The issue is not necessarily that humanity has reached absolute limits to growth; there are no such limits theoretically (though the assumption that technology will always advance at a pace sufficient to overcome depletion of resources and the development of new problems is highly questionable). However, there are obviously limits to the rate of growth, both theoretically and in reality.
Yes, we must not necessarily have reached any absolute limits of growth, while there are obviously limits to the rate of growth.
(Will technology always
advance at a pace sufficient to overcome resource depletion? Who knows. But should we assume there are limits because we aren't sure there are none? That would be expecting to prove a negative.)
The current monetary-financial system requires future growth on a scale that - given the massive misallocation of capital caused by the system - cannot possibly (or is extremely unlikely to) arrive. There is of course a simple solution - drastically change that monetary-financial system. Debt can be written down or allowed to default altogether and a new system insitituted which does not generate constant, exponential growth in the monetary base and debt levels.
The point of no return appears to be more or less now, given that the marginal utility of debt has turned negative - i.e. every new dollar borrowed not only doesn't generate at least a dollar in real growth, it actually causes net damage and contraction. The ability of the system to sustain itself on deficit spending and stimulation is finished, so there are only two choices: reform or collapse.
Making debt is implicitly expecting future growth. If that growth does not arrive, we have to make new debt to service the old debt plus the interest. This theoretically leads to an exponential expansion of the monetary base. Economic growth can absorb some of that credit expansion, but there are physical limits to the rate of economic growth. Thus at some point expansion of the monetary base must overrun economic growth and result in a Malthusian collapse. Or will it?
The economy is millions of individual people making millions of individual bets on future growth in many segments of the economy. If their individual bets are correct, then the expected economic growth did arrive. If their bets were wrong, they default, at a loss to them and their creditors. Thus capital that is created beyond economic growth is constantly written off, and the system has a natural mechanism to cleanse itself of excess capital, as well as incentives to not create it in the first place. Which keeps expansion of the monetary base in step with economic growth. The monetary base is not simply an uncontrolled monster, growing at a exponential rate, but follows economic growth.
We do have threatening debt, however. The reason is government. Governments have coercive power and therefore they are not subjected to the same economic forces as private citizens and corporations. People can't simply borrow exponentially larger amounts, because they wouldn't find anyone willing to lend to them. But governments have printing presses and laws, and guns, and can simply exponentially add debt. That will indeed lead to the very collapse you describe. Although not because the financial system is inherently flawed, but because people and institutions are. The problem is that we borrowed money that we can't pay back, not that we are forced into exponential credit expansion by "the system". I agree that these problems in some ways are the fault of the current system. But of representative democracy and shortsighted economic opinions having too much political leverage. The problem is not inherent to the monetary-financial system. All of western society lived above their means on borrowed money. And now we do stand before the choice of letting it default and taking the blow, or laboring to pay off debt that our generation didn't make. We should indeed make some changes to the system, so this won't happen again. I suggest some sort of constitutionally mandated separation of economy and state. Meaning that the state is not allowed to intervene in the economy with stimulus, subsidies, bailouts, etc.
Let's take one of your examples that encompasses a number of the issues. By 'shock therapy' I assume you mean the economic 'liberalization' of Chile, Argentina, Ecuador, etc. beginning in the late 70's early 80's?
This movement was ideologically driven by the so-called Chicago School, led by Milton Friedman, and the 'Washington consensus,' or, in other words, neo-liberalism. What were it's goals?
The U.S. closed the gold window in 1971, which began a gradual collapse in the value of the dollar, which of course threatened American imperium and that of American financial interests. A new system was needed to replace Bretton Woods. The plan, designed by Kissenger, was to create a new backing for the dollar: oil and debt. How does this work? The inflation of the 70's and the oil embargo (sparked by the U.S. government deliberately) meant one thing - vastly higher profits for the Arab oil states, which were consulted before the fact and had agreed to deposit their windfall profits in long-term treasury bonds. Secondly, the higher prices meant that foreign nations buying oil had to buy more dollars on the open market (as all oil contracts were and are settled in dollars); this is similar to the objective of the Marshal Plan for Europe after WWII, by which America ensured its oil companies a vast new market (and a very highly overcharged market) and the government/banks benefitted from the additional demand for American dollars. Even after oil prices receded from their crisis-highs, this petro-dollar system continued, and continues - the most recent challenge to it was Saddam Hussein's threat to price his oil in euros, we all know how that turned out.
