Comparing Deflationary and Inflationary Collapse

Both mainstream and dissident observers are coming up with "biflation" as an explanatory term to describe where we are as a planetary economy. That is a signal we're in a conceptual dead end (considering biflation has always been with us for the past half a century at least).



Some reactionary factions in the Western world desire a global return to a system of deflationary non-fiat industrial capitalism. I've began to write how "sound money" advocates are actually biting more than they can chew since deflation leads to collapse of capitalism a lot quicker than inflationary fiat funny money system. There's other very serious structural problems with the current world production and distribution system (such as machine efficiency rising faster than demand for workers) but lets focus on inflation and deflation first to see why there isn't a simple escape from current international fiat casino.


DEFLATIONARY COLLAPSE-
Caused by: Wage prices falling less fast than prices of goods
Result: Crisis of overproduction and profit collapse leading to shut downs of industry due to insufficient funds to run it, bringing corresponding misery.
Illustration of Industry versus "Consumer"/Worker deflationary cycle: 
                                                              

Industry makes KitchenBots (representing needed durable goods in general) and exchanges them for "sound" commodity backed currency. Consumers benefit in the mid stage of the cycle until overproduction leads to insufficient capital accumulation and horrendous social disturbance                                




 
1) Industry cycle begins


Pricey and new KitchenBot exchanged  >>>>>>>>>>>>>>
                                                    <<<<<<<<<<<<<< for 100 SoundBucks

Trickle in supply of KitchenBots begins some profit generation,  "consumers"/workers on average spend 2/3 of their total money on needed goods. Wealthier people/ early adopters create trickle of demand for the pricey good


2) Midstage of the industry cycle

Affordable and well known KitchenBot exchanged  >>>>>>>>>>>>>>
                                                            <<<<<<<<<<<<<< for 50 SoundBucks

Lots of supply as mass production slashes the price of the useful and desired KitchenBots yet profits increase on volume, workers on average spend 1/3 of their total money on goods (since their annual salary cuts are less drastic than cuts in the price of goods)


3) Final destructive stage of the industry cycle

Old and busted stamped out KitchenBot exchanged  >>>>>>>>>>>>>>
                                                            <<<<<<<<<<<<<< for 10 SoundBucks

Super supply and insufficient demand leads to inability of industry to make razor thin margins profitable. Profit collapses, capitalists cant afford to run factories and close them, laying off workers/"consumers". Workers on average spend 1/10th salary on goods yet they are now without income stream to afford the oversupply of goods all around them

Conclusion/Possible Solutions: We start out great on at least the light industry level and end up in a brutish destitute 1930s style depression (think of overproduced livestock being butchered instead of sold/given away to keep some profits). Everything grinds to a halt just as post-scarcity is within reach. One must keep in mind that life cycles of various goods overlap yet the general cumulative tendency is what is illustrated above. Possible remedies include introducing fiat inflation (see below) with serious state provided safety nets, war to destroy surplus goods/industry, and the state taking over some production to run factories without a profit motive (see 1930s-1970s socioeconomic experimentation in Europe)

And now lets turn to our current problem,

INFLATIONARY COLLAPSE-
Caused by: Wage prices rising slower than prices of goods
Result: Crisis of overproduction and profit collapse leading to shut downs of industry due to insufficient funds to run it bringing corresponding misery.
Illustration of Industry versus "Consumer"/Worker inflationary cycle:
                                                            

Industry makes KitchenBots  (representing needed durable good) and exchanges them for "fiat" faith backed currency. Consumers don't really benefit at any stage of the cycle until overproduction leads to insufficient capital accumulation and horrendous social disturbance 





                                
1) Industry cycle begins

Pricey and new KitchenBot exchanged  >>>>>>>>>>>>>>
                                                              <<<<<<<<<<<<< for 100 FiatBucks
Trickle in supply of KitchenBots begins some profit generation,  "consumers"/workers on average spend 2/3 of their total money on needed goods. Wealthier people/ early adopters create trickle of demand for the pricey good

2) Midstage of the industry cycle


Well known, yet still pricey KitchenBot exchanged >>>>>>>>>>
                                                              <<<<<<<<<<<<<< for 200 FiatBucks

Industry greatly increases supply of KitchenBots and KB price even briefly dips to 80-90 FiatBuck range. Yet soon enough new KitchenBots appear for 400 FiatBucks while the older generation ones are sold for 200. Industry is now trying to plan production in batches to prevent strong technology generated deflationary trends from surfacing even now. For the average "consumer", industry also designs shoddy goods that need constant replacement. Profit remains precarious yet stable with proper application of monopoly, cartel, and state ties. Workers meanwhile now spend 9/10th of their income on goods

3) Final destructive stage of the industry cycle

Old and busted KitchenBot exchanged >>>>>>>>>>
                                                              <<<<<<<<<<<<< for 1000 FiatBucks

At this stage we see normal consumer market destroyed, leaving only the luxury consumer market left standing. To overcome relentless international competition and fiat related higher prices on building materials, Industry goes all out to create super supply for ordinary people and hope to make money on mass production (whether technologically induced or using outsourced wage slave labor). These efforts fail as total mass production for KitchenBots was never fully developed due to sneaky attempts to prevent overproduction in the mid stage of the cycle. Workers now spend 10+/10 of their income on goods and increasingly only buy essential goods before gradually beginning to run out of those as well. Run away commodity inflation is the final straw of the fiat cycle. Since the rich do not need too many KitchenBots and since the rest of the workers prefer food and fuel instead, Industry begins to shut down factories and lay off people due to inability to fund further operations.

Conclusion/Possible Solutions:

We start out not that great and end up in the same poverty amongst plentiful resources scenario just as we do in the final stage of the deflationary cycle. We have witnessed what happens to a global system and its peoples under shocks from deflationary financial capitalism in the first half of the 20th century (historically, international financial cartels appear to take over the international industrial cartels regardless of fiat or sound status of the currencies).

We have not yet seen a planet wide inflationary fiat chain of collapse yet. This would imply all major currencies on the planet being affected relatively simultaneously via some failure on the part of Bank for International Settlements strategists to react quickly enough to systemic shocks. In many ways, inflationary monetarism allows Industry a variety of tools and more breathing room to play around with prices and thus survive a while longer. Inevitably, prices rising faster than wages destabilizes the whole system as surely as wages rising faster than prices.

Implications and alternatives

It appears that BOTH paths described above eventually lead real industry into a profit collapse and corresponding large scale social crisis (factory management not having the funds to keep production and distribution running and paying the workers). This would occur even if we minimized the influence of capital allocation industry (global banking cartels) on global industrial cartels. Symbiosis and convergence of finance and industry is as organic and essential to the system as is symbiosis between industry and state, banks and state, etc.

Austrian economists have done a good job continuing where original old school Marxist economists left off (when it comes to expanding a critique of capitalism in general). Namely, they ripped into the disastrous consequences of credit growing faster than real productive economy and the "statism" that often allows this. It is rather hilarious that both Marxists and Austrian economists really rely on victory by default. That is, the former group gets legitimacy by saying the planetary capital accumulating system we had for the past few hundred years is unstable, inefficient, and ultimately unworkable even with mass state subsidies. The latter group get their legitimacy on saying the fiat version of the same planetary system is unworkable due to statist interference. "If only we could purge statism from the world system!" This absurd cry rings forth from various corners of the Western dissident movement.

