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When Conventional Success Is No Longer Possible, Degrowth And The Black Market Beckon

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“Phantom economies tend to give rise to gray and black markets in proportion to the deviance of the phantom economy from reality.”

College graduates around the world are discovering that getting a university diploma no longer guarantees the conventional success story of a secure job and a life of ever-rising consumption. Doing all the things that the Status Quo said would lead to success no longer yields success, for the simple reason that the Status Quo is failing on a structural/systemic level.

The system is rigged to protect the Status Quo mafia from competition. As noted in The Mafia State of Mind (February 6, 2014), the Status Quo is a set of overlapping monopolies/extortion rackets. The system needs a trickle of new technocrats and apparatchiks to manage the rackets, but there is no place for the tens of millions of college graduates who are flooding into the job market every year around the world.

New conventional enterprises face essentially impossible barriers: sky-high rents, absurdly lengthy and costly permitting processes, onerous fees and reporting requirements, and a host of other barriers reputedly imposed to “protect the public” but whose real purpose is to eliminate small-enterprise competition to corporate dominance.

Which organizations have the cash flow, financing, legal expertise and political influence to meet all the requirements and pay the insanely overpriced leases? Global corporations and the state–two sides of the same kleptocratic coin.

The high costs of launching and operating a legitimate Status Quo business serves two other primary purposes: maintaining high returns on capital for crony-capitalist financiers and funding the state’s enormous cadre of functionaries at above-market-rate salaries, benefits and pensions. Recall that median personal income in the U.S. is about $40,000 for full-time workers, and compensation above $82,500 annually puts one in thetop 10% of all wage earners.

The California Public Policy Center has just posted its own searchable site of state and local employee wages and pension benefits, Some of the results were rather revealing – and should be shocking to taxpayers: There are 31,527 retired public workers in the “$100,000 pension club” and 582 who are receiving pensions of at least $200,000 a year. Including wages and benefits, there are 227,059 state and local workers earning total compensation of at least $100,000 a year.

Some may argue that these large figures apply to a relatively small portion of public employees, and that the average public employee receives modest compensation. However, a CPPC analysis revealed that even average compensation is startlingly high. Average compensation for full-time state employees was $93,851 for public safety employees and $68,282 for all other employees. Adding benefits boosted these totals to $129,388 and $90,402, respectively. The figures for city and county employees were even higher.
Source: Public sector’s growing $100K club

Two forces are disrupting this cozy interlocking mafia of financiers, corporate cartels and state functionaries: the End of (Middle-Class) Work and the rise of the peer-to-peer, self-organizing business models such as AirBnB, car-sharing, ride-sharing, farmers markets, etc.

Russ in Redding: The Human Face of The End of Work (September 2, 2011)

America’s Social Recession: Five Years and Counting (August 28, 2013)

The Ten Best Employers To Work For (Peak Employment) (March 28, 2013)

The Python That Ate Your Job (December 11, 2013)

The high costs of legitimate business (needed to keep rentier/financial profits and state functionary pay/pensions high) are effectively destroying middle-class jobs and pay scales: the only organization that can afford to pay high salaries and benefits, regardless of costs or the business climate, is the state.

Even the financial sector and global corporations can only pay middle-class salaries for technocrats and managers in what are effectively quasi-state agencies (sickcare, workers compensation insurance, the defense industry, etc.)

So what are the tens of millions of college graduates supposed to do for a livelihood if there are only a few slots open in the moated mafias of financiers, corporate cartels and the state? To answer, let’s start with this obvious statement: that which cannot be paid will not be paid.

All the infrastructure of consumption depends on tens of millions of college graduates making enough money to pay high taxes, service their student loans, buy homes, autos, particle-board furniture, electronic gadgets, dozens of pairs of shoes, etc. etc. etc. If they can’t make enough money to buy and own all that stuff, then they won’t be buying and owning all that stuff.

And if they can’t earn a living within the Status Quo mafia, they will do so outside the mafia in the gray and black markets.

This destruction of consumption is supposed to be a disaster, but it’s only a disaster for the moated mafias of financiers, corporate cartels and the state that depend on tens of millions of workers voluntarily becoming debt serfs and tax donkeys. If young workers cannot make their student loan payments, those loans become worthless. As the old saying has it, You can’t get blood from a stone.(Alternatively: You can’t get blood from a turnip.)

