Introduction
Since last Fall, I have been trying to figure out what's happening with the global economy. Maybe as a result of aging or disease, I seemed to have lost whatever easy insight I once had into economic affairs, so it is now difficult to make predictions. Or, could it be that we have fallen into unpredictable times which makes prediction unreliable? Or, with globalization, is it simply that the problem is now larger and more variable than ever before? What are the certainties and uncertainties of our present situation?

Guessing the world's business

Introduction

Since last Fall, I have been trying to figure out what's happening with the global economy. Maybe as a result of aging or disease, I seemed to have lost whatever easy insight I once had into economic affairs, so it is now difficult to make predictions. Or, could it be that we have fallen into unpredictable times which makes prediction unreliable? Or, with globalization, is it simply that the problem is now larger and more variable than ever before?

What are the certainties and uncertainties of our present situation?

I must once again disclaim that my analysis is not based on a Capitalist view of political economy. The reader is hereby warned that some of my statements may seem strange in comparison to the propaganda issued by the likes of the Wall St. Journal.

Reasonably Certain

In no particular order, the following are some things I believe very likely true or factual. Of course, I could be wrong.

There is a world economy, not just an American economy. This fact is still shocking to most Americans, who are used to being at the center of an Imperium. The greed of American capitalists brought on globalization, resulting in the world economy. In that larger context, the United States, with only 5% of the world's people, is just one country among others. What one cannot ignore are the world's most populous countries, India and China, which are now determined to enjoy the benefits of modernity. The economic center of gravity has shifted to Asia.

The United States enjoyed its position at the center of the world on account of two World Wars in which it was the "arsenal of democracy." Unlike Asians and Europeans, Americans did not suffer the devastation inflicted on entire populations by those wars. (That may be the reason Americans failed to understand the plight of the millions of Vietnamese and Iraqis they attacked and ruined.) The United States became Top Dog when the other contenders were licking their wounds. Three generations later, the peoples of Europe and Asia are determined to have the good life as they conceive it, which is not the same thing as living the American Dream. The result is the rest of the world, especially Asians, do not feel guilty about fleecing Americans of their money and power. Those attitudes and ambitions enforce the decline of the United States into relative obscurity. Those familiar with modern history should not be surprised by these changing power and economic relationships, as the United States is only following the well-trodden path previously taken by the Brits and, before them, the French, Germans, Dutch and Spanish. This should be a warning to those fostering Imperial claims in Asian capitals, especially Beijing, but, as has always been the case in History, the rising powers will ignore the fate of their predecessors.

Principle: Serious economic analysis must be global in nature, not Amerocentric. This is a major enlargement of the subject and a shift of focus compared to the recent past.

Consequence: Investors and Entrepreneurs must think and go global. Particularly, Americans who think only of U.S. markets and conditions are making false assumptions. The United States is no longer a safe investment.

Ancient and modern economies run on energy, whether human, animal or other. The basic problem is always making a living (cf. GSQ, "Ergecology"). The singular invention of modern people is machines; i.e., making inanimate materials perform tasks. Tool use began millions of years ago, and always involved personal exertion until the domestication of animals. Domestic animals replaced humans in many difficult labor intensive tasks, starting 10 millennia ago. Humans continued to do those things requiring a high degree of intelligence and training until ancient times, about 5 millennia ago. In the ancient world, humans expanded the use of tools to reduce the amount of brute force required in a project, but they did not invent machines that did the work completely. The Romans, for example, did not invent a road laying machine, so continued to hire human stone masons to cut and lay one block at a time. Machines are truly modern inventions - a more startling break with the past than most people realize - because they dispense with sweat altogether. The steam engine and all its descendants (diesel, gas, electric, turbine, etc) produce useful motions autonomously, requiring only to be built and maintained. They tap the internal energy of a fuel which humans provide. Machines are a generalization of human physiology enslaved: feed them and their muscles and brains do work.

