Consciousness of Sheep
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Trading safety
Within the inner sanctum of one of the world’s oldest and most esteemed universities, an ageing professor sits in a battered leather armchair. Oblivious to the day-to-day sensations within the room – the slow tick and tock of an antique grandfather clock, the shimmering particles of dust caught in the beam of sunlight making its way through the sash window, or the odour of the worn, dusty and tea-stained carpet – our professor meditates upon the deeper mysteries of the universe. In the adjacent reception sits a dragon secretary, whose main role in life is to guard the inner sanctum and to ensure that none of the mundane workings of a modern university be allowed to disturb the professor’s haven of tranquillity.
After three decades of neoliberal governments turning universities from bastions of knowledge and inquiry into the individual units of a cargo cult-based Ponzi scheme, this vision of a university may be but a reflection of a lost past. It is, however, a metaphor for the way in which the human brain works – just like the dragon secretary – to prevent any of the millions of pieces of data that flood in through the senses from disturbing peace of mind.
When the mechanism – which psychologists call the “Affective Signalling System,” which causes us to seek pleasure and avoid danger – works properly, any sudden change in the environment will be allowed to enter the conscious mind. This is a safety mechanism wired in by ancestors who needed to know if that rustle in the grass or snapping of a twig might indicate the presence of a predator hungry for a hominid meal. And even within that tranquil inner sanctum, the odds are that our professor will notice immediately if the old grandfather clock stops ticking.
Such behaviour is a relic of a simpler and more self-contained existence. A time when people lived within the environment rather than working to shape it to their own needs. Problems begin to arise when those inherited instincts come up against the growing complexity that advancing civilisations generate. A fight or flight response, for example, may make absolute sense in the presence of a hungry leopard but it is less useful when the boss is giving you a hard time at work. And so, with complexity comes an unconscious tendency to dismiss changes in the surrounding environment rather than consciously acting upon them… even when our lives depend on it.
Psychologist Norman Dixon identified multiple means by which we short circuit the process in the modern world:
“Repression, denial, rationalisation, isolation and projection are well-documented mechanisms of defence, but there is another more widespread, insidious and probably more dangerous device for preserving peace of mind – optimism and its close cousin, positive thinking…
“Unfortunately, this agreeable strategy has a darker side due to an alarming relationship that has been found between affective and cognitive processes, namely that positive feelings activate positive memories and vice versa. The trouble is that if… the induction of a happy state of mind brings back happy memories and evokes positive expectations of future events, then it is fair to assume that these enjoyable thoughts would quite naturally increase feelings of happiness, which would in turn evoke even more pleasurable memories and so on – a runaway system.”
Little wonder that people opt for the reassuring lie rather than acknowledge the inconvenient truth. And Dixon goes on to document a host of disasters where the process of “trading safety for peace of mind” – unconsciously filtering out any unpleasant information even where it indicates danger – played its part. The engineers at Three Mile Island, for example, blamed their instruments rather than face the fact that their reactor was beginning to meltdown. The NASA managers in charge of the ill-fated Challenger famously refused to acknowledge or act upon the engineers’ warnings about launching in cold weather. On a longer timeline, governments of all colours since the 1970s have left it to the future to deal with both finite reserves of fossil fuels and with the environmental damage that burning them will cause. And we can only wonder whether the same process is occurring in the heads of US State Department officials pushing us ever closer to a nuclear war, or European Union technocrats risking the rapid and irreversible de-industrialisation of the entire continent.
Nor is this process limited to individual brains. Hierarchies too, are constructed to trade safety for peace of mind. “Don’t bring me problems, bring me answers,” is an operating principle of British government. And so, everyone within the system knows better than to send problems and predicaments – the equivalent of the rustling in the grass or the snapping of twigs which so disturbed our ancestors – up the hierarchy until or unless an answer has been discovered. In the months and years leading up to the 2008 crash, for example, everyone from freelance mortgage brokers to mid-level traders knew damned well that the house of cards was about to come tumbling down. But senior managers and government regulators remained blissfully ignorant until banks started falling over.
