Peeling the Onion: What's Behind the Financial Mess?

Sharon September 25th, 2008

If you want a pat answer to what has caused the financial crisis that is reverbating around the world, and now threatening the derivatives market, we’ve got one. Nearly everyone – in the mainstream media and outside it, tells the same story – that the crisis was caused by the unravelling of the housing market, particularly the US housing market.  And if you ask what’s behind that, well, we’re told there was a bubble.  And if you ask what was behind the bursting of the bubble, well…it is turtles all the way down.

 I’m not a turtles kind of gal, and so I thought it might be worth playing with root causes some more.  Now it is absolutely the case that original causes are virtually impossible to come by – everything is always multicausational. And there’s no question that the housing market was so ridiculously overvalued that in no sense could it have been sustained.  Still, it is sometimes interesting and productive to tease out some of the major causes of our problems, the things that explain why now and how, and I think there’s one that people haven’t been looking too carefully at – and one I think bears some exploration of.

I’m going to suggest that if you peel off the layers of the financial crisis, we’re going to find some pretty basic things.  And one of the basic things is, well, food.  It seems sort of anti-climactic, I think, if you are a pundit, to talk about the cost of rice and soybean oil as part of the root problem of such a massive financial crisis, but I suspect we’ll find it there.  And underneath the food, I think we’ll find oil. 

Most commentators have taken the food crisis, which has run more or less in parallel with the financial crisis – growing gradually through 2007, and beginning to move more dramatically towards crisis in the winter and spring of this year, as an irritating factor, a small push against already strapped consumers.  But I’m not really sure this is the right way to look at this.  Instead, we might look at the question of how the growth economy grows.  Some of it, of course, is through population increase – new workers, new consumers.  But population growth itself has proved over and over again to be insufficient – not only do we need more people, but the industrial growth economy always needs a larger percentage of the populace to serve it.  This is one of the reasons I tend to agree with Vandana Shiva that the population problem is not primarily a cause of our current crisis, but a symptom of it.

We might look at the boom and bust cycle of our economy, and indeed, the world economy, as one moved not just by energy, but by new workers (who then conveniently become new consumers and create new markets – remember, 70% of the economy is consumer spending).  Each boom cycle has followed the move of vast numbers of new workers into the economy, essentially creating more money in the form of productivity, and more income to spread around and lubrication to the economic system. 

 So, for example, after the Great Depression, we got the country moving in large part by the industrialization of a large portion of the agricultural population – millions of farmers were brought into the industrial economy either to serve in the service or work in the factories.  After the war, many of them never returned to the farms – and the GI bill and the conversion of wartime industry to peacetime industry encouraged lower income farmers to go to work.  The movement of people employed largely in the subsistence economy into the industrial economy created a huge boost – poor black farmers in the South moved to industrial centers in vast numbers to take advantage of good wages, and low income women who had worked in the factories never did return to pre-war levels of women’s work.

In the 1970s, as the economy began to stagnate again, the answer was a new influx of workers and consumers – quite rapidly, women began entering the workforce in staggering numbers, requiring new work wardrobes, second cars, fast food restaurants and daycare providers to take the place of what we had.  Workers who had primarily provided subsistence labor not counted into the GDP were transferred into the formal economy, and disproportionately as low wage laborers.  The excesses of the 80s began just as the numbers of women workers fully doubled – all of a sudden there was more money to go around – and this is hardly surprising since there was more work being done, and more money being spent both on luxuries and on paying to do the jobs that had previously lived in the subsistence economy.

The next wave of prosperity was a world scale one, running from the 1990s until pretty much the last couple of years – and again, millions of new workers and new consumers were inserted into the world economy, spreading money.  Suddenly there was new movement of funds, new workers doing new things and buying new stuff.  There were new markets again, and plenty of growth to go around.  Again, we find that the growth is primarily produced not by high value, highly educated workers in the new information economy – the most important economic growth during those periods was of new, low wage workers, moving from the subsistence economy into the industrial economy. 

It is worth asking why these low wage workers are so important to each bubble.  There are a couple of reasons.  The first is that even in the booming periods of cheap energy, it was never possible to mechanize or use oil for the majority of jobs – and as energy supplies rose in cost and tightened, it is less and less possible to do so.  The majority of all world farmers, builders and factory workers do use some machinery, but the primary engine of production is human work.  The other thing that matters is while there is a substantial difference in the pay scale of, say, an IT professional over a construction worker or a farmer, and the value of the work of the IT professional in the industrial economy is higher, moving people over to the white collar economy isn’t nearly as effective or profitable as taking people out of the subsistence economy and putting them on the lower rungs of the industrial economy.  First of all, you take a large portion of the productivity of a human being (remember, new industrial workers generally work long, long hours), without any amortized costs to provide him or her with health insurance or education.  That is, the total society investment in someone in the subsistence economy who then moves to working 12 hours a day in the industrial economy is very small, and the amount of work she does is quite dramatically more than what she did to serve the industrial economy when she was a subsistence farmer or a housewife.  Education, on the other hand, is expensive, and white collar workers like things like health care and vacation.  The money is in the new workers.

So what happened? Well, in America and the UK, some of it really just was a bubble popping.  But what, oh what funded the bubbles?  To a large degree it was the purchase of various American assets, including a lot of mortgages, by the newly cash flush emerging economies.  And gradually, gradually those purchases have slowed down – they began slowing in the fall of last year, after some rumblings even before that, and the slowdown has accellerate – it hasn’t stopped, but the flow of money into the American economy through various routes, including buying bundled paper, has slowed.  And it has slowed at least in correlation – I do not swear about causality – with the housing market.  Now the assumption has been that the slowing is due to the increase of risk – and that’s probably true to a degree.  But I think some further scrutiny might find that there’s another factor – that it has slowed as the emerging economies have been dragged down.

