Today, I find myself in a very bleak space. It seems that I’ve been heading here for some time, although I’ve been unable to put my finger on exactly why I’ve found myself walking along this route to darkness. I’ve looked around at the world, and I have sensed that things are beginning to fall apart, whether that’s globally, nationally or locally, it appears to be happening. I’ve told myself that I have been mentally prepared for this, as it’s been something that I’ve been expecting for some time now. But as I look around on this road to darkness, I think that the one thing which surprises me the most, today, is how alone I am. I’m feel like a hitch hiker in the desert, and I just don’t get it. I always thought that misery loves company.
Today’s post is going to be formatted a little differently from my typical posts, as I want to talk about a few things which have been happening over the past week or so. These things have been building to a crescendo for some time now, and over the past few weeks they’ve exploded onto the scene. Yet so many of my friends, family, coworkers, and others whom I interact with continue to remain blissfully unaware of their significance. And I don’t understand why. It doesn’t take a rocket scientist (or a three year old) to connect the dots. What’s going on?
The Continuing Economic Crisis
I see our economy teetering on the brink, as it bashes up against all-too formidable natural constraints. Growth is necessary to power the economy, but with energy and food prices climbing, with competition for scarce resources amongst nations leading to higher prices, and with the wages of common people being squeezed throughout the world in order to give the corporations just a little more wealth, can we really be surprised that a global recession seems likely?
But the thing is, it can’t end there; and this is the part which genuinely confuses me, because I don’t understand why more people don’t understand this: The coming recession won’t be a new recession. Although we have experienced technical economic growth globally since 2009, after the short recession of 2008 (short because of the economic stimulus of public dollars being pumped into the economy and into the hands of corporations and banks – the so-called “job creators”), the real truth of the matter is that the world has been in an economic crisis for some time now.
Whether technically in recession or not, the crisis has been real, although not sustained. During these past few years we’ve been in a kind of Sitzkrieg, or Phoney War stage of the crisis, when it’s been easier to pretend that the hardships ahead might not happen. In his eye-opening book of the same name, author and futurist James Howard Kuntsler described where we are at today as the opening stages of the “The Long Emergency”. Kuntsler’s description is bound to be apt, even if the “Emergency” experiences ups and downs. In fact, there absolutely has to be ups and downs, given the economic circumstances of Peak Oil.
The End of Inexpensive Energy: Economic Impacts
I wrote about all of this before, just recently, in my blog, “The Limits of Growth and the Coming Recession: Why Measuring Matters”, so I won’t go into great detail again here. Quickly, though, when the recession hit in 2008, oil prices had never been higher. As people lost their jobs and there was less economic activity, oil prices began to fall. As the economy began to rebound, thanks to lower energy prices and a massive injection of public money, things started to pick up again and the price of oil began to rise. The same thing will undoubtedly happen again when the next recession hits.
However, oil prices (and the price of all non-renewable energy sources) will never fall back to where they were in the mid-2000s or before, because of resource depletion. That’s what Peak Oil is all about. So, although the price of oil may fluctuate with economic output, the overall trend is towards ever-higher prices. Which in our economy will mean less economic output, and less growth, maybe even decline.
And our current economic system can’t sustain itself for long when growth is not occurring. When economies are forced to contract, guess which group of people find themselves as the biggest losers? It’s not necessarily those who are already poor, as they’ve largely been left out of the current economic system’s benefits. Sure, they may lose what little they have. And the wealthiest amongst us may end up losing the most from an aggregate perspective (billionaires can afford to lose millions of dollars), but the rich will continue to be insulated from the shock.
It’s the middle class who will be the biggest losers, mostly because the middle class has become comfortable with its circumstance. This point has been borne out over the past several decades, as there has been little real growth in the middle class in terms of economic spending power. It’s been the middle class who has been squeezed out of prosperity and the ability to increase its wealth. We work longer hours for marginally better pay, only to see our gains eaten up by inflation and higher taxes, while our quality of life plummets due to government take-aways.
How will the middle class react to the coming austerity measures, those currently being contemplated for economic basket case nations like Greece, Italy, Portugal, Ireland, France, the UK and the United States? Wait a moment. Those nations include some of the biggest economies in the world. The term “economic basket case” is being misapplied by me, surely? We used to reserve that term for nations like Argentina, Chile, Poland, Russia and Bolivia, right? What gives?
