Superpower Collapse Soup  

Dmitri Orlov somehow got invited to do a talk to the "Long Now" guys comparing his predicted collapse of America with that of the Soviet Union. Energy Bulletin has the text - Social collapse best practices.

Good evening, ladies and gentlemen. Thank you for showing up. It's certainly nice to travel all the way across the North American continent and have a few people come to see you, even if the occasion isn't a happy one. You are here to listen to me talk about social collapse and the various ways we can avoid screwing that up along with everything else that's gone wrong. I know it's a lot to ask of you, because why wouldn't you instead want to go and eat, drink, and be merry? Well, perhaps there will still be time left for that after my talk.

I would like to thank the Long Now Foundation for inviting me, and I feel very honored to appear in the same venue as many serious, professional people, such as Michael Pollan, who will be here in May, or some of the previous speakers, such as Nassim Taleb, or Brian Eno – some of my favorite people, really. I am just a tourist. I flew over here to give this talk and to take in the sights, and then I'll fly back to Boston and go back to my day job. Well, I am also a blogger. And I also wrote a book. But then everyone has a book, or so it would seem.

You might ask yourself, then, Why on earth did he get invited to speak here tonight? It seems that I am enjoying my moment in the limelight, because I am one of the very few people who several years ago unequivocally predicted the demise of the United States as a global superpower. The idea that the USA will go the way of the USSR seemed preposterous at the time. It doesn't seem so preposterous any more. I take it some of you are still hedging your bets. How is that hedge fund doing, by the way?

I think I prefer remaining just a tourist, because I have learned from experience – luckily, from other people's experience – that being a superpower collapse predictor is not a good career choice. I learned that by observing what happened to the people who successfully predicted the collapse of the USSR. Do you know who Andrei Amalrik is? See, my point exactly. He successfully predicted the collapse of the USSR. He was off by just half a decade. That was another valuable lesson for me, which is why I will not give you an exact date when USA will turn into FUSA ("F" is for "Former"). But even if someone could choreograph the whole event, it still wouldn't make for much of a career, because once it all starts falling apart, people have far more important things to attend to than marveling at the wonderful predictive abilities of some Cassandra-like person.

I hope that I have made it clear that I am not here in any sort of professional capacity. I consider what I am doing a kind of community service. So, if you don't like my talk, don't worry about me. There are plenty of other things I can do. But I would like my insights to be of help during these difficult and confusing times, for altruistic reasons, mostly, although not entirely. This is because when times get really bad, as they did when the Soviet Union collapsed, lots of people just completely lose it. Men, especially. Successful, middle-aged men, breadwinners, bastions of society, turn out to be especially vulnerable. And when they just completely lose it, they become very tedious company. My hope is that some amount of preparation, psychological and otherwise, can make them a lot less fragile, and a bit more useful, and generally less of a burden.

Women seem much more able to cope. Perhaps it is because they have less of their ego invested in the whole dubious enterprise, or perhaps their sense of personal responsibility is tied to those around them and not some nebulous grand enterprise. In any case, the women always seem far more able to just put on their gardening gloves and go do something useful, while the men tend to sit around groaning about the Empire, or the Republic, or whatever it is that they lost. And when they do that, they become very tedious company. And so, without a bit of mental preparation, the men are all liable to end up very lonely and very drunk. So that's my little intervention.

If there is one thing that I would like to claim as my own, it is the comparative theory of superpower collapse. For now, it remains just a theory, although it is currently being quite thoroughly tested. The theory states that the United States and the Soviet Union will have collapsed for the same reasons, namely: a severe and chronic shortfall in the production of crude oil (that magic addictive elixir of industrial economies), a severe and worsening foreign trade deficit, a runaway military budget, and ballooning foreign debt. I call this particular list of ingredients "The Superpower Collapse Soup." Other factors, such as the inability to provide an acceptable quality of life for its citizens, or a systemically corrupt political system incapable of reform, are certainly not helpful, but they do not automatically lead to collapse, because they do not put the country on a collision course with reality. Please don't be too concerned, though, because, as I mentioned, this is just a theory. My theory.

