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Lessons from the Collapse of the USSR

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February 28, 2009 – Comments (12) | RELATED TICKERS: UDN , GLD , SKF

America Goes The Way of the USSR

From George Washington blog spot.

You know that our economy has been turned into a socialist system. You're already probably mad about that.

But there are many other ways in which America is going the way of the Soviet Union.

For example, China is criticizing America's human rights record, just like we used to criticize Soviet human rights abuses.

And George Soros says the world financial system has effectively disintegrated, and that the turbulence is actually more severe than during the Great Depression, comparing the current situation to the demise of the Soviet Union.

So the official finding by the U.S. Energy Department that the DOE cannot account for nuclear materials at 15 locations caught my eye. Remember, in the former Soviet Union, nuclear material frequently "went missing" and was then sold on the black market.

And just as the Soviet Union broke up, there are more and more indications that the US will break up. See this, this, this, this and this.

Indeed, a man who lived through the break up of the USSR goes around the country offering advice for Americans on how to weather the coming dissolution of the US.

Is it worth listening to this former Russian? Da, it might be wise . . .
More on this topic (What's this?)
George Soros is NOT helping talk me down from the ledge (Red-Hot Energy and Gold at Money..., 2/23/09)
No Holding Back (Financial Armageddon, 2/21/09)
Unrest in China Worse Than Widely Reported (naked capitalism, 1/31/09)
Read more on Nuclear Energy, Investing in China, George Soros at Wikinvest
3 comments

You should read this and print it, whether you believe the US will go down like the USSR or not.  The leasons are very valuable.

14 February 2009
The following talk was given on February 13, 2009, at Cowell Theatre in Fort Mason Center, San Francisco, to an audience of 550 people. Audio and video of the talk will be available on Long Now Foundation web site.

Good evening, ladies and gentlemen. Thank you for showing up. It's certainly nice to travel all the way across the North American continent and have a few people come to see you, even if the occasion isn't a happy one. You are here to listen to me talk about social collapse and the various ways we can avoid screwing that up along with everything else that's gone wrong. I know it's a lot to ask of you, because why wouldn't you instead want to go and eat, drink, and be merry? Well, perhaps there will still be time left for that after my talk.

I would like to thank the Long Now Foundation for inviting me, and I feel very honored to appear in the same venue as many serious, professional people, such as Michael Pollan, who will be here in May, or some of the previous speakers, such as Nassim Taleb, or Brian Eno – some of my favorite people, really. I am just a tourist. I flew over here to give this talk and to take in the sights, and then I'll fly back to Boston and go back to my day job. Well, I am also a blogger. And I also wrote a book. But then everyone has a book, or so it would seem.

You might ask yourself, then, Why on earth did he get invited to speak here tonight? It seems that I am enjoying my moment in the limelight, because I am one of the very few people who several years ago unequivocally predicted the demise of the United States as a global superpower. The idea that the USA will go the way of the USSR seemed preposterous at the time. It doesn't seem so preposterous any more. I take it some of you are still hedging your bets. How is that hedge fund doing, by the way?

I think I prefer remaining just a tourist, because I have learned from experience – luckily, from other people's experience – that being a superpower collapse predictor is not a good career choice. I learned that by observing what happened to the people who successfully predicted the collapse of the USSR. Do you know who Andrei Amalrik is? See, my point exactly. He successfully predicted the collapse of the USSR. He was off by just half a decade. That was another valuable lesson for me, which is why I will not give you an exact date when USA will turn into FUSA ("F" is for "Former"). But even if someone could choreograph the whole event, it still wouldn't make for much of a career, because once it all starts falling apart, people have far more important things to attend to than marveling at the wonderful predictive abilities of some Cassandra-like person.

I hope that I have made it clear that I am not here in any sort of professional capacity. I consider what I am doing a kind of community service. So, if you don't like my talk, don't worry about me. There are plenty of other things I can do. But I would like my insights to be of help during these difficult and confusing times, for altruistic reasons, mostly, although not entirely. This is because when times get really bad, as they did when the Soviet Union collapsed, lots of people just completely lose it. Men, especially. Successful, middle-aged men, breadwinners, bastions of society, turn out to be especially vulnerable. And when they just completely lose it, they become very tedious company. My hope is that some amount of preparation, psychological and otherwise, can make them a lot less fragile, and a bit more useful, and generally less of a burden.