One of the news stories that came out last week was that in addition to the 100 million starving people that made the UN news last spring, we’ve now got still 75 Million more hungry people in the world than there were before.  The UN announced that essentially all of the progress made on global poverty up until now is being erased by the food crisis.

Now it might be worth asking – where are those 175 million new starving people coming from?  Before they were starving, who were they?  And the answer would be that many of them were the people who left their farms in China and Vietnam and Indonesia and a host of other places to go live in the slums of various cities and work there.  They were the people who were just getting by – the ones who sent a daughter to the factories and who did day labor in construction building up the economies.  They lived quite close to the edge, and then, they crossed the edge when food prices began to rise.   Now these were the lowest level new industrial workers – they weren’t buying cell phones, but they might have bought a few things that they wouldn’t have when they needed every penny for rice or bread – they sent their children, even their daughters to school, and bought clothes and pencils, they might save up for a radio for the family, and all these things, over millions of people, added up.  And they produced more than they were paid for the economy as a whole – their work was more valuable than their salaries could account for, as is the way of things.  But now they aren’t buying those things – their kids are out of school, there is no money for radios or batteries, and there’s no food – so they are working less, getting sick more, contributing less to the industrial economy, unable to make money selling things to the other people in their neighborhoods, because their neighbors have no extra money for anything either.  Not only are they starving, but they’ve stopped adding money into the economy – and stopped spending it on anything but food.

Meanwhile, the next tier up in income were the people who had a little more than just enough – enough and a bit to send back home to their families, to get a cell phone and some jeans and buy meat a bit more often.  These people worked pretty regularly at the new jobs – in factories, in building, in making the new globalized economy.  And they spent money too and moved it around within their communities, and back into the global economy – the spent a little money buying coca cola, which came back this way.  Now they aren’t starving yet, but the rising cost of food has pushed them too – now the coca cola and the meat are gone, except for the holidays, and there won’t be any more jeans.  Because now the money goes for food – they have food to eat, but not enough for those other things.  And so the money increasingly doesn’t move around that much – because the farmer who grew the rice they are buying spent most of his money buying fertilizer.  And so the money is headed mostly back to a few small companies – without a lot of stops around the neighborhood. 

 It is easy not to pay attention to such small things, and small people – after all, they aren’t spending much money, and their wages aren’t much. But they produce the stuff we need, they move money around – and hundreds of millions and billions of these small personal economies add up to quite a lot.  And the money that they made went places  – it took trips.  The money a poor Chinese worker generated in productivity went a bit into his pocket – and some of that went back to American corporations that made things.  And a lot of what he generated went into companies that invested in other things that fed our economy.  And some of it went to the Chinese government that used it to buy up dollars and other things that seemed to have some value.  It is perhaps not totally surprising, then, that as the Chinese worker got functionally poorer because of rising food prices, there was less money to pour back – times some millions.

And so it goes, down the latter.  The new workers, and the lubrication they provide in the global money system are being systematically impoverished, and what money they do spend goes to an increasingly narrow band of companies – instead of spreading the money around, money goes for very basic things – mostly food, and mostly basic foods.  And the farmers who make the basic foods mostly send that money back to a very small number of companies – the ones that produce oil and the ones that produce fertilizer – many of them located in the same countries and places. 

What is reducing the amount of productive work accomplished, and moving the money increasingly only into a few pockets?  It is the high price of food.  And what is the root cause of the high price of food?  Well, the single biggest factor, according to a number of studies, including the UN studies, has been the move to food based biofuels.  So if we peel back the onion one more layer, what we find is that one of the major factors slowing the economy has been, well, oil.  The rush to biofuels is a response to tightening oil supplies and rising costs, and the aggregate effect has been to push up food prices all over the world, while doing pretty much nothing to increase energy security, reduce greenhouse gasses or do much of anything else useful.

I’m no economist, and I don’t pretend to be.  But I wonder, when we peel back the layers of the onion later, and look at the history of this Depression, I wonder if we’ll see that in fact, what happened was that we squeezed out the lifeblood of the very thing we’d built our economy upon – new workers/consumers who could be counted on to grow the economy outwards and upwards.  We could have forseen this – but we chose not to – we chose, as we struggled to keep our lifestyle intact on the backs of the world’s poor, not to see that we stand on their backs, and it is people…all the way down.  In killing them, we killed ourselves. It may be that besides the tragedy of starving millions of poor people, we may also have brought down our own system, simply because we did not see, did not realize that the poor matter more to us than we like to admit.


54 Responses to “Peeling the Onion: What's Behind the Financial Mess?”

  1. Theresa says:

    This is an example of the Buddhist idea of the interconnection, inter-being, of all things. We have to start seeing these connections to and with other people and other things because when we don’t, ultimately we bring harm to ourselves. Thank you for elucidating this point so well Sharon.

  2. olympia says:

    Wow, Sharon. It all makes perfect sense. Your analysis definitely, as Theresa said, speaks to the Buddist idea of interconnection. It also reminds me of the advice, given out in AA, that when tempted to have a drink, you think the drink “all the way through.” Sure, the reasoning goes, one drink won’t hurt you. The problem is that one drink, sooner or later, leads to seven drinks, to drinking every day, to losing everything. We haven’t been thinking the drink all the way through- and, well, you know the rest. Words fail.

  3. Love the AA analogy.

    Also thinking it’s rather like chess, innit? Pawns are SO much more important in chess than bishops and knights. Sometimes even the rooks and the queen. I didn’t learn about pawn structure until well into my 30s. I don’t really like chess all that much, but our society has been like a ADHD kid who’s no chess prodigy running around checking the opponent left and right, but losing the pieces steadily along the way, until he either has to withdraw or lose.

    Hm. Never thought I’d use a chess analogy, but there you go. Where’s Ron Weasley when we need him?