Moving on, the other major pillar of the post-Bretton Woods world monetary system was to be third world debt. This is where your 'shock therapy' comes in. In the mid to late-70's, Western banks and governments, including the World Bank, made very large 'development loans' to various Latin American (and also African, Asian, etc.) nations at very low variable interest rates. Those loans which were made by western banks to the third world were never intended to be paid off. The idea was to trap those nations in perpetual debt peonage to the west, forcing them to buy dollars on the open market to service their debt, and opening the nations up for exploitation by Western corporations. John Perkins explains all this very nicely - the loan money goes directly into the pockets of western corporations which the third world nations hire to do the development work that the loans are ostensibly intended to fund. The nations, having been given overly optimistic growth projections, soon find themselves unable to repay the loans. So more loans, either through the banks or the IMF are issued, while rights to natural resources are taken as collateral. In the end, the situation devolves into what we saw recently in Argentina - massive currency devaluations, 'dollar bonds' (which will never be paid off, just financed forever, providing the banks with a continual stream of income and the dollar with permanent demand), massive declines in standards of living, etc.
The various coup d'etat in South America at this time, the assasinations, as well as the bloody civil wars, are all reflections of the use of American military, diplomatic, economic, and espionage powers to force this economic model on the nations of the region. This is the story of neocolonialism, which has been terrible for Latin American citizens, bad for American citizens, and extremely profitable for the corporations and banks within the military-industrial complex. In other words, not good for freedom.
Thatcherism and Reaganism (funny how they broke out at precisely the same time with the same slogans, etc.) were simply the next stage in the game, rates needed to rise to set the trap for the third world and redirect capital flows toward the west. The liberalization of China - planned also by Kissenger - was intended to do exactly what it has done, deindustrialize the west and create a dependent foreign purchaser of dollars and dollar-denominated debt. The fall of the Soviet Union opened those nations to exactly the same kind of neo-liberal exploitation as the revolutions, wars, and assasinations did in Latin America. It's practially a cliche that Russia in the early 90's became a nation of pimps, gansters, and prostitutes - that;'s partially a result of the transition from command-economics to capitalism, but things were made infintely worse by the corruption inherent to the neo-liberal concept. The oligarchs were created as a pro-western class through the sale at far below value of state assets, mines, rail, etc. Likewise, Russia was subjected to the IMF debt machine, the currency destroyed, etc. Belarus is an epitome of the broader experience; in order to repay loans from the west- which were made to do what they did, not to develop the nation - the vast high-tech and industrial capacity of Belarus was literally sold for scrap and the nation plunged into depression.
I could go on and on, but the moral of the story is this; 'liberalization of trade' or other such terms are euphemisms for greater concentration of money and power in the hands of the cartel banks. It is the final victory of speculative over industrial capital - debt no longer functions as an investment but as a opportunity for the banks to canniballize the remaining productivity of the planet.
I can see how it's all a plot by a bunch of bankers who have the goal of concentrating wealth and power in their hands, maintain Anglo-Saxon world supremacy and whatnot. But does that mean these changes cannot be milestones in a trend towards more freedom? What change in history was ever caused by libertarian idealism? Take the US constitution, for example. It can be argued that George Washington was merely exploiting the democratic enthusiasm of his time to further the class interests of the Virginia landed gentry. Were his actions not a milestone towards freedom? After a century of failed socialist experiments, that came at great human cost, we finally get liberalization of markets. That it happens in the self-interest of wealthy elites does not necessarily exclude that it is in the interest of the public as well. I bet those bankers have every intention of cannibalizing the worlds productivity, enslaving the commons and implementing a permanent oligarchy. But that does not mean that the effects of their actions are such. One of the important lessons of economics is that intentions do not equal effects. As of now standards of living are rising worldwide as a result of liberalization of trade. Of course we have to look out that they don't actually manage to enslave the commons. But that struggle is always ongoing.
I think though that criminal world organizations, like the IMF debt machine or the UN, are separate occurrences than neo-liberalism. So while I certainly don't support capturing the third world in debt and similar plots, pursuing their self-interest is what nations always have done. It's not like there wouldn't be wars in the middle east or assassinations in South America, we can't blame all that on neocolonialism.
One sentence above is curious: "having been given overly optimistic growth projections". You seem to be suggesting that it is the fault of the US that third world nations take out loans that trap them in perpetual debt. It reminds me of the housing debacle, where it was somehow the fault of the banks that people bought houses they couldn't possibly afford with mortgages they didn't properly understand.
