COVID-19 and the economy: Where do we go from here?

The COVID-19 story keeps developing. At first, everyone listened to epidemiologists telling us that a great deal of social distancing, and even the closing down of economies, would be helpful. After trying these things, we ended up with a huge number of people out of work and protests everywhere. We discovered the models that were provided were not very predictive. We are also finding that a V-shaped recovery is not possible.

Now, we need to figure out what actions to take next. How vigorously should we be fighting COVID-19? The story is more complex than most people understand. These are some of the issues I see:

[1] The share of COVID-19 cases that can be expected to end in death seems to be much lower than most people expect.

Most people assume that the ratios of deaths to cases by age group, computed using reported cases, such as those included in the Johns Hopkins Database, give a good indication of the chance of death a person faces if a person catches COVID-19. In fact, the cases reported to this database are far from representative of all cases; they tend to be the more severe cases. Cases with no symptoms, or only very slight symptoms, tend to be missed. The result is that ratios calculated directly from this database make people think their risk of death is far higher than it really is.

The US Center for Disease Control has published Planning Scenarios, based on information available on April 29, 2020.* Using this information, the CDC’s best estimate of the number of future deaths per 1000 cases with symptoms is as follows:

Ages 0 – 49    0.5 deaths per 1000 cases with symptoms

Ages 50-64    2.0 deaths per 1000 cases with symptoms

Ages 65+       13.0 deaths per 1000 cases with symptoms

The CDC’s best estimate is that 35% of cases have no symptoms at all. Thus, if we were to include these cases without symptoms in the chart above, the chart would become:

Ages 0-49   0.5 deaths per 1,538 cases (including those without symptoms), or 0.3 deaths per 1000 cases with or without symptoms

Ages 50-64  1.3 deaths per 1000 cases with or without symptoms

Ages 65+    8.5 deaths per 1000 cases with or without symptoms

A recent study of blood samples from 23 different parts of the world came to a similarly low estimate of the number of deaths per 1000 COVID-19 infections. It reported that among people who are less than 70 years old, the number of deaths per 1000 ranged from 0.0 to 2.3 per 1000, with a median of 0.4 deaths per 1000.

The same paper remarks,

COVID-19 seems to affect predominantly the frail, the disadvantaged, and the marginalized – as shown by high rates of infectious burden in nursing homes, homeless shelters, prisons, meat processing plants, and the strong racial/ethnic inequalities against minorities in terms of the cumulative death risk.

[2] There seem to be things we can do ourselves to reduce our personal chance of serious illness or death.

General good health is protective against getting a bad case of COVID-19. Thus, anything that we can do in terms of a good diet and exercise is likely helpful. Staying inside for weeks on end in the hope of preventing exposure to COVID-19 is probably not helpful.

Continued exposure to huge amounts of disinfectants and hand sanitizers is likely not to be helpful either. Our bodies depend on healthy microbiomes, and products such as these adversely affect our microbiomes. They kill good and bad bacteria alike and may leave harmful residues. It is easy to scale back our personal use of these products.

There are recent indications that vitamin D is likely to be protective in reducing both the incidence of COVID-19 and the disease’s severity. Web MD reports:

Several groups of researchers from different countries have found that the sickest patients often have the lowest levels of vitamin D, and that countries with higher death rates had larger numbers of people with vitamin D deficiency than countries with lower death rates.

Experts say healthy blood levels of vitamin D may give people with COVID-19 a survival advantage by helping them avoid cytokine storm, when the immune system overreacts and attacks your body’s own cells and tissues.

While we don’t know for certain that vitamin D is helpful, there is certainly enough circumstantial evidence to suggest that it would likely be worthwhile to raise vitamin D levels to the amount recommended by the National Institute of Health (30 nmol/L or higher). People with dark skin living in areas away from the equator might especially be helped by this strategy, since dark skin reduces vitamin D production.

Masks seem to be helpful in preventing the spread of infection. A person’s own immune system can handle some level of germs. If two people meeting together both wear masks, the combination of masks can perhaps reduce the level of germs to within the amount the immune system can handle. Our immune systems are built to handle a barrage of small attacks by viruses and bacteria. Continued “practice” with relatively low combinations of good and bad bacteria (as occur with masks) will tend to build up our bodies’ natural defenses.

We see dentists and dental hygienists wearing face shields. These shields are readily available over the internet and can be worn with a mask or by themselves. We don’t yet know precisely how much protection they provide, but early models suggest that they can be helpful in two directions: (a) preventing the wearer’s droplets from harming others and (b) reducing the droplet exposure from others. Thus, they may be a worthwhile way to reduce exposure to the virus causing COVID-19, even when others are not wearing masks.

[3] The medical community’s ability to treat COVID-19 cases keeps improving.

There seem to be many small changes that are improving treatment of COVID-19. If patients are having trouble getting enough oxygen, having them lie on their stomachs seems to increase their blood oxygen levels. The cost of this change is pretty much zero, but it keeps people out of the ICU longer.

Originally, planners thought that ventilators would be needed for patients with COVID-19, since ventilators are often used on pneumonia patients. Experience has shown, however, that oxygen plus something like a CPAP machine often works better and is less expensive.**

The simple change of not sending recuperating patients to nursing home-type facilities for the last stages of care has proven helpful, as well. Many of these patients can still infect others, leading to infections in long-term care facilities. Tests to tell whether patients are truly over the disease do not seem to be very accurate.

Last week, it was announced that treatment with an inexpensive common steroid could reduce deaths of people on ventilators by one-third. It could also reduce deaths of those requiring only oxygen treatment by 20%. Using this treatment should significantly reduce deaths, at little cost.

We can expect improvements in treatments to continue as doctors experiment with existing treatments, and as drug companies work on new solutions. Looking at cumulative historical mortality rates tends to overlook the huge learning curve that is taking place, allowing mortality rates to be lower.