I've been working on this theory since about 1995, when it occurred to me that the US is retracing the same trajectory as the USSR. As so often is the case, having this realization was largely a matter of being in the right place at the right time. The two most important methods of solving problems are: 1. by knowing the solution ahead of time, and 2. by guessing it correctly. I learned this in engineering school – from a certain professor. I am not that good at guesswork, but I do sometimes know the answer ahead of time.

I was very well positioned to have this realization because I grew up straddling the two worlds – the USSR and the US. I grew up in Russia, and moved to the US when I was twelve, and so I am fluent in Russian, and I understand Russian history and Russian culture the way only a native Russian can. But I went through high school and university in the US .I had careers in several industries here, I traveled widely around the country, and so I also have a very good understanding of the US with all of its quirks and idiosyncrasies. I traveled back to Russia in 1989, when things there still seemed more or less in line with the Soviet norm, and again in 1990, when the economy was at a standstill, and big changes were clearly on the way. I went back there 3 more times in the 1990s, and observed the various stages of Soviet collapse first-hand.

By the mid-1990s I started to see Soviet/American Superpowerdom as a sort of disease that strives for world dominance but in effect eviscerates its host country, eventually leaving behind an empty shell: an impoverished population, an economy in ruins, a legacy of social problems, and a tremendous burden of debt. The symmetries between the two global superpowers were then already too numerous to mention, and they have been growing more obvious ever since.

The superpower symmetries may be of interest to policy wonks and history buffs and various skeptics, but they tell us nothing that would be useful in our daily lives. It is the asymmetries, the differences between the two superpowers, that I believe to be most instructive. When the Soviet system went away, many people lost their jobs, everyone lost their savings, wages and pensions were held back for months, their value was wiped out by hyperinflation, there shortages of food, gasoline, medicine, consumer goods, there was a large increase in crime and violence, and yet Russian society did not collapse. Somehow, the Russians found ways to muddle through. How was that possible? It turns out that many aspects of the Soviet system were paradoxically resilient in the face of system-wide collapse, many institutions continued to function, and the living arrangement was such that people did not lose access to food, shelter or transportation, and could survive even without an income. The Soviet economic system failed to thrive, and the Communist experiment at constructing a worker's paradise on earth was, in the end, a failure. But as a side effect it inadvertently achieved a high level of collapse-preparedness. In comparison, the American system could produce significantly better results, for time, but at the cost of creating and perpetuating a living arrangement that is very fragile, and not at all capable of holding together through the inevitable crash. Even after the Soviet economy evaporated and the government largely shut down, Russians still had plenty left for them to work with. And so there is a wealth of useful information and insight that we can extract from the Russian experience, which we can then turn around and put to good use in helping us improvise a new living arrangement here in the United States – one that is more likely to be survivable.

The mid-1990s did not seem to me as the right time to voice such ideas. The United States was celebrating its so-called Cold War victory, getting over its Vietnam syndrome by bombing Iraq back to the Stone Age, and the foreign policy wonks coined the term "hyperpower" and were jabbering on about full-spectrum dominance. All sorts of silly things were happening. Professor Fukuyama told us that history had ended, and so we were building a brave new world where the Chinese made things out of plastic for us, the Indians provided customer support when these Chinese-made things broke, and we paid for it all just by flipping houses, pretending that they were worth a lot of money whereas they are really just useless bits of ticky-tacky. Alan Greenspan chided us about "irrational exuberance" while consistently low-balling interest rates. It was the "Goldilocks economy" – not to hot, not too cold. Remember that? And now it turns out that it was actually more of a "Tinker-bell" economy, because the last five or so years of economic growth was more or less a hallucination, based on various debt pyramids, the "whole house of cards" as President Bush once referred to it during one of his lucid moments. And now we can look back on all of that with a funny, queasy feeling, or we can look forward and feel nothing but vertigo. ...

So that’s what we have now. The ship is on the rocks, water is rising, and the captain is shouting “Full steam ahead! We are sailing to Afghanistan!” Do you listen to Ahab up on the bridge, or do you desert your post in the engine room and go help deploy the lifeboats? If you thought that the previous episode of uncontrolled debt expansion, globalized Ponzi schemes, and economic hollowing-out was silly, then I predict that you will find this next episode of feckless grasping at macroeconomic straws even sillier. Except that it won’t be funny: what is crashing now is our life support system: all the systems and institutions that are keeping us alive. And so I don’t recommend passively standing around and watching the show – unless you happen to have a death wish.

