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The Era of Impact

Of all the wistful superstitions that cluster around the concept of the future in contemporary popular culture, the most enduring has to be the notion that somehow, sooner or later, something will happen to shake the majority out of its complacency and get it to take seriously the crisis of our age. Week after week, I field comments and emails that presuppose that belief. People want to know how soon I think the shock of awakening will finally hit, or wonder whether this or that event will do the trick, or simply insist that the moment has to come sooner or later.

To all such inquiries and expostulations I have no scrap of comfort to offer. Quite the contrary, what history shows is that a sudden awakening to the realities of a difficult situation is far and away the least likely result of what I’ve called the era of impact, the second of the five stages of collapse. (The first, for those who missed last week’s post, is the era of pretense; the remaining three, which will be covered in the coming weeks, are the eras of response, breakdown, and dissolution.)

The era of impact is the point at which it becomes clear to most people that something has gone wrong with the most basic narratives of a society—not just a little bit wrong, in the sort of way that requires a little tinkering here and there, but really, massively, spectacularly wrong. It arrives when an asset class that was supposed to keep rising in price forever stops rising, does its Wile E. Coyote moment of hang time, and then drops like a stone. It shows up when an apparently entrenched political system, bristling with soldiers and secret police, implodes in a matter of days or weeks and is replaced by a provisional government whose leaders look just as stunned as everyone else. It comes whenever a state of affairs that was assumed to be permanent runs into serious trouble—but somehow it never seems to succeed in getting people to notice just how temporary that state of affairs always was.

Since history is the best guide we’ve got to how such events work out in the real world, I want to take a couple of examples of the kind just outlined and explore them in a little more detail. The stock market bubble of the 1920s makes a good case study on a relatively small scale. In the years leading up to the crash of 1929, stock values in the US stock market quietly disconnected themselves from the economic fundamentals and began what was, for the time, an epic climb into la-la land. There were important if unmentionable reasons for that airy detachment from reality; the most significant was the increasingly distorted distribution of income in 1920s America, which put more and more of the national wealth in the hands of fewer and fewer people and thus gutted the national economy.

It’s one of the repeated lessons of economic history that money in the hands of the rich does much less good for the economy as a whole than money in the hands of the working classes and the poor. The reasoning here is as simple as it is inescapable. Industrial economies survive and thrive on consumer expenditures, but consumer expenditures are limited by the ability of consumers to buy the things they want and need. As money is diverted away from the lower end of the economic pyramid, you get demand destruction—the process by which those who can’t afford to buy things stop buying them—and consumer expenditures fall off. The rich, by contrast, divert a large share of their income out of the consumer economy into investments; the richer they get, the more of the national wealth ends up in investments rather than consumer expenditures; and as consumer expenditures falter, and investments linked to the consumer economy falter in turn, more and more money ends up in illiquid speculative vehicles that are disconnected from the productive economy and do nothing to stimulate demand.

That’s what happened in the 1920s. All through the decade in the US, the rich got richer and the poor got screwed, speculation took the place of productive investment throughout the US economy, and the well-to-do wallowed in the wretched excess chronicled in F. Scott Fitzgerald’s The Great Gatsby while most other people struggled to get by. The whole decade was a classic era of pretense, crowned by the delusional insistence—splashed all over the media of the time—that everyone in the US could invest in the stock market and, since the market was of course going to keep on rising forever, everyone in the US would thus inevitably become rich.

It’s interesting to note that there were people who saw straight through the nonsense and tried to warn their fellow Americans about the inevitable consequences. They were denounced six ways from Sunday by all right-thinking people, in language identical to that used more recently on those of us who’ve had the effrontery to point out that an infinite supply of oil can’t be extracted from a finite planet. The people who insisted that the soaring stock values of the late 1920s were the product of one of history’s great speculative bubbles were dead right; they had all the facts and figures on their side, not to mention plain common sense; but nobody wanted to hear it.

When the stock market peaked just before the Labor Day weekend in 1929 and started trending down, therefore, the immediate response of all right-thinking people was to insist at the top of their lungs that nothing of the sort was happening, that the market was simply catching its breath before its next great upward leap, and so on. Each new downward lurch was met by a new round of claims along these lines, louder, more dogmatic, and more strident than the one that preceded it, and nasty personal attacks on anyone who didn’t support the delusional consensus filled the media of the time.

People were still saying those things when the bottom dropped out of the market.

Tuesday, October 29, 1929 can reasonably be taken as the point at which the era of pretense gave way once and for all to the era of impact. That’s not because it was the first day of the crash—there had been ghastly slumps on the previous Thursday and Monday, on the heels of two months of less drastic but still seriously ugly declines—but because, after that day, the pundits and the media pretty much stopped pretending that nothing was wrong. Mind you, next to nobody was willing to talk about what exactly had gone wrong, or why it had gone wrong, but the pretense that the good fairy of capitalism had promised Americans happy days forever was out the window once and for all.