[4] More doubts are being raised about quickly finding a vaccine that prevents COVID-19. 

The public would like to think that a vaccine solution is right around the corner. Vaccine promoters such as Anthony Fauci and Bill Gates would like to encourage this belief. Unfortunately, there are quite a few obstacles to getting a vaccine that actually works for any length of time:

(a) Antibodies for coronaviruses tend not to stay around for very long. A recent study suggests that even as soon as eight weeks, a significant share of COVID-19 patients (40% of those without symptoms; 12.9% of those with symptoms) had lost all immunity. A vaccine will likely face this same challenge.

(b) Vaccines may not work against mutations. Beijing is now fighting a new version of COVID-19 that seems to have been imported from Europe in food. Early indications are that people who caught the original Wuhan version of the COVID-19 virus will not be immune to the mutated version imported from Europe.

Vaccines that are currently under development use the Wuhan version of the virus. The catch is that the version of COVID-19 now circulating in the United States, Europe and perhaps elsewhere is mostly not the Wuhan type.

(c) There is a real concern that a vaccine against one version of COVID-19 will make a person’s response to a mutation of COVID-19 worse, rather than better. It has been known for many years that Dengue Fever has this characteristic; it is one of the reasons that there is no vaccine for Dengue Fever. The earlier SARS virus (which is closely related to the COVID-19 virus) has this same issue. Preliminary analysis suggests that the virus causing COVID-19 seems to have this characteristic, as well.

In sum, getting a vaccine that actually works against COVID-19 is likely to be a huge challenge. Instead of expecting a silver bullet in the form of a COVID-19 vaccine, we probably need to be looking for a lot of silver bee-bees that will hold down the impact of the illness. Hopefully, COVID-19 will someday disappear on its own, but we have no assurance of this outcome.

[5] The basic underlying issue that the world economy faces is overshoot, caused by too high a population relative to underlying resources.

When an economy is in overshoot, the big danger is collapse. The characteristics of overshoot leading to collapse include the following:

  • Very great wage disparity; too many people are very poor
  • Declining health, often due to poor nutrition, making people vulnerable to epidemics
  • Increasing use of debt, to make up for inadequate wages and profits
  • Falling commodity prices because too few people can afford these commodities and goods made from these commodities
  • Gluts of commodities, causing farmers to plow under crops and oil to be put into storage

Thus, pandemics are very much to be expected when an economy is in overshoot.

One example of collapse is that following the Black Death (1348-1350) epidemic in Europe. The collapse killed 60% of Europe’s population and dropped Britain’s population from close to 5 million to about 2 million.

Figure 1. Britain’s population, 1200 to 1700. Chart by Bloomberg using Federal Reserve of St. Louis data.

We might say that there was a U-shaped population recovery, which took about 300 years.

A later example that almost led to collapse was the period between 1914 and 1945. This was a period of shrinking international trade, indicating that something was truly wrong. On Figure 2 below, the WSJ calls its measure of international trade the “Trade Openness Index.” The period 1914-1945 is highlighted as being somewhat like today.

Figure 2. The Trade Openness Index is an index based on the average of world imports and exports, divided by world GDP. Chart by Wall Street Journal.

Many of the issues in the 1914-1945 timeframe were coal related. World War I took place when coal depletion became a problem in Britain. The issue at that time was wages that were too low for coal miners because the price of coal would not rise very high. Higher coal prices were needed to offset the impact of depletion, but high coal prices were not affordable by citizens.

The Pandemic of 1918-1919 killed far more people than either World War I or COVID-19.

World War II came about at the time coal depletion became a problem in Germany.

Figure 3. Figure by author describing peak coal timing compared to World War I and World War II.

The problem of inadequate energy resources finally ended when World War II ramped up demand through more debt and through more women entering the labor force for the first time. In response, the US began pumping oil out of the ground at a faster rate. Instead of depending on coal alone, the world began depending on a combination of oil and coal as energy resources. The ratio of population to energy resources was suddenly brought back into balance again, and collapse was averted!

[6] We are now in another period of overshoot of population relative to resources. The critical resource this time is oil. The alternatives we have aren’t suited to fulfilling our most basic need: the growing and transportation of food. They act as add-ons that are lost if oil is lost.

If we look back at Figure 2 above, it shows that since 2008, the world has again fallen into a period of shrinking imports and exports, which is a sign of “not enough energy resources to go around.” We are also experiencing many of the other characteristics of an overshoot economy that I mentioned in Section 5 above.

Figure 4 shows world energy consumption by type of energy through 2019, using recently published data by BP. The “Other” combination in Figure 4 includes nuclear, hydroelectric, wind, solar, and other smaller categories such as geothermal energy, wood pellets, and sawdust burned for fuel.

Figure 4. World energy consumption by fuel, based on BP’s 2020 Statistical Review of World Energy.

Oil has been rising at a steady pace; coal consumption has been close to level since about 2012. Natural gas and “Other” seem to be rising a little faster in the most recent few years.

If we divide by world population, the trend in world energy consumption per capita by type is as follows:

Figure 5. World Per Capita Energy Consumption based on BP’s 2020 Statistical Review of World Energy

Many people would like to think that the various energy sources are substitutable, but this is not really the case, as we approach limits of a finite world.

One catch is that there are very few stand-alone energy resources. Most energy resources only work within a framework provided by other energy sources. Wood that is picked up from the forest floor can work as a stand-alone energy source. Wind can almost be used as a stand-alone energy source, if it is used to power a simple sail boat or a wooden windmill. Water can almost be used as a stand-alone energy source, if it can be made to turn a wooden water wheel.

Coal, when its use was ramped up, enabled the production of both concrete and steel. It allowed modern hydroelectric dams to be built. It allowed steam engines to operate. It truly could be used as a stand-alone energy source. The main obstacle to the extraction of coal was keeping the cost of extraction low enough, so that, even with transportation, buyers could afford to purchase the coal.