I summarize what everyone knows because nothing has changed, except people forgetting that nothing has changed. The world's economies run on inanimate sources of energy, not sweat. Carbon-based fossil fuels are the major class of energy sources currently in use. There are other classes of fuels, such as nuclear and hydro, but people have fastened onto carbon-based fuels because they are relatively cheap and easy to use. Unfortunately, using fuel involves waste products such as the carbon dioxide which causes global warming. In other words, the fuels of human choice are changing the global climate in a way that could threaten the existence of human and other life forms. This danger is exacerbated by the burgeoning human population. What these effects indicate is that people are using energy faster than the environment can maintain equilibrium (as in recycling waste products).

We know there is a growing shortage of useful fossil fuels. Using carbon-based fuels is limited by the polluting effects of the waste products as well as by their availability as oil and natural gas. Were we not concerned about pollution, oil and gas could be replaced by or generated from abundant coal. Coal is an unacceptable fuel for reasons repeatedly discovered in London during the last two centuries, and now being rediscovered in Chinese cities. Carbon-based fuels not only produce killer smogs, but also have a myriad of other unhealthy and deadly effects. Thus, using them is counter-productive.

Operating assumption: People won't give up their new-found luxuries easily. It is always easy to shrug off the ultimate payment until it becomes due. (This is what makes credit cards so popular.) Thus, our present circumstances amount to a contest between desire and prudence. History and experience tend to show that desire wins out over prudence more often than not. On the other hand, the human cultures that last longest are those that control desire. American consumerism is not one of them.

Consequence: The price of oil and gas will go up and up. Despite much verbiage, very little will be done to counteract global warming simply because that requires a wrenching change of lifestyle. In due time, our natural environment will exact its revenge for abuse.

Further consequence: A lot of money will be made entertaining the dancers. But that money and other forms of human wealth will be worthless when the party is over. Therefore, it is rational to find and equip a post-diluvium refuge.

Reasonably Uncertain

No one knows the day or hour of the really important events of one's life. Anticipation and striving are some of the excitements of living. In the same way, we do not know exactly when the environment will clamp down on our activities, even if it is reasonably certain someday it will. There are basically three ways people deal with this uncertainty: ignore it, live for the day, or live in fear of tomorrow.

Funerary societies, such as ancient Egypt and Medieval Europe, orient themselves around eventual death and a hoped-for afterlife. The afterlife is a required belief in such societies, for otherwise it makes no sense to continue living. The afterlife is a hope that makes living bearable.

Then, there are societies which deny any end. Present-day America and ancient Rome are examples of societies where immediate gratification is what is important. In such societies, it matters little what consequences flow from today's events: Que sera, sera. History shows that undisciplined abandonment to the pleasures of the day is a common human response to ultimate threats. People who live this way are resigned to the doom which could overtake them at any time, so throw over traditional restraints on their behavior. Such behavior is encouraged by the mating of consumerism with weapons of total destruction. Americans have lived under such a Sword of Damocles since World War II.

The third adaptation is to ignore the situation. In this case, one goes about living as if nothing unusual has happened or will happen. Things are as they have always been and always will be. This is essentially the posture of monks and nuns, those who live outside society and who have no personal ambitions. This is an unusual stance which is not uncommon among the aboriginal peoples of remotest Africa and Australia. I cannot think of any populous society which lives in ignorance of what might happen. The vast majority of modern people want things for themselves, even at the cost of eventual destruction. They are unwilling to live in the state of nature which studied ignorance requires.

Principle: Acute awareness of eventual death, disability or other damage, date uncertain, results in societal splits between those who demand repentance and those who guzzle another drink. Entrepreneurs can make money either way. The few who ignore or remove themselves from the situation are irrelevant to the economy, but are more likely to survive doomsday.

Playing the Odds

Which scenario best fits our circumstances?

Who will survive, how and in what condition?

What is your plan? Or, do you prefer not to have any plan?

Postscript

When I wrote this piece, I did not mention a fourth alternative.

We know enough about the causes and effects of our situation to change outcomes. The problems confronting us can be solved with appropriate planning and determination. The solutions will require a high degree of individual resolve and social cohesiveness. I prefer this kind of solution.

I did not mention this possibility because I think it unlikely to be adopted by any major society. There have been a few cases in which rationality prevailed over desire (cf. Jared Diamond's Collapse), so it is not impossible for a society to meet the challenge. Both democratic and authoritarian societies have done so when a sense of social purpose existed, the sort of feeling that existed in America during World War II. But that feeling is long gone almost everywhere.