Aug 192015
 
 August 19, 2015  Posted by at 1:13 pm Finance Tagged with: , , , , , , ,


Gustave Doré Dante looks upon the negligent rulers 1868

In case you missed it, we’re doing something a little different. Nicole wrote a very lenghty article and we decided to publish it in chapters. Over five days we are posting five different chapters of the article, one on each day, and then on day six the whole thing. Just so there’s no confusion: the article, all five chapters of it, was written by Nicole Foss.

This is part 5. Part 1 is here:
Global Financial Crisis – Liquidity Crunch and Economic Depression,
Part 2 is here:
The Psychological Driver of Deflation and the Collapse of the Trust Horizon
Part 3 is here:
Declining Energy Profit Ratio and Socioeconomic Complexity
and part 4 is here:
Blind Alleys and Techno-Fantasies


Solution Space

To use the word ‘solution’ is perhaps misleading, since it could be said to imply that circumstances exist which could allow us to continue business as usual, and this is not, in fact, the case. A crunch period cannot be avoided. We face an intractable predicament, and the consequences of overshoot are going to manifest no matter what we do. However, while we may not be able to prevent this from occurring, we can mitigate the impact and lay the foundation for a fundamentally different and more workable way of being in the world.

Acknowledging the non-negotiable allows us to avoid beating our heads against a brick wall, freeing us to focus on that which we can either influence or change, and acknowledging the limits within which we must operate, even in these areas, allows us to act far more effectively without wasting scarce resources on fantasies. There are plenty of actions which can be taken, but those with potential for building a viable future will be inexpensive, small-scale, simple, low-energy, community-based initiatives. It will be important to work with natural systems in accordance with permaculture principles, rather than in opposition to them as currently do so comprehensively.

We require viable ways forward across different timeframes, first to navigate the rapid-onset acute crisis which the bursting of a financial bubble will pitch us into, and then to reboot our global operating system into a form less reminiscent of a planet-killing ponzi scheme. The various limits we face do not manifest all at the same time, and so to some extent can be navigated sequentially. The first phase of our constrained future, which will be primarily financial and social, will occur before the onset of energy supply difficulties for instance. Some initiatives are of particular value at specific times, and other have general value across timescales.

Moving into financial contraction is going to feel like having the rug pulled out from under our feet, and all the assumptions upon which we have based our lives invalidated all at once. Preparing in advance can make all the difference to the impact of such an event. At an individual level, it is important to avoid holding debt and to hold cash on hand. It is also very useful to have prepared in advance by developing practical skills, obtaining control over the essentials of one’s own existence where possible and being located in an auspicious place. Human skills such as mediation and organizational ability will be very useful for calming inevitable social tensions.

However, community initiatives will have far greater impact than individual actions. The most effective paths will be those we choose to walk with others, as even in times when effective organizational scale is falling, it does not fall far enough to make acting individually the most adaptive strategy. Even in contractionary times, cooperation is not only possible, but vital. In the absence of lost institutional trust, it must occur within networks of genuine interpersonal trust, and these are of necessity small. Building such networks in advance of crisis is exceptionally important, as they are very much more difficult to construct after the fact, when we will be facing an unforgiving social atmosphere.

Cohesive communities will act together in times of crisis, and will be able to offer significant support to each other. The path dependency aspect is important – the state we find ourselves in when crisis hits will be an major determinant of how it plays out in a given area. Anything people come together to do will build social capital and relationships of trust, which are the foundation of society. Community gardens, perma-blitzes (permaculture garden make-overs), maker-spaces, time-banks, savings pools, local currency initiatives, community hub developments, skills training programmes, asset mapping and contingency planning are but a few of the possibilities for bringing people together.

Essential functions can be reclaimed locally, providing for far greater local self-sufficiency potential. The existence of locally-focused businesses, with local supply chains and local distribution networks for supplying essential goods and services will be a major advantage, hence establishing these in advance will be highly adaptive. Choosing to form them as cooperatives is likely to increase their resilience to external shocks as risks are shared. Where they can function at least partially through alternative trading arrangements, or as part of a local currency network, they can be even more beneficial.

Alternative trading arrangements are a particularly important component of local self-sufficiency during times of financial crisis, as they are able to mitigate the acute state of liquidity crunch which will be creating artificial scarcity. Implementing alternative means of trading will allow a much larger proportion of economic activity to survive, and this will allow many more people to be able to provide for themselves and their families. This in turn creates much greater social stability. Alternative currencies in particular are already being relied on in the countries at the forefront of financial crisis, which already find themselves facing liquidity shortage.

