Dark Age America: Climate Change, Cultural Collapse, and the Hard Future Ahead - John Michael Greer (2016)
Chapter 5. THE ECONOMIC COLLAPSE
THE POLITICAL TRANSFORMATIONS EXPLORED IN THE PREVIous chapter can also be traced in detail in the economic sphere. A strong case could be made, in fact, that the economic dimension is the more important of the two and that the political struggles that pit the elites of a failing civilization against the rising warbands of the nascent dark age reflect deeper shifts in the economic sphere. Whether or not that’s the case—and in some sense, it’s simply a difference in emphasis—the economics of decline and fall need to be understood in order to make sense of the trajectory ahead of us.
One of the more useful ways of understanding that trajectory was traced out some years ago by Joseph Tainter in his book The Collapse of Complex Societies. While I’ve taken issue with some of the details of Tainter’s analysis in various other writings, the general model of collapse he offers is sound and deserves to be summarized here.
Tainter begins with the law of diminishing returns: the rule, applicable to an astonishingly broad range of human affairs, that the more you invest—in any sense—in any one project, the smaller the additional return is on each unit of additional investment. The point at which this starts to take effect is called the point of diminishing returns. Off past that point is a far more threatening landmark, the point of zero marginal return: the point, that is, when additional investment costs as much as the benefit it yields. Beyond that lies the territory of negative returns, where further investment yields less than it costs, and the gap grows wider with each additional increment.
The attempt to achieve infinite economic growth on a finite planet makes a fine example of the law of diminishing returns in action. Given the necessary preconditions—a point we’ll discuss in more detail a bit later—economic growth in its early stages produces benefits well in excess of its costs. Once the point of diminishing returns is past, though, further growth brings less and less benefit in any but a purely abstract, financial sense. Broader measures of well-being fail to keep up with the expansion of the economy, and eventually the point of zero marginal return arrives and further rounds of growth actively make things worse.
Mainstream economists these days shove these increments of what John Ruskin used to call “illth”1—yes, that’s the opposite of wealth—into the category of “externalities,” where they are generally ignored by everyone who doesn’t have to deal with them in person. If growth continues far enough, though, the production of illth overwhelms the production of wealth, and we end up more or less where we are today, where the benefits from continued growth are outweighed by the increasingly ghastly impact of the social, economic, and environmental “externalities” driven by growth itself. That’s the nature of our predicament: the costs of growth rise faster than the benefits and eventually force the industrial economy to its knees.
The role of externalities in concealing the true cost of today’s industrial society is almost impossible to exaggerate. It’s been pointed out, for example, that none of the twenty biggest industries in today’s world could break even, much less make a profit, if they had to pay for the damage they do to the environment.2
The conventional wisdom these days interprets that statement to mean that it’s unfair to make those industries pay for the costs they impose on the rest of us—after all, they have a God-given right to profit at everyone else’s expense, right? That’s certainly the attitude of fracking firms in North Dakota, who have proposed that they ought to be exempted from the state’s rules on dumping radioactive waste, because following the rules would cost them too much money.3 That the costs externalized by the fracking industry will sooner or later be paid by others, as radionuclides in fracking waste work their way up the food chain and start producing cancer clusters, is, of course, not something anyone in the industry or the media is interested in discussing.
Watch this sort of thing, and you can see the chasm opening up under the foundations of industrial society. Externalized costs don’t just go away; one way or another, they’re going to be paid, and costs that don’t appear on a company’s balance sheet still affect the economy. That’s the argument of The Limits to Growth, still the most accurate of the studies from the 1970s that tried unavailingly to turn industrial society away from its suicidal path.4
On a finite planet, once an inflection point is passed, the costs of economic growth rise faster than growth does, and sooner or later force the global economy to its knees. The tricks of accounting that let corporations pretend that their externalized costs vanish into thin air don’t change that bleak prognosis. Quite the contrary, the pretense that externalities don’t matter just makes it harder for a society in crisis to recognize the actual source of its troubles. I’ve come to think that that’s the unmentioned context behind a dispute currently roiling those unhallowed regions where economists lurk in the shrubbery: the debate over secular stagnation.5
Secular stagnation? That’s the concept, unmentionable until recently, that the global economy could stumble into a rut of slow, no, or negative growth and stay there for years. There are still plenty of economists who insist that this can’t happen, which is rather funny, really, when you consider that this has basically been the state of the global economy since 2009. (My back-of-the-envelope calculations suggest, in fact, that if you subtract the hallucinatory paper wealth manufactured by derivatives and similar forms of financial gamesmanship from the world’s GDP, the production of nonfinancial goods and services worldwide has actually been declining since before the 2008 housing crash.)
Even among those who admit that what’s happening can indeed happen, there’s no consensus as to how or why such a thing could occur. On the off chance that any mainstream economists are listening, I have a hypothesis to propose: the most important cause of secular stagnation is the increasing impact of externalities on the economy. The dishonest macroeconomic bookkeeping that leads economists to think that externalized costs go away because they’re not entered into anyone’s ledger books doesn’t actually make them disappear. Instead, they become an unrecognized burden on the economy as a whole, an unfelt headwind blowing with hurricane force in the face of economic growth.
Thus there’s a profound irony in the insistence by North Dakota fracking firms that they ought to be allowed to externalize even more of their costs in order to maintain their profit margin. If I’m right, the buildup of externalized costs is what’s causing the ongoing slowdown in economic activity worldwide that’s driving down commodity prices, forcing interest rates in many countries to zero or below, and resurrecting the specter of deflationary depression. The fracking firms in question thus want to respond to the collapse in oil prices—a result of secular stagnation—by doing even more of what’s causing secular stagnation. To say that this isn’t likely to end well is to understate the case considerably.
This awareness of diminishing returns and unmentioned externalities formed the launching point for Joseph Tainter’s exploration of the nature of collapse. His core insight was that the same rules can be applied to social complexity. When a society begins to add layers of social complexity—for example, expanding the reach of the division of labor, setting up hierarchies to centralize decisionmaking, and so on—the initial rounds pay off substantially in terms of additional wealth and the capacity to deal with challenges from other societies and the natural world. Here again, though, there’s a point of diminishing returns, after which additional investments in social complexity yield less and less in the way of benefits, and there’s a point of zero marginal return, after which each additional increment of complexity subtracts from the wealth and resilience of the society.