One way to proceed would be to expand the credit supply at exactly the rate at which expansion of the real physical economy occurs. Some dissident thinkers believe we can bypass the inflation/deflation debate by having the state provide credit for high technology infrastructure (thus creating real economic growth). Another way to proceed would be to overlap the dying capitalist system (whatever form it'll take in the next 10 years) with energy accounting. Both can easily function in parallel for a time. Indeed, if we think of the global socioeconomic transition and experimental period in the decades ahead, overlaps and diverse systems running in parallel will be a must. Which of these experimental sandboxes will expand to swallow the imagination of the whole globe will be left for us to determine.

Minimum Wage Past and Present

19th Century 13 year old child laborer versus 2011 McDonalds laborer

                         VS.












Let's compare the salary of a 13 year old Andrew Carnegie making $1.20 dollars a week to the current federal minimum wage salary ($7.25*40=$290 a week).

There wasn't a minimum wage in 1849 so Carnegie pretty much got the lowest possible exploitation price as a bobbin boy (illustrated above). 12 hours a day * 6 day week makes for 72 hours. $1.20 divided by 72 gives Andrew 0.0166 cents an hour. Not bad scamp! But how do you measure up to the modern day wage slave making $7.25 an hour considering all that money printing over the last 160 years?

Let's assume little Carnegie worked a 40 hour week to keep this comparison simply illustrated. That's 66 cents a week.

A gold dollar introduced in 1849 had 1.5048 grams of gold. Andrew thus made 0.993 grams of gold a week (worth $45 in today's money) and 0.024 grams an hour (worth $1.11 in today's money)

A silver dollar introduced in 1840 contained 24.057 grams of silver. Andrew thus made 15.877 grams of silver a week (worth $17 in today's money) or 0.396 grams an hour ($0.43 in today's money).

A large copper cent in 1849 contained 10.89 grams of pure copper. Andrew thus made 718.74 grams of copper a week ($6.64 in today's money) or 17.96 grams of copper an hour ($0.16 an today's money).

Considering the spectacular nose dive of the dollar in recent years (with corresponding decade long "rise" in commodities such as silver, gold, and copper), the "today's money" calculation is not constant. For your information, I used the gold price of 1400 an ounce (off from its recent record peak of 1430), silver price of $34 an ounce (off from its recent record peak of $37) and copper price of $4.20 a pound (off from its recent record peak of $4.60).

Notice anything peculiar about how much Andrew made in different commodities (which were literally money back then as they are now) priced in today's dollars? Surely he couldn't have made $45 or $17 or $6.64 a week simultaneously?

Throughout the 19th century, the US government set an official peg of silver to gold (15.1 price ratio via Coinage Act of 1792 and 16.1 via Coinage Act of 1834) and copper to silver. It roughly but imperfectly corresponded to the actual fluctuating world supply of these commodities. Since the money was not fiat money, the ratios roughly held. In other words, if we still used precious metals as currency, not only would gold, silver, and copper amounts Andrew earned hover a lot closer to each other in valuation but valuation of gold itself would spike dramatically due to its demand as currency. That is a story for another day. Here is a preview.

And this brings us to the minimum wage McDonalds worker making $290 a week (6.4 gold grams) versus Andrew's $45 (0.99 grams). Victory of social progress!? Our modern 2011 bottom wage slaves making 6-7 times their counterparts in 19th century?

Not so fast. Due to capitalist control of the governing bodies, regulation usually occurs when it has already occurred naturally. For example, child labor laws were introduced when majority of businesses stopped utilizing child labor. Regulation only occurs to frame and embed what has already happened. That is, when the moneyed interests still engaging in a certain practice are a minority that can be overwhelmed politically (also note that majority of businesses in the north have ended slavery before northern federal authorities made it illegal).

There is reason to think (due to the suppression of gold and silver metal price by major financial interests in the last few decades) that the minimum wage already is at the bare minimum that is tolerable by the human herd and not something that is in any way intolerable to businesses paying it out. In other words, if it was to be eliminated tomorrow we would not have wage slaves selling themselves for $1-2 fiat dollars. This will become more evident as major fiat non-backed currencies of planetary powers go through their inevitable debt bubble collapse.

Considering millions of adults in United States work for minimum wage there is reason to believe they are not only being exploited at the same financial level of 19th century peasant children, but that they are actually being exploited more (and it is set in law and marketed as progress!)

Return of Class Warfare

The super rich suffer from acute nihilism and are vastly outnumbered by newly Internet literate aggressive personality types. They will lose badly if they don't preemptively and radically modify present socioeconomics

Considering all the negative attention that the global oligarchy has been getting recently, one interesting fact often left unmentioned is that the super rich are outnumbered 9,999 to 1. Let's briefly define what we're dealing with.

When one really filters rich people overall, it's evident that the number of decision makers is actually rather small. Out of 7 billion people on earth in the near future (6.8+ billion now), less than 1% are trend setters within social hierarchies. This is the socially visible merchant class that makes money purely off capital investments. That is less than 70 million capitalists scattered about. Majority of this group have relatively insignificant pools of investment money which doesn't expand much (mom and pop small business owners who may have some political pull locally but not too much nationally and internationally).

Within this group, there is 1% (<700,000) that makes the rest look like paupers. Here is a detailed article showing the sheer inequality among the capitalists in United States. These are the people so far removed from the rest of the world materially that they usually end up oppressing the lesser capitalists (through stock market swindles, cartels, and disproportionate buy outs of political lapdogs). In other words, majority of those within richest 1% are fighting their own battle against the 1% in their ranks.

The 700,000 super rich are trend settlers among trend setters. At this point real oligarchic activities become possible. An oligarch is simply anybody with enough disposable wealth to influence politics. Although actions (like paying 2 thousand dollar ticket at a candidate's fund raiser and donations to think tanks of one's choice) technically qualify, in the international arena influence really requires funding/owning think tanks with a global reach.

Finally, perhaps around 50,000 individuals (a few thousand families really) within the 700,000 have the power to culturally pull the rest of the international oligarchy behind them through role modeling and proactive moves. This small number of key oligarchs makes it very easy to hound them politically. Conceivably, people can protest in front of rich people's gatherings rather than in front of gatherings of politicians in the future.

The 700,000 are buffered by millions of loyal and very well paid proletariat patsies. They are the cream of the crop of the wage laborers who often defend the caste above them to the bitter end. One can compare them to house slaves who got it pretty good (200,000 - 600,000 a year paychecks). They can be found writing state propaganda articles for such oligarchic mouthpieces as the Harvard Business Review, The Economist, The Atlantic, and similar rags. This richest proletariat caste appears the most brainwashed due to its complete adoration of the ruling caste (desire to mingle and get interviews) and contempt for the caste right below them. Here is a good example of the type of apologist garbage they tend to write. It pretends to be a serious criticism on the surface while actually being staunchly defensive (avoid if you have a weak stomach).

The good news.

