Charles Hugh Smith: Preventing The Final Fall Of Our Democratic Republic

There’s mounting evidence that the Age of American Exceptionalism is grinding to an end.

Demographically, in the U.S. (as well as many other developed nations), the prospects of the younger generations are substantially less than those of the Baby Boomers. The same is true socioeconomically as well; the wealth gap between the 1% and everyone else continues to accelerate.

What’s been the root cause of this slide towards greater and greater inequity? And can anything be done to reverse it?

Economist analyst and author Charles Hugh Smith addresses these core questions in his new book Pathfinding Our Destiny: Preventing The Final Fall Of Our Democratic Republic. Charles concludes that we are the terminal end of a multi-century process of centralization that is no longer working for society’s benefit:

We have a political system which is becoming increasingly tied into money. Now, people have always said, like from 100 years ago, "money is the mother's milk of politics". Money and power have always coalesced around political power. But in the last, say, 70 years, post-World War II, the central governments and central banks of the world have grown immensely in their centralized power.

And one of the theses I’m proposing in my book is that centralization itself in now the problem. We’ve been told for 400 years that it’s been the solution. Just centralize power and wealth into tighter and tighter control and then that will somehow solve whatever problems we have.

The intense concentration of power is becoming blatantly visible these days. Six media companies control most of the media in the U.S. It used to be six banks, but now I think it’s down to only three or four, who control most of the financial system. And we see this in one sector after another. Facebook dominates social media. Google dominates search and ads and so on. And this makes perfect sense is the system we have now.

In other words, it’s really efficient, and it’s very profitable. If you can establish a cartel or a monopoly or a quasi-monopoly, then you can just raise your prices, and people have to pay it and it’s profitable. Everybody wins, right? The shareholders win. The managers win. The public? Well… eh, they don’t have a choice.

My book’s conclusion at the higher, systemic level is that it’s critical for people today to understand that we’re not going to be able to reform the current system as its structured and that we’re going to have to radically de-centralize power, wealth and capital. And we’re going to have to open the doors, so to speak, to a bunch of experimentation to find out what works best.

I think the best path is actually just asking people to develop those values. And I think those values are going to be the ones that are adaptive and flexible and most likely to bring personal success, community success, to those people that hold those values and understand that that’s the future.

Click the play button below to listen to Chris' interview with Charles Hugh Smith (45m:49s).

This is a companion discussion topic for the original entry at

Your discussion touched on, but never really dug into what I see as the core issue: Starting in the Reagan era, our culture has lost its awareness of the common good as the necessary balance to self-interest. What has replaced it is all-consuming self-interest. This means there is no longer a shared sense of all of us being in this together. No wonder all that’s left is division and rancor. With nothing binding together the citizens of this nation, there is no longer a functioning social contract. There are just interest groups, playing a zero sum game.
I recently spent 6 weeks in Europe. After 25 years as a transit advocate, I came away with the sad realization that Americans are never going to be willing to make the investment in infrastructure for quality transit for all, as Europeans have done. Most people can’t imagine life without a car, and wouldn’t want it, if they could. They want their own cars… (They don’t realize that larger urban areas have exceeded the population size where solo driving works well.)
Americans have been enculturated to value individualism over the common good. Not only is that trait deeply woven into the American character, I believe that training was accomplished through the public relations efforts of industrialists terrified by the spread of Bolshevism starting in 1917.
I don’t know if it is possible to nurture a sense of the common good back into the culture, but I don’t see any recovery from this dark point if we can’t. I’ll add, though, that individuals can recover it. Buddhism has given me access to deep feelings of interconnectedness. These are the source of my sense of the common good.

