GOING GLOBAL
ONE OF THE BEST-SELLING BOOKS OF 2005 WAS THE WORLD IS FLAT, political columnist Thomas Friedman’s account of the disappearance of national boundaries to the free flow of almost everything—money, people, labor, goods, ideas, and all the rest. In this award-winning volume, Friedman paints an evangelistic account of the phenomenon of globalization. Ironically, at just about the time the book was published, its central idea was already beginning to look much more like a publication from the Flat Earth Society than a visionary picture of how we will live in 2020. To Friedman’s (partial) defense, though, in 2005 even professional futurists bought in to the notion of a “flat earth.” As a small illustration of the groupthink prevalent at the time, I received a rousing silence accompanied by a sad, bemused shaking of heads from a group in Switzerland in 2006 when I had the temerity to deliver a presentation titled “The Decline and Fall of Globalization.” An especially odd reaction, I thought, at a meeting of futurists! But so much for post postmortems. Let’s fast-forward a few years and see how the future of globalization looks today.
Headlines in the financial press continue to paint an ever clearer picture of the emerging fact that the global financial system as it’s currently constituted is incapable of dealing with the capital flows across borders that Friedman-style globalization demands. Initially, it seemed that globalization was mostly focused on the flow of jobs from regions like the United States where labor is expensive to China, Vietnam, and other places where it is cheap. But movement of jobs necessarily entails movement of the capital those jobs generate from the net importers back to the net exporters. These are the two pillars of the international trade and financial system that the flow of capital must balance. Unfortunately, that system is hopelessly broken.
Digging into the way in which people, money, and most everything else makes its way around the world, we see the specter of complexity hanging like a shroud over every step of the process. The system of globalization has given corporations a vast spectrum of ways (degrees of freedom) by which they can develop new products, produce existing products, market their wares, and the like through picking and choosing where and when these functions are carried out. So in a world with no national boundaries or constraints, transnational corporations have a huge level of complexity. On the other hand, the system composed of the global population at large, as represented by their national governments, has given up most of whatever freedom they had to regulate what can and cannot cross their borders without having to pay. In short, nations have voluntarily reduced their complexity in the business realm to a minimal level. As always, as that gap widened, so did the social stress of growing unemployment in Western countries, as all but the high-skill jobs moved to Asia. We are seeing the end result of this complexity mismatch in these very days, as the United States tries desperately to address the problems of a jobless recovery from the financial crash of 2007, while Europe struggles to deal with an even more serious financial crisis, not to mention the social disruption emerging from its own dangerously high levels of unemployment, particularly in the southern countries of the European Union like Greece, Italy, Spain, and Portugal.
As the ongoing tension between the United States and China dramatically illustrates, net exporters like China must accept an appreciation in the value of their currencies. On the other hand, net importers like the United States have to devalue. Of course, the exporting countries strenuously resist taking this step, as the revaluation process would bring the flow of goods and money into balance—precisely what the exporters do not want. Initially, this obvious fact gets played out in diplomatic circles. But if the diplomats don’t get the job done within some acceptable period of time, financial markets will step in to do it for them. The result of that leveling of the playing field will not be pretty. In fact, this is another good example of a complexity mismatch that is very likely to be resolved by an X-event; namely, a massive devaluation of the US dollar, protectionist legislation, and a whole lot of other actions that will only accelerate the process of the world economy falling into a deep deflationary depression.
In an interesting juxtaposition of worldviews and timing, the year 2005 also saw publication of The Collapse of Globalism, a provocative work by Canadian polymath John Ralston Saul. While this volume garnered far less attention than Friedman’s paean to the globalists, it’s a much better guide to what we’re seeing today and will continue to see in the decades to come. At its heart, Saul’s work asks the question posed by a reviewer of the book, Michael Maiello: “Are political decisions meant to be made in deference to the economy and markets, or can we use our political institutions to shield us from some of the harsher effects that markets can dish out?” Adherents like Friedman claim that the powers of government will fade in the face of the power of markets. Saul thinks otherwise. According to the mythology of globalists like former Federal Reserve chairman Alan Greenspan, markets are self-regulating. But events like the Crash of 2007 show they most definitely are not. After more than three decades, globalization has failed in its promise to spread the wealth and reduce poverty. As noted by Pranab Bardhan in a 2006 article in Scientific American magazine, “Because the modern era of globalization has coincided with a sustained reduction in the proportion of people living in extreme poverty, one may conclude that globalization, on the whole, is not making the poor poorer. Equally, however, it cannot take much credit for the decrease in poverty, which in many cases preceded trade liberalization.” Why should we imagine that these purported benefits will ever come from tinkering with local needs and concerns? In the end, the most important message from Saul’s finely tuned argument is that the global economy is something that humans have created and is simply a part of human society. So shouldn’t it serve our interests rather than trying to force us to serve its needs?