Out of 7 billion people on the planet, almost 500 million people are ENTJs and ENTPs, many of whom are getting Internet for the first time. If you include all relatively unemotional and intuitive homo sapiens such as INTPs and INTJs (perhaps even more dangerous to the rich through behind the scenes work), then the number goes to 700 million uppity proletariat. These 700 million people are the most likely to self educate themselves by utilizing new informational technology and to subsequently find out about their exploitation at the hands of the 700,000. Now, they cannot all be bought off, suppressed, and co-opted. There just isn't enough room in the upper circles for so many comfortable house slaves. Even if 20% of them are co-opted into status-quo hierarchies worldwide, that leaves over 500 million on the outside looking in. This means that the enemies of humanity at large are outnumbered roughly 500-1000 to one (by people who got the drive and the oversized ego to try to bring them down).

The richest 0.01% cannot always count on the loyalty and constant support of the 10% of the population internationally (those who are assumed to have too much invested in the system and who are "too comfortable" to rebel). As much as petty capitalists and top notch white collar professionals defend the oligarchy on a day to day basis, as much as they want to be the people above them, their adoration can nevertheless rapidly transform into burning resentment and jealousy (since they realize that there are tangible limits to meritocracy and social mobility even in the upper circles). Therefore, roughly half a billion energetic, excitable, self educated, and newly politically aware individuals on the "outside" got people and supporters on the "inside" who can sabotage the oligarchs up close and feed valuable information (leak data, provide whereabouts of gatherings, provide funding, and share strategic input).

Besides being outnumbered they are also overcome with nihilism which can be exploited

Just as was the case over 100 years ago (when Nietzsche first described the phenomenon in detail), it appears that the most powerful individuals on the planet have not developed a common and coherent moral system for themselves and their offspring. Even as the elites are becoming increasingly culturally homogenized via cosmopolitan modes of consumption, Internet communication, international think tanks, common ivy league education, and jet travel allowing frequent dinners together, the majority of them have not officially agreed upon a life expanding moral framework of the future.

The future necessity and inevitability of some centralized governance on a planetary scale combined with the psychological need of rulers to overcome nihilism in a permanently atheistic world (when hedonism, Buddhism, socioeconomic ideology, and attainment of power to highest offices in the land fail to provide psychological comfort), will lead to such moral concoction eventually. However in the meantime, the lack of a relatively uniform belief system to indoctrinate elite's children (future planetary leadership) into is leading to severe infighting when it comes to paths towards planetary unification. This in turn allows for international paralysis and deference to the default mode of predatory corporate globalization overlapped with petty nationalisms.

Out of 700,000 super rich, the combination of thirst for both knowledge and power over others is mostly prominent among the NTs in the Myers Briggs typology. That leaves us with roughly 70,000 individuals who'd like to tinker with humans in new ways on a global scale and who have the financial means to do so. The ESTJs, who are 10% of the population, can add people to this group but only for managerial non-productive (in terms of building a new system) positions. Oligarch ESTJ spawn is likely to engage in something seemingly unnecessary considering their money such as military service. ESTP ofspring would get their kicks from flying balloons around the world or hunting lions (the traditional venues). Other personality types would not really be interested in possibilities of planetary governance. Many would consider politics in general beneath them (since politicians are just butlers) and boring. Even fame loses its appeal since it is not a means to get ahead and brings attention of the peasants to the wealth. If politically engaged at all, their donations would just go towards supporting the status quo of current predatory globalization.

Most of the world's proletariat are so busy just trying to survive that they have overestimated the potential of psychological fulfillment that hedonism can bring. For children of the oligarchy, sex, travel, and partying stop providing the same kick when they reach their late 20s. That's when they go their separate ways as determined by what neural breed they are. The financial means of the oligarchic NTs do a number on their egos (and the egos of the clinical psychopathic minority most likely overly represented within the ENT group) as a type of world conquest becomes possible.

One may argue that power may be sufficient to fill that void but only a minority of elites have the extroverted and emotionless traits to be inclined towards active involvement in politics. Even if they attain positions in high office, the satisfaction from power gained is not great considering most modern legislative and executive branches in the Western world are trapped within crushing interconnected oligarchic corporate power networks. Thus, even if a son from the capitalist class gets into high public office, his real satisfaction will stem mostly from drinking, talking, and dining with fellow political junkies rather than remolding the world with his will. If some legislation does get passed, it'll mostly benefit his fellow top 1% peers and have a less than pleasant feel that he is their secretary. It could very well be that political backers who actually try to get the poor peasantry educated are doing so out of resentment against their overbearing aristocratic fathers and/or their more extroverted political friends. This certainly has happened before when some children of the aristocracy in imperial Russia and Britain flirted with communism.

Conclusion:

They are much weaker and more psychologically paralyzed than they appear. Their patsies can be turned against them and millions of people throughout the world will go about doing just that. The goal is to target key oligarchic financial structures (federal reserve and various major banks) and create informational critical mass in the minds of the wage laborers at large. The super rich have grown too soft and comfortable and the intellectual oligarch strategists among them are overwhelmed by group think and cultural inertia of their peers. As this brilliant article suggests, sociologists should refocus from studying the least well off members of society to those best off in order to properly analyze what we're up against. To understand it is to find ever better ways to fight it. In the near future, the political class can be made to serve the general population again. Politicians are notorious for being able to smell blood in the water and the oligarchs present very juicy cows from which to milk political capital and fame (those politicians who stand up to the robber barons tend to get into history books).

Sound Money and Deflation

"With the enormous leaps in industrial productivity over the 20th century, shouldn't a penny now buy me at least 10 Snickers bars instead of nothing?" 

(Or how fiat money serves to prolong the life of capitalism while libertarians are ironically fighting to make capitalism disappear)


A great question, considering world's population rose 4.2 times from 1900-2010, annual copper mining output rose 30 times in same time period, and industrial/agricultural mass production technology (for making candy) has made exponential efficiency leaps. To investigate this serious matter lets look beyond the screams of "federal reserve and fractional lending robbed us all with depreciating overprinted fiat currency!" and delve into the underlining physical dynamics.

A one ounce Hershey's bar cost 3 cents (9 grams of copper) in 1918 whereas a 1.45 oz Hershey's bar in 1982 (last year to have 95% copper pennies) was 20.6 cents/62 copper grams per chocolate ounce. As of 2010, the Hershey's bar approximates 65 fiat cents an ounce but since the imperial authorities diluted the penny with mostly zinc (making current pennies a harder to quantify mix of zinc and copper), I'll use the 1918-1982 period for simplicity.

If one adjusts for inflation, 3 cents in 1918 is 19 cents in 1982 (539% depreciation in purchasing power). An 80 year old, lets call him Bob, getting his favorite childhood candy treat would have seen his under the mattress savings buy 6.3 less Hershey's chocolate. Now this may not seem too bad IF Bob was in a theoretical situation where his real income growth was pegged to inflation the entire life and his fiat currency grew in a bank under inflation pegged interest throughout the 20th century. Considering the candy's probable mild price buoyancy due to brand recognition, on the surface it looks like the company is only charging Bob 8% more than they did in 1918 (20.6 cents to 19).

Looking through an Austrian economics lens of inflation being an increase in the money supply, since most people do not have their finances perfectly adjusted to inflation, Bob is being continuously ripped off and impoverished via inflation tax. He may not get exactly 6.3 times less chocolate but even 2-3 less Hershey's towards the end of life is a criminal swindle.

