Resurrecting the American Economy

Donald Trump has recently ordered US corporations to move production out of China and into the US. Easier said than done!—or, rather, undone. Moving production to China (and, in case of IT, to India) allowed US corporations to benefit from the large wage differential and an easier regulatory environment in order to be more profitable. They spent these excess profits by buying back their own stock, paying generous dividends to their shareholders and using their artificially inflated stock prices to justify exorbitant executive salaries and bonuses.

Along the way, they impoverished American workers by depriving them of gainful deployment, eroded the skill base of the American population and, perhaps most importantly, destroyed demand for their products because more and more Americans could no longer afford them. As these trends played out, making China prosperous and the US increasingly distressed and impoverished, with close to 100 million working-age people permanently jobless, US corporations could no longer profit from their offshored production to the same extent, and so they took advantage of low interest rates to borrow huge sums of money and use it to continue buying back their own shares, paying dividends and continuing with the exorbitant executive compensation.

By now, many of the major US corporations are financial zombies, waiting for an uptick in interest rates to drive them into bankruptcy. And it is these zombies that are being tasked with bringing production back to the US. Good luck with that! Which is to say, it is highly unlikely that such an effort could possibly succeed. But even if it could succeed, would it solve the problem—which is that the US is gradually degenerating into a bankrupt third world country? Perhaps not, because, you see, the entire theory of “making America great again” is based on a fallacy—which is that China became the world’s largest economy (by purchasing power) and the world’s factory simply by virtue of the fact that American corporations offshored production to it.

No, China’s stunning success primarily has to do with its superior economic planning and social governance. Call it Stalinism 2.0. Under Stalin, the USSR was able to produce steady double digit growth rates through a combination of central planning and market mechanisms. It also had some 4 million political prisoners, which, for a country of 200 million, seems a bit much, but that’s politics, not economics. When it comes to managing the economy, Stalinism, and especially Stalinism 2.0—its modern, Chinese version—was and is a stunning success. Fundamentally, it is a recipe for building socialism using capitalist (mainly state-capitalist) means with whatever market elements are found to be effective.

Just bringing back production from China would not save the US. To achieve results comparable to China’s, the US would have to make some changes, to bring it more in line with Stalinism 2.0. I will now sketch out a few of these changes, to give you a sense of what would be involved.

First, the political system in the US is a mess. There are two political parties that agree about a few things—endless war, endless borrowing—and argue all the time. This is an unproductive waste of time. Eliminate them and replace them with a single party. Call it the Communist party, if you like; it doesn’t matter, since nobody knows or cares what communism is anyway. The purpose of the one party is to hand down the decisions made at the federal level down to every last inhabitant and make sure that they are obeyed. Don’t want to make America great again? OK, then, you must be a terrorist. Welcome to the Gulag! There is also the problem of states: there are too many of them, and each has its own legislature, executive branch, court system and so on. Eliminate all of that, group the states into regions, and make the regional authorities into federal departments: Department of the Northeast, Department of the West, etc.

Next, something has to be done about the exorbitant legal costs. The US has more lawyers per capita than any other country in the world and the legal profession is privatized and self-governing—basically a law onto itself. Worse yet, the legal system is a jumble of federal, state and local laws. Finally, the courts are allowed to base their decisions on precedent, which is an outrage, because this allows them to reinterpret laws and to second-guess legislators. Lawyers should either work directly for the government, and be paid based on a single schedule, or not be allowed to work at all. Case law should be done away with completely and replaced with just two sets of laws: a criminal code and a civil code, both at the federal level. Juries should be eliminated and replaced with panels of judges and, for more routine cases, with magistrates.

The medical system in the US accounts for a quarter of the economy, and it is all a waste. Cuba spends around 5% per capita on medical care relative to what the US spends, and it has much better health outcomes. Medical practice should be treated as a public service and de-privatized. Medical priorities should be established based on national priorities, with the highest priority assigned to maintaining a healthy, productive workforce. To this end, children’s health care should be prioritized above all else, since healthy children are the basis of the future workforce, while retirees and those not economically active should be afforded a modicum of mainly palliative care for the purpose of maintaining public morale. Geriatric medicine in the US currently accounts for 35% of all medical spending; this needs to be brought down to roughly 2%.