The retreat to localization has many faces that show themselves in different ways as we look at specific regions of the world. So let’s have a few concrete examples to fix the underlying principle that an overdose of complexity can be bad for your economic and spiritual health.
A CATERPILLAR OR A BUTTERFLY?
MIKHAIL GORBACHEV’S RESIGNATION AS PRESIDENT OF THE USSR ON Christmas Day 1991 was a moment of hope for Russian liberals, who saw the dissolution of the Soviet Union as an opportunity for the Russian populace to join into the political, social, and economic life of the industrialized Western world. A population that had lived, loved, and labored at an abysmally low complexity level, with little freedom to travel abroad, choose leaders, or even buy consumer goods beyond the bare necessities of life was now empowered to do all three and more. Alas, fate decreed that Gorbachev hand over power to Prime Minister Boris Yeltsin, a hopeless drunk who almost immediately threw the reconstituted Russian Federation into political and economic chaos for the better part of eight years. By the time Yeltsin himself draped the mantle of power over the shoulders of former KGB agent Vladimir Putin at the end of 1999, the nascent movement toward a freer and more complex society had devolved into a land grab, in which Yeltsin’s cronies became today’s “oligarchs” by effectively stripping all state assets worth taking and placing them in a few private hands (their own).
From the moment he took power in the 2000 election, Putin clamped down on any notion of political reform, free and open elections, public debate, and the like. Whatever complexity increase Russians acquired in the political arena was soon set back to its USSR level, where it remains to this day. Of course, an increase in the level of complexity in other areas of life like foreign travel, a semifree press, and consumerism was the trade-off Putin made for reducing the public’s degrees of freedom in the political sphere. Some newly minted oligarchs, notably Russia’s richest man at the time, Mikhail Khodorkovsky, didn’t quite understand this conjuring trick, which called for a hard lesson from Mr. Putin to set him straight—in fact, straight to a prison camp in 2004 on trumped-up charges of tax evasion (shades of Al Capone’s imprisonment in the USA on similar charges under similar circumstances in 1931).
A small but influential band of Russian liberals kept the faith during the interregnum of Dmitri Medvedev, who took power in 2008 when Putin was ineligible to run for a third term of office. In September 2011, one of those die-hard liberals, Lyubov Volkova, awoke the morning after Putin had “reappointed” himself president-to-be, saying in an interview with the New York Times that this development recalled a story similar to the one I told earlier in Part I about the butterfly flapping its wings in one part of the world, thus setting off a cascade of events that changes the world dramatically somewhere else. Ms. Volkova said, “Sometime—maybe not 20 years, but maybe 17 years ago—the butterfly was crushed and the consciousness of the Russian citizens traveled along a different path.” Putin’s return to the presidency will certainly stamp out whatever complexity gains in the political domain might have come from Medvedev’s time in office, ensuring that the political complexity level of the Russian population will remain low for many years to come. So it seems open and free political expression in Russia wasn’t a butterfly after all, eager to flap its wings and fly, but just a lowly caterpillar. (The mass protests in Russia in late 2011 seem to hold some promise for this butterfly, after all.)
This story of Russia’s sad political plight illustrates two important complexity principles. The first is that the complexity level in a society can vary across different domains of life. Here we see the political complexity temporarily rising, but then rapidly quashed when the rise became too unsettling to the overall social order during the Yeltsin period. The attempts to modernize the country rested on an almost magical belief in the power of the free market. Liberalization led to the privatization of many state industries, which in turn created social unrest, bankruptcy of companies, an extremely high rate of unemployment, kidnappings, prostitution, and the rise of criminal groups similar to the Mafia in the United States in the Roaring Twenties. But at the same time the complexity level in other spheres of life, especially foreign travel and consumer goods, dramatically increased. This example is worth keeping in mind, as it suggests that governments can engineer trade-offs between different types of complexity to maintain their grip on political power. The situation in China today is another good example of just this sort of trade-off.