A defender of the socioeconomic status quo in 1982 may partially agree but counter this via a pseudo-Austrian angle, "If anything Bob is lucky to only be paying 62 grams of copper per ounce instead of 9 grams in 1918 since copper is mined faster than people are breeding. He looks like he is getting a deal when using this depreciating physical metal! Copper is as fiat as paper!" (Authorities saw the copper content in penny spike more than a fiat cent in 1980-1981 period and thus changed the content, the price of copper in penny then collapsed to just under 1 fiat cent again in 1982-1984).

This is an interesting response and lets take a look at it without distracting ourselves with multitudes of other serious issues such as the government ending the use of silver in currency, going off the gold standard, stagnation of real incomes, etc. Some of these issues will begin to be resolved indirectly by the end of the article.

If one tries to look at Bob's situation via Marxist economics lens of commodity exchange, then we see that the poor fellow is being swindled in another way. This investigation is a little trickier considering technological productivity cannot be readily quantified and since the concept of productivity itself is culturally determined. What is very safe to say is that mechanical efficiency in producing an ounce of Hershey's has risen a lot more between 1918 and 1982 than the 260% rise of human population in same time period. That is, if copper production/demand magically froze in place, a 1982 Hershey's chocolate ounce should cost not 9 grams but substantially less. Surely, they've figured out ways to stamp out these chocolate treats by the millions in ways not dreamed of before (even taking into account employee salary operating expenses).

Of course copper dynamics were not frozen but they also end up benefiting Bob. If you consider the borderline exponential and evolving industrial demand for copper for electrical/water purposes throughout the 20th century, then it is clear that the 530% rise in copper production in 1918-1982 does NOT devalue 62 grams (needed to buy one 1982 Hershey's ounce) by half.

In other words, even though the copper money supply rose at twice the rate of human population, we did not see 100% inflation of the penny since the industrial demand for copper kept up pace with the human population at the very minimum. Therefore, a Hershey's bar ounce in 1982 should have cost at most 6 cents (1918 price * population growth) instead of 20.6 cents. Therefore, Bob doesn't just get ripped off through expansion of the fiat money supply but by value of goods not reflecting the breakneck pace in development of production and distribution of Hershey's bar. Considering a pre-1982 copper penny is approaching 3 fiat pennies in worth at the end of 2010 (and many countries having pulled copper from their currency in last 30 years), it may well be that a Hershey's bar should cost a lot less than a copper cent today. This makes more sense if one remembers that a silver dime from 1964 is worth over 2 dollars presently (even though annual silver output expanded 35 times in 1900-2010 period).

It appears safe to say that fiat currency was haphazardly introduced by business leaders in first half of the 20th century (via their political appointees) to prolong the life of capitalism via inflation. Ironically, the financial robber barons ended up doing the same thing that rural agricultural interests wanted in late 19th century America. 19th century saw various deflationary collapses and farmers wanted silver/gold bimetallism since rapid mining of silver would have introduced inflationary pressure on the dollar and thus prevented profit loss. Banksters 100 years ago were gold bugs since they made money from loans and deflation benefited the loan sharks. Since financial capitalist take over of industrial/agricultural capitalism was mostly complete by 1900, bankers tended to win political arguments.

During the great depression, there developed a compromise and some convergence of thought between financial, agricultural, and industrial interests concerning the benefits of inflation. Biggest bankers by that time, found a way to profit while expanding the money supply via modern money mechanics and farmers ended up getting governments to pay them to not produce too much and thus prevent deflationary profit loss. FDR managed to reconcile the key parasites, preserve capitalism, and artificially prolong the profit taking of major monopoly industries at the long term expense of the consumer (in a very humane developmental manner). Yes, he also did a lot of great things and is one of the kindest masters people saw in the last century (no sarcasm).

If the price of an 1982 Hershey's bar reflected the real amounts of hard money (commodity) availability PLUS availability of Hershey's ingredients (commodities) PLUS the cutting edge technological ability to produce and distribute the Hershey, then we'd see the company experience the periodic deflation born crisis of overproduction that the communist manifesto summarized. One can imagine what will happen to corporate bottom line if a copper/silver/gold/rare earth metal commodity money coin buys more consumer goods every year than the previous one. On paper, Austrian utopian capitalism is too efficient and benefits the consumer too much (so much in fact that it quickly implodes in deflationary collapse horror show, massive unemployment, and technologically driven socioeconomic evolutionary leap towards post-scarcity society).

It is little wonder that Trotsky sided with Austrian economists when he wrote of pre-requisites of United States going communist. They being commodity backed hard money utilized to barter for consumer goods. This is especially true for gold since gold production only rose 5.5 times in the 1900-2010 period, barely above population growth. Ironically, the current wave of libertarians are fighting to make capitalism disappear (since non-fiat currency would fully unleash the post-scarcity potential of means of production and distribution that have existed around us since at least the 1950s and that Buckminster Fuller and King Hubbert described in detail). I will leave with a few 1934 quotes from Leon Trotsky regarding the absolute necessity of ending the federal reserve. ;)



"-This system will be made to work not by bureaucracy and not by policemen but by cold, hard cash. 
-Your almighty dollar will play a principal part in making your new soviet system work. It is a great mistake to try to mix a “planned economy” with a “managed currency.” 
-Your money must act as regulator with which to measure the success or failure of your planning. 
-Your “radical” professors are dead wrong in their devotion to “managed money.” It is an academic idea that could easily wreck your entire system of distribution and production. That is the great lesson to be derived from the Soviet Union, where bitter necessity has been converted into official virtue in the monetary realm. There the lack of a stable gold ruble is one of the main causes of our many economic troubles and catastrophes. It is impossible to regulate wages, prices and quality of goods without a firm monetary system. An unstable ruble in a Soviet system is like having variable molds in a conveyor-belt factory. It won’t work."

Maximum Wage and the Limits of Human Inequality

Pegging the rise of maximum compensation to the rise in the minimum will go a long way towards avoiding global disruptions





The appropriate maximum wage that society should have will be a critical issue in this century. It is generally agreed upon at this point that a neurosurgeon should get compensated more than a tour guide. The Soviet experience of a relatively narrow gap between highest and lowest compensation (top company manager officially earning 3-5 times the entry level worker) shows that society's progress stagnates if tangibly unequal abilities and contributions are rewarded with compensation that's perceived as relatively equal. Yet various banana republics (United States included) around the world demonstrate that stagnation also sets in when wage inequality gets sufficiently monstrous.

It is not enough to look at relatively egalitarian societies like Japan or Sweden to try to find some golden maximum/minimum ratio. What is needed is a common sense and/or philosophical framework that 1) justifies a certain income ratio
and 2) creates conditions compatible with human nature and self interest that allow the set ratio to be maintained.