One reason, I suspect, why so much attention – organisational, governmental and individual – is being focussed on climate change – which is just one aspect of our predicament – just now is that of the “three e’s” – economy, energy and environment – environmental collapse is the furthest away. Economic failure was always going to manifest first, simply because of the mountain of unrepayable debt that will either have to collapse or be inflated away in a manner which will leave everyone materially damaged. Energy is not so far behind though, as we reap the consequences of believing that we could run a complex industrial economy on intermittent wind and sunlight alone. As the fossil fuels which still power more than eighty percent of the economy continue to deplete, so the list of things that we used to be able to do but no longer can, will grow exponentially. And yes, looming further in the distance is the potential collapse of the planetary human life support systems. But unlike with the collapsing economy and growing energy shortages, it is still possible to pretend that we might be able to do something about climate change.
The irony, of course is that whatever chance we did have of responding to climate change will evaporate in the event that the economy collapses and the energy available to us continues to deplete. Unfortunately, there is no way of getting this message through to Herr Schwab and his World Economic Forum political puppets because they are still trading safety for peace of mind with happy thoughts about central bank digital currencies, ESG investing and a fourth industrial revolution powered with renewable pixie dust.
An inflection point
Britain is booming. We know because Liz Truss told us so. And the establishment media has been keen to get in on the act by bigging up the latest employment data. Officially, unemployment is at its lowest since 1974. Employment is also close to its high point, although slightly down on the previous quarter. However – possibly because most Britons are preoccupied with matters monarchical just at the moment – even Britain’s equivalent to Pravda of old, the BBC, concedes that things are not as rosy as the headlines suggest:
“Although the unemployment rate fell to 3.6% in the three months to July – the lowest since 1974 – the employment rate and number of vacancies also fell…
“One reason for the fall in the unemployment rate is a rise in the number of people who are no longer looking for work, and so not counted in the figure. The inactivity rate rose to 21.7%, the Office for National Statistics (ONS) said, the highest since 2017.”
Youngsters fortunate enough to be able to fall back on the bank of mum and dad, and workers aged 50 and over have been dropping out of the labour market since the end of the pandemic. The latter often cashing in pensions at a far lower return than they may have planned for and settling for a slightly less arduous life than they would have on Universal Credit. Also, as Phillip Inman at the Guardian reports:
“Official figures giving an overview of the jobs market showed more than 150,000 workers joined the list of people with persistent ill-health in just two months to the end of July.”
This likely reflects the growing lockdown-induced crisis in the NHS, which has left working age people on two year waiting lists for previously routine operations such as hernia repairs, cataract surgery, and joint replacements, which would have been done within six months before we locked down to “flatten the curve” and “save the NHS.”
Economic growth – as measured by somewhat dodgy GDP figures – was also slower than anticipated. And, despite painful rises in food prices the rate of inflation unexpectedly declined slightly in August. According to Noor Nanji at the BBC:
“Overall UK inflation, which measures the rate at which prices rise, eased for the first time in almost a year in August, slipping to 9.9% from July’s 10.1%The figure was not as bad as feared but economists have warned the inflation rate is likely to continue to rise, noting that the cost of food, clothing and services – which include things such as shops and restaurant prices – were all continuing to rise sharply.”
The vacancy rate – a more effective measure of current demand for workers – fell at its fastest since the pandemic, with 34,000 fewer vacancies in August than July. And of the two measures we’ve been following on these pages, hours worked continue to fall and output per worker has flatlined.
Remember that these numbers are backward looking – they tell us how the economy was (subject to revision) last month or last quarter, not how it is today… still less how it will be a month from now. They do, however, suggest that the economy has reached an inflection point beyond which things could go south very rapidly. In the real world, consumers have been hit hard by relative declines in income since lockdown began. Shortages and broken supply chain disruption had sent prices spiralling upward even before the lockdowns had come to an end. But in that early stage in the post-pandemic collapse, most firms attempted to absorb the losses rather than risk losing customers to competitors. Beginning in 2022, and likely fuelled by rising energy prices resulting from EU sanctions, firms reached a point where they could no longer absorb rising costs, and price increases became the norm. The latest data, I believe, is evidence of the inevitable consumer response to those price increases – effectively to switch spending from discretionary to essential purchases.
The loss of 3.5 million working hours since the previous quarter, suggests that as demand for discretionary purchases falls, so the businesses which provide them as cutting workers’ hours in response. The flattening of output per worker also suggests that wholesale companies hit with falling demand are also curbing output and lowering hours. But with further energy price rises and interest rate increases already built in, the question is whether the discretionary sectors of the economy can make ends meet without widespread closures and redundancies. The latest data – which, remember, is from the summer quarter when energy demand is at its lowest – says not. A wave of bankruptcies and layoffs is likely already baked-in at this point. And we are all about to become a lot poorer.
