The Archdruid Report - Archive

It’s been a busy week for those of us who keep watch over the industrial world’s deepening tailspin, as politicians in the United States and Europe play a game of chicken using sovereign debt in the role traditionally filled by fast cars. The issue in the United States is simple enough: the most that either side is able to offer, given its political commitments, is less than the least either side can afford to accept, and the occasional turns toward demagoguery on both sides haven’t exactly helped. It’s still possible that some last minute compromise may be hammered out, but the odds against that are starting to lengthen, and if that doesn’t happen, the financial end of the federal government will start seizing up in about three weeks. It should be an interesting spectacle.

Europe is a more complex situation. Greece, the current poster child for sovereign debt dysfunction, did what poor countries so often do, borrowed in foreign markets far beyond its ability to repay, and now can’t meet its bills. Unfortunately the normal way to resolve such problems – defaulting on the debt – would bankrupt quite a few large banks in other EU nations, and these latter have put pressure on their national governments to stave off a Greek default. The problem here is that Greece is going to have to default sooner or later; the question is purely a matter of when The Greek government is in hock far beyond its ability to repay, and the austerity measures pushed on it by the cluelessly doctrinaire economists at the IMF have worsened the matter considerably by putting the Greek economy into a tailspin. So it’s simply a matter of waiting for the inevitable to happen, and the credit markets to go into spasm accordingly.

Mind you, the horrified utterances currently being splashed around the global media, claiming that default is unthinkable and unprecedented, are nonsense of the most blatant sort. Nations default on their debts all the time. Russia did it in 1998, Argentina did it in 2002, and both nations survived; most European nations, for that matter, have defaulted on their debts more than once over the course of their history, and bankrupted plenty of banks in the process – that’s where we get the word bankrupt, you know. Defaults have always been one of the inescapable risks of lending to governments. EU governments could get realistic about this, let Greece do what countries with too much debt normally do, and spend their time more usefully writing letters of condolence to the bank executives who will be out of a job shortly thereafter.

Come to think of it, it’s just possible that this is what EU governments are actually doing. The current flurry of handwaving and emergency meetings may be no more than a source of plausible deniability – we’re sorry, we did all we could, it was the fault of (fill in the blank to conform to local prejudices) that Greece crashed and took half Europe’s banks with it, blah blah blah. For that matter, it’s not completely beyond the bounds of possibility that politicians on this side of the Atlantic are playing a similar game. The US is up to its eyeballs in unpayable debts, loaded down with entitlements and international commitments that it can’t afford but that no elected official dares to touch, and lurching toward a default as inevitable as Greece’s but on an almost unimaginably vaster scale. Nearly the only way to get out of the resulting trap with some chance of national survival would be to trigger a run on Treasury bills, now, that will force a default on the national debt in the near future, when both sides can conveniently blame it on the intransigence of the other party and the perfidiousness of foreign lenders. It does seem unlikely that this level of public-spiritedness is at work in Congress and the White House, but I’d like to believe that it’s possible.

These latest consternations, in turn, provide all the more relevance to the theme I’ve been discussing in the last couple of posts here, the possibility of shifting over here and now to the salvage economy that’s already beginning to emerge outside the narrowing circle of scarcity industrialism. This week I’d like to bring up another dimension of that shift, and talk about one of the unspoken and unspeakable realities of life in a declining industrial society: the pervasive phenomenon of stealth inflation.

By this I don’t mean inflation in the sense in which economists use the word, the decrease in the value of money driven by the expansion of the money supply relative to the supply of goods and services. That kind of inflation deserves much better press than it gets; though it’s denounced by all right-thinking people these days, it’s one of the safety valves by which a capitalist economy’s tendency to produce excess paper wealth gets brought back into step with the actual wealth in circulation, the nonfiscal goods and nonfinancial services that meet actual human needs. It thus serves exactly the same role, in a much more subtle and flexible way, as the negative-interest currencies being proposed by would-be financial reformers these days.

Stealth inflation is a good deal less laudable. It’s the process by which the price of goods and services remains the same, while the value of what’s provided for that price diminishes. It’s sometimes done by decreasing quantities – most Americans over forty, for example, will remember the days when cans of soup and candy bars were a good deal larger than they are now – but far more often done by cutting quality. Sometimes this is a minor, even a subtle, factor; in other cases, it’s neither, and can quite easily become lethal in its effects.