1) Justification for capping the difference between top and bottom incomes should be grounded in reality and pragmatism and not idealistic popular desires of how a world should be. Theorists like Nietzsche spent considerable time elaborating that humans aren't equal. Yet in an ironic twist, the same reasons (that he gave for not having a leveling system where everybody is assumed to have the same value) can be used to set limits to difference in valuation.

click to enlarge

Like many characteristics of a population, the natural abilities to be exchanged for money are spread along a bell curve. Natural ability is anything that gives a physiological edge in addition to training. An example would be the hyper sensitive and rare taste buds of a top chef or a fighter pilot with remarkable reflexes and fast twitch muscles. If you take a person with poor taste buds and a person with exceptional ones and provide both with identical intensive high quality training on food preparation, there will be a certain intangible limit to how much better one chef is than the other. This applies to all professions. What is known for sure is that one is not 1000 times better chef after the training (or 100 times). Such numbers are simply ludicrous mathematically.

Napoleon Bonaparte is not 100 times superior person to say, a gas station manager and neither does Napoleon deserve 100 times more cars, 100 times more houses, 100 times better quality food, 100 times the salary, 100 times the size of personal land, etc. Think about it. Even without the leveling of military training, if you take the brain of the gas station manager and multiply its function by 10, the gas station manager would give Napoleon a run for his money in most if not all areas of life. Whether intelligence, speed, personality, patience, if you take an ability on one low end of the bell curve and multiply it by no more than 10, you automatically get to the other end of the bell curve (ex: IQ of 30*10=300).

I am using a multiple of 10 for simplicity here since the actual difference cannot be readily quantified (one perhaps can argue better for 15, 20, or 8). Considering the outrage over the bankster bonuses in the last 2 years, it appears the general public intuitively knows that there are limits to salary compensation. What remains to be done is to draw some line in the sand. A person earning 10 times as much as somebody earning 50 grand a year is getting half a million and automatically gets into top 1% income bracket. 10 times the compensation is an enormous leap. This perhaps sounds shocking, the way explaining that a duke does not have divine right to all the local land might have sounded shocking 300 years ago.

"But isn't compensation also determined by social importance of an ability (usually allocated by market forces)?"

As far as social importance, it is a very valid point. In today's absurd dying socioeconomic system, we don't see prime ministers and military generals receiving the same incomes as Lloyd Blankfein or other wall street criminals. We also don't see the operators of nuclear missile submarines getting 400 times the amount a waitress or a new army recruit gets (the way a modern CEO does compared to entry level workers in his/her organization).

Certainly the argument from social importance would indicate societal leaders, augmenters, and protectors to be the most vital. It is a tricky subject which should be properly studied with in depth examination of what professions benefit society the most (hint: engineers and scientists in political power). There are various ways of determining social importance with length and difficulty of educational training being one of them and critical examination of what makes real physical economy grow being the other (to filter out people who spent 13 years in intensive study of psychoanalysis or Gregorian chant from the top compensations).

This leads us to the idea of a free market competition, a concept as utopian and disconnected from reality as pure communism. The unregulated "market" is and will remain a diverse collection of political power centers that evolve the rules of the global private casino as they see fit. The obvious examples of the market giving top rewards to athletes, pop stars, and organized crime (Citigroup, JP Morgan Chase, etc) shows that it is a very poor determining mechanism of socially important tasks. This is where we see a difficult social divergence happening between perceptions of important jobs (nuclear power plant director) and consumer determined rewards for not-so important jobs (national talk show host). Obviously we'd like for both the public and infrastructural demands (that allow the public to live) to have a say in compensation without too much divergence.

If incomes could be broken into 10 levels, it very well could be that a top entertainer should be a level 7 worker (earning 7 times more than the minimum income of level 1) while the nuclear power plant director gets to be level 8. This will be up to the politicians and the needs of the crowds as long as they maintain the ratio system (in this case, based on maximum wage difference of bottom income multiplied by 10).

2) How does one make the maximum wage system stable and compatible with human nature? The simplest solution is to make the rise in maximum salary dependent on the rise in minimum salary. This means that if level 1 worker earns 100 units a day while the top level 10 worker earns 1000, the level 10 would only be able to get a raise of 10% to 1100 units if the salary of level 1 goes to 110. If you are beginning to suspect we are moving beyond capitalism to a more high tech welfare system of the future, then you are correct. Notice how the maximum salary gets to grow while being tied up to the minimum.

Pegging the material progress of the highest compensated to the material progress of the poorest can easily work within the capitalist system but it begins to work even better in a post-monetarist technocratic system. The strongest and richest must be given a personal incentive to improve the lives of the weakest and poorest through an income peg. They will still remain 10 times better off (10 times the cars, 10 times the living space, 10 times the clothing) but at the same time, if they work in their self-interest they will be lifting all boats. This dynamic inevitably puts more technically oriented people into top positions of society where they are most needed anyway. We're talking people who understand how to improve infrastructure, logistics, and basic structural economic welfare provision.

These matters will continue being a major concern as we gradually transition to a post scarcity transhumanist world of the future. It is important that we start discussing the limits to human inequality early on before social disturbances on a planetary scale have a chance to really develop.

Protectionism Works

Protectionism is what made every historically major country wealthy and powerful in the last 300 years (including the current free trade pushers like UK and USA). Protectionism should stop being a bad word as Japan and China can testify


The title may make the reader shake head immediately because a kind word is not often found with "protectionism" in the same sentence these days. Although United States industry was essentially built on protectionist tariffs (until 16th amendment of 1913 allowed federal government to start functioning via income tax instead of high tariffs on imports) the last 30 years involved continuous top down push of free trade propaganda. It is thus understandable that protectionism brings a negative psychological reaction even if there aren't ready made arguments to explain why.

If one looks at how world's key societies rapidly became wealthy and powerful (in the last 300 years), protectionism was always the dominating factor to help out native industry. France and England in 18th-19th century, United States, Japan, and Germany in 19th-20th century, and China in 20th are just some of the success stories.

In fairness, we can't overlook a number of small (population and physical size) states that are positioned to thrive in free trade by their geography (ocean reliant ports of Singapore, Hong Kong, Netherlands and Switzerland with its base in ancient Alps trading routes) which often also function as financial hubs. As far as large historically active players on the world stage, all became what they are due to basics like tariffs.

One may begin to argue that protectionism of old was different in that it was an ideological pillar of now "discredited" mercantilism. However, mercantilism never went away and still works wonderfully in more advanced forms in China and Japan (and even in Western Europe to a certain degree). Certainly we can understand the desire of a state to lower protectionist measures once its industries have sufficiently grown and benefited from them. We have seen England begin to push free trade propaganda in 19th century after its factories became the best in the world. Same pattern continued with United States (which had some of the most advanced and some of the only factories left standing) after World War 2.

One would think that United States would learn a lesson from slow decline of British Empire (late 19th century to 1960s) due to transition from mercantile protectionism to free trade and reserve currency imperialism. Surely it would have affirmed that lesson from the rapid rebirth (after the initial breathtaking success of their mercantile industrial expansion in late 19th century) of Japanese and German societies in the 1950s ad 1960s. It was crystal clear what works for national enrichment, job creation, national self respect, technological progress, and higher quality of life for the average citizen.

