Aengus Anderson: You're listening to the conversation. I'm Aengus Anderson.

Micah Saul: I'm Micah Saul.

Neil Prendergast: And I'm Neil Prendergast. And if you're just tuning into the series you may want to check out an earlier episode, where we lay out the whole premise of The Conversation.

Saul: Yeah, these are our final episodes. They were all recorded in 2013, and we've just been horrifically lazy about getting them packaged up for you. But, they are now ready and here they are.

Anderson: Today an interview with Charles Hugh Smith, an alternative economics blogger from the Bay Area.

Prendergast: The way we got to him, actually, is that he was recommended by a listener, so it was really nice to have that back and forth with our audience.

Anderson: He's a really interesting thinker. He's self-taught. He's got a background in philosophy, but he's worked in a whole gamut of different areas. But he's been doing economics blogging because it is his passion. CNBC listed him as one of their top alt economics bloggers. So it was really nice of him to carve out a little time and sit down for a conversation. And speaking as the one who interviewed him, this was one of the most conversational conversations I've had. It never felt like a single answer was boilerplate. And that is always refreshing. So, without further ado, here's Charles Hugh Smith.

Charles Hugh Smith: We’re in an era of over­lap­ping crises, and I think that’s what makes it sort of unique. We’re aware of the finan­cial aspect, which is sort of expo­nen­tial increase in debt. We’re also aware that ener­gy, the cost is going up because we’re reach­ing to deep­er and more expen­sive reserves of ener­gy, at least fos­sil fuels.

So that’s anoth­er if not cri­sis then um… Well, actu­al­ly it is a cri­sis, because the world we’ve con­struct­ed is based on cheap fos­sil fuels. And so any­thing that changes that cre­ates a chron­ic cri­sis. And I think con­sumerism as a way of life and as a guid­ing phi­los­o­phy for the finan­cial sec­tor and the econ­o­my as a whole, I think that has sort of run out of air, you know. That we’ve reached this sort of mar­gin­al return on con­sump­tion as the guid­ing phi­los­o­phy, not just for eco­nom­ic growth but for mean­ing in our lives. Like we iden­ti­fy who we are with the sig­ni­fiers that we’re able to pur­chase and con­sume.

And then we can also look at say, just resources in gen­er­al. Not just ener­gy but soil, which is being deplet­ed. Fresh water which is under pres­sure. And cer­tain of the min­er­als. And so that’s the gen­er­al con­text of my work, is these four over­lap­ping crises.

Aengus Anderson: If the cur­rent sys­tems log­ic con­tin­ues, what does that look like?

Smith: We can sep­a­rate the finan­cial from the mate­r­i­al.

Anderson: Okay.

Smith: So the finan­cial, there will be a cri­sis with­in I’d say ten years. Maybe you can stretch it out to you know, twelve years. But some­where rel­a­tive­ly soon, this whole thing of expo­nen­tial debt being built on an econ­o­my that’s basi­cal­ly flat­lined in the real world, that’s going to need to be reset. And the only way that it can be reset is all that debt’s liq­ui­dat­ed. It’s either destroyed by cri­sis or it’s for­giv­en, or it’s default­ed on. And so that’s guar­an­teed. That just math­e­mat­ics, and so that’s why guys like Chris Martenson who comes from a sci­en­tif­ic back­ground, they look at the math of debt at the gov­ern­ment and pri­vate sec­tor lev­els and they go, This is…there’s no way this is sus­tain­able.” And so that’s one thing.

But that doesn’t nec­es­sar­i­ly mean we all have to be like starv­ing in the streets, because the mate­r­i­al econ­o­my is still like, how much food is grown, how much energy’s extract­ed, and how is it dis­trib­uted? That I think will part­ly depend on ener­gy. And a lot of peo­ple are now con­vinced that there’s going to be tons of fos­sil fuels for­ev­er because of the frack­ing and new tech­nolo­gies extract­ing more oil out of old wells and all that kind of thing. I look at that and go that’s all fine and good, and maybe even if you said it was infi­nite, if the cost is five times more than it is now, then that doesn’t work for the econ­o­my we have, which requires cheap ener­gy.

Anderson: I was talk­ing to John Fullerton, are you famil­iar with him, of The Capital Institute?

Smith: Yes. A lit­tle bit.

Anderson: Okay. We were talk­ing about the sort of ter­ri­ble fork in the road that he feels we’re at. He said basi­cal­ly let’s not even wor­ry about ener­gy lim­its. Let’s say you’ve got all the ener­gy you want. But to burn it you still have to deal with the cli­mat­ic reper­cus­sions of that. So essen­tial­ly if you want to keep the cli­mate in an even remote­ly tol­er­a­ble zone for doing any­thing else in the world, farm­ing, or liv­ing, you basi­cal­ly have a lot of ener­gy that maybe exists in the ground but you just can’t burn.

And then he was say­ing so, we can either go down the road where we say in advance, Let’s not burn that,” and then you write off the val­ue of all of that. Which col­laps­es the val­ue of all these ener­gy com­pa­nies on the stock mar­ket and caus­es a sys­temic prob­lem that radi­ates out from that—with pan­ic and with poor dis­tri­b­u­tion based on just…pan­ic.

So that’s what you need to do to save the envi­ron­ment. And he said of course you could not save the envi­ron­ment. Let’s say you just burn all that stuff. And then you have a true envi­ron­men­tal prob­lem, with food dis­tri­b­u­tion issues that could lead to some sort of pan­ic that col­laps­es the stock mar­ket then pre­cip­i­tates a… And so he saw it as sort of this no-win sce­nario, but one of those ways real­ly hurts the phys­i­cal world that we live in, not only for us but for oth­er fea­tures as well. What do you think of that sce­nario? Are we in one of these…kinda lose-lose what­ev­er we do, with the cur­rent mar­ket?

