Building the new order Entry 18

Rereading myself, I see that many of the things I have been saying have become common discourse in the media. Perhaps I was not too unfocused, which makes me happy.

I said at the beginning that the aim of the serie was to understand what is going to happen in this stage of transition from a world order that is running out to another that will begin.

With what I have studied through these entries, I think I have understood how this transition is going to be made. At least, I have a theory that seems logical to me.

Here, after summarizing what has been said in previous entries, I will explain how I think this transition will be made. All this, making it clear that these are personal deductions, with the risk of being erroneous, but that to me they are a better tool than not having any, and that I share them in case anyone is interested.

The summary of my conclusions after the study is as follows:

The Internet is the origin of everything that happens.

Throughout these entries, I have come to the conclusion that the world is going to change a lot, and very soon, although not suddenly, nor in all aspects, and places, at the same time.

I have already said that we should not think of these “crises” (the wars, inflation, political polarization, climate, …) by comparing them with 2007, or with other relatively recent dates.

Rather, I think we should make the comparison with 1453, which is the year Gutenberg invented the printing press.

Although the comparison is surprising, from that moment on, slowly, the Middle Ages, based on feudalism, ended and the Renaissance began, based on Nation States (which did not exist before). The world changed completely. And it evolved, subsequently, until now, which is when there will be another great change.

I think the trigger for this new great change is the Internet (it deserves a capital letter). It will change the world even more than the printing press did. And, if someone says that the Internet is already old, I say that fifty years are too few for all the effects to be felt, and that many of the possible utilities based on the existence of the Internet have yet to be invented. Besides, it has only recently left the hands of the “enlightened” and is used by two thirds of the inhabitants of the planet.

In short, the important word is KNOWLEDGE. With knowledge everything is done. It improves production systems, social organization, …

The printing press “democratized” access to knowledge outside the monasteries and libraries of the nobles. And there was an explosion of changes based on that knowledge. I always remember that Leonardo Da Vinci was not a monk, nor a nobleman, and he would not have been able to do what he did without the existence of the printing press, not because of the dissemination of his works, but because he would not have had access to the knowledge that allowed him to do those works.

The Internet will have the same consequences, but with an even greater order of magnitude. The era in which we have lived will come to an end, and a new one will begin, to which we will have to give a name (as I will explain below, I suggest “techno-feudalism”).

In the meantime, it happens that most people are disoriented. That is because they are not yet aware of the change we are in. They try to apply the “instruction manual” of the issues in which they work or socialize. They do it with study and effort, … and they do not obtain the expected results. This happens because this instruction manual has become outdated. And we have the problem that the new instruction manual is not written yet.

It is time for the pioneers. They will write the new “instruction manual”. Although we must always remember that old phrase from the motivational books that said: “pioneers get eaten by Indians” (I know that today it is a very politically incorrect phrase, but I think it expresses very well the risk of doing new things). In contrast, there is another old but very descriptive phrase: “when you realize that you are riding a dead horse, the best strategy is to dismount” (there is no point in using the spurs or the whip with more force). And, … I believe that today, in almost everything, we are riding a dead horse.

I can’t resist copying here part of what I projected in a recent conference I gave in a master organized by Pedro (thanks for the opportunity). They are the following:

Blocks of countries.

Since 2020, when I started writing these entries, I have been saying that we are heading towards a division of the world into two blocks of countries, which are officializing their names as the West and BRICS+. Although they are not names that describe the countries involved well, they seem to be gaining ground.

The characteristic that best defines each of the blocs is the state of their middle classes:

In the West, their quality of life is declining. Which leads them to be very angry. That generates instability and populism.

In BRICS+, the former lower classes are rising in quality of life, creating the new “lower-middle” classes. They are still living worse than the old middle classes in the West, but they do not compare themselves to that, but to their situation a short time ago, and see that they are better off than before. That leads them to feel happier, and to accept the dictates of their leaders because, although there is no democracy, they feel that things are working.

Precisely because of this different situation of the middle classes, the blocs of countries will be forced to function in an almost autarchic way within each bloc (not within each country). Otherwise, there would be excessive “dumping” between blocs, with the possibility of one of them “suffocating” the other.

This situation of the new “Iron Curtain” (perhaps we could call it the “Silk Curtain“, due to the great Chinese influence) will continue until the quality of life of the middle classes of each bloc (and the percentage of population they represent of the total of each bloc) is homogenized, which will take decades. At that moment we will be able to think of true globalization, and something similar to world government.

By the way, I mention that the name of the blocs of countries used today is “contaminated” by the world order that is coming to an end. BRICS+ could be translated as “more brick” (with a typo, for lack of the K). That is a very old way of understanding what is happening in what we used to call “developing” (or emerging) countries.