It can be summarized as follows:

1) Tariffs work, keeping out foreign competition and their advanced imports such as cars works, trade barriers work, high import duties work, allowing foreign companies to set up shop only in partnership with native companies/unions works

2) Free trade doesn't work as well as trade barriers historically when it comes to rapid national development and can even fatally drain a nation

For a number of years before the current economic depression hit, many old time free trade warriors like Nobel prize winning neoclassical economist Paul Samuelson began to realize that the global reallocation of industry can produce a domestic win-loss scenario for United States (especially in its trade contact with protectionist China) where the loss is so great as to be socially catastrophic. Samuelson used to have absolute faith in comparative advantage but his most recent major paper argues that free trade theory needs to be reformed for the modern world if it is to survive. Samuelson is too old (94) to meaningfully contribute at this point but major reallocation of his thought at this age shows the seriousness of free trade problems. One translated Der Spiegel interview has him mouth the thoughts familiar to anti-WTO protesters: that rising economic inequality within "globalizing" nation is a type of win-loss scenario that is unacceptable and stupid to be allowed to happen.

Another crusty dinosaur, Alan Greenspan, has mentioned a few years ago how rising inequality can threaten democratic functioning of United States. When free marketeers and capitalist internationalists utter words like these, it's the equivalent of John McCain saying that perhaps United States naval forces should be cut down in size. It's the equivalent of the Pope saying that perhaps some birth control should be introduced into church doctrine to save lives. Some of American elites (mostly in the nationalist democratic wing of the American oligarchy) have taken notice of this.

At this point, rapid and badly needed protectionist measures may shock United States into falling further into the economic abyss. Chinese retaliation and corresponding rise in cost of imports will not help United States get further away from risk of a hyperinflationary scenario. It would thus make sense for Barack Obama to sneak in defensive nationalist measures gradually. His recent decision to to impose a tariff on Chinese tires may be beginning of such an attempt. Tariffs on foreign made car batteries and materials/parts connected to industries decided to be"strategic" ( like green energy ) may follow. The way protectionism is introduced by the current administration will be vital for any chances of American rebirth within a generation.

When pound sterling began declining as reserve currency in the 50s and 60s along with British industry, London decided to cut off its foreign colonies for purposes of national regeneration and survival. United States needs to begin a similar process of disengagement from the world to match decline of the dollar as reserve. Since British Empire and United States were both in strong imperial position at the time of their full commitment to pushing free trade on the world, they found it easy to combine lack of protectionism with parasitic existence of unproductive consumption through the use of reserve currencies. In that sense, free trade "worked" for them for a while even as it impoverished small countries that were pushed to engage in it. This period is now coming to an end and a new model has to be formulated.

Some Europeans, like Emmanuel Todd, propose "protectionism on a continental scale" (the article is in French but is very readable with google translate). It may be argued that China already practices that to a degree in that it has the population and economy large enough for import restrictions without being crushed and impoverished. European Union definitely has what it takes for such an action especially if it coordinates with some nearby states like Russia. North American Union and South American Union may one day be such entities to effectively fight off Asian and European imports. Trade cannot be decoupled from production and effective production needs to be able to compete between itself rather than just exist in one part of the world where it's cheapest.

Let's hope some common sense prevails and more people question official orthodoxy of global unification by only one narrow "inevitable" route (the optimism of Thomas Friedman is now laughable in hindsight). Real globalization seems a lot more within reach when self enriching, wealth producing, continent wide economic unions do business with one another in a more equal way.

Lets remember what the 25th president of the United States William McKinley said about free trade at the end of 19th century when he affirmed a commonly held belief among American elites and citizens,

"Under free trade the trader is the master and the producer the slave. Protection is but the law of nature, the law of self-preservation, of self-development, of securing the highest and best destiny of the race of man. [It is said] that protection is immoral…. Why, if protection builds up and elevates 63,000,000 [the U.S. population] of people, the influence of those 63,000,000 of people elevates the rest of the world. We cannot take a step in the pathway of progress without benefitting mankind everywhere. Well, they say, ‘Buy where you can buy the cheapest'…. Of course, that applies to labor as to everything else. Let me give you a maxim that is a thousand times better than that, and it is the protection maxim: ‘Buy where you can pay the easiest.' And that spot of earth is where labor wins its highest rewards."

Third Industrial Revolution

Nanotechnological manufacturing will have more impact on humanity in a few decades than agricultural/industrial revolutions had over thousands of years. Such rapid change in production/distribution will push towards global unification to prevent potentially devastating occurrences




As of today, every major state power in the world is actively pursuing nanotechnological breakthroughs to give itself a geopolitical advantage. Public and private enterprises are seeing sharp increases in financial and logistical support. Although the global economic depression weighs down the hands of many civilian branches (legislative/executive) by increased centrifugal pulls of populist and oligarchic factions, military leaderships and intelligence services understand that allowing foreign powers to make a nanotech leap can be disastrous. Whichever society is able to produce the first fabricator is but a few steps away from being able to cheaply and exponentially produce advanced weaponry and weapons systems in bulk. Even Iran is dabbling with nanotech lately by giving Ministry of Agricultural Jihad (ministry name not a joke, check the link) some money for agricultural product research. Whether they'll be making better fertilizer or better fertilizer bombs remains to be seen. Supposedly there's already been some nanotech use in an explosive device that had more destructive power than US's MOAB while being lighter in weight.

In recent years we saw an increasing number of breakthroughs in manufacturing processes of nanoscale parts. The advancements stand to produce larger quantity as well as better quality of objects on the scale needed to build the first fabricator. This video shows a visual sketch to give a person an idea of how an advanced fabricator (one made a number of version generations after the first proto fabricator is created) in mid 21st century can produce publicly approved items.

The processes shown in the video might seem fantastical and impossible but a number of scientists (such as the polymath Richard Feynman a few decades ago) have shown that there is nothing standing in the way from the side of physics. As of 2009, dozens of very optimistic research papers have not been shown to be completely wrong yet. We also have plentiful evidence of advanced nanotechnological systems working splendidly due to the presence of self replicating machinery such as cells in plants, animals, bacteria, and human beings. There is also not one single manufacturing process (to assemble parts for the first crude fabricator and put them together) to be derailed since a number of roads within biology and chemistry can lead to same desired results.



I have written how existing non-nano mass production technology is already capable of feeding and providing a basic material stipend to all people in the world and how that is slowly and painfully leading to global unification efforts. Creation of the first factory producing product on nano level will put a nail in the coffin of defining economics as a study of allocating scarce resources. Although different branches of economics try to parade themselves as empirical science, economics has been estranged from empirical research into human welfare for over half a century. Nanotechnology will reunite economics with research into material logistics of how much energy is needed to constantly raise the minimum human welfare (and correspondingly how many more fabricators are needed to mass produce parts of new energy plants to power production of new material goods for all). Technocratic societal organization as a concept will re-emerge again after having been stifled under the disastrous ideological jihads of the 20th century. Both varieties of state capitalism in Soviet Union and United States overlooked the empirically proven possibilities of providing for their people.