Women seem much more able to cope. Perhaps it is because they have less of their ego invested in the whole dubious enterprise, or perhaps their sense of personal responsibility is tied to those around them and not some nebulous grand enterprise. In any case, the women always seem far more able to just put on their gardening gloves and go do something useful, while the men tend to sit around groaning about the Empire, or the Republic, or whatever it is that they lost. And when they do that, they become very tedious company. And so, without a bit of mental preparation, the men are all liable to end up very lonely and very drunk. So that's my little intervention.

If there is one thing that I would like to claim as my own, it is the comparative theory of superpower collapse. For now, it remains just a theory, although it is currently being quite thoroughly tested. The theory states that the United States and the Soviet Union will have collapsed for the same reasons, namely: a severe and chronic shortfall in the production of crude oil (that magic addictive elixir of industrial economies), a severe and worsening foreign trade deficit, a runaway military budget, and ballooning foreign debt. I call this particular list of ingredients "The Superpower Collapse Soup." Other factors, such as the inability to provide an acceptable quality of life for its citizens, or a systemically corrupt political system incapable of reform, are certainly not helpful, but they do not automatically lead to collapse, because they do not put the country on a collision course with reality. Please don't be too concerned, though, because, as I mentioned, this is just a theory. My theory.

I've been working on this theory since about 1995, when it occurred to me that the US is retracing the same trajectory as the USSR. As so often is the case, having this realization was largely a matter of being in the right place at the right time. The two most important methods of solving problems are: 1. by knowing the solution ahead of time, and 2. by guessing it correctly. I learned this in engineering school – from a certain professor. I am not that good at guesswork, but I do sometimes know the answer ahead of time.

I was very well positioned to have this realization because I grew up straddling the two worlds – the USSR and the US. I grew up in Russia, and moved to the US when I was twelve, and so I am fluent in Russian, and I understand Russian history and Russian culture the way only a native Russian can. But I went through high school and university in the US .I had careers in several industries here, I traveled widely around the country, and so I also have a very good understanding of the US with all of its quirks and idiosyncrasies. I traveled back to Russia in 1989, when things there still seemed more or less in line with the Soviet norm, and again in 1990, when the economy was at a standstill, and big changes were clearly on the way. I went back there 3 more times in the 1990s, and observed the various stages of Soviet collapse first-hand.

By the mid-1990s I started to see Soviet/American Superpowerdom as a sort of disease that strives for world dominance but in effect eviscerates its host country, eventually leaving behind an empty shell: an impoverished population, an economy in ruins, a legacy of social problems, and a tremendous burden of debt. The symmetries between the two global superpowers were then already too numerous to mention, and they have been growing more obvious ever since. 

The rest is here:

http://culturechange.org/cms/index.php?option=com_content&task=view&id=325&Itemid=66

12 Comments – Post Your Own

#1) On February 28, 2009 at 3:11 PM, Hudarios (< 20) wrote:

Why should anyone give a rats a** what China has to say about human rights?  When it comes to death and human misery, China's was one of the 20th century's top purveyors, right up there with Nazi Germany and the aforementioned USSR.  Countries like these only whine about human rights to take the attention off of themselves and to distract pampered Western liberals.

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#2) On February 28, 2009 at 5:16 PM, abitare (33.88) wrote:

 Hodarius,

Good to hear from you. Of course we don't care what China says, anymore then they care what we say about their human rights abuses.   

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#3) On February 28, 2009 at 7:10 PM, JGus (28.74) wrote:

Great post, Abit! I've posted a follow-up/complimentary blog to this one entitled
Lessons from the Collapse of the USSR - Part 2 - How we're actually worse off!

I don't think we're anywhere near bottom yet (and I'm not talking about the market, though that's bound to go lower as well). Things are going to continue unravelling at an even faster speed!

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#4) On February 28, 2009 at 7:12 PM, JGus (28.74) wrote:

That link doesn't seem to be working. Here's another try:

Lessons from the Collapse of the USSR - Part 2 - How we're actually worse off!