Since much of the industrial base in the US is either obsolete or has been dismantled and sold off as production was moved offshore, it needs to be built up more or less from scratch. To this end, the federal government should seize large areas of land, declare them federal economic development zones and construct industrial clusters on them, complete with worker housing, schools, clinics and other resources. The housing should be high-density housing, in the form of high-rise apartment buildings, and served using public transportation. The sites for these zones should be chosen based on proximity to resources and on logistics. Large sections of suburban sprawl currently used as commuter housing can be bulldozed to make room for them.

Many other, more minor changes would need to be made as well. For instance, the obsolete Imperial system of weights and measures, still in use in Liberia, Myanmar and, most curiously, the US, needs to be done away with. Any use of Imperial measures should be outlawed. The mentally ill, who are currently allowed to wander the streets in the US, need to be locked up. To improve social cohesion the use of languages other than English should be disallowed. Mandatory reeducation programs should be set up for those who fail to follow the dress code, behave in an impolite manner or use bad grammar or foul language. And so on and so forth…

But perhaps most importantly, it must be understood that repatriating production to the US and redeveloping the industrial base will not be a profitable venture, at least not initially. At the outset, and for at least the duration of the first Five-Year Plan, it will definitely lose money. Borrowing it is a bad idea; the federal government is already $21 trillion in debt. Instead, this money needs to be confiscated from the top 1% of the population which owns close to 40% of the country’s wealth. Doing so will yield roughly $50 trillion—more than enough to fund this project. This is best done as part of a Cultural Revolution: round up the one-percenters, make them wear dunce caps and march them through the streets while pelting them with fruits and vegetables and heaping verbal abuse on them. Oh, and take away all of their money and sentence them to a lifetime of free public service.

These may seem like significant changes, and indeed they would be. But there are reasons to believe that if they are made and Stalinism 2.0 is imposed on the US and followed faithfully, then there is a chance that America can indeed be made great again. And so, good luck and God bless!

Going Negative

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The following article was first published three years ago. Since then the US Federal Reserve has raised interest rates above zero, only to start lowering them again. In the meantime, the total amount of negative-yielding debt in the world has reached $13 trillion (USD). This is more than the combined 2019 federal budgets of USA, China, Germany, France, the UK, Japan, Italy, Brazil and Canada (which, incidentally, are nine of the largest, most overdeveloped and most collapse-prone economies on the planet). It may seem surprising that investors are willing to lend money at a negative interest rate, but it\’s an offer they can\’t refuse: they would rather lose their money slowly over time than all at once. Some investors (and central banks) have decided that fiat currency reserves are a bad idea and are buying gold instead, but this won\’t change the overall economic picture. And overall picture is that global financial collapse has been on pause since 2008, but now somebody hit \”play\” again. In any case, this seems like an opportune moment to dust off this article and once again look at what negative interest rates are, and what they do.

Previously, I have written about the progression from positive interest rates to zero interest rates (since 2008) and finally to negative interest rates. And I asked my readers a simple question: How will negative interest rates blow up the financial system? And apparently none of you knew the answer. Now, I must confess that to start with I didn’t know the answer either, which is why I asked the question, and my first attempts at finding it were somewhat tentative. But now, having thought about it, I do seem to have found the answer, and it is that…

But first let us back up a bit and answer several preliminary questions:

1. Why did zero interest rates become necessary?
2. Why are negative interest rates now necessary? and,
3. Why are negative interest rates a really excellent idea?*

* if you ignore certain unintended consequences (which is what everyone does all the time, so let’s not worry about them just yet).