There’s a mordant irony to what happens next. Societies in crisis reliably respond by doing what they know how to do. In the case of complex societies, what they know how to amounts to adding on new layers of complexity; after all, that’s what’s worked in the past. I mentioned in the previous chapter the way this plays out in political terms. The same thing happens in every other sphere of collective life—economic, cultural, intellectual, and so on down the list. If too much complexity is at the root of the problems besetting a society, though, what happens when its leaders keep adding even more complexity to solve those problems, and then treat the additional problems as externalities that aren’t supposed to be taken into account?
Any of my readers who have trouble coming up with the answer might find it useful to take a look out the nearest window. Whether or not Tainter’s theory provides a useful description of every complex society in trouble—for what it’s worth, it’s a significant part of the puzzle in every historical example known to me—it certainly applies to contemporary industrial society. Here in America, certainly, we’ve long since passed the point at which additional investments in complexity yield any benefit at all, but the manufacture of further complexity goes on apace, unhindered by the mere fact that it’s making a galaxy of bad problems worse. Do I need to cite the US health care system, which is currently collapsing under the sheer weight of the baroque superstructure of corporate and government bureaucracies heaped on top of what was once the simple process of paying a visit to the doctor?
We can describe this process as intermediation: the insertion of an assortment of persons, professions, and institutions between the producer and the consumer of any given good or service. It’s a standard feature of social complexity, and it tends to blossom in the latter years of every civilization, as part of the piling up of complexity on complexity that Tainter discussed. There’s an interesting parallel between intermediation and ecological succession—the process by which barren ground is colonized by one wave after another of organisms, each of which forms a more complex and more stable ecosystem than the one before it.6 Just as an ecosystem, as it moves from one stage in succession to the next, tends to produce ever more elaborate food webs linking the plants whose photosynthesis starts the process with the consumers of detritus at its end, the rise of social complexity in a civilization tends to produce ever more elaborate patterns of intermediation between producers and consumers.
Contemporary industrial civilization has taken intermediation to an extreme not reached by any previous civilization, and there’s a reason for that. White’s law, one of the fundamental rules of human ecology, states that economic development is a function of energy per capita. The jackpot of cheap, concentrated energy that industrial civilization obtained from fossil fuels threw that equation into overdrive, and economic development is simply another name for complexity. The US health care system, again, is one example out of many; as the American economy expanded metastatically over the course of the twentieth century, an immense army of medical administrators, laboratory staff, specialists, insurance agents, government officials, and other functionaries inserted themselves into the notional space between physician and patient, turning what was once an ordinary face-to-face business transaction into a bureaucratic nightmare reminiscent of Franz Kafka’s The Castle.
In one way or another, that’s been the fate of every kind of economic activity in modern industrial society. Pick an economic sector, any economic sector, and the producers and consumers of the goods and services involved in any given transaction are hugely outnumbered by the people who earn a living from that transaction in some other way—by administering, financing, scheduling, regulating, taxing, approving, overseeing, facilitating, supplying, or in some other manner getting in there and grabbing a piece of the action. Take the natural tendency for social complexity to increase over time and put it to work in a society that’s surfing a gargantuan tsunami of cheap energy, in which most work is done by machines powered by fossil fuels and not by human hands and minds, and that’s pretty much what you can expect to get.
That’s also a textbook example of the sort of excess complexity Joseph Tainter discussed in The Collapse of Complex Societies, but industrial civilization’s dependence on nonrenewable energy resources puts the entire situation in a different and even more troubling light. On the one hand, continuing increases in complexity in a society already burdened to the breaking point with too much complexity pretty much guarantee a rapid decrease in complexity not too far down the road—and no, that’s not likely to unfold in a nice neat orderly way, either. On the other, the ongoing depletion of energy resources and the decline in net energy that unfolds from that inescapable natural process means that energy per capita will be decreasing in the years ahead. That, according to White’s law, means that the ability of industrial society to sustain current levels of complexity, or anything like them, will be going away in the tolerably near future.
In order to sort out the implications of this fact, it’s worth starting from the big picture. In any human society, whether it’s a tribe of hunter-gatherers, an industrial nation-state, or anything else, people apply energy to raw materials to produce goods and services. This is what we mean by the word “economy.” The goods and services that any economy can produce are strictly limited by the energy sources and raw materials that it can access.
A principle that ecologists call Liebig’s law of the minimum is relevant here: the amount of anything that a given species or ecosystem can produce in a given place and time is limited by whichever resource is in shortest supply. Most people get that when thinking about the nonhuman world, since it’s obvious that plants can’t use extra sunlight to make up for a shortage of water and that soil deficient in phosphates can’t be treated by adding extra nitrates. It’s when you apply this same logic to human societies that the mental gears jam up, because we’ve been told so often that one resource can always be substituted for another that most people believe it without a second thought.
What’s going on here, though, is considerably more subtle than current jargon reflects. Examine the cases of resource substitution that find their way into economics textbooks, and you’ll find that what’s happened is that a process of resource extraction that uses less energy on a scarcer material has been replaced by another process that takes more energy but uses more abundant materials. The shift from high-quality iron ores to low-grade taconite that reshaped the iron industry in the twentieth century, for example, was possible because ever-increasing amounts of highly concentrated energy could be put into the smelting process without making the resulting iron too expensive for the market.
The point made by this and comparable examples is applicable across the board to industrial societies. Far more often than not, in such societies, concentrated energy is the limiting resource. Given an abundant enough supply of concentrated energy at a low enough price, it would be possible to supply a technic society with raw materials by extracting dissolved minerals from seawater or chewing up ordinary rock to get a part per million or so of this or that useful element. Lacking that kind of absurdly vast energy supply, access to concentrated energy is where Liebig’s law bites down hard.
Another way to make this same point is to think of how much of any given product a single worker can make in a day using a set of good hand tools, and comparing that to the quantity of the same thing that the same worker could make using the successive generations of factory equipment, from the steam-driven and belt-fed power tools of the late nineteenth century straight through to the computerized milling machines and assembly-line robots of today. The difference can be expressed most clearly as a matter of the amount of energy being applied directly and indirectly to the manufacturing process—not merely the energy driving the tools through the manufacturing process, but the energy that goes into manufacturing and maintaining the tools, supporting the infrastructure needed for manufacture and maintenance, and so on through the whole system involved in the manufacturing process.
