The Great Global Contraction Has Begun

BRANDON J. WEICHERT | THE WEICHERT REPORT

Americans have been told for almost a century that free trade, open borders, and low taxes have been the source of American power, economic prosperity, and global dominance. There is some truth to this. But, in life, nothing is static. Ultimately, all systems begin breaking down in a natural process called entropy. The system that was created following America’s victory after the Second World War–that was reaffirmed following the end of the Cold War and collapse of the Soviet Union in 1991–is at critical entropy.

The presidential election of 2016 was the apotheosis of trends that can be traced at least back to the 1970s which were basically poison pill developments; seeds meant to sow the inevitably destruction of the postwar American order.

Today, the very elements that propelled the United States to greatness back then–its open borders, “free” trade commitments, and even historically low taxes and its loose monetary policies–may be the very things weakening the United States.

This is especially true in what Barry Pavel of The Atlantic Council once referred to as “Dynamic Stability.” It’s more like historic instability. And, judging from the rise of populism, socialism, nationalism, and the coronavirus, the world has entered into a period of historic instability.

There can be little doubt that the 2020s will be a decade of chaos and fundamental change. If we listen to the usual suspects for solutions, we’ll lose the country.

As I write in my forthcoming book, Winning Space: How America Remains a Superpower, due out this Fall from Republic Book Publishers, the probability of a great power war is high (including the prospect of a nuclear war). Historic instability has eroded the very foundations of the world system for decades and we are now at peak instability. The solutions of yesteryear; the idea that increasingly centralized systems managed by purported experts and elites will keep the pipes open and the sludge flowing through it no longer hold true.

It’s Opposite Day now.

America’s Poseidon Adventure

Like the S.S. Poseidon in Irwin Allen’s classic 1970s disaster film (a film in which a young Gene Hackman and an aging Ernest Borgnine simply bark at each other for two hours while other actors try to keep up), the world is upside-down. We must now claw our way out of the broken mess-heap and cut our way through the hull to safety. Except, to get to the surface before the ship sinks, we must, in fact, go deeper down into the ship–because the vessel has capsized.

America is too top-heavy today (and, yes, the captain of the Poseidon is played by Leslie Neilsen–and stop calling him “Shirley!”)

When I hear Donald Trump speak, I am reminded of the rebellious and cantankerous priest that Gene Hackman plays in the 1970s disaster flick, who leads his flock through the burning and damaged hulls of the doomed Poseidon–as his own followers question and berate his judgement. Hackman is a scoundrel, but he’s right. And, unlike so many of our purported betters, Hackman doesn’t quit or much care about his appearance. He just keeps pushing until he gets what he wants–sound familiar?

In the battle between authority vs. reason, Trump and his supporters may not have the authority expertise, but they do have reason; common sense (because they all have skin-in-the-game–and the game has been working against them for some time).

In the film, Hackman must overcome the haughty ship’s purser, who insists that everyone who survived the initial catastrophe–a tsunami wave that capsized the ship during a New Year’s Eve celebration–remain in the ballroom where they were. Hackman, realizing the ship has flipped over and is slowly sinking, tells the purser that anyone who could render aid has now drowned, as the control room and the top levels of the ship are underwater.

He tells the survivors they must climb out of the ballroom and work their way down to the ship.

Only a dozen people heed his calls because few can comprehend the way the ship has flipped over (despite being thrown about the ballroom and crushed beneath an ornate Christmas tree).

The rough and ready man, Gene Hackman, was right and the stuffed shirt expert–the bloviating purser–was wrong.

Hackman’s group later comes upon the ship’s doctor, who is leading a massive crowd of survivors toward the ship’s bow. Hackman pleads with the presumptuous doctor to follow him with the other survivors to the ship’s engine room, where the steel is thinnest and they could potentially escape to the surface to be rescued. The doctor says that the engine room has been destroyed–yet, the doctor has not been to the engine room to see if it was destroyed. The doctor, as a member of the crew, simply “knew” it had been destroyed.

