An unresilient system

Blog 189.

It is the debt we already carry that makes the porter’s task so impossible.

Of the many, many articles being written about the current Covid-19 pandemic, I have found one particularly enlightening. It was written by Georgi Marinov, a post-doctoral researcher at Stanford University. Having been born in communist Bulgaria, Marinov writes not only from a scientific viewpoint, but also with a political awareness that comes from having had practical experience of both neo-liberalism and communism. His lengthy article (20 minute read?) is not designed to leave the reader feeling good.

He laments the fact that Covid-19 has now been allowed to spread globally and will be unable to be eradicated. Given its close relationship to the common cold virus, Marinov contends that it is unlikely that an individual’s immunity following an infection, or the possible injection of a vaccine, will last more than two or three years. (Only time will confirm that he is right in this assertion.) In the meantime, while social-distancing and the ensuing economic disruption will prove effective at controlling the rate of spread of the virus, the present, debt-driven, economic systems will make it impossible to eliminate it. In effect it will become endemic, harvesting a small percentage of the population at each new outbreak. Should the Covid-19 virus mutate into a more lethal strain that percentage will increase. Furthermore, given the persistence of cultural eating habits, future outbreaks of similar, zoonotic (and possibly far more lethal viruses) are inevitable.

Against the rapid spread of such viral infections the, only effective control is social-distancing, which is something with which modern economies cannot cope. After a ‘pause’ in economic activity of a month or so, the pressure on neo-liberal democracies to return to economic ‘normality’ becomes irresistible. As Marinov puts it, caught between a rock and a hard-place, democratic governments face the choice “between hundreds of thousands of victims and a new Great Depression on the one hand, and sacrificing millions at the altar of the GDP and the stock markets, in a failed attempt at preventing the depression on the other.”

At this point, Marinov asks “why these should be the only two choices? Why do we live in a social and economic system that can only exist in a state of frantic movement forward and up, and for which it is impossible to pause for a while?” At this point, I will quote at length from Marinov’s well-articulated article.

“Yes, we are currently facing a serious epidemiological problem, but all the ensuing social and economic problems are self-inflicted and there is absolutely no rational reason for them to develop. The economy is going to collapse because it is based on a giant hyper-complex and ever-expanding,

tangled mess of leveraged debt relationships that will implode when rent and mortgage payments are no longer made. In the same time, millions are facing the very real likelihood of starvation because their only sources of income are cut off. This is income that has been so suppressed that

most people have no savings, and even for those earning more, every effort has been made to persuade them to spend as much of it as possible to “stimulate the economy”, a persuasion that often succeeds.

Yet this should not be a real problem as we are talking about numbers on screens and symbols on paper. We do not face a real physical crisis. Real problems we face when crops fail and when critical resources (such as fossil fuels) become scarce, i.e. when the essential life support systems of society are threatened. Both of those things will happen with absolute certainty in the future because of global warming and the depletion of non-renewable mineral resources. But this is in the future. Right now, we are still able to ensure the physical survival of everyone … However, we have voluntarily built a system that is so fragile that it crashes when it is asked to just pause for a little bit. This in itself automatically means that it is a broken system that needs to be radically reorganized. SARS-CoV-2 simply exposes its fundamental failings.”

Marinov continues… “Therefore, even if we successfully tackle SARS-CoV-2, we will be eventually facing similar or much more difficult situations in the future.

Hence, the focus now should not be on how to open the economy at all costs, but on how to restructure the socio-economic system so that society does not collapse completely if we have to pause for a while. (My emphasis.) It must also be strongly emphasized that this instinct “not to harm the economy” is what got us in this mess to begin with.”

Marinov goes on to list the history of the current outbreak as one in which governments faced with the choice of imposing the necessary controls or damaging their consumption-oriented economies, delayed until it was largely too late.

“Which brings us back to the question of why we live in a socio-economic system that cannot afford to pause for a while?

The superficial answers are well known. Because the system is based on a constantly growing pile of debt, thus if debt payments stop, the whole system begins to unravel and everything falls apart. And because GDP growth is the highest goal, on which all macroeconomic and political decisions are based.

If the economy closes, private businesses run out of income, cannot pay their debts and dismiss their employees, who can no longer pay their rent, mortgages and other debts, all of which causes a cascade of defaults along the chain. Because everything is “optimized” so that the system pays workers only as much as to allow them to meet their daily needs but not to save, and because the businesses themselves have no reserves either, if the “pause” goes on for too long, where

“too long” in many cases only means two to three months, the businesses close forever and the workers are left without the means to even buy food. What the latter will lead to remains to be seen.