The second big idea, of course, is the butterfly effect referred to by Ms. Volkova. There was a moment when it actually looked as if a political butterfly was starting to emerge from its cocoon and flap its wings to set Russia off onto an entirely new course of political and economic freedom. But it was not to be.
THE DECLINE AND FALL OF THE EUROPEAN UNION
ANOTHER RECONFIGURATION, VERY DIFFERENT FROM THE SPECIFICS of the one in the former Soviet Union, yet eerily similar in other respects, is under way in Europe as I write. Here the entire edifice of the European Union is teetering on the edge of collapse, not through political and social unrest, but through what appears to be purely economic and financial causes. As money matters in every aspect of life, it’s important for us to understand how this European crisis may unfold as a glimpse of how the world’s geopolitical structure may look a few years from now.
Political analysts, editorial writers, and financial pundits, along with many other dreamers, schemers, and so-called men of affairs have pointed their collective finger at a wide variety of reasons for the financial quagmire the European Union finds itself bogged down in. These putative culprits run the spectrum from lazy Greeks, greedy bankers, and rapacious property developers to mindless Brussels technocrats and feckless politicians of every stripe. But such “explanations” are like doctors addressing the symptoms of a disease, rather than its cause. For the EU crisis, the cause runs much deeper than the mere caprices of an assortment of conceivably even well-meaning, but essentially clueless, individuals. The true causa causarum rests upon the fact that an ever-increasing gap in complexity between interacting human systems is almost inevitably brought back to contact with reality through “shock therapy.” As I’ve repeatedly emphasized, this therapy generally takes the form of an X-event. Here’s how those guiding principles work out in the context of the current EU crisis.
The formation of the EU can certainly be seen as a “joining,” “globalizing” type of event. And indeed that event, the 1957 Treaty of Rome, took place at a time of increasingly strong feelings on the part of European governments that the time had come to unite into a single political body. Despite some setbacks in getting the EU Constitution approved in 2005–2008, the history of the EU has been pretty much onward and upward—until now! Forces of “separation” and “localization” have now begun to dominate, showing up in events ranging from the unwillingness of prosperous states in the EU to prop up the finances of the weaker members to talk of the reimposition of border controls by some countries to stem the flow of unwanted economic refugees from the Balkans, Turkey, and elsewhere.
As we’ve said earlier, when organizations, especially states or empires, encounter problems, the time-honored way to solve them is to add another layer of complexity onto the organization. Basically, this solution is the well-known process of “bureaucratic creep.” As problems accumulate, the bloat of bureaucracy increases to the point where the entire resources of the organization are consumed in simply maintaining its current structure. When the next problem comes online, the organization falls off the cliff of complexity and simply collapses.
Many times this complexity trap shows up when two (or more) systems are in interaction. The gap in complexity between them becomes too big to sustain, and the resultant X-event emerges to close it. We saw this process earlier in the collapse of the repressive regimes in Tunisia and Egypt, both of which were facilitated by a rapid upgrading of the complexity of the low-complexity system, the citizenry of each country, via social networking and modern communication channels. The governments could neither suppress this buildup, nor keep up with it themselves. The end result was, of course, the X-event of rapid, violent regime change.
To illustrate this principle in the context of the EU, think of the Eurozone countries as a system in interaction with the rest of the global economy. If the countries were not in the Eurozone, they would have many options at their disposal to address changing economic times. They could, for instance, manage the supply of their own currencies, raise or lower interest rates, impose trade tariffs, and the like. In short, they would have a high level of complexity arising from the many different types of actions that could be taken.
Instead, the Eurozone members are severely constrained because no country can act unilaterally but must act in unison as per the dictates of the European Central Bank (ECB). So a complexity gap arises between a high-complexity system (the world) and a low-complexity one (the Eurozone states). Loans from the wealthier Eurozone countries to indebted ones and other efforts by the ECB to bridge this complexity gap will almost surely end up falling into the category of “throwing good money after bad.” Ultimately, this will also almost surely lead to human nature’s default solution for such a problem, which in this case will be the extreme event of a collapse of the euro, and very possibly the EU itself. Here it’s no pun to call it a “default” solution.