A good example of the first kind came my way a while back when a friend, knowing I like to cook with cast iron pans, found an elderly example in a secondhand store for some absurdly small price and gave it to me. Because my wife has celiac disease – a severe enough case that relatively small traces of gluten can have unwelcome effects – I had to strip off the natural coating that cast iron cookwear gets when it’s well treated, and reseason the pan again, just as though it had been bought new. Even with this rough treatment, though, the old pan proved to be a much better piece of cookwear than any of the more recently manufactured cast iron pans I’d been using for a decade or so previously. Its inner surface has a much smoother finish, its metal conducts heat more evenly; this evening’s fried zucchini (fresh from the garden) was cooked in it, because no other pan I have does as good a job.

This isn’t simply a matter of chance or a personal quirk. Ask any cast iron aficionado and dollars will get you doughnuts – perhaps these days I should say “credit swaps will get you crullers” or something like that – you’ll hear a similar story; the cast iron cookware you can buy in your local hardware store simply isn’t as good as the same products made a quarter century ago, and the difference is no small thing. I’ve heard the same thing in the very different context of craftspeople who work with old tools; the quality of the metal, they say, as well as the workmanship tends to be dramatically better in tools that are at least a quarter century old.

In some cases the differences are enough to kill. One of the nasty little secrets behind the rising toll from food poisoning in the United States and elsewhere is that a great deal of it could easily have been prevented by common sense sanitary procedures that used to be standard, but have been cut for the sake of lower per unit costs and higher quarterly profits. What makes this all the more embarrassing is that this is America’s second encounter with what happens to the safety and quality of processed food in a capitalist system under economic stress; Upton Sinclair’s The Jungle probably ought to be required reading for the pundits, and there are many of them just now, who fatuously insist that government regulation is always and everywhere a bad idea

The same purblind mania for gutting sensible regulation that freed the banking industry from the Glass-Steagall Act and its equivalents in other industrial nations, and at a stroke brought back the devastating bubble-and-bust economics that dominated the industrial world before the Glass-Steagall Act was originally passed, has had equivalent effects in many other sectors of economic life. An acceleration in stealth inflation through declining quality is among the results. Still, there’s a deeper force pressing in the same direction, and it comes from the relentless mathematics of fossil fuel depletion and its impact on an economy founded on the expectation of constant growth.

There has been a great deal of talk recently on the leftward side of the economic spectrum about the need to “decouple” economic growth from increases in the supply of energy. Still, as Zen masters are wont to say, talk does not cook the rice; insisting that economic growth can continue while energy supplies are stuck in a bumpy plateau does not make it so. The production of real, nonfiscal goods and services requires inputs of energy, as well as raw materials (which must be extracted by using energy) and labor (which in America, at least, usually uses a fair amount of energy, too). The only goods and services that can grow unchecked as energy supplies flatline are financial goods and services – that is, “goods” that consist of the essentially arbitrary tokens our society uses to allocate real wealth, on the one hand, and “services” that consist of shuffling and exchanging these tokens in more or less intricate ways, on the other.

As the cheap abundant energy that provided the basis for three centuries of industrial civilization stops being cheap and abundant, then, one of the consequences is a widening disconnection between the production of nonfiscal goods and services and the production of money in all its various forms. Left to itself, the natural result would be a rising spiral of inflation in which the value of money declined steadily, to stay more or less in step with the amount of real goods and services available to buy. This natural result, though, is utterly unacceptable to the political classes – the people who take an active role in the political process – anywhere in the industrial world.

This has imposed any number of distortions on the global economy, but one of them is a constant push to keep the nominal rate of inflation as low as possible, thus sparing politicians the hard task of explaining to their constituents a reality that neither the politicians nor the constituents have yet begun to understand. That push drives the widespread juggling of economic statistics across the industrial world, but I’ve come to believe that it also provides an important motive force behind stealth inflation. Large corporations have plenty of interfaces with governments, and governments have plenty of levers by which to influence corporate behavior for political ends; if the politicians in Washington DC, let’s say, decided that it would be really helpful if businesses increased their profit margins relative to their costs by some means other than raising prices, it doesn’t seem at all unlikely that this preference would be heard in corporate boardrooms, and play at least some role in shaping their decisions.