Right now the Washington economic stimulus team is putting on their Scuba gear and diving down to the engine room to try to invent a way to get a diesel engine to run on seawater. They spoke of change, but in reality they are terrified of change and want to cling with all their might to the status quo. But this game will soon be over, and they don’t have any idea what to do next.

So, what is there for them to do? Forget “growth,” forget “jobs,” forget “financial stability.” What should their realistic new objectives be? Well, here they are: food, shelter, transportation, and security. Their task is to find a way to provide all of these necessities on an emergency basis, in absence of a functioning economy, with commerce at a standstill, with little or no access to imports, and to make them available to a population that is largely penniless. If successful, society will remain largely intact, and will be able to begin a slow and painful process of cultural transition, and eventually develop a new economy, a gradually de-industrializing economy, at a much lower level of resource expenditure, characterized by a quite a lot of austerity and even poverty, but in conditions that are safe, decent, and dignified. If unsuccessful, society will be gradually destroyed in a series of convulsions that will leave a defunct nation composed of many wretched little fiefdoms. Given its largely depleted resource base, a dysfunctional, collapsing infrastructure, and its history of unresolved social conflicts, the territory of the Former United States will undergo a process of steady degeneration punctuated by natural and man-made cataclysms.

Food. Shelter. Transportation. Security. When it comes to supplying these survival necessities, the Soviet example offers many valuable lessons. As I already mentioned, in a collapse many economic negatives become positives, and vice versa. Let us consider each one of these in turn. ...

A couple of years ago I half-jokingly proposed a political solution to collapse mitigation, and formulated a platform for the so-called Collapse Party. I published it with the caveat that I didn’t think there was much of a chance of my proposals becoming part of the national agenda. Much to my surprise, I turned out to be wrong. For instance, I proposed that we stop making new cars, and, lo and behold, the auto industry shuts down. I also proposed that we start granting amnesties to prisoners, because the US has the world’s largest prison population, and will not be able to afford to keep so many people locked up. It is better to release prisoners gradually, over time, rather than in a single large general amnesty, the way Saddam Hussein did it right before the US invaded. And, lo and behold, many states are starting to implement my proposal. It looks like California in particular will be forced to release some 60 thousand of the 170 thousand people it keeps locked up. That is a good start. I also proposed that we dismantle all overseas military bases (there are over a thousand of them) and repatriate all the troops. And it looks like that is starting to happen as well, except for the currently planned little side-trip to Afghanistan. I also proposed a Biblical jubilee – forgiveness of all debts, public and private. Let’s give that one… half a decade? ...

So how do you prepare? Lately, I’ve been hearing from a lot of high-powered, successful people about their various high-powered, successful associates. Usually, the story goes something like this: “My a. financial advisor, b. investment banker, or c. commanding officer has recently a. put all his money in gold, b. bought a log cabin up in the mountains, or c. built a bunker under his house stocked with six months of food and water. Is this normal?” And I tell them, yes, of course, that’s perfectly harmless. He’s just having a mid-collapse crisis. But that’s not really preparation. That’s just someone being colorful in an offbeat, countercultural sort of way.

So, how do you prepare, really? Let’s go through a list of questions that people typically ask me, and I will try to briefly respond to each of them.

OK, first question: How about all these financial boondoggles? What on earth is going on? People are losing their jobs left and right, and if we calculate unemployment the same way it was done during the Great Depression, instead of looking at the cooked numbers the government is trying to feed us now, then we are heading toward 20% unemployment. And is there any reason to think it’ll stop there? Do you happen to believe that prosperity is around the corner? Not only jobs and housing equity, but retirement savings are also evaporating. The federal government is broke, state governments are broke, some more than others, and the best they can do is print money, which will quickly lose value. So, how can we get the basics if we don’t have any money? How is that done? Good question.

