Nine Reasons Why Globalization Can’t Be Permanent

Since the late 1990s, globalization has seemed to be the great hope for the future. Now this great hope seems to be dimming. Globalization sets up conflict in the area of jobs. Countries around the world compete for development and jobs. If there is not enough cheap-to-produce energy to go around, huge wage disparity is likely to result.

We know from physics and history that economies need to grow, or they collapse. The wage disparity that high-wage countries have been experiencing in recent years is evidence that the world economy is already reaching energy limits. There are no longer enough jobs that pay well to go around. Any drop in energy supply is likely to worsen the job situation.

Most observers miss this problem, because they expect high oil prices to signal energy limits. This time, the signal is low wages for a significant group of workers, rather than high oil prices. This situation is possible in a networked economy, but it is not what most people look for.

Unhappy citizens can be expected to react to the wage disparity problem by electing leaders who favor limits to globalization. This can only play out in terms of reduced globalization.

History and physics suggest that economies without adequate energy supply can be expected to collapse. We have several recent examples of partial collapses, including the Great Depression of the 1930s and the collapse of the Soviet Union. Such collapses, or even more extensive collapses, might occur again if we cannot find energy alternatives that can be quickly scaled up to replace oil and coal in the very near term. These replacements need to be cheap-to-produce, non-polluting, and available in huge quantities.

The story that the economy doesn’t really need a growing supply of very cheap-to-produce energy is simply a myth. Let’s look at some of the pieces of this story.

[1] The world economy needs to grow or it collapses. Once all of the nations of the world are included in the world economy, one obvious source of growth (incorporating nations that are not yet industrialized into the world economy) disappears. 

The reason why the world economy needs to grow is because the economy is a self-organized system that operates under the laws of physics. In many ways it is like a two-wheeled bicycle. A bicycle needs to roll quickly enough, or it will fall over. An economy must grow quickly enough, or debt cannot be repaid with interest.

Also, government promises may be a problem with slow growth. Pensions for the elderly are typically paid out of tax revenue collected in that same year. It is easy for a mismatch to take place if the number of younger workers is shrinking or if their wages are lagging behind.

Figure 1. Author’s view of analogies of speeding upright bicycle to speeding economy.

I explain a little more about my bicycle analogy in Will the World Economy Continue to “Roll Along” in 2018?

Economies throughout the ages have collapsed. In some cases, entire civilizations have disappeared. In the past 100 years, partial collapses have included the Great Depression of the 1930s, the collapse of the central government of the Soviet Union in 1991, and the Great Recession of 2008-2009. Economic collapses are analogous to bicycles falling over.

[2] A growing supply of energy products is extraordinarily important for keeping the world economy operating.

We can see in Figure 1 that the energy of the person operating a bicycle is very important in allowing the operation of the bicycle to continue. In the world’s economy, the situation is similar, except that we are facing a problem of a world population that is continually growing. In a sense, the economic situation is more like a rapidly growing army of bicycles with riders. Each member of the economy needs goods and services such as food, homes, clothing, and transportation. The members of the economy can collapse individually (for example, growing suicide rate) or in much larger groups (collapsing government of a country).

Figure 2. World population according to the United Nations 2017 historical estimates and Medium forecast of population growth after 2017.

In an economy, we have a choice regarding how much energy to use. If more energy is used, workers can have many tools (such as trucks and computers) to leverage their productivity. If all goods are made with few energy inputs other than human labor, most workers find themselves working in subsistence agriculture. The total amount of goods and services produced in such an economy tends to be very small.

If supplemental energy is used, many more jobs that pay well can be added, and many more goods and services can be created. Workers will be rich enough that they can pay taxes to support representative government that supports many services. The whole economy will look more like that of a rich nation, rather than the economy of Somalia or Haiti.

Individual nations can grow their economies by using available energy supply to create jobs that pay well. Globalization sets up competition for available jobs.

If a given country has a lot of high paying jobs, this is likely to be reflected in high per capita energy consumption for that country. There are two reasons for this phenomenon: (1) it takes energy for an employer to create jobs, and (2) workers can use their wealth to buy goods and services. This wealth buys more goods and services made with energy products.

 

[3] One measure of how well the world economy is doing is world energy consumption per capita. On this basis, the world economy is already reaching limits.

Figure 3. World energy per capita and world oil price in 2016 US$. Energy amounts from BP Statistical Review of World Energy, 2017. Population estimates from UN 2017 Population data and Medium Estimates.