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#5) On February 28, 2009 at 8:22 PM, Seano67 (39.70) wrote:

Great post, arbitare.

RE: China criticising our human rights record, that's just standard operating procedure and it happens every year. We come out with our annual report condemning their human rights issues, and in a tit for tat, 'what's good for the goose is good for the gander' type gesture, they fire right back with their own criticism of our human rights concerns. I don't see anything wrong with that, we are hardly sterling when it comes to our own record of human rights, and if we're going to be preachily pointing out their flaws, then they sure as heck have the right to do the same to us.

As stated, this is an annual occurence, and neither side seems to get too worked-up about it or take it personally either way. I like what the Chinese Premier said the other day when asked about this yearly exchange of human rights reports, to paraphrase him: "Hey we know we're not perfect, but maybe the point is that those living in glass houses should not be throwing stones" 

And ya know what? He's 100% percent correct there. We're not the hero on the white horse, we are nowhere near being a standard-bearer of moral virtue, and we really don't have the right to be throwing stones at anyone at all.

Dueling human rights reports aside, both sides know they are intrinsically linked. We are partners with our fates intertwined, and both China and the US know it's overwhelmingly in both sides self-interest to cooperate and work together- in fact the alternative to that is somewhat unthinkable

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#6) On February 28, 2009 at 8:39 PM, russiangambit (29.24) wrote:

I don't really see that many parallels between pre-collapse USSR and the USA right now. The only one which stands out to me is the empire building. USSR overstretched itself by spending too much on military and support of "friendly" regimes around the world. On top of it, much of the production was extremly inefficient. But somehow I had a feeling that USSR never reached its full potential. First it was recovering from the revolution, then from the WWII, then it got into the arms race. There was always a shortage of resources to invest at home. So, the lack of reserves contributed to its collapse. This is why (I think) Putin was building reserves for rainy day. He learned the same lesson.

USA today is an empire which is crumbling under its own weight, very much like Roman empire. The best thing we can do right now is to cut military, by 50% at least. Withdraw from the bases around the world and put resources towards industrial growth and innovation at home. USA is at the beggining of collapse, but it is not invitable. However, 10-20 years of the same empire building policies and it will collapse.

I will start planting fruit trees in my backyard in 5 years if things don't imporve. LOL.

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#7) On February 28, 2009 at 8:42 PM, starbucks4ever (97.73) wrote:

Speaking of human rights, how about the right to have an 8% GDP growth for 30 years in a row? Sorry, proud American Libertarians, but without money there's no freedom :)

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#8) On February 28, 2009 at 8:50 PM, whereaminow (23.21) wrote:

LOL zloj!

You just took big whiff of your own fart, decided it smelled great, and patted yourself on the back after that post. How silly of us Libertarians to never consider that! 

I feel so naive.

Have you ever considered the idea that the money supply does not need to be controlled by a handful of private bankers? Money, itself, is a commodity, in any form - be it peanuts, paper, or gold. It has a value that is recognized by those who use it. Tell me, what reasons would you give against allowing free market competition in the supply of money? 

David in Qatar

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#9) On February 28, 2009 at 9:19 PM, Seano67 (39.70) wrote:

russiangambit, I have a very similar point of view. I also think that Ronald Reagan's hyper-aggressive pursuit of the whole 'Star Wars' missile defense system was what really drove it home to the Soviets that they had no chance to compete. Whether 'Star Wars' was a fantasy or something that might have actually worked, the point was that we could and would spend the vast sums of money required to build it, and there was no way the Soviets could match. They'd be driven into bankruptcy just trying to keep up. They trumped us militarily, but we dwarfed them in terms of economic power, and that in my opinion is what won the Cold War.

I agree about the USA too, and the current course we're on.

If you haven't read it yet, you should check out the book 'Rise and Fall of the Great Powers' by historian Paul Kennedy. It's a great read, and it ties into a lot of the stuff being talked about here- the fall of empires throughout history, and the commonalities which existed in all their collapse. Imperial overstretch, military overstretch, economic overstretch etc etc etc., it just gets to be too much, and the empire eventually collapses beneath the weight of it all. That's historically been inevitable, and the American Empire will fall too (if it hasn't or isn't already). That's just history, and no one has been able to buck that trend yet.

