Bardi: How we Became What we Used to Despise

How we Became What we Used to Despise. Turning the West into a New Soviet Union. Ugo Bardi. Feb.12, 2022.


For everything that happens, there is a reason for it to happen. Even for turning the former Free World into something that looks very much like the old "Evil Empire," the Soviet Union. I understand that this series of reflections will be seen as controversial, but I thought that this matter is fascinating enough to deserve a discussion

It all started two years ago when we were asked to stay home for two weeks "to flatten the curve." Two years later, we are looking, bewildered, at the wreckage around us and asking ourselves: 'what the hell has happened?'

In such a short time, we found that our world had turned into something very similar to one that we used to despite. The old Soviet Union, complete with heavy-handed police, censorship of the media, demonization of dissent, internal passports, and the state intruding on matters that, once, were thought to be part of every citizen's private decision sphere.

Surprising, perhaps. But it is a rule of the universe that everything that happens has a reason to happen. The Soviet Union was what it was because there were reasons for that. It was not an alien world populated by little green men. It was an empire similar to the Western one, just a little smaller, and it concluded its cycle a few decades before us. We can learn a lot from its story.

I would start by proposing to you an excerpt from Dmitri Orlov's book "Reinventing Collapse." Orlov, born in Russia, was among the first who noted the parallel path that the Western and the Soviet empire were following. Here, he tells us of an event he experienced in St. Petersburg in the years just after the collapse of the Union. At that time, the ruble was worth little more than the paper it was printed on. So, people who had dollars, as Orlov did, had a market power that ordinary Russians couldn't even dream of. We see the consequences of being so rich that you don't worry about carrying small change with you.

There was also an old woman in front of the store, selling buns from a tray. I offered her a thousand-ruble note. "Don't throw your money around!" she said. I offered to buy her entire tray. "What are the other people going to eat?" she asked. I went and stood in line for the cashier, presented my thousand-ruble note, got a pile of useless change and a receipt, presented the receipt at the counter, collected a glass of warm brown liquid, drank it, returned the glass, paid the old woman, got my sweet bun, and thanked her very much. It was a lesson in civility.

Looks like a funny story, but it is not just that. It is a deep metaphor of how a market economy works, and also how it may NOT work. The problem is that, unless some specific conditions are met, a market economy based on money is unstable. Money tends to end all in the hands of a few, leaving the rest with nothing. It is the law that says "the rich get richer" has a corollary that says "and everyone else gets poorer."

There is only a way to avoid that a market economy leads to the rich getting everything: it is growth. If the economy grows, then the rich cannot pull money out of the market fast enough to beggar everyone else. The result is the illusion of a fair share of the wealth, so you may understand why our leaders are so fixated with growth at all costs. But don't forget that those who believe that an economy can grow forever can only be madmen or economists.

So, how do you make the economy grow? The magic word is "resources." No resources, no growth (actually, no economy, either). And if you exploit a resource faster than it can reform (it is called overexploitation), then, at some moment, the whole system will crash down. It is what happened to the Soviet Union and may well happen to us, too. But let's go in order.

Let's go back to the story of Dmitry Orlov trying to buy a sweet bun in St. Petersburg. He had so much money that he risked to crash the whole market of sweet buns of that particular place. If the old woman had accepted Orlov's offer to buy the whole tray, the price of the buns would have skyrocketed to levels so high that nobody except him could have bought them. The standard Western economic theory has that, at that moment, another old woman with another tray should have magically appeared to sell buns. Supply must always match demand: it is a postulate. But things don't work like that in the real world.

The market mechanism that matches demand and offer, the way you are taught in the Economics 101 course, can work only in conditions of relative abundance. If people have dollars, then someone will make buns for them. If they only have rubles, then it may well be that nobody will bother making buns for them. But rubles and dollars are the same thing: pieces of paper with numbers printed on them. What makes the difference is a working -- or not working -- economy. The Russian economy after the fall of the Soviet Union wasn't working anymore: its roubles could still buy sweet buns (unless foreigners with dollars were passing by), but little more.

This market problem with the Soviet Economy was there even why before the collapse. The trouble was that the Soviet economy couldn't produce an output large enough to sustain a free market economy. To avoid collapse, the government had to play the role of the wise old woman in Orlov's story. The Soviet government used its five-year plans to make sure that sweet buns for the Soviet citizens were produced, that is, the fundamental needs for life: food, shelter, clothing, fuel, and some vodka.