Can the complexity gap be bridged without a collapse of the euro? Maybe it could have been, but only if the EU had taken a politically unpopular, but necessary, short-term “hit” when the debt crisis first arose instead of trying to buy their way out of a problem that money cannot solve. For example, implementing much more stringent regulatory procedures for vetting the finances of candidate member countries, or even slowing down the entire process for admission of new members, would have been painful and unpopular in the short run. But these sorts of actions would certainly have helped prevent the current crisis. This “faster is better” policy for admitting new member states was put in place to try to enlarge the EU as quickly as possible, presumably so that it would be “too big to fail.” Talk about irony!
Even the policy of rapid expansion might have worked if it had been accompanied by the recognition that one-size-fits-all financial policies, while looking good in principle, almost always fail miserably in practice. Different cultures call for different approaches to almost everything, and to imagine that financial policies that work for a country like Germany could/should apply equally well to a country such as Greece or Portugal is only to invite a disaster.
Of course, it’s now much too late in the day for actions of this sort. The historical record is filled with examples of ideologies that crashed into the brick wall of reality. The big question at the moment is whether the EU itself will end up in that graveyard of experiments in social engineering, an experiment that had to be done, but which is now likely to be seen as a noble failure. Let’s be a bit more specific now about how things might look if the Eurozone does indeed come apart.
In times like today, many pundits argue that the future of the Eurozone rests primarily with its strongest member states, Germany and, to a lesser degree, France. The most likely way the Eurozone could fall would be if Germany saw the collapse of the Eurozone as being in its best interests. In short, the fundamental question is whether Germany would gain more by remaining in the Eurozone and, in essence, bankrolling it. Or would Germany’s interest be best served by leaving? There are at least three major scenarios that might play out if Germany decided for the latter course of action and left the Eurozone, each one of which constitutes its own special type of X-event.
Total Collapse: In this future, the Eurozone would revert back to what it was before the euro was introduced. This would require the European Central Bank to return its gold to member states of the Eurozone in proportion to their initial contribution. The myriad former national currencies—deutsche mark, lire, franc, Finnmark, and others—would be brought back to life and cross-values set to their levels at the time the euro was introduced.
In this scenario, the US dollar reserves built by the states will replace their euro reserves. Confidence in almost all currencies would disappear, as people and countries desperately seek hard assets like gold. It’s safe to say that currency markets would be chaotic, probably with a strong initial move into the US dollar—but only until the smoke cleared away and business returned to something approximating normalcy.
Partial Collapse: It’s more likely that the Eurozone will not totally collapse, at least initially, but will simply shrink by kicking out weak member countries from southern Europe. These southern countries—Spain, Greece, Portugal, Italy—would have to go back to their original currencies, which would take place in conjunction with imposition of currency controls to prevent flight capital from moving to the still-extant euro. The outcast countries would suffer years of poverty, but maybe not worse than what they will suffer by remaining in the Eurozone. The “new euro” would suddenly become the currency du jour, as the indebtedness of the remaining Eurozone countries would decline dramatically.
Unilateral Withdrawal: This is an extreme scenario in which the strongest member of the Eurozone decides it’s had enough and sees that its national interest rests in flying solo. If this were to happen, the euro would be devastated to the advantage of the US dollar, which would remain the global reserve currency—but still fall slowly against other major currencies like the Japanese yen and Chinese renminbi.
Seers of the future love to spin scenarios like those above, laying a path to a new world order. I have to admit to a weakness for this sort of armchair philosophy myself—not so much to predict what will happen, but more to sketch a spectrum of possibilities for what might happen, ranging from the plausible (no X-events) to the highly speculative (many “high-X” X-events). Basically, scenarios are a way of focusing the mind both on constraints limiting how the world might look and on opportunities for shaping that world into something we’d prefer rather than a world we must simply endure. In this direction, let me tell a story about an exercise I participated in over a decade ago, but which still holds some very intriguing lessons for us as we try to understand the world as it might be a decade or two from now.
I WAS INVITED TO WASHINGTON, D.C., AT THE TURN OF THE MILLENNIUM to participate in a US government–sponsored exercise named Project Proteus. The goal of the project was to explore several very disparate scenarios for the way the world might look in the year 2020, and to evaluate what American interests would be threatened in such worlds and how to address those threats. The Proteus group consisted of about sixty people from a dazzling array of disciplines, ranging from physics and engineering to economics to science-fiction writing and even poetry. What’s interesting for us is not the Proteus exercise itself, but some of the scenarios presented. (Tom Thomas of Deloitte Consulting and Michael Loescher of the Copernicus Institute created these visions of the world of 2020, and I’m indebted to them for their counsel and permission to reprint some of them here.)