It is clear from Figure 3 that energy consumption tends to move in the same direction as oil price. If “demand” (which is related to wages) is high, both oil price and the amount of energy products sold will tend to be high. If demand is low, both oil price and the amount of energy products sold will tend to be low.

Since 2014, energy consumption has remained quite high, but oil prices have fallen very low. Today’s oil prices (even at $70 per barrel) are too low for oil producers to make adequate investment in the development of new fields and make other needed expenditures. If this situation does not change, the only direction that production of oil can go is down, rather than up. Prices may temporarily spike, prior to the time production falls.

Looking at energy consumption per capita on Figure 3 (above), we notice that this amount has been fairly flat since 2011. Normally, in a growing world economy, a person would expect energy consumption per capita to rise, as it has most of the time since 1820 (Figure 4).

Figure 4. World Energy Consumption by Source, based on Vaclav Smil estimates from Energy Transitions: History, Requirements and Prospects (Appendix) together with BP Statistical Data for 1965 and subsequent, divided by population estimates by Angus Maddison.

The fact that energy consumption per capita has been nearly flat since 2011 is worrying. It is a sign that the world economy may not be growing very rapidly, regardless of what government organizations are reporting to the World Bank. Some subsidized growth should not really be considered economic growth. For example, some Chinese cities have been buying off the country’s housing glut with borrowed money. A better accounting would likely show lower GDP growth for China and the world.

Looking more closely at Figure 3, we note that energy per capita hit a high point in 2013, just before world oil prices began sliding downward. Since then, world energy consumption per capita has been trending downward. This is part of the reason for gluts in supply. Producers had been planning as if normal growth in energy consumption would continue. In fact, something is seriously wrong with demand, so world energy consumption has not been rising as fast as in the past.

The point that is easy to miss is that (a) growing wage disparity plus oil gluts and (b) high oil prices are, in a sense, different ways of reflecting a similar problem, that of an inadequate supply of truly inexpensive-to-produce oil. High-cost-to-produce oil is not acceptable to the economy, because it doesn’t produce enough jobs that pay well, for each barrel produced. If oil prices today truly represented what oil producers (such as Saudi Arabia) need to maintain their production, including adequate tax revenue and funds to develop additional production, oil prices would be well over $100 per barrel.

We are dealing with a situation where no oil price works. Either prices are too high for a large number of consumers or they are too low for a large number of producers. When prices are low, relative to the cost of production, we tend to get wage disparity and gluts.

[4] The reason why energy demand is not growing is related to increased wage disparity. This is a problem for globalization, because globalization acts to increase wage disparity.

In the last section, I mentioned that demand is closely connected to wages. It is really wage disparity that becomes a problem. Goods and services become less affordable for the people most affected by wage disparity: the lower-paid workers. These people cut back on their purchases of goods such as homes and cars. Because there are so many lower-paid workers in the world, demand for energy products, such as oil and coal, fails to grow as rapidly as it otherwise would. This tends to depress prices for these commodities. It doesn’t necessarily reduce production immediately, however, because of the long-term nature of investments and because of the dependence of oil exporters on the revenue from oil.

Figure 5 shows that China and India’s energy consumption per capita has been rising, leaving less for everyone else.

Figure 5. Energy consumption per capita comparison, based on energy data from BP Statistical Review of World Energy 2017, and UN 2017 Population Estimates.

A major way that an economy (through the laws of physics) deals with “not enough goods and services to go around” is increased wage disparity. To some extent, this occurs because newly globalized countries can produce manufactured products more cheaply. Reasons for their advantage are varied, but include lower wages and less concern about pollution.

As a result, some jobs that previously would have been added in developed countries are replaced by jobs in newly globalized countries. It is probably not a coincidence that US labor force participation rates started falling about the time that China joined the World Trade Organization in 2001.

Figure 6. US Labor Force Participation Rate, as prepared by Federal Reserve Bank of St. Louis.

Lower wages for unskilled workers may also occur as the result of immigration, and the resulting greater competition for less skilled jobs. This has been a particular concern in the UK.

[5] Adding China, India, and other countries through globalization temporarily gives a boost to world energy production. This boost disappears as the energy resources of the newly added countries deplete.

Both China and India are primarily coal producers. They rapidly ramped up production since joining the World Trade Organization (in 1995 for India; in 2001 for China). Now China’s coal production is shrinking, falling 11% from 2013 to 2016. Both China and India are major importers of fossil fuels (difference between black line and their own production).

Figure 7. China’s total energy consumption compared to its energy production by type, based on BP Statistical Review of World Energy, 2017.

