perception of reality is shaped by their language. Yet this is often the case. For instance, we think about electricity in terms of current (amperage) and pressure (voltage) because it is too difficult to think directly in terms of electromagnetic fields. We think about the origin of the universe as an explosion - a very loud one, hence the term "Big Bang" - although no physicist can tell us just how loud it was in terms we can appreciate. Loud enough to pulverize your eardrums and shoot them clear out of the Solar system at relativistic speeds? Since you wouldn't be left standing around to enjoy such a noise, why call it a noise at all? Probably because "Big Bang" is the best we can do, being unable to directly imagine a universe erupting out of nothing, and need a linguistic handle by which to hold it. Metaphors allow us to take something that is too abstract and to make it visceral enough for us to comprehend.

A long time ago, money was quite visceral: bags and boxes of shiny metal coins, or bits of paper that you could take to a bank and exchange for shiny metal coins. The coins could be both weighed and counted. But with the advent of fiat money - paper money that is not directly redeemable for a fixed quantity of anything - we are left with just naked digits printed on scraps of paper. All that remains is the lingering metaphor of coinage. Unlike numbers that represent physical quantities, which are usually known only to a few decimal places, money still demands the arduous task of counting, summing up meaningless pennies. The people at the top, who have all the power, and who create money out of nothing by writing government IOU's, force the rest of us to keep track of every penny.

Somewhat more significant than these pennies are our own heads, which, in a democracy, are also supposed to be counted, by voting. Elections are conceived of as strict counting exercises, such as what you might have in a roll call. But since they are done for the benefit of those who lack power, to give them the illusion that they have some, the rules are more lax than with counting pennies. Glancing at the two columns of numbers from the incomplete recount after the New Hampshire primary elections (they are incomplete because the Kucinich campaign, which requested the recount, ran out of money), about half of the precincts miscounted their votes the first time, the second time, or (if I may conjecture) both. Later on, during the Florida primary, it was noticed that a certain precinct reported voter turn-out that was more than 100% of the registered voters for that precinct. Such things are generally not discussed, and, whenever they are brought up, someone always says that such minor variances are not statistically significant. Clearly, what we have here is a mixed metaphor: are we measuring the voters, or are we counting their votes? I am convinced that my vote is not statistically significant, so I don't vote. (I don't think my tax return is statistically significant either, so perhaps we should "measure" it as well, the same way we "measure" my vote.)

Although the powerful, who "coin" and dispense money for our use, demand that we account for every penny of it, many of the operative terms that relate to money treat it as if it were a liquid. The "flow" of money in and out of an organization is termed "cash flow" while the ability to convert assets to cash and vice versa is termed "liquidity." Those who have mortgages that are in excess of the value of the collateral are said to be "underwater," while organizations on the verge of bankruptcy often require a "bailout." There are some "fire" metaphors as well, such as the "burn rate" of funded start-up companies, as well as "blood" metaphors, such as the term "hemorrhaging money," applied to production delays of expensive legal battles. But liquid metaphors, from "float" to "slush fund" to "pool," are by far the most common.

It is therefore fair to ask, What sort of liquid might this be? Is this tap water, salt water, or bilge water? Or is it perhaps something more potent? Really, if money had the potency of tap water, few people would bother very much about it. And we certainly do bother about it: we may be well-clothed, well-fed, have adequate shelter, plenty of free time, good company and even some entertainment, but we would still want some spending money. There is nothing like a roll of bills in our pocket or a credit card in our handbag, because it can make people do things for us they otherwise would not do: serve us drinks, give us massages and pedicures, bring us shoes to try on, transport us to some place warm and sunny - the list is virtually endless. Money can give us a feeling of well-being and euphoria by allowing us to indulge our whims, or to escape.

A potent liquid that can fuel escapism and produce euphoria must be at least 80-proof, if not 100. I deduce that we are speaking of alcohol. Indeed, the nexus between money and alcohol is an obvious one. Many governments maintain monopolies on liquor, treating it as another coin of the realm, while others tax it heavily, relying on it for much of their revenue. For those at the bottom of the socioeconomic pecking order, money and liquor are largely the same: they might be willing to work for room and board, but would much prefer to be paid in money as well, in order to be able to go and get drunk. Moonshine is illegal, because it avoids taxation, and marijuana is illegal because poor people can grow it themselves and use it as a substitute for liquor, again, avoiding taxation, and possibly avoiding money altogether. Thus, the monopoly on liquor goes beyond liquor, and turns out to be a monopoly on all euphoria-inducing substances, including money itself.

A good metaphor should provide reasonable explanatory depth to the underlying phenomenon. The ability to think of electricity as a fluid turns out to be quite good, to a point, although capacitors act like springs rather than like water tanks, while alternating current in a water pipe has none of the advantages of its electromagnetic analogue. So, how far can we push the metaphor of money as liquor?

At the start we might have a traditional society, with a largely non-monetized economy, analogous to a healthy working individual, who makes a bit of spending money, and uses it to get drunk (i.e., consume) after work and on holidays. His liver (economy) is in fine shape, able to process all the alcohol with no ill effects (provide the consumer goods in exchange for money). Over time, his liquor consumption (spending) increases, and his capacity for work drops (outsourcing). He now borrows against everything he owns (equity cash-outs), his future earnings (consumer debt) and even the earnings of his unborn children (national debt) in order to continue drinking his fill every night.

Later, his liver becomes enlarged and diseased (bubble economy), is no longer capable of processing all this alcohol, generates back-pressure (commodity price spikes, energy shortages) and even causes black-outs (market crashes). He can work even less (layoffs), and becomes unable to service his debts (foreclosures, repossessions, defaults). No longer able to afford all the booze, he goes on the wagon (decrease in consumer confidence and spending), which gives him delirium tremens (recession, depression).

Now, delirium tremens is a serious, sometimes life-threatening medical condition that requires medical intervention (government stimulus package). The DT-sufferer can be a danger to himself and to others. By far the easiest way to help is to buy the bum a drink (tax rebate checks in the mail this May). If he is well enough to make it from his mailbox to the checks cashed place to the nearest bar, we can all breathe easier. Once he feels better, maybe he'll even buy us a round.

Seems like a good metaphor to me...