Human agency; specifically those of tough and able leaders–men of action rather than theory–save people during disasters. Rather than trusting the experts, such as the purser or the doctor, men of action take a chance and lead us to destiny (whether that destiny be great or destructive is an entirely different matter). But, whether talking about the American republican system or an authoritarian system, those leaders who possess the greatest agency and will tend to be remembered while measly technocrats obsessed with process tend to halt and hinder real progress.

Human agency wins all.

The United States has been in a disaster scenario for decades. When President Donald Trump gave his Inaugural Address in 2017, former President George W. Bush muttered that the speech was some “weird sh*t.” In his speech, Trump argued that decades of “carnage” had been visited upon Americans and the country was in a dire crisis.

Like the Poseidon, the country was upside-down and everyone who supposedly knew anything kept saying that everything was A-OK. They argued that only racist rubes and Russian bots thought otherwise. The system militated against the nationalist-populist elements (and is doing the same against the socialist-populist elements on the Left).

George Carlin once referred to this mentality that everything was great, no matter what, as the great “American Okie-Doke.” It’s bull.

NSFW. But necessary viewing.

Trump was right and they were wrong.

Despite the slowdowns imposed on the Trump agenda by the administrative state, the Democrats, and the partisan media, the president has still managed to implement most of his agenda within the first two years. Due to this, the economy is doing better than it was under Obama; the country has avoided more entangling wars in the Mideast; and the culture is at least potentially going to be restored.

The country is upside-down and historic instability is the cause. The country has been swamped by this historic instability because its elite have managed to hermetically seal themselves off from the rest of the population they purport to manage through “expertise.” This pattern has played out in other countries throughout history and it has led to collapse of once-great civilizations, such as China.

The China Example

I’ve spent much of my academic career studying China’s long history. One of the most amazing things that people forget is that China really was once the apex of human civilization. During the fourteenth century A.D., the Ming Dynasty possessed one of the most advanced governments; it was what we might today refer to as a “tech innovation hub”; gunpowder was ubiquitous in China; and the Ming Dynasty built one of the most advanced fleet of oceangoing sailing ships–what became known as the “Treasure Fleet” led by the famous eunuch Admiral Zheng He–all while Europe was a muddy backwater subject to feudalism and random barbarian invasions.

The Treasure Fleet spread the Ming Dynasty’s flag and collected vast treasures from areas of the world as far away from China as Africa and the Middle East. In fact, the revisionist historian, Gavin Menzies speculated in his 2008 book, 1421: The Year China Discovered America that the Chinese Treasure Fleet under Admiral Zheng He’s command may have even discovered the Americas before Columbus did. This is still in dispute today, though. Whatever the case may be, China was leagues ahead of Europe in terms of development 400 years ago.

The Ming emperor was a key driving force behind the Chinese expansion. When the leadership changed in China, though, everything stopped. The technocratic court mandarins who rose to manage China’s vast empire after the passing of the Ming emperor were unable to innovate and they simply fought to conserve what they had and to cling on to power a little while longer than they should have.

During this time, Zheng He was persecuted and his beloved Treasure Fleet was mothballed because it was too expensive for the Chinese state to maintain (despite the fact that it provided prestige, power, and could have provided prosperity in the form of tributaries well before Europe ever embraced this).

Soon, China’s breakneck development simply stopped. Great men no longer led China. Instead, weaklings managed the relative decline of China under the auspices that they were the experts. Meanwhile, the once backwater of Europe enjoyed a rejuvenation of thought, capabilities, and prosperity. The script quickly flipped which soon saw Europe become the global hegemonic power and ultimately China became a subject nation of the various competing and dynamic European empires.