Figure 8. India’s total energy consumption compared to its energy production by type, based on BP Statistical Review of World Energy, 2017.

China and India’s big surge in coal production has had a major impact on world coal production. The fact that both countries have needed substantial imports has also added to the growth in coal production in the “Other” category in Figure 9.

Figure 9 also shows that with China’s coal production down since 2013, total world coal production is falling.

Figure 9. World coal production by part of the world, based on BP Statistical Review of World Energy, 2017.

Figure 10 shows that world GDP and world energy supply tend to rise and fall together. In fact, energy growth tends to precede GDP growth, strongly suggesting that energy growth is a cause of GDP growth.

Figure 10. World three-year average GDP growth compared to world three-year average energy consumption growth. GDP data is from the World Bank, based on 2010 US$ weights of GDP by country; energy consumption is from BP Statistical Review of World Energy, 2017.

If a growth in energy consumption is indeed a primary cause of world economic growth, the drop in world coal production shown in Figure 9 is worrying. Coal makes up a large share of world energy supply (28.1% according to Figure 12). If its supply shrinks, it seems likely to cause a decline in world GDP.

Figure 11 shows energy consumption growth on a basis comparable to the energy consumption growth shown on Figure 10, except for different groupings: for the world in total, the world excluding China, and for the combination of the US, EU, and Japan. We can see from Figure 11 that the addition of China and Japan has greatly propped up growth in world energy consumption since 2001, when China joined the World Trade Organization.

Figure 11. Three-year average growth in energy consumption, for the world total; the world less China and India; and for the sum of the United States, the European Union, and Japan. Energy data from BP Statistical Review of World Energy, 2017.

The amount of the “benefit” was greatest in the 2003-2007 period. If we look at Exhibit 10, we see that world economic growth was around 4% per year during that period. This was a recent record high. Now the benefit is rapidly disappearing, reducing the possibility that the world energy consumption can grow as rapidly as in the past.

If we want world energy consumption per capita to rise again, we need a new large rapidly growing source of cheap energy to replace the benefit we received from China and India’s rapidly growing coal extraction. We don’t have any candidates for a suitable replacement. Intermittent renewables (wind and solar) are not candidates at all. According to the IEA, they comprised only 1% of world energy supply in 2015, despite huge investment. They are part of the gray “Other” slice in Figure 11.

Figure 12. Figure prepared by IEA showing Total Primary Energy Supply by type from this IEA document

Academic studies regarding wind and solar have tended to focus on what they “might” do, without considering the cost of grid integration. They have also overlooked the fact that any energy solution, to be a true energy solution, needs to be a huge energy solution. It has been more pleasant to give people the impression that they can somehow operate a huge number of electric cars on a small amount of subsidized intermittent electricity.

[6] On a world basis, energy consumption per capita seems to need to be rising to maintain a healthy economy. 

When energy consumption is growing on a per capita basis, the situation is similar to one in which the average worker has more and more “tools” (such as trucks) available at his/her disposal, and sufficient fuel to operate these tools. It is easy to imagine how such a pattern of growing energy consumption per capita might lead to greater productivity and therefore economic growth.

If we look at historical periods when energy consumption has been approximately flat, we see a world economy with major problems.

Figure 13. World per Capita Energy Consumption with two circles relating to flat consumption. World Energy Consumption by Source, based on Vaclav Smil estimates from Energy Transitions: History, Requirements and Prospects (Appendix) together with BP Statistical Data for 1965 and subsequent, divided by population estimates by Angus Maddison.

The flat period of 1920-1940 seems to have been caused by limits reached on coal production, particularly in the United Kingdom, but also elsewhere. World War I , the Great Depression of the 1930s, and World War II all took place around this time period. Charles Hall and Kent Klitgaard in Energy and the Wealth of Nations argue that resource shortages are frequently the underlying cause for wars, including World Wars I and II.

The Great Depression seems to have been a partial economic collapse, indirectly related to great wage disparity at that time. Farmers, in particular, had a difficult time earning adequate wages.

The major event that took place in the 1990 to 2000 period was the collapse of the Soviet Union in 1991. The central government collapsed, leaving the individual republics to operate independently. The Soviet Union also had strong trade relationships with a number of “satellite” countries, including Cuba, North Korea, and several Eastern European countries. In the next section, we will see that this collapse had a serious long-term impact on both the republics making up the Soviet Union and the satellite countries operating more independently.

[7] The example of the Soviet Union shows that collapses can and do happen in the real world. The effects can be long lasting, and can affect trade partners as well as republics making up the original organization.