The name BRICS was first proposed by Jim O’Neill (chairman of Goldman Sachs). I don’t think he was looking for a reference to the brick, but something easy to remember with the play on the initials of the countries. The fact is that he relegated China (which is the undisputed leader) to the fourth position in the name, and left Brazil (which matters, but not so much) in the first position.

If I were the leader of that block, I would change its name. I would not let the world that “I am going to change” be the one that gives me the name, moreover, with some “ironic malice”. By comparison, the United States of America did not accept that the English continued to call them “the colonies”.

On the other hand, those countries we used to call “emerging” may be tempted by the logical idea of saying: “we have already emerged“. Again, no different from what happened between the UK and the USA, when they were derogatorily called “the cowboys”.

One consequence of this process is what happened last May 24, when the International Court of Justice (a UN body) ordered Israel to stop its attacks (news here). We will have to see the practical effects of this, but one effect is clear: the West has lost control of the UN. International bodies are going to start to redefine themselves.

Countries in each block (and required signings).

For a first approximation of the countries that will belong to each bloc, I have used the outcome of the UN votes on the Ukraine War, as well as Xi Jingping’s speech for the pact (which I consider the declaration of the beginning of the new times, which I discussed in entry 12).

That vote occurred on February 2, 2023. I discussed the matter in my entry 12 of the previous series. There I came to say that it seems to me that, barring subsequent changes, the countries that can be considered as belonging to the Western bloc are those that voted in favor.

Following the study made in the previous entries, I have tried to deduce the countries that the West should try to “contract” for its “alignment” with the objective of being autarkic in the access to the necessary raw materials.

The result I get is that the West has to:

“Conserve” Chile, for its lithium mining for electric batteries.

It does not seem difficult for Chile to continue in this “alignment”.
And Argentina, for the same lithium issue, in addition to the issue of agricultural raw materials.

Argentina was originally invited to join the BRICS+ bloc, but after the elections in which Milei won, the new government rejected the offer. It seems that they now intend to move closer to the Western bloc, but this is an unstable government that, in addition, has signed collaboration contracts with China in terms of supplies. This is a matter to watch closely, which implies that the West should help Argentina in its difficult economic reorganization.
And Australia, for zinc for solar energy, and lithium and nickel for electric batteries.

It seems easier to “keep” Australia than Argentina, but it is still necessary to help them modify the contracts they have signed with China for this purpose.
And to whatever is “left of Ukraine as an independent country”, because of the issue of agricultural grains.

This does not seem difficult in the current situation. What will have to be watched is whether what is left of Ukraine is “enough”.
And to a country with large oil reserves, Venezuela being the main candidate, despite the great ideological differences of its current government with the West.

It seems that we will have to “forgive and accept” them. Perhaps helping them in their claim over Guyana and the maritime domain reserves.

This may be the most difficult issue to explain and sell politically.
Avoid cobalt in electric batteries, or make a difficult deal with the Democratic Republic of Congo.

Moreover, the West must be aware of the immense investments required to change the energy model. And this in the knowledge that, even so, it is difficult to achieve the goal, and that there may not be enough raw materials. More research into other energy sources is needed.

Goodbye to the nation state.

As I have already said, the concept of the nation state is something derived from the Renaissance. Before that we were in the feudal kingdoms.

Because of the new “post-Internet” world, the strength of these nations will “fade away”. There will be fewer and fewer issues in which the decision will depend on the leader of each country (what we call competences). The competences that do not depend on transnational organizations (World Bank, WHO, UN, …) will be decided by the leader of the corresponding block of countries, with the exception of the competences related to the control of the local masses (police and justice). And, the few remaining competences, the “identity” ones, such as local festivities, gastronomy, local language, … will be held by organizations smaller than countries (regions). In reality, the concept of country will continue to exist in name, but will be worth almost nothing in practice.

Coins (energy?).

I have explained that not only will the dominant currency change (today it is still the dollar), but also the very concept of currency.

It is expected that each of the country blocs will have its own official currency. It will be used by law for fiscal surveillance and accounting regulations, as well as for trade. Of course, the BRICS+ countries will do their utmost to decouple from the dollar, although this will not be easy or immediate.

In addition, it is also to be expected that the public does not trust these currencies in each block. They will do their accounting with them (out of obligation), and they will have some of them in their current accounts (the minimum necessary for their operations). But they will have their main savings (or their investments) in specific assets (what I call “things”) in which they trust more than in the coins. This may be the case of bitcoin, gold, real estate, … Everyone will make their decisions based on their knowledge and the sector in which they operate.