  4. A very interesting take. Driving an SUV or living in a McMansion is literally taking food out of the mouths of babes. But most people who drive and live in this way go about their lives comfortably numb, not having the least idea of the interconnectedness of everything.

  5. homebrewlibrarian says:

    It didn’t used to be like this where what happened in one country affected countless others in another. Once the industrial machine ramped up, self sufficiency went out the window and everyone became reliant on goods and services not produced by them. It didn’t take too long before a couple generations of Americans only knew that food, clothing and stuff came from stores. I guess it took even less time for people to care where it came from and how it got there. When you aren’t part of it, it isn’t all that important. Unless there are problems.

    Now the problems are too enormous for governments and businesses to hide. We might think we’re a strong, free and self reliant country but we’re not and haven’t been for decades. As Americans struggle to understand our interconnectedness with the world, I think it comes as a complete surprise the knotty issue of social justice. Sure came as a surprise when I started down that road and pushed me right out of my comfort zone. I see that confusion and discomfort in others now. For some it’s thinking the drink all the way through for the first time and it’s tough.

    May those of us who are farther down that road reach back and help guide those who have just started the journey. We could all use the company.

    Kerri in AK

  6. Vegan says:

    Nationalism, racism and elitism have always worked together to blur and discourage humanity’s understanding of interconnectedness, so necessary for our evolving into compassionate human beings.

  7. Evelyn says:

    Everybody blame that big CEO & politicians for good reasons but all those people that lie to get a house or to sell a house are to blame too. I have a friend that is a realtor & is selling 1 bedroom apartment for $200,000 as an investment property. When she offered to me I told her that how can she sleep at night knowing that nobody can rent a 1 bedroom apartment where we live for $2,000 so the person that buy it will have to rent it and still pay money out of their pockets not to lose it to the bank or ruin their credit. They were offers like this one everywhere for the past few years and people bought them as investments and now they lost them. The other thing is that ignorance of the law does not excuse you when you commit a crime. I know this because of all my mistakes. Ohh! I have never committed a crime but I have made stupid decision for not getting myself informed and feel pray of bad people. A lot of people bought houses at a variable rate instead of fixed rate knowing how bad things can get, and the Sunday commercial about 1% interest, and the ones that bought fixer upper because “everybody is doing it”. My husband use to tell me that the best investment is the land because it will never devalue and I told them that it was not true because this happened before now he knows better. The incredible thing is that all this people that stole from the poor and desperate selling them a bad house or bad mortgage are complaining that they cannot afford their life style. And now we all good people that live a simple live are in this mess. I have no sympathy for people that waste their money and are crying about their live style. I am worry about my neighbor that her job after doing everything right and there are no more jobs out there for her or the old lady that is old and by herself after working hard all her live she is malnourish because she will buy medicines or food. UFF I am angry and sad. The worst is that I do not have enough money to get ready but worst is that I am more ready that my friends and family and I cannot see myself taking care of them because they spend their last money in useless things and they do not believe me that thing will get really bad. The weird thing is that my ex-husband is the only person that understands me. We have a son together. He got me a big barrel for rainwater catchment and he love to see our garden and always ask me what is new. What are we going to do with all the people with not skills to survive? You know people that we love but are clueless.

  8. Rosa says:

    Not just the SUV and the McMansion, but my job in an office tower and our little Toyota, too – it’s the entire worldwide system.

    Thanks, Sharon, for calling out the fact that growth capitalism relies on growth in both breadth and depth of the markets.

    But even if food costs are the deep cause, the specific shape and scope of this crash have to do with how we run our financial markets – capitalism has these crises on a regular basis, regulations were instituted in the ’30s to even them out as best we could, and they worked very well until they were dismantled. (Worked very well = flattened most bubbles, cushioned most busts, confined failures to specific sectors or regions).

    We’re wasting a lot of resources shoring up the broken parts in first world systems that were purposefully weakened, and that means we are not putting those resources where they are needed to solve root causes or mitigate the effects on the poorest people.

  9. Ani says:

    I don’t know- seems to me that the current crisis is just more of the same- no different than say the tulip bulb mania that tanked when people finally realized that well, it was just a tulip after all…… So I think that because we have a neo-classical economic system, which is predicated on growth, then these sorts of binges and busts are built into it- and are a given. Growth cannot continue forever- even a cancer eventually kills its host-and thus our Ponzi-like economic system must eventually reset and then do it all over again….. And thus it will be until we consider the value of a steady-state economic system…..

    That said, I do believe that one of the most troubling issues behind the financial free-fall is that our gazillions of new dollars that were being “earned” weren’t in fact based on new products, or food or anything much useful- it was based on financial “products” that were sold- and the value of those were??? So we had ticky-tacky houses with huge price-tags that in no way resembled their real value, sold to people who in no way could afford to pay them, resold as packaged/bundled mortages to others and so on- so once it all began to crumble as it must, the downfall was swift as mostly this was illusionary wealth I’d say…..

  10. [...] Casaubon’s Book » Blog Archive » Peeling the Onion: What’s Behind the Financial Mess? If you want a pat answer to what has caused the financial crisis that is reverbating around the world, and now threatening the derivatives market, we’ve got one. Nearly everyone – in the mainstream media and outside it, tells the same story – that the crisis was caused by the unravelling of the housing market, particularly the US housing market. And if you ask what’s behind that, well, we’re told there was a bubble. And if you ask what was behind the bursting of the bubble, well…it is turtles all the way down. [...]

  11. [...] Sharon’s take is that economies grow as subsistence workers, farmers and others, begin working the entry level factory work force. Only now, rising cost of oil is raising food prices, and the entry level workers that had been driving economic growth are now starving, and what wages they earn go solely to food, instead of fueling the local economy. And the shrinkage is rising to the top. [...]

  12. jerah says:

    And WaMu just failed too. Wow. One at a time. The only good thing I see coming out of this is the fact that hundreds of thousands of Americans have written to/called their congressional representatives to say no to the bail-out. People from every part of the electorate are pissed.