Some analysts, like Robert Zubrin or Niall Ferguson, have asserted that China’s turn inward was the cause of China’s loss of superiority to the West. I think that’s only part of the equation. The real reason was a decline in viable leadership. The elite in China had become too insular and closed off from their people; they had engaged in far too much rent-seeking behavior and their ideas for change were not applicable to the dynamic environment their country had found itself in at that time.

Meanwhile, the leadership of the various European empires was far more dynamic and flexible; the societies there were also much more willing to try new things. Rather than China’s decline being the result of the country isolating itself from the world, it is more likely that its leadership simply became too incestuous and hermetically sealed off from its own population to understand what problems truly needed addressing.

The Boomer Blockade (and the Elite Retrenchment)

Whereas following the Second World War, to better fight and win the Cold War, America opened itself up to the world now, it is overexposed. It made sense to implement the free trade, open borders, and other policies that our elites have taken for granted when the Soviet menace was sweeping the world and stalking the United States at every turn. That threat is gone. There is no great ideological foe today. Yet, the system that no longer reflects geopolitical reality continues to be the default paradigm of our leadership (save Trump and his small cadre of advisers).

Only a tiny percentage of Americans benefit from the current system and this is a problem. When such inequality exists–with little or no hope of amelioration–revolutionary politics becomes the norm. How else does one explain the attraction of 78 year-old socialist Bernie Sanders to so many young people today (who otherwise would scream, “OK, Boomer” at him?)

Frankly, the changes that both Trump and Bernie represent should have happened 15 years ago. But, meaningful, incremental political reform was denied back then due to the enhanced lifespans of the dominant generation in our country today: the Baby Boomers.

As Paul over at Think-Boundless has deftly explained our predicament today:

The baby boom led to the largest shift in the demographics of the modern workforce. As baby boomers entered the workforce it coincided with steady and prosperous economic growth and a dearth of older workers to compete with as they moved through the ranks. They were promoted to the senior ranks earlier than previous generations and have stayed well into their sixties, enabling them to continue to amass wealth in a way that their parents did not. Millennials and Gen Xers have entered the workforce amid lower rates of growth and with less opportunities due to such a large percentage of older workers. We will need to reimagine the narratives of success at work that no longer align with what the boomers experienced throughout their careers.

Paul has called what Gen-X’ers and Millennials (and now, I’m sure, the rising “Zoomers”) have experienced with “burnout” and endless lateral career moves; the fact that harder work no longer ensures young workers the definite path to prosperity that it did for the Baby Boomers back in the day, as nothing more than a “Boomer Blockade.” The Boomers, benefiting from advances in science and medicine have been able to capitalize on their position atop the socio-economic pile far longer than previous generations that reached maturity had been able to. The average Boomer today can live today is 79 years of age.

The average life expectancy of the Boomers’ parents generation, the Greatest Generation (those born between 1900-1925, who endured the Great Depression and the Second World War) was a decade less than what their children could expect. Plus, the advances in medical sciences meant that the Boomers have been able to enjoy more mobility and mental acuity well into their old age than previous generations have–meaning they have been able to influence the country’s socio-economic and political development far longer than they would have in previous generations, creating an assortment of massive dislocations that benefit them at the expense of future generations.

What is occurring in the United States, whether it be Trump’s nationalist-populist phenomenon or Bernie Sanders’ socialist-populist movement, is a great correction to the excesses of that generation.

And, the reason that the correction is so caustic is due to the fact that these changes have been delayed by at least 15 years. Many of those in elite circles stand to lose should the populists get their way, which is why the “one-percent” is fighting so hard to ensure that they maintain a grip on power; it’s why the “Deep State” has conspired against Trump since before he won office and why the oligarchs who control the Democratic Party are working overtime to deny Bernie what should rightfully be his victory in 2020.