Of the five worlds of 2020 presented to the group, the three worlds that seem most appropriate for our purposes here are those termed Militant Shangri-La, The Enemy Within, and Yankee Going Home. The full scenario for each world was incredibly detailed, consisting of many, many pages of both data and fictional accounts of life in that world. Following Thomas and Loescher, here is a telegraphic summary of each of these three worlds.
Militant Shangri-La: This is a world of unexpected events and difficult-to-trace villains. The world, in general, and the United States, in particular, has continued into a third decade of a prosperous information-driven economy. But the world is also continuing along the road to complexity, with new structures of influence on the globe. The Newtonian diplomatic and military calculus of the past four hundred years since nation-states emerged to close the Middle Ages seems to be giving way to another age. In particular, the global man-in-the-street has endured the past century of two hundred million deaths in war, endured dizzying and difficult technological change, and is listening sympathetically to the earth groan under the burden of population and extinction. Nearly all of the animals of Africa, many of fish in the sea, and much of the wild areas of the globe are used up. Into this world enters the new and worrisome Alliance of the Southern Constellation: South Africa, India, Indonesia, China, and other pariahs to the Western social philosophy of individual liberty and human rights, operating both legitimately as a block of aligned nation-states and illegitimately as criminal cartels. Their grand strategy is to keep the world on the edge of chaos and, from that chaos, reap profit. The Alliance is in space, on the seas, in the media and financial institutions, and worming into the hearts and minds of individuals to kill the very idea of personal liberty. Meanwhile, the United States, its four English-speaking cousins, and their Pacific allies Japan and a newly unified Korea unite to resist the evil empire.
The Enemy Within: This is a world in which the United States has slowly and unexpectedly, but quite dramatically, unraveled. Like so many other nations at the height of power, disagreements, ethnic tensions, and single-issue politics have torn the social fabric. The society is fractured and fragmented—politically, socially, and culturally. Intergenerational strife, compounded by record unemployment, has torn apart churches, neighborhoods, and families. Racial tensions are a tinderbox in both cities and suburbs. The United States has become an uncivil society, with uncertainty the specter looming over each activity of every day. Violence can pop up at any time and in the most unlikely places. There seems to be no refuge. Under such social circumstances, capital and business are flowing out of the country. The nation’s economy creaks along at barely sustainable levels. Agriculture, health care and pharmaceuticals, low-end retail, personal security services, and construction are among the few bright spots in this abysmal economy. Government coalitions struggle to find an appropriate national response to the seemingly never-ending crisis. All other national tasks and obligations are deemed unimportant as the country turns inward and faces the most critical turning point of its 250-year history.
Yankee Going Home: This is a world in which little is clear except that the world has changed in fundamental ways. Who is running things? Why are certain decisions being made? What goals are being pursued? Who are friends and who are enemies? The United States has withdrawn from the world, gone home after a series of terrible foreign-policy blunders and after a long-standing and deep recession. The world is heavily influenced by the memories of terrorism, regional war, and worldwide instability that followed the US isolationism. In the wake of the US retreat, we find a world made up of both traditional actors (nations, international organizations, nongovernmental organizations) and powerful nontraditional actors (global corporate alliances, criminal groups, mercenary units). These actors cooperate for power and influence while simultaneously competing for position and control in a constant whirl of politics and economics, bewildering to nearly all concerned. In this world, historical notions of allegiances are questioned, and the rules of the game are difficult to understand. Predictable behavior becomes the unique exception rather than the expected standard.
The Proteus scenarios show how the United States might decline, if not fade away altogether, as a world power. It’s interesting to see how these paths to ignominy match up with visions of the end of the American empire set out by another famed visionary.
PETER SCHWARTZ IS PROBABLY THE WORLD’S MOST WELL-KNOWN FUTURIST. Formerly head of scenario planning for Royal Dutch Shell, he founded the Global Business Network (GBN) some years ago in order to explore various scenarios for the future for clients ranging from the US Department of Defense to filmmaker Steven Spielberg for his production Minority Report. In August 2009, Schwartz was approached by Slate magazine to create alternative visions for how the United States might leave the world’s geopolitical center stage sometime in the next hundred years. His group developed four different paths by which this might occur. Here is a brief summary of each of the roads to collapse that the GBN group cooked up.