    And look, congress is STILL trying to make the damn thing work. Let. It. Burn. Let it all burn. We need to start over.

  13. olympia says:

    Just wanted to expand on the “think the drink through” bit- it is, in some ways, an imperfect analogy. Most people really can stop at one drink. So far as oil goes, though, we’re all junkies, and the train is only headed in one direction. I am seriously unnerved now.

  14. pat says:

    Great post Sharon,

    I had a bit of an epiphany a few months ago. I imagined our family of 4 having to build and assemble our cars and home, fell the wood for house and warmth, make our fabrics, sew our clothes, raise our food, maintain our homes, etc, etc and it quickly became obvious that it would probably require the labor of more than 30 full time workers to sustain my families way of life. And yet there is only one person in our family earning a living outside the home. Can it be that my labors are so valued that they are equivalent to 30+ people elsewhere in the world? The reality is that people are subsidizing our family to a great degree and they largely remain out of site and out of mind.

    It should be of no surprise that as people around the world slowly escape from underneath our thumb they are expecting and demanding more for their own lives. This story should be a familiar one to us. We objected when the British attempted to hold us as serfs. Slavery subsidizing the southern way of life was eventually abolished. Just like the Romans or the British or any other society built on the backs of others we will be faced with having to be ever more overt in our efforts to keep people around the world in their place or we will have to accept a declining standard of living well into the future. Particularly when our society no longer creates and manufactures sufficient tangible items of value that other people want and can not provide for themselves…
    All the best,


  15. Basia says:

    Ani, you wrote of considering “a value of a steady-state economic system…..”
    Lao Tzu was speaking about it a few tousend years ago in “A Book about the Way and the Power of the Way”:

    80 Freedom
    “Let there be a little country without many people.
    Let them have tools that do the work of ten or a hundred,
    and never use them.
    Let them be mindful of death
    and disinclined to long journeys.
    They’d have ships and carriages,
    but no place to go.
    They’d have armor and weapons,
    but no parades.
    Instead of writing,
    they might go back to knotted cords.
    They’d enjoy eating,
    take pleasure in clothes,
    be happy with their houses,
    devoted to their customs.
    The next little country might be so close
    the people could hear cocks crowing
    and dogs barking there,
    but they’d get old and die
    without ever having been there.”
    Transl. Ursula K. Le Guin

    Is it possible, to drink all the way through? Not to allow our greed rule?

    thank you, Sharon and everybody

  16. [...] Sharon Astyk peels the onion to ask ‘what are the real problems?’ I’m going to suggest that if you peel off the layers of the financial crisis, we’re going to find some pretty basic things. And one of the basic things is, well, food. It seems sort of anti-climactic, I think, if you are a pundit, to talk about the cost of rice and soybean oil as part of the root problem of such a massive financial crisis, but I suspect we’ll find it there. And underneath the food, I think we’ll find oil. [...]

  17. Devin Quince says:

    Jerah said:
    “And look, congress is STILL trying to make the damn thing work. Let. It. Burn. Let it all burn. We need to start over.”

    While I agree with letting these large companies get their dues, I wonder what would happen to all the people that have mortgages both sub-prime, greedy, or just what they need in a home? What are the chances that good honest people could lose their homes in addition to those that over extended or were greedy and is that right just to make these people get their just desserts?

  18. MEA says:

    My fear about letting those companies get their dues is that the leaders are likely to walk away relatively unscathed, but the people who input the data and scrubbed the toliets are likely to walk away with no job.

    Now, I don’t think we should prop up companies just to keep the inputters and scrubbers employed. I think, some how, though we need to find a way to take care of them and their need to work.


  19. Rebecca says:

    The thing is, the economy is going to crash anyway. There’s no avoiding it. The longer we prop it up and delay the worse it is going to be when it finally does come down. So what’s the right action, here?

  20. MEA says:

    If only I knew the answer…

    I’ll take a stab though, and am very interested to hear what others have to say.

    I think we are beyond collective action by the goverment, except (and this will happen about the same time pigs fly) pour what money they can into propping up very local health and food systems. Neighborhood clinics, keeping medical transport going for rural communities, grants to hook up soup kitchen with local growers. Not to mention giving away insulation and providing people to install it. That sort of thing — a pair of thermal longjons on every body and a laying chicken in every garage.

    Get the safely net as mened as possible for the “little people” who are crashing down with the big. I’m not advocating not feeding the now-starving once rich, but I think they are going to feel the squeeze less soon that the mimium wage earner when both are layed off the same day.

    Work on providing transitional job training for jobs that will be there and will be needed in months and years to come, without displacing people who are already doing that work.

    Reorganize school disctricts where possible — as the population grew were I was the k-8 schools became k-3, with new buildings for 4-8 then, newer ones for 6-8. We could go back to k-8 in a lot of schools that server a smaller area.

    Blah, blah, blah — sorry, but people have been saying this for years here and elsewhere — and I know that it’s all so obvious.

    And on the personal level, I’d look at what we can do the support the local food banks and crises centers, even in a very small way, in the hopes that it will all add up. The donations of large bits of batting have driedup, so my mother and I have gone into the chache of worn out bed pads for batting for cot quilts for the children’s clinic nurses to give out. (And, having saved them from being thrown out at various bedding drives, etc. we have quite a few.) Admittedly, on or two scrap quilts a week aren’t going to save the world, but they will keep a child warm.

    I can’t think of any thing that will save us all. I can only suggest that we keep trying to do to what we can.


  21. dewey says:

    Pat writes: “I imagined our family of 4 having to build and assemble our cars and home, fell the wood for house and warmth, make our fabrics, sew our clothes, raise our food, maintain our homes, etc, etc and it quickly became obvious that it would probably require the labor of more than 30 full time workers to sustain my families way of life…. Can it be that my labors are so valued that they are equivalent to 30+ people elsewhere in the world?”