As I briefly mentioned, the basics are food, shelter, transportation, and security. Shelter poses a particularly interesting problem at the moment. It is still very much overpriced, with many people paying mortgages and rents that they can no longer afford while numerous properties stand vacant. The solution, of course, is to cut your losses and stop paying. But then you might soon have to relocate. That is OK, because, as I mentioned, there is no shortage of vacant properties around. Finding a good place to live will become less and less of a problem as people stop paying their rents and mortgages and get foreclosed or evicted, because the number of vacant properties will only increase. The best course of action is to become a property caretaker, legitimately occupying a vacant property rent-free, and keeping an eye on things for the owner. What if you can’t find a position as a property caretaker? Well, then you might have to become a squatter, maintain a list of other vacant properties that you can go to next, and keep your camping gear handy just in case. If you do get tossed out, chances are, the people who tossed you out will then think about hiring a property caretaker, to keep the squatters out. And what do you do if you become property caretaker? Well, you take care of the property, but you also look out for all the squatters, because they are the reason you have a legitimate place to live. A squatter in hand is worth three absentee landlords in the bush. The absentee landlord might eventually cut his losses and go away, but your squatter friends will remain as your neighbors. Having some neighbors is so much better than living in a ghost town.

What if you still have a job? How do you prepare then? The obvious answer is, be prepared to quit or to be laid off or fired at any moment. It really doesn’t matter which one of these it turns out to be; the point is to sustain zero psychological damage in the process. Get your burn rate to as close to zero as you can, by spending as little money as possible, so than when the job goes away, not much has to change. While at work, do as little as possible, because all this economic activity is just a terrible burden on the environment. Just gently ride it down to a stop and jump off.

If you still have a job, or if you still have some savings, what do you do with all the money? The obvious answer is, build up inventory. The money will be worthless, but a box of bronze nails will still be a box of bronze nails. Buy and stockpile useful stuff, especially stuff that can be used to create various kinds of alternative systems for growing food, providing shelter, and providing transportation. If you don’t own a patch of dirt free and clear where you can stockpile stuff, then you can rent a storage container, pay it a few years forward, and just sit on it until reality kicks in again and there is something useful for you to do with it. Some of you may be frightened by the future I just described, and rightly so. There is nothing any of us can do to change the path we are on: it is a huge system with tremendous inertia, and trying to change its path is like trying to change the path of a hurricane. What we can do is prepare ourselves, and each other, mostly by changing our expectations, our preferences, and scaling down our needs. It may mean that you will miss out on some last, uncertain bit of enjoyment. On the other hand, by refashioning yourself into someone who might stand a better chance of adapting to the new circumstances, you will be able to give to yourself, and to others, a great deal of hope that would otherwise not exist.

Yes, the news is bad, but Lordy, people seem to be outdoing each other in predicting how horrible things will be.

First, some examples of the current problems:

The Russian bond market is dead. Their companies can no longer borrow on international markets. Yields are approaching 80%, up from 12% last year. This is way beyond junk bond…

Failure to save East Europe will lead to worldwide meltdown, says Ambrose Evans-Pritchard, but y’know, he seems to delight in being apocalyptic.

Social collapse best practices by Dmitry Orlov, who now has a booming book / speaker business telling the US citizens how their economy will crater worse than the USSR’s did.

Even John Robb is saying we’re all doomed, The Depression scenario is here

Well, call me a contrarian, but it seems to me the planet has muddled through way worse times than these and come out the other side. Besides, I’m starting to see the Prophets of Doom trying to out-apocalypse each other. “Oh, so you believe your scenario is dire. So, Mr. Happy Face, you say we’ll be living in caves and not eating worms. Well, you better start practicing eating earthworms now.” That kind of thing. To which I say, count me out.

First off, the apocalypse may not happen. (Oddly, some, both on the left and the right, really seem to want a collapse of civilization, how weird is that?) Second, making a religion out of being gloomy is not a path to recovery. Optimistic people who think they can effect change, often do. But if you think we’re screwed, you’ll probably sit home or turn to crime or drugs instead.

Our chances of solving the very real problems we face are much better if people think they can be solved, rather than giving in to disaster chic.