The New Global Economy is Local
It's pretty obvious by now (at least, I think so) that modern capitalism is in the process of failing. There are a number of good reasons for this, some to do with greed and short-sightedness, others to do with the strange idea that infinite growth is possible. That latter has always been a strange idea to me; not just unintuitive, but demonstrably wrong. However, the major concern now seems to be that money is essentially fictional, on a worldwide basis.
For most of human history, money - currency - has represented something real. Sometimes it was gold, sometimes grain, and there have been currencies backed by things as diverse as beef and beer. Modern money, though, is backed by... nothing much. Agreement, between national banks, that we might as well jst pretend there's something there, and as long as nobody stops pretending, we're all fine. The trouble of late seems to have been that many of the people working in and around these banks had too much imagination, and a truly stupendous amount of pretend money went into circulation.
There was an occasion last year in the US in which the imaginary money had to be reined in. Had it not, we're told, the US economy would have completely vanished down an equally imaginary plughole, leaving rather a vaccuum - all, essentially, by agreement.
Anti-globalist protestors have been pointing out the flaws of modern capitalism for more than a decade now. The main trouble seems to be that nobody has been able to suggest anything to replace it - nobody seems to be able to conceive of a global system that will work, be reasonably fair, and not subject to abuse by any party involved. I'm beginning to suspect that this is because we're looking in the wrong places - or, rather, the wrong place.
We're not finding a global solution because there is no global solution. We need local solutions, and each local solution needs to be able to negotiate exchanges with other local solutions, situation by situation. Different areas worldwide have widely different priorities.
Look at real estate, for instance. In Ireland, despite recent falls in house and land prices, you still need to go into debt for, essentially, the rest of your life in order to own a piece of ground. There are exceptions; I know of a site in Wicklow which you could probably have for about 33% of a year's average pre-tax salary, rather than the 1000% you'd pay for a house near Dublin. Unfortunately, it's boggy, isolated, you can't buy it unless you have ancestors who were born in Wicklow, and in any case, planning permission will never be granted on it becase it's right beside the Wicklow Way.
On the other hand, in Detroit, you can buy a house - with some land - for less than a month's take-home pay. At the moment, these two situations exist in the same economy. There are all kinds of reasons for this, but look: it makes no sense. It's perfectly reasonable for land prices to vary based on location, quality, accessibility, and even historical notability, but these places in Detroit are not very different to the ones in Dublin that are selling for more than three hundred times the price. The prices are instead determined by... the prices, in a self-referential spiral.
It would make a lot more sense to decouple these. If you break the global system up into national, or even regional chunks, deliberately isolate them so that they have to make sense internally first, and only then permit an interchange, there will be more stability. No region, having to keep its own books straight first, is going to tangle with regions who don't have things settled - and that's good.
Let me pull out an analogy here. If you need a huge amount of computing power, you don't try to build a single supercomputer. Nobody has tried to do that in years. Instead, you build hundreds of smaller, reasonably powerful computers, and then connect them together sensibly. You get a lot of computation, your whole system can no longer break down at a single point of failure, and the whole thing works better. And, obviously, anyone attempting serious computing with imaginary cycles is going to crash into reality rather quickly - as should have happened to the global economy years ago.
The best thing about this idea, I think, is that it will probably happen on its own. Sooner or later, some nation or region is going to look at its own economy, and say "Look, we can basically be self-sufficient. Take your fictional debts and credits and shove them; we're going our own way for a few years, and you can come back and talk to us when you have real goods and services to trade." Certainly, they'll need to import things - I don't think there's anywhere in the world that produces all the raw goods it needs, and very few regions can produce all the pharmaceuticals their population requires. But as long as the trade for such goods happens in real rather than imaginary terms, it will work.
Labels: economy, ireland, recession
Recession Era Supplies
I've been debating for a few days where to post this article - here, on my house-and-garden blog, or on my livejournal. I've eventually settled, as you can see, on posting it here, and I'll probably link to it from LJ, because I want to hear people's opinions on this.
Ireland officially entered a recession a couple of months back. So far, this has made little enough difference in areas immediately visible to me - one friend was made redundant, another was refused a car loan, and that's been about it. But assuming this continues - and it almost certainly will - there will be changes in the local economic landscape. The main one, I think, is not going to be in terms of money coming in, but in terms of what you can get for it, and how much what you can get costs.