The crisis of under-consumption
The phrase “worse than economists predicted,” or some variant thereof, is getting a good outing in the business pages these days. Energy prices are still much higher than economists predicted. The rise in food prices was greater than economists predicted. The number of economically inactive people is far higher than economists predicted. Perhaps Michael Gove was right after all:
“I think the people in this country have had enough of experts from organisations with acronyms saying that they know what is best and getting it consistently wrong.”
Might it be simpler just to say that “economists are wrong.” After all, most of us readily accept the joke that economic models only exist to make weather forecasts look reliable. Except, of course, that the people who rule over us and who have the ability to wreck people’s lives at the stroke of a pen, take economic forecasts seriously. And so, the consequences are far more profound. Get the weather forecast wrong, and the worst that happens is people get wetter or colder than they might have done if they’d donned an extra sweater or taken an umbrella. Get an economic forecast wrong, in contrast, and whole industries are laid low. Thousands, and sometimes millions of workers are left without work. People are made homeless, and children go hungry. All because the policy-maker acted on a wrong forecast by an unaccountable technocrat.
In the UK, the homelessness and child hunger engineered in the aftermath of the 2008 crash is still with us. But like some sedimentary layer, it is now subsumed beneath new layers of poverty and misery generated by a dodgy Brexit deal which, itself, is now buried by the fallout from the economic vandalism of two years of lockdowns. But even these sedimentary layers of human misery are but a tiny sliver against what is coming over the next few years as an entire continent experiences a sudden, massive loss of energy.
Nevertheless, in the tranquil surrounds of the central banks, those same, wrong, economic models act like Valium on those charged with maintaining inflation at just two percent – something which simply cannot be done without lowering economic activity and living standards to something akin to the 1890s. Looking out of the rear window at economic forecasts based upon – often rigged – data about how the world used to be months, quarters, or even years ago, the bankers can convince themselves that they are in control… that the mild recession they are seeking to cause has yet to appear.
Meanwhile, in the real world, something a lot worse than what almost happened 14 years ago is already brewing. As we have seen (above) the labour market is already faltering. Businesses may be maintaining employment for now, but only by cutting hours worked and causing output per worker to fall. And on the other side of the equation, consumer demand – already crushed by rising energy prices, falling real wages and higher debt-servicing costs – is taking its effect. As Michael Race at the BBC reports:
“Retail sales fell sharply in August as the rise in the cost of living put pressure on households, figures show. Sales fell by 1.6%, much larger than economists predicted, continuing a slide since the summer of 2021…
“On Thursday, John Lewis revealed that while its shopper numbers were higher than last year, customers were spending less and avoiding buying as many ‘big ticket’ items. The department store and its supermarket chain Waitrose reported a loss of £99m for the first half of its trading year. Waitrose said it sales were down 5% on last year, with basket sizes shrinking by ‘nearly a fifth.’”
John Lewis and Waitrose are of interest here because of their predominantly middle-class (in its UK meaning) customer base, suggesting that even those higher up the income ladder were making big switches from discretionary to essential purchases. Meanwhile a more working-class example of the same phenomenon was seen earlier in the week, when the less upmarket ASDA had to ration its low-cost “Just Essentials” as a result of a big leap in demand. Meanwhile, the switch in spending has resulted in discount store chain Aldi overtaking Morrisons to become the UK’s fourth largest supermarket. This shows that not only are consumers switching from discretionary goods and services to essential items, but they are also seeking to find the lowest price possible for essentials.
This is reflected in the ONS data which, in addition to the headline drop of 1.6 percent in sales volumes reported by the BBC, also records a fall in sales value of 1.7 percent – the first fall in the value of sales since November 2021, when the second lockdown was announced:
Nor can the establishment media fall back on their pre-pandemic pacifier that the decline in high street shopping is the result of people buying online. Online sales values have fallen far more rapidly than physical stores, with sales down 3.6 percent compared to July and 9.5 percent on the year to August.
We could, perhaps, reach for some barely plausible reason – such as the women’s football in July – to say that this is no more than a blip and that sales volumes and values will bounce back in September – although this is unlikely with the mass closures in response to the death of the Queen (London florists may see a big rise in sales though). More likely though, we are already in the grip of a classic crisis of under-consumption, as consumers collectively no longer have the spending power to keep the economy growing or even flatlining. And this is even before the increase in energy prices from October, which will put around £600 on the average bill even after the government support packages are factored in.