If young workers can’t make enough to buy autos, homes, etc., the market for those goods and services implodes. And if all the financial/debt churn generated by consumption goes away, so do the fees and taxes the state depends on to pay its armies of functionaries.

Rather than a disaster, this wholesale loss of middle-class incomes and aspirations is enormously liberating. Instead of the yoke of debt-based ownership, young people are finding sharing to be better than owning: one shared car can provide transport for 10 people. Ten people no longer need to own 10 cars to get around.

One way to grasp how deeply the mafia state of mind has taken hold is to ask: how many middlemen have to be paid to produce/buy a good or service? In Greece, liberation starts by eliminating the middleman, which of course includes the voraciously corrupt state: After Crisis, Greeks Work to Promote ‘Social’ Economy.

The state is naturally in full freakout mode, as self-organizing sharing/no-middleman enterprises are outside the debt-serf/tax donkey system that funds the state. In response, the state is frantically trying to impose the same fee structure that has crushed conventional small businesses on the sharing/no-middleman organizations.

The problem for the state is that its success in imposing exorbitant fees and taxes will simply drive low-income people scratching out a minimal living in the gray market to other networks that do not even have a corporate structure to tax. To wit: “The more you tighten your grip, the more systems will slip through your fingers.”

If making a living in the gray market becomes untenable, then people will be forced into the black market, which is whatever trade can be done outside the reach of the state. As noted previously, that which cannot be paid will not be paid.

As correspondent Peter D. recently observed: “Phantom economies tend to give rise to gray and black markets in proportion to the deviance of the phantom economy from reality.” If we believe that phantom economies of moated fiefdoms, mafias and cartels are “reality,” then the rise of liberating degrowth networks is distressing and confusing.

But if we look past the propaganda and see the debt-serf/tax donkey system for what it really is, a predatory system of oppression and exploitation, then we can see how degrowth, de-consumption, de-debt, etc. is liberating.

TEDx Tokyo: The “De” Generation (8 minutes) (de-ownership, de-materialism, de-corporatism)

Degrowth, Anti-Consumerism and Peak Consumption (May 9, 2013)


OfTwoMinds blog

15 Comments on "When Conventional Success Is No Longer Possible, Degrowth And The Black Market Beckon"

  1. DC on Fri, 7th Feb 2014 11:44 pm 

    I agree 100%……

  2. J-Gav on Sat, 8th Feb 2014 12:08 am 

    Not new but still interesting. Degrowth can have a ‘liberating’ side to it. Despite the good intentions though, how to prevent the formation of other mafia-like structures in that framework remains a question that’s not quite answered here …

  3. action on Sat, 8th Feb 2014 12:24 am 

    Tax donkey lmao. Seriously though, social unrest from indebted college kids has already materialized via the 99% movement and is not a force to be underestimated, angry youths tend todo rather drastic things. Those that learn that skills are more valuable than a degree, or getting a degree in something useful will find work, but that takes knowledge of the economy and good parenting which the US at least lacks per the dumb sheeple phenomena for a lack of a better phrase. Honestly I blame television for that. Then theres the enormous, truly gigantic amount of money riding on those loans… Anyways theres social unrest coming just from this aspect alone, and young people live in the moment and couldn’t care less who suffers when they challenge the system. College kids are angry at the false promise and will seek societal downfall, even without having a plan for what happens afterward. Enter the police state, then next the US will look like Iraq or equivalent war zone between those in power and the status quo. And to think this was all caused by the reality of peak oil. Dollars are no longer infinite.

  4. Davy, Hermann, MO on Sat, 8th Feb 2014 1:46 am 

    The article is making a good point on how rigid the system is getting. He is a bit optimistic with the resulting outcome of this destruction of the traditional social fabric by the mafia of financiers, corporate cartels and state functionaries. It is almost as if he is heralding a rebirth of a new system that will bring down the evil empire and restore fairness, equity, and stability

    I see the results of this destruction of the traditional social fabric in a systematic way. The system is getting brittle and heading for catastrophic bifurcation. Tipping points are being passed and a series of positive feedbacks are driving the system to a new state of a collapsed global system of trade, finance, and governance.

    So if anything is positive about the mentioned liberating effects of degrowth, de-consumption, de-debt, etc. it would have to be collapse training. Degrowth, de-consumption, de-debt is a description of collapse. The people in this informal economy are getting an early dose of survival post collapse.

