It all started two years ago when we were asked to stay home for two weeks "to flatten the curve." Two years later, we are looking, bewildered, at the wreckage around us and asking ourselves: 'what the hell has happened?'
In such a short time, we found that our world had turned into something very similar to one that we used to despite. The old Soviet Union, complete with heavy-handed police, censorship of the media, criminalization of dissent, internal passports, and the state intruding on matters that, once, were thought to be part of every citizen's private decision sphere.
Surprising, perhaps. But it is a rule of the universe that everything that happens has a reason to happen. The Soviet Union was what it was because there were reasons for it to be that. It was not an alien world populated by little green men. It was an empire similar to the Western one, just a little smaller, and it concluded its cycle a few decades before us. We can learn a lot from its story.
Dmitri Orlov, born in Russia, was among the first who noted the parallel paths that the Western and the Soviet empire were following. His first book was titled "Reinventing Collapse" (2011). Let me propose to you an excerpt where Orlov tells us of an event he experienced in St. Petersburg in the years just after the collapse of the Union. At that time, the people who had dollars, as Orlov did, had a market power that ordinary Russians couldn't even dream of. We see here the consequences of being so rich that you don't worry about carrying small change with you.
There was also an old woman in front of the store, selling buns from a tray. I offered her a thousand-ruble note. "Don't throw your money around!" she said. I offered to buy her entire tray. "What are the other people going to eat?" she asked. I went and stood in line for the cashier, presented my thousand-ruble note, got a pile of useless change and a receipt, presented the receipt at the counter, collected a glass of warm brown liquid, drank it, returned the glass, paid the old woman, got my sweet bun, and thanked her very much. It was a lesson in civility.
Looks like a funny story, but it is not just that. It is a deep metaphor of how a market economy works, and also how it may NOT work. The problem is that, unless some specific conditions are met, a market economy is unstable. Money tends to end all in the hands of a few, leaving the rest with nothing. It is the law that says "the rich get richer." It has a corollary that says, "and everyone else gets poorer."
There is only a way to avoid that a market economy leads to the rich getting everything: it is growth. If the economy grows, then the rich cannot pull money out of the market fast enough to beggar everyone else. The result is the illusion of a fair share. So, you may understand why our leaders are so fixated with growth at all costs. But don't forget that those who believe that an economy can grow forever can only be madmen or economists.
But how do you make the economy grow? The magic word is "resources." No resources, no growth (actually, no economy, either). And if you exploit a resource faster than it can reform (it is called overexploitation), then, at some moment, the whole system will crash down. It is what happened to the Soviet Union and may well happen to us, too. But let's go in order.
Let's go back to the story of Dmitry Orlov trying to buy a sweet bun in St. Petersburg. If the old woman had accepted Orlov's offer to buy the whole tray, the price of the buns would have skyrocketed to levels so high that nobody except him could have bought them. So, Orlov could have crashed the whole market of sweet buns of that particular place. The standard Western economic theory has that, at that moment, another old woman with another tray should have magically appeared to sell buns. Supply must always match demand: it is a postulate. But things don't work like that in the real world.
The market mechanism that matches demand and offer, the way you are taught in the Economics 101 course, can work only in conditions of relative abundance. If people have dollars, then someone will make buns for them and profit from the sales. If they only have rubles, then it may well be that nobody will bother to satisfy their demand: no profit can be made from nearly worthless rubles.
But rubles and dollars are the same thing: pieces of paper with numbers printed on them. What makes the difference is a working -- or not working -- economy. The Russian economy after the fall of the Soviet Union wasn't working anymore: its roubles could buy little more than sweet buns and even that risked being disrupted by a rich foreigner passing by.
The problem was structural. Even before the collapse, the Soviet system couldn't produce an output large enough to sustain a free market economy. In part, it was an ideological choice, but mostly it was because it was because of the need to funnel a large fraction of production to military expenses. The Soviet Union was rich in natural resources, especially mineral ones. That was an advantage, but also a temptation for other countries to invade it. The idea of turning Russia into "the world's gas station" is recent, but it was around already long ago. And that was not just a temptation: over a couple of centuries, Russia, was invaded several times, the last time in 1941. If there ever was an "existential risk" for a country, that was it. The invading Germans had clearly stated that their plan was to exterminate some 20-30 million of Soviet citizens.