It’s crucial to note, though, that what followed this realization was the immediate and all but universal insistence that happy days would soon be back if only everyone did the right thing. It’s even more crucial to note that what nearly everyone identified as “the right thing”—running right out and buying lots of stocks—was a really bad idea that bankrupted many of those who did it, and didn’t help the imploding US economy at all.

It’s probably necessary to talk about this in a little more detail, since it’s been an article of blind faith in the United States for many decades now that it’s always a good idea to buy and hold stocks. (I suspect that stockbrokers have had a good deal to do with the promulgation of this notion.) It’s been claimed that someone who bought stocks in 1929 at the peak of the bubble, and then held onto them, would have ended up in the black eventually, and for certain values of “eventually,” this is quite true—but it took the Dow Jones industrial average until the mid-1950s to return to its 1929 high, and so for a quarter of a century our investor would have been underwater on his stock purchases.

What’s more, the Dow isn’t necessarily a good measure of stocks generally; many of the darlings of the market in the 1920s either went bankrupt in the Depression or never again returned to their 1929 valuations. Nor did the surge of money into stocks in the wake of the 1929 crash stave off the Great Depression, or do much of anything else other than provide a great example of the folly of throwing good money after bad. The moral to this story? In an era of impact, the advice you hear from everyone around you may not be in your best interest.

That same moral can be shown just as clearly in the second example I have in mind, the French Revolution. We talked briefly in last week’s post about the way that the French monarchy and aristocracy blinded themselves to the convulsive social and economic changes that were pushing France closer and closer to a collective explosion on the grand scale, and pursued business as usual long past the point at which business as usual was anything but a recipe for disaster. Even when the struggle between the Crown and the aristocracy forced Louis XVI to convene the États-Généraux—the rarely-held national parliament of France, which had powers more or less equivalent to a constitutional convention in the US—next to nobody expected anything but long rounds of political horse-trading from which some modest shifts in the balance of power might result.

That was before the summer of 1789. On June 17, the deputies of the Third Estate—the representatives of the commoners—declared themselves a National Assembly and staged what amounted to a coup d’etat; on July 14, faced with the threat of a military response from the monarchy, the Parisian mob seized the Bastille, kickstarting a wave of revolt across the country that put government and military facilities in the hands of the revolutionary National Guard and broke the back of the feudal system; on August 4, the National Assembly abolished all feudal rights and legal distinctions between the classes. Over less than two months, a political and social system that had been welded firmly in place for a thousand years all came crashing to the ground.

Those two months marked the end of the era of pretense and the arrival of the era of impact. The immediate response, with a modest number of exceptions among the aristocracy and the inner circles of the monarchy’s supporters, was frantic cheering and an insistence that everything would soon settle into a wonderful new age of peace, prosperity, and liberty. All the overblown dreams of the philosophes about a future age governed by reason were trotted out and treated as self-evident fact. Of course that’s not what happened; once it was firmly in power, the National Assembly used its unchecked authority as abusively as the monarchy had once done; factional struggles spun out of control, and before long mob rule and the guillotine were among the basic facts of life in Revolutionary France.

Among the most common symptoms of an era of impact, in other words, is the rise of what we may as well call “crackpot optimism”—the enthusiastic and all but universal insistence, in the teeth of the evidence, that the end of business as usual will turn out to be the door to a wonderful new future. In the wake of the 1929 stock market crash, people were urged to pile back into the market in the belief that this would cause the economy to boom again even more spectacularly than before, and most of the people who followed this advice proceeded to lose their shirts. In the wake of the revolution of 1789, likewise, people across France were encouraged to join with their fellow citizens in building the shining new utopia of reason, and a great many of those who followed that advice ended up decapitated or, a little later, dying of gunshot or disease in the brutal era of pan-European warfare that extended almost without a break from the cannonade of Valmy in 1792 to the battle of Waterloo in 1815.

And the present example? That’s a question worth exploring, if only for the utterly pragmatic reason that most of my readers are going to get to see it up close and personal.

That the United States and the industrial world generally are deep in an era of pretense is, I think, pretty much beyond question at this point. We’ve got political authorities, global bankers, and a galaxy of pundits insisting at the top of their lungs that nothing is wrong, everything is fine, and we’ll be on our way to the next great era of prosperity if we just keep pursuing a set of boneheaded policies that have never—not once in the entire span of human history—brought prosperity to the countries that pursued them. We’ve got shelves full of books for sale in upscale bookstores insisting, in the strident language usual to such times, that life is wonderful in this best of all possible worlds, and it’s going to get better forever because, like, we have technology, dude! Across the landscape of the cultural mainstream, you’ll find no shortage of cheerleaders insisting at the top of their lungs that everything’s going to be fine, that even though they said ten years ago that we only have ten years to do something before disaster hits, why, we still have ten years before disaster hits, and when ten more years pass by, why, you can be sure that the same people will be insisting that we have ten more.