Maverick economist E. F. Schumacher pointed out that the cost per worker of equipping a workplace is one of the many crucial factors that mainstream economic thought invariably neglects.7 That cost is usually expressed in financial terms, but underlying the abstract tokens we call money is a real cost in energy, expressed in terms of the goods and services that have to be consumed in the process of equipping and maintaining the workplace. If you have energy to spare, that’s not a problem; if you don’t, on the other hand, you’re actually better off using a less complex technology: what Schumacher called “intermediate technology” and the movement in which I studied green wizardry thirty years ago called “appropriate technology.”
The cost per worker of equipping a workplace, in turn, also has a political dimension—a point that Schumacher did not neglect, though nearly all other economists pretend that it doesn’t exist. The more costly it is to equip a workplace, the more certain it is that workers won’t be able to set themselves up in business and the more control the very rich will then have over economic production and the supply of jobs. As Tainter pointed out, social complexity correlates precisely with social hierarchy; one of the functions of complexity, in the workplace as elsewhere, is thus to maintain existing social pecking orders.
Schumacher’s arguments, though, focused on the Third World nations of his own time, which had very little manufacturing capacity at all. Most of them had been colonies of European empires, assigned the role of producing raw materials and buying finished products from the imperial center as part of the wealth pump that drove them into grinding poverty while keeping their imperial overlords rich. He focused on advising client nations on how to build their own economies and extract themselves from the political grip of their former overlords, who were usually all too eager to import high-tech factories, which their upper classes inevitably controlled. The situation is considerably more challenging when your economy is geared to immense surpluses of concentrated energy and the supply of energy begins to run short. That’s the situation we’re in today.
Even if it were just a matter of replacing factory equipment, that would be a huge challenge, because all those expensive machines—not to mention the infrastructure that manufactures them, maintains them, supplies them, and integrates their products into the wider economy—count as sunk costs, subject to what social psychologists call the “Concorde fallacy,” the conviction that it’s less wasteful to keep on throwing money into a failing project than to cut your losses and do something else.8 The real problem is that it’s not just factory equipment; the entire economy has been structured from the ground up to use colossal amounts of highly concentrated energy, and everything that’s been invested in that economy since the beginning of the modern era thus counts as a sunk cost to one degree or another.
Add these trends together, and you have a recipe for the radical simplification of the economy, a politer way of saying “decline and fall.” The state of affairs in which most people in the workforce have only an indirect connection to the production of concrete goods and services to meet human needs is, in James Howard Kunstler’s useful phrase, an arrangement without a future.9 The unraveling of that arrangement, and the return to a state of affairs in which most people produce goods and services with their own labor for their own, their families’, and their neighbors’ use, will be the great economic trend of the next several centuries.
That’s not to say that this unraveling will be a simple process. All those millions of people whose jobs depend on intermediation, and thus on the maintenance of current levels of economic complexity, have an understandable interest in staying employed. That interest in practice works out to an increasingly frantic quest to keep people from sidestepping the baroque corporate and bureaucratic economic machine and getting goods and services directly from producers.
That’s a great deal of what drives the ongoing crusade against alternative health care—every dollar spent on herbs from a medical herbalist or treatments from an acupuncturist is a dollar that doesn’t go into feeding the gargantuan corporations and bureaucracies that are supposed to provide health care for Americans, and sometimes even do so. The same thing is driving corporate and government attacks on local food production, since every dollar a consumer spends buying zucchini from a backyard farmer doesn’t prop up the equally huge and tottering mass of institutions that attempt to control the production and sale of food in America.
It’s not uncommon for those who object to these maneuvers to portray them as the acts of a triumphant corporate despotism on the brink of seizing total power over the planet. I’d like to suggest that they’re something quite different. While the American and global economies are both still growing in a notional sense, the measures of growth that yield that result factor in such things as the manufacture of derivatives and a great many other forms of fictive wealth.
Subtract those from the national and global balance sheet, and the result is an economy in contraction. The intractable rise in the permanently jobless, the epidemic of malign neglect affecting even the most crucial elements of America’s infrastructure, and the ongoing decline in income and living standards among all those classes that lack access to fictive wealth, among many other things, all tell the same story. Thus it’s far from surprising that all the people whose jobs depend on intermediation, all the way up the corporate food chain to the corner offices, are increasingly worried about the number of people who are trying to engage in disinter-mediation—to buy food, health care, and other goods and services directly from the producers.
Their worries are entirely rational. One of the results of the contraction of the real economy is that the costs of intermediation, financial and otherwise, have not merely gone through the roof but zoomed off into the stratosphere, with low Earth orbit the next logical stop. Health care, again, is among the most obvious examples. In most parts of the United States, for instance, a visit to the acupuncturist for some ordinary health condition will typically set you back rather less than $100, while if you go to an MD for the same condition, you’ll be lucky to get away for under $1,000, counting lab work and other costs—and you can typically count on thirty or forty minutes of personal attention from the acupuncturist, as compared to five or ten minutes with a harried and distracted MD. It’s therefore no surprise that more and more Americans are turning their backs on the officially sanctioned health care industry and seeking out alternative health care instead.
They’d probably be just as happy to go to an ordinary MD who offered medical care on the same terms as the acupuncturist, which happen to be the same terms that were standard a century ago for every kind of health care. As matters stand, though, physicians are dependent on the system as it presently exists; their standing with their peers, and even their legal right to practice medicine, depends on their willingness to play by the rules of intermediation—and of course, it’s also true that acupuncturists don’t generally make the six-figure salaries that so many physicians do in America. A hundred years ago, the average American doctor didn’t make that much more than the average American plumber. Many of the changes in the US health care system since that time were quite openly intended to change that fact.
A hundred years ago, as the United States moved through the early stages of its age of imperial excess, that was something the nation could afford. Equally, all the other modes of profiteering, intermediation, and other maneuvers aimed at maximizing the take of assorted economic sectors were viable then, since a growing economy provides plenty of slack for such projects. As the economics of growth gave way to the economics of stagnation in the last quarter of the twentieth century, such things became considerably more burdensome. As stagnation gives way to contraction, and the negative returns on excess complexity combine with the impact of depleting nonrenewable resources, the burden is rapidly becoming more than the US economy or the wider society can bear.