I grew up in a recession, one in which Ireland was, to all intents and purposes, a second-world country. I didn't actually realise this until I was in my twenties; it was just how things were. There were a few things that were markedly different about that era and now, and some of them will return. First and foremost, we have access today to a vast range of goods. Many of these goods are imported. I'm not going to look at consumer goods or clothes here, just food. For an agricultural country, Ireland imports a frightening amount of food. Second, we don't have to go far to get those goods. Most people in Ireland, even in rural areas, can buy Parmesan cheese and out-of-season strawberries within, say, five miles of their homes. I'm pulling that figure out of the air, but considering Ireland's population density, and the distribution of Spars, Centras, Supervalus, etc, it seems reasonable.
These two things are going to change. First, importing food is expensive. It may not look like it, but that's because each step in the process has been optimised until it can't be optimised any more. To get to your table, the following things have to happen to food: it has to be grown, harvested, transported to a storage facility, if imported it's flown or shipped to another storage facility, distributed to the retailer, and then you go in, buy it, and bring it home. Each stage of that process involves a cost - in many cases, it's the cost of fuel, but there's also rental on storage locations and shelf space, and the credit facilities that all the companies involved make use of. Fuel costs will rise. Rentals will rise. Credit facilities will not be available. Each of these will impose an increase in the eventual retail price of food. And when food prices rise, and people cut down on what they can buy, retailers will go out of business.
The result of this will be that people will have to travel further to get their food, and when they get there, they'll get less for their money. As a corollary, fuel prices may rise enough that running cars becomes too expensive for everyday use, and then people are confined to the walkable (or cyclable, or ridable) distances - but that's outside the scope of this current set of thinking.
So, what can people do to cope with these new circumstances? Here's a list of things my folks did when I was a kid.
Store Cupboards: When you DO get to a retailer, buy large amounts of storable food. Bread goes off within days, but flour keeps for months. Fresh vegetables are unusable after a few days as well, but canned goods last for years. Smoked fish and meat keeps longer, and frozen goods will last better as well, assuming you can rely on not having many power cuts. Rice and pasta keep better than potatoes.
Grow Your Own: My grandfather grew about an acre of vegetables every year. I don't know if we ever bought vegetables; they certainly don't appear on the lists of groceries my mother kept. There's been a movement toward growing food lately anyway, for entertainment and health reasons more than economic ones, but it still works. I don't have an acre, but I'm willing to bet that will careful planning, I can supply all the vegetables we use for about 75% of the year from the space I do have.
Local Co-operatives: Somewhere near you (unless you're right in the middle of Dublin, and sometimes even then), there is someone who has the space and knowledge to keep a couple of pigs, and a number more who can keep chickens, ducks, or even quail. If you can offer some money to contribute to feeding these, or vegetables in exchange, you're on your way to having meat that hasn't come through the retail chain. It may involve a local retailer, certainly, but the butcher may well be happy to deal with the raw materials in exchange for a share.
Planning: This is something that plenty of people do anyway, but more of it is needed if you have limited resources. You can't rely on buying what looks good when you do get to a stocked supermarket; you need to go out with a list of goods, and a set of planned meals that will last until you're next out. If the market is offering special deals, you can adjust your plan on the fly, but arriving home with goods that won't last you until the next trip, or will go off before they can be used, is no longer a viable option. You can only change the plan if you have a plan to begin with.
Deliveries: For something that's seen as a bit of a luxury now, deliveries will become a lot more useful. In plain old cost terms, both in time and money, it's a lot more efficient for a retailer to send out one driver with boxes of goods on a round trip to multiple customers than it is for each customer to drive in, select their own goods, and drive back again. Deliveries work well with planning.
There are a few things that are going to make things easier, though, than it was in the 80s. First, we have computers, the internet, and mobile phones. This makes many things easier - planning, deliveries, running a co-op, and managing your stores. Second, we have better public transport now, and that's going, of necessity, to see more use. Thirdly, more people can work from home now than ever before. And fourthly, the whole how-do-I-deal-with-all-this question is much easier to answer when you can hit the internet for information than when you were reliant on books and occasional phone calls.
So - am I overthinking all this? Or do you agree, and have more coping strategies in mind? Or do you think that none of this is going to happen? Let me know, in comments or emails.
Labels: economy, ireland, recession
Economies after the Decline of Capitalism
There have been predictions for years of the crash of civilisation, due to running out of
oil, catastrophic climate change, or even epidemics. Few enough people have taken seriously the idea of a crash due to capitalism failing, though.
For what it's worth, I don't think it's likely, even with panicky stock markets, falling currencies, banks in trouble, and so on, that capitalism will fall. It's enshrined in the entire legal system of the West, in our habits and livelihoods, and the vast majority of us literally have some investment in it, be it savings, land, loans, or whatever.
