Depression and Transformation

As we have stated repeatedly in prior posts, this Depression will be a life-changing event for everyone who lives through it. It is not an interruption to the economic routine. The economy is not going to 'recover' to where it used to be.

The world is going to look very different on the other side of the Depression. Most of the old rules of economics and finance - both high and personal - will be tossed out the window. There may be vast political and social changes as well. We don't know what they will look like, only that they will happen. However, we shall speculate on some changes that may take place, and the opportunities that will lie therein.

First and foremost, the economy at all levels will be focused on efficiency. This will be necessary due to less available investment capital and depleting natural resources. We do not doubt that efficiency can theoretically make up for many lacks. But it will not necessarily do so. There is a great deal of cultural inertia, especially in (but not limited to) the USA, that looks at conspicuous consumption as the non plus ultra of human existence.

Compounding this problem there is a lot of turf that is going to get vigorously defended. Bank bailouts (for example) are not for preserving the integrity of the economic system, but for preserving an opulent lifestyle for well-connected bankers even after their banks stop creating value for society.

But moving along, what sort of efficiencies are waiting in the wings? The Internet will enable a wide range of peer-to-peer markets. You can buy and sell stuff on an auction market or classifieds, you can make loans or borrow on a lending network, you can put up a website and sell your services. All of these markets capitalise on the process of disintermediation, or cutting out the middle man.

Another, less glamorous level of efficiency is simply making do with less: smaller living spaces, perhaps shared with (more) others; a smaller car - or no car. Beyond efficiency, there is becoming more of a producer: growing a garden; cooking home meals, mending and fixing instead of replacing.

All of the above mentioned activities involve learning new skills and attitudes. Multiply these and more across all of society and you have transformation. If this change is resisted by individuals and institutions, change will be slower, and the Depression will be prolonged. Nevertheless, if you embrace the trend, your personal circumstances should prove manageable and you may find the quality of your life even improves.