In the West today, the big news is the latest bailout of another European nation’s bankrupt financial system. The bailout of Cyprus is different from others we’ve seen so far because for the first time, normal account holders are being forced to pay for part it with a portion of their deposited savings. The potential of that hit to ordinary people is causing outrage, panic, and a run on local banks. Financial markets across the West are again in disarray, a Cyprus bank holiday has been declared to prevent a full blown panic, and European leaders are once again scrambling to figure out how to prevent a small southern nation from triggering a domino-like collapse of the western financial system.
That our house of cards in the developed world became this fragile is sad and ridiculous. Yet we’ve become so accustomed to life in our delicate debt based economies that most of us now simply choose to ignore this news like it’s background noise, we hope the problems just go away sometime, somehow. We fail to recognize that our high standard of living is enabled by spending far more than we earn, the shortfall coming from ever-increasing levels of debt. Our governments do it, our banks do it, our corporations do it, and we the people do it. It’s a system that’s served us well for many decades – our quality of life rose exponentially by nearly all measures, our life expectancies grew, we outsourced our unpleasant labor-intensive jobs to people in poorer countries, we got houses and new cars, we became “rich” beyond the imagination even of Kings and Queens from prior generations. All of it was enabled largely by the miracle of expanding debt.
The problem with this strategy, as we’ve seen first hand in many places on our journey so far (e.g. this, this, and this), is that there are limits to the game of endless borrowing. At some point the debt reaches crushing levels, repayment becomes obviously impossible to anyone with basic math skills, and the house of cards begins to be exposed for what it really is. We’ve reached that point, and we’re now just starting to reconcile the accounts of the foolish borrowers and the even more foolish lenders. No matter the solution from here, it’s clear our old game of “endless” borrowing isn’t quite as “endless” as we had hoped.
As we ponder the complete mess we’ve become in the developed world and search for some kind of “EJECT” button, it’s tempting to look for other ways societies might be organized that don’t rely on limitless debt expansion. We’ve found one such example, although an imperfect one, here in Guatemala. We’ve been here for over a week now, frequently traveling into rural towns and villages where the idea of debt doesn’t even exist for most people. Our intent was to learn about their living condition and how people in the developed world can help them solve their most dire problems, but we’re learning just as much about how we might solve our own problems as we are theirs. The people here live simple lives, they farm their own land, trade with each other at local markets, they have almost no need for “money” (let alone debt), and most admirably, they consume virtually no outside resources and enjoy completely sustainable lives – they can live this way forever.
To be sure, this simple lifestyle is riddled with poverty-related problems and is not a model for the future of the west. Pollution here is uncontrolled, living conditions are frequently unsafe and unsanitary, medical care is unavailable to most. But as we start thinking about life without limitless debt expansion, we’ll need to consider lifestyle changes that let us live more efficiently, consume less, and most critically, borrow less. Guatemala and its economic model, despite its shortcomings, is a model of efficiency and sustainability. Although we’ll be slow and reluctant to adopt these changes, we predict the following might inevitably be coming our way in coming decades:
- food produced closer to where it’s consumed, rising importance of local agriculture
- reduced ability of the state to provide welfare, increased reliance on friends, family, neighbors for support, increased sense of “community”
- shifting preferences from comfort and style towards utility and function
- fewer imports, more domestic production, fewer people in offices
- longer careers
- smaller cars, more scooters, mopeds, etc., more public transportation
- less miles traveled
We have two days left in Guatemala without much on the agenda, then we’re off to El Salvador for one last charity visit before getting back to the boat in Florida and finally blasting out to sea again. It’s been 24 hours in bed for me, thanks to an impressive case of Montezuma’s Revenge, which explains today’s longer than usual ramblings…. I promise a return to regular length updates as soon as I return to regular length bathroom visits.