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Monday, July 26, 2010

The Cardinal Crisis - Is American Middle Class Being Wiped Out? The Math Formula That Killed The Economy > And: China Braces For End Of Cheap Labor? Also > You Know You Are In A Depression When...? Plus > Future Shock: Are Things Changing Too Fast?

The Cardinal Crisis

Is American Middle Class Being Wiped Out?
You Know When You Are In A Depression When...

The Math Formula That Killed Wall Street?

China Braces For End of Cheap Manufacturing

Future Shock:
Are Times Changing Too Fast?

By Theodore White; mundane Astrolog.S

I continue to forecast on the economy, Wall Street, and the impacts on society here on Global Astrology for a reason. It has been, and remains my contention that we are now living in historic astrological times.

The transition between the closing of one era, that of the late 20th century, and the emergence of the new era of the decade of the 2010s.

 For instance, on July 26, we have begun the fifth, and last Saturn-Uranus opposition of our current time cycle.

This last exact opposition, along the Aries/Libra axis, is now in effect as the Cardinal T-Square involving Jupiter, Saturn, Uranus, and Pluto strengthen during the summer of 2010 in the northern hemisphere.

In this edition of Global Astrology we look at the American Middle Class, which according to some, is being wiped out by the corrupt and uber wealthy.

 We also take a look at the mathematical formula that helped lead to the global Bank Crisis in The Math Formula That Killed Wall Street?

A writer asks, You Know You Are In A Depression When...?

 Also, we look to the past to understand the present with a retro-future look forward in Future Shock: Are Times Changing Too Fast?

We continue to see the power of this waning cycle of the original 1982 Saturn/Pluto square in China, where labor shortages and strikes have some western companies seriously considering a return of mass production manufacturing back to the United States?

The Cardinal Crisis
American Middle-Class Being Wiped Out?

By Michael Snyder
The Business Insider

The 22 statistics detailed below prove beyond a shadow of a doubt that the middle class is being systematically wiped out of existence in America.

The rich are getting richer and the poor are getting poorer at a staggering rate.

Once upon a time, the United States had the largest and most prosperous middle class in the history of the world, but now that is changing at a blinding pace.

Why are we witnessing such fundamental changes?

Well, the globalism and "free trade" that our politicians and business leaders insisted would be so good for us have had some rather nasty side effects.

It turns out that they didn't tell us that the "global economy" would mean that middle class American workers would eventually have to directly compete for jobs with people on the other side of the world where there is no minimum wage and very few regulations.

The big global corporations have greatly benefited by exploiting third world labor pools over the last several decades, but middle class American workers have increasingly found things to be very tough.

Here are the statistics to prove it:

  • 83 percent of all U.S. stocks are in the hands of 1 percent of the people.

  • 61 percent of Americans "always or usually" live paycheck to paycheck, which was up from 49 percent in 2008 and 43 percent in 2007.

  • 66 percent of the income growth between 2001 and 2007 went to the top 1% of all Americans.

  • 36 percent of Americans say that they don't contribute anything to retirement savings.

  • A staggering 43 percent of Americans have less than $10,000 saved up for retirement.

  • 24 percent of American workers say that they have postponed their planned retirement age in the past year.

  • Over 1.4 million Americans filed for personal bankruptcy in 2009, which represented a 32 percent increase over 2008.

  • Only the top 5 percent of U.S. households have earned enough additional income to match the rise in housing costs since 1975.

  • For the first time in U.S. history, banks own a greater share of residential housing net worth in the United States than all individual Americans put together.

  • In 1950, the ratio of the average executive's paycheck to the average worker's paycheck was about 30 to 1. Since the year 2000, that ratio has exploded to between 300 to 500 to one.

  • As of 2007, the bottom 80 percent of American households held about 7% of the liquid financial assets.

  • The bottom 50 percent of income earners in the United States now collectively own less than 1 percent of the nation’s wealth.

  • Average Wall Street bonuses for 2009 were up 17 percent when compared with 2008.

  • In the United States, the average federal worker now earns 60% MORE than the average worker in the private sector.