    No, there aren’t 30 people working full-time to support you. The real message of this thought experiment should be the value of division of labor. Instead of imagining how long it would take YOU to do all of these tasks (including, say, a 1% annual fraction of the house-building effort), imagine how long it takes a skilled worker with adequate tools to do each task, then sum the values. If your family buys a typical amount of clothing, and your sewing skills are as poor as mine, you could spend a month trying to sew that clothing from scratch – and even then, it would not be very good clothing. But the actual labor embodied in those purchases is far less, because workers in a clothing factory can make a T-shirt in a couple of minutes. Even with foot-powered hand machines, a skilled seamstress could make several good shirts in a day.

    Specialization allows the development of skill, hence speed, so that the same amount of goods and services can be produced at the cost of far less drudgery, and usually to higher quality. Or, of course, it allows the same amount of drudgery, plus a painful assembly-line pace, to produce a far greater quantity of goods, thus hastening the rape of the biosphere. That’s what seems to give division of labor its bad name among collapsophiles, but (ignoring for the moment that we are dealing with humans) there is no reason that the time freed up should not be used for leisure rather than an endless scramble for more Stuff. (Which is why, after spending months working on one sock only to find that using a circular needle made the circumference at the ankle about ten inches, I am putting my foot down and saying that I will NOT knit my family’s socks under any circumstances whatsoever, I will damn well go out and barter for socks, and no matter how much they cost, it would be smarter than making them myself. That’s not to knock sock making if, like Sharon, you are good at it – but if you are lousy at it and force yourself to do it anyway because you want to be the perfect generalist, you are aspiring to a hard and miserable life.)

  22. Steve in Colorado says:

    An interesting question Sharon. You raise a good point, and I think your analysis provides a useful way to look at this. Certainly a most meaningful one from the human suffering aspect.

    With everything interconnected (which is the usual, messy state of reality) though, one can focus in on many a factor and see its as a causal relationship. Especially in positive feedback loops (as booms are in their growth and decline stages), many if not all of the self reinforcing factors can look (and be to some extent) causal. That is afterall the underlying nature of positive feedback loops.

    For me, the more useful analysis is to try and stop dissecting the situation, step back and recognize the “big picture.” If one can recognize a boom/bust cycle in the making, then one has the potential of staying away from it and its consequences. Don’t “go to the big city” because life won’t be better there for long. Don’t flip houses because there will be a downside to this bubble that will wipe away all your profits. Etc, etc. Granted many people, most of us, even if we recognize what is going on, cannot isolate ourselves and family from it entirely. But you as an individual/family are better off for knowing the “script” ahead of everyone else. And if enough people recognize these things early on, they will not grow to such monsterous levels (I hope).

  23. [...] Astyk on Casaubon’s Book tries to peel the onion and find food and oil as the ground causes of the financial crisis, and I must say, her arguments [...]

  24. [...] Astyk on Casaubon’s Book tries to peel the onion and find food and oil as the ground causes of the financial crisis, and I must say, her arguments [...]

  25. MKS says:

    Sharon has done a good job explaining recent history from a sociological viewpoint. But the progress of society is not to blame, just as home-owners who currently can’t pay their mortgages aren’t to blame either. She is right that oil and other resources are strangling an already drunken economic system. However, the real culprit is the way the money supply is controlled in our “credit” based economic system which is completely dependent on growth to survive. This is what is making the “onion” that Sharon is peeling apart stink so badly.

    Our recent economic crisis can be traced back directly to the actions of one very powerful individual, Alan Greenspan (and an Administration that pressured him). After the “Dot-com” market bust he lowered interest rates too low and kept them there for too long, causing the proliferation of “easy money” which kicked off both the housing boom and the mindset on Wall Street that “we can do anything because money is cheap.”

    Notwithstanding the ebb and flow of societal activity over the past decades which Sharon illustrates, careful analysis shows that the monetary policies of the Fed has been behind most of our economic boom and bust cycles. Ben Bernanke even commented in 2002 at Milton Friedman’s 90th birthday party that the Fed was responsible, at the very least, for increasing the severity of the Great Depression. Read about it on the website of the Federal Reserve here;

    Andrew Jackson hated the 2nd independent Central Bank of the US and finally successfully abolished it. Anybody interested in economic history should read about the fetid state of the US banking system in Jackson’s era, the similarities are disgustingly familiar. (For those of you who are still ill-informed, the Fed is neither Federal, nor does it maintain any reserves since we now have a Fiat currency. But I digress)….After abolishment of the Central US Bank the country enjoyed almost a century of almost no inflation in spite of the fact that during that time many of our ancestors were pouring into this country from points abroad. Things changed forever when, in a moment of weakness under pressure from powerful banking interests, Woodrow Wilson signed into law legislation passed by an 11th hour special session of Congress (with virtually no one in attendance) and re-incarnated the 3rd US Central Bank, this time with the misleading name “Federal Reserve.” Soon afterward we had the Great Depression followed by the economic roller-coaster ride we are on now.

    With abundant resources, huge corporate profits, and a seemingly limitless supply of cheap oil, we haven’t really noticed that our banking and financial system has interposed itself in between every aspect of commerce, taking its greedy share. Virtually all commerce is run off of credit now, even the creation of money by the US Treasury! But… by definition, if economic growth declines or even reverses, a society that runs on credit cannot function, because future growth is necessary to pay the interest on that credit. The only alternative is default which can happen at any level in the system, not just for home-owners. This is our current crisis.

    Everyone who reads and contributes to these blogs is a concerned citizen who knows that we are entering a new era with fewer exploitable resources and is looking for answers. Wall Street and our financial system is on a collision course with this new reality. Can we put aside capitalistic pride and invent an economic system that can exist without growth? If we can accomplish this we might even be able to survive the coming era of declines. Our current actions say that we would rather throw even more money at the problem (also obtained on credit) than face the ugly reality that things will never be the same again. Will the US government be the ultimate defaulter? Andrew Jackson, we need you again.


