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I recently posted Dmitry Orlov’s great essay ‘Closing the Collapse Gap‘, and here is his latest piece, which he delivered to the 5th Conference on Peak Oil and Community Solutions. I am only reposting excerpts, because the original is very long and somewhat repetitive. I also must warn that although I find Orlov’s insight useful, I have a much more positive view of the collapse of US Imperialism, mainly because I think he is overlooking the benefits of this process for the planet’s ecosystem as well as the possibility of freedom for the majority of the world’s people who are currently suffering under US dominance. Iraqis certainly will have a different view of the collapse of the US Empire than those in the Pentagon.
How about for Americans? Is the collapse of the US better for people who live here? Orlov’s conclusion actually indicates that it may be, especially in terms of rebuilding the social fabric that has been worn away by individualism and consumerism. But he also overlooks the reality of social oppression in the US. Not everyone lives the same “middle class” lifestyle he seems to be taking for granted. There are already millions of Americans on the brink of poverty, or deep in poverty, who don’t worry about losing their SUVs.
The best outcome is for not just a collapse, but a transformation, so that nobody has to go hungry or work their life away just so that the wealthy can take cruises or visit the spa. The current Bailouts are the most striking example of the government having the exactly opposite priorities. Instead of bailing out homeowners, or the poor who lack access to public transportation, they are dumping money into the hands of the real estate and automaking profiteers! We must continue to oppose this nonsense, from Obama or anyone, and make sure that our money is used for the benefit of the majority, not the wealthy few. In a world of shrinking wealth, there should be no rich, and there doesn’t have to be any poor either. [alex]
The Five Stages of Collapse
by Dmitry Orlov
Originally published by Energy Bulletin, Nov. 11, 2008.
1.
Hello, everyone! […] My specialty is in thinking about and, unfortunately, predicting collapse. My method is based on comparison: I watched the Soviet Union collapse, and, since I am also familiar with the details of the situation in the United States, I can make comparisons between these two failed superpowers.
I was born and grew up in Russia, and I traveled back to Russia repeatedly between the late 80s and mid-90s. This allowed me to gain a solid understanding of the dynamics of the collapse process as it unfolded there. By the mid-90s it was quite clear to me that the US was headed in the same general direction. But I couldn’t yet tell how long the process would take, so I sat back and watched.
I am an engineer, and so I naturally tended to look for physical explanations for this process, as opposed to economic, political, or cultural ones. It turns out that one could come up with a very good explanation for the Soviet collapse by following energy flows. What happened in the late 80s is that Russian oil production hit an all-time peak. This coincided with new oil provinces coming on stream in the West – the North Sea in the UK and Norway, and Prudhoe Bay in Alaska – and this suddenly made oil very cheap on the world markets. Soviet revenues plummeted, but their appetite for imported goods remained unchanged, and so they sank deeper and deeper into debt. What doomed them in the end was not even so much the level of debt, but their inability to take on further debt even faster. Once international lenders balked at making further loans, it was game over.
What is happening to the United States now is broadly similar, with certain polarities reversed. The US is an oil importer, burning up 25% of the world’s production, and importing over two-thirds of that. Back in mid-90s, when I first started trying to guess the timing of the US collapse, the arrival of the global peak in oil production was scheduled for around the turn of the century. It turned out that the estimate was off by almost a decade, but that is actually fairly accurate as far as such big predictions go. So here it is the high price of oil that is putting the brakes on further debt expansion. As higher oil prices trigger a recession, the economy starts shrinking, and a shrinking economy cannot sustain an ever-expanding level of debt. At some point the ability to finance oil imports will be lost, and that will be the tipping point, after which nothing will ever be the same.
This is not to say that I am a believer in some sort of energy determinism. If the US were to cut its energy consumption by an order of magnitude, it would still be consuming a staggeringly huge amount, but an energy crisis would be averted. But then this country, as we are used to thinking of it, would no longer exist. Oil is what powers this economy. In turn, it is this oil-based economy that makes it possible to maintain and expand an extravagant level of debt. So, a drastic cut in oil consumption would cause a financial collapse (as opposed to the other way around). A few more stages of collapse would follow, which we will discuss next.[…]
I don’t mean to imply that every part of the country will suddenly undergo a spontaneous existence failure, reverting to an uninhabited wilderness. I agree with John-Michael Greer that the myth of the Apocalypse is not the least bit helpful in coming to terms with the situation. The Soviet experience is very helpful here, because it shows us not only that life goes on, but exactly how it goes on. But I am quite certain that no amount of cultural transformation will help us save various key aspects of this culture: car society, suburban living, big box stores, corporate-run government, global empire, or runaway finance. Read the rest of this entry »
Now I hope people don’t see this article as ‘support for the Soviet Union’ or something ridiculous like that, but I think this is a very insightful and amusing article, based on a powerpoint presentation. The question is, was the USSR more prepared for the economic collapse it suffered than the US is for the collapse it will soon suffer? Orlov lived through the former and seems to think that it was.
