A man walks into a bar …
Oscar Wilde famously observed, ‘life imitates art … ‘
Economic Undertow shares the grief of the families and friends of those who were gunned down in Orlando, as well as in Paris, Norway and elsewhere … also Syria, Yemen and Afghanistan. Undertow is not a heartless robot, he is sensitive to human suffering. At the same time, everything that goes on in robot kill-zones are all of a piece with systemic unraveling, Peak Oil, over-population, resource exhaustion resulting from too many useless, non-remunerative gadgets: Undertow grunts, “I told you so!”
As we surrender our je ne sais quoi we turn our guns against each other. This is what we are programmed by our culture to do, by peer pressure and the dictates of fashion … to reflexively resort to punishment instead of creativity, sacrifice and hard work (even as we give lip service to these things).
With each passing day, First Law- related surplus costs pile up, the most vulnerable are on the hook for them whether they are able to bear them or not, the outcome is short, nasty and brutish, (New York Times):
Venezuelans Ransack Stores as Hunger Grips the Nation
CUMANÁ, Venezuela — With delivery trucks under constant attack, the nation’s food is now transported under armed guard. Soldiers stand watch over bakeries. The police fire rubber bullets at desperate mobs storming grocery stores, pharmacies and butcher shops. A 4-year-old girl was shot to death as street gangs fought over food.
Venezuela is convulsing from hunger.
Hundreds of people here in the city of Cumaná, home to one of the region’s independence heroes, marched on a supermarket in recent days, screaming for food. They forced open a large metal gate open and poured inside. They snatched water, flour, cornmeal, salt, sugar, potatoes, anything they could find, leaving behind only broken freezers and overturned shelves.
And they showed that even in a country with the largest oil reserves in the world, it is possible for people to riot because there is not enough food.
Venezuela has the resources to be self-sufficient in food, at one time (1998) the country was a food exporter. Its inept governments have not made a priority of developing agriculture. Land reform has been poorly managed and counterproductive. Due to urbanization and the flight of rural inhabitants to the cities, much of the productive farmland is in the hands of speculators who grow non-food crops such as sugar and coffee on large plantations. Until very recently it has been easy for the country to sell petroleum and use the funds to import necessary staples from neighbors and the US. The crash in fuel prices since 2014 has left less in the till; accompanying bolivar depreciation and inflation have made imports blindingly expensive. The blows rain down on the hapless country: a severe drought constrains what domestic food production remains while the cities are forced to endure blackouts as Venezuela relies on dams for both the supply of water and the generation of electricity.
Venezuela stumbles along with the help of dollar- loans from China, a country that is experiencing severe difficulties of its own. These loans paper over problems, the government has no incentive to determine whether policies work or not, and to abandon those that are ineffective. Much of the money is simply stolen by corrupt officials and cronies. Beijing reinforces defeat, shoveling billions down various politically favored rat holes, funding projects that offer uncertain prospect of return.
Venezuela, a Spanish word for crook, (Insight Crime):
$350 Billion Lost to Corruption in Venezuela
Freddy Guevara, a National Assembly representative and president of the Comptroller General Office’s permanent committee in the Assembly, announced that he will submit a proposal aimed at recovering the state money that has been diverted into the coffers of corrupt politicians.
“We are in the presence of the most corrupt regime in the Western Hemisphere,” said Guevara, who is also the national coordinator for the opposition party Voluntad Popular. “How does one explain that in a country with a fixed exchange rate, many officials have [bank] accounts in Andorra worth approximately $4 billion, enough to pay off the debt owed from the food sector, which is close to $1.6 billion? The answer is easy: corruption.”
Guevara added that corruption at Venezuela’s state-run oil company PDVSA has cost the government $10 billion.
One of the main sources of corruption in Venezuela is the country’s fixed exchange rates, which thanks to runaway inflation have created a huge gulf between the official currency exchange rates and the black market rate. The limited number of US dollars in Venezuela means importers often have to pay off officials at the country’s currency control agency, known as CADIVI, for the right to trade local currency (for dollars) at the government’s extremely low exchange rates. One Venezuelan businessman told the New York Times last year that importers pay bribes of up to several hundreds of thousands of dollars in order to receive permission to ship in a product from abroad.
Because both the collateral and repayment for Chinese loans is Venezuelan crude, the lenders feel comfortable offering more credit even as the ability of Venezuelan petroleum industry to extract its product is declining. Venezuela holds the world’s largest oil sands (bitumen) deposits @ 300 billion barrels equivalent. Because the bitumen is expensive to extract and refine, current world prices leave the national oil company underwater. Without loans, Venezuela’s oil is unrecoverable. With loans, crude that is extracted is unaffordable and is added to the world’s ‘energy glut’.