  26. Noah Scales says:

    Hi, Everybody. I hope you are all well.

    Generalists have less to exchange with each other than specialists, and generalization decreases the list of item available to exchange, including technologies and technology products, because the mental effort and physical attention used to develop and manufacture technology is occupied by the activities required to satisfy a short list of general needs. Therefore, generalization deprives cultures of variety and development in arts, sciences, politics, and economics.

    Furthermore, selfishness, defined as specialization and reliance on capital flows to serve general needs, is matched by its partner, selfishness , defined as generalization and reliance on self-protected (hoarded) resource flows to serve general needs. Therefore, generalist claims to recognize interdependence or demonstrate compassion through their back-to-basics lifestyle is false.

    Finally, compassion is satisfaction of other’s desires or needs when your actions cause you discomfort, whether or not those actions reward you. That discomfort includes grief over the lost alternatives to your compassionate acts. That grief becomes an addictive pleasure for physiological reasons, rather than an act of self-sacrifice and diligence. Compassion itself wears away its distinguishing moral feature, the discomfort that guaranteed that compassion is moral. Therefore, compassion (possibly in recognition of interdependence) is not moral.

    In summary, generalists who act compassionately in recognition of interdependence are moral frauds. As a generalist, my lack of capital production for those who would provide me capital in exchange – specialists without moral claims to a generalist lifestyle – also protects resource flows that I require, because my lifestyle requires devotion of my mental effort and physical attention away from specialists’ needs.

    If the poor face a lack of resources hoarded by the wealthy, then capital outflows from the poor must provide resources not available to the wealthy. The world’s poor (in hoarded resources) can create culture. Alternatively, they can provide their physical labor as a resource. However, in a high-energy society, the world’s poor can provide culture by their high level of education, diversified skills, and the relationships they foster during their leisure time. Just give them capital, a community focused on cultural development, and respect for their plentiful leisure time. Obviously, intentional movement toward a low-energy society without hope for a high-energy future damns the poor to relying on their labor as a capital outflow when their resource consumption is potentially more costly than their labor is valuable.

    If you are wealthy, contribute to the cultural development of the poor (for example, by sponsoring free cultural events), or increase energy capture that facilitates capital flow (for example, by investing in alternative energy technologies).

    An alternative is to turn your capital into waste efficiently and utilize your hoarded resources self-sustainingly. Just presume that you can protect those resources from several billion other people whose (potential) capital production you will ignore or refuse to consume.

    For a while, I guess I assumed that a bunch of people would die untimely deaths during peak oil and climate change crises. However, it is immoral to plan around high death rates when the plan only works if those deaths occur anyway. Now it seems like generalism is a romanticized lifestyle without relevance to upcoming circumstances of differentially-distributed global resource availability.

  27. hokey pokey says:

    Everyone should spend a year or so and go live on a small to medium sized island.

    Islands have a way focusing the mind on what is important, especially if you have to drag everything you need on and off of boats a lot.

    It makes you want to simplify because dragging things back and forth from off island is expensive and time consuming and get to be a real pain in the ass.

    The earth is an island, it is so big however that few really feel that reality on a daily basis. But yes, it’s an island that has no ‘resupply’ from any ‘mainland’. This is it.

    The water and heat systems and cycles are closed loops. If you screw them up, you end up peeing in your tea, so to speak.

    Much of ‘modern economics’ is about unending growth in a finite space.

    This is impossible, though not immediately apparent to ‘civilization’.

    So most of human economics is actually a Ponzi Scheme, because of the above circular logic of unending growth in a finite space.

    Until this pyramid scheme of infinite expansion in a finite landscape is addressed, human economics is doomed to progressively larger and more violent boom and bust scenarios.

    We look like we are approaching a ‘scrape the humans off the planet’ moment as numerous tipping point in Nature converge to ‘balance out’ the planet’s complex feedback loops, with or without human input.

  28. dewey says:

    Noah – I have a few quarrels with that. First, your definition of compassion (and of morality) is idiosyncratic, therefore your argument doesn’t make much sense to those of us who use standard definitions.

    Second, while I agree that high energy consumption CAN substitute for manual labor, thus giving people more time to engage in cultural activities, this is by no means necessarily the case. Our efficiency and productivity have risen greatly during the last century; where is the flowering of participatory culture? When automation halved the time required to make most goods, workers could have seized the chance to work a 20-hour week. Instead, they let corporate persuaders convince them that they had to keep working 40 hours, because they “needed” twice as much stuff as they used to. Then three times, or four – and the end result is the modern Boobus Americanus, who works more hours than a medieval serf and whose participation in arts and culture is limited to solitary after-hours vegetating in front of the very television that sells him all that corporate [email protected] On the other hand, some cultures we define as “low-energy and poor” do seem to have time to spend on art and cultural traditions (e.g., the distinctive embroidery that some groups are known for).

  29. Noah Scales says:

    Hi, Dewey.

    Whatever you think of my definitions and claim about grief and addiction, please specify your quarrels with them, when you’re interested.

    As I wrote, “However, in a high-energy society, the world’s poor can provide culture by their high level of education, diversified skills, and the relationships they foster during their leisure time. Just give them capital, a community focused on cultural development, and respect for their plentiful leisure time.”

    So far, (financial) capital, culturally-focused community, and respect for leisure time are missing from plans to help the poor.



  30. Jan Steinman says:

    I made this connection long ago, when the housing bubble first started. I mean, someone with a sub-prime loan has three needs: 1) to eat, 2) to drive to work, to pay for their food and lodging, and 3) to pay their mortgage. #1 and #2 go up in price, guess which one they’re going to scrimp on?