Deficit financing gives, that’s what. In the past, prosperous nations like Canada and the United States used to run its finances akin to how a household was run. It was ok to rack up some debt, primarily to purchase necessary items, like a home or even a car for transport. But there was always a point beyond which debt no longer made economic sense, because servicing that debt would simply cost too much money, or interest payments would have to be strung out over a greater time. In those days, now long past, national debts were held to a level which were generational in nature, just as a household has generally held its debts to a level which could be paid off during the productive lifetime of the household.
Then something happened back in the 1970s. The prosperous nations, for many reasons, but in part because they wanted to become even more prosperous, decided that it was ok to accumulate higher levels of debt in order to pay for public services and infrastructure, and to stimulate the economic system. As a result, massive highways were built to suburban utopias (a term I use here ironically), and productive agricultural lands gave way to subdivisions. The stock market ratcheted itself up a notch, and new ventures were formed to sell goods to suburban consumers occupying bigger houses: bigger cars, bigger televisions, bigger everything.
In the 1980s, the economy really kicked into high gear after a few early years of recession. Massive companies consolidated in order to squeeze out more profits, and new terms entered our vocabulary: “off-shoring”, “downsizing” and “out-sourcing”. In the North American heartland, factories closed down and manufacturing was moved to where labour was cheaper. The hollowing out of cities, previously relegated to large American centres, began to strike mid-sized cities, like Sudbury. While the suburban, car-accessible fringes grew with the development of big box stores and power centres selling cheap goods made far away, we thought we had it all. And for a while we did. Until we started losing our jobs, and then even shopping at Wal-Mart became a luxury.
And we paid for all of this – all of it – through deficit financing. The debt from which these goods were created was to become “inter-generational”, meaning that it would not be paid off within the lifetimes of those who received the majority of the benefit. The real costs would be passed on to future generations to deal with. And now national governments find themselves in circumstances where they can no longer service the debt under current budgetary constraints. Just as someone living in poverty may be forced to make a terrible choice between paying the rent or buying food, now too our governments find themselves in similar predicaments. The rent, clearly, has to be paid by our governments, meaning the debt has to be serviced. Or else eviction is going to occur, and it’s going to be hostile and nasty.
Finding Sources of Revenue
So what will our governments sacrifice? Public sector salaries are an easy first target. No one is going to complain when well-paid unionized government workers are forced to take cuts. But cuts to salaries and jobs aren’t going to amount to very much in the budget. Which means deeper spending cuts are going to prove necessary. What about public services? Absolutely there will be cuts to our public services, especially to those services which assist those living in poverty. After all, the poor are an easy target for governments: they don’t have any power, there’s a perception that they don’t contribute to society, and they certainly don’t vote. Those living in poverty will be the second group hit by austerity measures.
But where do we go from there, what’s the plan? Maybe sell off some public assets to private enterprise, even if we have to do so at bargain-basement prices (because there will be a risk for the private sector to turn a profit in a time of economic decline). In Ontario, we can say goodbye to the LCBO, public electrical utilities, transit services, waste collection, maybe even sewer and water services. And when these public services leave the public sector, we can say goodbye to good-paying jobs as well. Which leads to less wealth staying in our communities. Sure, these efforts might lead to raising the GDP and contributing to economic growth, because someone will probably make money off of privatization. But it’s not going to be the 99% who do the work.
But why stop there when it comes to public services? Especially when there are debts to be paid. What about police and fire protection services? Does that seem silly to you? It seems silly to me, sure, but check out the sizable chunks of a budget which these services eat up. If we contracted out our police services, as they do in some municipalities in the United States, we could save money.
How about health care services? After all, they’re doing just fine in the United States without public health care, while we here in Canada pay so much and receive so little in return? We wouldn’t have to get rid of the whole system all together, just decrease the overall funding to it by offering less service. Plus, we can make the rich pay their way by requiring them to seek out privatized services! Wouldn’t that mean more money then being allocated to help those who can’t afford to pay? Not sure where the middle class might fit in, but those technical things could be worked out.
But why stop there? Why not generate revenue through selling advertising rights to public parks and transit stops? Or bottling all that water that just ends up being wasted at the mouth of our rivers, and selling it for profit? Do we really need libraries when everyone has access to the internet? And swimming pools and recreation centres are costly too, so if you want to use it, you should pay for it, not me. Same goes for a public education system too, by the way. Or how about we sell off our roads to private consortiums who can maintain them by charging tolls to users (ok, I’ve gone too far with that last one I’m sure!)
Would the public accept it? The public probably wouldn’t be very happy about it, but then again, they might not have any choice. Literally.
(…continued in Part 2)
(opinions expressed in this blog are my own, and should not be interpreted as being consistent with those of the Green Party of Canada)