In Figure 14, the flat period of the 1980-2000 period seems to be related to intentional efforts of the United States, Europe, and other developed countries to conserve oil, after the oil price spikes of the 1970s. For example, smaller, more fuel conserving vehicles were produced, and oil-based electricity generation was converted to other types of generation. Unfortunately, there was still a “backfire” effect related to the intentional cutback in oil consumption. Oil prices fell very low, for an extended period.

The Soviet Union was an oil exporter. The government of the Soviet Union collapsed in 1991, indirectly because with these low oil prices, the government could not support adequate new investment in oil and gas extraction. Businesses closed; people lost their jobs. None of the countries shown on the Figures 14 and 15 have as high energy consumption per capita in 2016 as they did back when the Soviet Union collapsed.

Figure 14. Per capita energy consumption for the Soviet Union and three of its satellite countries. Energy data from BP Statistical Review of World Energy, 2017. Population data from UN 2017 Population data and Middle Estimates.

The three satellite countries shown on Figure 14 (Bulgaria, Hungary, and Poland) seem to be almost as much affected as the republics that had been part of the Soviet Union (Figure 15). This suggests that loss of established trading patterns was very important in this collapse.

Figure 15. Per capita energy consumption for the three largest (by population) republics that made up the Soviet Union. Energy data from BP Statistical Review of World Energy, 2017. Population data from UN 2017 Population data and Middle Estimates.

Russia’s per capita energy consumption dropped 29% between peak and trough. It had significant fossil fuel resources, so when prices rose again, it was again able to invest in new oil fields.

Ukraine was a major industrial center. It was significantly impacted by the loss of oil and gas imports. It has never recovered.

The country that seemed to fare best was Uzbekistan. It had little industry before the collapse, so was less dependent on energy imports than most. Of all of the countries shown on Figures 14 and 15, Uzbekistan is the only one that did not lose population.

[8] Today, there seem to be many countries that are not far from collapse. Some of these countries are energy exporters; some are energy importers.

Many of us have read about the problems that Venezuela has been having recently. Ironically, Venezuela has the largest oil reserves in the world. Its problem is that at today’s prices, it cannot afford to develop those reserves. The Wikipedia article linked above is labeled 2014-2018 Venezuelan protests. Oil prices dropped to a level much lower than they had been in 2014. It should not be surprising that civil unrest and protests came at the same time.

Figure 16. Monthly average spot Brent oil prices, through December 2017, based on EIA data.

Other oil producers are struggling as well. Saudi Arabia has recently changed leaders, and it is in the process of trying to sell part of its oil company, Saudi Aramco, to investors. The new leader, Mohamed bin Salman, has been trying to get money from wealthy individuals within the country, using an approach that looks to outsiders like a shake-down. These things seem like very strange behaviors, suggesting that the country is experiencing serious financial difficulties. This is not surprising, given the low price of oil since 2014.

On the oil-importer side, Greece seems to frequently need support from the EU. The lower oil prices since 2014 have somewhat helped the country, but the basic shape of the energy consumption per capita chart makes it look like it is struggling to avoid collapse.

Figure 17. Greece energy per capita. Energy data from BP Statistical Review of World Energy, 2017; population estimates from UN 2017 Population data and Medium projections.

There are many other countries struggling with falling energy consumption per capita. Figure 18 shows a chart with four such countries.

Figure 18. Energy consumption per capita for Japan, UK, Italy, and Spain. Energy consumption from BP Statistical Review of World Energy; population from UN 2017 Population data and Medium Estimates.

In a sense, even though oil prices have been lower since 2014, prices haven’t been low enough to fix the economic problems these countries have been having.

China is in a different kind of situation that could also lead to its collapse. It built its economy on coal production and rapidly growing debt. Now its coal production is down, and it is difficult for imports and substitution of other fuels to completely compensate. If slowing growth in fuel consumption slows economic growth, debt will become much harder to repay. Major debt defaults could theoretically lead to collapse. If China were to collapse, it would seriously affect the rest of the world because of its extensive trading relationships.

[9] Leaders of countries with increasing wage disparity and unhappy electorates can be expected to make decisions that will move away from globalization. 

Unhappy workers are likely to elect at least some leaders who recognize that globalization is at least a small part of their problems. This is what has happened in the US, with the election of President Trump.

The hope, of course, is that even though the rest of the world is becoming poorer and poorer (essentially because of inadequate growth of cheap-to-produce energy supplies), somehow a particular economy can “wall itself off” from this problem. President Donald Trump is trying to remake trading arrangements, based on this view. The UK Brexit vote was in a sense similar. These are the kinds of actions that can be expected to scale back globalization.