Collapse: Following government-bungled responses to a series of Hurricane Katrina–like catastrophes, the mood of the American population flips to the negative, as the public begins to see their own government as the common enemy. This shift in the collective psychology of the population results in a complexity mismatch between the government and the public, much like what’s happened recently in the Arab countries of north Africa, the end result being an implosion of the United States due to unsustainable internal divisions.
Friendly Breakup: This scenario involves a downsizing in which the United States breaks apart due simply to an inability to bear the cost of running a huge empire. Schwartz sees this dissolution as analogous to the breakup of the Soviet Union. A variation of this scenario would be if a big state, say California or Texas, or a region like the West Coast would develop sufficient resources and individuality to split off from the union. The GBN argues that one way this could happen would be for the politically left-leaning states to join together into a “Democratic Alliance,” while states at the opposite end of the political spectrum would form a “Republican Nation.”
Global Governance: In this world, the United States gradually declines in geopolitical significance as it is assimilated into a larger global community. In short, the world bands together to form a true “United Nations,” and all nation-states, including the United States, cede much of their authority to that overarching global government.
Global Conquest: This is the hard path to the sidelines, in which not only the United States but also the rest of the world is subjugated to a world dictatorship. A kind of “super Mao,” as Schwartz terms the dictator, takes over the world by force, probably using space-based weaponry, and shuts down the rest of the world.
The three Proteus pictures of the world of 2020, as well as the GBN scenarios, illustrate the way scenarios might be used for anticipating the future. As we see from recent events, each of them contains pieces of the actual world as it seems to be unfolding, and each gives a glimpse of how an X-event is likely to impact what we’d see a decade from now. Both the Proteus organizers and the Schwartz group caution that the scenarios should not be taken as predictions of the future, but more as thought experiments to stimulate discussion about the various factors that might combine to create such an event. In short, we have to mix and match from each of the scenarios in order to come up with something that would look to be the way to bet today on the most likely world of tomorrow.
With these examples of Russia, the EU, and Project Proteus under our belts, I’ll wrap things up by speaking briefly about the strategic aspects of historical cycles and complexity gaps, together with how as individuals we might weather the economic, political, and social storms forming on the visible horizon.
All the Proteus scenarios envision social collapse proceeding as a slow train wreck, a gradual, almost leisurely, process whereby one social group (society, empire, civilization) smoothly passes on the baton of global power and influence to its successor. Of course, this “passing on” is more in the order of the newly minted power yanking the baton away from the ancien régime than a friendly handoff. Nevertheless, the cyclical theories of historical processes espoused by twentieth-century thinkers, ranging from Oswald Spengler and Arnold Toynbee to Paul Kennedy, all see such a smooth transition. Basically, the received wisdom is that history has a rhythm and that that rhythm entails gradual change with no huge discontinuities. Recently, Harvard historian and general social thinker Niall Ferguson has argued a very different picture for how this transition really takes place. A brief account of Ferguson’s ideas is a good place to begin our summing up.
FITS AND SPURTS
SOME YEARS AGO, EVOLUTIONARY BIOLOGISTS STEPHEN J. GOULD and Nils Eldredge put forth a theory of evolutionary processes they termed “punctuated equilibrium.” Their claim was that evolutionary processes do not take place in a slow, gradual fashion but rather occur in fits and spurts. For long periods of evolutionary time (hundreds of thousands or even many millions of years), more or less nothing happens. Then along comes a period like the Cambrian explosion, which took place about 650 million years ago, during which a huge number of dramatic evolutionary changes take place. In a short (by evolutionary standards) period of 510 million years, the major animal groups we know today appeared, animals with shells and external skeletons. Afterward, things settled back into a kind of long-term “hibernation.”
Niall Ferguson’s view of the dynamics of historical processes is very reminiscent of the Gould-Eldredge theory for biological processes. And why not? After all, history is itself a social process involving evolutionary change. So it’s not unreasonable to imagine that the biological mechanisms of change and the historical ones (whatever they may turn out to be) would show great similarities.
