Post-Peak Liberal: Whither a Way Out?

Post-Peak Liberal

....... Life on the Downslope

Whither a Way Out?

Hurricane (now Tropical Storm) Irene has put a drenching final touch on the surreal summer of 2011. With debt-ceiling games of chicken, stock market rollercoasterism, European insolvency (or is it illiquidity?), and general economic malaise buffeting us over the last few months, the familiar script of a natural phenomenon like Irene is almost welcome. At least with a problem like a hurricane, we know roughly what to do and how to react. We stock up on supplies, get our chores out of the way, and hope that the power stays on long enough to get through a good chunk of our Netflix queue. When the disastrous images start to roll in from the storm's landing points, we furrow our brows and call the relatives to make sure everything is okay. And then, more often than not, when the storm does not live up to the hype, we breathe a sigh of relief for the divine mercy. Or we chuckle that, once again, we got duped into panicking over another relative non-event. Damn that sensationalistic media!

Now, I'm not making light of the damage and suffering that hurricanes and other natural disasters can cause. I'm simply noting the familiarity of the script and the ensuing human responses.

When looking at the basic crappiness of our economic situation, however, similar comforting rituals are proving impossible to maintain. Oh sure, that doesn't stop our pundits and politicians from trotting them out. But it is becoming more and more difficult to find any type of familiar ideological mooring to which to cling, and it feels as if something truly awful is lurking around the next corner.

We are essentially painted into an operational corner, because of long trends in our economy, our politics, and our thinking. Here are the basic facts that are squelching meaningful discourse and action:

Due to many factors (technological innovation, globalization, labor-power decline, labor-value decline, financial evolution, etc.), wealth and power are more concentrated than at any time since the Gilded Age. I know this an oft-repeated trope, but it is the crucial starting point for any analysis of our predicament. And I'm not even making a value judgment here (yet). I'm simply stating the obvious. The very top of the pyramid has almost unfathomably-more power and resources that the rest of us. And it's getting worse (or better, if you're in that top slice). The erosion of net worth is creeping relentlessly up the educational and vocational ladder, with larger swaths of the middle class dropping into the gaping maw of debt, default, and depression.
Concentrated power has to be expressed somewhere other than the marketplace, if only to convince itself of its own inevitability. So the government and culture complexes have attached themselves to the swollen teats of the corporate/financial world, sanitizing the raw transfer of wealth from the bottom to the top with some fizzing streams of pop economics, junk philosophy, and consumption boosterism. Don't be deceived by the perennial pretendings of the right (and now the mainstream 'left') that somehow the 'government' is a separate entity from the 'private' business sphere. One look at the revolving door between corporate boardrooms, K-street lobby shops, and government agencies gives lie to that bit of campaign conceit. It makes for good stump shtick, but it has no relation to reality. Similarly, the idea that 'the media' and other culture outlets are independent entities challenging the more wholesome, boring, conservative business world is laughable. Keep in mind that the large media companies that give us news, magazines, movies, and TV shows are as intrinsically profit-motivated as any oil or pharmaceutical company.
With Big Business, Big Government, and Big Culture melded into one huge econo-ideological complex, the channels of politics and social change are extremely narrow. Consolidated power has honed the electoral and policy processes into a finely-edged blade. Winner-take-all elections, unlimited campaign finance, district gerrymandering, closed presidential debate structures, constitutional constraints that inflate low-population-state influence --- these and other factors almost insure that no ideas outside the pro-corporate mainstream ever get a hearing. No third party can ever get traction, no matter how many people define themselves as 'independent.' Substantive policies that offend large campaign donors can't even get off the ground (think single-payer healthcare, which almost every other industrial country uses to keep costs way below ours; or mandatory, blanket mortgage refinancing, which would quickly eliminate the massive debt overhang that is strangling growth, but which would also, of course, necessitate huge shifts from debtors to creditors).

There are other long-term trends to consider (international trade, military waste, etc.), but you get the idea. The question for this post is: Considering the breadth of our current predicament, but also the straight-jacketed nature of our political process, what can we actually expect in regards to a way out? Will anything of substance actually happen to get us through this dark time?

Here is what I think we can expect, based on how certain things shake out over the next year or so. There are a few different ways we can go, not many more. None of them are very pleasant.

First, if the European monetary union disintegrates, all bets are off. The core countries like Germany and France will probably stagger back towards relative national health, but the overall failure of the experiment will reduce investor confidence for years to come. The peripheral countries, contrary to popular expectation, will also turn out okay, albeit with a much lower standard of living. With control of their own currencies again, they will be able to inflate/devalue their way to some sustainable level of health -- it just won't be very luxurious.

From what I understand (which is certainly not much in the international finance arena), a European collapse will be a blessing and curse for the US. More investor capital would probably start flowing to America, as the number of global safe bets is reduced. But the prospect of long-term reductions in European demand, coupled with exhausted demand in the US, would also sharply reduce the possibility of global economic 'recovery.' Robust growth would probably push way out into mid-century (at least that's what the experts will say), and the Japanification of the world would be at hand -- i.e., stagnation. It probably wouldn't matter which party comes to power in the US, if global stagnation and European shrinkage take hold. The Dems and the GOP would probably just flip-flop from one election to the next, as the blame-game that is our electoral process winds out in all its inept glory. Elsewhere, I called this "Musical Chair Politics."