It is by no means necessary to wait until crisis hits before establishing such systems. Indeed they can have considerable value locally even in stable times. Since they only constitute money in one area, and, being fiat currencies, must necessarily operate within the trust horizon, they help to retain purchasing power locally, rather than allowing it to drain away continually. Once well established, alternative currencies can go from being parallel systems to being the major form of liquidity available locally.

Beyond a close-knit community, it will be very helpful to have an informed layer of local government, as this confers the potential for a top-down/bottom-up partnership between local government and the grass roots. Local government is capable of removing barriers to people looking after themselves, assisting with the propagation of successful grass roots initiatives and acting facilitate adaptive responses with the resources at its disposal, even though these will be for more limited than currently.

Contingency planning in advance for the distribution of scarce local resources would be wise. With the trust horizons drawing inwards, local government may be the largest scale of governance still lying within it, and therefore still effective. It operates at a far more human scale than larger political structures, and is far more likely to have the potential for transparency, accountability and reflexive learning.

That is not to say local government is necessarily endowed with these qualities at present. The odds of it becoming so will increase if informed and public spirited individuals get involved in local government as soon as possible, rather than setting their sights on regional or national government. Presiding over contraction will, however, be a thankless task, as constituents will tend to blame those in power for the fact that the pie is shrinking. The job will be a delicate balancing act under very trying circumstances as the fabric os society becomes tattered and torn, but as difficult as it will be, it will remain essential, and getting it right can make a very substantial difference.

Higher levels of government may currently appear to be the relevant seats of power, but are far less likely to be as important in a period of crisis as their response time is far too slow. It is possible that higher levels of government may temporarily be involved in useful rationing programmes, but beyond a certain point, the most important initiatives in practice are likely to be those profoundly local. National governments are more likely to generate additional problems rather than solutions, as they crack down on angry populations during an on-going loss of political legitimacy.

Given the fragility of trade in the future we are facing, programmes of import substitution could be useful, if there would be time to implement them before financial crisis deepens too substantially for the necessary larger-scale organizational capacity to fucntion. Being able to provide for the essentials, without having to rely on vulnerable international supply chains, is extremely beneficial, and food sovereignty in particular is critical.

Once trade withers, we will once again see tremendous regional disparities of fortune, based on differing local circumstances. It would be wise to research in advance what one’s own local circumstances are likely to be, in order to work out in advance how one might live within local limits. Getting expectations aligned with what reality can hope to deliver is a major part of adaptation without unnecessary stress.

In the longer term, we can expect to move through economic depression into some form of relative recovery, although we may see large scale conflict first, and will not, in any case, see a return to present circumstances. We will instead be adapting to the age of limits, mostly in an ad hoc manner due to on-going instability and consequent inability to plan for the long term. The bursting of a bubble on the scale of the one we have experienced has far reaching consequences that are likely to be felt for decades at least. In addition, our current condition of extreme carrying capacity overshoot means that we will actively be tightening our own limits, even as the population declines, by further cannibalizing remaining natural capital.

The operating system reboot which could lead to relative recovery would involve the restoration of some level of trust in the financial system, following the elimination of the huge mass of excess claims to underlying real wealth, and very likely the subsequent destabliization of a currency hyperinflation some years later (timeframe location dependent). We are very likely to see financial innovation, which is nothing more than another name for ponzi scheme, banned for a very long time, and likely the creation of money as interest bearing debt as well.

Humanity is in the habit of locking the door after the horse has bolted, so to speak, only restoring financial regulatory controls once it is too late. Once restored, regulations requiring plain vanilla finance will probably persist until  we have once again had time to forget the inevitable consequences of laissez faire. This will be measured in generations.

The small-scale initiatives which we need to navigate the crunch period could be scaled up as trust is slowly re-established. The speed at which this might happen, and the scale that might eventually be workable, are unclear, but it is not likely to be a rapid process, and scale is likely to remain small relative to today. Society will be lower-energy and therefore significantly simpler by then, with far smaller concentrations of population.

While some fossil fuels will no doubt be used for essential functions for quite some time to come, the majority of society will be excluded from what remains of the hydrocarbon age. We will likely have renewable energy systems, but not in the form of photovoltaic panels and high-tech electricity systems. Diffuse renewable energy can give us thermal energy, or motive power, or the ability to store energy as compressed air, all relatively simply, but at that point it will not be a technological civilization.