  • The top 1 percent of U.S. households own nearly twice as much of America's corporate wealth as they did just 15 years ago.

  • In America today, the average time needed to find a job has risen to a record 35.2 weeks.

  • More than 40 percent of Americans who actually are employed are now working in service jobs, which are often very low paying.

  • For the first time in U.S. history, more than 40 million Americans are on food stamps, and the U.S. Department of Agriculture projects that number will go up to 43 million Americans in 2011.

  • This is what American workers now must compete against: in China a garment worker makes approximately 86 cents an hour and in Cambodia a garment worker makes approximately 22 cents an hour.

  • Approximately 21 percent of all children in the United States are living below the poverty line in 2010 - the highest rate in 20 years.

  • Despite the financial crisis, the number of millionaires in the United States rose a whopping 16 percent to 7.8 million in 2009.

  • The top 10 percent of Americans now earn around 50 percent of our national income.
Giant Sucking Sound?

The reality is that no matter how smart, how strong, how educated or how hard working American workers are, they just cannot compete with people who are desperate to put in 10 to 12 hour days at less than a dollar an hour on the other side of the world.

After all, what corporation in their right mind is going to pay an American worker 10 times more (plus benefits) to do the same job?

The world is fundamentally changing. Wealth and power are rapidly becoming concentrated at the top and the big global corporations are making massive amounts of money.

Meanwhile, the American middle class is being systematically wiped out of existence as U.S. workers are slowly being merged into the new "global" labor pool.

What do most Americans have to offer in the marketplace other than their labor? Not much.

The truth is that most Americans are absolutely dependent on someone else giving them a job.

But today, U.S. workers are "less attractive" than ever. Compared to the rest of the world, American workers are extremely expensive, and the government keeps passing more rules and regulations seemingly on a monthly basis that makes it even more difficult to conduct business in the United States.

So corporations are moving operations out of the U.S. at breathtaking speed. Since the U.S. government does not penalize them for doing so, there really is no incentive for them to stay.

What has developed is a situation where the people at the top are doing quite well, while most Americans are finding it increasingly difficult to make it.

There are now about six unemployed Americans for every new job opening in the United States, and the number of "chronically unemployed" is absolutely soaring.

There simply are not nearly enough jobs for everyone.

Many of those who are able to get jobs are finding that they are making less money than they used to.

In fact, an increasingly large percentage of Americans are working at low wage retail and service jobs.

But you can't raise a family on what you make flipping burgers at McDonald's or on what you bring in from greeting customers down at the local Wal-Mart.

The truth is that the middle class in America is dying -- and once it is gone it will be incredibly difficult to rebuild."


Mundane Analysis

 It has been my contention for some years that the earth would enter a transition phase which would then turn with the advent of the Cardinal transits by 2008 and continue through the new decade of the 2010s to the next Saturn/Pluto conjunction in 2020.

The American statistics cited above prove this to be true.

For years, Wall Street firms, hedge fund players, and international bankers have depended on a mathematical formula of variables to make huge sums of money in the derivatives market.

In astrology, we deal with multiple variables. This is because all planetary bodies, the stars, the Sun, and the Moon are always in motion.

Because of this fact, astrology is a very difficult field for most because of the every-changing mathematical interactions between moving bodies along various lines of declination. It is variable mathematics in its highest form.

A trained astrologer will require at least 20-30 years of knowledge and experience to gain enough insight required to extensively forecast; especially in mundane astrology.

The patterns observed, and studied, show astrologers what is more likely to occur, and what is less likely to occur, always through the science of celestial transits relative to the Earth over periods of time.

On the sector of the world economy, forecasts by rationalist financial engineers, some who despise astrology but never studied the science in any depth, turned towards using mathematical shortcuts in an attempt to do what astrologers have been doing well for centuries - accurate forecasting.

Wall Street hired these rationalist "quant mathematicians" to improve profits.

In effect, though the financial community had no actual historical data to base their investment forecasts on economic correlation, a shortcut was taken, based on less than 10 years of data on a corrupted, and bubble priced real estate market, which then led to the near collapse of the world economy.