Also note that I strongly disagree with his recommendation to abandon politics – he’s right that politicians are swine but i think he’s wrong in overlooking people’s ability to build a resistance movement that can make real changes to our society, despite politicians best efforts to derail it. So with that, enjoy the article! [alex]
Closing the ‘Collapse Gap’: the USSR was better prepared for collapse than the US
by Dmitry Orlov
Originally published be Energy Bulletin, December 4, 2006.
Good evening, ladies and gentlemen. I am not an expert or a scholar or an activist. I am more of an eye-witness. I watched the Soviet Union collapse, and I have tried to put my observations into a concise message. I will leave it up to you to decide just how urgent a message it is.
My talk tonight is about the lack of collapse-preparedness here in the United States. I will compare it with the situation in the Soviet Union, prior to its collapse. The rhetorical device I am going to use is the “Collapse Gap” – to go along with the Nuclear Gap, and the Space Gap, and various other superpower gaps that were fashionable during the Cold War.
Slide [2] The subject of economic collapse is generally a sad one. But I am an optimistic, cheerful sort of person, and I believe that, with a bit of preparation, such events can be taken in stride. As you can probably surmise, I am actually rather keen on observing economic collapses. Perhaps when I am really old, all collapses will start looking the same to me, but I am not at that point yet.
And this next one certainly has me intrigued. From what I’ve seen and read, it seems that there is a fair chance that the U.S. economy will collapse sometime within the foreseeable future. It also would seem that we won’t be particularly well-prepared for it. As things stand, the U.S. economy is poised to perform something like a disappearing act. And so I am eager to put my observations of the Soviet collapse to good use.
Slide [3] I anticipate that some people will react rather badly to having their country compared to the USSR. I would like to assure you that the Soviet people would have reacted similarly, had the United States collapsed first. Feelings aside, here are two 20th century superpowers, who wanted more or less the same things – things like technological progress, economic growth, full employment, and world domination – but they disagreed about the methods. And they obtained similar results – each had a good run, intimidated the whole planet, and kept the other scared. Each eventually went bankrupt. Read the rest of this entry »
On President-elect Barack Obama’s first trip to the White House yesterday to meet privately with his predecessor, lame duck George W. Bush, reportedly the first and most pressing message Obama delivered to the man in charge was “bail out General Motors.”
Cartoon by The Rag Blog
The American taxpayers are sick and tired of their money being doled out to corporate crooks like the carbon-polluting, oil-guzzling auto industry, or banks like AIG who apparently weren’t satisfied by the first two bailouts and now want another. (They apparently spent too much of their last check on trips to the spa.)
Is this really Obama’s highest priority? Giving public money to private companies that will use it to pollute the planet?
If YOU had the opportunity to sit down with President Bush for an hour and have him actually listen to you, what would YOU ask him to do?
Why not instead bail out homeowners by ending foreclosures to keep people in their houses?
Why not bail out the poor, sick, and elderly, by instituting single-payer universal health care like every other industrialized nation does?
Why not bail out Iraqis, military families and soldiers by pulling U.S. forces out of Iraq and ending a bloody occupation? (or Afghanistan, or the 100+ countries where the US military is stationed)
Why not bail out human rights by ending torture, closing Guantanamo and allowing all prisoners a trial by jury?
Why not bail out civil rights by ending anti-immigrant raids and the criminalizing of immigration?
Why not bail out students, who are suffering from the greatest debt crisis in history as education becomes increasingly unaffordable?
Why not bail out the planet, by investing heavily in renewable energies controlled by local communities, urban gardens, home weatherization and create 5 million new Green Jobs?
Barack, if you’re going to be a president worthy of the immense praise and expectation placed on you, you’re going to need to stop palling around with terroristic industry and corporate lobbyists, and listen to the people.
[alex]
Sources: Obama pressed Bush for auto industry bailout
Originally published by CNN, November 11, 2008
Jessica Yellin, Candy Crowley, CNN’s Ed Henry
(CNN) – At their private Oval Office meeting on Monday, President-elect Barack Obama urged President Bush to support billions of dollars in aid for the struggling auto industry during the upcoming lame-duck session of Congress, according to three officials briefed on the meeting.
The officials said Bush privately expressed skepticism about taxpayer money for automakers on the heels of a string of government bailouts for other industries, and the president also urged Obama to help push through a free trade pact with Colombia Read the rest of this entry »
This is a new article written by my friend and mentor, Jerry Silberman. I helped him edit it, so if anyone wants to discuss these issues, i’m available! [alex]
The Last Recession? Or Our Best Opportunity for Hope?
by Jerry Silberman
Originally published by Energy Bulletin, November 7, 2008.