The result, in one way or another, will be disintermediation: the dissolution of the complex relations and institutions that currently come between the producer and the consumer of goods and services, and their replacement by something much less costly to maintain. “In one way or another,” though, covers a great deal of ground, and it’s far from easy to predict exactly how the current system will come unglued in the United States or, for that matter, anywhere else.
Disintermediation might happen quickly, if a major crisis shatters some central element of the US economic system—for example, the financial sector—and forces the entire economy to regroup around less abstract and more local systems of exchange. It might happen slowly, as more and more of the population can no longer afford to participate in the intermediated economy at all, and have to craft their own localized economies from the bottom up, while the narrowing circle of the well-to-do continue to make use of some equivalent of the current system for a long time to come. It might happen at different rates in different geographical areas—for example, cities and their suburbs might keep the intermediated economy going long after rural areas have abandoned it, or what have you.
Plenty of people these days like to look forward to some such transformation, and not without reason. Complexity has long since passed the point of negative returns in the US economy, as in most other aspects of American society, and the coming of disintermediation across a wide range of economic activities will arguably lead to significant improvements in many aspects of our collective life. That said, it’s not all roses and affordable health care. The extravagant rates of energy per capita that made today’s absurdly complex economy possible also made it possible for millions of Americans to make their living working in offices and other relatively comfortable settings, rather than standing hip-deep in hog manure with a shovel in their hands, and it also allowed them to earn what currently passes for a normal income, rather than the bare subsistence that’s actually normal in societies that haven’t had their economies inflated to the bursting point by a temporary glut of cheap energy.
It was popular a number of years back for the urban and suburban middle classes, most of whom work in jobs that exist only due to intermediation, to go in for “voluntary simplicity”—at best a pallid half-equivalent of Thoreau’s far more challenging concept of voluntary poverty, at worst a marketing gimmick for the consumption of round after round of overpriced “simple” products.10 For all its more embarrassing features, the voluntary simplicity movement was at least occasionally motivated by an honest recognition of the immediate personal implications of Tainter’s fundamental point—that complexity taken past the point of diminishing returns becomes a burden rather than a benefit.
In the years ahead of us, a great many of these same people are going to experience what might best be called involuntary simplicity: the disintermediation of most aspects of economic life, the departure of lifestyles that can be supported only by the cheap abundant energy of the recent past, and a transition to the much less complex—and often, much less comfortable—lifestyles that are possible in a deindustrial world. There may be a certain entertainment value in watching those who praised voluntary simplicity to the skies deal with the realities of simple living when it’s no longer voluntary, and there’s no way back to the comforts of a bygone era.
That said, the impact of involuntary simplicity on the economic sphere won’t be limited to the lifestyles of the formerly privileged. It promises to bring an end to certain features of economic life that contemporary thought assumes are fixed in place forever: among them, the market economy itself. Unthinkable as the concept may be, the end of the market economy will be a central feature of the coming of America’s deindustrial dark ages.
One of the factors that makes it difficult to think through the economic consequences of the end of the industrial age is that we’ve all grown up in a world where every form of economic activity has been channeled through certain familiar forms for so long that very few people remember that things could be any other way. Another of the factors that make the same effort of thinking difficult is that the conventional economic thought of our time has invested immense effort and oceans of verbiage into obscuring the fact that things could be any other way.
Those are formidable obstacles. We’re going to have to confront them, though, because one of the core features of the decline and fall of civilizations is that most of the habits of everyday life that are standard practice when civilizations are at zenith get chucked into the recycle bin as decline picks up speed. That’s true across the whole spectrum of cultural phenomena, and it’s especially true of economics, since the economic institutions and habits of a civilization in full flower are too complex for the same civilization to support once it’s gone to seed.
The institutions and habits that contemporary industrial civilization uses to structure its economic life make up that tangled realm of supposedly voluntary exchanges we call “the market.” Back when the United States was still contending with the Soviet Union, that almost always got rephrased as “the free market”; the adjective still gets some use among ideologues, but by and large it’s dropped out of use elsewhere. This is a good thing, at least from the perspective of honest speaking, because the “free” market is, of course, nothing of the kind. It’s unfree in at least two crucial senses: first, in that it’s compulsory; second, in that it’s expensive.
“The law in its majestic equality,” Anatole France once noted drolly, “forbids rich and poor alike to sleep under bridges, beg in the streets, or steal bread.”11 In much the same sense, no one is actually forced to participate in the market economy in the modern industrial world. Those who want to abstain are perfectly free to go looking for some other way to keep themselves fed, clothed, housed, and supplied with the other necessities of life, and the fact that every option outside of the market has been hedged around with impenetrable legal prohibitions if it hasn’t simply been annihilated by legal fiat or brute force is just one of those minor details that make life so interesting.
Historically speaking, there are a vast number of ways to handle exchanges of goods and services between people. In modern industrial societies, on the other hand, outside of the occasional vestige of an older tradition here and there, there’s only one. Exchanging some form of labor for money, on whatever terms an employer chooses to offer, and then exchanging money for goods and services, on whatever terms the seller chooses to offer, is the only game in town. There’s nothing free about either exchange, other than the aforesaid freedom to starve in the gutter. The further up you go in the social hierarchy, to be sure, the less burdensome the conditions on the exchanges generally turn out to be—here as elsewhere, privilege has its advantages—but unless you happen to have inherited wealth or can find some other way to parasitize the market economy without having to sell your own labor, you’re going to participate if you like to eat.
Your participation in the market, furthermore, doesn’t come cheap. Every exchange you make, whether it’s selling your labor or buying goods and services with the proceeds, takes place within a system that has been subjected to the process of intermediation. Thus, in most cases, you can’t simply sell your labor directly to individuals who want to buy it or its products. Instead, you are expected to sell your labor to an employer, who then sells it or its product to others, gives you part of the proceeds, and pockets the rest. Plenty of other people are lined up for their share of the value of your labor: bankers, landlords, government officials, and the list goes on. When you go to exchange money for goods and services, the same principle applies; how much of the value of your labor you get to keep for your own purposes varies from case to case, but it’s always less than the whole sum, and sometimes a great deal less.