The sheer transformative potential of the first fabricator (to change human condition more in a few decades than agricultural and industrial revolutions did over thousands of years) makes control over nanotechnology development top issue for world's power elites. The most likely scenario will be creation of international protocols concerning non-proliferation of dangerous nano technologies. The protocols can only extend further with time since:

1) knowledge of fabricator production may be easier to spread than that of nuclear warheads
2) energy needed for fabricator production and then energy to feed the fabricators may be a lot lower than uranium refining
3) fabricators will be able to mass produce deadly viruses and explosives to be used by non-state actors

It is thus logical that key technologically advanced countries will follow their eventual economic unification with political unification. This in turn will be followed with the North Hemispheric block (EU, North American Union, Europe, Russia, Japan, China) extending into global political unification of either imperial non-exploitative nature (Soviet model of unification), imperial exploitative nature (Anglo-Saxon model of unification), or most likely an imperial hybrid of both (EU model).

This will be to keep tight control over nanoscale production and to prevent large scale violent crime by non-state actors that is motivated by either luddite, ideological, or religious reasons. Western elites have been blabbing their mouths for some time now about economic global unification under the guise that "only international cooperation can solve global problems". Gordon Brown ( the leader of a country that is in much worse debt situation than United States proportional to its population) has had the nerve recently to say world needs to work together to solve things like hunger. Such blatant attempts by Anglo-Saxon leaderships to weasel out of national bankruptcies and acquire greater control over south hemispheric natural resources will fail. Economic and then political global unification will occur however with Eurasia in the political driving seat. Only this backdrop can properly release the third industrial revolution of nanotechnology manufacturing while greatly reducing potential for violence.

China and Russia have been funding large scale crash programs in nanotech development (Moscow is now determined to match US in annual public investment dollar for dollar). They however lack the benefits that years of investment has brought to nanotech research in the West. They also don't have the benefit of decentralized nanotech laboratories with enormous private funding. It is thus logical that the rapid construction of centralized nanotech centers by Chinese and Russians is to make use of the nanotech intelligence acquired through industrial espionage (or mass hiring of foreign talent after economic crisis deepens in the West). They will be prepared to rapidly emulate efforts in case breakthroughs occurs in Japan, South Korea, Western Europe, or United States.

Some give the name of third industrial revolution to the rapid increase in globalized capitalism. That is a historically incorrect way of looking at advances in manufacturing and agricultural processes. Globalization just changed the location of production whereas the second industrial revolution rapidly changed the quality and quantity of industrial products through better technological application of technology such as the assembly line. Having cars made abroad by former peasants to save money is not revolutionary when it comes to material progress. Neither is it revolutionary to use technology to move capital investments around rapidly to places where these peasant workers are willing to labor more to survive. Nothing evolutionary industrial in moving capital where the proles are under more crude coercion.

Nano level assembly will usher in such an exponential technological increase in manufacturing productivity that all socioeconomic systems we're familiar will rapidly disappear from sight. There will be a much larger break between a post scarcity world than one between a hunter gatherer world and an agricultural world (not mentioning the rather small differential jump from feudalism to capitalism).

Amidst these dark economic times and convulsions of inefficient market systems, there is a lot of optimism to be had. Economic depression is more likely to drive a company to try to offer an advanced product that is not just a tiny incremental difference over the old version. Nokia for example recently had refocused its research money towards luxury high end phones (demand for luxury items doesn't really dip during bursting of bubbles unsurprisingly). People are less likely to buy an object that is just a mild improvement such as a Pentium 4 was over Pentium 3. Hard economic times lead to greater application of new technology and pushes companies to offer something new enough to be worth buying. The more misery that this shrinking economy creates the more hopeful and amazing the possibilities of nanotech production will seem.

Multipolar World Means More Freedom

PART 2 of Threats to Freedom Series: Mechanization makes it more profitable for world's future oligarchs to switch from competing by force and financial exploitation of the third world to competing in industrial output and welfare provision



 
Recently, the global international situation changed from one of feudalism (with each feudal lord constantly trying to slaughter the other with full use of the vassal states and being polite and collegial in peacetime) to one of libertarianism. The former vassal states/serfs are now "free" to work for former masters who now style themselves as capitalists. Every small country in the world is "free" to dress how they like and do what they want with their body as long as they work for United States or European Union sponsored financial institutions.

Those countries that really want to make autonomous economic decisions are threatened by force, internationally ridiculed, or badly beaten up. We can see how ridiculous the situation would be if 200+ "sovereign" countries were actual people living in one neighborhood block. United States would just be the muscular mob boss loan shark with a crew of yes men. They would makes rounds down the street, slap people around, or drag them by the collar. Germany, England, and Japan would be the former mobsters who put away the guns (for the most part) and now try to be the corner store owners and minor loan sharks. They pay a bit of protection money to United States and tacitly support it to preserve the global system that benefits them. France and Russia (also former mobsters who got beaten up rather badly) are the ones who want America to weaken so there can be collective bullying of the world. They try to make conspiracies with Germany to that end since collective bullying and loan sharking would give them a larger share of the cut. India, China, and Brazil are too well armed to be bullied anymore and are just trying to stay out of business on the street for now. Everybody else is at the mercy of the colorful characters above for their wealth (if they don't want to lay there dying in the streets).

It's an intolerable situation internationally and intolerable domestically. Blatant use of force will have to come to an end since racketeering is inefficient and will exhaust society that practices it through logistical overextension. That has been the case for centuries and is especially true if the racketeer does not lead in making useful products. Recent American slide into a new economic depression has accelerated the process of multipolar world's reemergence. Rise of new global powers ( European Union, China) and perseverance of old regional powers (Russia, Turkey, Brazil, Iran, India, Japan), is raising macro level competition to new levels. The oligarchs ( that exercise control over most governments on the planet) cannot compete anymore by using force since it is now economically, physiologically, and politically suicidal. As such, interstate competition has to take the form of constantly raising the quality of life for citizens living inside. As much as it pains them, oligarchal elites can no longer throw the poor armed with bayonets at each other to gain greater market share.

The modern form of post-violence competition is also burning itself out. It has so far involved:

1) Overworking citizens by ideologically promoting economic libertarianism domestically, to other great powers, and within the post-colonial space. This increasingly resulted in wealthier workers growing poorer while competing with even poorer foreign workers for an increasingly shrinking and depreciating currency pie

2) Turning small nations into indentured servants (they way American former slave masters did to freed blacks in 1870s) by force. As discussed in part 1, the international community now respects states as independent autonomous decision makers. Of course that is only on paper since United States has used mass violence and coercion during the transition of countries from colonial slavery to post-colonial dollar dominated indentured servitude. Western powers are also freed from the expense of protecting their former subjects.

3) International financial manipulation of currencies, investments, and capital flows through IMF, WTO, World Bank. This allowed Western elites and their third world elite allies in creating wealth outflows from the third world and giving regional conspirators a share of the cut

older unipolar world concept: click to enlarge

The first method of competition in terms of reduction of state power by oligarchs ( to promote economic libertarianism and profitable indentured servitude within the general population) is also overextending itself. Many oligarchs have found out (like their ancestors in the late 19th century) that if you don't provide health care and other infrastructure for your indentured servants, the rich of other countries cut into your profits with time. Many of the American rich have recently seen their worker related health care costs rise dramatically and so decided to pass on the costs to the government. Obama even admitted publicly that health reform is needed because the American worker is becoming too expensive for domestic employers. Indentured servants ( who are overburdened by costs of living and whose incomes are reduced by competition and outsourcing), are bad for domestic consumer market and bad for foreign investment. A paradox is created in which economic libertarianism cuts costs in terms of paying people less but increases costs of privately provided infrastructure. Even if private sector mimics some third world countries in not providing any infrastructure or welfare, it finds that domestic consumer market is hurt and violent insurgency looms on the horizon. Libertarian economics also reduces tax revenue to support the military as a second type of competition.