    Greece is a good example of an entire country in training for social decent. It may be argued that Greece will have an advantage when the global system implodes. It will already have taken a step down the ladder of complexity that all modern societies will descend.

    Talking about all the evil deeds of the mafia of financiers, corporate cartels and state functionaries may place blame when the blame is all of ours and none of ours. A global society of the complexity we have today is self-organizing and no group has a handle on what is happening. None of us are to blame for something beyond our control.

    The sooner we stop the blame the sooner we can start adjusting and mitigating the effects of collapse. These mafia of financiers, corporate cartels and state functionaries are the top of the house of cards. They are in charge of a Ponzi scheme but it is not of their making. We as a society are a bubble caused by the exploitation of fossil fuels. We dramatically overextended our carrying capacity in an overshoot. Thermodynamic laws dictate a return to a less complex state. This is nature and only nature can overcome nature.

  5. kervennic on Sat, 8th Feb 2014 2:25 am 

    Religion is a sect that has defeated all the others.
    The state is a mafia that has ovethrown the others.

  6. DMyers on Sat, 8th Feb 2014 2:41 am 

    I agree with DC. I especially like the way Smith ties this into the aspirations and expectations associated with a college education. Clearly, those expectations will not be met in a contracting economic environment, which is, clearly, where we are.

    This college education business has become a rolling snowball of madness. I don’t see how this can go on, but it does, in even larger form. As Smith is suggesting, a college degree is, in many if not most instances, economically worthless. Tuition keeps rising as the product keeps losing value.

    Why did a degree ever have value in the first place? It was partly due to supply and demand in a system growing increasingly complex. Supply has exploded while demand has imploded. Over the past twenty years, the university systems have expanded as though the pattern of the previous thirty years would extend into the distant future. To the contrary this enormous mass of brick, concrete, and exemplary architecture is headed for a rapid decline in relevance. Right now, the whole university system
    is in a HUGE overshoot, which will not end well.

    These college professors really get top dollar, in order to compensate their services commensurately with the “private sector”. Same argument is used to justify the high salaries of government workers, which Smith also treated very well. It’s time for a revaluation in this regard. Those alluring private sector wages have been falling, so it’s time for the government and professorial wages to follow suit.

    Speaking of these government workers, in particular those who were actually voted into office. Consider the following dramatization.

    Senator Smith: “Ms. Holly?”

    Ms Holly: “Yes?”

    SS: “This is Senator Smith.”

    MH: “It’s about time.”

    SS: “They told me you’d called a hundred and one times, and in my book that’s one too many. So, I got right back to you. I’m a very busy man, if we could get right to the point.”

    MH: “Senator, I’m a legal secretary, and I make about forty thou’ a year. I read that your secretary, who does the same shit I do, earns eighty five thou’. Now, I’d like to know why I should pay taxes on my miserable forty thou’ to pay her for doing the same thing I do at eighty five thou’!”

    SS: “You know what, lady? Fuck you.”

    I’m not saying Senator Smith would use that kind of language. But however it might be expressed, that’s what he would say. Can you imagine it any other way? For one thing these politicians hate hard questions and for another, “fuck you” sums up their true regard for their constituencies.

    The devastation of the middle class has to a large extent been the accomplishment of the computer. Although the term “automation” has been reserved in the past for those processes that have replaced blue-collar labor with machines, the same phenomenon has hit the middle class. Even professional level workers could be replaced in the future.

    How many more people would Wells-Fargo employ in the absence of computers? Aside from the question of whether it could operate at all without computers, the number of employees for the same amount of work would be huge. These employees would be the college educated middle class. This applies across many businesses and, certainly, government operations, which are word-processing intensive by nature.

    So, I contend that there is a major role for computers in the devastation of the middle class. Due to our deep love for and dependence on computers, I don’t think the matter is often framed in those terms.

  7. DC on Sat, 8th Feb 2014 3:10 am 

    Interesting you pick Wells Fargo there. We must remember WF has a history that long pre-dates the computer. They ran banking, mail and courier services long before the IT age. The ‘modern’ WF, definitely couldn’t function at all w/o comps, the old one, functioned just fine. China and Rome had extensive courier networks of their own that made the management of sprawling complex empires less problematic than we tend to imagine they were in todays terms.