Karl Marx performed a valuable service to political economy by pointing out these facts and giving them the stress they deserve, in the teeth of savage opposition from the cheerleaders of the status quo who, then as now, dominated economic thought.12 His proposed solution to the pervasive problems of the (un)free market was another matter. Like most of his generation of European intellectuals, Marx was dazzled by the swamp-gas luminescence of Hegelian philosophy, and he followed Hegel’s verbose and vaporous trail into a morass of circular reasoning and false prophecy from which few of his remaining followers have yet managed to extract themselves.
It’s from Hegel that Marx got the enticing but mistaken notion that history consists of a sequence of stages that move in a predetermined direction toward some as-perfect-as-possible state: the same idea, please note, that Francis Fukuyama used to justify his risible vision of the first Bush administration as the glorious fulfillment of human history.13 (To borrow a bit of old-fashioned European political jargon, there are right-Hegelians and left-Hegelians; Fukuyama was an example of the former, Marx of the latter.) I’ll leave such claims and the theories founded on them to the true believers, alongside such equally plausible claims as the Singularity, the Rapture, and the visionary fantasies of Charles Fourier, who believed that the oceans would turn into lemonade once enough people adopted his sociopolitical theories. What history itself shows is something rather different.
What history shows, as already noted, is that the complex systems that emerge during the heyday of a civilization are inevitably scrapped on the way back down. Market economies are among those complex systems. Not all civilizations have market economies—some develop other ways to handle the complicated process of allocating goods and services in a society with many different social classes and occupational specialties—but those that do set up market economies inevitably load them with as many intermediaries as the overall complexity of their economies can support.
It’s when decline sets in and maintaining the existing level of complexity becomes a problem that the trouble begins. Under some conditions, intermediation can benefit the productive economy, but in a complex economy, more and more of the intermediation over time amounts to finding ways to game the system, profiting off economic activity without actually providing any benefit to anyone else. A complex society at or after its zenith thus typically ends up with a huge burden of unproductive intermediaries supported by an increasingly fragile foundation of productive activity.
All the intermediaries, no matter how wholly parasitic their function, expect to be maintained in the style to which they’re accustomed, and since they typically have more wealth and influence than the producers and consumers who support them, they can usually stop moves to block their access to the feed trough. Economic contraction, however, makes it hard to support business as usual on the shrinking supply of real wealth. The intermediaries thus end up competing with the actual producers and consumers of goods and services, and since the intermediaries typically have the support of governments and institutional forms, more often than not it’s the intermediaries who win that competition.
It’s not at all hard to see that process at work; all it takes is a stroll down the main street of the old red brick mill town where I live. Here, as in thousands of other towns and cities in today’s America, there are empty storefronts all through downtown, and empty buildings well suited to any other kind of economic activity you care to name there and elsewhere in town. There are plenty of people who want to work; wage and benefit expectations are modest; and there are plenty of goods and services that people would buy if they had the chance. Yet the storefronts stay empty, the workers stay unemployed, the goods and services remain unavailable. Why?
The reason is intermediation. Start a business in this town, or anywhere else in America, and the intermediaries all come running to line up in front of you with their hands out. Local, state, and federal bureaucrats all want their cut. So do the bankers, the landlords, the construction firms, and so on down the long list of businesses that feed on other businesses, and can’t be dispensed with because this or that law or regulation requires them to be paid their share. The resulting burden is far too large for most businesses to meet. Thus businesses don’t get started, and those that do start up generally go under in short order. It’s the same problem faced by every parasite that becomes too successful: it kills the host on which its own survival depends.
That’s the usual outcome when a heavily intermediated market economy slams face-first into the hard realities of decline. Theoretically, it would be possible to respond to the resulting crisis by forcing disintermediation, and thus salvaging the market economy. Practically, that’s usually not an option, because the disintermediation requires dragging a great many influential economic and political sectors away from their accustomed feed trough. Far more often than not, declining societies with heavily intermediated market economies respond to the crisis just described by trying to force the buyers and sellers of goods and services to participate in the market even at the cost of their own economic survival, so that some semblance of business as usual can proceed.
That’s why the late Roman Empire, for example, passed laws requiring that each male Roman citizen take up the same profession as his father, whether he could survive that way or not.14 That’s also why, as already noted, so many American jurisdictions are cracking down on people who try to buy and sell food, medical care, and the like outside the corporate economy. In the Roman case, the attempt to keep the market economy fully intermediated ended up killing the market economy altogether, and in most of the post-Roman world—interestingly, this was as true across much of the Byzantine empire as it was in the barbarian West—the complex money-mediated market economy of the old Roman world went away, and centuries passed before anything of the kind reappeared.15
What replaced it is what always replaces the complex economic systems of fallen civilizations: a system that systematically chucks the intermediaries out of economic activity and replaces them with personal commitments set up to block any attempt to game the system; that is to say, feudalism.
Enough confusion hovers around that last word these days that a concrete example is probably needed here. I’ll borrow a minor character from a favorite book of my childhood, therefore, and introduce you to Higg, son of Snell. His name could just as well be Michio, Chung-Wan, Devadatta, Hafiz, Diocles, Bel-Nasir-Apal, Mentu-hetep, or any of a score or more of other names, because the feudalisms that evolve in the wake of societal collapse are remarkably similar around the world and throughout time, but we’ll stick with Higg for now. On the off chance that the name hasn’t clued you in, Higg is a peasant—a free peasant, he’ll tell you with some pride, and not a mere serf. His father died a little while back of what people call “elf-stroke” in his time and we’ve shortened to “stroke” in ours, and he’s come in the best of his two woolen tunics to the court of the local baron to take part in the ceremony at the heart of the feudal system.
It’s a verbal contract performed in the presence of witnesses: in this case, the baron, the village priest, a couple of elderly knights who serve the baron as advisers, and a gaggle of village elders who remember every detail of the local customary law with the verbal exactness common to learned people among the illiterate. Higg places his hands between the baron’s and repeats the traditional pledge of loyalty, coached as needed by the priest; the baron replies in equally formal words, and the two of them are bound for life in the relationship of liegeman to liege lord.