Smith: The biol­o­gist E.O. Wilson, he wrote a book… I for­get the exact title but his think­ing is sim­i­lar. In life on plan­et Earth, a lot of peo­ple see the same kind of cone you’re describ­ing, where the num­ber of species that are being dri­ven to extinc­tion, and the dis­rup­tions of these ecosys­tems is just reach­ing a crit­i­cal phase based on burn­ing huge quan­ti­ties of coal, and of strip min­ing the ocean so there’s you know…totally dis­rupt­ing those ecolo­gies, and that you can’t go back and fix that stuff. You know, we can’t bring species back. We can’t bring the ocean ecol­o­gy back after we’ve elim­i­nat­ed all the whole food chain. So I think there is a point where you know, you can’t go back and fix that stuff with just more mon­ey. That’s kind of the intel­lec­tu­al par­a­digm we have, is, Well, all you need is more mon­ey.” If you’re burn­ing too much coal then you spend mon­ey and put a scrub­ber on that chim­ney stack or what­ev­er. And so the idea that no amount of mon­ey can fix the prob­lems, that’s part of the…kind of the end of cap­i­tal­ism think­ing that I’m pur­su­ing, you know. That the whole mod­el is bro­ken.

Then I take your ques­tion as sort of like well, it’s an orga­ni­za­tion­al one. Is there some oth­er way that we could orga­nize life such that we could get by as a species on 10% of the ener­gy we now spend? And I think the answer’s well clear­ly, yes we could. So then it’s like, how do we orga­nize that ratio­nal­ly?

Anderson: And do you buy his descrip­tion where we have that fork in the road with two options that lose, but one that takes out the envi­ron­ment? Or, is there a way to ignore that fork in the road entire­ly? Is there a third way that gets you to this min­i­mal ener­gy sce­nario with­out say, an eco­nom­ic col­lapse that leads to pan­ic? You know, because it seems like a big theme of this, is that every­thing is so inter­con­nect­ed that it doesn’t mat­ter what’s mate­ri­al­ly out there, right. There’s the psy­cho­log­i­cal aspect of if the mar­ket col­laps­es then dis­tri­b­u­tion breaks down. And that that kind of snow­balls, in a way.

Smith: Yeah. I agree with the domi­no sequence there. And I con­sid­er it a pos­i­tive if the finan­cial sit­u­a­tion col­laps­es. In oth­er words, if all of our finan­cial wealth van­ish­es, what impact does that actu­al­ly have? And if we fol­low that through it leads to some inter­est­ing ques­tions. Because most of us don’t con­trol enough wealth to real­ly make a dif­fer­ence. And so what we’re real­ly talk­ing about is the loss of all finan­cial wealth real­ly only affects the one tenth of 1% who own like 80% of the assets. And so if they were wiped out, how bad would that be for the rest of us? Well, it might be good.

Anderson: Mm hm. But would it lead to a dis­tri­b­u­tion prob­lem? A pan­ic that would affect every­one else? So, maybe they would lose a lot of wealth but in the process their com­pa­nies would stop func­tion­ing. You know, we have a very dis­trib­uted food sys­tem, for exam­ple, so if there was a finan­cial pan­ic and the top lost the wealth and their com­pa­nies fell into dis­ar­ray, would Walmart then be ship­ping pro­duce to all of these towns that aren’t ready to grow any­thing, and where the local pop­u­la­tion doesn’t have the knowl­edge to grow things?

So that’s where I won­der, in the short term do you face a real cri­sis, even if it is in the long term a pos­i­tive thing? Because I’ve had sev­er­al peo­ple in the series—I’m think­ing of Jan Lundberg down in Santa Cruz, talk­ing about you know, cri­sis could be cathar­sis, you know, and lead to a bet­ter state. But I always won­der well what does that cri­sis look like, and how many peo­ple die just because of our own inef­fi­cien­cies and our own pan­ic mech­a­nism, our own herd men­tal­i­ty?

Smith: Yeah. And that’s um…that’s a ques­tion that’s real­ly hard to answer because there’s so many vari­ables. My sense is there’s a lot of peo­ple, and this is the pos­i­tive part, who are try­ing to set up par­al­lel sys­tems. Of course we’re still depen­dent on these large infra­struc­tures. You know, the Internet and the pow­er grid and all that. But to what­ev­er degree we can I think we need to cre­ate a par­al­lel sys­tem not only of val­ues but of ways of using the ener­gy and the infra­struc­ture, that if we can dis­tance our­selves from these car­tels, the more the bet­ter. So if they sur­vive, they’re not going to impact us so much. And if they crum­ble, or devolve, then we’ve sep­a­rat­ed our­selves out.

And so that’s the whole idea of the relo­cal­iz­ing econ­o­my, that you can say, Well you know, the farm­ers mar­ket can’t replace Walmart. But can it replace the fresh fruits and veg­eta­bles that Walmart doesn’t have, or that it only has a selec­tion, or that Walmart flew in those grapes 6,000 miles from Chile? Can it replace some part of that?” And so the more that we can replace the bet­ter, that’s how I would kind of phrase it.

Some com­mu­ni­ties are going to do bet­ter than oth­ers, because they’ve built a lit­tle bit of resilience. That would be hope­ful in the sense that there’s a mod­el that oth­er peo­ple can quick­ly fol­low, and because of the Internet we now have a way to spread that kind of knowl­edge extreme­ly quick­ly.

You go, Well wait a minute. You’re talk­ing about like the real world. Can gar­den­ing spread that fast? Can Zipcar spread that fast?” And I’m say­ing I think in terms of social inno­va­tion yes it can. It can spread as fast as tech­nol­o­gy, because it’s enabled by tech­nol­o­gy. And so I’m a lit­tle more hope­ful that par­al­lel sys­tems can arise as these cen­tral­ized sys­tems decay or devolve.

So I have one foot in that camp, that rec­og­nizes the pow­er of the local econ­o­my and the real world. And then I also have a foot in the camp of gee, this 3D print­er is going to wipe out a bunch of car­tels because we don’t need these 6,000-mile sup­ply chains to China any­more because you can buy like a desk­top 3D print­er for three grand or some­thing. And if you put that in a com­mu­ni­ty work­shop where a bunch of peo­ple can rent it for like ten bucks an hour, sud­den­ly you have like a nexus of poten­tial inno­va­tion, with­out a 6,000-mile sup­ply chain con­trolled by a cen­tral­ized cor­po­ra­tion con­trolled by a cen­tral state.

Anderson: Kind of the big thrust in terms of what you’d want to see hap­pen­ing now would be local, par­al­lel, resilient, small-scale sys­tems.

Smith: Yeah. And why would that be some­thing we want to do? Well, two rea­sons. One is it’s more fun and it feels bet­ter. With the caveat that we can actu­al­ly sup­port that this is a health­i­er envi­ron­ment with data. Just like there’s end­less reams of data to sup­port the Mediterranean diet as like the key to longevi­ty, and the com­mu­ni­ty that goes with that kind of lifestyle is part of that longevi­ty. That’s been stud­ied to death and it’s sup­port­ed by data.