    I wouldnt dispute computers have played there part in all this but I think they play at best, a minor role. The real kicker for the ‘middle class’ hasnt been the computer so much, as the fact that this world just cannot support the inflated numbers of middle class ‘consumers’ we have now. Example, after WW2, the US spent several decades siphoning the worlds resources towards itself, with 1/2 the pop. is has today, while the rest of the world tried to recover from the ravages of that war. Fast foward 70 years, the US, and most other western nations have on average doubled there populations. But, the cheap resource flows required to maintain our high maintenance high-waste lifestyles simply isn’t there anymore. Thus, the ‘middle-class’ is taking it on the chin. The 1% aren’t about to take a hair-cut and share the wealth, and the middle-class itself are for the a pretty passive lot, thus, the great contraction. Too many want-to-be middle classers chasing a lifestyle the planet simply cant support-at least not for the numbers we have now.

    Think the US can support a population in 300-500 million range all expecting 2.5 gas-burnings cars and a pool in every back yard?

    What about the Uk? Same thing. 70 million people crammed into a small island that physically can support maybe 1/5th that number.

    Canada and Mexico, both committed to expanding there populations. So is Australia in a land that cant support many more people. Every one of those countries and others besides, continues to breed or import more people all expecting a ‘middle-class’ lifestyle of easy affluence and waste. Sure, we could make things less worse(temporarily) by hanging every 1%er from the nearest tree and breaking up the corporations, but so long as the we clung to a high-birth, fossil-fuel based way of life, wed be back here in the exact same spot in less than a generation, computers or no.

    No, the only countries doing well, are those with small and stable populations, access to decent quality resources, and that are not committing huge resources on building up war economies. Since those conditions are either long gone, or going away here in N.America and other parts of the western world, thats why Mr Smith wrote this article.

  8. Makati1 on Sat, 8th Feb 2014 3:56 am 

    DC, I agree. I see contraction, the correct word for shrinking economies, not the made-up ‘degrowth’.

    The middle class is starting to feel the shaft and wonder who is applying it. When that realization is more well known … maybe an investment in guillotines would be a good bet? Won’t change or stop the slide, but it would be emotionally satisfying to see baskets of heads on the National Mall or Wall Street or The City or wherever else the elite congregate. The French had the right idea.

  9. Norm on Sat, 8th Feb 2014 4:25 am 

    One economic collapse, can ruin your whole day.

  10. rollin on Sat, 8th Feb 2014 5:28 am 

    Who needs all those labor saving devices anyway? Read an article once proving that most things from vacuum cleaners to dishwashers did not save any labor, sine you had to work to make the money to purchase, maintain, power and eventually dispose of said item. Not even mentioning the storage space they take up.

    Still, as I hand shovel my driveway and road, I do look longingly at those snow blowers. Especially after the fourth or fifth storm.

  11. J-Gav on Sat, 8th Feb 2014 9:46 am 

    Rollin – There’s a 60-page book available on the net called “De-junking,” meant to help people get rid of a lot of the clutter they accumulate over the years. Nothing revolutionary in it, sort of common sense really, but even a frugal, long-time de-junker such as myself found a good reminder or two there …

  12. Arthur on Sat, 8th Feb 2014 12:34 pm 

    It is all a matter of marketing a concept really. How about redefining growth, away from number of tons steel & oil produced, number of miles driven, that’s so 20th century, towards number of lines of code written, number of kwh produced by renewable energy sources, number of trees planted, number of hours worked less, the hours gained by replacing commuting with remote working, etc., etc.

  13. Davy, Hermann, MO on Sat, 8th Feb 2014 2:04 pm 

    J-Gav on Sat, 8th Feb 2014 9:46 am

    There’s a 60-page book available on the net called “De-junking,”

    Going to check into that J. I am that way anyhow but I can always use further ideas!

    Hey, how do you get a pic to appear when you post?

  14. Stephen on Sat, 8th Feb 2014 7:33 pm 

    I think the if anything, the corporate mafia will be the one that fails if the energy or transportation system were to collapse. What happens from that point is anyone’s guess. A lot will depend on whether the people want to work cooperatively or competitively to create a sustainable society with what is left in terms of resources, and their willingness to put survival and a quality of life as a higher priority than profit, growth, or all debts being paid.

  15. Northwest Resident on Sat, 8th Feb 2014 9:08 pm 

    In ages past, a huge group of idle unemployed youth would most definitely lead to serious unrest and violence in the streets. These days, the youth have their video games, their computer porn and their social media — all of which is highly addictive and all-consuming. When all that stops working, THEN we’ll see the angry and restless youth hitting the streets, but probably not before.

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