Dear Friends,
It seems to me, the governments of the world are at the point where there is less and less wealth to extract, just as they need to extract more and more. This engine of extraction can only run until the fuel (the wealth of the nation) is spent… then that engine must stall. Once that happens, an economy that runs on extraction instead of production collapses. Zombie companies kept undead by government largesse turn to dust. This wipes away huge gobs of well-paying jobs. All because the fuel runs out. The thing about running out of fuel is that once it becomes apparent, many people will speed up… burning their remaining fuel at a higher rate. This may seem to be a suboptimal solution from our perspective, but in such cases emotion overrides logic.
I once had a guy working for me as a subcontractor. They called him Creamy. I suppose because he liked creamies. They were laying out a floor deck with 2 X 10s. The crew had set several up on their spots but hadn’t nailed them down. Creamy came along with 3 of them on his shoulder. We tried to warn him, but he was rushing. He stepped on the first one and it flipped out from under his foot. He darted to the second, which also shot out from under him. In a panic now, Creamy jumped to the last one… it flipped. Down he went 8 feet to a concrete floor with all the 2 X 10s landing across his back. I was shocked. He popped up like Inspector Clouseau and laughed it off. He always did. Our central banks are where Creamy was at the third loose 2 X 10. I bet they won’t laugh this fall off, though.
The reasons to extract are as myriad as the means to extract. Zombie companies require huge infusions of money extracted from living companies. This seems to make sense to the extractors since those firms employ so many people and at such high wages that their fall would lower GDP. Fraud becomes prevalent in an extractive system. Olson’s theory of The Logic of Collective Action tells us that the fraudsters will politic hard to maintain the fraud… while the people defrauded don’t have the incentive to fight back. Meanwhile, every penny spent can be justified by lowering the poverty rate (whether it does or not), saving children (even when it endangers them), and fighting hate (especially when it promotes hate). This perverse incentive is why extractive systems always need revenue.
The same system that hands out trillions in grift, waste, and fraud keeps track of every penny you and I earn. Their wrath should you or I keep an extra penny is boundless. Extractors’ wrath is asymmetric, as their forgiveness of fraudsters, grifters, and criminals is limitless. Birds of a feather, I suppose. Such a double standard is only understandable in the context of an extractive system. If extraction is the goal, then fighting that extraction would be the ultimate offense. Exploiting the extraction is simply the natural consequence. That’s why people, NGOs, and foreigners who steal from the taxpayer get a pass… until a Nick Shirley comes along exposing the game. A self-unaware extractive state would even pass laws to limit exposure of its crimes. They keep it up even as the extractable wealth runs out.
Systems go from production to extraction because central planning requires extraction while production requires distributed planning. The elites love power so prefer central planning and thus become extractors. Extractors justify their extraction by claiming it’s for the children, to save democracy, or some such cliché. Then they use that extracted money to do the opposite, out of stupidity, generally, not malice. The result is often the same. Cipolla’s outcome for the elites differs… the stupid are ruined and the malevolent are benefited. Nevertheless, our governments are wide-eyed and on the last 2 X 10, while it flips under their feet. They’re in panic mode and so have little ability to think logically. Soon they’ll drop and land on a concrete floor. Prepare your nest accordingly.
Sincerely,
John Pepin