What this means in practice is anything but vague. As the baron’s man, Higg has the lifelong right to dwell in his father’s house and make use of the garden and pigpen; to farm a certain precisely specified portion of the village farmland; to pasture one milch cow and its calf, one ox, and twelve sheep on the village commons; to gather, on fourteen specified saint’s days, as much wood as he can carry on his back in a single trip from the forest north of the village, but only limbwood and fallen wood; to catch each year two dozen adult rabbits from the warren on the near side of the stream, being strictly forbidden to catch any from the warren on the far side of the millpond; and, as a reward for a service his great-grandfather once performed for the baron’s great-grandfather during a boar hunt, to take anything that washes up on the weir across the stream between the first sound of the matin bell and the last of the vespers bell on the day of St. Ethelfrith each year.
In exchange for these benefits, Higg is bound to an equally specific set of duties. He will labor in the baron’s fields, as well as his own and his neighbors’, at seedtime and harvest; his son will help tend the baron’s cattle and sheep along with the rest of the village herd; he will give a tenth of his crop at harvest each year for the support of the village church; he will provide the baron with unpaid labor in the fields or on the great stone keep rising next to the old manorial hall for three weeks each year; if the baron goes to war, whether he’s staging a raid on the next barony over or answering the summons of that half-mythical being, the king, in the distant town of London, Higg will put on a leather jerkin and an old iron helmet, take a stout knife and the billhook he normally uses to harvest wood on those fourteen saint’s days, and follow the baron in the field for up to forty days. None of these benefits and duties are negotiable. All Higg’s paternal ancestors have held their land on these terms since time out of mind, and each of his neighbors holds some equivalent set of feudal rights from the baron for some similar set of duties.
Higg has heard of markets. One is held annually every St. Audrey’s day at the king’s town of Norbury, twenty-seven miles away, but he’s never been there and may well never travel that far from home in his life. He also knows about money, and has even seen a silver penny once, but he will live out his entire life without ever buying or selling something for money, or engaging in any economic transaction governed by the law of supply and demand. Not until centuries later, when the feudal economy begins to break down and intermediaries once again begin to insert themselves between producer and consumer, will that change—and that’s precisely the point, because feudal economics are what emerge in a society that has learned about the dangers of intermediation the hard way and sets out to build an economy where that doesn’t happen.
There are good reasons, in other words, why medieval European economic theory focused on the concept of the just price, which is not set by supply and demand, and why medieval European economic practice included a galaxy of carefully designed measures meant to prevent supply and demand from influencing prices, wages, or anything else.16 There are equally good reasons why lending money at interest was considered a sufficiently heinous sin in the Middle Ages that Dante, in The Inferno, put lenders at the bottom of the seventh circle of hell, below mass murderers, heretics, and fallen angels.17 The only sinners who go further down than lenders were the practitioners of fraud, in the eighth circle, and traitors, in the ninth: here again, this was a straightforward literary reflection of everyday reality in a society that depended on the sanctity of verbal contracts and the mutual personal obligations that structure feudal relationships.
(It’s probably necessary at this point to note that yes, I’m quite aware that European feudalism had its downsides—that it was rigidly caste-bound, brutally violent, and generally unjust. So is the system under which you live, dear reader, and it’s worth noting that the average medieval peasant worked fewer hours and had more days off than you do. Medieval societies also valued stability or, as today’s economists like to call it, stagnation, rather than economic growth and technological progress. Whether that’s a good thing or not probably ought to be left to be decided in the far future, when the long-term consequences of our system can be judged against the long-term consequences of Higg’s.)
A fully developed feudal system takes several centuries to emerge. The first stirrings of one, however, begin to take shape as soon as people in a declining civilization start to realize that the economic system under which they live is stacked against them and benefits, at their expense, whatever class of parasitic intermediaries their society happens to have spawned. That’s when people begin looking for ways to meet their own economic needs outside the existing system, and certain things reliably follow. The replacement of temporary economic transactions with enduring personal relationships is one of these; so is the primacy of farmland and other productive property to the economic system—this is why land and the like are still referred to legally as “real property,” as though all other forms of property are somehow unreal—as indeed they are, in the times of crisis that give rise to feudal systems.
A third consequence of the shift of economic activity away from the institutions and forms of a failing civilization has already been mentioned: the abandonment of money as an abstract intermediary in economic activity. That’s a crucial element of the process, and it has even more crucial implications, but those are sweeping enough that the end of money will require an extended discussion of its own.
Of all the differences that separate the feudal economy just sketched out from the market economy most of us inhabit today, the one that tends to throw people for a loop is the near-total absence of money in everyday medieval life. Money is so central to current notions of economics that getting by without it is all but unthinkable these days. The fact—and, of course, it is a fact—that the vast majority of human societies, including complex civilizations, have gotten by just fine without money of any kind barely registers in our collective imagination.
One source of this curious blindness, I’ve come to think, is the way that the logic of money is presented in school. Those of my readers who sat through an Economics 101 class will no doubt recall the sort of narrative that inevitably pops up in textbooks when this point is raised. You have, let’s say, a pig farmer who has bad teeth, but the only dentist in the village is Jewish, so the pig farmer can’t simply swap pork chops and bacon for dental work. Barter might be an option, but according to the usual textbook narrative, that would end up requiring some sort of complicated multiparty deal whereby the pig farmer gives pork to the carpenter, who builds a garage for the auto repairman, who fixes the hairdresser’s car, and eventually things get back around to the dentist. Once money enters the picture, by contrast, the pig farmer sells bacon and pork chops to all and sundry, uses the proceeds to pay the dentist, and everyone’s happy. Right?
Well, maybe. Let’s stop right there for a moment, and take a look at the presuppositions hardwired into this little story. First of all, the narrative assumes that participants have a single rigidly defined economic role: the pig farmer can only raise pigs, the dentist can only fix teeth, and so on. Furthermore, it assumes that participants can’t anticipate needs and adapt to them: even though he knows the only dentist in town is Jewish, the pig farmer can’t do the logical thing and start raising lambs for Passover on the side, or what have you. Finally, the narrative assumes that participants can interact economically only through market exchanges: there are no other options for meeting needs for goods and services, no other way to arrange exchanges between people other than market transactions driven by the law of supply and demand.