The consequence is obvious: in order to survive, the Soviet Empire had to match the rival Western Empire in military terms. But the Soviet economy was much smaller: we can roughly estimate that it always was no more than about 40% of the US economy, alone. To match the huge Western economic and military machine, the Soviet Union needed to dedicate a large fraction of its economic output into the military system. Measuring this fraction has never been easy, but we can say that in absolute terms the Soviet military expenses nearly matched those of the US, although still remaining well below those of the NATO block. Another rough estimate is that during the cold war the Soviet Union spent about 20% of its gross domestic product on its military. Compare with the US: after WW2, military spending went gradually down from about 10% to the current value of about 2.4%. In relative terms, during the cold war, the USSR would normally spend four times more than the US for its military.
In a free-market economy, these huge military expenses would have drained the market of resources, beggaring a large fraction of the Soviet citizens. To keep the market functioning, the Soviet government had to play the role of the wise old woman in Orlov's story. It used its "five-year plans" to make sure that sweet buns for the Soviet citizens were produced, that is, the fundamental needs for life: food, shelter, clothing, fuel, and vodka.
The five-year plans also had the purpose to limit the production of items that were considered "luxuries." For instance, the Soviet Union was a producer of caviar and, nominally, the price of caviar was low enough that most Soviet citizens could afford it. But caviar was not normally available in shops. When a batch of caviar tins appeared, people would stand in line hoping that there would remain a few cans left for when their turn came. This feature avoided that the rich could corner the caviar market, driving prices sky-high, just like Dmitry Orlov could have done with the sweet buns. It also had the effect of giving Soviet citizens the illusion that their rubles were worth something. But they understood that the ruble was a form of "funny money," not the same thing as the mighty dollar. Soviet people used to say "they pretend to pay us, and we pretend to work," and they were perfectly right. The ruble was a limited kind of money: it couldn't be always be used to buy what one wanted (just like when the Western government locked their citizens in their homes: they had money, but they couldn't use it).
Now the pieces of the puzzle go to their places. The need for a tight control of the economy shaped the Soviet society: the media were controlled, censorship enacted, dissent criminalized, and more. Those who publicly disagreed that communism was the best possible government were considered to have psychiatric problems thanks to a subservient medical establishment. Then, they could be hospitalized, sometimes for life. (I know that it looks very much like.... you know what, but let's keep going).
Not only the Soviet system was strained to the limit, but it was also critically dependent on the availability of cheap resources. So, it was vulnerable to depletion, probably the factor that caused its collapse in the late 1980s. It is not that the Soviet Union ran out of anything, but the costs of natural resources simply became incompatible for the Soviet economy. Later on, the core of the Soviet Empire, Russia, could return to being a functioning state only because it didn't have to pay the enormous costs related to keeping an empire together.
On the other side of the iron curtain, the relatively low military expenses and abundant natural resouces made it possible for the American citizens (most of them, at least) to enjoy an extravagant lifestyle, unthinkable elsewhere in the world. They lived in suburban houses, had two cars in every garage, could go wherever they wanted, had overseas vacations every year, could buy whatever they wanted without standing in line. The US citizens could even afford a certain degree of variety in the information they received. The state control on the media was enacted in subtle ways, giving citizens the illusion that they were not exposed to propaganda.
It was the kind of lifestyle that president Bush said was "not up for negotiation" -- except that when you deal with Nature, everything is up to negotiation.
The current problem is that the resources that made the West so rich and so powerful, mainly crude oil and other fossil fuels, are not infinite. They are being depleted, and production costs increase with depletion. And that's not the only problem: something else is choking the Western economic system: it is the enormous cost of the health care system.
In 2018, the US spent $3.6 trillion in health costs, nearly 18% of its GDP. Today, it is probably slightly more than that. Yes, health costs in the US are nearly ten times larger than military costs. It is probably not a coincidence that troubles started to appear when these costs reached the same level, about 20%, of the military expenses for the Soviet Union.
Someone has to pay for those costs and, as always, the task falls on the middle class which becomes poorer and poorer. On one extreme of the wealth distribution curve, former middle class citizens are losing everything and are being gradually squeezed out of the market. And here is the problem: those who have no money to spend can't buy their sweet buns. They become "non-people," aka, "deplorables." What is to be done with them? A possible solution (that I am sure some elites are contemplating), is just to let them die and cease to be a problem (it is the zombie scenario). But we are not there, yet. The elites themselves don't want the chaos that would result from starving a large fraction of the citizens. How to avoid that?
The solution is well known from ancient times: it is rationing. The Romans had already developed a system called "Annona" that distributed food to the poor. During WW2, the US had ration books, ration stamps and other forms of rationing. Food stamps were introduced at that time, and they still exist. The Soviets used a kind of funny money called "ruble." In the West, rationing seems to be a silly idea but it was done during WW2 and, if there is a serious economic crash -- as it is perfectly possible -- it can return. It must return because, without rationing, we'll have the zombie apocalypse all over simply because there is no mechanism in place to limit those who still have money from hoarding all they can, when they can.