    But don’t take my word for it. I was gratified to find a rigourous white paper that vindicated my hypotheses:

  31. paul says:

    Speaking directly to the heart of the matter.

    One of the best pieces I’ve read on ‘peeling back the onion” otherwise known as Peak Oil.

    Thank you.

  32. souperman2 says:

    Sharon – A brilliant piece of big picture thinking.

    I have felt this intuitivily for some time now so it’s good to see it fleshed out.

    I find it unbearable that the world chooses to use money as the determining factor in who lives or dies. From that reality I suppose greed makes sense but I still hate it.


  33. dewey says:

    Noah – you imply that since specialization leads to more diverse economic and cultural goods and services, those who fail to be highly specialized (meaning, for most, to work a cog in the machine job) are depriving society of extra goodies and are thereby “moral frauds.” You also suggest that either specialization or generalization, apparently treated as dichotomous alternatives, constitutes mere “selfishness.” In a sense, that is true and properly so, since any sane animal takes its own interests into account when choosing how to act. However, when you define a word in such a way that it is applicable to all people, the word becomes meaningless, and you no longer have a word with which to describe the observed variation in the degree to which individuals are willing to pursue their desires to others’ cost.

    You define compassion as “satisfaction of other’s desires or needs when your actions cause you discomfort.” That’s self-sacrifice, not compassion. By the standard definition of the word, compassion is the sympathy that one feels for suffering creatures – e.g., you can feel compassion for a child dying of cancer, though you cannot intervene to relieve his pain. The related virtue of benevolence or generosity involves actually doing something to help. Sometimes one can help others with little cost to oneself, so that one does not suffer “grief over the lost alternatives to your compassionate acts.” To most of us, this does not mean that such benevolence is not virtuous. It certainly is from the viewpoint of the individual helped, and it helps a community of social animals to function smoothly. Thus, psychological studies have shown that humans who are not sociopaths feel happier and better about themselves when they have opportunities to help others. Here is how you you describe that innate capacity for kindness: “That grief becomes an addictive pleasure for physiological reasons…. Compassion itself wears away its distinguishing moral feature, the discomfort that guaranteed that compassion is moral. Therefore, compassion… is not moral.” This sounds like something taken straight from Ayn Rand, of whom I (too?) was once rather fond before I recognized that she was, in fact, a sociopath.

    I’m going to be off the net for a while, so you get the last word.

  34. Father OKC says:

    Hokey Pokey is wrong. It is not a closed system. New energy in the form of sunlight pours down on the Earth every day. But we are still relying on the sunlight that poured down on the Earth millions of years ago for our food, our housing, our chemicals, and our leisure.

    We must move to a new paradigm where we are far less dependent on old sunlight. We will find that there is a lot more of everything to go around.

  35. Noah says:

    OK, Dewey has provoked me into a rant.

    Compassion with your consciousness behind it involves more than lip service ( as in “Oh I feel really bad for them but can’t do anything for them”). It involves sacrifice. Otherwise it’s mislabeled, and probably baloney. Compassion is pursuing other’s interests at your cost.

    At least you agree that generalism serves selfish interest. In fact it is self-sufficiency out of self-interest. Recognizing interdependence by becoming self-sufficient, in the current context, is not sparing anyone else anything. It’s preparing for the collapse of the survival systems that support specialization. The romantic ideal of generalism is self-serving for those it appeals to, when it is cast as a morally superior choice. Specialization will win out on many levels, including cultural development, unless civilization is deprived of energy. Then generalism will triumph, and the lucky will live busy and happy while everyone else suffers famine, disease, war, slavery, and absolute poverty.

    Our global population is too big to live both low-energy AND economically decoupled. Right now humanity survives on high energy supporting aggressive resource extraction and massive industrial and transportation capacity. Given the convergence of global problems with potential to impact the population, taking care of you and yours is not enough. In fact, a world of high-energy consumption is a requirement for supporting the world’s population, even if me and my friends, prepared to live without, alone after some disasters kill off people who would take our stuff, will do fine. Talk about sociopathic .. geez.

    Anyhow, efforts to preserve ecology, live lightly, and preserve self-sufficiency, if uncoupled from a global movement toward the same, are entirely wasted. However, movement toward a high-energy future preserves the possibility that the global population will survive without demands placed on its moral capacity (for example, a collective desire to preserve fellow humans from death).

    What will enable us all to live interdependently over the long term? Lots and lots of energy. Thus, while a low-energy future is desirable from an ecological and environmental perspective, human energy and ambition must be directed the other way, to keep everyone I could live without, alive.

    Take care, Dewey.

  36. Eva says:

    Greed and thinking that there is/was a free lunch are big factors in getting us here.

    Human nature, perhaps?

  37. Noah Scales says:

    Grrr, Dewey.

    One more response to Dewey, about the claim that specialization leads to “coglike” living. This is one point (there is more than one) where Mr. Greer and I diverge. Mr. Greer imagines paperwork, drudgery, and meaningless work to be the unchanging reality of white collar careers, and sweatshop labor the uncompromising truth of industrial work. No.

    It is true that economy focused on contribution to for-profit enterprise can create an artificial need for work and a race to the bottom, ending with slave labor jobs in factories. However, the bottom of industrial automation rises fast as technology improves in a high-energy world.

    The biggest problem in a high-energy world will be how to couple capital flow to human activity. This proposal to support culture through capital, as an exchange with the jobless, is a kind of stealth employment that revalues community and culture enveloped in the free market economy. It’s not an original idea of mine. However, the specialization I am talking about is the kind enabled by free time, the kind allowed by non-profits that run at a loss, the kind that brings practical value to community-oriented living and gets people off the street.

    Oddly enough, the story of labor exploitation and meaningless work will certainly ring true in a world of low-energy, the secret truth in the romance with it. You either work or your lover throws you off the lifeboat.