The five-year plans also had the purpose to limit the production of items that were considered "luxuries." Nominally, the price of caviar in the Soviet Union was low enough that most Soviet citizens could have afforded it, in theory. But caviar was not normally available in shops. When a batch of caviar tins appeared, people would stand in line hoping that there were a few cans left for when their turn came. This feature avoided that the rich could corner the caviar market, driving prices sky-high, just like Dmitry Orlov could have done with the sweet buns. That gave to the ruble a certain aspect of "funny money." Soviet people used to say "they pretend to pay us, and we pretend to work." The ruble was money, but it couldn't be always be used to buy what one wanted (just like when the Western government locked their citizens in their homes).

But why did the Soviet Union organize its economy in this way? In part, it was an ideological choice, but mostly because it was forced by the circumstances. The Soviet Union was rich in natural resources, especially mineral ones. That was an advantage, but also a temptation for its neighbors to invade it, turning it into "the world's gas station," as it was recently said. And that was not just a temptation: over a couple of centuries, the main state of the union, Russia, was invaded several times, the last time in 1941. The invading Germans had clearly stated that they wanted to exterminate some 20-30 million Russians had they managed to defeat the Soviet Union.

The consequence is obvious: in order to survive, the Soviet Empire had to match the rival Western Empire in military terms. But the Soviet economy was much smaller than the Western one: we can roughly estimate as about 40% of the US alone, to say nothing of the other economies that were part of the NATO alliance. To match the huge Western economic and military machine, the Soviet Union needed to funnel a huge fraction of the economic output into its military system. Measuring this fraction is not easy because of the various factors involved, but we can say that the Soviet military expenses nearly matched those of the US alone, although still remaining behind those of the sum of the NATO block. Another rough estimate is that the Soviet Union spent about 20% of its gross domestic product on its military during the cold war. Compare with the US: after WW2, military spending went gradually down from about 10% to the current value of about 2%. In relative terms, the USSR would normally spend four times more than the US for its military.

The need to funnel such a large amount of resources into the military was the origin of the nasty control that the Soviet state imposed on its citizens. It was a police state, had censorship of the media, internal passports, demonization of the dissent, and those who publicly disagreed that communism was the best possible government system were considered to have psychiatric problems. (I know that it looks very much like.... you know what, but let's keep going).

Not only the Soviet system was strained to the limit, but it was also critically dependent on the availability of cheap resources. It was vulnerable to depletion, probably the factor that caused its collapse in the late 1980s. It is not that the Soviet Union ran out of anything, but the costs of natural resources simply became incompatible for a large empire as the Union was. The core of the Empire, Russia, could return to being a functioning state only because it didn't have to pay the enormous costs related to keeping the Soviet Empire together.

Now the pieces of the puzzle go to their places: in the US, the government didn't need to intervene to throttle supply and avoid that the elites would corner the market. The free market would make it sure that everyone got their sweet bun. The combination of abundant resources and relatively low military expenses made it possible for the American citizens (most of them, at least) to enjoy an extravagant lifestyle, unthinkable elsewhere in the world. They lived in suburban houses, had two cars in every garage, could go wherever they wanted, have overseas vacations every year, buy whatever they wanted without standing in line. The US citizens could even afford a certain degree of variety in the information they received. The state control on the media was enacted in subtle ways, giving citizens the illusion that they were not exposed to propaganda.

It was the kind of lifestyle that president Bush said was "not up for negotiation" -- except that when you deal with Nature, everything is up to negotiation.

The current problem is that the resources that made the West so rich and so powerful, mainly crude oil and other fossil fuels, are not infinite. They are being depleted, and production costs increase with depletion. And that's not the only problem: something else is choking the Western economic system: it is the enormous cost of the health care system. In 2018, the US spent $3.6 trillion in health costs, nearly 18% of its GDP. Today, it is probably more than that. It is probably not a coincidence that big troubles started to appear when these costs reached the same level, about 20%, of the military expenses for the Soviet Union.

Someone has to pay for those costs, and the deadly mechanism of wealth concentration is starting to appear. The result is that the poor are being gradually squeezed out of the market. And here is the problem: those who have no money to spend can't buy their sweet buns. They can't buy anything and they become "non-people." (aka "deplorables"). What is to be done with them? A possible solution (that I am sure some elites are contemplating), is just to let them die and cease to be a problem (it is the zombie scenario). But we are not there, yet. The elites themselves don't want the chaos that would result from leading a large fraction of the Western society to starvation. But if they don't have money, how can they buy food?

