The Great Depression of the 1930s was primarily a financial event. While the implosion of the financial system prevented producers and consumers from connecting, and led to a great deal of poverty and poor outcomes, the physical infrastructure remained intact. Americans said at the time that they had everything but money – a virgin continent’s worth of resources, plenty of labour, and industrial prospects. A financial depression (ie an economic seizure) prevents these things from being used effectively, but their continued existence allows for recovery once depression conditions ease. This time will be different, and the scale of the coming depression will be far worse, because the physical infrastructure and connecting supply chains are being substantially damaged in ways which are not fully predictable due to the extreme level of complexity involved.
In particular, global energy supply will never recover to its former level. Oil production had already peaked prior to the war, and energy returned over energy invested (EROEI) was already in sharp decline. With global production flat to falling and EROEI falling as well, an energy crisis was already predictable. EROEI determines how much surplus energy is available for society’s purposes, after deducting the amount of energy that must be reinvested in continued energy production. In the early days of the oil industry, one could expect a return of a hundred units of energy for every one invested, but now the ratio is more like ten to one. As oil exploration has come to rely on ever more marginal sources of supply, the amount of energy needed to be invested in regions where production is inherently difficult and risk is much higher (eg deep offshore, arctic regions with no existing infrastructure, politically unstable areas etc) has increased substantially. Add war and the deliberate destruction of critical infrastructure and the result will be a permanent decline in economic potential.
During the previous phase of increasing energy production, available energy and GDP were as tightly correlated as possible, but this is not going to be the case on the way down. The fall in GDP will be much steeper than the decline in energy supply because supply chains will collapse, unemployment will spike, low intensity conflicts will flare up and further damage infrastructure, and the framework within which the economy operates will crumble. Much would have to be rebuilt, but with much less energy to work with, and demands on the supply from every angle, rebuilding to the previous level will not be possible.
Western countries appear to have decided that military keynesianism is the way to revive their flagging economies, which are drowning in unrepayable debt and being extremely incompetently managed. This approach involves printing enormous sums of money to spend on the production of military hardware, with a view to stimulating the economy while preparing for yet another unnecessary war. However, economic stimulus cannot help where the problem is a physical deficit rather than a purely financial debacle. The proposed military build up would come at the expense of a civilian economy already trapped in stagnation and decline, pushing countries further into economic depression. If the growth rate of the economy is less than the rate of interest on the debt, one enters an exploding debt spiral, or doom loop. Interest rates typically rise substantially in a depression, reflecting greatly increased financial risk, while growth stalls, making the exploding debt spiral inevitable.
Several different parties to the current wars have either been backed into a corner or have backed themselves into a corner so that the conflicts are now existential for them, and each has made it known that if they’re about to suffer strategic defeat, they would be prepared to take the world down with them. This is an extremely dangerous situation. Russia is fighting against all of NATO, which has been trying to break it up and steal its resources for decades. The war is existential for both parties. Russia will fight to the death, and defeat would lead to the use of the ‘dead hand’ system, firing everything they have if the country is going down. It’s existential for NATO, defeat will means the fragmentation of the alliance and the balkanisation of Europe, likely with a revival of the continent’s earlier levels of violence. Parts of Europe also possesses weapons of mass destruction that might be expected to be used in extremis.
The Gulf war is existential for Iran, Israel, and the Gulf Arab monarchies, and the potential for mass death due to destruction of electricity and water infrastructure is very high. Israel has long said that its last resort would be the Sampson option, meaning the deliberate nuclear targeting of western capital cities. While Iran doesn’t possess such weaponry, it has the ability to hold the global economy hostage through its control over the Strait of Hormuz. The Gulf monarchies are in the weakest position, due to their lack of ability to defend themselves despite purchases of expensive American weapons, and their near total dependence on desalination equipment to sustain the population. Destruction of those plants could easily lead to tens of millions of deaths in a very short space of time. Unfortunately, many of the warring parties have added an eschatological element to their position, which is extremely dangerous, as religious imperatives are non-negotiable and lead to entrenched positions that are mutually exclusive. This guarantees worst case outcomes.
The American imperial strategy, which also has a religious element in the form of a crusader mindset, appears to be one of refusing to recognise its terminal decline and doing everything in its power to retain global dominance, if necessary by dragging the whole world down and hoping to be the last man standing, with relative supremacy. The US has spun a political narrative bearing no resemblance to reality and is attempting to defend it at all costs despite there being no actual strategy behind it. The opposing side is all about a comprehensive, decentralised strategy that has been decades in the making. They have known this was coming for a very long time and have prepared for it in ways the US obviously does not understand at all. Iran is now an impregnable defensive fortress. Militarily, America is living in the past, using technology like aircraft carriers that are now obsolete in the era of drone warfare, where a cheap drone can take out a multi-billion dollar weapons platform or radar. It invests in overly complex and extremely expensive technology designed to pad the balance sheets of the military industrial complex, rather than to be effective in combat, and it lacks surge capacity since that is expensive to maintain. It’s already depleted much of its weaponry and cannot replace it, hence the extend ceasefire that America asked for, not Iran.
The empire cannot win this war. All Iran has to do to win is to survive, whereas the American/Israeli side would have to achieve a spectacular victory, and that is pure fantasy. It can achieve only destructionon a global scale, resulting in the deaths of billions of people. Trump wants to be famous, but he’s more likely be infamous, as the face of the end of global civilisation.