What Ferguson has in mind for historical change is a process that will gladden the heart of any system theorist. Ferguson explained his radically different view of the way history unfolds in a 2010 article in the journal Foreign Affairs:
Great powers are, I would suggest, complex systems, made up of a very large number of interacting components that are asymmetrically organized…. They operate somewhere between order and disorder—on the “edge of chaos,”…Such systems can appear to operate quite stably for some time; they seem to be in equilibrium but are, in fact, constantly adapting. But there comes a moment when complex systems “go critical.” A very small trigger can set off a “phase transition” from a benign equilibrium to a crisis….
So there it is: the Gould-Eldredge punctuated equilibrium theory scaled up (or down!) to the domain of social processes.
In his argument, Ferguson states that any large-scale political unit is a complex system, be it a dictatorship or a democracy. In particular, empires show the characteristic tendency of a complex system to move from stability to instability very rapidly. Cyclical theories of history have no room for such acyclical discontinuities, which is perhaps not surprising as the theory of complex systems is a relatively new entry into the modeling pantheon, having emerged in full force only over the past few decades.
Ferguson buttresses his argument with numerous historical examples of empires that dropped off the edge almost overnight rather than doing a slow fade into the sunset of history. It’s of considerable interest to note the benchmark case of the Roman Empire, which collapsed in just two generations, with the city of Rome itself suffering a population decrease of nearly 75 percent during that time. The archaeological evidence—lower-grade housing, fewer coins, smaller cattle—shows the downsizing phenomenon I’ve noted several times in this volume and reflects a dramatic reduction in the influence of Rome on the rest of Europe. A more recent example is the fall of the Soviet Union in 1989, which I discussed earlier in this chapter. The historical record traces many more sudden empire “crashes” in between these two.
What does this all suggest for the prospects of the United States in the years to come?
As Ferguson notes, empire transitions happen virtually overnight. As a result, it’s largely a waste of time to talk about stages of decline and wonder where the United States stands today in that transition. Moreover, most empires ultimately fall due to financial mismanagement and their attendant crises. In essence, the gap between income and expenses widens precipitously, and the empire is ultimately unable to finance this debt (yet one more complexity gap). Looking at the escalation of US public debt from $5.8 trillion in 2008 to a projected $14.3 trillion a decade or so from now should be enough to throw fear of the fiscal gods into anyone.
As I noted in Part I, a driving factor in what actually happens in the social realm is the beliefs people hold about their future, the so-called social mood. As long as people believe the United States will be able to deal with its problems, all is well and the country, along with the rest of the world, will make it through whatever the crisis of the day may be. But the moment a financial butterfly flaps its wings in the form of a seemingly innocuous event, perhaps the failure of a bank (like Lehman Brothers in 2007) or the downgrading of a minor (or major) country’s debt (like the USA in 2011 or France in 2012), the whole house of cards can come tumbling down as both panicked investors and the general public start running for the exits. As Ferguson states it, the system “is in big trouble when its component parts lose faith in its viability.” The conclusion from this argument is that empires function for some unpredictable period in seeming equilibrium—and then they fail abruptly.
Now we ask how all these fancy abstractions and general principles translate into the kind of life Americans will probably be living when a deflation-fed depression or a hyperinflation sets in for real? Here’s a short preview of coming distractions. How likely are any of the scenarios I’ve presented to actually occur? From today’s perspective, none of them look especially likely, particularly if you’re a trend follower. But a few decades is a long time, and there will certainly be many surprises between now and then. One need only consider things like nanoscale weaponry, catastrophic weather pattern changes, a new Ice Age, or almost any of the X-events I’ve put on the table in this section of the book. Any of these might well dramatically shift the odds in the coming decades. Moreover, if Niall Ferguson is right, the time to prepare is now, since the collapse, if/when it comes, will take place quickly and by then it will already be too late.
ADDING IT ALL UP
A BLOOMBERG HEADLINE CAUGHT MY EYE THE OTHER DAY AS IT PROCLAIMED, “Apocalypse Angst Adds to Terrorist Threat as Rich Russians Acquire Bunkers.” The story went on to tell about a firm building $400,000 private bunkers for oligarchs at hidden locations across Russia, in order to protect themselves against the global cataclysm foretold by the ancient Mayan calendar for the end of 2012. For those with a less-than-oligarch-level bank balance, another firm is building communal bunkers at undisclosed locations in central Europe, where you can check in for $25,000 per person when it all comes undone. While it seems unlikely that even a figurative bombshell X-event would call for adoption of literally a bunker mentality to survive the fallout, there can be little doubt that today’s post-postindustrial lifestyle will be in for some serious downsizing (maybe even for oligarchs) if any of the X-events presented here were actually to take place.
