16. The collapse of the West
The mechanisms are in place to ensure that the Western democratic governments have no alternative but to destroy their societies. The State might consist of people but as a system they operate as an organic entity in their own right. They have to feed to survive and will continue to consume until nothing is left. It would be pointless to even try to slow their rate of consumption if only because their electorates will never permit it. Most individuals are self centred and cannot see very far into the future. Full cognitive development is found in less than 30% of the population by the age of 40 and even a large proportion of these people will reason that they might as well enjoy themselves if the system is going to fail anyway. Politicians will always seek to persuade the bulk of the population that all will be well and to create the illusion that everything will work out all right in the end. The bulk of the population always chooses to believe that if there is a problem that it is the job of the Government to solve it. Most people will cling to this belief until the very end even though it clearly is not true. Instead of focusing the population on the imminent problems of living without energy and wealth the Government is still focusing time and effort on the global environment, civil rights, social equality and solving the problems of other countries.
The British Treasury has a much vaunted model. All that would need to be done would be to feed into it the real financial data for the UK economy and the hopelessness of the situation would become apparent. Britain is living on borrowed money. As long as people have confidence in the financial system it will continue. However maintaining faith will get harder and harder. When the hopelessness of the situation dawns the Western Democracies will go into terminal decline. The problems will start first in the cities where the young will have little to do except resort to drugs and crime.
The UK is already technically bankrupt. If it was a company the British Government would not be allowed to continue trading as its liabilities exceed its ability to generate the income to discharge its liabilities. Provided that cheap goods are available and provided energy prices stay reasonably low there will be no real problems for the political establishment. However as soon as the cost of consumer goods that are available on the World market start to rise relative to disposable incomes then people's apparent high standard of living will fall. The International Energy Agency (the industrialised countries energy watchdog) warned in July 2007 that "oil looks extremely tight in five years time" and there are "prospects of even tighter natural gas markets at the turn of the decade". Energy prices look set to increase by 10% per annum above the 'official' interest rate from now on. As food and fuel costs rise the quality and quantity of consumer goods that can be purchased will have to decline. At that time a major permanent recession and downward spiral in the economy can be the only outcome.
In 2006 the International Monetary Fund issued a warning over Britain's health care bill, saying the British Government may have massively under-estimated the future growth of NHS costs. The Washington-based organisation said huge tax rises or spending cuts would be inevitable in the years ahead if the Government is to satisfy the growing financial demands of the health sector. The news should have reignited the debate over the "black hole" in public finances but as usual it was ignored. In its survey of the British economy, the IMF said that while the Government's accounts had improved after Mr Brown raised North Sea oil taxes, they failed to take on board the potential costs of an ageing population and that this would have "significant" implications for health spending. "The average person aged 65 or over costs the UK health system about five times more than the average person under 65," it said. The report also said that the long-term estimates for the annual NHS bill, which was about 7.8 per cent of Britain's Gross Domestic Product in 2006, were over-optimistic. The basic conclusion was that ... 'healthcare spending could rise by about six percentage points of GDP between 2007 and 2050, significantly higher than the Government's projections of 1.5 percentage points." The difference between the two positions is equivalent to more than £50 billion in today's terms - based on the current size of the economy. This would equate to an extra 17p on the basic tax rate. The IMF forecasts had serious long-term implications for both health care and the national economy. They underlined the question of whether public funding will be sufficient to keep the NHS fully operational. This report should have sparked fear in financial markets, where investors buy Government bonds based on Britain's long-term prospects. An unexpected drain from health costs would damage prospects for future UK growth. James Morsink, head of the IMF's European department, said the Government had 'to be even more forthright in terms of describing the underlying uncertainties and what we see as the upside risks for health spending'. As one would expect the response from the Treasury spokesman was that 'the Treasury's projections on health spending over coming decades are based on official population projections and cautious assumptions regarding future trends in healthy life expectancy'. 'The IMF's projection is based on various assumptions including technological change which are highly uncertain, and which may, in reality, lead to cost savings'. Elsewhere in the report, the IMF said the economy was still threatened by overvalued house prices and energy costs. It also advised the Government to take more action on pensions, and said there was a 'compelling' case for increasing private savings funds and raising the retirement age.
The point at which the system finally fails is when the Chinese cause the price of oil to rise due to their consumption, when the number of elderly people in the Western democracies reach a level where the medical services fail and when the savings of these nations are exhausted. At that point the young will have nothing to look forward to. It will be impossible to motivate a work force who has nowhere to live, are short of cash, who are surrounded by crime and social problems and who are expected to support huge numbers of elderly people while at the same time knowing that there will be no one to support them when their time comes. It will be impossible to persuade a population that has become accustomed to a soft gentle existence to return to the world of manual labour. It only means winding back the clock to 1930 but is will be an impossible task.