As I said above, all of this is insanity, as there is no reasonable reason for it to happen if enough food is produced and the power grid, water and sewer systems work. There is currently no general physical problem that should lead to the complete disintegration of the system. If the system breaks down, it is entirely due to its own fundamental defects, thus the situation now should be a reason to reorganize the system, not to engage in futile attempts to save it, as it is obviously inherently broken. (My emphasis.)

This is true even if there was no pandemic. It is physically impossible to achieve infinite growth within a finite physical system, but our socio-economic system is fundamentally based on the opposite assumption. If GDP does not grow steadily, the system collapses. However, there is no way GDP can grow indefinitely – every economic transaction involves a certain amount of physical work, thus it is not possible for GDP to grow without increasing the consumption of physical resources and

energy. Indeed, the graph between energy consumption and GDP on a global scale over the years is a straight line. However, planet Earth is very much a finite sphere, with very much finite reserves of energy and other non-renewable resources, with a limited energy influx from the sun, and with limited renewable resources (many of which effectively become non-renewable if used too intensively).

Economists like to talk about the so-called “decoupling” between the use of physical resources and GDP growth but as I said above, this is physically impossible. It is seen only as an artificial local effect of outsourcing energy-intensive industries to other countries, but not globally. Even from a purely economic point of view, it is a ridiculous proposition – if GDP could grow without increasing resource consumption, then the relative cost of resources in the long run would fall asymptotically to zero, which is clearly absurd.

Even if there were no pandemics and other disasters, human civilization is on the path towards total self-destruction within the next one or two centuries due to the combination of environmental degradation and the depletion of vital resources to which socio-economic systems based on continuous growth inevitably lead. This is a fundamental defect that is common to all such systems tested in the 20th century – endless growth was the goal of both communist and capitalist regimes.

However, the pandemic brings to light the additional defects that were added to the system in the last four decades because of the rise of neoliberalism and market fundamentalism to the position of a universally dominant, unquestionable ideological dogma.

In Bulgaria, we at least have the privilege of having until fairly recently lived in a different system and having a base of comparison. Let us imagine what would happen if an epidemic had to be battled in the 1970s in one of the countries of the former Eastern Bloc. In fact we do not even need to imagine it because there is a real-life such example – the last smallpox epidemic in Europe broke out in 1972 in the former Yugoslavia (then, a Kosovan Muslim returning from worship in Iraq brought the virus). The reaction was swift – martial law, border closures, roadblocks, cordon sanitaires, etc., and the epidemic was contained within two months. Of course, in that case, there was a vaccine, which helped a lot, but the important thing is that there was no hesitation in immediately taking the necessary measures due to economic concerns.

In a non-market economy, like the one we (Bulgaria) had 30 years ago, an even longer quarantine would not be a much of a problem. Most people own their homes, and most of those who pay rent pay it to the state. There are no small and medium-sized businesses to collapse and leave their staff without any income, and there are no stock markets to crumble and destroy the retirement savings of people forced to invest in them due to a lack of a real pension system. Food production and distribution is centralized and controlled by the government, as are all other essential systems, which is a huge advantage in such a situation. There is no problem whatsoever to stop and wait as long as needed – people do stay in their homes, the army distributes food to people’s homes (making quarantine would be much more efficient), rural areas are isolated as much as possible to prevent infection and declines in agricultural output, etc. Yes, the five-year plan is not fulfilled, but by itself, this does not automatically bring down the system and it does not lead to mass starvation and chaos.

Yes, such a system is “inefficient” from a conventional economic point of view, and this is one of the main reasons it no longer exists. However, is it such a good idea to make “efficiency” a cult? A perfectly efficient system is, by definition, completely non-resilient, as it does not have any buffers to absorb external shocks, which are inevitable in the long run. “Efficiency” is achieved by eliminating these buffers. A system based on the assumption that everything will be fine forever is doomed in the long term.”

I find the above analysis utterly credible. For the reasons Marinov gives, even without a pandemic, the current ideological pursuit of endless GDP growth is bankrupt. Actually it is even more dangerous than he details. It is capitalism’s pursuit of growth and profit that drives the military industrial complexes to seek armaments and inspire conflicts that not only risks nuclear disaster but also inhibit global cooperation in the face of common threats such as climate change and pandemics.

The world is now entering a state of flux – new ideas are going to be called for if the global civilisation is to survive – and even thrive.

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