There is a rising opinion, though, with government bailouts of large financial institutions happening worldwide, that capitalism has now been, for want of a better word, broken. Some people will say it was broken to begin with, others will say it was greedy banks who broke it, and some few will hold the perverse opinion that the bailouts are the breakage, not the fix.
The problem is: even if we acknowledge that capitalism is broken, what can we replace it with?
I don't think it's possible, or even desirable, to replace capitalism overnight with anything else. We'd need to rewrite our laws, change large chunks of infrastructure, and everyone would need to undergo fairly extensive re-education.
Instead, I'm thinking of the current economic climate as being like an ebbing tide. It has covered over all the underwater mountains of other systems and ideas for some centuries now, but that doesn't mean that they're gone, or that people can't build on them as the decline of capitalism turns them back into visible islands. And new ones may be revealed as well, because who knows what's been going on under the surface?
So here are two things that may happen, on a small or local scale, which can partially replace capitalism.
Small Scale Socialism
This is most visible at the moment in Credit Unions - there are probably similar institutions elsewhere, but that's what we call them here. These are essentially small, community owned banks, which do not (as far as I'm aware) have external debts. They take in savings, give out loans, and pay interest on savings from the interest on the loans. They pay no heed to external credit records, and are very flexible about repayments. These already exist, and they shouldn't be harmed much, if at all, by the damage to larger financial institutions.
The idea of the cooperatives is another sub-surface practice that is going to come into its own again. During the lates 70s and early 80s, when Ireland was in a depression that essentially made it a second-world country, small co-ops sprang up all over. Some still exist as Farmers Co-ops, which sell hardware and farm supplies in rural towns, but there were other, far more local ones where one household kept a couple of pigs, another chickens, another goats for milk, and so on, and the goods were divided up between the participants. And, of course, everyone grew their own vegetables, and when there was a glut of some produce, it got shared with the neighbours. We have the internet and mobile phones now, so this kind of thing should be far easier to arrange.
Small Scale Feudalism
Economic feudalism has never completely gone away. It'll take a greater decline in capitalism to bring it to light, but there are small bits still there. Anyone who pays attention in rural areas of Ireland or the UK knows of a farm where there are labourers who have lived and worked on that farm all their lives, in a house owned by the landholder, and who inherited that position from their parents, grandparents, and so on. Some of these will pass it on to their children. They may receive a paycheck, and pay rent (sometimes nominal) to the landlord, but these people are effectively living in a feudal situation.
It's hard for many of us to see a feudal situation as being good, but imagine this: you have a situation where your job in a bank has disappeared, and there's no sign that you can get another one that will even pay the rent and bills. Your partner is similar straits; maybe they worked for an insurance company that's gone bust. You're renting an apartment, and while you have some savings, they're not going to last long. And someone comes along and says, "Here, I have a big farm. I need someone to do some numbers, and help with running the place. And maybe drive a tractor, or help with lambing, when the need arises. I'll give you a place to live with heating and water and so on, provide food, and pay you a bit as well. I need people who aren't going to jump ship, and you need some security. How about it?"
And suddenly, feudalism looks a lot more reasonable.
I've no doubt there are other systems I haven't thought of, more equitable ones, or those that use modern technology better. I'm looking forward to finding out about them.
Labels: economy, feudalism, socialism
Oil Prices
There's an article on the BBC saying that
oil prices could hit $200 within 10 years. Thing is, I think that's really, really optimistic. Look at this: in late February, oil prices hit $103. In July, they hit $147. That's not going to stop, and there are a few reasons for this.
First and foremost, there's simple supply and demand. China and India are still on the upward part of the curve with regard to oil use, and all the environmental policies in the world are not going to change that; industrialisation needs oil, and the Western-style status symbol of the car needs oil. So demand will go up. Supply - unless massive reserves are found under the Arctic ice - is going to go down, because there's a limit to the amount of oil that's there, and a limit to how fast it can be pulled out of the ground.
Second, the oil producers can see that they're onto the last of a good thing here. At this stage, with the peak of production either here, or already past, their livelihood is going to be gone in, say, twenty years' time. None of them are going to cut the prices much, and even if oil is a commodity, there are still people who can say "I'm not selling for less that $145, and that's final". And it will still sell, even as they up the price.
What the really sensible oil producers will be doing around now is gouging the oil industry for every cent they can get out of it, and pouring that money into developing solar and wind power, and ever-more-efficient batteries - and particularly, getting patents on the cutting edge technology in those areas. Once they have those nailed down, they'll be sorted for income for good.
Labels: economy, oil