Of the three classic characteristics of a currency: a store of value, a unit of account, and a means of payment, only the last one will continue to work for the classic currencies.

Normally, the “value” is “stored” in something less easily manipulated than currencies (and with less inflation).

It is also normal that our internal accounts, the ones that really give us information and reliability to measure what we do, are based on something other than currencies. Each one in its own way. Something similar to replacement accounting. Whatever inflation there is, everyone will try to know if what he has is enough to maintain his standard of living, or business activity. If you sell hams, you will keep your internal accounting in hams, and you will try to know if next year you can cure more hams than the previous one (although you have your official accounting in euros). And I say that I have not given the example of hams by chance, but because many years ago a good friend of mine (thank you, Luis) made me understand the replacement value when talking about hams.

By the way, I make a suggestion: let’s use energy as a “unit of account”. In fact, everything needs energy to be produced. If we measure things in kWh, we will seek to get the most out of those kWh, which means we will seek to save energy, which is very important to avoid climate change, as well as to optimize production.

Alan Greenspan’s punch.

Related to the issue of currencies and inflation, I would like to recall that old phrase of Alan Greenspan (Fed Chairman from 1987 to 2006). He said that his job was to “take the punch out of the party when it is at its most fun”. He was referring to controlling inflation and raising interest rates.

The idea was clear, and it was sensible. When things are about to get out of hand, someone has to be the “party pooper” so that the next day people have less of a hangover and can get up to work in a world that has to keep turning.

Given what is happening today, it seems that, instead of “pulling out the punch”, they have decided to take us to the most fun “afterhour” place. It’s as if they don’t care about the hangover we will have tomorrow (not even if we will be alive). Because they know that in that metaphorical tomorrow (which could be years), the world will no longer spin the same way. Something like: “let the kids have a good time for the last time, … for what they have left, …”.

It looks like a prelude to hyperinflation, the collapse of the dollar, and total system change.

Within that comparison with the parties, my opinion is that we are now at approximately three o’clock in the morning. It’s starting to get too late, but it’s still a long way before dawn and we’re still in that afterhour in terrible conditions.

Democracy- AI

We talk a lot about what Churchill said: “democracy is the least bad system of government”.

I am not saying that he was not right, but it is a fact that democracies are in decline. Most countries do not practice it. Of those that do, there are many where it is only a nominal matter (do elections mean there is democracy in Russia?). And, in the few that do, there is much polarization, social tension, and a tendency toward autocracy.

This is all very much related to the change of the post-Internet world. If we go to a new world, with a different and unwritten instruction manual, the decision of the masses may not be the best judgment to adapt to what is coming. I often use the example of Columbus’ voyage. If he had made a referendum among his crew, they would have chosen to return, and they would never have changed the world as they did (with suffering, of course).

Then there is the issue of AI. Very soon, that AI will have more capacity than we do to make the right decisions about what to do to adapt to the future (just as it has long had the capacity to beat us at chess). The question is, do we let the AI make the good decisions so that we all win, or do we make them ourselves, democratically, even if they are bad and hurt us? The answer to that is very difficult and has great philosophical undertones. The very concepts of “individual” and “freedom” are affected.

In any case, we must be aware that freedom of individual decision (the basis of democracy) does not really exist today. The truth is that most people think the way they are educated (manipulated?) by the media or social networks. And that is how they decide to vote. After that, decisions are made by governments, with much less capacity to get it right than AI (for the good of the people, for their own good maybe they do get it right).

*****

Main ideas.

Trying to summarize even more what has been discussed in all the entries regarding the world situation, and with the risk of simplifications, but with the advantage of trying to describe the situation in a few paragraphs, the following can be said.

All human activity (technological, economic, social, political, …) depends on the way knowledge is created and transmitted. The Internet changes and accelerates everything. The end result may be good, but the path is dangerous.

For this reason, and because of the current situation, we will divide the world into two blocks of countries with great differences between their middle classes (in the West, the quality of life is going down, and in BRICS+, it is going up). Blocs that will function almost autarchically between them.

The West, in order to guarantee its access to natural resources that will allow it to face the change of energy model and access to agricultural raw materials, in addition to its current “workforce”, must guarantee the continuity of Chile, Argentina, Australia, and the rest of Ukraine after the war, as well as it must “sign” Venezuela.

Wars, the polarization of society in the West, social discontent, and the disorientation of almost everyone when it comes to making decisions, are the cause of the above. The world is changing and people are restless, not knowing how it will affect them, nor what they should do. Neither those at the bottom nor those at the top (the majority) know.