Even in modern industrial societies, these three presuppositions are rarely true. I happen to know several pig farmers, for example, and none of them are so hyperspecialized that their contributions to economic exchanges are limited to pork products; garden truck, fresh eggs, venison, moonshine, and a good many other things could come into the equation as well. For that matter, outside the bizarre feedlot landscape of industrial agriculture, mixed farms raising a variety of crops and livestock are far more resilient than single-crop farms, and thus considerably more common in societies that haven’t shoved every economic activity into the procrustean bed of the money economy.
As for the second point raised above, the law of supply and demand works just as effectively in a barter economy as in a money economy, and successful participants are always on the lookout for a good or service that’s in short supply relative to potential demand, and so can be bartered with advantage. It’s no accident that traditional village economies tend to be exquisitely adapted to produce exactly that mix of goods and services the inhabitants of the village need and want.
Finally, of course, there are many ways of handling the production and distribution of goods and services without participating in market exchanges. The household economy, in which people produce goods and services that they themselves consume, is the basis of economic activity in most human societies, and still accounted for the majority of economic value produced in the United States until not much more than a century ago. The gift economy, in which members of a community give their excess production to other members of the same community in the expectation that the gift will be reciprocated, is immensely common; so is the feudal economy delineated above, with its systematic exclusion of market forces from the economic sphere. There are others, plenty of them, and none of them require money at all.
Thus the logic behind money pretty clearly isn’t what the textbook story claims it is. That doesn’t mean that there’s no logic to it at all. What it means, rather, is that nobody wants to talk about what it is that money is actually meant to do. Fortunately, we’ve already discussed the relevant issues, so I can sum up the matter here in a single sentence: the point of money is that it makes intermediation easy.
Intermediation is very easy to do in a money economy, because—as we all know from personal experience—the intermediaries can simply charge fees for whatever service they claim to provide, and then cash in those fees for whatever goods and services they happen to want. By way of contrast, imagine the predicament of an intermediary who wanted to insert himself into, and take a cut out of, a money-free transaction between the pig farmer and the dentist. We’ll suppose that the arrangement the two of them have worked out is that the pig farmer raises enough lambs each year that all the Jewish families in town can have a proper Passover seder, the dentist takes care of the dental needs of the pig farmer and his family, and the other families in the Jewish community work things out with the dentist in exchange for their lambs—a type of arrangement, half barter and half gift economy, that’s tolerably common in close-knit communities.
Intermediation works by taking a cut from each transaction. The cut may be described as a tax, a fee, an interest payment, a service charge, or what have you, but it amounts to the same thing: whenever money changes hands, part of it gets siphoned off for the benefit of the intermediaries. The same thing can be done in some money-free transactions, but not all. Our intermediary might be able to demand a certain amount of meat from each Passover lamb, or require the pig farmer to raise one lamb for the intermediary per six lambs raised for the local Jewish families, though this assumes that he either likes lamb chops or can swap the lamb to someone else for something he wants.
What on Earth, though, is he going to do to take a cut from the dentist’s side of the transaction? There wouldn’t be much point in demanding one tooth out of every six the dentist extracts, for example, and requiring the dentist to fill one of the intermediary’s teeth for every twenty other teeth he fills would be awkward at best—what if the intermediary doesn’t happen to need any teeth filled this year? What’s more, once intermediation is reduced to such crassly physical terms, it’s hard to pretend that it’s anything but a parasitic relationship that benefits the intermediary at everyone else’s expense.
What makes intermediation seem to make sense in a money economy is that money is the primary intermediation. Money is a system of arbitrary tokens used to facilitate exchange, but it’s also a good deal more than that. It’s the framework of laws, institutions, and power relationships that creates the tokens, defines their official value, and mandates that they be used for certain classes of economic exchange. Once the use of money is required for any purpose, the people who control the framework get to decide the terms on which everyone else gets access to money, which amounts to effective economic control over everyone else. That is to say, they become the primary intermediaries, and every other intermediation depends on them and the money system they control.
This is why, to cite only one example, British colonial administrators in Africa imposed a hut tax on the native population, even though the cost of administering and collecting the tax was more than the revenue the tax brought in.18 By requiring the tax to be paid in money rather than in kind, the colonial government forced the natives to participate in the money economy, on terms that were, of course, set by the colonial administration and British business interests. The money economy is the basis on which nearly all other forms of intermediation rest, and forcing the native peoples to work for money instead of allowing them to meet their economic needs in some less easily exploited fashion was an essential part of the mechanism that pumped wealth out of the colonies for Britain’s benefit.
Watch the way that the money economy has insinuated itself into every dimension of modern life in an industrial society, and you’ve got a ringside seat from which to observe the metastasis of intermediation in recent decades. Where money goes, intermediation follows: that’s one of the unmentionable realities of political economy, the science that Adam Smith actually founded but which was gutted, stuffed, and mounted on the wall—turned, that is, into the contemporary pseudoscience of economics—once it became painfully clear just what kind of trouble got stirred up when people got to talking about the implications of the links between political power and economic wealth.
There’s another side to the metastasis just mentioned, though, and it has to do with the habits of thought that the money economy both requires and reinforces. At the heart of the entire system of money is the concept of abstract value, the idea that goods and services share a common, objective attribute called “value” that can be gauged according to the one-dimensional measurement of price.
It’s an astonishingly complex concept, and so needs unpacking here. Philosophers generally recognize a crucial distinction between facts and values; there are various ways of distinguishing them, but the one that matters for our present purposes is that facts are collective and values are individual. Consider the statement “It rained here last night.” Given agreed-upon definitions of “here” and “last night,” that’s a statement about fact—in this case, the fact that all those who stood outside last night in the town where I live and looked up at the sky got raindrops on their faces. In the strict sense of the word, facts are objective—that is, they deal with the properties of objects of perception, such as raindrops and nights.
Values, by contrast, are subjective—that is, they deal with the properties of perceiving subjects, such as people who look up at the sky and notice wetness on their faces. One person is annoyed by the rain, another is pleased, another is completely indifferent to it, and these value judgments are irreducibly personal; it’s not that the rain is annoying, pleasant, or indifferent; it’s the individuals who are affected in these ways. Nor are these personal valuations easy to sort out along a linear scale without drastic distortion. The human experience of value is a richly multidimensional thing; even in a language as poorly furnished with descriptive terms for emotion as English is, there are countless shades of meaning available for talking about positive valuations, and at least as many more for negative ones.