 

 

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#10) On February 28, 2009 at 9:45 PM, whereaminow (23.21) wrote:

Seano67,

On the 2nd point I agree with you.

On the 1st point, that Reagan defeated the USSR with Star Wars, I used to believe the same thing. Then I read Requiem for Marx with a forward by Yuri Maltsev. That's when I discovered the inevitable doom in all planned economies.... like ours.

Dr. Maltsev held, over a fifteen-year period, various teaching and research positions in Moscow, Russia. Before coming to the U.S. in 1989, he was a member of a team of Soviet economists that worked on President Gorbachev's reforms package of perestroika at the Russian Academy of Sciences. He was a Program Director of the International Center and a Peace Fellow at the United States Institute of Peace.

David in Qatar

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#11) On February 28, 2009 at 10:26 PM, starbucks4ever (97.73) wrote:

LOL, whereaminow,

I never said anything in defence of Ben Bailout Bernanke, you must have confused me with someone else :)

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#12) On February 28, 2009 at 10:27 PM, abitare (33.88) wrote:

There are so many great quotes / tid bits of information, I hope you take the time to read the article, here are some of what I thought was good: 

http://culturechange.org/cms/index.php?option=com_content&task=view&id=325&Itemid=66 

Women seem much more able to cope. Perhaps it is because they have less of their ego invested in the whole dubious enterprise, or perhaps their sense of personal responsibility is tied to those around them and not some nebulous grand enterprise. In any case, the women always seem far more able to just put on their gardening gloves and go do something useful, while the men tend to sit around groaning about the Empire, or the Republic, or whatever it is that they lost. And when they do that, they become very tedious company. And so, without a bit of mental preparation, the men are all liable to end up very lonely and very drunk. So that's my little intervention. 
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When the Soviet system went away, many people lost their jobs, everyone lost their savings, wages and pensions were held back for months, their value was wiped out by hyperinflation, there shortages of food, gasoline, medicine, consumer goods, there was a large increase in crime and violence, and yet Russian society did not collapse. Somehow, the Russians found ways to muddle through. 
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The United States was celebrating its so-called Cold War victory, getting over its Vietnam syndrome by bombing Iraq back to the Stone Age, and the foreign policy wonks coined the term "hyperpower" and were jabbering on about full-spectrum dominance. All sorts of silly things were happening. Professor Fukuyama told us that history had ended, and so we were building a brave new world where the Chinese made things out of plastic for us, the Indians provided customer support when these Chinese-made things broke, and we paid for it all just by flipping houses, pretending that they were worth a lot of money whereas they are really just useless bits of ticky-tacky. Alan Greenspan chided us about "irrational exuberance" while consistently low-balling interest rates. It was the "Goldilocks economy" – not to hot, not too cold. Remember that? And now it turns out that it was actually more of a "Tinker-bell" economy, because the last five or so years of economic growth was more or less a hallucination, based on various debt pyramids, the "whole house of cards" as President Bush once referred to it during one of his lucid moments. And now we can look back on all of that with a funny, queasy feeling, or we can look forward and feel nothing but vertigo. 

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Here is another key insight: there are very few things that are positives or negatives per se. Just about everything is a matter of context. Now, it just so happens that most things that are positives prior to collapse turn out to be negatives once collapse occurs, and vice versa. For instance, prior to collapse having high inventory in a business is bad, because the businesses have to store it and finance it, so they try to have just-in-time inventory. After collapse, high inventory turns out to be very useful, because they can barter it for the things they need, and they can’t easily get more because they don’t have any credit. Prior to collapse, it’s good for a business to have the right level of staffing and an efficient organization. After collapse, what you want is a gigantic, sluggish bureaucracy that can’t unwind operations or lay people off fast enough through sheer bureaucratic foot-dragging. Prior to collapse, what you want is an effective retail segment and good customer service. After collapse, you regret not having an unreliable retail segment, with shortages and long bread lines, because then people would have been forced to learn to shift for themselves instead of standing around waiting for somebody to come and feed them. 

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Prior to collapse, the overall macroeconomic positive is an expanding economy. After collapse, economic contraction is a given, and the overall macroeconomic positive becomes something of an imponderable, so we are forced to listen to a lot of nonsense. The situation is either slightly better than expected or slightly worse than expected. We are always either months or years away from economic recovery. Business as usual will resume sooner or later, because some television bobble-head said so. 

