Adapted for the Internet from:

Why God Doesn't Exist
Government relief?

    The weeks following total unemployment constitute a period of demographic attrition. Authority breaks
    down and it’s every man for himself. The strong take justice into their own hands. Mass killing of people
    and stealing is the order of the day.

    The skeptic is unconvinced. Surely, there are a few things that a government can do to alleviate the
    situation. It can create jobs if the situation gets really bad, even if this work is artificial or compulsory.
    Government runs up an emergency budget deficit and puts people to work in whatever just to get  
    through the impasse. Isn’t this what the New Deal did in the 30s to get the U.S. out of the Great
    Depression? Doesn’t the example of the Great Depression disprove my prediction?

    At first glance, the Great Depression indeed seems to prove that Man is a very resilient species,
    confirming the skeptic’s argument. Unemployment hit rock bottom and bounced back. The national
    economies that were most affected crashed, but eventually recovered. This suggests that seemingly
    hopeless economic collapses are merely temporary dips in a long trend. There will always be ups and
    downs, and that’s just a fact of economics. Indeed, Ebeling strongly criticizes Roosevelt’s New Deal
    saying it exacerbated an already bad situation. He argues that Roosevelt was moving towards Fascism
    and assuming dictatorial powers. Friedman blames the Federal Reserve for causing and deepening the
    Great Depression by restricting the money supply at the wrong time. The solution to crises is to get
    government off our backs. Allow market forces to act. The economy recovers and adjusts on its own
    without government meddling. The role of government should be limited to making the right amount of
    money available to business so that each pursuing its own self-interest in the classic Smithian tradition
    nurses the economy back to health.

    We should put the upcoming collapse in perspective. Unlike the Great Depression or the Russian
    Revolution, we are not talking about a few million peasants, workers, and soldiers who are just discontent
    with government, want a political change, and meanwhile receive foreign aid. We are talking about
    hundreds of millions stranded on a gigantic island known as Earth with food for about a thousand and
    with no hope of relief from extraterrestrial aliens. We are talking about a sudden collapse in primary
    production, with no government to overthrow and no reason to create a new one. We are talking about
    millions of destitute urbanites roaming the streets among armed cannibals. The Russian Revolution better
    serves as an analogy for a different aspect of what’s to come. When authority collapses, the local
    ‘patriots’ with the guns impose their (and not the government’s) version of law and order locally. If there is
    someone you’ll have to fear after a complete labor collapse is the unemployed, hungry, and armed ex-
    government official. He has just killed and eaten his wife and children and is now going after you. It is the
    weak minded people having blind trust in the old system who will disappear first.

    The Great Depression is so different from the scenario I am describing that it cannot even serve as an
    analogy. I’ll quickly run down through a few snapshots just to make my point:

    1.        In 1930s, agriculture claimed about a 10th of GDP and almost half the population was rural. There
    were 6 million farms in the 1930s. Today, despite that the population has multiplied, there are less than 2
    million farms remaining, many of which are struggling to survive against the onslaught of large scale
    farming. [1] It wasn’t until after the war that the U.S. shifted to a service economy. [2] [3] Since then,
    manufacturing has suffered great attrition and today contributes only about 14% of U.S. GDP. This
    number continues to drop as we speak. Agriculture has fared even worse. U.S. agriculture is so efficient
    that it contributes to less than 1% of GDP, some of which is non-food (cotton, wool, hides, timber, etc.).
    Only about 2% of the work force is allocated to food production. Hence, when banks foreclosed on farms
    in the 30s, people moved to urban areas where they were absorbed into manufacturing and services, two
    activities that had yet to be exploited.

    Today, over 80% of the U.S. population is already urban and over 80% work in services. Unemployed
    workers in a futuristic crash would come almost exclusively from services and from the cities. There is no
    fourth occupational category in the artificial economy to move them into. We have agriculture,
    manufacturing, services, and …? The urban population cannot return to farming or manufacturing in
    hordes because the U.S. has already saturated the efficiencies of these sectors. In fact, developed nations
    are now working on making services more cost effective through outsourcing, streamlining, and the
    introduction of software. In his analysis of the 16th Century enclosure movement, Thomas More wrote
    that sheep were eating men. [4] [5] Today we can safely say that computers are zapping white collar
    employees.