But then there’s also that the tech­no­log­i­cal or eco­nom­ic argu­ment is the 3D desk­top fab tech­nol­o­gy enables faster bet­ter cheap­er, at least in cer­tain areas. And so in those areas it’s actu­al­ly more effi­cient and cheap­er than Walmart.

Anderson: With 7 bil­lion peo­ple on the plan­et, could you have any oth­er kind of mod­el? You know, when I think of soci­eties where peo­ple had a much more direct, vest­ed con­nec­tion to the com­mu­ni­ty, it seems like they were small and prim­i­tive, in a way that…well,we don’t know how to be small with 7 bil­lion peo­ple, and we don’t want to be prim­i­tive, right?

Smith: Yeah, and this is where it’s real­ly inter­est­ing to con­sid­er Tainter’s view of com­plex­i­ty and maybe tease apart the parts of our lives that are com­plex? And so, if you say…let’s take the whole Internet. It’s very com­plex in all of its work­ings. But in terms of its ener­gy con­sump­tion, it’s about 2% of ener­gy use, I think. All the servers, the whole deal. That’s still a con­sid­er­able amount of elec­tric­i­ty. But it’s a tiny per­cent­age of the elec­tric­i­ty com­pared to air trav­el, trans­porta­tion, heat­ing and cool­ing you know mil­lions of build­ings. And so we could say, is is sus­tain­able to main­tain the Internet com­plex­i­ty? And on just a straight ener­gy lev­el, you’d have to say yes.

And then you say well, what about all the com­plex­i­ty that the Internet gen­er­ates or enables? And then you go well, if it’s not an ener­gy drain, there’s real­ly no mate­r­i­al rea­son why that’s not sus­tain­able. And so the com­plex­i­ty that seems unsus­tain­able to me is the mar­gin­al return kind of thing. And you know, there’s lots of exam­ples of that. Flying in grapes from coun­try 6,000 miles away. Is that real­ly wise? What if we just chose to eat some oth­er fruit or veg­etable that was local?

Anderson: This makes me think of when I was talk­ing to David Korten, he was out­lin­ing this big eco­nom­ic prob­lem. And I was say­ing okay, well what do you do about it? And he said, You reduce waste.” You can have access to all these things that give you qual­i­ta­tive rich­ness, say through the Internet, all that infor­ma­tion. And yet you can mas­sive­ly reduce. You can get rid of the car. You know, you don’t have to live in the sub­urb.

And of course what I always want to know about some­thing like that, and this was a ques­tion I was talk­ing about with my co-host after­wards is, to have that lit­tle con­nec­tion to the Internet, can that exist at all with­out the giant high-energy frame­work else­where, you know?

Smith: One of my friends is Jim Kunstler, the author of The Long Emergency, and his view is we’re going to go back to a world made by hand. In oth­er words were going to lose all this tech­no­log­i­cal com­plex­i­ty because of the same dynam­ic you just described. It requires this gigan­tic struc­ture. And if you lose the huge indus­tri­al struc­ture then you lose the tech­nol­o­gy.

I’m not so sure, per­son­al­ly, because of the like, dig­i­tal fab rev­o­lu­tion, the so-called desk­top 3D print­ing and so on. It could be that a lot of the parts to the tech­nol­o­gy will be able to be designed and man­u­fac­tured on a very small scale. And then that would open up a lot of doors to keep­ing all this elec­tron­ic tech­nol­o­gy afford­able.

Anderson: The hypo­thet­i­cal sit­u­a­tion I talk about my co-hosts will be like, you want to make some­thing like this record­ing device that we’re using here. It’s a sol­id state recorder and it’s full of inte­grat­ed cir­cuits. It’s full of exot­ic rare earths that come from all over the world. Does dig­i­tal fab­ri­ca­tion allow you to make this in a local way?

Smith: Yeah, I think there’s a bit of sleight of hand there that like the actu­al ICs—the inte­grat­ed circuits—they’re made in like these enor­mous fabs that cost like $2 bil­lion.

Anderson: Right, and there’s no way to real­ly quite fake that.

Smith: No, there isn’t. In an ide­al­ized sys­tem? then you’d have a fab…like and IC fab like that locat­ed next to a big hydro­elec­tric dam, or some sort of ener­gy source that wasn’t like coal-fired or what­ev­er. Because that fab uses a lot of pow­er, but it gen­er­ates tens of mil­lions of chips at an incred­i­bly low cost. And so that’s some­thing that you’d say well, look at the enabling pow­er of those lit­tle ten-cent chips glob­al­ly. If we need­ed a bil­lion chips, or 10 bil­lion chips, how much would this cost us in terms of ener­gy con­sump­tion, and it would again be some­thing like 1% or less.

Anderson: So I think you’ve made a com­pelling argu­ment that you could prob­a­bly keep a lot of the good­ies in a very effi­cient system—at least the elec­tron­ic good­ies. Maybe the com­plex good­ies. But maybe not the heavy indus­tri­al good­ies like the car.

Smith: One of the oth­er themes I con­stant­ly write about is social inno­va­tion. One of the things that authors like Jim Kunstler focus on is most peo­ple look to tech­nol­o­gy to solve all prob­lems through what he calls mag­ic. In oth­er words we don’t real­ly under­stand how it’s all going to work, but we’re going to get hydro­gen and unlim­it­ed sup­plies from the ocean, and they’re going to like, dig down two miles and get to some sol­id methane and do some mirac­u­lous thing to it.

And of course, the more you know about the actu­al tech­nolo­gies of ener­gy the more amazed you are that it’s as cheap as it is. Because I mean, drilling a hole like 10,000 feet deep and then frack­ing it and then extract­ing this stuff and then tak­ing it to this gigan­tic refin­ery, it’s so immense and cost­ly it’s a mir­a­cle that we even have any gaso­line at less than 100 bucks a gal­lon.

And so that kind of mag­ic I don’t believe in. But on the oth­er hand desk­top 3D, it is a sort of mag­ic. And so I think we have to kind of sep­a­rate out the mag­ic from the tech­nol­o­gy that can be local­ized and could actu­al­ly be cost effec­tive.