Many successful people believe that they should concentrate on looking after themselves and their families for the future. This is a forlorn hope. Many more are convinced that the British Government will be able to resolve matters despite the fact that it is obvious that it cannot. The current problems were caused by governments of different political persuasions over the last thirty years across the Western World. The general level of taxation will have to rise as the British Government seeks to spread societies remaining resources ever more thinly. Anyone who has any savings or assets will have to liquidate them before the State will give them any assistance. Taxes will rise until the point is reached that there is nothing left to tax. Finally all the savings will be spent and the level of borrowing will have reached its ceiling. Eventually the currencies of the Western nations will have to decline in value to reflect their actual productive output. As these currencies decline in value so the ability of these countries to purchase cheap imports will also decline by a proportionate amount.
The current financial and commercial trends can only have one outcome. China already holds well over two trillion dollars of monetary instruments. This is more than sufficient to destabilise the US economy. Quite what the Chinese hold in terms of other Western currencies is unclear but it must be at least the same amount. As the Western Economies give up manufacturing and become more and more reliant upon the manufacturing capacity of the Chinese so more and more of the wealth of the West will pass to China. The Chinese do not need to repatriate all this money but can leave much of it in the Western economies and take dividends that are transferred more slowly into their own economy.
The recent fall in the dollar has cost the Chinese very dearly. The Chinese are already buying stakes in Western banks so that they can better control the way that 'their' money is handled. After the recent troubles with the Western World's financial systems the Chinese will now be seeking ways to ensure that their money is anchored in something more tangible than Western currencies. By the time that the current financial difficulties have resolved themselves the Chinese and the Arabs will control a large part of the West's banking operations. This will allow them to regulate their customers as the Western governments will be beholden to them.
Surplus funds will be used by the Chinese to secure rights to the raw materials that they know that they will need at some future date. They will transfer the raw materials or semi finished material to their country to be processed. They need to keep their people employed. They are not interested in the rest of the World. This approach will mean that even the businesses that are already present in the weaker Third World countries will succumb as they will not be able to compete for raw materials. Those countries that can supply raw materials such as Canada and Australia will continue to prosper for several decades more. However those countries which have no reserves of natural resources and in particularly have no cheap energy sources will be in considerable difficulty.
The Western democracies will become gradually more and more impoverished and what resources they still have will have to be spent caring for an increasingly elderly and non productive population. Being democratic the Western societies will have no option but to care for these people. The Chinese by contrast have always believed that the children should care for their parents and although this model will undoubtedly change it is very unlikely that the Chinese will ever embrace the notion that the State is responsible for the ultimate well being of its citizens from cradle to grave. The great advantage that Chinese has is that it is not a democracy. They can always make pragmatic decisions based on common sense. They do not need to even try to appease a whole raft of special interest groups.
Eventually all the ways of hiding the truth about inflation, government debt, the State's pension liabilities, the real magnitude of unproductive State expenditure and the consequences of high personal borrowing will be exhausted. A new generation will then wake up to a stark and unwelcoming future. Without products to trade for food and fuel it will be a very cold and uncomfortable World for people who are accustomed to the easy life. When the final stage is reached it will be quick and take no more than a decade. For two decades before the collapse starts the media will be full of stories of rising prices, increasing taxes and the need for increased security. To the very end the British Government will reassure the electorate that all is well and that they have policies to solve the myriad of problems that will face the country.
No empire lasts forever and the Western Nations are now in the final run up to economic collapse. It is only a matter of three decades or less before implosion occurs. It happened several times during the history of Egypt. It happened to the Chinese Empire. In fact human history is littered with examples of civilisations that simply ran out of money and so were unable to support their infrastructure. When it happens the end comes very fast.
What is happening in the Western Nations today is no different to what happened in the closing Stages of the Roman Empire. Rome was strong as long as it expanded and as long as the wealth of the conquered lands was channelled into the centre. When Hadrian decided to fix the boundaries of the Empire the chance to plunder wealth from outside ceased. From that point forward materials that came in from outside the Empire had to be paid for with cash rather than taken by force of arms. Protecting and achieving stability on the borders was done by buying favours from neighbouring tribes. As a result taxes had to increase. Inflation was rampant and the currency was continually being devalued. Gradually the Empire simply ran out of money. As the centre declined so the provincial cities became stronger. When the control of the centre eventually failed the infrastructure started to collapse. The cities then started to fade as they could no longer engage in trade for the raw materials that they needed. The countryside then ceased to supply the food that the cities required. The rest is history. The process did not happen simultaneously across the Empire. In some places civilisation continued for many decades after Rome fell. What happened to the population of the Empire when it collapsed in seldom discussed. What is certain is that the population of Romano Britain dropped from 6 to 8 million to less than 1 million in a very short time. The analogy with the modern world is clear.
Published: August 2008