Conclusion

Having enough cheap energy for the world’s population has been a problem for a very long time. When there is enough cheap-to-produce energy to go around, the obvious choice is to co-operate. Thus the trend toward globalization makes sense. When there is not enough cheap-to-produce energy to go around, the obvious choice is to try reduce the effects of globalization and immigration. This is the major reason why globalization can’t last.

We now have problems with both coal and oil. With the decline in China’s coal supplies, we are reaching the point where there are no longer enough cheap energy supplies to go around. At first glance, it looks like there is enough, or perhaps even a superabundance. The problem is that no price works. Producers around the world need higher oil prices, to be compensated for their total cost, including the cost of extraction, developing new fields, and the tax levels governments of exporting countries need. Consumers around the world are already having trouble trying to afford $70 per barrel oil. This is what leads to gluts.

We have been told that adding wind and solar to the electric grid can solve our problems, but this solution is simply absurd. If the world is to go forward as before, it somehow needs a new very large, very cheap supply of energy, to offset our problems with both coal and oil. This new energy supply should not be polluting, either.

At this point, it is hard to see any solution to the energy problems that we are facing. The best we can try to do is “kick the can” down the road a little farther. Perhaps “globalization light” is the way to go.

We live in interesting times!

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

About Gail Tverberg

My name is Gail Tverberg. I am an actuary interested in finite world issues - oil depletion, natural gas depletion, water shortages, and climate change. Oil limits look very different from what most expect, with high prices leading to recession, and low prices leading to financial problems for oil producers and for oil exporting countries. We are really dealing with a physics problem that affects many parts of the economy at once, including wages and the financial system. I try to look at the overall problem.
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2,343 Responses to Nine Reasons Why Globalization Can’t Be Permanent

    • I have been looking for spreadsheets from the CBO saying exactly what they are projecting. When I look for data, I get to this website: https://www.cbo.gov/about/products/budget-economic-data#3

      But the latest forecast on this web page is from June 2017. Otherwise, the forecasts are as of January and June of years. Am I correct that they are not really available yet? The articles all seem to give a number or two here and there, but no graphs.

    • JH Wyoming says:

      “The budget calls for about $716 billion in annual defense spending, more than $100 billion above the level Trump requested last year. Add in the tax cuts Republicans pushed through in December and the extra spending Congress approved just last week, and the result is a flood of red ink projected to send the national debt ever higher.”

      But that money has to come from somewhere, oh, here we go;

      “His budget would slash almost $700 billion in federal healthcare spending that helps low- and moderate-income Americans who rely on insurance marketplaces created by the 2010 healthcare law.”

  1. Artleads says:

    Graffiti artists win one:

    \http://www.newshub.co.nz/home/world/2018/02/graffiti-artists-win-6-7-million-lawsuit-after-their-work-is-buffed.html

    • From the report: “For the nation as a whole, the Well-Being Index score for the U.S. in 2017 was 61.5, a decline from 62.1 in 2016 and the largest year-over-year decline since the index began in 2008.”

      This doesn’t exactly match up with,”The economy is doing wonderfully; we need to raise interest rates several times in 2018 to keep it from growing too much.”

  2. Fast Eddy says:

    The non-technocratic cohort of the thinking class squanders its waking hours on a quixotic campaign to destroy the remnant of an American common culture and, by extension, a reviled Western civilization they blame for the failure in our time to establish a utopia on earth. By the logic of the day, “inclusion” and “diversity” are achieved by forbidding the transmission of ideas, shutting down debate, and creating new racially segregated college dorms. Sexuality is declared to not be biologically determined, yet so-called cis-gendered persons (whose gender identity corresponds with their sex as detected at birth) are vilified by dint of not being “other-gendered”—thereby thwarting the pursuit of happiness of persons self-identified as other-gendered. Casuistry anyone?

    The universities beget a class of what Nassim Taleb prankishly called “intellectuals-yet-idiots,” hierophants trafficking in fads and falsehoods, conveyed in esoteric jargon larded with psychobabble in support of a therapeutic crypto-gnostic crusade bent on transforming human nature to fit the wished-for utopian template of a world where anything goes. In fact, they have only produced a new intellectual despotism worthy of Stalin, Mao Zedong, and Pol Pot.

    http://www.theamericanconservative.com/articles/beyond-cynicism-america-fumbles-towards-kafkas-castle/

    The leader of this is Justin Trudeau….