And then social inno­va­tion doesn’t require any mon­ey at all. For instance, there’s like Zipcar and share rides, that’s one vehi­cle that’s shared by maybe five peo­ple or even ten peo­ple. So let’s say that you had one vehi­cle and you had a much more effi­cient sys­tem than we have with Zipcar. Then [we’ve] basi­cal­ly elim­i­nat­ed 90% of the autos through a social inno­va­tion that’s enabled by the Internet.

Anderson: It’s inter­est­ing because we’re deal­ing with this lega­cy of sub­urbs here, right—

Smith: Yes.

Anderson: —where all these peo­ple live in places where there’s going to be a drag if you want to shift away from that. You’re going to have to rebuild city cen­ters so there are walk­a­ble areas.

Smith: Yeah. I men­tioned Jim Kunstler because he basi­cal­ly start­ed from that per­spec­tive of look­ing crit­i­cal­ly at sub­urbs and then fol­low­ing up on the con­se­quences of that fixed invest­ment. And so he feels that we’re trapped between the sunk cost, it’s called, like we’ve invest­ed so much in this infra­struc­ture of inter­state high­ways and sub­urbs that we can’t let go of it. And yet it’s cost­ing us more and more ener­gy and time for less and less yield.

Anderson: Mm hm.

Smith: Yeah, and that’s also Joseph Tainter’s analy­sis, is that the return on all this invest­ment just gets small­er and small­er. And then you reach a thresh­old where it implodes. Then you start won­der­ing well what are the con­se­quences of that, and one avenue of thought is the sub­urbs become the new ghet­tos.

Anderson: Let’s just say, in a hypo­thet­i­cal sce­nario, we got rid of a lot of the waste. Even if you do that, we’re still faced with a sce­nario where we have an eco­nom­ic mod­el that real­ly only knows how to grow. Even if the rate of rise is much slow­er with an effi­cient econ­o­my is it still always going to increase the mate­r­i­al foot­print any­way?

Smith: Yeah, I think that’s…I think you’ve iden­ti­fied sort of the nub of glob­al cap­i­tal­ism, which is based on there’s always got to be more. More mate­r­i­al wealth, more finan­cial wealth that can be dis­trib­uted to more and more peo­ple. And so Jeremy Rifkin wrote a book called The End of Work a few years ago. And the thrust of his think­ing was tech­nol­o­gy is reduc­ing the need for human labor to such a degree that paid work is no longer going to be a sys­tem we can count on to dis­trib­ute the essen­tials of life. I think we see that more and more as the abil­i­ty of soft­ware automa­tion, robot­ics, keeps advanc­ing up the food chain from low-skill labor to higher-skill labor. And so then we face a cri­sis per­haps less of mate­r­i­al wealth or exploita­tion of resources, to we just don’t have enough pay­ing work any­more to sup­port this sort of con­sump­tion.

And so then we go well what’s beyond paid work? And then you go well, in my mind we have to go back to a community-based thing where you can have a good life but you have very lit­tle expo­sure to the finan­cial econ­o­my. You don’t need debt. You’re not mak­ing enough to bor­row mon­ey but you don’t need to because there’s a new sys­tem of exchange that takes a sur­plus that the econ­o­my gen­er­ates and dis­trib­utes it to the com­mu­ni­ty, based less on the mar­ket val­ue of your labor and more on what you’re con­tribut­ing to the com­mu­ni­ty local­ly.

Anderson: But is there enough of a demand for that, at the end of the day? Are there enough jobs or do we just have so many damn peo­ple that they can’t all be work­ing at soup kitchens and being fund­ed by their friends’ dona­tions in the com­mu­ni­ty, liv­ing a very ascetic lifestyle? Are we just deal­ing with a giant num­bers prob­lem?

Smith: My sense is there’s a ton of undone work, but that there’s only two sources of fund­ing for it in our cur­rent sys­tem. Either the gov­ern­ment bor­rows the mon­ey by sell­ing trea­sury bonds or local munic­i­pal bonds. Or it skims the mon­ey from some pri­vate sec­tor enter­prise, or indi­vid­ual with tax­es. Or, the mar­ket econ­o­my iden­ti­fies some prof­it in this thing that will gen­er­ate enough mon­ey that they can pay peo­ple to do it.

And so I think of things like well what about a bike lane or a bike­way? Now, we all know that bikes are good, and that they are health­i­er, and they reduce pol­lu­tion, and they also are good for the urban econ­o­my. You know, like, peo­ple on their bikes will stop and go to local busi­ness­es that they hap­pen to see because they’re able to do so, they’re on their bike and so on. And so there’s this mul­ti­pli­er effect that’s been shown with hav­ing bike lanes and bike­ways that are safe.

I don’t want to sound too fanat­i­cal about it because there’s a lot of com­mu­ni­ties where bik­ing doesn’t work because the weather’s extreme or the dis­tances are too great. But I men­tion bike­ways because there’s so many ben­e­fits to them, but our sys­tem doesn’t pro­vide any way to cost that. The gov­ern­ment doesn’t count cars that are not on the road because somebody’s rid­ing a bike. They don’t mea­sure the health improve­ments from rid­ing a bike. We only mea­sure how much mon­ey we’re blow­ing on peo­ple that had a heart attack, not the peo­ple that were saved from hav­ing a heart attack because they’ve been rid­ing a bike for 10 years.

So there’s no ben­e­fit to the gov­ern­ment or the mar­ket econ­o­my to cre­at­ing a bike lane. It’s like, well who’s going to pay for it? There’s no prof­it in this. And there’s no polit­i­cal demand strong enough. And so I look at this as a clas­sic mod­el where the com­mu­ni­ty would then look at the val­ue of a bike lane, and they would take resources that had been made avail­able from the sur­plus gen­er­at­ed else­where. Maybe it’s by tax­es, maybe it’s by dona­tions. And then the com­mu­ni­ty gets to decide how to spend the mon­ey, with­out regard to prof­it or lob­by­ing.

Anderson: And so do you think that’s some­thing that could be done in say, a more…a lower-production econ­o­my?

Smith: Yeah.

Anderson: Yeah, because in this case you’d deploy a bunch of peo­ple out to make the bike lane—

Smith: Yes.