The Color Revolution Post-Mortem

Over the recent weeks two attempts at color revolution have been proceeding in parallel; one in Moscow and another in Hong Kong. While a casual observer might feel that the connection between the two is tenuous at best, a closer look reveals that the methodology is exactly the same one that had been used successfully during the various regime change exercises in the past—more than once in the case or the Ukraine—but has been misfiring of late.

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Hull Assembly Made Easy

Today we ignore all the crazy happenings in the big wide world (since it\’s all going according to plan anyway) and concentrate on moving the Quidnon project closer to completion.

The Technological Revolution Devours its Children

It’s been almost three years since I published my book Shrinking the Technosphere, and an astute critic might observe that it didn’t work as intended because the technosphere hasn’t shrunk. True, it was intended as an only slightly ironic how-to book, but then it isn’t known how many people bothered to read it and actually practice what I preach. It is possible to equivocate a bit on the point that the technosphere isn’t shrinking: for example, heavy truck orders in the US are down 81% from last year. These Class 8 trucks move the vast majority of goods in the US and this collapse signals a major slowdown across the entire economy.

So the technosphere may not be entirely thriving; but then it doesn’t seem to be particularly shrinking either. There is no shortage of techno-optimists on hand talking up newfangled technologies such as nanotechnology, biotechnology, molecular, cellular and nuclear technology, stem cell technology, tissue and organ farming, nanobiotechnology, biomimetics, nanobionics, nanotronics, not to mention the perennial techno-utopian stand-by’s of artificial intelligence, renewable energy, electric driverless cars and the internet of things. “A new technological revolution is at hand!” they exclaim. Fine, I say, but what’s the new, overabundant resource for this new technological revolution?

As the famous movie quote goes, “If you can\’t spot the sucker in your first half hour at the table, then you are the sucker” (From John Dahl’s 1988 film Rounders). Another famous quote, all the way back from the French Revolution, is “The revolution, like Saturn, devours its own children” (said by Danton at his trial). If you can’t spot the resource for your next technological revolution, then you are the resource. Look at all the previous technological revolutions. In each case, a new technology opened up for exploitation a new, superabundant resource: agriculture—arable land; mechanical spinning and weaving—water power; steam engine and steelmaking—coal; internal combustion engine—oil; artificial intelligence-based robonanobiotronics—still oil? Sorry, that\’s no longer overabundant by any stretch of the imagination. (If you said “renewable energy” then think again: wind turbines, solar panels and battery banks can’t be made or maintained without oil and natural gas.) Technology without a superabundant resource it can tap into is as useful as a spoon if your bowl is empty. The logic is simple: spot the resource; if you can’t, it’s probably you.

Let’s focus on what’s supposed to be the main pillar of the next technological revolution: information technology. Most of us have smartphones, laptops, store our data in the cloud and make use of abundant and free information resources—all the free apps you want, free blogging, free Youtube videos, etc. But what new resource has all this technology opened up for you, the user? The hardware costs you money (the average iPhone now costs around 800 USD) and the time you spend fiddling around with it is subtracted from all the other, potentially useful and gainful activities.

You could try arguing that having an iPhone makes you more efficient because you have all the information and communications technology you could possibly need right at your fingertips. That point is hard to deny. I recently recorded a radio interview for a radio station in upstate New York while strolling about among the potato blossoms on my field in the Novgorod region of Russia via the internet and a 4G connection via a tower in the neighboring village. That’s nothing short of miraculous, and it’s certainly efficient (my smartphone is 7 years old, fully amortized a long time ago and still as good as new now that I’ve replaced every single mechanical component, sometimes twice). But is it effective?

The smartphones are generally effective in making their users spend money that they may or may not have on things they may or may not need. All of the free access to information is paid for by collecting data on users (spying, basically) and using it to create targeted ads that turn users into online shoppers. Everything is highly customized: women look at pictures of shoes; men look at pictures of power tools. Both the shoes and the power tools, if purchased, will be used a few times a year at most, but the money will be gone forever. The limiting factor here, of course, is the resource, which is you: once your savings are depleted and your debts are maxed out, you are cast out into the howling wilderness roamed by various troglodytes—those the information revolution has already eaten as well as those who were never on the menu.