We are heading for a profoundly humbling experience, to put it mildly. Technological man is not the demigod he supposed himself to be, but merely the beneficiary of a fortuitous energy bonanza which temporarily allowed him to turn dreams into reality. We would do well, if we could summon up sufficient humility in advance, to learn from the simple and elegant technologies of the distant past, which we have largely discarded or forgotten.

We could also learn from present day places already constrained by limits – places which already operate simply and on a shoe-sting budget both in terms of money and energy. It takes practice to learn to function without the structural dependencies we have constructed for ourselves, and the sooner we begin the learning curve, the better off we will be. Focusing on solution space for our ways forward would save us from countless blind alleys in the meantime.

This is part 5. Part 1 is here:
Global Financial Crisis – Liquidity Crunch and Economic Depression,
Part 2 is here:
The Psychological Driver of Deflation and the Collapse of the Trust Horizon
Part 3 is here:
Declining Energy Profit Ratio and Socioeconomic Complexity
and part 4 is here:
Blind Alleys and Techno-Fantasies

Tune back in tomorrow for the article in its entirety.

Home Forums The Boundaries and Future of Solution Space – Part 5

This topic contains 14 replies, has 11 voices, and was last updated by  RobM 4 years ago.

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  • #23307

    Gustave Doré Dante looks upon the negligent rulers 1868 In case you missed it, we’re doing something a little different. Nicole wrote a very lenghty a
    [See the full post at: The Boundaries and Future of Solution Space – Part 5]

    #23309

    Variable81
    Participant

    @ Nicole,

    Hi Nicole. I think I’ve asked a few times but never really got a response – curious if you’ve permanently relocated to New Zealand or if it is only temporary? I think when you first announced your decision to visit Atamai it was only temporary, but perhaps things have changed…

    If the move is permanent, I’d like to know how that change was received/accepted by your family? Perhaps that’s too personal a question, but I’ve tried to sell the idea to my family of getting out of Canada with what little money we have and relocating to somewhere a bit more isolated a few times with little success. Looks like we’ll be stuck in Ontario for the Long Descent…

    Looking forward to the full posting of this great article you’ve put together BTW.

    Cheers,
    Variable

    #23310

    chettt
    Participant

    Thanks Nicole, it was a wonderful read. Part 4 was my favorite; really well done.
    question…
    Don’t you think that parts of the technology will be considered “too big to fail” and will be prioritized accordingly? Cell phones, email, gps?
    And what do you think will happens to all that military tech?

    #23311

    Diogenes Shrugged
    Participant

    Broadly speaking, I suspect the future will see a vast assortment of epic struggles between two conflicting paradigms: cooperation and compulsion. Current civilization is organized with compulsion from the top and cooperation from below. It’s safe to predict that increasingly compulsive measures will be implemented from the top attempting to manage the chaos and misery resulting from financial collapse, so “peak compulsion” will probably not arrive until well after most of the financial crash has played out, and that will take many years.

    So those who rely on using compulsion are likely to increasingly abuse and prey upon those who rely on cooperation because that’s the methodology of survival they’re familiar with. Compulsion is by nature a parasitic strategy based on brute force, and being inimical to trust, is an impediment to cooperation (constructive cooperation, anyway).

    What will cause the tide to turn from prevalent compulsion to prevalent cooperation? Again, it probably depends on which location we’re talking about because conditions will vary widely. Nonetheless, the sixty dollar question going forward will be, “how can we persuade the controllers to abandon compulsion and embrace cooperation?” If you don’t want the entire globe to become a galaxy of North Koreas going forward, you have to ask the question.

    If you answer, “through rational argument and kindly persuasion,” you’re a nice person, but giddily optimistic, IMO. And if you no longer have sufficient debt-money to bribe your power mad overlords, then only one form of persuasion remains. It’s the same form of persuasion they’ll be using on you.

    Of course, we can all just wait passively until the parasites have either completely enslaved or wiped out their hosts. But what would be the lesson at that point, and who would learn it?

    #23313

    earlmardle
    Participant

    I’m interested to get a handle on what you expect to happen at a slightly finer grain about issues such as debt. With a collapse of central authority that needs both money and energy to enforce laws, contracts etc, what will be the probable fate of those with debts like mortgages.

    Do you expect banks to fail utterly and the debts be lost in the dust or will there be residual institutions with claims to property etc and in practice how might they try to enforce those claims given an absence of buyers? Or will they have some kind of rushed process, selling of their debts to whoever has cash and letting them settle it with the mortgagor?

    I can see the 1% trying to buy up the debt but I can;t see them putting together their own armies to enforce the change of ownership, dependent as they are on the serfs paying for their own control through taxes.