I always understood our country was established as a Representative Republic, not a true Democracy. Where in a democracy, the concentrations in densly populated areas could easily outvote the less densley populated areas, thereby eliminating the vote of the people living in the country. Hence the reason for the electoral college, with the problems that it has. Nevertheless, I agree the system is broken and probably beyond saving the original concept that was America. Possibly a slide into socialism is what is coming.
Chris mentioned people shrug their shoulders and say “what can you do” and there are some that are content or happy with the system as it is. I belive that where we are in society today, there is a majority of the population that is receiving part or all of their income from the government. Why would someone who is receiving something from the government, whether they work for it or it is handout, want to reduce or eliminate it? They don’t see their income or subsidy as part of the problem. They are on the gravy train. Little to no competition.
Perfect example is our failing public education system. In our state, Washington, we had a House Bill on the ballot a year ago, 2242 I think, that would impose 12.9 Billion dollars in property taxes over 10 years to “Fully fund K-12 Education”. It got voted down statewide 62% to 38%, however, the court ruled that it must fully fund education K-12 and it got imposed anyways. Teachers went on strike demanding more money. Even after as much as a 20% salary increase, they still complain this hasn’t fixed the problem. I’m sure in a few years they will be back crying about how they just can’t continue unless they get another influx of tax revenue. My property tax went up $600. I now pay over $4000 a year on State and Public school taxes and I don’t use them. I home school and I pay for my own curriculum. The first thing that this new tax will go towards is increased salaries. “We must pay for good teachers” is the argument, and the non crittically thinking masses swallow it. State law requires them to teach 1080 hours per year (RCW 28A.150.220) Schools are required to teach a year no less than 180 days ( WAC180-16-215) They spend $18,000 per student for what amounts to a graduated 12th grader that functions on a 10 year old level. (Personal interaction with these students is what tells me that) The teachers make more on average than the privately employed in our area ($82,708 vs $67,106) The superintendent Jean Schumate makes over $230,000 a year, and this doesn’t include the insurance benefits and retirement they get on top of their salaries. They are building a brand new $150 million dollar high school that also got voted through locally to replace the existing High School. It is not going to improve the outcome of the students, still the same Pavlovian style of stimulus training/reward system is in place.
I don’t know of any of these teachers that have held a job privately in their lives. They have no concept of what it means to be self employed, like myself. To compete for income on a level business environment. They have no clue what it takes to perform a job where you are reliant upon other businesses to MAKE A CHOICE to call you so you have an opportunity to earn money. They are at the trough demanding more every year. You work 2/3rds of the year. Go get a second job if you want more money. I don’t want to hear your whining you aren’t compensated enough to be in an underperforming government monopoly. Go comptete in the private sector and shut your pie hole. You are a part of the problem.
Eliminate the NEA. Break up the teacher unions. Give parents the choice on how to educate their own children. Let them keep their property tax portion and decide where they want to spend it. If you want to use the public system, fine, pay the $18,000 per yer, per child to get that fine education. Stop demanding that I supplement your abdication of raising your child. If you are not competent or confident enough, let someone else raise your child. Better yet, don’t have children and you’ll be doing the rest of us a huge favor.
Adults, teach your own kids. Don’t give them over to someone repeating what someone else told them.
Yes a storm is coming, and you do not want to be on the receiving end if I have to make a choice of food for my family or funding your retirement.

What a great episode! I wish I could sit down with Chris and Charles to discuss this topic over a couple beers. I totally agree that the only feasible way forward from where we are now is decentralization. I’m not so confident that we can get there. And we need to get there before the steel trap of the surveillance state is sprung around our ankles.
I’m a fan of Nassim Taleb, and the idea of lots of small, competing jurisdictions (sort of like the Founders meant the country to be) really jibes with his ideas in “Antifragile”. Antifragile systems (that get stronger with stress) generally have many semi-independent parts and the competition and evolution of those parts under stress is what makes the system stronger.
I’m glad Charles hit on the idea of coercion vs choice. To me this is the key structural and moral issue. Whenever we implement top-down, coercive solutions to anything, the result is sub-optimal and often the opposite of the intent. Choice is the key. Why don’t our bosses, or spouses, just beat us with blackjacks? Because we can quit, or we can get a divorce. We have a choice. We would choose to spend our time with someone else. People without a choice are called slaves. Coercion is the use of force to remove choice. Coercion is evil. Coercion is the primary tool of big government.
Coercive top-down governments have officials with no skin in the game (again Taleb); if their policies backfire there are no repurcussions (can you spell “John Bolton”?).
I don’t, however, like all these ideas of “the common good.” How in world would you determine that? A commenter above mentioned public transit, and how wonderful it would be to have a good transit system in the US. And yet, probably 95% of the people living here would hate that idea. So we are back to appointing our (enlightened) selves as The Annointed, and if the rabble won’t listen we’ll start cracking skulls, or at least we’ll steal their money to reshape the world the way we know it should be. This just gets back to totalitarianism really fast. I say let everyone have choice, coerce no one.
Also, there were a lot of comments like “all anyone cares about is money” and “everyone just wants growth” etc. That’s “common knowledge” but I challenge you with this: write down a list of everyone you know, and then put a check next to those who care nothing about others, who only want to get money, who disdain helping others, or contributing to society. How many of these people actually exist? I think we are engaging in faulty thinking when we say stuff like “my and my 6 friends are cool, but everyone else is a rapacious capitalist out to destroy the world.” It just ain’t so. You might be able to name 30 nasty people/companies, but there are 300,000,000 people in this country. 30 bastards ain’t so bad. Let’s not throw out the baby with the bathwater.
Keynesian economics is, of course, a complete sham. But an economy can “grow” not only by making more trinkets, but by making the same stuff with less energy, less material inputs, etc. We don’t need more stuff to have more profit.
Ok, now I really need a beer!