    • Greg Machala says:

      Sure the debt is unsustainable. We know that. The question is which unsustainable aspect of industrial civilization will collapse first. Finance, resources, labor, infrastructure? It is anyone’s guess at this point.

    • JH Wyoming says:

      “The failure to address our long-term fiscal situation has increased the national debt to over $20 trillion and growing. This situation is unsustainable, as I think we all know, and represents a dire threat to our economic and national security.
      Director of National Intelligence Dan Coats”

      I am really shocked at the momentum and trajectory of the increasing deficits/debt. Since when did it become the new normal for the US to go 1T a year during what are considered by the media anyway, good times? We have all sorts of new normal’s that are being accepted. New normal for hugely destructive storms, new normal for the US president work with Russia in an election, new normal for cities like Cape Town and states like CA to be having dire droughts, new normal for the super wealthy to get ridiculously super extra amazingly fantastic wealthy, new normal for 10 species to become extinct every five minutes, new normal for loss of 80% of ocean plankton, new normal to lose 90% of all large fish in the oceans, new normal for ice in the arctic to hit new lows, ad infinitum. Those are just the one’s I thought of off the top of my head.

    • Slow Paul says:

      Debt is not supposed to be sustainable, it’s just very comforting for our minds to think of debt as something we loan and have to pay back and all will be right in the universe. It might work like this on a personal level, but on a societal level debt is just arbitrary numbers generated from the great machine, and is more a measure of how much deficit spending an entity is allowed. Deficit spending by governments are the roots of the entire economic system. This creates a flow of money which “floats all the boats” and upholds the integrity of the system. All money originates from this source.

      Debt are just 0’s and 1’s in the world’s giant computer network. What matters is resource extraction and distribution. Energy, food, water. Money and debt is just means to an end, and that end is dissipating resources.

  3. Third World person says:

    this article clear show the decline of the American Left

    There will be no economic or political justice for the poor, people of color, women or workers within the framework of global, corporate capitalism. Corporate capitalism, which uses identity politics, multiculturalism and racial justice to masquerade as politics, will never halt the rising social inequality, unchecked militarism, evisceration of civil liberties and omnipotence of the organs of security and surveillance. Corporate capitalism cannot be reformed, despite its continually rebranding itself. The longer the self-identified left and liberal class seek to work within a system that the political philosopher Sheldon Wolin calls “inverted totalitarianism,” the more the noose will be tightened around our necks. If we do not rise up to bring government and financial systems under public control—which includes nationalizing banks, the fossil fuel industry and the arms industry—we will continue to be victims.

    Corporate capitalism is supranational. It owes no loyalty to any nation-state. It uses the projection of military power by the United States to protect and advance its economic interests but at the same time cannibalizes the U.S., dismantling its democratic institutions, allowing its infrastructure to decay and deindustrializing its factory centers to ship manufacturing abroad to regions where workers are treated as serfs.

    Resistance to this global cabal of corporate oligarchs must also be supranational. It must build alliances with workers around the globe. It must defy the liberal institutions, including the Democratic Party, which betray workers. It is this betrayal that has given rise to fascist and protofascist movements in Europe and other countries. Donald Trump would never have been elected but for this betrayal. We will build a global movement powerful enough to bring down corporate capitalism or witness the rise of a new, supranational totalitarianism.

    The left, seduced by the culture wars and identity politics, largely ignores the primacy of capitalism and the class struggle. As long as unregulated capitalism reigns supreme, all social, economic, cultural and political change will be cosmetic. Capitalism, at its core, is about the commodification of human beings and the natural world for exploitation and profit. To increase profit, it constantly seeks to reduce the cost of labor and demolish the regulations and laws that protect the common good. But as capitalism ravages the social fabric, it damages, like any parasite, the host that allows it to exist. It unleashes dark, uncontrollable yearnings among an enraged population that threaten capitalism itself.
    https://www.truthdig.com/articles/bankruptcy-american-left/

    • Greg Machala says:

      I despise the use of the labels “left” and “right”. The same with Dem vs Rep. Or liberal vs conservative. As if there is nothing in between. I would hazard a guess that the vast majority of Americans are between the “left” and “right”. George Carlin was so well spoken on this topic. If you want choice in things that don’t matter (like coffee) you have hundreds of choices. But, for things that really matter (like presidents) there are only two choices. Think about that.

    • The issue is partly not enough goods and services to go around. Also, the huge amount of specialization and complexity in our current system. We would have a problem, no matter what economic approach we were using.