We discover that this shortcut, or the "formula," was primarily the result of the work of a single mathematician.

David X. Li, born in China in the 1960s, became a quantitative analyst and a qualified actuary who, in the early 2000s had pioneered the use of what he called Gaussian Copula models for pricing of collateralized debt obligations (CDO)

But, in the wake of the global Bank Crisis, and the resulting economic crisis, Li's model now has been called a "recipe for disaster."

Li was quoted as saying about his disastrous financial model that:

"The most dangerous part is when people believe everything coming out of it."


For more, see ~ The Formula That Killed Wall Street.

Li left his celebrity forecaster status in the United States, and is now working in Beijing, China.

What also makes the above somber statistics even more confusing and sad is the fact that while China has benefited from the Baby Boomer corporate/political establishment moving quality American manufacturing to Asia for cheap workers, we now witness China suffering signs of a labor shortage?

This next feature highlights a mundane forecast made over three years ago where I pointed out that China would lose its primary hold on cheap manufacturing, and suffer a labor shortage that would return quality manufacturing gradually back to the United States.

The Saturn/Pluto square, highlighted in the July 23 feature of Global Astrology detailed the business climate from the last waning square of the 1982 Saturn/Pluto cycle to the new conjunction in 2020.

China's problems are typical to countries in transition. The economic crisis, as it is called, sees global trade not fractured, but de-fragmenting.

In order to keep up, nations have to train and educate workforces to meet the new demands of the times.

We are currently in one such cycle.

The Cardinal Crisis
Brace For The End of Made-In-China Era?
A Chinese garment worker at a factory in Pinghu, near Shanghai, China.
Credit: Philippe Lopez/AFP/Getty

Associated Press

July 2010-- SHANGHAI, CHINA -- Factory workers demanding better wages and working conditions are hastening the eventual end of an era of cheap costs that helped make southern coastal China the world's factory floor.

A series of strikes over the past two months have been a rude wakeup call for the many foreign companies that depend on China's low costs to compete overseas, from makers of Christmas trees to manufacturers of gadgets like the iPad.

Where once low-tech factories and scant wages were welcomed in a China eager to escape isolation and poverty, workers are now demanding a bigger share of the profits.

The government, meanwhile, is pushing foreign companies to make investments in areas it believes will create greater wealth for China, like high technology.

Many companies are striving to stay profitable by shifting factories to cheaper areas farther inland or to other developing countries, and a few are even resuming production in the West.

"China is going to go through a very dramatic period. The big companies are starting to exit. We all see the writing on the wall," said Rick Goodwin, a China trade veteran of 22 years, whose company links foreign buyers with Chinese suppliers.

"I have 15 major clients. My job is to give the best advice I can give. I tell it like it is. I tell them, put your helmet on, it's going to get ugly," said Goodwin, who says dissatisfied workers and hard-to-predict exchange rates are his top worries.

Beijing's decision to stop tethering the Chinese currency to the U.S. dollar, allowing it to appreciate and thus boosting costs in yuan, has multiplied the uncertainty for companies already struggling with meager profit margins.

In an about-face mocked on "The Daily Show with Jon Stewart," Wham-O, the company that created the Hula-Hoop and Slip 'n Slide, decided to bring half of its Frisbee production and some production of its other products back to the U.S.

At the other end of the scale, some in research-intensive sectors such as pharmaceutical, biotech and other life sciences companies are also reconsidering China for a range of reasons, including costs and incentives being offered in other countries.

"Life sciences companies have shifted some production back to the U.S. from China. In some cases, the U.S. was becoming cheaper," said Sean Correll, director of consulting services for Burlington, Mass.-based Emptoris.

That may soon become true for publishers, too. Printing a 9-by-9-inch, 334-page hardcover book in China costs about 44 to 45 cents now, with another 3 cents for shipping, says Goodwin. The same book costs 65 to 68 cents to make in the U.S.

"If costs go up by half, it's about the same price as in the U.S. And you don't have 30 days on the water in shipping," he says.