Oil, similarly, can be a stand-alone energy solution because it is very flexible, dense, and easily transported. Or it can be paired with other types of less-expensive energy, to make it go further. We can see our dependence on oil by how level energy consumption per capita is in Figure 5 since the early 1980s. Growth in population seems to depend upon the amount of oil available.

As I have mentioned in previous posts, the economy is a self-organizing system. If there isn’t enough of the energy products upon which the economy primarily depends, the system tends to change in very strange ways. Countries become more quarrelsome. People decide to have fewer children or they become more susceptible to pandemics, bringing population more in line with energy resources.

The problem with natural gas and with the electricity products that I have lumped together as “Other” is that they are not really stand-alone products. They cannot grow food or build roads. They cannot power international jets. They cannot build wind turbines or solar panels. They cannot put natural gas pipelines in place. They can only exist in a complex environment which includes oil and perhaps coal (or other cheaper energy products).

We are kidding ourselves if we think we can transition to modern fuels that are low in carbon emissions. Without high prices, oil and coal that are in the ground will tend to stay in the ground permanently. This is the serious obstacle that we are up against. Without oil and coal, natural gas and electricity products will quickly become unusable.

[7] A major problem with COVID-19 related shutdowns is the fact that they lead to very low commodity prices, including oil prices. 

Figure 6. Inflation-adjusted monthly average oil prices through May 2020. Amounts are Brent Spot Oil Prices, as published by the EIA. Inflation adjustment is made using the CPI-Urban Index.

Oil is the primary type of energy used in growing and transporting food. It is used in many essential processes, including in the production of electricity. If its production is to continue, its price must be both high enough for oil producers and low enough for consumers.

The problem that we have been encountering since 2008 (the start of the latest cutback in trade in Figure 2) is that oil prices have been falling too low for producers. Now, in 2020, oil production is beginning to fall. This is happening because producing companies cannot afford to extract oil at current prices; governments of oil exporting countries cannot collect enough taxes at current prices. They hope that by reducing oil supply, prices will rise again.

If extraordinarily low oil prices persist, a calamity similar to the one that “Peak Oilers” have worried about will certainly occur: Oil supply will begin dropping. In fact, the drop will likely be much more rapid than most Peak Oilers have imagined, because the drop will be caused by low prices, rather than the high prices that they imagined would occur.

Amounts which are today shown as “proven reserves” can be expected to disappear because they will not be economic to extract. Governments of oil exporting countries seem likely to be overthrown because tax revenue from oil is their major source of revenue for programs such as food subsidies and jobs programs. When this disappears, governments of oil exporters are forced to cut back, lowering the standard of living of their citizens.

[8] What our strategy should be from now on is not entirely clear.

Of course, one path is straight into collapse, as happened after the Black Death of 1348-1352 (Figure 1). In fact, the carrying capacity of Britain might still be about 2 million. Its current population is about 68 million, so this would represent a population reduction of about 97%.

Other countries would experience substantial population reductions as well. The population decline would reflect many causes of death besides direct deaths from COVID-19; they would reflect the impacts of collapsing governments, inadequate food supply, polluted water supplies, and untreated diseases of many kinds.

If a large share of the population stays hidden in their homes trying to avoid COVID, it seems to me that we are most certainly heading straight into collapse. Supply lines for many kinds of goods and services will be broken. Oil prices and food prices will stay very low. Farmers will plow under crops, trying to raise prices. Gluts of oil will continue to be a problem.

If we try to transition to renewables, this leads directly to collapse as well, as far as I can see. They are not robust enough to stand on their own. Prices of oil and other commodities will fall too low and gluts will occur. Renewables will only last as long as (a) the overall systems can be kept in good repair and (b) governments can support continued subsidies.

The only approach that seems to keep the system going a little longer would seem to be to try to muddle along, despite COVID-19. Open up economies, even if the number of COVID-19 cases is higher and keeps rising. Tell people about the approaches they can use to limit their exposure to the virus, and how they can make their immune systems stronger. Get people started raising their vitamin D levels, so that they perhaps have a better chance of fighting the disease if they get COVID-19.

With this approach, we keep as many people working for as long as possible. Life will go on as close to normal, for as long as it can. We can perhaps put off collapse for a bit longer. We don’t have a lot of options open to us, but this one seems to be the best of a lot of poor options.

Notes:

*The CDC estimates are estimates of future deaths per 1000 cases. Thus, they probably reflect the learning curve that has already taken place. It is unlikely that they reflect the benefit of the new steroid treatment mentioned in Section 3, because this finding occurred after April 29.

**I have been told that disease spread can be a problem when using CPAP machines, however. Using ventilators at very low pressure settings seems also to be a solution.

 

 

 

This entry was posted in Financial Implications and tagged , , , , , by Gail Tverberg. Bookmark the permalink.

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.

2,824 thoughts on “COVID-19 and the economy: Where do we go from here?

  1. Saudi Arabia has threatened to ignite an oil-price war unless fellow OPEC members make up for their failure to abide by the cartel’s recent production cuts, delegates said.

    Saudi energy minister Prince Abdulaziz bin Salman issued the ultimatum in recent weeks as he asked Angola and Nigeria to submit detailed pledges to carry extra oil-production curbs, delegates said.

    The hard-line stance from OPEC’s de facto leader risks a new flare-up within the Organization of the Petroleum Exporting Countries. It comes just months after Saudi Arabia waged a price war against longtime oil-market ally Russia following disagreements over how to supply global markets as the coronavirus spread.