As the drama of the bursting bubble of Wall St. gives way to a slower, but steady and painful, economic decline, the first and most important question we should ask is “Should we try to blow another bubble, or should we reject bubble culture values for something entirely different?”
If we agree that we need a new culture, this leads to the question “Can we take advantage of the opportunity afforded by this collapse, by the exposure of a failed system, to establish new “rules for the house” (the root meaning of “economy” from the Greek)?”
If the house, metaphorically, is Planet Earth the way we have enjoyed it for millennia, then making the choice now to change to a sustainable economy is the best way to turn the apparent lemon of this economic contraction into the best lemonade in history. Read the rest of this entry »
[There are many articles (including one I wrote in college), and even whole books written about Petrodollars – the way that US dollars dominate the world economy by their crucial involvement in all global oil trades. This just happens to be a very clearly written and accessible essay, so I’m reprinting it despite slightly out-of-date numbers. The extent to which the fragility of petrodollar hegemony affects US foreign policy is probably the biggest question mark, but it seems plausible that the much-threatened aggression against Iran has a lot to do with that country’s moves to abandon the dollar for their oil trades. – alex]
Oil prices and the dollar
C. P. Chandrasekhar
Jayati Ghosh
Originally published by Business Line, February 26, 2008.
| The depreciation of the US dollar has been closely bound up with the movement of oil prices, as world oil trade is typically denominated in dollars. Yet this relationship may now be under threat as the dollar continues to depreciate and the US economy tips into recession. In this edition of Macroscan, C. P. Chandrasekhar and Jayati Ghosh examine how oil prices have changed with different numeraires, and consider the implications for the future of the oil-dol lar nexus. |
The relationship between oil and the US dollar has been at the heart of the way international economic relations have been organised for more than half a century.
International capitalism has relied on the US dollar as the basic reserve currency, and has therefore granted it an essential degree of stability for several decades despite the large external deficits run by the US and the periodic swings in its valuation in currency markets.
More than half of aggregate world exports are denominated in dollars; more than 80 per cent of all international currency transactions similarly involve dollars.
Loans made by the IMF and other multilateral institutions are denominated in dollars. More than 60 per cent of the foreign exchange reserves held by central banks of all countries are in dollar assets.
This has obviously meant huge advantages for the US. It has allowed the US economy to benefit from access to imports that can effectively be paid for simply by printing dollars, and has therefore allowed the US to run enormous current account deficits for prolonged periods. It has encouraged the rest of the world to finance these deficits by providing its savings to be held in US or dollar-denominated financial assets, to the point that all the developing regions of the world are also building dollar reserves that directly or indirectly find their way to the US economy.
Dollarisation of oil markets
A key feature of this entire process has been the dollarisation of world oil markets. Oil is the central commodity of industrial capitalism, absolutely essential for the production of essential and widely used goods. All industrial economies, and most developing ones, would grind to a halt with even a moderate disruption of oil supplies.
Most of the world oil trade has operated and continues to operate in dollars, even when the US is not the trade partner. Oil prices are defined in dollars for most oil exporters. As a result, oil importing countries also pay in dollars. The oil-exporting countries accumulate dollar reserves, which have been preferentially invested back in the US because of the zero currency risk involved in this.
Indeed, this recycling of petrodollars has been very significant as a source of finance for US trade deficits in several periods, including in recent times. Other countries also hold dollars for future oil purchase.
The dramatic increase in the price of oil in the past few years could be argued to have accentuated this tendency. As Chart 1 indicates, oil prices have increased dramatically in dollar terms especially from 2003, going up by nearly 2.5 times between 2003 and 2007.
This has obviously contributed very significantly to the wealth of oil exporters, and allowed them to generate balance of payments surpluses and build foreign exchange reserves, which have then been invested dominantly in dollar assets in US markets.
However, this is also the period that the US dollar has been depreciating, especially with respect to some of the other major currencies such as the euro and the Japanese yen. As a result, the change in oil prices has been less striking in terms of these currencies than in terms of the dollar.
The currency factor
Read the rest of this entry »
Originally published by Common Ground Magazine.
By Daniel Pinchbeck
Witnessing the unraveling of the global financial system, I find myself gripped by contrasting emotions. While part of me feels like heading for the hills and hoarding cans of sardines, another part of me is giddy, almost celebratory. The tyrannical rule of Wall Street is ending, along with the self-serving free market ideology of Neoconservatives. The massive amounts of fictitious capital created by our corrupt financial system must be destroyed, so we can address our immediate situation on this planet.
I feel sorry for the millions of people who may suffer during a transition that will be extremely difficult. On the other hand, our rapacious economic system is destroying the integrity of the biosphere, threatening our future as a species. Taking a wider perspective, we can see a new social structure that creates sustainable patterns of behavior is necessary, if we want our descendents to continue on the earth.