From that vast universe of human experience, the concept of abstract value extracts a single variable—“How much will you give for it?”—and reduces the answer to a numerical scale denominated in dollars and cents or the local equivalent. Like any other act of reductive abstraction, it has its uses, but the benefits of any such act always have to be measured against the blind spots generated by reductive modes of thinking, and the consequences of that induced blindness must either be guarded against or paid in full. The latter is far and away the more common of the two, and it’s certainly the option that modern industrial society has enthusiastically chosen.
Those of my readers who want to see the blindness just mentioned in full spate need only turn to any of the popular cornucopian economic theorists of our time. The fond and fatuous insistence that resource depletion can’t possibly be a problem, because investing additional capital will inevitably turn up new supplies—precisely the same logic, by the way, that appears in the legendary utterance “I can’t be overdrawn, I still have checks left!”—unfolds precisely from the flattening out of qualitative value into quantitative price just discussed. The habit of reducing every kind of value to bare price is profitable in a money economy, because it facilitates ignoring every variable that might get in the way of making money off transactions. Unfortunately it misses a minor but crucial fact, which is that the laws of physics and ecology trump the laws of economics and can neither be bribed nor bought.
The contemporary fixation on abstract value isn’t limited to economists and those who believe them, nor is this fixation’s potential for catastrophic consequences. I’m thinking here specifically of those people who have grasped the fact that industrial civilization is picking up speed on the downslope of its decline but whose response to it consists of trying to find some way to stash away as much abstract value as possible now so that it will be available to them in the future. Far more often than not, gold plays a central role in that strategy, though there are a variety of less popular vehicles that play starring roles the same sort of plan.
Now, of course, it was probably inevitable in a consumer society like ours that even the downfall of industrial civilization would be turned promptly into yet another reason to go shopping. Still, there’s another difficulty here, and that’s that the same strategy has been tried before, many times, in the last years of other civilizations. There’s an ample body of historical evidence that can be used to see just how well it works. The short form? Don’t go there.
It so happens, for example, that in there among the sagas and songs of early medieval Europe are a handful that deal with historical events in the years right after the fall of Rome: the Nibelungenlied, Beowulf, the oldest strata of Norse saga, and some others. Now, of course, all these started out as oral traditions, and finally found their way into written form centuries after the events they chronicle, when their compilers had no way to check their facts; they also include plenty of folktale and myth, as oral traditions generally do. Still, they describe events and social customs that have been confirmed by surviving records and archeological evidence and offer one of the best glimpses we’ve got into the lived experience of descent into a dark age.
Precious metals played an important part in the political economy of that age—no surprises there, as the Roman world had a precious-metal currency, and since banks had not been invented yet, portable objects of gold and silver were the most common way that the Roman world’s well-off classes stashed their personal wealth. As the Western Empire foundered in the fifth century CE and its market economy came apart, hoarding precious metals became standard practice, and rural villas, the doomsteads of the day, popped up all over. When archeologists excavate those villas, they routinely find evidence that they were looted and burned when the empire fell, and tolerably often a hobbyist with a metal detector has located the buried stash of precious metals somewhere nearby, an expressive reminder of just how much benefit that store of abstract wealth actually provided to its owner.
That’s the same story you get from all the old legends: when treasure turns up, a lot of people are about to die. The Volsunga saga and the Nibelungenlied, for example, are versions of the same story, based on dim memories of events in the Rhine valley in the century or so after Rome’s fall.19 The primary plot engine of those events is a hoard of the usual late Roman kind, which passes from hand to hand by way of murder, torture, betrayal, vengeance, and the annihilation of entire dynasties. For that matter, when Beowulf dies after slaying his dragon, and his people discover that the dragon was guarding a treasure, do they rejoice? Not at all; they take it for granted that the kings and warriors of every neighboring kingdom are going to come and slaughter them to get it—and in fact that’s what happens.20 That’s business as usual in a dark age society.
The problem with stockpiling gold on the brink of a dark age is thus simply another dimension, if a more extreme one, of the broader problem with intermediation. It bears remembering that gold is not wealth; it’s simply a durable form of money, and thus, like every other form of money, an arbitrary token embodying a claim to real wealth—that is, goods and services—that other people produce. If the goods and services aren’t available, a basement safe full of gold coins won’t change that fact, and if the people who have the goods and services need them more than they want gold, the same is true. Even if the goods and services are to be had, if everyone with gold is bidding for the same diminished supply, that gold isn’t going to buy anything close to what it does today. What’s more, tokens of abstract value have another disadvantage in a society where the rule of law has broken down: they attract violence the way a dead rat draws flies.
The fetish for stockpiling gold has always struck me, in fact, as the best possible proof that most of the people who think they are preparing for total social collapse haven’t actually thought the matter through and considered the conditions that will obtain after the rubble stops bouncing. Let’s say industrial civilization comes apart, quickly or slowly, and you have gold. In that case, either you spend it to purchase goods and services after the collapse, or you don’t. If you do, everyone in your vicinity will soon know that you have gold; the rule of law no longer discourages people from killing you and taking it in the best Nibelungenlied fashion; and sooner or later you’ll run out of ammo. If you don’t, what good will the gold do you?
The era when Nibelungenlied conditions apply—when, for example, armed gangs move from one doomstead to another, annihilating the people holed up there, living for a while on what they find, and then moving on to the next, or when local governments round up the families of those believed to have gold and torture them to death, starting with the children, until someone breaks—is a common stage of dark ages. It’s a self-terminating one, since sooner or later the available supply of precious metals or other carriers of abstract wealth are spread thin across the available supply of warlords. This can take anything up to a century or two before we reach the stage commemorated in the Anglo-Saxon poem “The Seafarer”: Nearon nú cyningas ne cáseras, ne goldgiefan swylce iú wáeron (No more are there kings or caesars, or gold-givers as once there were).21
That’s when things begin settling down and the sort of feudal arrangement sketched out above begins to emerge, when money and the market play little role in most people’s lives and labor and land become the foundation of a new, impoverished but relatively stable society where the rule of law again becomes a reality. From there, the slow growth of economic complexity will proceed as it has in the past and eventually bring North America out of the deindustrial dark age into whatever new economic arrangements emerge on its far side.