The information revolution makes efficient use of you, its prime resource. Efficiency is a measure of how few resources are required to obtain the required result (in this case, making sure that “the fool and his money are soon parted”). Effectiveness is a measure of how effective that result is. What Americans have been doing for the past 70 years has been more and more efficient (just look at the improvement in gas mileage!) but less and less effective. The all-time high mark for standard of living was set by white American suburbanites in the 1950s, when daddy worked at a factory punching holes in sheet metal and earned enough money to pay for a house and two cars and feed the whole family, a dog and a cat, while all mommy had to do was operate various labor-saving domestic appliances, pop out babies and take them shopping. It’s been a downhill ride ever since then.

How far downhill? Now many fewer children can only find part-time employment and can’t afford to start families once they grow up. Most of them live in their parents’ attics and basements. Many of them have been brainwashed into thinking that they don’t need to start families anyhow: you see, the planet is overpopulated already and anthropogenic climate change will cause everyone to go extinct in another decade or so, and therefore bringing more children into the world would be a cruel thing for them to do. They’ve also been conditioned to think that they are some “gender” or other than one of the three biological sexes (male, female, reject). This makes traditional mating rituals ineffective, impairing family formation.

This is both good and bad. It’s bad, especially from the parental perspective, because what’s the point of bringing up children that won’t have children of their own? It’s good, because if we find the perspective of evolving into free-range troglodytes unappealing and want to stay “on the inside,” where there will be less and less room as resources are consumed and depleted, then fewer people is what we want. (I am not sure who “we” are in this instance since that’s not a club to which I wish to belong.)

“But that’s not necessarily everyone’s fate!” you might exclaim. True, the more talented young people can move to where there are still good jobs, in cities such as New York, Los Angeles and San Francisco, where they spend most of what they earn on rent for closets and bunk beds to sleep in and the rest on gadgets. This gives an entire new meaning to the expression “on the inside”: the $1600/month bunk beds they inhabit are quite similar to the ones found in prisons. Will they be able to do this for the rest of their lives or will they suffer burn-out, get tossed out and join these cities’ burgeoning homeless populations?

If you don’t like the prospect of you and your children getting eaten by the technological revolution, there are things you can do to avoid that fate. There are ways of milking the technosphere for all it’s worth while rendering yourself inedible. The method is explained in my book.

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Surviving Cultural Collapse

My recent interview with Fr. Robert McTeigue of the Catholic Current can be heard here.

Yes, this is a religious radio program, and although there is only passing mention of religion during the interview, perhaps a quick note on my personal stance on religion is in order. The gift of faith is one that not all people are granted. Faith comes most easily to those who are simple, while hypereducated urbane sophistos like most of my readers tend to find it difficult to believe in immaculate conception, resurrection, tricks with loaves and fishes, ascension unto heaven, the second coming, yadda-yadda. But here\’s a stunning discovery I\’ve made that you may find useful: if you find that you lack the gift of faith, you don\’t necessarily have to tell anyone about it. You may also lack perfect pitch but nobody is ever going to demand that you sing a capella. You can still go on and act as if you believe in an all-seeing God who is just but merciful. Living in fear of a God that you believe to exist is functionally equivalent to living in fear of a God whose existence you doubt but cannot disprove, which is the best you can do. (To use Bertrand Russell\’s famous example, you cannot disprove the existence God just as you cannot disprove the existence of a small porcelain teapot in high elliptical orbit around the Earth). Having looked up some statistics, I can assert that if you live your life as if God exists and abide by His commandments it is statistically likely that numerous benefits will accrue to you more or less automatically: you will suffer fewer psychological problems, your marriage will be stronger, your children better-behaved, you will find yourself keeping better company and, when the time comes, you will rest easier on your deathbed because you\’ve done your homework, unlike W.C. Fields who, when visited by a friend shortly before his death, discovered to be studying the Bible, and asked as to why, responded: \”Looking for loopholes.\”