In my last book, I looked at many predictions of systemic financial dissolution at this time. I discussed the possibility that a financial H-bomb could melt down the economic system while leaving the “tangible assets” — people, infrastructure, land — still standing. I suggested this could be the best thing to happen to our world. Such a systemic collapse is a tremendous opportunity to change the direction of our society. Those who believe civilization can be run according to different principles — humane, equitable, and collaborative ones — need to step forward now with concrete proposals and put ideals into practice.
Several factors made the collapse of the global financial system inevitable. One problem with capitalism is that it is not self-sufficient, but depends on the constant availability of new markets, forcing expansion by creating ever-increasing amounts of debt. We now have a globalized world market, so exploitation of new territories can no longer take place. As Naomi Klein analyzed in The Shock Doctrine, this led to a policy of “disaster capitalism,” where cataclysms like hurricanes and terrorist acts were seized as opportunities to redevelop internal markets. Such a practice is inherently unsustainable.
Another crucial element that is rarely discussed in the media is the connection between the current financial meltdown and peak oil. Just as our debt-based economic system needed new markets to penetrate, it also required an ever-increasing supply of cheap energy to fuel its expansion. The decreasing supply of fossil fuels relative to global demand has brought the second law of thermodynamics into play, breaking the delusionary spell cast by the financier-sorcerers, who decoupled financial value from real value back in the early 1970s. When we consider the permanent reduction in the supply of cheap energy combined with the lack of new markets, it is obvious the amassed debts will never be repaid. Read the rest of this entry »
I found this letter to the editor in the Scotland Herald pretty spot-on with its analysis, so I thought I’d repost it. Worth reading, even without the article he’s responding to. [alex]
Ian Bell’s superb analysis that we are undergoing a “paradigm shift” in economics is timely and insightful (October 25). This is potentially a wonderful time in human history. As someone who has read Marx, Mr Bell recognises the inevitable consequence of capital accumulation as paper “value” in a system in which money is issued as debt, at interest.
Thus finance capital expands exponentially in the hands of fewer and fewer people desperately trying to increase their individual net worth through calls on the product of the real economy, which has to grow to meet these.
In contrast, the real economy can grow only as far and as fast as increasing productivity and technological innovation will allow, resulting in what the great US Green economist Herman Daly calls the “fallacy of exponentially increasing natural resource productivity”, whereby mainstream economics proclaims resource infinity – a scientific absurdity – and treats depletion and pollution as joint externalities.
Thus the desperate search for economic rents in all areas of life (the encroachment of the private into the public under the Thatcher/Reagan voodoo economics of the Chicago school), and a succession of speculative bubbles. Mr Bell also recognises this as the consequence of class war, whereby the owners of capital retain an outrageously unfair proportion of surplus value. Proof that the class war is still alive: bailouts for the owners of capital, and recapitalisation of destitute banks from public funds, the usual expected remedies now being applied: Some pseudo-Keynesian activity used to stimulate demand (but the owners of capital will not let this go too far). There will be some winners from the fire sales of assets (Citicorp and JP Morgan spring to mind) and there will be great anger and hardship.
But the probability that this will work this time is limited by two things: we are likely at peak oil, thus destroying any prospect of growth in the real economy, and global warming plus biofuel production is increasing basic food prices through scarcity of food and water, and finity is taking care of all other basic resources. Meanwhile, the expansion of western economies (demanded by finance capital) is limited largely to the military-industrial (the civil real economy having been exported to points east to exploit cheaper labour there). So the Keynesian option is seriously limited, except by war, which is problematic since present wars are being financed by the Saudis and Chinese purchase of T-bonds – and these are going badly – but sadly not impossible (read some of Joseph Biden’s speeches and quiver).
The finance capitalist paradigm is broken, probably beyond repair. For students of Marx, there is absolutely nothing surprising about this, the only surprise being that anyone is surprised. Indeed, much of this was also understood (but forgotten by his country) by the great Thomas Jefferson, author of the American Constitution, and president: “I believe that banking institutions are more dangerous to our liberties than standing armies.” Well, now we have both – owned and controlled by the same people.
The Marxian analysis is right, to a point. But Marx was a man of his time, and like Adam Smith, who grew up on the nascent Scottish coalfields, saw the “infinite” potential of extraneous hydrocarbon injections as part-liberator of the working class. (Marxism, too, is into “technological fixes”).
This option is no longer open. A recession that reduces consumption in an ecologically challenged world is no bad thing, so long as we share the hardships. The present crisis offers us a new beginning: a move to steady state economics and a system that returns humanity to a balance with the rest of our natural ecology. We have reached the end of the present paradigm; what matters is to choose the right successor. If we don’t? The words of another great US scholar and statesman spring to mind: “This sucker is going down”. For “sucker” read planet.
Dr John O’Dowd, Bothwell.
The End of Capitalism 
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