Life in America has become one big game of Monopoly, where the longer the game goes, more players end up w nothing while a few (eventually one) end up w everything. Take capitalism, infuse it w trickle down economics, then add Citizens United, and here we are.
Great points made by Charles throughout this podcast.

As someone who chose not to have children, I, too, as a Washington resident, raised my eyebrows at the increased property taxes. Property taxes will figure prominently in the transition to a new system such as Charles describes. Charles has outlined something that may be a solution – but there will be a lot of pain in the interim.
There will be a great deal of resentment from those who are not part of the defined benefits system as taxes increase dramatically. (I realize that teachers and public employees pay a portion of their retirement.) Once we recognize – or are forced to recognize – that most jobs are B.S. jobs, our infrastructure will change. For example, the Washington State Investment Board (WSIB) on behalf of Washington teachers and public employees owns One and Two Union Square. Signature office buildings in the Seattle CBD. At some point these buildings will be worth nothing. 99% plus of those who work there are in B.S. jobs. Another example: WSIB bought a resort on an island barely above sea level in the South Pacific. If projections are correct this property will be literally and figuratively underwater in a few years. Who will pay? The Washington State property tax payer.
Why am I familiar with these investments? Before I realized that I worked in a B.S. job, I was an investment officer with WSIB. I actually recommended that WSIB divest (in 1995-1996) of a portion of One and Two Union Square in order to eliminate to our exposure to a single city. What a dummy I was.
It’s all a matter of timing. I used to think that I was ten years ahead of the times. Now I think that I am at least 20 years ahead. : ) It’s hard to know how quickly it will collapse. But, as S7 expresses, there are going to be many unhappy campers in the interim.

I couldn’t help but reflect on this cursory discussion of the this topic. Decentralization may appear as the logical solution to the malaise modern society finds itself in, however, what has evolved over the centuries is the concept of agency in human interactions. In other words, “let somebody else take care of the details”, because I’m too busy and can’t be bothered. A close examination of Roman law always held that an obligation between two people was a bond that could not be broken without the consent of the primary respondents in a civil society. The day the concept of agency developed was the day things began to go south.
It is amazing how we have lost all concept of an obligation that requires recourse in order for a society to function. Everything from borrowing a 5 note to extended warranties has limited utility where theft is a common trait. Whether it be clipping coins, shrinking the size of your favorite candy bar or that 12 oz. beer that is now a 330 ml slurp of insipid, fermented, carbohydrate swill, the evidence is there that our society is breaking down. A friend of mine recently purchased a $1200 smart refrigerator that after two years later crapped out and cost him $500 to fix. The recent discovery of some customers that their Sears appliance’s extended warranty will still cost them a monthly charge despite the company’s liquidation, only highlites the predictament we find ourselves in.
I recently replaced the bushings on my old pumpjack that has been working non-stop for over 40 years and will now go another 10 before I rebush the parts… How many things do we all own that won’t last a decade due to the quality of the design and materials. And, if we wanted to fix them, they have become so specialized that only an agent can fix them. I guess that is another name for government, eh?