As a somewhat smaller step in the direction of lifestyle change, a survivalist-oriented website, www.usacarry.com, contains a very entertaining, and even possibly useful, article titled “The Top Ten Survival Things You Need to Do Before the Complete Collapse of the U.S. Dollar.” I was certainly eager to see how the author, a certain Mr. Jason Hanson, saw life without the US dollar, so I looked in on his site. He wrote, “There will be riots in the streets and Marshall [sic] Law,” as part of the American scene. As for his ten steps toward ensuring a place in the new America, the first thing to do according to Mr. Hanson is to have “at the very minimum the following three guns: A handgun, a rifle and a shotgun.” Later, after laying in a year’s supply of food and a month’s worth of water, the article finally comes around to money: some gold, silver, and cash. So there it is. The article concludes with the admonition: “And most importantly, get those guns!”
Well, OK. If you’re ready to live in a world where the survivors will probably envy the dead, an armload of weapons and an underground bunker might be just the ticket. But an Armageddon-like post-nuclear-holocaust type of world versus what we’re likely to face in a post-US dollar, deflationary world are very probably going to be quite different things. For a bit of perspective, think about how the current Great Recession has already affected family life and then just scale it up to a Greater Depression level.
According to a mid-2010 survey by the Pew Foundation, more than half of all adults in the US labor force had experienced some “work-related hardship,” such as prolonged unemployment or reduced work hours since the beginning of the recession in late 2007. Another survey showed that more than 70 percent of Americans over the age of forty felt affected by the economic crisis, and that the net worth of the average American household declined by around 20 percent. So the impact of simply a major recession has already put lasting dents in the American way of life.
The other side of this bleak economic coin is the social benefits that many believe will accrue from being forced to adopt a less profligate way of life. Myth has it that the Great Depression of the 1930s was ultimately redemptive, by forcing society to work together to bring a sense of unity to the country. But reality is a harsh mistress, and the facts of the matter are that it was the Second World War that served this function, not the Great Depression. At present, the Great Recession is showing no signs of bringing about a simpler, slower, less consumer-oriented way of life. Most people are simply getting poorer as the rich get richer, while family relationships are strained and in many cases coming totally unglued. It’s difficult to imagine that a total collapse of the global economy would make this picture any brighter.
Instead of a brighter, better America, a postcrash world is almost surely destined to reset what we mean by “normal.” Here are just a handful of the “new normals” that Fortune magazine identifies as being what we’re likely to see:
Renting, Not Owning: The central pillar upon which the so-called American Dream rests is home ownership. Having your own piece of land and a home as your castle goes right along with Mom and apple pie. While Mom and apple pie may survive as a part of the postcrash America, home ownership will definitely have to go. The rich will own; the rest will rent.
Permanent Unemployment: The US economy would have to add more than 300,000 new jobs per month over the next three years to get the jobless rate below 7 percent by 2014. Nowadays, a monthly report that adds fewer than 100,000 jobs is heralded as a major advance. So a return to the pre-2007 levels of 5 percent unemployment or lower is a distant dream. And it won’t get any closer when the US economy steps off center stage.
Saving, Not Buying: Reduced income and uncertainty surrounding jobs translates into paying down debt and saving for arrival of the pink slip, not picking up a nice, but unnecessary, pair of glitzy shoes or treating yourself to dinner at a fancy French restaurant.
Higher Taxes for “the Rich”: According to today’s lexicon, “rich” means earning $250,000 a year or more. Where that figure comes from is anyone’s guess. But somehow it’s been enshrined in Washington-speak to mean the boundary between those who should pay more income tax and those who shouldn’t. This sounds great. After all, less than 2 percent of US households have an annual income this high. But, in fact, if the dollar collapses and hyperinflation sets in, that quarter of a mil isn’t going to buy so much anymore. In fact, some folks say it doesn’t even buy that much right now. On the other hand, with a scenario of deflation that does not flip into hyperinflation, that money will go a very long way indeed—provided you’ve buried your cash in the backyard or stuffed it into a mattress so you can get your hands on it when your bank goes belly-up.
In summary, the way of life in the industrialized world will definitely take on a bleaker and more somber tone when the world separates into a cluster of localized, not globalized, power blocs. But Armageddon it ain’t (probably)!