      • Dennis L. says:

        Forty plus years ago I was able to both start a dental practice and what became a very large dental laboratory with essentially no debt and sweat equity. Today, that would be impossible due to student debt and in the dental laboratory area the change from labor to capital as in machined restorations. Ironically, the selling cost of laboratory work today is the same as it was more that forty years previous, and my ability to add value significantly reduced.
        Additionally managerial, financial an accounting skills could be learned over time, today with the extremely high capital costs, that is not the case and additional expensive expertise must be employed in these areas.
        The frontier is much further out, the amount of knowledge required is much greater, and the knowledge is applied to a much smaller area.

        • Lastcall says:

          Its called ‘barriers to entry’, and quite often are the result of the established businesses being keen to up the ante with regards to raising barriers to new competition via regulation, min standards et al.

          Guild halls were an early example, health and safety qualifications a more modern variant.

          • The actuarial groups figured out early on that having a series of difficult exams was a way to keep down the number of actuaries. Indirectly, it could be expected to help wages.

        • Young people today don’t understand how much easier the older generation had it. Becoming an actuary required a huge amount of study, but virtually no cost. I had a master’s degree before I started the exams, but there was (and is) no requirement. I know one actuary whose only degree is a high school diploma. He started out as a “clerk,” working as an aid to actuaries. He took night school college courses to fill in specific background courses he needed, and studied the exam material diligently. He did very well in the field. I doubt that he ever mentioned the lack of a college degree to anyone.

          • Dennis L. says:

            Michael Dell, Bill Gates and others have done well without a degree. There is a story of Steve Wozniak thinking he should have some formal education taking a business/economic course and interrupting the instructor telling the instructor that is not how it is done. This did not go well, the instructor told Steve(he had enrolled under an alias) he did not know what he was walking about and should stop asking questions. Steve told the instructor his real name, founder of Apple and walked out of class. Kind of an independent thinker.

            • Greg Machala says:

              If everyone thinks the same way and learns the same techniques, how can that help improve out ability to discover new techniques? Independent thinking is what we need now more than ever before. But, the opposite is actually occurring. One can see this single-minded thinking in the so called peer reviewed process. Everything seems to be susceptible to diminishing returns, even our ability to think and learn.

            • I am doubtful that a big actuarial department would hire anyone right out of high school, even as a “clerk” now. The clerk job existed in the days of mainframe computer reports that were bound into big books. The dates were written with a pen or marker on the outside of the books. If a person wanted a particular value, as of several dates, a clerk might be asked to pull the numbers from several different reports, and write them in a paper notebook in a particular format. The clerk would then make calculations, using fairly primitive calculators. Now those who are hired are expected to have good computer skills and a college degree, among other things.

          • Dennis L. says:

            We also had stable families, two parents(one to relieve the other as in , “When your father gets home.”), a church life with a set of rules handed down over centuries, the Catholic church to police what was able to be shown in movies, music with out the f word, and poor as we were, jeans that were not falling off out butts due to lack of funds for a good belt.
            We did division long handed, we memorized rote memory which was derided.
            I joke about dance, but it actually seems to improve my memory, there are no cell phones on the dance floor and no Google to look up the next move. It is fun, and I owe it to you for taking time to do something frivolous, thanks for a real solution to our present predicament.

            • I grew up in a situation similar to yours. We also had school teachers who knew our parents, and classmates who moved from grade to grade together (since the total number of students was less than thirty). We walked to school, because it was not too far. In some classes, we had students who were related to the teachers. My Latin teacher (only foreign language taught in the school) was a relative.

            • Also, I had only partial choice in what classes I took in high school. I tried to sign up for “World History,” but the principal decided that typing was more essential, regardless of what career path I chose. (In retrospect, he was probably right. I needed to type a whole lot of term papers, and later reports.)

        • Karl says:

          I’m an attorney. 38 years old. Practicing on my own since 2009. The stories of the older generation starting practices and the relative ease of acquiring business is laughable. Even in the 13 or so years I have been practicing, I have seen the competition for clients ratchet up relentlessly. Some local injury firms have taken to violating the rules of professional conduct to gain an edge in soliciting clients. It has certainly hurt my business, but I have chosen (for now) not to go down that road. The Boomers that are unsympathetic to the real difficulties face by younger people in the economy today really have a lack of historical perspective.