    The early-March decision triggered an immediate crash in oil prices, which fell 25% in the U.S. to their lowest levels since 2016. The abrupt collapse forced Saudi Arabia, Iraq, Nigeria and other oil-producing nations to consider budget cuts, while U.S. producers moved to slash their spending. In April, the Saudis and Russians resolved their differences, joining in a 23-nation effort to reduce output by 10% to shore up prices. The group extended the agreement on June 6.

    https://www.wsj.com/articles/saudis-threaten-new-oil-price-war-with-opec-brethren-11593619230

    • I am not sure that there is any way to obtain higher oil prices. Cutting production doesn’t really do it. Someone else raises their production in response. Or debt defaults bring overall demand down, as well as oil prices.

      • Many U.S. oil and gas drillers were already living on borrowed time even before the COVID-19 pandemic, thanks to heavy borrowings from banks over the past years. But the crash in oil demand and the collapse in oil prices shortened the time for indebted companies to be able to kick the can down the road, accelerating the upward trend in bankruptcy filings.

        Analysts and legal professionals expect more energy bankruptcies in the U.S. shale patch in the coming months even as WTI Crude prices more than doubled to nearly $40 a barrel by the end of June from the average in April.

        The number of filings for protection from creditors in the energy sector has been the second-highest so far this year, second only to bankruptcies in the retail and entertainment industry, according to Bloomberg estimates.

        In the last week of June alone, several companies filed for Chapter 11 protection, including fracking pioneer Chesapeake Energy, the biggest victim of the price crash so far and the most prominent example of the U.S. shale industry’s modus operandi of the past few years—borrow to drill.

        Chesapeake has reached an agreement with creditors to restructure some US$7 billion out of its US$9 billion debt.

        https://www.zerohedge.com/energy/40-oil-isnt-enough-prevent-wave-shale-bankruptcies

  2. https://www.newsweek.com/u-s-coronavirus-death-toll-may-higher-officially-thought-1514911

    ‘U.S. Coronavirus Death Toll May Be Almost 30 Percent Higher Than Officially Thought’

    “The COVID-19 death toll in the U.S. may be almost 30 percent higher than previously thought, according to a study. Writing in the journal JAMA Internal Medicine, researchers said the estimated gap may partly be explained by an initial lack of widespread testing.

    “The researchers estimated the number of undocumented COVID-19 fatalities by counting what are known as “excess deaths.” This is a common way for experts to measure the impact of a new infectious pathogen, such as a pandemic flu, when there is a lack of comprehensive testing, according to the team.”

    30% is substantial and likely is at least that percentage higher for the rest of the world, except in China where it is likely multiple times what has been reported.

    • When you are totally discredited, double down on the misinformation. Forget it, JAMA, nobody believes a word the US medical profession says.

    • Or it may be higher because of untreated illnesses of other kinds.

      https://www.washingtonpost.com/graphics/2020/investigations/coronavirus-excess-deaths-heart/
      Heart conditions drove spike in deaths beyond those attributed to covid-19, analysis shows
      Fear of seeking care in hospitals overwhelmed by the pandemic may have caused thousands of deaths, experts say

      Article shows charts showing spikes in heart disease and diabetes deaths in many places, especially New York City. Cases of these kinds did not show up in Emergency Rooms, for fear of catching COVID-19. Instead, they died at a higher rate at home.

  3. Saw a really excellent video over on George Gammon’s YouTube channel today:

    If you have time, check it out. I’m not sure that I agree with George’s point of view in the mid-to-late parts of the video, nor his conclusions at the end, but I really liked how he actually takes the time to try to offer a fair and comprehensive point of view of Marxism before levying any criticism against it. I wish more people would take the time (and intellectual integrity) to do this, as too often I feel like I’m reading articles or watching videos of straw man articles and/or misrepresentation of the opposing argument.

    I have to admit though, I don’t think I’ve ever actually taken the time to really understand Marxist / Communist theory, and after watching this video I had to email George and tell him that I think he may have made me into a Marxist / communist (or at least more open to their points of view) 😐 Not because I’m some SJW on a quest for ultimate equality (I’m not), nor because I don’t believe the Fed is causing incredible wealth / income disparity (they are), but because I don’t understand why George assumes that free market capitalism doesn’t also create wealth / income disparity on its own, even without the help of the Fed.

    While I’m not sure if they are good analogies, I compared a free market capitalist economy (as per Merriam-Webster definitions) to the game of Monopoly as well as the game of poker. My concluding question in my email to him was:

    “So, unless I get incredibly lucky, the likely outcome in a fair and free competition (no tampering with the deck, bribing the dealer, having Dustin Hoffman count cards for us, etc.) is that you will eventually ‘capture’ all the capital (i.e. chips) and will be left standing as the winner. Thus, I ask you: what mechanism exists in real life to prevent this sort of outcome, aside from luck? Even if the Fed didn’t exist to exacerbate the situation, couldn’t this scenario play out where one capitalist / corporation could ‘capture’ all the capital, thus creating maximum wage / wealth disparity in a given economy (i.e. I have everything, you have nothing)? And if that is in fact the case, doesn’t that mean that only one of two outcomes are possible: a) the collapse of the capitalist economy; or b) a revolution to a new type of economic system?”

    Perhaps I’ve missed something completely, but is there anyone here with a deep understanding of multiple disciplines of economic thought who can explain to me how free market capitalism doesn’t eventually get to the point of either collapse or revolution? Or perhaps Gail has an idea on how to look at this question from an energy perspective?

    Thanks!
    -GBV

    • It is lack of energy per capita that is causing incredible wealth disparity. If there were enough energy to go around, we wouldn’t need so much in the way of high tech solutions to try to make things work.

      With this lack of energy, we need a huge amount of debt as well, to pay for capital goods that supposedly work, but don’t really, like wind turbines, solar panels, and electric vehicles.