What this means for the individual green wizard, in turn, is that there’s every reason to think that a good many of the goods and services sold to consumers are going to continue to decrease in quality in the years ahead. That in turn implies at least two things. The first is that the strategy of salvaging energy discussed in last week’s post has an additional advantage, because what’s being salvaged in a good many cases is not simply an equivalent of what’s on the market today, but a better product, one that tolerably often will work better and last longer than a new product of the same type. As we approach an age in which many goods may stop being available at all for extended periods, this is not an opportunity to ignore.

The second implication is that those who learn the skills needed to take older products that are no longer working, or no longer working well, and recondition them so that they can return to usefulness, may find themselves with a job skill of no small importance in the emerging salvage economy. It’s not too hard, for example, to find old handsaws for sale very cheaply at flea markets and estate sales. Fairly often, after being handed down through a couple of generations, these have rusted blades, teeth that are dull and bent out of their proper set, cracked and damaged handles, and the like. The steel of the blade, however, is very often of much higher quality than the equivalent new product in a hardware store today, and it doesn’t actually take that much in the way of skills and tools to remove the rust, polish the blade, reset and file the teeth, make a new handle out of hardwood and attach it to the old blade, and so on. The result is a saw that can be handed down for several more generations, and do a great deal of useful work in the meantime; it’s also a product that can be sold or bartered to craftspeople at a premium price.

In at least a few cases, it’s also possible to go one step further and figure out how to manufacture products on a small scale to old specifications. I don’t have anything like the metallurgical knowledge to figure our what makes the difference between my old cast iron pan and my newer pans, but the information’s surely out there, and could be tracked down by someone with the necessary background. Whether or not there would be enough of a market to make this a paying proposition anytime soon is another matter; there are odd little niche markets that might at least pay the bills.

Myself, having more facility with words than with metals, I’m contemplating tracking down a basic letterpress and exploring the honorable profession of Benjamin Franklin. The printing press with movable type was invented in the Middle Ages, after all, and very likely can remain a viable technology no matter how far down the slope of decline we end up sliding. Under current conditions, it can help pay its own bills via handprinted wedding invitations and the like; as conditions change and the complex supply chains that keep computer printers and copiers functioning become more problematic, a printing press powered by human muscle and capable of running on supplies no more complex than paper and homebrewed ink may turn into a serious asset.

Your mileage will unquestionably vary, and a second income refurbishing old items or using some outdated but sustainable technology will be the right choice for some people and the wrong choice for others. I mention it here partly because a good many readers of these posts have asked about potential businesses and income sources in a deindustrializing world, and partly because a fair number of people out there in the peak oil blogosphere don’t yet seem to have thought through the fact that they’ll need to earn a living in one way or another during the long slow unraveling of the industrial economy,

That unraveling may have its sudden jolts, to be sure. If the politicians in Washington DC and an assortment of European capitals fumble the current situation spectacularly enough, this autumn could see an economic crisis on the grand scale, with markets seizing up, banks shutting down, and governments facing abrupt replacement by legal means or otherwise. Still, we’ll come out the other side of it, no doubt poorer but still faced with the ordinary challenges of the human condition; if learning how to recondition old tools allows someone to barter for necessities during the years ahead, that’s a positive step, and such positive steps on the individual scale are the raw materials from which the deindustrial future will gradually emerge.

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On a related note, those of my readers who have been following The Archdruid Report for a while now will have seen me more than once pointing out that, challenging as the decline and fall of industrial civilization will doubtless be, it’s not the end of the world. With the help of an enthusiastic publisher, I’ve had the chance to make that point a little more clearly. This September, San Francisco’s Cleis Press will be bringing out my next book, Apocalypse Not, a wry survey of the apocalypse meme – the notion that sometime very soon, history as we know it will suddenly be replaced by a new osmos that just happens to bear a close resemblance to our favorite daydreams – and its role in inspiring the last three thousand years or so of End Times that weren’t. The Rapture, the Singularity, the prophecies of Nostradamus, and of course the upcoming 2012 brouhaha, among other things, all come in for discussion Though the subject’s a serious one, the book is a good deal shorter than my three peak oil books, and a lighter read as well. On the off chance that you’re interested, dear reader, it’s now available for preorder.