Figure 1: Venezuela maximum output occurred during the 1970s. (Mazama Science); The distress in Venezuela — and recent declining domestic consumption — is suggestive of the downside of peak oil. Venezuelan blends (with lighter crudes or naptha) typically sell at a 50% discount to the Brent benchmark. The revenue decline explains the intense demand for credit. Loans can postpone the day of reckoning but cannot alter industry fundamentals; energy invested in oil recovery is either met with energy returned or it isn’t. The potential outcomes are limited: Venezuela can mortgage itself while hoping for a miracle, becoming an uneasy Chinese satrapy. It can otherwise become a failed state, with the economy collapsing entirely and China forced to write off billions in uncollectible loans. So far the United States is content to sit aside and watch …
Caracas sports a yearly homicide rate of 120 persons per 100,000. With 2.1 million inhabitants, there is the equivalent of one Orlando shooting in Caracas every week. In comparison the deadliest US city, New Orleans, suffers 43 murders per 100,000. Violence by itself adversely affect business activity, it’s a leading indicator; more deaths = business gets out of Dodge. One of the contributors to misery is the ballooning Venezuelan population, a 25% increase since 2000, from 24.5 million to 30.5 million, each one of whom wakes up every morning hungry.
The epidemic of murder is worldwide. Causes include political disputes/asymmetric warfare, blood feuds between groups also street gangs and drug cartels battling each other and governments over turf. Resource depletion is a driver: the ‘pie’ of resources to be divided shrinks even as the number of claimants relentlessly increases. As more are excluded, many fight for a share, fair or not. This is what happened in Syria: a large and unmanageable population, inept/corrupt government; extreme drought with agriculture breakdown leading to forced urbanization plus declining oil sales. It is hardly likely that the mad man shooting up the Orlando nightclub spent any time at all considering capital depletion but its outcome is a context where homicide rampages are logical- if not inevitable: a war, as suggested by Thomas Hobbes, ” … of all against all”.
Another outcome of depletion are obsolete ‘prosperity’ governments that have become demonstrably, universally ruinous … at the same time demonstrably, universally irrelevant! There is only one exception: criminality at the top sets the standard for everyone else. Self-dealing, impunity, theft, resort to military aggression and finance manipulation are not alternatives to choose against but examples to be followed. Economies fail to provide the promised progress or to pay off those with nothing to sell but their willingness to behave themselves for a fee: the outcome is mayhem. Elites borrow billions, then spirit the funds to tax havens leaving the debts to be paid by straitened populations. When funds cannot be extracted from the populations by way of guile or fraud, force is called upon: assets are stripped, collateral is reclaimed including savings and the worth of a country’s money. Funds not paid as wages or as revenue to smaller firms is available to be diverted toward retirement of tycoons’ stupendous debts.
The will to powerlessness.
The triumph of modernity is that of the fake over reality. Life imitates art … think about that for a minute. The ‘American Dream’ isn’t owning a house … the house is a thing, the dream is a languid form of willfulness! The banks own all the houses while the ‘owners’ rent them by paying on oversized mortgages + utilities and property taxes … you pay or else. In a land of immigrants from around the world, the real aim has always been something more: relief from hereditary occupations and ties to the land, from rigid economic class- and social stratification. With effort and ingenuity, any dreamer could reinvent himself- or herself any way they might choose; from male to female, from nerd to housewife … to field marshal; from athlete to dope addict, from businessman to a gambler … By doing so, one might presume to gain ascendancy over the ‘rest’, who are all attempting the same thing. But this is just a mirage; dominion over others is impossible, ascendance is transitory. Only notoriety is within reach as it is a form of failure. Will to Powerlessness is a cynical process that leads to (social) media celebrity and Facebook ‘likes’; to fill the role played by the Paris Hiltons and Rick Astleys of our precious, emptied world. Everything we do with keys in the ignition, whether burning out cities with B-29s, shooting up nightclubs, bootlegging carloads of whiskey from Canada, selling dope, starting online businesses, sitting in an office ‘making money’ … all of these things and more offer status according to a set of rules that scrupulously follow the dictates of tyrannical fashion. For a gunman in Orlando or Caracas, an economist at the World Bank or an EU bureaucrat … and his wife … the roles are clearly marked out, they are where and what they are because they meet public expectations. Terrorist or economist; the humans are actors reading from scripts that must be followed exactly.
Trapped in this way, like robots in a maze or starving Venezuelans, the humans struggle to escape without understanding what it is that grinds them down. Turns out to be what it is we want, to get ‘it’ or not, our pleasures and conveniences and the rationalizations that come along with these things. Grinds us up then grinds us again … looking for freedom but it is a non-sequitur, we cannot know what it is because we lack the tools. We are senseless robots, beating against the current, borne back ceaselessly into entropy.