      • I just listened to the Alhambra Investments “Making Sense Eurodollar University” YouTube video that George references in his own YouTube video that I posted above. There’s a part where the interviewer says that he does’t believe in a limit to human imagination / ingenuity, and (sadly) Jeff Snider kind of agreed with him, even going on to say “there isn’t an end to capitalism!”.

        Seems like Alhambra Investments doesn’t recognize / accept limits to growth… although maybe I misinterpreted Jeff’s response, or maybe capitalism can truly survive collapse (I’m not gonna hold my breath though).

        Here’s a article on that same topic by Jeff, also espousing his view that capitalism is boundless, from last week:

        https://www.realclearmarkets.com/articles/2020/06/26/a_massive_problem_that_has_them_searching_for_one_497350.html

        Pretty sure you’re onto something there though Gail with lack of energy per capita contributing to incredible wealth disparity. In a post-collapse world, when energy per capita falls to next to nothing, I’m sure there’ll be some warlords running around to pillage and loot whatever is left, consolidating wealth more than we ever imagined possible. I just hope those warlords will be hiring, as I’m in serious need of a job…
        🙂

        Have Gun Will Travel reads the card of a man…

        Cheers,
        -GBV

        • “There’s a part where the interviewer says that he does’t believe in a limit to human imagination / ingenuity…”

          two points:

          the obvious one that without cheap abundant energy resources, not much can be accomplished no matter how much imagination/ingenuity. Someone imagined The Jetsons, but humanity is far short of the resources to get there.

          the other one: human ideas are susceptible to diminishing returns. Perhaps some future Einstein v2 will think of something awesome, but I suspect that most of the best ideas have already been conceived.

    • It’s a mathematical certainty that one person will end up with all the capital. Anyone who has ever played Monopoly knows this. That’s why we have wealth distribution. That’s why we breakup up corporations that get too big. Communism is just another way of redistributing that wealth accumulation. You may reverse the accumulation every so often but you are never ever going to stop it. It’s human nature.

      • One needs to understand User Value and Exchange Value, and who takes that difference.
        (Without doing any of the production).
        This was a new concept when it arose in the City States in Italy in the 14th Century.

    • Marxism results in capital distribution in theory only; the Pareto coefficient still applies.

      There will always be an assymetry in capital distribution in the free market due to small differences in an agent’s knowledge, experience, or innate talent. Those small differences under the capitalist model can snowball into large differences due to ownership of equity. What Marxism proscribes is to deconsolidate the ownership of equity. The reality however is that this is unnatural for enterprise; some system has to actively force enterprise to act in an unintuitive, inefficient way and that role tends to be governmental.

      The result is that where the power in a capitalist society derived from financial capital (which anyone can accrue to some extent, no matter their station or environment), you’ve substituted it with social capital, or proximity to and influence with the centres of government.

      They are both capitalist frameworks really, but while liberal markets don’t pretend to be perfect, Marxism is by design utopian and proscriptive, and utopians can justify just about any god-awful practice as they’re creating “a better world”. This is the carrot used by newly empowered Marxist governments when they start short-sighted collectivization polices or anti-intellectual pograms (see Khymer Rouge). Luckily, I think we’re more likely to go down the societal disintegration route rather than end up with Marxism since that ideology still requires functioning supply lines/markets to subsist.

    • Lots of comments on why Marxism / socialism / communism / etc. are flawed, which I do appreciate, but I’m actually looking more for some insight on the terminal nature of capitalism, as I can’t see how it continues indefinitely (imagine a game of Monopoly that never ends… painful!).

      Thanks!
      -GBV

      • maybe, maybe not.

        I can’t see how capitalism itself has something inherent that would cause it to reach some endgame where it discontinues.

        yes? no?

        otherwise, I think there are obvious external forces which surely will put an end to capitalism, such as population overshoot, virus/disease, unrelenting diminishing returns on resources, perhaps nuclear winter.

        • “I can’t see how capitalism itself has something inherent that would cause it to reach some endgame where it discontinues.”

          You can’t imagine an individual, single corporation or multiple colluding organization capturing all the capital within the system?

          I guess I can’t either, because I suspect capitalism as a system would collapse prior to that occurring, given all the social unrest that scenario would result in (i.e. people tend not to like being starved to death). The only way to avoid that outcome is to put some sort of mechanism that redistributes capital once any one entity captures enough of it (a solution that in itself violates the whole premise of the thought experiment I’m proposing – wealth redistribution is not free market capitalism), or for capital to grow indefinitely, forever.

          Cheers,
          -GBV

      • It isn’t the systems that are flawed. It is the human beings that operate within them. Human beings are, to varying degrees, greedy and selfish. That is natural. It is also common for humans to try to satisfy their greed and selfishness using lies and violence. This is what can be called “evil”.

        Only people who do not believe in huiman evil can put their faith in the silly idea that economic systems can render justice.

        Without recognizing evil as a primary fact of human life, the entire discussion is ridiculous.

        • If a man uses violence to “satisfy his greed” to get himself a loaf of bread to avoid starvation, is he “evil”?

          “Evil” is a subjective term, Kim. Worse, it oversimplifies many of the outcomes we see in the world today, allowing us to blame others for outcomes we dislike or find unsavoury, rather than taking any accountability / responsibility for said outcomes (“we’re ‘good’ people who lead ‘good’ lives… It’s all those ‘evil’ people’s fault!”).

          That being said, I think you’re correct to say that my little thought experiment is ridiculous – true free market capitalism has never existed, not will it ever, as life is not “fair”. Given the chance, I believe any entity in a free market capitalist system would quickly do everything they could to achieve regulatory capture or skew the system in their favour, as it is completely in their interests to do so.

          Cheers,
          -GBV

          • No, if a man is starving and kills to get food, that is not evil. Why not? Because to satisfy one’s basic needs is not “greed” nor “selfishness”.

            It is only greed or selfishness to want more than one needs at the cost of others.

            Thus, you see, the idea of evil is not subjective at all.