Crises of under-consumption can spiral out of hand very rapidly because business costs are rising even as business income is in decline. Even though the main cost pressure is from energy, commodities and wholesale supplies, wages are usually the main cost to running a business. And so, eventually businesses have to lay off workers in an attempt to restore profitability. The collective impact of this, however, is to further reduce consumer demand, causing even fewer sales and even more lay-offs and business failures.
Higher interest rates add to the problem because they discourage consumer borrowing as well as preventing business investment. Moreover, because almost all of the currency in circulation is created in the form of bank loans, and because higher rates result in more people paying off loans than those who take out new loans, the amount of currency in circulation can drop precipitously, accelerating and deepening the under-consumption crisis.
Sooner or later, things are going to start breaking because bankrupt companies and households are going to leave a mountain of unpaid debt behind them. And as in 2008, we are going to find that banks have continued to sell trillions of pounds of derivatives on the anticipated income from those debts. We can only guess which of the banks is going to be the next Bear Stearns or Lehman Brothers, but we will likely not have to wait too long to find out. And interestingly, financial contagion works in a very similar manner to pandemic contagion, where what begins as a handful of apparently unrelated cases rapidly morphs into a national and then global emergency.
Everything which was too big to fail in 2008 has been allowed and assisted to become too big to save today. And with the growing global dollar shortage – which both prevents governments borrowing and makes repayment more expensive – coupled to the emergence of a new, Eurasia-centred non-dollar trading bloc, even countries and continents look set to fail.
A reign of decline
It seems that I am not the only one to wonder whether Queen Elizabeth II might have lost the will to live when she met her final prime minister. Satire aside, there is a huge gulf between the world-striding figure of the late Queen’s first prime minister, Winston Churchill and the dim-witted pork marketeer who apparently thought that Ukrainia was an island in the Baltic Sea. And the difference is due to a lot more than mere personality.
The late Queen was the daughter of the last British Emperor whose Empire was at its largest following the absorption of German territories after the First World War. By the time Princess Elizabeth became Queen Elizabeth II, that Empire had already begun to unravel. The convenient myth of the Commonwealth allowed the pretence of empire even as more and more countries became independent during her reign. Nor was this mere window dressing. Imperial pretentions saved governments of both colours from making heavyweight decisions about the future of a small island in a big – mostly American – world.
Becoming the world’s money-launderer happened almost by accident, as, beyond the reach of government, banks created the international Eurodollar system in what remained of Britain’s overseas territories. At the same time, Britain’s real economy, including once leading-edge sectors like aviation, was allowed to wither. The problem – which is as true today as it was back in 1952 – is that the covert activity of the banks drove the value of the pound far higher than Britain’s real economy warranted, rendering British exports uncompetitive even as cheap imports began to arrive in quantity. Governments were left to grapple with the headache of powerful (by today’s standards) trade unions fighting rear-guard actions to preserve jobs, pay and conditions in both declining nineteenth century industries like mining, as well as in previously leading-edge sectors like automobiles.
Things went from bad to worse with the oil crises of the 1970s and, ironically, with the discovery of oil and gas in the North Sea. During the Thatcher governments – 1979-1990 – the income from North Sea oil not only bailed out the UK government, but also underwrote the pound, allowing banks to inflate the debt-based bubble of the 1990s and early 2000s.
By then though, financial deregulation and the massive growth of the banking and financial sector had served to diminish the status of politics and government. Whereas in Churchill’s day, government was among the highest aspiration for landed gentry and trade union activists alike, by the time Blair and Brown arrived to solidify the neoliberal system, politics had been reduced to a mere stepping stone on the way to a lucrative sinecure in the City. Prime ministers today do not retire on a government pension or take an advisory seat in the House of Lords, instead they go on to become multi-millionaire hedge fund directors or national newspaper editors.
And then we arrive at BoJo the Clown – the only inhabitant of Versailles-on-Thames with sufficiently inflated vanity to believe that he might deliver Brexit where all had failed before him. But also, a man so hubristic that, unlike his predecessors, did not even bother to hide the soft-corruption of free wallpaper and donations from oligarchs. And possibly the only political figure in Britain’s long history to personally bring about the downfall of three successive prime ministers.
And following him… the cheese lady. Queen Elizabeth’s final reminder of just how far her country had fallen just hours before her death. But even now, as this last symbol of stability and continuity goes (somewhat more slowly than is strictly necessary) to her final resting place, we are still ducking those key questions about the future position of a small island in a big world.
As you made it to the end…
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