By Kevin M
What if the economy isn’t turning the corner? What if the “Great Recession” isn’t a recession at all, but the early stage of a longer term economic devolution?
I consider this as more than a reasonable possibility. As much as we might cling to the notion of “business as usual”, the history books tell us that long term cycles are periodically broken by the onset of a new eras. The fall of the Roman Empire was one such turn; the onset of the Industrial Revolution was another. Closer to our own time and place were the Civil War and the Great Depression. All of these events changed not only the rules of the game, but also the way the majority of people lived. And they were hardly isolated incidents.
I’m reading Survival+, Structuring Prosperity for Yourself and the Nation, where author and website host Charles Hugh Smith spells out the “Great Transformation” that we may well have entered already. The evidence to support his claim isn’t hard to find.
Making the case for the Great Transformation
Smith outlines a substantial range of stresses in the economy which are already underway and thus beyond our collective ability to reverse, including:
- A contracting middle class. The socio-economic backbone of the economy is under pressure from an ever increasing cost of living, shrinking job opportunities and more recently, from less generous credit availability.
- The end of cheap energy. The economy has been built on cheap energy, but new sources are increasingly coming at higher cost—deep sea oil drilling and tar sands conversion being prominent examples.
- Unsustainable levels of credit. The sub-prime mortgage crisis, which began three years ago, continues on, and has now expanded into nearly every other credit sector.
- The United States is a high cost economy. We are increasingly unable to compete successfully with lower cost countries in an expanding global market.
- A media culture which feeds a state of permanent adolescence and denial.
- Unrelenting healthcare costs, growing at 2-3 times the rate of economic growth on average.
- An aging population with its attendant pension and healthcare costs.
- A badly overextended public sector. At all levels, government is swamped with public demands to spend money it doesn’t have to solve every societal or economic ill.
- An increasingly unfathomable web of complexity at all levels of the economic system: “the unspoken idea that things are too complex to modify in any meaningful way”.
- A population largely disengaged from the political process and the true issues by diversion into “low level conflict and anxiety by the media”
The list reads like doom-and-gloom, but most of these problems are growing faster than the general economy, a trend which even an optimist must admit cannot be sustained.
Smith contends that our problems have grown so enormous that “the system will not reform itself” and that change will be forced on us by circumstances rather than engineered into existence by popular choice.
In Part Two of the book he outlines what we need to do as individuals in order to live prosperous lives and to lead the nation into a world with a very different set of parameters than what we’ve known in the past.
He makes reference to what he calls The Remnant, the very small percentage of the population who see the changes coming and who adjust strategy and tactics consistent with the new reality. It is that small group—no more than 4% of the population—who will emerge and lead a reluctant population into world which has great potential to be better than any we’ve known to date.
He recommends “radical self-reliance”—accepting the end of the Savior State and taking personal responsibility for one’s health, livelihood, education, energy, food, retirement and pursuit of happiness”, suggesting the following:
- Turn off your TV (and it’s myriad influences) and start experiencing real life
- Develop multiple income sources; have a back up skill, trade or income source
- Diversify, counterbalance and be flexible and opportunistic with investments (“when gasoline is cheap, buy a futures contract”) – no single investment vehicle will work in all environments
- There is no security, always have a Plan B
- Democracy requires active engagement; participate beyond voting by serving on committees and contacting representatives at the local level where our actions can make a real difference
- Adopt a radical savings strategy—live beneath your means, develop independent income sources and save as much as 50% of your income
- Lead a “low cost/low debt lifestyle” which will afford the ability to be flexible and mobile as circumstances require
- Cultivate close ties with community and network sources for both business and social interaction
His concept of “hybrid work” has immediate value. It’s described as “…one finger in the wage economy, one in growing food (no matter how little), another in creative pursuits, another in (for example) trading childcare for eldercare, another in hedging/investing to preserve purchasing power, another in helping to develop locally owned distributed energy as either a technical innovator…investor or provider of labor (local enterprise)…”
These tactics would work well in any economy, but would certainly have greater relevance in an economy marked by rolling recessions or worse.
Not a doomsday or survivalist scenario
Critics may argue that this is just another doomsday book, looking to sensationalize the nations problems for personal profit, but the degree to which Smith makes the case that a transformation of major proportions is indeed underway is hard to dismiss.
Others may confuse the word “Survival” in the title as synonymous with survivalist which is categorically untrue. He devotes a significant amount of ink to explaining why any survivalist strategy is an empty venture. On page 62 he addresses the survivalist cults with the following…
“Another enduring myth of the American culture is “living off the land”. Many of my correspondents who hunt and fish report that when discussions of financial hardship arise, many of their acquaintances say they will simply bag some deer and go fishing to feed their families. Sadly, what was possible in the remote, largely unpopulated America of the distant past is not possible for a nation of dwindling wilderness and 300 million mouths to feed.”
Smith’s emphasis on the need for reliance on family, community and networks runs completely counter to the “go it alone” credo of the survivalist movement.
Smith spends a great deal of the book making the case for the Great Transformation. And well he should—with the recent rise in the stock market, the media and much of the population have already relegated the recession to a serious but also typical cyclical downturn from which we will emerge stronger and richer than ever. The case against this viewpoint cannot be accomplished in a few words.
This is the view of the economy that I have. The recession we’ve just experienced is unlike any we’ve seen in my lifetime. It was not caused by an energy shortage, terrorist act or a spike in interest rates, but by the sudden slowing of an economy running into a wall of structural stresses. There is no evidence that those stresses have been corrected in any material way.
The current mini-celebration over the dramatic rise in stocks since March and in reaction to various metrics showing firming in certain areas of the economy may be causing people to slip back into their more comfortable and familiar pre-recessionary practices, and I think this book sounds an alarm to look deeper and more critically at where we are and where we’re heading based on the trends.
If you’re interested in Survival+, Structuring Prosperity for Yourself and the Nation by Charles Hugh Smith–and I strongly recommend it—it’s available at Amazon.com
What’s your take? Is the Great Recession over, or is it actually a part of a longer term trend, like the Great Transformation? And if so, how should we be preparing for it?