In a way it makes sense that socialism and liberalization are not spontaneous movements, but part of the same orchestrated Hegelian dialectic. I.e. alternating phases of liberalization and regulation, each step further advancing the financial interests of the same people. For example the "regulation" that followed the financial crisis is written by the very bankers it is supposed to curtail, rigging the system further in their advantage.
Which of the two trends you see as the anamoly depends entirely on your timeline; thinking in terms of a few centuries, the secular trend is toward more freedom and the anamoly is authoritarianism. However, thinking in terms of a millenia or more, the anamoly is clearly the trend towards freedom. (...) My personal opinion is that freedom is an anomaly, and one that really peaked in the early 19th century and has been in decline, more or less rapidly, since that time.
Certainly freedom is the unusual condition in that timespan. But wouldn't you agree that communism and national socialism were temporary setbacks, and not examples of the larger trend? Authoritarianism is unsustainable, it lives off itself and is therefore always temporary. That's really what I mean when I see authoritarianism as the anomaly, and liberalism as the trend. Five hundred years ago, practically all the worlds citizens were authoritarian, and today a growing share are not. So there was
a trend towards liberty that did happen. If you were once small and now you are larger, then the trend is towards larger size. Whether that's a trend or an anomaly depends on what direction the future is going to go.
It does make sense to see advancements in freedom as a result of the overthrowing of the old hierarchical order. The 'new men' recruit the masses with promises of liberty and equality to overthrow the old nobility, but after the new order is established the new nobility quickly becomes oligarchic again. Thus freedom as a temporary anomaly in a nonevolving world. While I agree that there is no evolution of societal structures or human wisdom which would explain freedom, there definitely is a evolution of technology. And nobody can foresee what technology will bring even ten years into the future. Will the masses be subjugated with predator drones, hedonistic and apathetic with consumerism? Or will rising material abundance and modern communication empower the masses to gain the knowledge and influence to abolish hierarchy? Nobody knows. But I do sense a sort of libertarian awakening going on. I think that is not a fad, but due to changes in technology, see this
The notion that freedom is currently in decline isn't necessarily accurate. Yes, intrusive statism seems to be on the rise currently. But we aren't necessarily objective observers. We tend to compare our current flawed situation to a pristine ideal, instead of the even more flawed actuality of history. And both left-wing and right-wing pundits have the narrative that socialism is on the rise. The right exaggerates in order to whip up opposition, while the statist left wishes to appear victorious. But if we compare objective indicators, it might look very different. We are mostly concerned with coercive regulation by nation states, and disregard the main source of coercion throughout history; personal coercion by warlords, marauders, neighbors, etc. We are more safe today than ever, which is something we tend to take for granted. Even with the carnage of two world wars, Mao famines, Stalin's shootings, etc., as a human being on planet earth you were still less likely to be murdered by another person in the 20th century than in any century before it. Statism (in the precise sense of the word: there being a state) may be the price for safety. But it brings statist coercion with it. If you only count that form of coercion, it might appear as though coercion is on the rise. But really, this new type has replaced the old type and will hopefully be gradually reduced as well.
And while the transition of the eastern block certainly didn't unfold perfectly, you have to admit that the end of the friggin Soviet union is a bit of a liberalization.
It is really the hippies in the schools that have implanted us with a belief in progressive evolution. This paradigm sees societal changes as a progressive evolution towards collectivism, and self-interested individualism (e.g. capitalism) as an obstruction that is temporary and has to be overcome. That paradigm is so generally accepted amongst left and right that we rarely question it, and it influences our thoughts without us even knowing it. Seeing individualism as an anomaly within a larger trend towards authoritarianism might be a offshoot of that belief in progressive evolution.
A trend of individualism is even present in human evolution. I assume you agree that humans started out as primordial elements that evolved into what we are today. So we didn't start out as individuals, but now we are individuals. Thus there was a trend towards individualism. We did end up as billions of conscious individuals, and not as one large organism. Evolution resulted in a trend towards individualism because evolution is essentially a form of free market enterprise. Only individualism allows for the bad to fail and the good to advance. And that this trend exists in biology makes me think that it exists in societal structures as well, as they base on biology.
I think it is just more constructive to look at freedom as the trend, and not the anomaly. If you see something as inevitable that you might be able to delay a bit, you just react differently to it than if you view it as an aberration. Seeing collectivism as inevitable makes you potentially apathetic towards it.
Of course the knowledge that humanity will ultimately converge upon freedom is little consolation when you have to live through one of those totalitarian anomalies, so we have reason enough to fight it. But on a philosophical level I think it is better to view liberty as the trend, and authoritarian experiments as temporary setbacks.