Saturday, March 22, 2008

MORAL FAILURE

So far I have explained at length the various economic root causes for this historic economic breakdown that we are witnessing, many of which are due to the mismanagement of the United States' economy.

Beyond the relative decline of one country however, the current "Globalized" economy was doomed to fail regardless, as much from MORAL failure as economic failure.

From a moral standpoint, the vast majority of people on this planet do not get paid under the current "pyramid" model, nor do they stand any reasonable chance of ever getting paid. One of the central tenets of a successful Ponzi Scheme is that the people at the bottom of the pyramid must absolutely hold faith that they too will one day attain an improved lifestyle. This is why trade barriers have been falling around the world, as country after country has put its faith in the globalized pyramid scheme.

Unfortunately, as we are now witnessing in real-time, the Westernized lifestyle is not SUSTAINABLE, to say nothing of being SCALABLE. The model is not sustainable because it is massively resource intensive i.e. 5% of the World's population (U.S.) use roughly 25% of the current output of natural resources. Simple mathematics indicates that this model can only be maintained if U.S. incomes rise as fast or faster than prices of natural resources. With the explosion of commodity prices in the past several years (e.g. oil has increased 1000% since 1998), this is clearly not the case.

If the model cannot be sustained across the current base of consumers in North America and Europe, then the scalability of this model is not even remotely possible, as the 5%/25% figures above make it mathematically impossible for the majority on this planet (or even a decent sized minority) to ever achieve a Westernized consumption-oriented lifestyle.

Once the leaders of the various developing countries around the world actually wake up to this most obvious fact, then the trade barriers will go back up and the global Ponzi will be officially over - for good.

Where does that leave the world economy? It means for one thing that the race is on to find the next great source of energy, as it's not possible for oil to be the same enabler of growth in the next century that it was in the past century. In fact, those economies rigidly tied to the use of fossil fuels, will inevitably experience sub-optimal growth. More importantly, however, for developing and developed nations alike, there will be a forced migration to an entirely new economic model and away from the Westernized lifestyle. Some of the key aspects of this new economic model will be (among others):

- Reduced resource footprint / end of the mass consumption based life style
- Quality of goods over quantity. Renewed emphasis on reusability and repairability
- Shared services: public transportation; rent vs. own etc.
- Focus on quality of life vs. wealth and material aggregation
- Focus on community life over individualistic lifestyles
- Reduced role and size of Government

Needless to say, for those in the developing world who already practice most of the habits described above, the adjustment will be relatively easy. For those in the developed world, the adjustment will be wrenching, difficult, AND LONG OVERDUE.