The political transformations that have occupied the last
four posts in this sequence 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 the political struggles that pit the elites
of a faliing civilization against the proto-warlords 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 my own work, the general model of collapse
he offers was also a core inspiration for the theory of catabolic collapse that
provides the basic structure for this
series of posts, so I don’t think it’s out of place to summarize his theory
briefly 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 in
this post—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”—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. As The Limits
to Growth pointed out all
those years ago, 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.
Tainter’s 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 at the
beginning of this month, in an
earlier post in this sequence, 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?
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 a variety of intermediate 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 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 the process of intermediation
and the process of ecological succession.
Just as an ecosystem, as it moves from one sere (successional stage) 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 20th 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 guarantees 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—and 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.
Add these trends together and you have a recipe for the
radical simplification of the economy. The state of affairs in which most
people in the work force 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. 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 ongoing 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 are dependent 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
disintermediation—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 well under $100, while if you go to an MD for the same thing you’ll be
lucky to get away for under $1000, 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 20th 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 only exist 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. 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 I suppose might best be called involuntary
simplicity: the disintermediation of most aspects of economic life, the
departure of lifestyles that can only be supported 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 all that’s possible in a deindustrial
world. There may be a certain entertainment value in watching what those who
praised voluntary simplicity to the skies think of simple living when it’s no
longer voluntary, and there’s no way back to the comforts of a bygone era.
************
In other news, I'm pleased to report that Twilight's Last Gleaming, my novel of the fall of America's empire based on 2012's "How It Could Happen" series of posts, is hot off the press and available from the publisher with free shipping worldwide. The novel also has its own Facebook page for fans of social media. By all means check it out.