China's small businesses struggle to adapt to survive the global bank crisis. Chinese workers stitch teddy bears at a toy factory in Shenzhen.
Agence France-Presse/Getty Images

Even with recent increases, wages for Chinese workers are still a fraction of those for Americans. But studies do show China's overall cost advantage is shrinking.

Labor costs have been climbing about 15 percent a year since a 2008 labor contract law that made workers more aware of their rights. Tax preferences for foreign companies ended in 2007. 

Land, water, energy and shipping costs are on the rise.

In its most recent survey, issued in February, restructuring firm Alix Partners found that overall China was more expensive than Mexico, India, Vietnam, Russia and Romania.

Mexico, in particular, has gained an edge thanks to the North American Free Trade Agreement and fast, inexpensive trucking, says Mike Romeri, an executive with Emptoris, the consulting firm.

Makers of toys and trinkets, Christmas trees and cheap shoes already have folded by the thousands or moved away, some to Vietnam, Indonesia or Cambodia. 

But those countries lack the huge work force, infrastructure and markets China can offer, and most face the same labor issues as China.

So far, the biggest impact appears to be in and around Shenzhen, a former fishing village in Guangdong province, bordering Hong Kong, that is home to thousands of export manufacturers.

That includes Taiwan-based Foxconn Technology, a supplier of iPhones and iPads to Apple Inc. 

Foxconn responded to a spate of suicides at its 400,000-worker Shenzhen complex with pay hikes that more than doubled basic monthly worker salaries to $290. 

Strike-stricken suppliers to Honda Motor Co. and Toyota Motor Corp., among many others, also have hiked wages.

Foxconn refused repeated requests for comment on plans to move much of its manufacturing capacity to central China's impoverished Henan province, where a local government website has advertised for tens of thousands of workers on its behalf.

But among other projects farther inland, Foxconn is teaming up with some of the biggest global computer makers to build what may be the world's largest laptop production hub in Chongqing, a western China city of 32 million where labor costs are estimated to be 20 to 40 percent lower than in coastal cities.

Given the intricate supply chains and logistics systems that have helped make southern China an export manufacturing powerhouse, such changes won't be easy.

But for manufacturers looking to boost sales inside fast-growing China, shifting production to the inland areas where many migrant workers come from, and costs are lower, offers the most realistic alternative.

"The new game is to find a way to do the domestic market," says Goodwin.

Many factories in Foshan, another city in Guangdong that saw strikes at auto parts plants supplying Japan's Honda, have left in the past few months, mostly moving inland to Henan, Hunan and Jiangxi, said Lin Liyuan, dean at the privately run Institute of Territorial Economics in Guangzhou.

Massive investments in roads, railways and other infrastructure are reducing the isolation of the inland cities, part of a decade-old "Develop the West" strategy aimed at shrinking the huge, politically volatile gap in wealth between city dwellers and the country's 600 million farmers.

Gambling that the unrest will not spill over from foreign-owned factories, China's leaders are using the chance to push investment in regions that have lagged the country's industrial boom.

They have little choice.

Many of today's factory workers have higher ambitions than their parents, who generally saved their earnings from assembling toys and television sets for retirement in their rural hometowns. 

They are also choosier about wages and working conditions. 

"The conflicts are challenging the current set-up of low-wage, low-tech manufacturing, and may catalyze the transformation of China's industrial sector," said Yu Hai, a sociology professor at Shanghai's Fudan University."


The high jobless rate as the Saturn/Pluto waning square begins in earnest in July 2010 will be stubbornly high until the generational transition is completed in the early years of the new decade.

The economy went south, as tens of millions of people struggle to survive as the volume of work continues to drop dramatically even as the need for infrastructure rebuilding and business expansion grows.

My general forecast shows the United States, Asia, Europe, and other nations continuing to feel the pinch of the contracted business climate.

I expect a slower recovery as the waning Saturn/Pluto cycle plays out. Each major aspect of the general 38-year cycle is broken down in 9.5 years.

The main story of this cycle will be the revelations of the major banks roles in the economic crisis and why the lenders of the past 18 years are not fit to manage their institutions.

Despite this, global transits shows a surprising uptick in the sector of dry bulk commodities just ahead.

