As Centralized Systems Devolve, The Solution Is Localism   (January 10, 2012)

Depending on Central State/central bank borrowing and spending to prop up the Status Quo is a doomed strategy.

I think the thread between these three seemingly disparate stories is clearly visible. I am indebted to longtime correspondent Joel M. for sending me these articles:

A Dimly Flickering Light in a Darkened Downtown. An Ohio mill town's once-bustling main street is now a ghost town; people are desperate to sell their family heirlooms to one of the downtown's few remaining businesses, a vintage shop, to raise cash.

A Fight for Post Offices and Towns’ Souls. Even as the number of family farms rises for the first time in decades in the U.S., long-standing services to rural communities such as post offices and schools are being slashed.

With Work Scarce in Athens, Greeks Go Back to the Land. As Greece’s economy plunges and unemployment rises, many Greeks are fleeing to the countryside and looking to the nation’s rich agricultural past as a guide to the future.

The thread that connects these stories is the devolution of centralized concentrations of control and the power of localism to fill the void.

As I have often noted here, the expansive Central State is on an S-curve of decline, and this is most apparent in places such as Greece that cannot print a couple trillion dollars a year to fund a bloated Status Quo like the U.S. can (at least for now).

But the Central State is on an S-curve even in nations such as the U.S. and "socialist" France, where rural post offices are also being closed or their hours drastically slashed for budgetary reasons.

Though few believe it possible, Wal-Mart is also on an S-Curve of decline; right now it has topped out, roughly comparable to the centralized corporations that owned and operated the mills in the 1960s. Though these conglomerates seemed eternal, beneath the surface they were already in decline. So it is with the Wal-Mart model of centralized distribution of goods sourced via long global supply chains. The decline just isn't visible yet.

It is instructive to consider how the tiny village in the south of France where my brother lives is responding to the closure of rural services and the devolution of centralized funding. The village has actively constructed subsidized housing on village-owned land to attract young families with children so the village school and post office won't be closed.

Those who depend on a strategy of pleading with central authorities to continue funding at old levels are doomed to disappointment--all systems follow an S-Curve of rapid expansion, stasis and decline. The Central State is no different.

The solution is localism. By creating cheap housing with its own modest tax resources, then the village attracts young families, whose children will keep the village school from closing, and the commerce brought to the village and its post office will keep it above the "closure" threshold.

Passively hoping that centralized concentrations of wealth and power will return to pre-eminence is a losing strategy, the equivalent of a cargo cult ritualistically hoping for a return to World War II-era bounty. Focusing local resources on obvious bootstrap solutions is the winning strategy, not just in the U.S. but globally.

That old mill town could do worse than to gather its resolve and institute a tax on all retail stores with more than 50,000 square feet of sales area. That would levy a special tax on one retailer, Wal-Mart. As long as the tax was modest, Wal-Mart would resist and threaten but it would be highly unlikely to close a profitable store.

Then the town could use that revenue to begin condemning all those empty buildings downtown via eminent domain and leasing them out for $1 a year to entrepreneurs. With no prospect of tenants, the buildings are essentially worth zero, so the owners would be lucky to get any sum. Most of the businesses would fail, as do most small businesses, but with nothing to lose, why not trust to capitalist energy and experimentation? Maybe something good would start happening as creative juices were given a chance to flow. Something would be much better than nothing.

When the devolution of the Central State and central bank (and indeed, all centralized concentrations of wealth and power) picks up speed, as it has in Greece, then people migrate back to where localist solutions are possible.

Breaking the mindset that Central State subsidies is the solution to every problem is difficult, but as reality intrudes then clinging to broken models of the past is not the way forward.

In many minds, Greece is a failed state and the U.S. is successful. To my mind, Greece is a state in a positive transition to dealing with reality, and it is the U.S. which is the failed state, borrowing and blowing 10% of its entire GDP each and every year to fund its bloated, corrupt Status Quo ($1.5 trillion in Federal borrowing annually, plus state and county borrowing and corporate/consumer borrowing).

Failed states depend on endlessly rising debt to prop up their bloated, corrupt Status Quo. That no longer described Greece, but it still describes the U.S.

If this recession strikes you as different from previous downturns, you might be interested in my new book An Unconventional Guide to Investing in Troubled Times (print edition) or Kindle ebook format. You can read the ebook on any computer, smart phone, iPad, etc. Click here for links to Kindle apps and Chapter One. The solution in one word: Localism.

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