    2.        It helped that the masses of the Roaring 20s were still somewhat politically naïve or at best
    immature, and people on both sides of the Atlantic believed in nationalism and in demagogues. The fact
    that many laws were not yet in the books also enabled central governments to manipulate people more
    easily. The government was thus able to coordinate the distribution of emergency aid, open up soup
    kitchens, relocate people, etc., and transport or evacuate people where necessary without too much
    opposition.

    Today we have come a long way in our small world and learned from past mistakes. Communications are
    so well developed that governments can’t seem to keep secrets for very long when the public already
    hears about them together with expert commentary from reporters. If the government were to attempt to
    evacuate millions, the opposition would be heard from New York to San Francisco. Ironically, it will be
    people brought up on laissez faire who will make the situation worse. They will do everything in their
    power to prevent the government from tinkering with them and the economy, mistaking the events for a
    routine depression that market forces can correct.

    3.        In the 1930s, the government put people to work in grand public projects. These projects were not
    suddenly implemented because they had a high priority and were long overdue. The purpose of the
    projects was to create artificial labor following massive layoffs. The government wanted people to earn a
    minimum income with which to support their families.

    Today, everything is already constructed. Most grand projects (roads, forestry) are already complete and
    running efficiently. There are few towns that aren’t 20 miles from a paved road or a park that doesn’t have
    a full time ranger service. In what grand public works will a president put idle laborers to work if
    unemployment hits the ceiling? Nevertheless, traditional brute work is now performed with heavy
    equipment. We no longer use shovels. We use excavators.

    4.        In the 1930s, the president had the authority to order families into agriculture. Sharecropping
    alleviated the situation a bit because agriculture was still labor intensive. [6]

    Today, a president would first have to break the law in order to carryout massive redeployment of people
    to the country. Then, the industrial rural corporations would kick them right back because contemporary
    agriculture has little use for manual labor. We don’t pick cotton by hand anymore. Today we use
    machines called cotton-pickers. [7]

    5.        In the 1940s, the government increased military recruitment and ordered millions to war. Almost
    12% of the population (16 million [8] from a total population of 140 million. [9]) participated in the effort.
    International conflicts were manpower intensive. The ripple that this economic multiplier caused in
    aggregate demand cannot be overestimated. [10] Most analysts agree that it was the war that got the U.S.
    economy rolling again.

    Today, armed forces are voluntary and lean. High tech has replaced soldiers. We don’t need large armies
    anymore. We just need to bring the proper mixture of forces to bear at the right place at the right time with
    the right weapons. The forces of Napoleon and his rivals numbered close to a million at a time when world
    population was less than a billion. In contrast, U.S. forces stationed in Iraq number a little over 150,000
    while the global population is over 6 billion. Hence, the government would be hard pressed to stimulate
    employment by creating a war. Certainly, it will help the military industrial complex, because killing people
    is still good for business, but it won’t remotely have the impact war had on the economy in the 40s.
    Nevertheless, manufacturing is disappearing as an important segment of the economy. The economic
    multiplier that can be set in motion today by stimulating the military industrial complex would not be
    remotely as impressive as the multiplier effect of World War II.

    6.        During World War II, women massively flooded the job market to fill vacancies left by men. This
    strategy enabled the U.S. to reduce unemployment to less than 2% while increasing aggregate demand in
    both the private and public sectors. The widespread induction of women into manufacturing and men into
    soldiering created labor shortages in non-war segments of the economy.

    Today, women in the U.S. already comprise half the labor force, and aggregate demand is built around
    this reality. [11] Not only would the government find it unnecessary to massively shift males to the front
    and housewives to the factories, but it would be unable to do so since that is the status quo.   

