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Collapse Part 3: No Institutional Path To Contraction

General Ideas

Collapse is not an event, it is a process.

One poorly understood source of collapse is the lack of pathways to contraction and a reduction of complexity/cost. The only pathway that is clearly marked is the one to expansion–of production, debt, credit, government, income, benefits, costs and complexity: more agencies, more regulations, more committees, more staff, more of everything.
The path to less complexity, less debt, less production and a contraction of the entire system doesn’t exist in most institutions.
Many dismiss any talk of collapse as mere fear-mongering. This is a legitimate issue to discuss, for if we focus exclusively on the lurid horrors of being killed by a shark in open water (for example) while ignoring the much higher risks of being killed by falling off a ladder at home, we have distorted the risks of accidental death and done a disservice to our understanding of various risks.
But collapse is not an event, it is a process. As a result, systemic collapse doesn’t lend itself to statistical calculations of probability. Processes are driven by dynamics, not odds.
So those dismissing any discussion of collapse as mere fear-mongering are doing a disservice to our understanding of processes–or lack thereof. One interesting feature of collapse is that it can result from either a choking over-abundance of complex, costly processes or a complete lack of essential processes, conceptually and practically.
Which brings us to the process that is lacking virtually everywhere–the process of contraction: shrinking the system, income, headcount, complexity and being productive with less of everything.
The corporate world offers many examples of what happens when the process of contraction and reducing complexity does not exist: companies buckle, fold and go bust. The world’s corporate darling Apple experienced this precise death-spiral in 1996-1997 before the company’s board brought Steve Jobs back as CEO. (So tentative was the board that Jobs was appointed “interim CEO.”)
Apple had only one path: expansion. More fiefdoms, more staff, more product lines, more models, more sales, more profits. The reversal from profits to losses marooned the company, for there was no institutional history of a vast reduction in products, fixed costs and organizational complexity.
Not only was there no institutional history of downsizing, there was no conceptual or practical pathway from unprofitable bloat and institutional failure to a leaner, flatter more productive system. Without an emergency infusion of cash from Microsoft and the appointment of a manager empowered to slash and burn fixed costs and re-set priorities and product lines, Apple would have collapsed.
The same can be said of the European Union. The bylaws of the EU (as I understand them) define the pathway of expanding the EU but not the pathway of forcibly shedding members. Member nations may elect to leave the EU of their own volition, but there is no mechanism in place for the EU to eject member nations such as Greece.
In other cases, systems are structured so any contraction leads to collapse. This is the nature of our debt/leverage-based financial system: any contraction in debt, credit or inflation will bring the system down because the system is predicated on the permanent expansion of collateral to support more debt and the expansion of income to service debt.
If either collateral or income declines, the system implodes:
This is not an event, it is a process. If debt and leverage expand while collateral and income decrease, the system becomes systemically more fragile and prone to destabilization. The financial system is dynamic and has multiple inputs; on its current setting, the system will become increasingly fragile. If alternative policies were put in place, it could become increasingly resilient.
Systems with no conceptual or practical pathway to contraction and reduced complexity/fixed costs are more at risk of collapse than systems with institutional pathways for successful reductions in debt, credit, income, fixed costs and complexity.
How many institutions have proven pathways for becoming smaller, leaner, and flatter in organizational structure? Very few, as the default setting for the past 60 years has been expansion and more of everything. Less of everything does not compute.
Charles Hugh-Smith of OfTwoMinds blog


12 Comments on "Collapse Part 3: No Institutional Path To Contraction"

  1. GregT on Wed, 24th Jun 2015 7:54 am 

    The current system of creating money out of thin air with interest attached, and fractional reserve lending, requires infinite exponential growth or it will collapse in on itself. We either end the fed voluntarily, and create a new monetary system by the people, for the people, or the bankers will bleed everyone of us dry as the system collapses by itself. If we have any hope for a future, we need to construct a new, steady state economy. One that belongs to everyone, instead of a small handful of evil and ruthless men.

  2. Makati1 on Wed, 24th Jun 2015 8:21 am 

    “Contraction” has been deleted from the new American Dictionary. No? When did you last see it used in the US MSM Propaganda mill other than to describe the muscle spasms of birth?

    De-growth has replaced it, as if people are so stupid that they don’t see the blatant attempt to pretend that the economy is not in collapse mode. Well, then again, most Americans are that stupid. The evidence is overwhelming.

  3. Makati1 on Wed, 24th Jun 2015 8:23 am 

    GregT, I agree, but that would mean that Americans could only use the 4-5% of the world’s resources instead of the 25-30% they have consumed for the last 50 years or more. I don’t see that happening voluntarily. Do you?