Anderson: But, you know, now we of course think well, we’ve got pro­fes­sion­als who know how to [pave roads, you’ve got da da da da da da. But if we have on an econ­o­my that’s sort of moved beyond a lot of the tra­di­tion­al employ­ment roles that we have, do you have a bunch of peo­ple who just kind of vol­un­teer to dif­fer­ent caus­es and can’t real­ly put in a bike lane? To some extent do you need a real­ly spe­cial­ized, strat­i­fied econ­o­my to be able to achieve some­thing like paving a road, which seems like a very tech­ni­cal job that maybe couldn’t be done in the sort of local craftsper­son way?

Smith: Yeah, I think you’ve raised a very impor­tant issue that I often write about too, which is prepar­ing our­selves for like a new mode of work which I call hybrid work.” Like maybe acquir­ing skills across a spec­trum of things as opposed to the spe­cial­iza­tion, which we all know that’s kind of the mod­el that we’ve been fol­low­ing for decades, which is the more spe­cial­ized your skills then the high­er val­ue your labor has. And of course, in terms of being a sur­geon or a pilot we under­stand that these are high-value posi­tions because there’s very few peo­ple who qual­i­fy. But the num­ber of peo­ple that are in that role might be 5 or 10% of the econ­o­my, and the oth­er 9% of us are gen­er­al­ized, or our skillset’s not quite that unique or dif­fi­cult to reach.

So, kind of to go back to the point, I’ll men­tion the exam­ple from the UK, from Britain, where a lot of local gov­ern­ments are find­ing they don’t have enough mon­ey to fund every­thing they want to, just like here. And so when at least one town in Britain, they’ve come up with a solu­tion where there’s one paid city work­er who dri­ves the truck with the asphalt to fill pot­holes. And then there’s vol­un­teers who then he teach­es or leads. And so then the pothole-filling crew is one paid guy and like five vol­un­teers. And of course you go well, how are the five peo­ple paid? And of course in Britain it’s a wel­fare state so they’re get­ting some sort of social ben­e­fits.

And what I’m kind of propos­ing as an alter­na­tive is the com­mu­ni­ty would get what­ev­er mon­ey we now devote to social ser­vices rather than the indi­vid­ual, so that peo­ple would have a chance to con­tribute rather than just get­ting a check in the mail and then sit­ting down and watch­ing TV and feel­ing depressed about their lack of mean­ing in their life. The only way that you could get hous­ing and food and all the stuff that social ser­vices pro­vide is you would have to con­tribute to the com­mu­ni­ty. And I think the key word here I think is reci­procity, and that’s what we’ve lost. We only know about the reci­procity of mon­ey. In oth­er words, I pro­vide my labor to you and you pay me. And then I go out and I do some more finan­cial trades. But in terms of like my involve­ment in the com­mu­ni­ty we’ve lost that reci­procity.

Anderson: I think some­thing that comes to mind for me is always that if you’ve got that say, par­al­lel to a mar­ket econ­o­my, it seems like you might have peo­ple who are play­ing this big­ger finan­cial game always able to sort of…ooze in and coopt and cor­rupt those local sys­tems.

Smith: Yeah. You’ve brought up a crit­i­cal ques­tion about this iter­a­tion of glob­al cap­i­tal­ism we’re in. And if you take say, thinkers like Wallerstein, his idea was the tele­ol­o­gy of cap­i­tal­ism is always expand­ing your asset base, which is what you just spoke to. And so, with­in that tele­ol­o­gy, if there’s some way to mon­e­tize or prof­it from some­thing that’s out­side the exist­ing finan­cial sys­tem, then those prof­it cen­ters will attempt to take it over.

But the ques­tion that that world sys­tems approach rais­es is, what if we’re at the end of this iter­a­tion of cap­i­tal­ism? Because this iter­a­tion of cap­i­tal­ism only works if there’s enough peo­ple that can earn enough mon­ey from their wage labor to sup­port what I call the finan­cial­ized economy—like in oth­er words it’s all based on debt, you know. You want to have a house, roof over your head? Big debt. You want to go to col­lege? Oh, here’s anoth­er giant amount of debt. You want to have a vehi­cle? Oh! More debt. So real­ly it’s sort of like, what would we have if debt was elim­i­nat­ed? Well you’d elim­i­nate this iter­a­tion of glob­al cap­i­tal­ism.

Anderson: So you think there could be anoth­er form of cap­i­tal­ism that wouldn’t be based on per­pet­u­al growth?

Smith: Yeah. I think it’s pos­si­ble or that it would be much more freeform and anar­chis­tic. There might be high growth in one area and like, sta­ble or slow growth or even decay­ing sit­u­a­tions else­where but that we’d have a local­ized and per­haps more frag­ment­ed sit­u­a­tion. I’m strug­gling here to describe some­thing that I see, that the Internet allows for all these con­nec­tions at a high­er lev­el. We can be more like a bee­hive. In oth­er words, where the bees have a sys­tem for com­mu­ni­cat­ing and orga­niz­ing their labor which appears chaot­ic and ran­dom but is actu­al­ly high­ly effi­cient. And it’s…this thing with­in sys­tems analy­sis, it’s called self-organizing sys­tems, where each indi­vid­ual unit (in this case for exam­ple a bee), does not have a tremen­dous amount of intel­li­gence. It has a tiny brain, it has very few ways of feed­ing back infor­ma­tion and com­mu­ni­cat­ing with oth­er fees, But nonethe­less, it cre­ates an immense­ly com­plex sys­tem from real­ly small pieces. And so I think a lot of peo­ple see the poten­tial in that as being the basis for a new glob­al cap­i­tal­ism.

Anderson: It seems like there’s a real ques­tion of human nature here which I find very inter­est­ing. You know, with the be anal­o­gy, are we bees? Can we self-organize in that way or are we a hier­ar­chi­cal ani­mal that nat­u­ral­ly self-organizes in ways that are very…pyramid-like. Do we seek the sim­plic­i­ty of the hier­ar­chy, rather than the chaos of the emer­gent or self-organizing sys­tem?

Smith: Yeah, that’s a fas­ci­nat­ing ques­tion and I think like a lot of things in human nature, I guess you can say yes to both? If we look at our pri­mate cousins, we can say that chim­panzees are extreme­ly hier­ar­chi­cal, and bru­tal­ly so in enforc­ing the hier­ar­chy. And yet we also have the orang­utans and oth­er pri­mate cousins who are indi­vid­ual, who are iso­lat­ed. Typically they don’t form groups that much. And so you say well gosh, we seem to have both of those char­ac­ter­is­tics. Is it cre­at­ing a bal­ance between those?