            • “It is only greed or selfishness to want more than one needs at the cost of others.”

              And who will be the supreme-high arbiter of this? If the man takes two loaves, has he now become “evil”? How about three?

              “It is only greed or selfishness to want more than one needs at the cost of others.”

              By your definition, you (whether consciously or not) are an “evil”, “greedy” and “selfish” person Kim – your Western-living standard is much higher than that of the people starving to death in some parts of the world, and is only made possible by our constant exploitation of those poorer nations. Our whole existence is likely us having more than we need at the cost of others 😐

              So, by all means, please be the first to end evil greed and selfishness by giving up your excess material wealth (including whatever electronic device you use to post comments here on OFW) so that others can have the meals they’re literally dying to have.

              Cheers,
              -GBV

    • GBV, two words: “creative destruction”. It was first described by Marx, but doesn’t work quite the way he described it. In brief: market leaders become big and wealthy, but they also become complacent. This creates opportunities for innovators to bring out decisively better products (often based on new technologies) that eat the market leaders’ lunch.

      For example: who buys mainframe computers anymore? Who buys huge mass storage arrays? Who buys calculators? And in the near future, who will buy private cars when a shared vehicle is 5 minutes away by app? On the larger scale, how many major companies of the 1970s still exist? Even one of the biggest, Boeing, survives only by virtue of government largesse.

      I’m not a zealot who claims capitalism is “infinitely renewable”. But I lived through enough nonsense in the UK to know that socialism is infinitely stagnant. For example, the UK National Health Service, which is still trapped in 1950. And is an endless money sink because two thirds of the money is spent on administration, not medicine.

      • Just on the point of creative destruction – as I understand it, it was first used by Werner Sombart who was influenced by Nietzsche (https://link.springer.com/chapter/10.1007/978-0-387-32980-2_4):

        “This paper argues that the idea of ‘creative destruction’ enters the social sciences by way of Friedrich Nietzsche. The term itself is first used by German economist Werner Sombart, who openly acknowledges the influence of Nietzsche on his own economic theory. The roots of creative destruction are traced back to Indian philosophy, from where the idea entered the German literary and philosophical tradition.”

        With regards to capitalism itself ending it probably begins with what Douglas Murray has been hinting at – i.e. when the youth cannot accumulate capital then it ceases to be a viable economic model – and we end up with the monopoly outcome stated above. Given that growth is over and tax revenues (in real terms) begin to shrink (see Tim Morgan) then I think Central Banks will continue to step it up from here.

        What I can’t get my head around is why there isn’t a political party that sees and acts upon this – either in the UK of the US – and focuses on allocating excess debt to capital projects (infrastructure). I am not saying such a strategy is a silver bullet but it would at least create jobs, boost commodity prices, alleviate some of the indifference and potentially bring additional energy capacity on line. Perhaps it is because social media has driven everyone crazy…

        Instead, in the UK, we have spent a lot of government debt on paying people’s mortgages (furlough schemes) and now the chancellor of the exchequer is talking about tax rises. OK, well let us see how that works out…

      • “market leaders become big and wealthy, but they also become complacent”

        I think that may be more of a symptom of things like IP rights, regulatory capture, and other aberrations that occur in our pseudo free market economy. Ideally, they shouldn’t really exist in a true free market capitalist economy, as the most competitive and successful entity should continually reinvest capital to provide exactly what the consumer wants next (simultaneously starving their opponents of capital to do the same), until they reach the point of monopoly (i.e. no more competition).

        Your comment was helpful though, as it got me thinking that the only reason our capitalistic system may have lasted as long as it has is due to the intervention of governments to create situations where an entity can become complacent rather than always being forced to be ultra competitive (i.e. delaying the emergence of a monopoly). I also think our anti-competition laws may be doing the exact opposite of what they were intended to achieve, but that seems par for the course with regards to many of the laws as they stand in the West today… 😐

        Cheers,
        -GBV

        • GBV, thank you for a most thoughtful response. i agree that complacency is a problem created by defects in the capitalist system, though defects grounded in flawed human nature (our propensity for rent seeking, for example). The rest of your post I shall contemplate overnight and perhaps reply to later.

    • I only know two ways to think. deductive and inductive. Think of Euclid’s elements and how proofs of further Truths can be deduced. Inductive is gathering data and seeing if we can find cause/effect relationships. Not like a defense lawyer who makes an assumption (innocent) and finds data to support it but more like a good detective. Marxism, inductively, has piled up 100 000 000 bodies. China, Soviet Union, Cambodia, North Korea. etc. Solzhenitsyn, a soviet prisoner among other things, wrote “The Gulag Archipelago” a look into the horror show of prison camps and how easy it was to get into one. If you read Marxism is good, read more.

      • Alas, Suqi, I know a third way to think, having seen it in action many times. It might be called “remunerative”: discover or conclude what you are being paid to discover or conclude. For example, conclude that a cheap drug is useless against a virus, because a big pharma company is paying you to suppress news about any existing competition to their patented expensive cure. As The Lancet did just last month.

    • The video contains nothing about the limits to growth, and the fact that we are reaching / have passed peak everything.

      • Exactly.

        Perhaps Gail should write a new economic manifesto that proposes an economic model that actually incorporates debt, limits to growth, and other issues we talk about that seem to be ignored in modern economics. She could call it… OFWism! 😀

        Joking aside, while none of the videos discuss energy constraints, it did discuss the concepts of limits to growth imposed by a particular economic system, and how Marx saw those limits as being inflection points (for lack of a better term) that either collapse the existing economic paradigm or result in revolution and a new economic paradigm. It was those concepts that fascinated me, as it was the closest thing to limits causing a persistent, systematic change I’d come across in any mainstream economic theory.