First: growth, of course! Getting the economy going. We learned nothing from the last huge spike in commodity prices, so let’s just try it again. That calls for economic stimulus, a.k.a. printing money. Let’s see how high the prices go up this time. Maybe this time around we will achieve hyperinflation. Second: Stabilizing financial institutions: getting banks lending – that’s important too. You see, we are just not in enough debt yet, that’s our problem. We need more debt, and quickly! Third: jobs! We need to create jobs. Low-wage jobs, of course, to replace all the high-wage manufacturing jobs we’ve been shedding for decades now, and replacing them with low-wage service sector jobs, mainly ones without any job security or benefits. Right now, a lot of people could slow down the rate at which they are sinking further into debt if they quit their jobs. That is, their job is a net loss for them as individuals as well as for the economy as a whole. But, of course, we need much more of that, and quickly! 

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So that’s what we have now. The ship is on the rocks, water is rising, and the captain is shouting “Full steam ahead! We are sailing to Afghanistan!” 

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So, what is there for them to do? Forget “growth,” forget “jobs,” forget “financial stability.” What should their realistic new objectives be? Well, here they are: food, shelter, transportation, and security. 

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Given its largely depleted resource base, a dysfunctional, collapsing infrastructure, and its history of unresolved social conflicts, the territory of the Former United States will undergo a process of steady degeneration punctuated by natural and man-made cataclysms. 
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The year 1990 was particularly tough when it came to trying to score something edible. I remember one particular joke from that period. Black humor has always been one of Russia’s main psychological coping mechanisms. A man walks into a food store, goes to the meat counter, and he sees that it is completely empty. So he asks the butcher: “Don’t you have any fish?” And the butcher answers: “No, here is where we don’t have any meat. Fish is what they don’t have over at the seafood counter.” 

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Many people live in places that are not within walking distance of stores, not served by public transportation, and will be cut off from food sources once they are no longer able to drive. 

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Fast food outfits such as McDonalds have more ways to cut costs, and so may prove a bit more resilient in the face of economic collapse than supermarket chains, but they are no substitute for food security, because they too depend industrial agribusiness. Their food inputs, such as high-fructose corn syrup, genetically modified potatoes, various soy-based fillers, factory-farmed beef, pork and chicken, and so forth, are derived from oil, two-thirds of which is imported, as well as fertilizer made from natural gas. They may be able to stay in business longer, supplying food-that-isn’t-really-food, but eventually they will run out of inputs along with the rest of the supply chain. Before they do, they may for a time sell burgers that aren’t really burgers, like the bread that wasn’t really bread that the Soviet government distributed in Leningrad during the Nazi blockade. It was mostly sawdust, with a bit of rye flour added for flavor. 

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Many Russian families could gauge how fast the economy was crashing, and, based on that, decide how many rows of potatoes to plant. Could we perhaps do something similar

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An even simpler approach has been successfully used in Cuba: converting urban parking lots and other empty bits of land to raised-bed agriculture. Instead of continually trucking in vegetables and other food, it is much easier to truck in soil, compost, and mulch just once a season. Raised highways can be closed to traffic (since there is unlikely to be much traffic in any case) and used to catch rainwater for irrigation. Rooftops and balconies can be used for hothouses, henhouses, and a variety of other agricultural uses. 

College campuses make perfect community centers: there are dormitories for newcomers, fraternities and sororities for the more settled residents, and plenty of grand public buildings that can be put to a variety of uses. A college campus normally contains the usual wasteland of mowed turf that can be repurposed to grow food, or, at the very least, hay, and to graze cattle. Perhaps some enlightened administrators, trustees and faculty members will fall upon this idea once they see admissions flat-lining and endowments dropping to zero, without any need for government involvement. So here we have a ray of hope, don’t we. 

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Now, $40 a barrel is a good price for US consumers at the moment, but there is hyperinflation on the horizon, thanks to the money-printing extravaganza currently underway in Washington, and $40 could easily become $400 and then $4000 a barrel, swiftly pricing US consumers out of the international oil market. 