    As a debt-free holder it makes no direct difference to me but it would be good to know what my neighbours might face in the process, especially if we are also to share resources that might benefit them but might also be taken over by the new lord of the manor.

    #23315

    earlmardle
    Participant

    Diogenes. There are similar thoughts lurking in my mind but I am guessing that the compulsion phase would have to come earlier in the financial failure process because at the latter end, the ability to use money to buy compulsion services will be much more limited and by that stage, those with the compulsion powers will be the ones making the decisions, not their erstwhile employers.

    It will be a case of use it or lose it and those who really get it will act earlier. For years I have said that I kind of hoped that TPTB were in fact cynical and corrupt assholes who actually got what the underlying reality was but were prepared to manipulate its public face for their own ends. My fear was that these people really do believe what they are saying, in which case they will pretty much go down in a heap when reality is undeniable any longer.

    So, on balance, peak compulsion early-ish, or not at all with a possible landscape of random bands of ex-compellers preying on the producers. Even that will be hard to manage given that so much of the compulsion apparatus is also embedded in the failing system and fossil fuel dependent.

    #23321

    V. Arnold
    Participant

    All in all, this seems a very western-centric outlook. Which, given the audience, is reasonable.
    My POV is S.E. Asian; so I don’t see the same scenario going down. Third world and emerging economies are not subject to the same vulnerabilities, IMO. These represent important differences; food, fuel (vehicle, cooking gas, and electricity) are not import dependent, but rather regionally supplied.
    Yes, collapse of the western/world economies will effect the planet, but regions will be affected in different ways, IMO. It’s important to understand the differences; again, my opinion is based on my 12+ years of self exile in S.E. Asia and learning how their cultures and economies work…
    A major advantage is climate; no heating in winter (mostly, some exceptions), and if one is smart; no air-con in the summer.
    In any event; the application of intelligence is most critical…

    #23323

    GolanTrevize
    Participant
    #23325

    GolanTrevize
    Participant

    This should be enough for the steady state economy : https://en.wikipedia.org/wiki/Energy_returned_on_energy_invested#Low_carbon_power

    Even if I agree on the necessity to abate the material complexities of the market with its needless countless products doing more or less the same thing you are not accounting for the rationalization of trade and the functioning of large scale organizations that can be achieved thorough information technology if set properly.
    Also don’t forget that country like India has a space program and that racking up resources even from a poor or impoverished economy if put to good use can achieve breakthrough that eventually can circumvent bottlenecks.
    I all for doubling down on nuclear fusion starting tomorrow morning.
    Also ,after half a century of global media and 20 years of Internet with the exchange of ideas still going on at full speed I think calling in the Second Middle Age with donkeys at the treadmill and women back in the house mending clothes in a revival of the eco-friendly scattered peasant economy might be too early and pessimistic unless , of course , if you crave for it.

    #23327

    GolanTrevize
    Participant

    This should be enough for the steady state economy : https://en.wikipedia.org/wiki/Energy_returned_on_energy_invested#Low_carbon_power

    Even if I agree with the necessity to abate the material complexities of the market with its needless countless products doing more or less the same thing you are not accounting for the rationalization of trade and of the functioning of large scale organizations that can be achieved thorough information technology if set properly.
    Also don’t forget that a country like India has a space program and that racking up resources even from a poor or impoverished economy if put to good use can achieve breakthrough that eventually can circumvent bottlenecks.
    I am all for doubling down on nuclear fusion starting tomorrow morning.
    Also , after half a century of global media and 20 years of Internet with the exchange of ideas still going on at full speed I think calling in the Second Middle Age with donkeys at the treadmill and women back in the house mending clothes in a revival of the eco-friendly scattered peasant economy might be too early and pessimistic unless , of course , if you crave for it.

    #23330

    Engdahl may believe in abiotic oil but to believe in globull warming exceeds this in folly.

    I automatically subtract points from any author that proposes globull warming to be anything besides a political scam and hoax. It is most definitely not science.

    #23341

    Ken Barrows
    Participant

    Lord Effington,

    Doesn’t matter. Ocean acidification demands reduced carbon emissions anyhow.

    #23342

    Ken Barrows
    Participant

    GT,
    Yes, let’s double down on fusion. Unfortunately, 0 x 2 = 0.

    #23372

    sensato
    Participant

    Para 2, last sentence — should read “It will be important to work with natural systems in accordance with permaculture principles, rather than in opposition to them as we currently do so comprehensively”?

    #23424

    RobM
    Participant

    Why should I be debt free? Surely I can load up on debt and hold on to cash? What if I cannot become debt free?

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