One other possibility, if Europe manages to hold together and limp along (or, god forbid, they turn 180 degrees from austerity to stimulus -- something I doubt will happen), is that things get so bad in the US that the people will start demanding government spending to create jobs. Now considering the current stance of the White House (in capitulation to the nonsensical right) that the government is like one big household that has to cut up its credit cards and live within its means, the idea that more stimulus will get approved seems outrageous. And in fact, I don't think it's too likely myself. But what happens if a few mega-shocks happen in rapid succession? Say that Bank of America and Chase become insolvent in quick order, and that the government refuses to bail them out. The stock market swoons for real this time, and large companies begin to drastically slash their workforces. Money start gushing out of the US to safer places, and businesses of all sorts and sizes start to fold, as financing and demand slow to a drip-drop. Say that by February 2012, unemployment has surged to 13%, mortgage foreclosures spike again, and retirement savings take another 25% hit from stock market contraction. Will people really continue to insist that the government cut spending even more? Will they decide that it's okay to wait around for a Republican government to take the reins in January 2013? Or might people finally demand that the government go into FDR spending mode? I think it is in the realm of the possible. And the long-term outcome might even be positive, if (and this is the biggest 'if' in recent history) the federal jobs programs are intelligently constructed for sustainable, low-impact vocations. But unless some Washington brain-boxes have this emergency plan under construction right now, what are the odds that a highly-pressurized Congress and White House will come up with something good? Recent events do not bode well for a positive outcome, even with the public breathing down the government's neck. More likely, massive federal stimulus will be opportunist, piece-meal, porkish, and backward-looking. The goal will be to get as many people back up to maximum consumption as possible, instead of something targeted to the redesigning of our communities and workplaces to create a more sane, sustainable lifestyle. Poorly-planned new stimulus would not be ideal, but it would be a little less unpleasant than the next option....

.... which is, straight-up austerity and the dismantling of the American welfare state. This is a more likely outcome, especially if Obama is a one-term prez, and Republicans sweep into majorities next year. Come election time in 2012, unemployment will probably still be in the 8-10% range, which will definitely be enough to unseat the Dems. The Blame Bush thing will have worn thin, and Obama and the Blue Dogs will pay the price for thinking that business will stick by them if they just stick by business. They will learn the hard way that campaign cash will flow to whichever party looks more likely to win. When there's blood in the water, corporate donors will not hitch up their britches and make sacrifices for the good of their Democratic buddies. They will continue to push for tax reductions and more favorable treatment -- no matter that these same tactics have already brought the country to the brink of collapse.

In this scenario, the ascendant Tea Partiers will make uncomfortable bedfellows with the GOP establishment, and we could be in for some interesting civil wars on the right. Certainly, it will never get to the point where Ron Paul gets his wish, with small government principles actually being applied to the bloated military and corporate pork. On that front, the Bible-thumpers and the Golwaterites are in sync. But we could get to an interesting place where a President Bachmann or Perry has enough Tea Party support in Congress to force through a repeal of Obamacare, a gutting of Social Security, and a dismantling of existing government health programs (would the VA even be spared?). Corporate and other taxes on the wealthy could get slashed to minuscule proportions, which really would start to shrink government down to bathtub-drowning size. What would be the actual result of such a program? Would businesses suddenly bring all of their foreign operations back to the US, to take advantage of the 'competitive' tax structure? Would the decreased regulation spawn an eruption of small business activity, a la John Galt's hideaway in the Rocky Mountains? Would over-dependent Americans, who at first staggered around rubbing their eyes due to the government-support matrix cable being unplugged, finally start seeing the truth in the world around them, and become self-sufficient adults?

Well, I doubt things would go like that, because the underlying mythology is hyper-nostalgic and simply untenable. We don't live in a Currier and Ives print or a Thomas Kinkade painting. Millions of unemployed and underemployed people are not going to suddenly start coopering and blacksmithing. Nor are they going to magically become credit-worthy, talented, independent entrepreneurs. The stuff of industrial production is much more mundane and pedestrian than the bootstrap idylls spun by Tea Party orators. One of the main reasons for our massive public spending is that we have yet to come to terms with the obsolescence of human labor and skill, vis-a-vis industrial capitalism. Not that skill and labor won't be important after capitalism, whatever that might be. But these conservatives who dream of a minimized government seem to think that centralized corporate exploitation will also magically end, and every free man will become a business titan. Unfortunately, without a welfare state tempering the worst of it, the brutal upward shift of power and wealth will increase, not disappear. John Galt's valley will be one huge Home Depot, with Johnny himself a team leader in the lumber department.

As regular readers of this column know, I would imagine that no matter which of the above scenarios play out, there will be no 'way out,' no 'recovery.' We're looking The Long Emergency square in the face, and no amount of stimulus or austerity will bring back the easy, hyper-consumptive social form. And that, actually, is a good thing. Provided that we can avoid massive social turmoil and violence, and that we don't turn to monstrous right or left wing regimes for rescue, we can actually look forward to a lower-intensity, more human lifestyle. We just need to find the right bridge to get there.