In the meantime, the nation state will be left with almost no competences, those that are not “higher up” will be “lower down”.

Economically, there is a tendency to have a leading currency in each block. Currency that will work for transactions and for accounting and taxes. However, the public will have little confidence in them, and will look for the store of value in other assets (gold, bitcoin, real estate, art, …).

Until everything explodes, we will live a total “binge”, using the old system of political and economic power. The current situation of debt, inflation, and currency printing is equivalent to partying at the local afterhour (exaggeration without limit and with consequences). When we get out of there, and the hangover passes (for those who have not had a heart attack), nothing will be the same.

Another issue that will lose strength in the process is the concept of democracy as a system of government. Those who know where we are going will govern, and there will be few with knowledge of what needs to be done to reach that new world. As always, some will do better and some will do worse. This will be greatly influenced by AI.

*****

Given the summary of what has been studied, the big question is what will the new order look like? I see it like this:

Techno-feudalism.

I cannot be sure of the shape of that new order. Nor do I think anyone else can be. But I do have some opinion about the likely option.

I call it “techno-feudalism”. And I think it will apply to the Western bloc of countries, because in the other bloc I think the system is clear: they will perfect their autocracies (which are working for them).

In the West, I use the word “techno” because I believe that the power that financial institutions and governments have today will be transferred to large technological corporations. That is because, before, the important thing was to control money, and tomorrow it will be to control data, on the basis of which everything is done. I think that the big decisions of the bloc of countries will be very much influenced by the technology companies. It is not that they will be in direct command, but their power lobby will be basic, as has been that of the big banks up to now.

And I say “feudalism” because I believe that the local management of satisfying and controlling the masses is going to be done that way. Let’s call it “enlightened feudalism“. In each place there will be someone, with means, knowledge, and good intentions (it better be so), who will be the one who dominates the area. This local government (much smaller than the current countries) will be the one who will apply, locally, the decisions taken in the block of countries by the technological lobbies, and will be the one who will relate to them. Normally, this local government will not be a single person, but an influential group, with a lot of communication between them, in which local politicians, businessmen, and the relevant social structures in the area will participate. They will be dedicated to the implementation of decisions taken at the country bloc level, but adapted to local capacities and idiosyncrasies, in addition to exercising local police and justice functions.

Deadlines.

I have already said that not all changes will occur in all places and sectors at the same time, just as it did not happen in the passage from the Middle Ages to the Renaissance.

But it is tempting to try to define a date that will be the benchmark and end up in the history books. But it is also pretentious.

I dare to make my small bet on the date of these future books. Of course, I insist that I don’t have a crystal ball, just intuition.

I think it may be summer 2025.

There is no way to prove the correctness of that date, but I can explain my motivations for choosing it:

The first is that everything has been on the verge of exploding for a long time. The straw that breaks the camel’s back (what I have talked about “afterhour”) is coming.

The second is that I don’t think anything will happen until the outcome of the US elections is known (and the first decisions of the new president, as well as the reactions of Xi Jingping and Putin.

And the third is an average of the many predictions that have been made by relevant people and that I have described throughout the previous entries. Among them, I specifically quote the one made by Samuel Benner in 1872. I talked about it at the end of entry 7 of the previous series. And he said it was in 2026.

Spain (or, Ex-Spain?)

As I am Spanish, I am going to talk a little about the future I see for our current country in application of all of the above.

I believe that the country will continue to exist, but almost without competences. Those that are not “above” (in the direction of the West), will be “below” (in the local fiefdoms). Spain will be a concept of cultural unity, and little more (and little less).

On the other hand, it is well known that Spain belongs to Europe (at least until now, though everything can change), and that many people say that Europe is the “museum” of the world, with minimal capacity to influence the management of the Western and BRICS+ blocs.

I agree with that, but I usually add as a joke, although with substance, that Spain will be the “museum´s bar“. The place of leisure and fun inside the museum that is Europe.

In addition, I also say that Spain has two other “small” characteristics to manage:

The Strait of Gibraltar. With its capacity to influence the very important maritime traffic (in the east-west direction). And with its capacity to connect the traffic of people and goods between Africa and Europe (in the north-south direction).

By the way, it is imperative to build the bridge, tunnel, or whatever, that has been under study for so long.
And the Spanish language, with its capacity for cultural connection between Europe and South America.

I believe these are not bad cards for our country. Let’s hope we know how to manage them well.

*****

Thank you very much for reading me.

I can’t guarantee it, but I will normally start a new serie of entries soon, oriented towards possible actions in the face of the changes.

As always, I welcome comments on my email: pgonzalez@ie3.org