Yves here. While I agree with the general thrust of Ilargi’s argument, some small caveats are in order. First, the idea of progress, which is the foundation of the internalized belief in rising incomes and improving living standards, is a child of the Industrial Revolution. And that is despite the fact that the first generation, in fact, nearly two generations of the Industrial Revolution brought worse living standards for ordinary people in England (see here for details).
Second, we’ve had considerable periods even in the modern era where living standards have stagnated and people didn’t have good reason to be optimistic about the future. Consider the 1920s in England and Europe through the reconstruction after World War II. The UK didn’t get fully off WWII rationing for well more than a decade after the war ended. The US didn’t get whacked by the post Great War malaise, but the period from 1929 to 1945 was no party, and the later half of the 19th century had America going from the Civil War into the Long Depression. So the idea of more or less continuous improvement in living standards is an artifact of the 1980s and 1990s (and a lesser degree the first few years of the new century, although I’d argue that was projecting previous experience onto deteriorating fundamentals) projected backwards (the 1970s were an economically lousy, anxious decade, until you compare it to our current malaise).
By Raúl Ilargi Meijer, editor-in-chief of The Automatic Earth, Cross posted from Automatic Earth
What worries me most about the world today, in the last weeks before Christmas and New Year’s Day 2014, is that all the plans we make for our futures and more importantly our children’s futures are DOA. This is because nobody has a clue what the future will bring, and that’s more than just some general statement. Is the future going to be like the past or present? We really don’t know. But we do exclusively plan for such a future. And that’s not for a lack of warning signs.
One might argue that in the western world over the past 50 years or so, we’ve not only gotten what we hoped and planned for, but we’ve even been to a large extent pleasantly surprised. In a narrow, personal, material sense, at least, we’ve mostly gotten wealthier. And we think this, in one shape or another, will go on into infinity and beyond. With some ups and downs, but still.
While that may be understandable and relatively easy to explain, given the way our brains are structured, it should also provide food for thought. But because of that same structure it very rarely does.
The only future we allow ourselves to think about and plan for is one in which our economies will grow and our lives will be better (i.e. materially richer) than they are now, and our children’s will be even better than ours. If that doesn’t come to be, we will be lost. Completely lost. And so will our children.
The ability of the common (wo)man to think about the consequences of a future that doesn’t include perpetual growth and perpetually improving lives (whatever that may mean), is taken away from her/him on a daily basis by ruling politicians and “successful” businessmen and experts, as well as the media that convey their messages. It’s all the same one-dimensional message all the time, even though we may allow for a distinction between on the one hand proposals, and their authors, that are false flags, in that their true goal is not what is pretended, and on the other hand ones that mean well but accomplish the same goals, just unintended.
This all leads to a nearly complete disconnect from reality, and that is going to hurt us even more that reality itself.
We extrapolate the things we prefer to focus on in today’s world, with our brains geared for optimism, into our expectations for the future. But what we prefer to focus on is, by definition, just an illusion, or at best a partial reality. We don’t KNOW that there will be continuing economic growth, or continuing sufficient energy supplies, or continuing plenty food. Still, it’s all we plan for. Not every single individual, of course, but by far most of us.
The last generation in the western world old enough to live through WWII fully aware, i.e. the last who knew true hardship – as a group -, is now 75 or older. Everyone younger than 70 or so have lived their entire lives through a time of optimism, growth and prosperity. That this could now be over is therefore something the vast majority of them either fail to recognize or refuse to.
They stick to their acquired possessions and wealth, which they view wholly as entitlements, and fail to see even the risk that they can continue to do so only by preying on their children, their children’s children, and the weaker members of the societies they live in. That notion may be tough to understand, even tougher to process mentally, and for that reason provoke a lot of resistance and denial, no doubt about it, but that doesn’t make it less true. The more wealth you want to retire with, the less your children and grandchildren will have to retire with, and even to live on prior to retirement. That is because there is a solid chance that the pie is simply no longer getting bigger.
As societies we must find a way to deal with these issues as best we can, or our societies will implode. If trends from the immediate past continue, then, when the entire baby boomer generation has retired, 10-15 years from now, income and wealth disparities between generations will have become so extreme that younger people will simply no longer accept the situation.
That is what should arguably be the number one theme in all of our planning and deliberations. It is not; indeed, there is nobody at all who talks about it in anything resembling a realistic sense. Every single proposal to deal with our weakened economies, whether they address housing markets, budget deficits, overall federal and personal debt, or pensions systems, is geared towards the same idea: a return to growth. It doesn’t seem to matter how real or likely it is, we all simply accept it as a given: there will be growth. It is as close to a religion as most of us get.
And while it may be true that in finance and politics the arsonists are running the fire station and the lunatics the asylum, we too are arsonists and loonies as long as we have eyes for growth only. That doesn’t mean we should let Jamie Dimon and his ilk continue what they do with impunity, it means that dealing with them will not solve the bigger issue: our own illusions and expectations.
We allow the decisions for our future to be made by those people who have the present system to thank for their leading positions in our societies, and we should really not expect them to bite the hand that has fed them their positions. But that does mean that we, and our children, are not being prepared for the future; we’re only being prepared, through media and education systems, for a sequel of the past, or at best the present. That might work if the future were just an extrapolation of the past, but not if it’s substantially different.
If there is less wealth to go around, much less wealth, in the future, what do we do? How do we, and how do our children, organize our societies, our private lives, and our dealings with other societies? Whom amongst us is prepared to deal with a situation like that? Whom amongst our children is today being educated to deal with it? The answer to either question is never absolute zero, but it certainly does approach it.
Obviously, you may argue that we don’t know either that the future will be so different from the past. But that is only as true as the fact that neither can we be sure that it will not. So why do we base our entire projections of the future on just one side of the coin, the idea that we will have more of the same – and then some more -, without giving any thought to what will be needed when more of the same will not be available? That looks a lot like the “everything on red” behavioral pattern of a gambling addict. But who amongst us is ready to admit they’re gambling with their children’s future?
I see the future as completely different than a mere continuation from the 20th century past and the 21st century present. I even see the latter as very different from the former, since all we’ve really done in the new millennium is seek ways to hide our debts instead of restructuring them. You can throw a few thousand people out of their homes, but if you label the by far biggest debtors, the banks, as too big to fail, and hence untouchable, nothing significant is restructured. But that doesn’t mean it’s going to go away by itself, the by far biggest debt in the history of mankind. At some point it must hit us in the form of a massive steamroller of dissolving and disappearing credit. In a world that can’t function without it.
And if we refuse to consider even the possibility that the debt will crush us under its immense weight, and profoundly change our societies when it does, then we will be left unprepared. And lost. That should perhaps scare us into action, not denial. Denial simply doesn’t seem very useful. Is there a risk that business as usual will no longer be available? Yes, and that risk is considerable. But we plan our futures as if it’s non-existent. That is a huge gamble. Not to mention the worst possible kind of risk assessment.
The best, or most, that people seem to be able to think of doing, even if they feel queasy about their economic prospects, is to stuff as much manna as they can into their pockets. That is the sort of approach that may have worked in the past, but it offers no guarantees for the future. It’s just another gamble.
We love to tell ourselves how smart we are. It’s time we walk that talk.