        Cheers,
        -GBV

        • I am shocked to find that no one here has heard of the guillotine. When some bi&*h says, “Let them eat cake.”, or similar, capitalism has reached its end.

          IMO we need a guillotine on every street corner.

  4. Not my normal fare; a TED talk. But this is interesting as it includes a reference to Ilya Ilyich Mechnikov ( a Russian Imperial zoologist of Moldavian-Jewish origin best known for his pioneering research in immunology. In particular, he is credited with the discovery of phagocytes in 1882. This discovery turned out to be the major defence mechanism in innate immunity)
    At about 6 min mark the young TED ‘talker/host’ mentions that Mechnnikov deliberately ingested cholera.. a number of times. Now thats a real scientist.
    Also mentioned is that 90% of our cells are bacteria; antibiotics are my number one worst medical invention, and I imagine if someone correlated covid deaths with history of antibiotic use the results would be interesting.
    The 6 min mark discusses role of our biome in healthy response to environment.

    The medical system is not a health system, that is why outcomes are poor where medicine prevails.
    Similarly, the legal system is not a justice system.
    The capitalist system is based on debt not capita
    All these systems deduct from your future.
    etc etc.
    Choose your nouns/words crefully.
    Doublethink has upended them

    • Lastcall, Antibiotics kill bacteria which kill you. See any leper colonies? Tuberculosis? Bubonic plague? The risk/benefit ratio for death from antibiotic use, I’d bet is almost zero in their history. They have literally saved millions.

      • Antibiotics are not selective in the bacteria they kill. They kill beneficial bacteria along with harmful ones. After a course of antibiotics it can take years for the beneficial bacteria in the gut, i.e. the ones that do the digestion, to recover.

        In the overwhelming majority of cases, a course in antibiotics will do more harm than good. They should be used only as a last resort, I’ve taken antibiotics maybe half a dozen times in my life. Not once did they cure me of whatever ailed me. The harm they did is impossible to quantify.

    • Coincidentally I watched this last night. I am not sure that I would have understood the talk as well if I had not already read a book or two on the subject. It is a relatively new discipline for modern science to investigate (gut bacteria and just how important they are for good health, and their interactions with the brain), looks very interesting. But I think time has run out. Still worth watching though.

    • I was aware of the role of gut bacteria before listening to this talk. I am sure he is right.

      He briefly flashed a list of prebiotic foods on his screen. (I expect that a lot of plant foods are prebiotic to some extent). This is a list of prebiotic foods from Healthline:
      https://www.healthline.com/nutrition/19-best-prebiotic-foods

      1. Chicory root – Often used as a caffeine free replacement for coffee.
      2. Dandelion greens
      3. Jerusalem artichoke
      4. Garlic
      5. Onions
      6. Leeks
      7. Asparagus
      8. Bananas
      9. Barley
      10. Whole oats
      11. Apples
      12. Konjac root (also known as elephant yam)
      13. Cocoa
      14. Burdock root – In some parts of the world, people eat the root like potatoes
      15. Flaxseeds
      16. Yacon root – Root that looks like sweet potato but tastes like pear, from South America
      17. Jicama root
      18. Wheat bran
      19. Sea weed

      He also mentions the role of bacteria from aged milk. It seems like these would be the bacteria used in cheese and perhaps yogurt.

    • All communist/socialist governments are dictatorships, often of the worst possible kind.
      This is because citizens are required to act in ways contrary to human nature and natural inclinations to satisfy attempts at social engineering.

      The lockdowns are another great example here. Humans do not lockdown involuntarily, and so governments must institute them with force.

      Every time the government uses force on its citizens you can rest assured it’s because ” it’s for your own good, or to save lives, or to save the glorious revolution”.

      The question of evil thus arises in human governments, and this is where history has limitless examples. So it’s plain that we all need to operate within constraints to govern this evil inherent in human nature, but governments operate largely without constraint – and are a source of fresh evils on a daily basis. It’s also why governments only run monopolies- the NHS, the military, etc. They hate the free market which is a form of constraint on its participants. I’m in South Africa where the government appears to hate all businesses other than the nightmare state owned enterprises they run.

      So firstly, this corona virus may have come from a government program to begin with, and the lockdown cures also come from government, but which will ultimately usher in the collapse of economies.

      If that’s not an evil, I don’t know what is.

      That’s not to say that there aren’t evils in capitalism, there are. If evil in the form of greed, suppression of competitors, rent seeking, is inherent in the human psyche ( and it is) then all human systems are vulnerable to evil and need to be regulated to stop it getting out of hand.

      And this, as we all know, is a constant battle. It’s when government becomes the problem and not the solution that it gets totally out of hand.

    • All communist/socialist governments are dictatorships, often of the worst possible kind.
      This is because citizens are required to act in ways contrary to human nature and natural inclinations to satisfy attempts at social engineering.

      The lockdowns are another great example here. Humans do not lockdown involuntarily, and so governments must institute them with force.

      Every time the government uses force on its citizens you can rest assured it’s because ” it’s for your own good, or to save lives, or to save the glorious revolution”.

      The question of evil thus arises in human governments, and this is where history has limitless examples. So it’s plain that we all need to operate within constraints to govern this evil inherent in human nature, but governments operate largely without constraint – and are a source of fresh evils on a daily basis. It’s also why governments only run monopolies- the NHS, the military, etc. They hate the free market which is a form of constraint on its participants. I’m in South Africa where the government appears to hate all businesses other than the nightmare state owned enterprises they run.

      So firstly, this corona virus may have come from a government program to begin with, and the lockdown cures also come from government, but which will ultimately usher in the collapse of economies.

      If that’s not an evil, I don’t know what is.

      That’s not to say that there aren’t evils in capitalism, there are. If evil in the form of greed, suppression of competitors, rent seeking, is inherent in the human psyche ( and it is) then all human systems are vulnerable to evil and need to be regulated to stop it getting out of hand.