The solution is well known from ancient times: it is rationing. The Romans had already developed a system called "Annona" that distributed food to the poor. The Soviets used a kind of funny money called "ruble." In the West, rationing seems to be a silly idea but if there is a serious economic crash -- as it is perfectly possible -- it will be the zombie apocalypse all over simply because there is no mechanism in place to limit those who have money from hoarding all they can, when they can. And leaving the others starving.

That explains many of the things we have seen happening: whereas the Soviet Government acted by restricting supply, the Western ones may find it easier to restrict demand. The lockdowns of 2020 seem to have had exactly that purpose, as argued convincingly by Fabio Vighi. Their effect was to reduce consumption, cool down the economy, and avoid a crash of the REPO market that seemed to be imminent.

Once you start thinking in these terms, you see how more pieces of the puzzle fall to their places. The West is moving to reorganize its economy in a more centrally controlled manner, as argued, among others, by Shoshana Zuboff. That means reducing private consumption and using the remaining resources to keep the system alive facing the twin threat of depletion and pollution, the latter also in the form of climate change.

And that's what happened and what's happening. Not that there was a command center somewhere that dictated the various actions that governments took over the last two years. It was just a series of common interests among different lobbies that happened to be compatible with each other. The financial lobby was terrified of a new financial crash, worse than that of 2008, and pushed for the control of the economy. The pharmaceutical lobby saw a chance to obtain huge profits from forcing medical treatments on everyone. And states saw their chance to gain control of their citizens at a level they couldn't have dreamed of before.

Lockdowns were just a temporary test. The final result was the "Vaccination QR code." At present, it has been imposed as a sanitary measure, but it can be used to control all economic transactions, that is what individuals can or cannot buy. It is much better than the lines in front of shops of the old Soviet Union, so it may be used to ration essential goods before the zombies start marching.

Does that mean that the QR code is a good thing? No, but do not forget the basic rule of the universe: for everything that happens there is a reason. Before the current crisis, the Western society had embarked on a free ride of wasteful consumption: it was good as long as it lasted. Now, it is the time of reckoning. In this sense, if the QR code it were used for the good of society, it could be a fundamental instrument to avoid waste, reduce pollution, provide at least a basic supply of goods for everyone.

Then, of course, the QR can do that only if the citizens trust their government and governments trust their citizens. Here, we see the limits of the Western approach to governance. During the past decades, the Western governments couldn't do anything important without imposing it on their citizens by a shock-and-awe campaign of lies. That was the way in which governments imposed QR codes or, better said, they are trying to impose QR codes. The problem is that, over the years, the Western Governments have managed to lie to their citizens so many times that nowadays they have no credibility anymore.

So, what's going to happen? Several scenarios are possible. The Western governments may succeed in their "Sovietization" of society. In this case, we face at least a few decades of Soviet-like life: the government will use QR codes to control everything we do. If you dissent or protest, you'll risk being declared officially insane, and be subjected to mandatory psychiatric treatment (it could be much worse). You'll be also forced to submit to whatever treatment the pharmaceutical industry will decide is good for you. Bad, but at least you'll have something to eat and a roof under which to sleep. Don't forget that the Soviet citizens citizens survived (most of them, at least) and, in some periods, even prospered.

That's not the only possible outcome. We might just sidestep the "Soviet" phase and move directly to the "post-Soviet" one. It would mean the collapse of the Western Empire, fragmenting into smaller states. Lower governance costs are possible in smaller organizations and that could mean that the smaller states could recover, at least in part, just like Russia did (but there is also the example of Ukraine). In this case, the transition will be tough, it is not obvious that you'll have sweet buns for your breakfast.

But history never repeats: it just rhymes. So, the Soviet system is just one of the many possible ways that a state can control the supply of goods to society. There may be other ways, after all there was no Internet at the time of the Soviet Union and for us it could be a useful tool if we could learn to use it well. Because of the complexity and the versatility of the Internet, the Western society might manage to avoid the heavy top-down control that eventually led to the collapse of the Soviet Union. Maybe.

There are other possible scenarios, some even scarier than those I sketched before, and I won't go into that. But the future is full of surprises us and, who knows? It may even surprise us in a pleasant manner. And whatever we do, we must learn to be in friendly terms with the future: after all, it always becomes the present.