    7.        In the 30s and early 40s, there were crucial inventions yet to be developed and popularized. Cars
    were luxury items. Few had refrigerators, dishwashers, and radios. Microwaves, TVs, and computers
    hadn’t been invented. After the war, manufacturers were able to stimulate the post war economy by
    making household appliances available to the common man.

    Today, designers only make improvements to existing products, especially to ‘necessary’ artifacts. If we
    buy high-resolution plasma TVs today it is only to spoil ourselves and not like in the 50s because you
    were the first one with a TV on the block. In a period of economic and political austerity, the purchase of a
    plasma TV or a third car is postponed. There are not many more features that manufacturers can build
    into necessary articles (stoves, microwaves, refrigerators, etc.) that can induce consumers to buy
    products ad infinitum. Hence, neither government nor the manufacturing sector has a powerful way to
    stimulate aggregate demand of industrial products by inciting a large scale buying like the one that
    occurred after the war.

    8.        From the 30s to the 50s, it was the 20 and 30 year olds who married and bought household items.
    Their goal in life was to form families.

    The youth of today have no jobs or families nor interest in forming families. They impatiently wait for the
    old people to die so they can take over their jobs (and houses). Meanwhile, those who have jobs and earn
    money (the old) don’t need a fourth TV while those that need a 1st TV (the young) don’t have jobs or
    money or sufficient disposable income to buy one. The typical family of today is fast becoming the
    bachelor. This bachelor or divorcé stays and watches TV at mom’s.

    9.        In the 30s and 40s, many service industries were just developing. There was little consumer credit
    and people bought with their savings.

    Today services such as banking, tourism, health, insurance, and fast food are fine tuned to the point
    where little can be improved. People buy with credit and run up the tab. In an uncertain economy, people
    consume fewer services or declare bankruptcy. They eat at home and travel less. A service is like a luxury
    item. It would be nice to have a professional shave, but when the economy runs sluggishly, you sharpen
    a knife and do it yourself in front of the mirror or just create a new fashion trend by leaving your chin
    alone. In a downward spiraling service economy, services go up in smoke in a manner quite different than
    goods. With goods, you have something tangible. Service is a world of make-believe. The only tangible
    inside a package from a service company is the bill. Government is powerless to create an artificial
    demand for services like it created an artificial demand for war material and equipment. A government has
    actually little power to stimulate a service economy more than lower the interest rate or give handouts to
    the masses.

    10.        In the 40s, people bought houses with their savings and on tight credits.

    Today, people finance houses at distorted prices and use their equities to make more purchases. The
    government can only lower the interest rate to zero. After that, credit companies have no reason to lend.
    Deflation is a more dangerous animal than inflation.

    11.        In the 40s, international commerce was a small part of Gross World Product (GWP). If one economy
    went under this had comparatively little effect on others. Nationalistic policies such as protectionism were
    designed to help local corporations (i.e., protectionism).

    In a global economy, the tariffs or bans imposed by one affects the production of another. Today’s global
    economy is more integrated and interdependent. Exports comprise 16% of the world’s GWP and is the
    fastest growing segment of the world economy. [12]  The day exports are maximized for all countries, we
    will have attained our greatest level of efficiency possible. At that point, what one country does will
    severely affect its neighbors.

    These are just a few of the factors that differ markedly from 70 years ago. A sudden joblessness would
    take on different dimensions today. If the economy were to collapse, the entire service pyramid would
    come tumbling down. So what would a U.S. president do in a modern day Great Depression? What tools
    do governments officials dispose of nowadays to put people back to work?

    The answer is that the U.S. Government of today has been relegated to having the role of a cheerleader. It
    encourages people to go out, borrow money, and buy something just to keep the economy going.

    How about the rest of the economies of the world?

    Well, they just try to imitate the U.S. A perfectly tuned global economy is like the United States or Japan of
    today, but without any other country on the planet to sell its goods and services to.

    ________________________________________________________________________________________


     Home                    Book WGDE                    Glossary                    Extinction   

    Last modified 03/01/08


        Copyright © by Nila Gaede 2008
"I thought the
Government sent the
army to help us!"