  38. Oldnovice says:

    but if you are lousy at it and force yourself to do it anyway because you want to be the perfect generalist, you are aspiring to a hard and miserable life.)

    I can relate to this, dewey.

  39. Limits to greed…………….

    A remarkable amount of mental energy has been exerted by many `experts’ (and wealth distributed to them by their benefactors) over much of my lifetime in a concerted effort to widely share and consensually validate the specious idea that there is no such thing, of all things, as the most obvious of things……limits to growth in a finite world. Most recently, Schellnhuber in Germany, Rapley in England, Rees in Canada, Hansen in the USA, McMichael and Butler in Australia……the list goes on and on…… good scientists all, have been noting over and over again that the human species is approaching ecological limits evidently, obviously imposed by the biophysical reality of the planetary home we are blessed to inhabit. To put it another way, rampant overproduction, rapacious overconsumption and unregulated overpopulation activities by the human species now overspreading the surface of Earth will lead to an ecological “tipping point” of some, perhaps unimaginable sort.
    The question seems to have been, Which biophysical limit will be exceeded first? Precisely what will it mean for the human species to overreach and by so doing “give rise to” or “produce” some sort of ecological tipping point? What will happen then? What kind of global wreckage might ensue? What will that moment in space-time look like? Many scientists seem to have been thinking that the unbridled overgrowth activities of the human species would literally and eventually overwhelm the Earth and its environs because the family of humanity has chosen to recklessly ignore the reality of human species limits and Earth’s biophysical limitations. For example, recall the ruthless derision of the great work of the Club of Rome regarding ecological limitations to the growth of absolute global human population numbers.

    Even so, despite all the attention, the warnings and the good scientific evidence, an ecological tipping point may not be the source of the greatest, most imminent challenge to human wellbeing in these early years of Century XXI. The most pressing, most forbidding threat to human wellbeing may not be ecological in its nature.

    For a long time, I have been haunted by the words of Percy Bysshe Shelley (1792-1822) that are emblazoned in a sonnet about Ozymandias.

    ” I met a traveller from an antique land
    Who said: Two vast and trunkless legs of stone
    Stand in the desert. Near them on the sand,
    Half sunk, a shatter’d visage lies, whose frown
    And wrinkled lip and sneer of cold command
    Tell that its sculptor well those passions read
    Which yet survive, stamp’d on these lifeless things,
    The hand that mock’d them and the heart that fed.
    And on the pedestal these words appear:
    “My name is Ozymandias, king of kings:
    Look on my works, ye Mighty, and despair!”
    Nothing beside remains: round the decay
    Of that colossal wreck, boundless and bare,
    The lone and level sands stretch far away. ” –Schelley

    What was the “colossal wreck” this “king of kings” observed and how had it happened? What caused the destruction of the world?

    The calamity Ozymandias witnessed may not have been more or less than the incredible consequences of human greed having exceeded limits to its growth. That is to say, the adamant and relentless greediness of kings and self-proclaimed Masters of the Universe precipitated the gigantic, distinctly human-driven catastrophe to which The King of kings makes reference.

    Steven Earl Salmony
    AWAREness Campaign on The Human Population,
    established 2001

  40. Lindy says:

    “When we try to pick out anything by itself,
    we find it hitched to everything else in the universe.”
    John Muir, 1869

    Great minds think alike. This quote from John Muir fits perfectly with what Sharon wrote, “. . . the Buddhist idea of the interconnection, inter-being, of all things.”


  41. Noah says:

    You know, thinking about it, I don’t believe that grief is addictive. The rest of my argument seems fine, though. –Noah

  42. Sharon says:

    Steven, it is sort of fascinating to hear Ozymandias quoted in support of population reduction – simply because Shelley was a disciple of William Godwin’s (Mary Shelley’s father), who wrote his extensive reply to Malthus about the possibility that human ingenuity could overcome material limits. There’s every reason to believe that Shelley believed this too, and quite firmly. While Ozymandias may have come to his state through greed, it is unlikely Shelley thought he got there due to overpopulation ;-) .


  43. Richard says:

    You say “I’m no economist,” but you are! We must be reminded that economics is not a science and that academic pretenders have been mostly copted by the banking & securities industry to serve the accumulation of “wealth” or “money”. The term economics comes from the Ancient Greek οἰκονομία (oikonomia, “management of a household, administration”) from οἶκος (oikos, “house”) + νόμος (nomos, “custom” or “law”), hence “rules of the house(hold)” ( In that respect, I’d trust your economic judgement far more, because it takes us back to the primacy of real people, their households and ability to “put food on the table.”

  44. Jon Carlson says:

    9/11 Ringleaders Execute Brilliant German Spy Plot: ID Theft

  45. [...] materials. See: 2Thanks to Sharon Astyk for describing this:…; 3 I am using the scientific notation for naming species, i.e., Genus species Author, and the [...]

  46. [...] materials. See: 2Thanks to Sharon Astyk for describing this:…; 3 I am using the scientific notation for naming species, i.e., Genus species Author, and the [...]

  47. Andrew says:

    Great blog – good, but scary, thought pattern on how economies work.

    Just wanted to comment on the debate surrounding “division of labour”. There is some truth to the fact that some are better at doing things then others.

    I think we need to approach life as a generalist first, at least to the level of being somewhat self-reliant (however you define it). After this crucial step you are now useful to others either to help or to barter. And if you are useful, helpful, and open to barter then you are on your way to building trust and community via exchange (again, depends how you define these last terms). After trust and community, I would then agree more with the “division of labour” thought pattern.

    In a nutshell, being an actualist, you can’t get from here (crisis) to there (division of labour / community) without that crucial step of being a generalist, even an inefficient one, for a while.

  48. [...] huge portions of the population out of the formal economy and into the informal one. in my essay “Peeling the Onion” I track the history of these moves – from the 1930s into the 1970s, the massive elimination [...]

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