And you go well, what’s the bal­ance in a cen­tral­ized sys­tem? And what I see is the fed­er­al gov­ern­ment is an excel­lent exam­ple of a sys­tem with increas­ing­ly dimin­ish­ing returns on its cen­tral­iza­tion. Like it sucks up more and more of the resources, and it pro­vides less and less, real­ly. In its ini­tial growth phase, say in the 20th cen­tu­ry, cen­tral­iza­tion as a whole paid all these div­i­dends, you know. That the larg­er the com­pa­ny or the gov­ern­ment got, then the more effi­cient it could [be]come. It’s like, they call it the effi­cien­cies of scale, you know, and the idea that that’s an end­less process is per­haps just flat-out wrong. And that actu­al­ly maybe we’ve reached a point where we’ve topped out on the effi­cien­cies and now it’s actu­al­ly cost­ing us the more we cen­tral­ize.

Democracy’s not becom­ing more demo­c­ra­t­ic as a result, it’s actu­al­ly we’re get­ting a less demo­c­ra­t­ic nation as a result. And the econ­o­my is becom­ing more frag­ile from this cen­tral­iza­tion into the Federal Reserve and the exec­u­tive branch. So we’re get­ting actu­al­ly a neg­a­tive yield on more cen­tral­iza­tion, so then it would be nat­ur­al to say well then we need to try the new mod­el beyond this. The next tele­ol­o­gy will be decen­tral­iza­tion because it’s sim­ply way more effi­cient.

Anderson: Part of the premise of this project is look­ing at dif­fer­ent his­tor­i­cal moments where it seems like a social sys­tem has ceased work­ing and there are a lot of peo­ple in the cul­ture talk­ing about, Well what do we do next?” and all these crazy ideas are on the table. But of course what I won­der is, does that lead the change, proac­tive­ly? Or does that hap­pen after the change is already under­way? Are we, as Joseph Tainter said, only respon­sive to the price mech­a­nism?

Smith: Yeah. I think you’ve iden­ti­fied real­ly the key ques­tion of the era. Like say if we go back to the print­ed word, the Gutenberg press and the sud­den explo­sion of tech­nol­o­gy which we con­sid­er sort of prim­i­tive like oh my gosh, you make paper and you print it… But that explo­sion of knowl­edge cre­at­ed immense changes because an aver­age per­son could now have access to a scale of knowl­edge that was only attain­able to a hand­ful of schol­ars a few decades before. Maybe what we’re real­ly ask­ing is, can we take the kind of tech­no­log­i­cal change that we’re used to…transforming the world lit­er­al­ly in a decade, can we extrap­o­late that to social inno­va­tions? Or are those unat­tain­able, or are those in some oth­er scale that we can’t real­ly apply the tech­nol­o­gy mod­el?

And I’m a lit­tle more hope­ful, I guess, that the tech­nol­o­gy mod­el is the social inno­va­tion mod­el. Because the tech­nol­o­gy rev­o­lu­tion of the Internet has enabled the spread of all these ideas that can be applied. They’re prac­ti­cal.

Anderson: Though with some­thing like tech­nol­o­gy, you know, you could’ve giv­en me a new com­put­er in the mid-90s with an Internet con­nec­tion and I would’ve gone, Oh, well this is excit­ing. It opens up all these doors, but it doesn’t demand sac­ri­fice,” right. I mean sac­ri­fice in terms of learn­ing it, a lit­tle time sac­ri­ficed.

But it seems like this would be like you’re propos­ing well, here’s a sys­tem that…that may be hurtling towards destruc­tion but doesn’t seem that way, to most peo­ple who are look­ing at it. They’re just not read­ing those sources, they’re not look­ing at the same things that you’re look­ing at or that oth­er peo­ple are look­ing at. And so what you’d be ask­ing of them almost is like, Make this big sac­ri­fice so this thing doesn’t dri­ve off a cliff, even though you think it’s not dri­ving off a cliff.” So it seems like there’s some­thing dif­fer­ent between adapt­ing to a new tech­nol­o­gy and adapt­ing pre­emp­tive­ly to a new social mod­el.

Smith: Yeah. I think you’re right, and I think you’re rais­ing a point that goes back to human nature, which at least from my point of view and my own per­son­al expe­ri­ences none of us change until we have to. As you men­tioned that Tainter men­tioned, peo­ple find an amaz­ing abil­i­ty to inno­vate and to adapt when the price of some­thing like, goes up ten-fold. They sud­den­ly find some way around that. And so then we’re real­ly ask­ing, is that process going to be so dis­rup­tive that we’re going to lose the sys­tem.

Anderson: Right.

Smith: I tend to look at the mate­r­i­al cul­ture and say if it’s extreme­ly frag­ile, that cul­ture, that soci­ety, that econ­o­my could be in real big trou­ble. I would think the next ten years are are real­ly going to be extreme­ly inter­est­ing. There’s gonna be resets of sys­tems, and whether it’s going to be messy or not, it’s total­ly up in the air.

Anderson: I’m think­ing of my con­ver­sa­tion with the philoso­pher Lawrence Torcello, and I said, What’s the cri­sis of the present?” He said, It’s stu­pid­i­ty.” And you know, so when we think about stu­pid­i­ty and hav­ing to like deal with these resets…and how do we do that?, do we have the matu­ri­ty to do that?, there’s a real­ly inter­est­ing ques­tion there in terms of like how do we even per­ceive real­i­ty? Because edu­ca­tion plays such a role in like what data we choose to take in. The com­plex­i­ty of sys­tems that we can see.

Smith: Well when we talk about stu­pid­i­ty, my favorite exam­ple of that as a sort of a joke about it is The Onion had a par­o­dy where it said only six­teen peo­ple in the US qual­i­fy to dri­ve their cars. And if you were entire­ly strict about your…

Anderson: Right.

Smith: That would be true!

Anderson: Yeah.

Smith: That, why do we allow 200 mil­lion peo­ple this free­dom to kill oth­er peo­ple?

Anderson: Then when we’re talk­ing about you know, you hit this cri­sis moment and we’re allow­ing them to vote…

Smith: Yeah, exact­ly.