Blatant use of military force was the cheapest path of least resistance to be used short term. The French, German, American, and British oligarchs in the 1970s and 1980s could care less that the new violent indirect loan shark method of exploitation is unsustainable. They had a wonderful pretext in the form of Soviet power to defend their financial interests. They has the cover of the constant cold war emergency to look the other way when America frequently engaged in international violence. Now that the cold war is over with nothing to replace it with, there is no justification for enormous military apparatus to shake down poor nations for money and resources. Military action, besides being unpredictably draining as Iraq has shown, also results in increasingly earlier blowback from various populations. This type of competition was the most effectively and widely used by United States and we have seen how it rotted and impoverished the general society. Japanese, Dutch, and German oligarchs now smirk at the price and inefficiency of huge conventional war machine over the cheaper way of worker training and healthcare provisions. They are able to keep their white collar workers productive and obedient tax payers and supporters of the status quo.

International financial structures such as the IMF provide a forum and platform for the world's rich on how to peacefully exploit the entire planet. These structures had a competitive function against communist backed international structures (such as Comecon) for courting third world power elites. Now Chinese and Russians want inside the exclusive Anglo-American/Western European dominated financial cartel and it is beginning to lose some of its purpose.

Since these methods are burning themselves out, we will see new forms of international competition rise. We will increasing see attempts by powerful interests to use government power to create a German style welfare state. Only such attempts stand to preserve as much capitalism as possible in the face of two immediate threats. The first is competition from foreign rich who are better able to exploit third world resources/the poor while remaining domestically productive with exports (such as the Chinese). The second bigger threat to international capitalist business as usual is the rapidly increasing mechanization.

Efficiency of assembly lines and technological production has multiplied many fold since the times of Henry Ford in the 1920s. From a purely non-ideological scientific perspective (in terms of resources, rates of production, energy expenditure, etc), the world is more than capable of providing a basic annual income to 9-10 billion people along with minimum level of schooling, shelter, food, pharmaceuticals, clothing, and basic technological gadgets. This has been true for some time now. Industrial machine production has become so efficient that even in 1960s Milton Friedman talked of minimum basic wage and scientists warned the president of rising mass unemployment becoming socially destabilizing and impoverishing in the future. The truth that nobody talks about is that a large bulk of humanity is no longer needed as workers. Mechanization (which accelerated its already breakneck pace with the computer revolution in the 1980s) is making far more first world workers obsolete than outsourcing. It is absolutely ridiculous for capitalist ideologues to suggest that by the middle of 21st century, most or even a third of 9 billion people will all work in advanced hypertechnological white collar jobs.

Nobody believes it.

Here's the scenario that economic libertarian internationalists actually describe for the future in hopeful optimistic terms. They want the world united under direction of a few financial institutions so capital can flow unhindered to smoothly create the flat world that Thomas Friedman talked about. Exponentially accelerating technological growth ensures that only a few million oligarchs need to employ a few dozen million super skilled white collar technocrats to oversee production and distribution. Then of course you need whatever corporate local branch staff not already replaced by robotics. The globalization proponents actually suggest that a planetary system (that doesn't need vast majority of people to work for it) will be able to constantly sell advanced products to most of the world's population at a profit!

Say it takes for example, an outrageous number of 10% of world's population to man the factories making the nanotechnology suits and flying cars and robotic assistants. Say it also takes 10% to fill the white collar positions of the planetary corporate structures to distribute and promote the goods. 80% of people not working are supposed to to buy the products and thus provide profit and wages to the 20%! Don't laugh. The fantasy being seriously promoted by many internationalist globalists. Most people are supposed to be each others bartenders, barbers, and juggler type entertainers. Yes, even with advanced college degrees. It is so logistically irrational that the world's people will reject the idea before the real starvation, violence, and hyper poverty begin. Global unification under such a corporate system is far more structurally and practically ludicrous than any socialist design envisioned in the 20th century.

Many of the world's political and corporate elites understand this and know that transition to post scarcity systems must begin at the top while they are still in control. That entails politically defeating internationalist free market oligarchs and using the government to provide vast safety nets for the armies of the unemployed throughout the Western world. That also entails pushing the government to take managerial control of strategic sectors of the economy such as car/ship/airplane production facilities as well as the land with natural resources. Agricultural land will also be taken (most likely utilizing the health pretext of making food products safer for consumption).

Of course the process in United States will rip its social and political fabric apart and it is likely the process will first be started and finished in Germany-France-Russia-China-Japan block. Once United States follows (hopefully without civil war or other violence), most societies on earth will become advanced welfare states that technology necessitates. Free market hold outs in South America will join once they see United States blatantly copying Russia in strategic asset seizure. Many countries will flip to this model not because they can now do so without facing American violence (or investment ruin) but because the former capitalist superpower now pushes the opposite. Following the transition by most leading countries, the increasing % of society that is unemployed due to mechanization will be able to receive a minimum income and goods stipend.

Such a transition is the only one that would allow most of the oligarchs to continue making a lot of money (and avoid violence and government seizure without compensation). Thus it will be done.

This is what was meant in 1950s science fiction predictions about people in the year 2000 working 1-3 hours a day or a couple days a week. Mechanization and gains in efficiency cut out most people from being needed for work. As such, the global unification will be taken by rich welfare states that keep the factories running by providing a minimum of material goods to themselves and all the peoples of the world. Of course natural resources are needed for that. We see how China rapidly acquired 60% of Africa commodity exports while becoming the factory of the world. Perhaps "free market with Chinese characteristics" is not a euphemism for them selling out but a long term strategy to become the backbone of a new world order. Only European Union has the assets to become a partner in such a system and European oligarchs will push it to do so. Then world's governments will trade natural resources in exchange for goods that are distributed to people for free. Anything less than that (such as violent preservation of the current free market/finance architecture) means mass suffering and turmoil the likes of which we haven't seen in over 50 years.

Lets make a full circle to why a multipolar world with EU (including Russia), China, and U.S. balancing each other creates more freedom. Since the only logical logistical system is a post-scarcity stipend for most people, the key aspect of autonomy is satisfied. When individual human beings are guaranteed a food/shelter/resource stipend, they can demand greater subnational sovereign rights from international bodies and their own governments. The national governments will devolve power to people below and to international/regional structures(that supervise resource/goods trade) above. Global authorities such as departments within the newly empowered UN and International Court of Justice can finally begin to fulfill their functions and charters.

Today's competition between regional powers involves exploitation and violence. Tomorrow's competition stands to take the form in which regional powers compete to produce the most quality goods to be distributed for free. It's very easy to come up with incentives for a few million meritocratically chosen technocrats needed to operate the systems. Neither currency nor overlapping service industry capitalism need to disappear to supplement 21st century solution to a looming crisis. World's resources will flow to those states that make the best use of them. The talented technocrats will still find a society that has the best assembly lines and resource management and get paid handsomely for their services. The rest will take a small step towards the universal goal of greater sovereignty and self mastery.