Introduction

Things are falling apart--that is obvious to everyone who looks beneath the superficial veneer of modest economic growth.

Why are they falling apart? The conventional answer is a few bad eggs in our financial system triggered a recession, and our government isn’t borrowing and spending enough to generate strong growth.

The correct answer is that the U.S. economy and society have structural problems that cannot be solved within the current Status Quo.

What can we do about it? We must embrace the fact that complex systems with diminishing returns will revert to simpler, lower cost systems either by collapsing under their own weight or by being replaced by systems that are faster, better and more sustainable.

Protecting vested interests at the expense of the average citizen is a key reason why things are falling apart. When people lose faith in the institutions that were supposed to protect them, when they feel that they have little recourse against abuses of power, the social fabric falls apart.

Capitalism is based on a handful of principles: capital is invested—placed at risk—to earn a return. The marketplace is transparent to buyers, sellers and regulators. The market prices goods, services, risks and interest rates. Creative destruction eliminates inefficient, unproductive enterprises and frees the trapped capital to be deployed in more productive ways.

When vested interests keep failed systems from collapsing, creative destruction is not allowed to reallocate capital and labor.

When vested interests protect their monopoly from market forces, it acts like a hidden tax on our economy: the cost is spread to everyone. Protecting vested interests creates distortions that eventually bring the entire economy to its knees. When risk and consequence have been eliminated for the favored few, the system itself is at risk.

But even if we eliminated the legalized looting of vested interests, our future is endangered by much deeper flaws in the Status Quo. We are becoming poorer, not just from financial over-reach, but from fundamental forces that are not easy to identify or understand.

The purpose of this book is to explain those fundamental forces so we can change what we leave future generations.

It is human nature to want to blame others. Yes, self-serving vested interests are eroding our society and economy. But it’s not that simple: it is the entire Status Quo which is robbing future generations.

People tell me that the reason they like my weblog is that I make complex topics understandable. This is my trade, and I learned it over 25 years of free-lance journalism.

The only way to understand complex systems is to break them down into core concepts that act like building blocks. Once we assemble these key concepts, we will have a solid understanding of our nation’s problems.

I call this an integrated understanding because all the problems are related. It’s the difference between understanding all the systems in a vehicle—the engine, fuel and electrical systems, brakes, transmission, heating and cooling, electronics, suspension and so on—and knowing that the car moves forward when you press the accelerator pedal. The person whose understanding is limited to pressing the accelerator pedal has no clue how to fix the car when it breaks down; they are helpless.

We will cover the five core reasons why things are falling apart:

1. Debt and financialization

2. Crony capitalism and the elimination of accountability

3. Diminishing returns

4. Centralization

5. Technological, financial and demographic changes in our economy

We will then cover what we can do to change an unsustainable future into a sustainable one.

One of the core ideas in this book (and in all my books) is that we are not powerless. Just because we are not individually rich and powerful does not mean we have no power. The Status Quo depends on us passively playing our role as consumers and taxpayers and allowing the vested interests to control the nation’s finances and politics. Just as each vote we cast in an election is a vote for or against the Status Quo, every dollar we spend is a vote, too. Every dollar we don’t send to a vested interest is a dollar we can invest in our own household.

If we don’t insist on change, then nothing will change, and things will fall apart. Not accepting responsibility and being powerless are two sides of the same coin: once we accept responsibility, we become powerful.

First we have to understand what’s really going on, and then we have to accept responsibility to do two things: 1) change our daily lives to support what is sustainable, adaptable and open and 2) insist positive changes are made to the nation’s bankrupt financial and political systems.

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