Anderson: And I think Torcello’s thrust was like, boy we sure need to work on edu­ca­tion first so we extend the term that peo­ple are think­ing in. And actu­al­ly I think that was the only bit of opti­mism in my con­ver­sa­tion with Joseph Tainter. And he doesn’t think it’ll make any dif­fer­ence but he thinks you have to try with edu­ca­tion first, to extend people’s time­frames so they’re at least cog­nizant of the crises that they’re cre­at­ing and deal­ing with.

Smith: And then we come into the bio­log­i­cal lim­its. Is that just an intel­lec­tu­al con­cept or can we start chang­ing our behav­ior for that? And then that’s when the price is every­thing” guys tend to come in and they tend to win that argu­ment because peo­ple talk about dif­fer­ent things about their val­ue sys­tem but they actu­al­ly only respond gen­er­al­ly to price.

But it also rais­es this notion of…that Douglas Rushkoff wrote in his lat­est book, it’s called Present Shock.

Anderson: Mm hm.

Smith: And he’s refer­ring to the 1970 book Future Shock, which was a big deal way before you were born. And that what the idea behind Future Shock was, the world is chang­ing so rapid­ly that it’s exceed­ed our bio­log­i­cal abil­i­ty to process this rapid change and make sense of it and adapt to it. And so then we basi­cal­ly enter a stage of being over­whelmed and inca­pable of pro­cess­ing every­thing. And so Rushkoff, and prob­a­bly many oth­er peo­ple, have con­clud­ed we’ve reached that point now.

Anderson: Right.

Smith: That the Internet has speed­ed up so much the input that we’re receiv­ing that we lit­er­al­ly have lost the abil­i­ty to track a nar­ra­tive. And that our sense of time has now been com­pressed. Everything hap­pens in the present.

Anderson: Mm hm.

Smith: That’s real­ly destruc­tive, obvi­ous­ly, to the thing we’re talk­ing about, which is we need a longer-term point of view here.

Anderson: Right, and what’s inter­est­ing you know, when I talked to Rushkoff and I was try­ing to ask him like, Where are you going with this? What kind of future do you want?” he was so into the present shock thing that he said like, I’m not even con­cerned about that. I’m con­cerned about what we can do right now,” in a way that real­ly resem­bles stuff that we’ve been talk­ing about, you know. Not as orga­nized, but he was just say­ing you know, have din­ner with your neigh­bor. Pull out of the big sys­tem as much as you can in a way that makes me think now as you’re talk­ing about resilience like ah, there’s a res­o­nance there, you know. Rushkoff was say­ing, can you knit some­thing at home? Okay, well that’s not every­thing but start there. Very prag­mat­ic, and maybe not…it might seem remark­ably unambi­tious to a lot of peo­ple. But I think he feels that we’re so stuck in this present shock that ask­ing for any more than that is just ask­ing too much.

Smith: This rais­es anoth­er issue which I think about a lot because I’m 59 and so yes, I’m a Baby Boomer and so yes, I’m to blame for all these prob­lems. Certainly my gen­er­a­tion has a lot to answer for; I will be the first to say that. Having lived through, as a child, the 60s and the ear­ly 70s, I think that that era is inter­est­ing. There was kind of a counter-revolution or a ref­or­ma­tion of the whole con­sumerist men­tal­i­ty that we now call the coun­ter­cul­ture. And it’s often derid­ed or mar­gin­al­ized now because the Baby Boom Generation quick­ly dropped that and bought back into the con­sumerist men­tal­i­ty with total vig­or.

But I think that it shows that you can have a social rev­o­lu­tion that has an eco­nom­ic and a reli­gious aspect. I mean like, in oth­er words Christianity changed in the 60s as well, with the Jesus freak move­ment and a lot of growth of mar­gin­al church­es and explo­ration of Eastern think­ing and try­ing to inte­grate that into Christianity. And so the pos­si­bil­i­ty of broad spec­trum change, just the last fifty years, proves it is pos­si­ble. And we could look at 1968 in terms of like Paris and Czechoslovakia, and—

Anderson: Right.

Smith: It’s not just a US phe­nom­e­non is what I’m say­ing. Or in a neg­a­tive exam­ple the Cultural Revolution in China. You can have this broad spec­trum change that touch­es on all these dif­fer­ent things. And again it’s not a cen­tral­ized idea or a cen­tral­ized author­i­ty cre­ates it.

Anderson: If we were to call that The Conversation, which is some­thing that we do peri­od­i­cal­ly in here, that cer­tain­ly seems like the last one we had, you know. And where did that come from?

Smith: I mean, some peo­ple say, and I think you could make the case, that it was all about the dis­cov­ery of new super­giant oil fields in the North Sea and Alaska and West Africa. And that every­thing that had a momen­tum for chang­ing the kind of con­sumerist ver­sion of cap­i­tal­ism tele­ol­o­gy van­ished in a flood of cheap oil. If we are no longer find­ing these kind of gigan­tic new sources of cheap ener­gy, maybe the ground will become fer­tile again for a social rev­o­lu­tion, or everything’s on the table again.

Anderson: That’s a real­ly inter­est­ing way of putting it because you know, some­thing I’ve been think­ing about as we’ve been talk­ing is kind of eco­nom­ic deter­min­ism. How much of us is just a reac­tive ani­mal deal­ing with scarci­ty and sup­ply. You know.

Smith: Yes.

Anderson: And all of this philo­soph­i­cal stuff is just…it’s just the wrap­ping paper we put on it to give our­selves a sense of dig­ni­ty, you know?

Smith: [laugh­ing] Yes.

Anderson: Maybe that descrip­tion can bridge this a lit­tle bet­ter, where you can say well okay so yes, we’re reac­tive to all of these eco­nom­ic forces. But, when they’re scarce, then there’s a place for this con­ver­sa­tion and the social stuff and indi­vid­ual agency and lead­er­ship and all of those things to real­ly play a role in decid­ing how you deal with it. Maybe if there’s unlim­it­ed wealth, then maybe we do act in real­ly pre­dictable and self­ish and shal­low ways. But maybe when there’s lim­it­ed wealth, then you get a lit­tle more vari­ety.

Smith: I hadn’t real­ly thought about it in the way you just described but I think you’ve nailed a key dynam­ic of our era, is that when there’s immense sur­plus the deci­sion­mak­ing can be real­ly loose because there’s so much wealth we can afford that slop­py deci­sion­mak­ing. And so what you’re say­ing is it becomes we only have to start think­ing clear­ly in scarci­ty. And I think that’s a very pow­er­ful dynam­ic.