America Must Become “Anti-Fragile” to Survive & Thrive the Ongoing Historic Instability

The biggest problem facing American workers is wages not keeping up with the cost-of-living and, regardless of what people think, illegal immigration over the last 30 years has been a key problem depressing those wages for most people. Healthcare costs have also skyrocketed due to this fact. There is a direct relation between the cost of healthcare and illegal immigration. This is not a popular fact, but it is a fact (despite what the CATO types will tell you).

Free Trade has also done much to prop up consumer demand by lowering the cost of consumer goods. But, it has removed key production capabilities here in the United States. There is a bizarre debate in the United States between the free trading globalist-types on the coasts and those who are protectionists.

The way the debate plays is that it is a zero-sum issue: one either is for free trade or they are for protectionism. Of course, this has never been the case. The United States has long embraced a dual policy of selective protectionism and free trade, depending on the country’s need. There have been times where the United States needed lower barriers to international trade. At other times, though, the U.S. might not have benefited from free trade and embraced protectionism. It’s not an either-or scenario.

And, it is certainly true that the United States began its existence as a country immensely invested in world trade (particularly for the northeastern states). Yet, it is also true that the United States decisively employed tariffs and protectionist trade barriers to, as the name suggests, protect its critical industries from undue foreign competition and meddling.

Having cheap iPads and affordable consumer goods is awesome. But, if everyone is struggling to find gainful employment and is living paycheck-to-paycheck, in part, because lower wage jobs have either been outsourced, automated, or taken by illegal immigrants, no one but the rich and formally educated classes benefit. Trump’s calls to build a wall, to reform immigration policies, and to fundamentally change the way that America engages in trade are the paths forward to making America “anti-fragile” in the age of dynamic instability.

As Nassem Taleb defines “anti-fragility”:

Some things benefit from shocks; they thrive and grow when exposed to volatility, randomness, disorder, and stressors and love adventure, risk and uncertainty. Yet, in spite of the ubiquity of the phenomenon, there is no word for the exact opposite of fragile. Let us call it anti-fragile. Anti-fragility is beyond resilience or robustness. The resilient resists shocks and stays the same; the anti-fragile gets better.

By fostering policies that promote the national interest over the global, the United States would be making itself more anti-fragile–which is key in today’s world. As Peter Zeihan has argued, during the Cold War, the United States essentially bribed other countries into siding with it over the Communist bloc. It did this through “free” trade, open borders, loose monetary policies, foreign aid, lower taxes, and other internationalist policies aimed at attracting foreign support for its cause.

Start video at 6:40.

Back then, the United States was heavily exposed to Mideast oil shocks. Today, it remains exposed, though less so–especially since President Trump overcame opposition to ensure the United States became a net exporter of fossil fuel energy harvested from the United States. Before these dynamically unstable times, Washington would often have to accept stunningly bad deals to keep its Cold War allies in line.

Today, it no longer has to.

America has the geographical position to withstand much from abroad. It is protected from the rest of the world by two giant moats; a dominant Air Force (and, soon, hopefully a potent Space Force); its economy is still the engine of the world; its currency remains the world reserve currency of choice. The notion that the United States must always make itself vulnerable to win “goodwill” or maintain shaky Cold War-era alliances and institutions is a dangerous one.

It’s akin to the French building the Maginot Line and not understanding that military technology and strategic thought had changed since the end of the First World War.

What’s more, the country has the military power (that it needs to also make anti-fragile itself) to defend itself from any kind of attack; the United States also has the capability to become a net producer of goods and resources that the world will depend on. In so doing, it will have the ability to write its own geopolitical ticket in the coming century.

Regardless of what happens with automation, the fact remains that Trump’s vision of an America that is mostly self-sufficient is the best hope for most Americans who, since the 1970s and the rise of Shareholder Capitalism, have been left in the dust by the transnational elite.

The long-term strategic ambitions for the United States should be to act as the world’s offshore balancer of last resort rather than the non-stop interventionist that it has become over the last several decades.

