One of humanity’s enduring fantasies is luxury and wealth without effort—Midas, manna from heaven, alchemy. If half the energy that has been put into the quest for something for nothing had been directed towards productive endeavors, society would be several centuries more advanced than it is. Fortunately, nature and markets yield nothing to dreams unconnected to thought, curiosity, exploration, experimentation, testing, ingenuity, invention, integrity, work, and production. Unfortunately, man has devised ways—theft and slavery—to coercively separate production from its producers, to which, in the interest of self-preservation, producers must yield. The more that’s stolen the less they produce. In extreme cases, they meet only the subsistence requirements necessary to avoid the whip, jail cell, or firing squad.
All manner of philosophies have attempted to justify theft and slavery, and here, religion falls under the rubric of philosophy. Producers have supposedly owed a debt to a deity or deities, or, more accurately, to their anointed representatives on earth. Religion has often been conjoined with the state, so producers supported both priests and rulers, who have frequently been one and the same. Of course that support was not a matter of voluntary choice. When producers got a relatively good “bargain,” they were allowed to keep more than a subsistence portion of their own production, and the coercive force employed against them was also deployed to protect them from criminality and external invasion.
Historically, governments, whether run by holy men, enlightened despots, or brutal thugs, have always failed, felled by hubris, rapacity, depravity, and incompetence. One constant has been that their tyranny, corruption, and wars eventually required more resources than they were able to expropriate from their producers. Failed governments have invariably been bankrupt governments.
Despite the claims of their progenitors, there was nothing new about nineteenth and twentieth century collectivist philosophies. They were merely variations on time worn justifications of theft and slavery. Dictatorships of the proletariat replaced the divine right of kings, but the reality was still governments forcing producers to hand over what they produced. What was new, blossoming in the nineteenth century, was the astonishing productivity unleashed by capitalism in those countries that moved away from the older kleptocratic formulations, notably the US and Great Britain, by affording producers an unprecedented degree of freedom and protection of property and contract rights.
Capitalism was revolutionary not just in its productive bounty, but more importantly, in its philosophical implications. Those implications were grasped at an instinctive and emotional level by its critics long before Ayn Rand connected the dots for its would-be proponents in her seminal philosophical novel, Atlas Shrugged. Capitalism is the economic system that flows from the premise that an individual’s life is his or her own, not the property of the state. If individuals’ lives are indeed their own, then they must be free to either keep or voluntarily trade that which they produce. These are the logical consequents of the Declaration of Independence’s assertion, “We hold these Truths to be self-evident, that all Men are created equal, that they are endowed by their Creator with certain inalienable Rights, that among these are Life, Liberty, and the Pursuit of Happiness.”
Securing those inalienable rights has proven devilishly difficult. In 2015, the earth’s inhabitants are living under governments guided by a mishmash of incoherent precepts from which only one constant emerges: individuals’ lives are not their own, they are the property of the state. The ideals embedded in Jefferson’s declaration and Rand’s opus are more revolutionary now than when they were penned and typed, respectively.
The consequences of theft and slavery are predictable. In Western welfare states, governments have stolen and enslaved under a banner of faux humanitarianism that has enhanced only the welfare of governments. As power and resources accrete to them at the expense of individuals’ liberty, rights, and wherewithal, the robbed and the enslaved’s incentives to produce dwindle. There is, as Adam Smith noted, much ruin in a nation, but even capitalism’s bounty can be completely ransacked.
The sputtering of the global economy, its dying gasp before it descends into depression, are not the result, unfortunately, of a conscious shrug among the world’s Atlases, but rather their staggering—to be followed by their collapse—under the weight of taxes, regulations, corruption, enforced transfer payments and government-provided services to the unproductive, permanent war, and the maintenance of massive military-industrial-security complexes. Unable to limit their rapacity to the fruits of the current generation’s labor, governments have plunged into debt, stealing from future generations and consigning them to debt slavery until they either collapse or repudiate.
Bankruptcy and war will fell the current constellation of governments. While government failure is nothing new, the scale of the impending collapse will be unprecedented. Debt, fiat currencies, and taxes only allow so much fraud and theft. To survive and thrive, governments must be able to acquire real resources with their phony scrip and expropriation. The world’s public and private debt is a lien, often a literal one, on the world’s real resources, and its nominal value of around $225 trillion is about three times world GDP. That nominal value understates the true extent to which present and future assets and production are encumbered. Welfare state pension and medical promises dwarf current governmental debts. Add entitlement promises to existing debt and even that gargantuan number falls well short of the notional amount of financial derivatives, all of which incorporate some sort of debt. Estimates of their size range from $700 trillion to over a quadrillion dollars.
The world is at peak debt; it’s broke. In effect, every real asset on the planet is subject to one or more claims; every financial asset is somebody’s debt (or equity, which is only a residual and contingent claim behind debt), and income streams are less than total debt service. This unsustainable load will grow more unsustainable.
Deleveraging, mostly from insolvency and write-offs, has barely begun, and so far has only occurred in the natural resource sector. The ongoing constriction of opportunities in developed world welfare states has been met with a reduction in family formation and birthrates. Denied the opportunity to produce, would-be Atlases are not marrying or procreating, either. This means aging populations and increasing draws on old age “entitlements” will be funded by a shrinking pool of producers. Measured in dollars, world GDP started contracting last quarter and will continue to do so as recession, debt contraction, falling asset prices, excess capacity, and rising unemployment spread from Canada, Brazil, and many emerging market countries to the rest of the world.
Predictions of some sort of emergent global government and a new world order should be met with skepticism. Not that there aren’t plenty of people out there who wouldn’t like to see such an outcome, but governments require resources, and the bigger the government, the more resources it requires. Governments propose; individuals dispose. Bigger, more powerful, intrusive, and repressive government will also be more expensive government, hastening Atlas’ collapse. A global superstate can steal every asset and institute slavery, but the world’s productive individuals, denied their rightful incentives, will produce enough to subsist and no more.
The result will not be an imposed “order,” but chaos, as the dream of world government crashes on the reality of producers who cannot and will not sustain it. The most dangerous predictions of the future are straight line projections of the past. A straight line prediction that governments will continue to grow, get more powerful, and perhaps consolidate into a still bigger and more powerful government may be the most dangerous prediction of all. Imposing order requires energy, and government as an institution is already spent and exhausted. The future is not likely Orwell’s totalitarian nightmare, but rather the human entropy that has engulfed the Middle East and Northern Africa and is migrating to Europe. Say hello to the gathering world disorder.
DANIEL DURAND: AN ATLAS WHO DIDN’T SHRUG OR COLLAPSE