          • lawyers—along with all superfluous occupations—mine as a writer/illustrator included—are a product of the surplus energy economy

            the more energy in the system, the more ”jobs” you can have.–brain surgeons, garbage collectors, housepainters—even bloggers

            reduce the surplus energy, and the excess jobs fall away as everyone has to concentrate increasingly on the basic business of survival

      • theblondbeast says:

        A 2016 book Fossil Capital (https://www.amazon.com/Fossil-Capital-Steam-Global-Warming/dp/1784781290) made an interesting argument about the privatization of resource ownership being a key component to allow industrialization. In times past you had “the kings forest” for instance which limited resource extraction based on aristocratic land resource ownership.

        You are right we would have a problem no matter what – I think the private resource ownership issue probably just let’s things go quicker since their are no artificial barriers to resource exploitation – since debt money allows private resource ownership and consumption as long as a return seems probable. The limitation in this case is not the kings decree on resource use, but the limitations of return on capital.

        • Good point!

          I think private ownership of land (for homes or farms or factories) has been important as well. Of course, land is an important resource. Mortgages become possible. The equity freed up by a mortgage can be used to buy other needed goods, such as tools to run a factory. Private land ownership enables a higher level of debt. This is important for bidding up the price of commodities, and making it worthwhile to extract them.

    • JesseJames says:

      Very true third.

    • JH Wyoming says:

      “Deficits will probably reach $1 trillion in the current or next fiscal year, almost double what the Congressional Budget Office had projected less than a year ago for 2018. And U.S. debt is now on track to reach $30 trillion over the next decade. That’s over 100% of projected GDP, well into the danger zone where investors demand higher rates to buy government debt. And if rates do rise substantially, the U.S. will rival the likes of Italy as one of the world’s most debt-ravaged nations.”

      From that article you linked, BD is that paragraph above.

      Wasn’t the Tea Party (as in Boston Tea Party early from US history) suppose to alter the political landscape to reign in spending? It’s almost like both parties are hell bent on out spending the other party. At this point to go another fiscal year with another 1T deficit during a time that is supposedly good economically is so crazy it’s ludicrous.

    • It is when debt stops growing that recession hits, at least based on what happened on 2008. Be thankful household debt is still growing.

      • Dennis L. says:

        Following you, debt is tomorrow’s problem. Is it mostly stored here?
        https://www.zerohedge.com/news/2018-02-13/12-trillion-asset-manager-forget-volatility-real-financial-timebomb-public-pensions

        Perhaps there is less there than even the pessimists suggest. Someone had to purchase all the fracking and other debt.

        • Greg Machala says:

          It seems like for every dollar of debt, there is a promise to someone that they have a dollar of purchasing power. This purchasing power “could” manifests itself as resource consumption if it is spent. However, it seems to me that there are is a lot
          more debt outstanding than there are resources to cover it all. So, lets hope that all the holders of debt don’t do anything with it and just hoard it thinking they are rich.

          • Harry Gibbs says:

            Corporate debt levels, too:

            “Debt levels continued to climb among US corporates last year even as a tightening cycle gathered momentum, leaving many uneasy about how businesses will handle rollover risk if rates take off…”

            http://citywire.co.uk/wealth-manager/news/as-us-corporate-leverage-soars-is-history-repeating/a1090686

            • Fast Eddy says:

              He said: ‘Yes companies now may have more debt, but they’re paying less on that debt. US corporates are also able to borrow for longer, and that visibility locks down funding costs as it shows them what the repayments will be.

          • The dollars of debt partly (indirectly) goes into wages, and much of that does get spent. It helps pump up commodity prices, and makes the extraction of minerals more profitable.

            It is the fact that people were able to buy homes and cars with debt that helps stimulate the economy. Also, the fact that governments are able to hire teachers and soldiers. And businesses can build factories with debt.

            • Greg Machala says:

              “It is the fact that people were able to buy homes and cars with debt that helps stimulate the economy. Also, the fact that governments are able to hire teachers and soldiers. And businesses can build factories with debt.” – This has been true in the past. However, I think that dynamic is changing as more debt is needed to extract the same amount of resource. The idea of debt spurring growth may be reaching an inflection point due to diminishing returns.

            • I think the issue is that all of the spending (from debt) is on things that are not on worthwhile things.

              Governments build high speed rail that is too expensive for consumers to afford, and doesn’t save enough time over air to make a difference, for example.

              Debt is used to repair long-neglected roads and bridges. All we get is roads and bridges back to where they should have been before. We continued to use the roads and bridges all along.

              Debt is used by Chinese governments to pay for homes for Chinese buyers who really cannot afford these homes. There is a need to keep building homes like these (for other people who cannot afford them), to provide some jobs.

              You are right–the issue is related to diminishing returns. If the debt could be used to build a road where none and gone before, it might have encouraged growth.

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