As for immigration policy, it is true that the United States needs some immigrants to goose the innovative process along. The nationalists are wrong when they pooh-pooh the claims of pro-immigration folks entirely. Lee Kuan Yew, the now-deceased great leader of Singapore, once said that the Chinese have one billion people at their disposal but the United States ultimately has seven billion (because everyone in the world–including Chinese–yearn to come to the United States).

This is especially true of those involved in the Knowledge Economy. Yet, current policies are too permissive and, as we’ve seen, allow for foreign regimes–like China–to take advantage and conduct industrial espionage against our high-tech firms.

The Trump Administration has proposed changes to legal immigration to favor talent and merit rather than the current system of lotteries, chain migration, and rent-seeking. This is the way forward. National self-reliance will be key. No one is saying to totally close the United States down for business. What Trump and his supporters have been arguing–and the “Bernie Bros” to a certain extent as well–is for the United States to focus on addressing its most critical issues at home.

Oddly enough, this is something that none other than Richard N. Haas argued for in his book a few years ago entitled Foreign Policy Begins at Home: The Case for Putting America’s House in Order. Of course, one can see the insincerity of his work then by comparing his extreme opposition to Trump’s attempts to do exactly what Haas argued for during the Obama years.

Those who want “free” trade don’t understand that consumer goods are not the only thing that matter. Jobs and self-sufficiency for most Americans is what counts. Those who insist upon open borders and limitless immigration into the United States cannot see that, while we do need some people from abroad, we simply must become more selective. What’s more, they fail to account for the fact that we’ve abandoned trying to help our own people who are suffering by instead favoring the cheap and quick solution of simply bringing in new folks from abroad.

This is best exemplified in former New York City Mayor Mike Bloomberg’s odious remarks in 2016:

Courtesy of the Said School of Business, 2016.

The former mayor and billionaire thinks that human beings are replaceable, first the “lessers” of the farm and rust belt are subordinate to those with greater amounts of brainpower. Then, ultimately, the entire economy is predicated on replacing “people with technology.”

This is an insane postulation. It’s the kind of mid-twentieth century thinking is what has gotten the United States into its “carnage” filled position.

First, automation is coming–and artificial intelligence is its herald, that much is true.

But, that doesn’t mean it will completely replace people and that doesn’t mean the government cannot take steps to mitigate the downside risks of rapidly embracing such technology. We should have learned our lessons from the Open Kimono attitude our elites took vis-a-vis globalization, the internet, etc.

Maybe we have not.

Trump and future leaders should definitely take heed.

No one is saying not to take on artificial intelligence. What I’m saying is to be judicious and encourage responsible, sustainable, and judicious development of this new technology. Just letting ‘er rip may make the shareholders money but it could permanently disrupt–even destroy–the economy and force upon the country a massive welfare state in the process (or, at least, one more expensive and unwieldy than the one we currently have).

In terms of immigration, everyone keeps telling me that there is a consistent decline in American fertility rates. We are headed into a Baby Bust. This will impact everything from wages to innovation to political stability. They are correct. But, the rest of the world is either already undergoing a “Baby Bust” or they are set to undergo this bust as much as the United States will.

Again, I do not believe in the total shutting down of legal immigration (I just want to reform that system).

Yet, there are things we as a country could do to encourage Americans to start having more babies and forming more stable families.

This is the heart of Trump’s social policies.

He wants to encourage greater family formation. The family, traditionally, has been the bedrock of socio-economic and capital formation over the long-run. Yet, neoliberalism has ensured that we are all becoming atomized. The trends that Paul from Think-Boundless outlined above have played into this as well.

We can do things at the policy level to change the parameters for most Americans and to prompt them to return to a more traditional way of life. These ideas and policies are being stymied, though, because of preexisting notions of what it takes to get rich or (more likely) die trying in the United States.

National self-sufficiency means building community. The most basic community is the family. This is the bedrock of civilization and this is what has been most under siege for decades in the West. We are not socially anti-fragile anymore.