So I think we’re going to expe­ri­ence that time that we’re talk­ing about, when scarci­ty occurs, in the next decade, where deci­sion­mak­ing will have to real­ly sharp­en up. I kin­da go back to the Pareto Principle that the 4%, the vital few, influ­ence the 64 and then the 80%. And so—

Anderson: But that’s got to be after our cri­sis.

Smith: Well actu­al­ly I think it’s actu­al­ly got to be before, because what you’re doing, and all the peo­ple that you talk to— And I don’t try to put myself in some sort of like…that I’ve got the answers. But what we’re doing is we’re talk­ing about things, and some of the peo­ple you have talked to I con­sid­er part of the 4% who are lay­ing out all these alter­na­tives and dif­fer­ent ways of think­ing and approach­ing things, and that those will catch on like fire. When the time is right, and when peo­ple are look­ing for alter­na­tives they’ll already be there. If we didn’t talk about it, and if you didn’t do your work, and the rest of us didn’t do our work, then we real­ly would be in a tight spot because we wouldn’t have any alter­na­tives already laid out.

Anderson: So as we look towards this dif­fer­ent par­a­digm, are you opti­mistic that the things that you hope to see will hap­pen?

Smith: I’m opti­mistic because of the vast explo­sion of knowl­edge and shar­ing of knowl­edge and mod­els because of the Internet. And that puts one of my feet in the tech­nol­o­gy is going to save us” mag­ic camp, but I don’t real­ly think of myself as being in that camp for the sim­ple rea­son is I see it as an exten­sion of the print­ing press rev­o­lu­tion. In oth­er words all you’re real­ly doing is enabling the aver­age per­son to access far more knowl­edge and skills than they could have oth­er­wise.

Anderson: It seems like ulti­mate­ly your faith is in knowl­edge, and the free­dom to use it.

Smith: I think that sum­ma­rizes my view­point very well. Better than I could myself.

Anderson: So there we have an interview that is really…non-dogmatic, very pragmatic. One of the things that I really liked about this is it felt like we got to follow trains of thought for a while. There've been a lot of interviews where people say, "Here's an example of a magic technology." And I go, "Okay," maybe I ask one or two follow-up questions, maybe I don't have time for it.

But in this case, Charles said, "Okay, fabricators." And I said, "Well, alright. But do they make this really complicated form of electronics equipment?" which is something that I always wonder, right? You can't say "fabricator is a panacea" and then just let it…go.

And he said, "Well. Okay. Here's some ways in which that could still be produced, and here are some other things that couldn't be produced by that. And oh by the way, here's a way it could be scaled," and maybe it felt like we got a little bit lost in detail? But part of me didn't edit that because I wanted to show that we went down those roads.

Prendergast: It actually really kind of inspired me, and I like that he connected his ideas to a lot of works that actually I'm kind of interested in myself. End of work, James Howard Kunstler's book, Present Shock also, Rushkoff. Really interesting stuff. And kind of what I wanted to see was more of those particularities, actually. A little bit maybe beyond the economics, and—

Anderson: Wait, you wanted to get lost in the weeds more?

Prendergast: Yeah, I did, actually. But I mean I think that just says that I was on board with his big picture. And what I kind of wanted was some of the more policy stuff. Talking about the bike lanes, the community gardens, the farmers markets kind of thing. Those things have kinda taken off around the country right now. But I think there's just so much more that small communities need to do to kind of create those parallel systems. But I think a lot of people are wondering well, what do you do after you create that community garden plot? What do you do after you get that bike lane in? What else can a small community do?

Anderson: So it's almost like the question you're asking is, are the current parallel systems remotely big enough to handle these challenges, or do we need like a toolkit for small towns to make much more complicated parallel systems.

Prendergast: Yeah, that's kinda what I'm interested in. I'd like to know what that would be. What would that new Whole Earth Catalog look like?

Anderson: We talked for three hours…and I coulda gone down that road. I think with Charles you could probably go back and say, "Hey man, we had a bunch of thoughts about this. Do you want to riff on these ideas more?" and I'm sure he would say yes.

Saul: I was also really sort of fascinated by these parallel communities. I had a little bit of a…problem?…with it? You know, there's the farmers markets and bike lanes, which makes sense—they exist in our communities now. Then there was sort of the next step? where he's talking about those in conjunction with this sort of post-work thing and you start getting to these reciprocity-based economies. Which…also sound kind of idyllic and utopic in their way.

But he has them existing…parallel, right. And in some ways feeding off of the surplus of the larger growth-based economies that we currently have. And I guess my question is how do you protect those small economies from the growth-based economy? I mean, if you view the growth-based economy as this sort of…monster devouring everything (which I think a lot of people we've talked to do; some don't, obviously), how do you preserve this little more-idyllic, utopic community in the face of that?

Anderson: I'm pulling this from a lot of conversation that was edited out of what we're posting here. But my guess would be that he would feel well, you know these parallel systems, they just need to exist as almost reminders of an idea. Reminders that you can do it in this other way. Maybe it doesn't need to be a full-fledged economy. Maybe it isn't ever going to successfully compete with the larger growth-based economy. But you just need to have those farmers markets there so when the growth-based economy crashes face-first into a wall, which he does expect, you have models of development.

There've been other thinkers in this project who've talked about similar things. Chuck Collins mentioning that really what you need to do is you need to have ideas in place. And that ideas, when they're needed they can spread really fast. So it's just what you need to do is you need to have the ideas more than have like, a fully functioning parallel economy.

Prendergast: It actually kinda reminds me of some of the work that people in local farming movement conduct. Think of the seed-saving type of farmer gardener. They want to make sure that seed continues into the future. But for that to happen, you have to have somebody actually using that seed. You can't just put that seed in a seed bank. Somebody actually has to use it.

Saul: I like that. You need to actually use it to preserve it. And my big take away from this conversation was right there at the end. He was talking about what knowledge and conversation or good for, and it's…the conversation is useful because it lays the groundwork for the things we'll need when we're all fucked.

Anderson: Which is interesting, but it did leave me thinking that like, this is a collapse scenario which is pretty rosy. And that's rare in this project.

This is The Conversation and that was Charles Hugh Smith, recorded on June 10th, 2013 in Berkeley, California.

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This interview at the Conversation web site, with project notes, comments, and taxonomic organization specific to The Conversation.

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