That explains many of the things we have seen happening: whereas the Soviet Government acted by restricting supply, the Western ones seem to find it easier to restrict demand -- it is the same thing: it means cooling the economy by reducing consumption. The lockdowns of 2020 seem to have had exactly that purpose, as argued convincingly by Fabio Vighi. Their effect was to reduce consumption, and avoid a crash of the REPO market that seemed to be imminent.
Once you start thinking in these terms, you see how more pieces of the puzzle fall to their places. The West is moving to reorganize its economy in a more centrally controlled manner, as argued, among others, by Shoshana Zuboff. That means chocking private consumption and using the remaining resources to keep the system alive facing the twin threat of depletion and pollution, the latter also in the form of climate change.
It is happening, we see it happening, Note that it is probable that there is no "command center" somewhere that dictated the various actions that governments took over the last two years. It was just a series of common interests among different lobbies that happened to align with each other. The financial lobby was terrified of a new financial crash, worse than that of 2008, and pushed for the control of the economy. The pharmaceutical lobby saw a chance to obtain huge profits from forcing medical treatments on everyone. And states saw their chance to gain control of their citizens at a level they couldn't have dreamed of before. The epidemic was just a trigger that led these lobbies with similar goals to act in concert.
Lockdowns were just a temporary test. The final result was the "vaccination QR code." At present, it has been imposed as a sanitary measure, but it can be used to control all economic transactions, that is what individuals can or cannot buy. It is much better than the lines in front of shops of the old Soviet Union, so it may be used to ration essential goods before the zombies start marching.
Does that mean that the QR code is a good thing? No, but do not forget the basic rule of the universe: for everything that happens there is a reason. Before the current crisis, the Western society had embarked on a free ride of wasteful consumption: it was good as long as it lasted. Now, it is the time of reckoning. In this sense, if the QR code were used for the good of society, it could be a fundamental instrument to avoid waste, reduce pollution, provide at least a basic supply of goods for everyone.
But the QR can do that only if the citizens trust their government and governments trust their citizens. Here, we see the limits of the Western approach to governance. During the past decades, the Western governments couldn't do anything important without imposing it on their citizens by a shock-and-awe campaign of lies. That was the way in which governments imposed QR codes or, better said, they are trying to impose QR codes. The problem is that, over the years, the Western Governments have managed to lie to their citizens so many times that nowadays they have no credibility anymore.
So, what's going to happen? Several scenarios are possible. The Western governments may succeed in their "sovietization" of society. That would mean a heavy crackdown on all forms of communication not directly controlled by the government and the criminalization of all dissent. The government may not necessarily need to arrive to concentration camps or to mass exterminations, but it might. In this case, after that the dust settles, we face at least a few decades of Soviet-like life. The government will use QR codes to control everything we do. If you dissent or protest, you'll risk being declared officially insane, and be subjected to mandatory psychiatric treatment in a hospital, or exiled in the Western equivalent of Siberia, or worse. Even if you are not branded as insane, you'll still be forced to submit to whatever medical treatment the pharmaceutical industry will decide is good for you. Bad, but at least you'll have something to eat and a roof under which to sleep. Don't forget that the Soviet Union survived for about 70 years and, in some periods, even prospered.
That's not the only possible outcome. We might just sidestep the "Soviet" phase and move directly to the "post-Soviet" one. It would mean the collapse of the Western Empire, fragmenting into smaller states. That may imply severe political disturbance and civil wars are perfectly possible. The transition will be tough: it is not obvious that you'll have sweet buns for your breakfast. But after the "hot" phase, the lower governance costs of smaller state could allow them to recover and rebuild a functioning economy, at least in part, just like Russia did (but there is also the example of Ukraine).
But history never repeats: it just rhymes. So, the Soviet system is just one of the many possible ways that a state can control the supply of goods to society. There may be other ways: after all, there was no Internet at the time of the Soviet Union. There were only the "media" which could be hijacked by the state and controlled from above: a "vertical" communication system. Instead, the Web is naturally a horizontal communication system. Controlling the Web may turn out to be difficult for states, perhaps impossible despite the unleashing of legions of those demonic creatures called "fact-checkers." Because of the complexity and the versatility of the communication system available today, the Western society might manage to avoid the heavy top-down control that eventually led to the collapse of the Soviet Union. Just maybe.
The future is full of surprises and, who knows? It may even surprise us in a pleasant manner. We might perhaps escape the "Great Reset" and move to the "Great Awakening."