Let’s now look at the coronavirus outbreak, because unlike the elites who shrug and take China’s assurances that they’ve got this under control, I think this is going to be a brutal event over the long-term.

The medical community keeps insisting that China must share its data with the world, so that a cure can be found quicker. There is merit to these arguments. But, what’s being discovered is that China not only has not been forthcoming with pivotal information about the disease (until it is basically too late), but also China may have engineered the disease in a lab in Wuhan, 300 yards away from the food market where the disease supposedly spread.

Now, to placate the twitchy Chinese regime, the United States has kept its borders open to passengers coming in from China–leaving it up to individual airlines to regulate whether they will take in passengers flying in from China or not.

Coronavirus as the Last Straw

The whole thing is ridiculous. To be anti-fragile in this world, the United States needs to be able to block itself from the rages of the rest of the world and know that it can be mostly self-sufficient. While it may use things like “free” trade at times, it needn’t depend so much on it that a crisis in distant China could potentially collapse the American economy.

At the very least, the United States needs to start bringing its manufacturing and moving the global supply chain away from vulnerable and unstable China and closer to its shores–preferably creating policies to encourage companies to completely onshore in the United States. Whatever the government decides, companies are already starting this trend (albeit slowly).

Thus, the Great Contraction has begun.

Nations are moving farther away from each other–and will continue to do so, particularly in the case of the United States, which enjoys many untapped advantages over the rest of the world (if only our elite would let us tap into those advantages).

The way forward is paradoxical.

Like the path to salvation in The Poseidon Adventure, the survivors of the American carnage must go deeper down into the ship to make it to the ocean surface before the entire vessel sinks and everyone dies.

To survive and thrive in the Great Global Contraction, then, America must embrace self-reliance and self-sufficiency more than ever. And, as the domestic political battle of our lives: between socialism and liberty rages on throughout the 2020s, we must remember that centrally-planned solutions will not save us.

What’s needed to make the country more survivable is to embrace its federal framework of government; to embrace the loaded concept of decentralized networks. Americans everywhere must “go local” even if that raises prices in the short-term on most Americans. Greater power should be diffused away from Washington power elites and into the waiting (and more responsive) hands of local and regional leaders.

The Left loves to argue that America’s greatest asset is its diversity. They are right–to a point.

Though, the Left’s definition is, as per usual, superficial and therefore useless to us. The real diversity is in our thoughts and our souls. Rather than imposing uniform non-solutions from above, let us instead raise the defenses higher around our great country and work over these next decades of the dynamically unstable 21st century to make the United States truly anti-fragile.

There is much to be gained from chaos and even more to be gained from the coming Great Contraction as war, disease, poverty, population decline, and resource gluts become the norm again. The United States has the inherent advantages to come out ahead in such dark times. But, it needs leadership that is equally as dynamic as the times we live.

Outsiders will be key and great individuals possessed of unorthodox ideas from places we would least expect are the solution. America has these traits in abundance. In many cases, though, they are blocked by a stodgy, feckless, and woefully detached Mandarinate in Washington, New York, Boston, and Los Angeles.

The coronavirus, bad trade deals, weak fertility rates, slackening global growth, all of these things indicate a coming contraction and historic instability that the United States must be prepared to endure. It is not adequately prepared because its elites are still clinging on to a world that no longer exists.

The election of 2020 will be the most consequential of our lives as it will determine the destiny of this country for the next 50 years. Either we find it within ourselves to learn to stand on our own again or we will be subsumed by the roiling flood waters of the world’s historic instability. The way forward, I believe, is to keep Trump as president. But, the absolute wrong way forward is to continue counting on our brain dead Mandarin class who still think that corporations are people and farmers contribute nothing to the economy. They will lead us to ruin (and many of them, incidentally, are bought-and-paid for by the Chinese Communist Party).

©2020, The Weichert Report. All Rights Reserved.

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