  4. ghung on Wed, 24th Jun 2015 8:50 am 

    Any “Institutional Path To Contraction” would necessarily involve conflict since individuals and institutional entities will resist contraction fiercely. Voluntary contraction, as some of us have chosen, is a more rare thing than the desire to grow (better one’s lot). Seems humans are hard-wired for growth. The idea of reducing growth, output, and perceived wealth accumulation so predominant these days runs counter to most societies’ nature. Plenty of historical examples. More people: more growth. It’s that simple, and the goal is generally to bring more humans into the middle class – more consumers; consequences be damned.

    No matter how you spin it, a big reset of everything is baked in. As Greer says; “collapse now and beat the rush…”

  5. Boat on Wed, 24th Jun 2015 9:10 am 

    Better gas mileage, tighter homes, better tech etc. Check out the chart. Per Capita The US is using much less energy than in 1980. Make energy expensive and people start to think and change. Americans are good at the think and change thing. Along with the rest of the educated populations

    http://www.eia.gov/cfapps/ipdbproject/iedindex3.cfm?tid=44&pid=45&aid=2&cid=regions&syid=1980&eyid=2011&unit=MBTUPP

  6. Davy on Wed, 24th Jun 2015 9:22 am 

    Mak, how can you explain or justify the grotesque population levels of Asia as you hypocritically criticize the U.S.? IMA an Asia growing both in population and consumption. Asia is the real stupidity and the real earth killing agents. China consume more than the U.S. in almost every category other than oil. There is no hope for the world with he Asian disease of population and consumption growth.

  7. Rodster on Wed, 24th Jun 2015 9:45 am 

    “The current system of creating money out of thin air with interest attached, and fractional reserve lending, requires infinite exponential growth or it will collapse in on itself. We either end the fed voluntarily, and create a new monetary system by the people, for the people”

    As I said MANY time, there in lies the problem, the current money system. It requires that everything grows exponentially including the population to keep the system FUNCTIONING.

    And it was all made possible by cheap and plentiful oil.

  8. penury on Wed, 24th Jun 2015 10:21 am 

    Collapse is inevitable. Decay and rot are always at work. Look around your towns and cities. Is infra structure as well maintained as last year or the year before? how is the debt level for your family? Your state? Your nation? Mostly unservicable I would bet. The money system is a fraud. Accept that these debts will not because they cannot be re-paid. Either war will happen, to dis-avow all debts or nations will be forced to accept that spent money is gone forever. It is time to evaluate what will come next. Being humans,what comes nest will horrible, prepare for the worst. Hope I am wrong, or at least several years too early.

  9. Lawfish1964 on Wed, 24th Jun 2015 11:39 am 

    “Americans are good at the think and change thing.” LOL! That’s a good one, Boat!

    I suppose in a way you’re right. Americans are good at thinking – thinking about whether Bruce Jenner looks better as a girl than a guy, and changing – changing from a society of decent, honest, hard-working people into a society of obese, lazy, self-involved idiots.

  10. Hubbert on Wed, 24th Jun 2015 3:33 pm 

    It’s almost hopeless if you’re expecting these brain-dead politicians to make any real change. I seriously doubt 99% of Americans understand what peak oil means. Even if they did, they have no interest in buying into it. No one wants to believe we will be living in a very different world in few years.

    Nothing will change until people are forced to change, but by then, it’ll be too late.

  11. justeunperdant on Wed, 24th Jun 2015 9:25 pm 

    I lost faith in humans being a long time ago. You would think that the Greece negotiation will be about changing the monetary system to work in a contracting environment (Lower energy available) instead of growth environment (lot of energy available). No, we have a bunch of adults trying to look important and powerful by playing minds game like 6 years old.
    The is also the problems of overpopulation very well explain in the mouse utopia video. This apply mostly to western countries with high standard of living. Every new generation that is born in these counties are losing the knowledge of the previous generation. That was the conclusion of this experimentation. Now you have a young generation this is born into a totally artificial environment that have no connection with nature, manual labour. I have no confidence in humans anymore. Now people in power are trying to avoid a crash by delaying it as much as possible. That will make the crash even more brutal,violent and bloody.

    https://www.youtube.com/watch?v=0Z760XNy4VM

  12. Davy on Thu, 25th Jun 2015 7:48 am 

    Just, I have lost faith in humans at the global level but not on the local level. It will not be long (1-10yr?) and our world will contract and we will not be talking on boards and forums. We will be meeting with neighbors more out of necessity. Manual labor will be the new way of life. The changes ahead are huge. It is the dying that scares me. So many will need to be culled from this overpopulated earth. I am also worried about the climate. Bad stuff ahead. I wish I knew when.

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