==========================
 I brought along my uncle’s wife, who at the time was 8 months pregnant, and we tried use her huge belly to convince the gas station attendant to give us an extra 10 liters with which to drive her to the hospital when the time came. No dice. The pat answer was: “Everybody is 8 months pregnant!” How can you argue with that logic? So 10 liters was it for us too, belly or no belly. 

==========================================
 I advocated banning the sale of new cars, as was done in the US during World War II. The benefits are numerous. First, older cars are overall more energy-efficient than new cars, because the massive amount of energy that went into manufacturing them is more highly amortized
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Another excellent idea pioneered in Cuba is making it illegal not to pick up hitchhikers. Cars with vacant seats are flagged down and matched up with people who need a lift

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One interesting observation is that once collapse occurs it becomes possible to rent a policeman, either for a special occasion, or generally just to follow someone around. It is even possible to hire a soldier or two, armed with AK-47s, to help you run various errands. Not only is it possible to do such things, it’s often a very good idea, especially if you happen to have something valuable that you don’t want to part with. 

============================
And so we will have former soldiers, former police, and former prisoners: a big happy family, with a few bad apples and some violent tendencies. The end result will be a country awash with various categories of armed men, most of them unemployed, and many of them borderline psychotic. The police in the United States are a troubled group. Many of them lose all touch with people who are not "on the force" and most of them develop an us-versus-them mentality. 

=================================

Or perhaps you want to start a community health clinic, so that you can provide some relief to people who wouldn’t otherwise have any health care. You don’t dare call yourself a doctor, because these people are suspicious of doctors, because doctors were always trying to rob them of their life’s savings. But suppose you have some medical training that you got in, say, Cuba, and you are quite able to handle a Caesarean or an appendectomy, to suture wounds, to treat infections, to set bones and so on. You also want to be able to distribute opiates that your friends in Afghanistan periodically send you, to ease the pain of hard post-collapse life. Food. Shelter. Transportation. Security. Security is very important. Maintaining order and public safety requires discipline, and maintaining discipline, for a lot of people, requires the threat of force. This means that people must be ready to come to each other’s defense, take responsibility for each other, and do what’s right. Right now, security is provided by a number of bloated, bureaucratic, ineffectual institutions, which inspire more anger and despondency than discipline, and dispense not so much violence as ill treatment. That is why we have the world’s highest prison population. They are supposedly there to protect people from each other, but in reality their mission is not even to provide security; it is to safeguard property, and those who own it. Once these institutions run out of resources, there will be a period of upheaval, but in the end people will be forced to learn to deal with each other face to face, and Justice will once again become a personal virtue rather than a federal department. 
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People are losing their jobs left and right, and if we calculate unemployment the same way it was done during the Great Depression, instead of looking at the cooked numbers the government is trying to feed us now, then we are heading toward 20% unemployment. And is there any reason to think it’ll stop there? Do you happen to believe that prosperity is around the corner? Not only jobs and housing equity, but retirement savings are also evaporating. The federal government is broke, state governments are broke, some more than others, and the best they can do is print money, which will quickly lose value. 

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While at work, do as little as possible, because all this economic activity is just a terrible burden on the environment. Just gently ride it down to a stop and jump off. 
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If you still have a job, or if you still have some savings, what do you do with all the money? The obvious answer is, build up inventory. The money will be worthless, but a box of bronze nails will still be a box of bronze nails. Buy and stockpile useful stuff, especially stuff that can be used to create various kinds of alternative systems for growing food, providing shelter, and providing transportation. If you don’t own a patch of dirt free and clear where you can stockpile stuff, then you can rent a storage container, pay it a few years forward, and just sit on it until reality kicks in again and there is something useful for you to do with it. Some of you may be frightened by the future I just described, and rightly so. There is nothing any of us can do to change the path we are on: it is a huge system with tremendous inertia, and trying to change its path is like trying to change the path of a hurricane. What we can do is prepare ourselves, and each other, mostly by changing our expectations, our preferences, and scaling down our needs. It may mean that you will miss out on some last, uncertain bit of enjoyment. On the other hand, by refashioning yourself into someone who might stand a better chance of adapting to the new circumstances, you will be able to give to yourself, and to others, a great deal of hope that would otherwise not exist.

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