      And this, as we all know, is a constant battle. It’s when government becomes the problem and not the solution that it gets totally out of hand.

  5. I quickly duck duck goed (went?) this story. Almost no reporting on it. There was an Epoch Times article. There was just one short article on Fox a few days ago. I found a Breitbart article from July 2019.

    So there is a global news blackout on this enormous story. This from a media that normally thrives on panic and fear-mongering. But for some reason (Chinese power) the mass media won’t report this.

    • The reporter is talking about the potential collapse Three Gorges Dam.

      I put up a link earlier today that said (as of June 29), water was up to tops of cars in Wuhan, just from the excess water let out of the dam. They have a problem, just with this water.

      • The irony of this development is the dam was built primarily for flood control, which has been a problem for centuries. Now they have to release water causing flooding downstream due to apparent weakness, deformed center area of the dam as seen from aerial photos. It seemed odd when Three Gorges Dam was being built that they didn’t do some similar to Hoover Dam, in which it is curved inward towards the water load to best handle the pressure, much like an arch is curved to the weight above. But instead they built it straight across.

        • Similar to their strategy for world domination. Straight across. No nuance.

        • Those are 2 different types of dam. Arch dams and gravity dams are not built the same way and are chosen depending on the rock and valley shape. Rock dams are especially fragile in the case of floods because if water overflows, the dam can break. Arch dams needs really good foundation as stronger pressures are applied on the ground and narrow valley. Gravity dams like three gorge dam are more stable regarding earthquakes and ground characteristics. In this case, the only risks concerning dam failure is if it rips on the ground, or if you have water finding a path under the dam.

          Regarding flood control, the fact that it’s not much efficient can come from the réservoir shape. It’s narrow, so the water it can store for 1m high of storage is smaller than for larger, round reservoirs.

    • the dam will have to actually fail for this to be a big story.

      even then, the unfolding global depression, which is only in its first stage, is a far bigger story.

      • Frankly the dam collapse if ever it occurred would only be of significance to us if it were to affect Chinese production or lead to chaos and state collapse. One assumes a lot of farmland would go?

        One has to avoid getting anxious over such events,as there are far too many to fret about -volcanoes, dams, glacier melt, earthquakes,repeated region-wide droughts – until they actually happen.

    • It was on my news sites—-
      I’m on the left, but visit quite a bit of MSM.
      We shall see- quite interesting and potentially destructive.

    • Thanks so much for posting this video. It’s very informative and not, as far as I know, exaggerating the dangers of this situation. Why isn’t the legacy media all over this story the way they were over California’s Oroville Dam crisis?

      Duncan will be enjoying this! He believes dams should be removed to bring back natural watercourses, doncha Duncan?

      I’m confident that this dam is going to fail catastrophically sometime. But even if it survives the current heavy rainfall, there is going to be a lot of flooding along the Yangtze this summer.

      • Thank you, Tim. I also believe most dams should be removed. If Egypt was the gift of the Nile, China was the gift of the floods. They were necessary to inundate the rice paddies that fed the people. China’s dams have destroyed the farmland upstream (more than a million farmers were ruined by the Three Gorges Dam) and disrupted the seasonal water flow downstream. You do not progress by destroying the lower levels of the hierarchy of needs in order to build the higher levels.

        Of course, Egypt’s disastrous Aswan High Dam should have taught us this decades ago.

    • Oddly “Crossroads with JOSHUA PHILI” videos started appearing whenever I visit YT, from about 4 days ago, I think he posts one video daily. I have never heard of CrossRoads otherwise, but the three gorges flooding has been the main them each day. And it does look pretty bad. I was beginning to wonder if it was a scam because no mention of the issue in the MSM. Other videos I have since watched seem to suggest the dams were not built as well as they could have been, and if they break then its curtains for Wuhan. Who knows.

  6. The news report at 22:57 in the video above comes from New Tang Dynasty (NTD) Television whic Wiki tells us is a television broadcaster, founded by Falun Gong practitioners (and aren’t they a determined, tyrant-resisting bunch).

  7. the solution is simple population has too drop to rebalance energy per capita and it will the question is how many and how fast

    • First they pull the statues down, then they do the same to people and ruin their lives for ideological ‘crimes’.

      Just a step away from gulags, always.

      • “Whenever they burn books, they will also burn people”. Heinrich Heine. In the original, “Dort wo man Bücher verbrennt, verbrennt man auch am Ende Menschen.”

    • Maybe people should say they support God’s sixth commandment “Thou shalt not kill”.

  8. “It is hard to imagine that the suffering and despair across the Middle East could worsen.

    “But across Syria, Lebanon, and Iraq a new economic unravelling is continuing apace, threatening to throw the region into even deeper turmoil. In Lebanon and Syria state finances are collapsing and hyper-inflation is setting in, while in Iraq a dramatic collapse in oil revenues has depleted the budget…”

    https://www.ecfr.eu/article/commentary_economic_meltdown_in_the_middle_east_how_europe_can_soften_the_i

      • “Lebanon’s routine daily electricity cuts have increased up to five-fold in the capital Beirut in recent days following a corruption scandal involving Algeria’s national oil company that caused fuel shortages at power plants…

        “A Lebanese judge ordered the arrest of 17 people in April after fuel imported from Algeria was discovered to be tainted.”

        https://www.thenational.ae/world/mena/lebanon-crisis-fuel-scandal-leaves-lebanese-in-the-dark-for-longer-1.1043191

      • Conveniently forgetting that Iraq and Syria were destabilised by gratuitous US imperial warmaking, and Lebanon by gratuitous Israeli imperial warmaking.

        Of course, we British, in our heyday, were far from being angels of light. But Edward Shepherd Creasy’s observation still stands: “All republics that acquire supremacy over other nations, rule them selfishly and oppressively.”

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