This is the classic rhetoric of an era of pretense. Over the last few years, though, it’s seemed to me that the voices of crackpot optimism have gotten more shrill, the diatribes more fact-free, and the logic even shoddier than it was in Bjorn Lomborg’s day, which is saying something. We’ve reached the point that state governments are making it a crime to report on water quality and forbidding officials from using such unwelcome phrases as “climate change.” That’s not the action of people who are confident in their beliefs; it’s the action of a bunch of overgrown children frantically clenching their eyes shut, stuffing their fingers in their ears, and shouting “La, la, la, I can’t hear you.”

That, in turn, suggests that the transition to the era of impact may be fairly close. Exactly when it’s likely to arrive is a complex question, and exactly what’s going to land the blow that will crack the crackpot optimism and make it impossible to ignore the arrival of real trouble is an even more complex one. In 1929, those who hadn’t bought into the bubble could be perfectly sure—and in fact, a good many of them were perfectly sure—that the usual mechanism that brings bubbles to a catastrophic end was about to terminate the boom of the 1920s with extreme prejudice, as indeed it did. In the last decades of the French monarchy, it was by no means clear exactly what sequence of events would bring the Ancien Régime crashing down, but such thoughtful observers as Talleyrand knew that something of the sort was likely to follow the crisis of legitimacy then under way.

The problem with trying to predict the trigger that will bring our current situation to a sudden stop is that we’re in such a target-rich environment. Looking over the potential candidates for the sudden shock that will stick a fork in the well-roasted corpse of business as usual, I’m reminded of the old board game Clue. Will Mr. Boddy’s killer turn out to be Colonel Mustard in the library with a lead pipe, Professor Plum in the conservatory with a candlestick, or Miss Scarlet in the dining room with a rope?

In much the same sense, we’ve got a global economy burdened to the breaking point with more than a quadrillion dollars of unpayable debt; we’ve got a global political system coming apart at the seams as the United States slips toward the usual fate of empires and its rivals circle warily, waiting for the kill; we’ve got a domestic political system here in the US entering a classic prerevolutionary condition under the impact of a textbook crisis of legitimacy; we’ve got a global climate that’s hammered by our rank stupidity in treating the atmosphere as a gaseous sewer for our wastes; we’ve got a global fossil fuel industry that’s frantically trying to pretend that scraping the bottom of the barrel means that the barrel is full, and the list goes on. It’s as though Colonel Mustard, Professor Plum, Miss Scarlet, and the rest of them all ganged up on Mr. Boddy at once, and only the most careful autopsy will be able to determine which of them actually dealt the fatal blow.

In the midst of all this uncertainty, there are three things that can, I think, be said for certain about the end of the current era of pretense and the coming of the era of impact. The first is that it’s going to happen. When something is unsustainable, it’s a pretty safe bet that it won’t be sustained indefinitely, and a society that keeps on embracing policies that swap short-term gains for long-term problems will sooner or later end up awash in the consequences of those policies. Timing such transitions is difficult at best; it’s an old adage among stock traders that the market can stay irrational longer than you can stay solvent. Still, points made above—especially the increasingly shrill tone of the defenders of the existing order—suggest to me that the era of impact may be here within a decade or so at the outside.

The second thing that can be said for certain about the coming era of impact is that it’s not the end of the world. Apocalyptic fantasies are common and popular in eras of pretense, and for good reason; fixating on the supposed imminence of the Second Coming, human extinction, or what have you, is a great way to distract yourself from the real crisis that’s breathing down your neck. If the real crisis in question is partly or wholly a result of your own actions, while the apocalyptic fantasy can be blamed on someone or something else, that adds a further attraction to the fantasy.

The end of industrial civilization will be a long, bitter, painful cascade of conflicts, disasters, and accelerating decline in which a vast number of people are going to die before they otherwise would, and a great many things of value will be lost forever. That’s true of any falling civilization, and the misguided decisions of the last forty years have pretty much guaranteed that the current example is going to have an extra helping of all these unwelcome things. I’ve discussed at length, in earlier posts in the Dark Age America sequence here and in other sequences as well, why the sort of apocalyptic sudden stop beloved of Hollywood scriptwriters is the least likely outcome of the predicament of our time; still, insisting on the imminence and inevitability of some such game-ending event will no doubt be as popular as usual in the years immediately ahead.

The third thing that I think can be said for certain about the coming era of impact, though, is the one that counts. If it follows the usual pattern, as I expect it to do, once the crisis hits there will be serious, authoritative, respectable figures telling everyone exactly what they need to do to bring an end to the troubles and get the United States and the world back on track to renewed peace and prosperity. Taking these pronouncements seriously and following their directions will be extremely popular, and it will almost certainly also be a recipe for unmitigated disaster. If forewarned is forearmed, as the saying has it, this is a piece of firepower to keep handy as the era of pretense winds down. In next week’s post, we’ll talk about comparable weaponry relating to the third stage of collapse—the era of response.