Vincent Fernando reports July 26, 2010
The Business Insider

Iron ore forwards have had an extremely strong week, according to data from the Iron Ore & Steel Derivatives Association.

August 2010 forwards have had the largest gains, indicating expectations of a near-term rebound:

Despite concerns about Chinese demand growth, higher stockpiles of steel, a global growth slow-down, and Chinese plans to consolidate its steel industry into fewer players, iron ore and steel are rallying.

Where there's demand for steel, there's demand for many other commodities as well.

There's also demand for ships.

This, combined with a stabilized Baltic Dry Index and today's overall stock market rally, means it's a sea of green for dry bulk stocks today.

August & September could get interesting for the commodities space."

The Cardinal Crisis
You Know You Are In A Depression When...?

By David Rosenberg, Chief Economic Strategist
Gluskin Sheff & Associates

"Congress moved to extend jobless benefits seven times, as has been the case over the past two years, at a time when almost half of the ranks of the unemployed have been looking for at least a half year.

The unemployment rate for adult males (25-54 years) hit a post-WWII this cycle and is still above the 1982 recession peak, and the youth unemployment rate is stuck near 25%.

These developments will have profound long-term consequences – social, economic and political.

The fiscal costs of the depression continue to mount, with the White House on Friday raising its deficit projection for 2011 to $1.4 trillion from $1.267 trillion.

That gap in the forecast – $133 billion – was close to the size of the entire budget deficit back in 2002. 


You also know it is a depression when you find out on the weekend that the FDIC seized and shuttered another seven banks, making it 103 closures for the year.

What a recovery!

Meanwhile, how are the surviving banks making money?

By cutting their provisions for bad debts (at a time when the household debt/income ratio is still near record highs of 120% and at a time when one-quarter of the consumer universe has a sub-600 FICO score – which means they are also ineligible for
Fannie or Freddie mortgage financing.

The banks thus far have reduced their loan loss reserves between 23% (Cap One) and 73% (First Horizon) – as Jamie Dimon said last week - these are not real earnings.

You also know it's a depression when a year into a statistical recovery, the central bank is still openly contemplating ways to stimulate growth.

The Fed was supposed to have already started the process of shrinking its pregnant balance sheet four months ago and is now instead thinking of restarting Quantitative Easing.

Of course, we are in this bizarre environment where bank credit continues to contract – last week alone, bank wide consumer credit outstanding fell $2.2 billion; real estate lending contracted $9.2 billion; and commercial & industrial loans slid $5.1 billion.

 click on graphic to enlarge

What did the banks do this past week?

They replaced cash with government
securities – the $47.5 billion net buying was the second largest in the past three

As the banks find few opportunities to lend – households are either not
creditworthy enough to lend to or are busy paying off debts and companies that do have any expansion plans have enough cash on their balance sheet to
finance their initiatives.

They are likely to use their $1 trillion in excess reserves buying government and related securities, especially with the yield curve so steep and the Fed ensuring that it has no intention of taking the 'carry' away for a long, long time.

Did we mention that you also know you are in some sort of depression when
after two years of record $1+ trillion deficit financing to kick-start the economy, the yield on the 5-year note is sitting at 1.8%?

What do you think that tells you?

It tells you that the private credit market is basically defunct, especially when it comes to the securitized loans, which played such a critical role in promoting leveraged economic growth from 2001 to 2007.

The amount of securitized credit that has vanished since the credit bubble burst two years ago is $1.4 trillion – 40% of this market is gone.

And what replaced it was this rampant government intervention into the economy aimed at putting a floor under the economy.

But insofar as the government stimulus fades and the contraction in credit persists, it will be interesting to see what sort of spending, output and income growth we are going to see in the near- and intermediate-term."


Okay, we all know the economic news certainly is not positive. I would rather forecast much more positive news, but in the near-to-medium term what is needed much more is a clear view of what has been really happening since the 1982 Saturn/Pluto cycle.

The bigger picture matters.

I continue to state that until the establishment generation of Baby Boomers have completed their time as establishment, which they are now in the final months of doing, the economic recovery will be anemic at best under the current atmosphere of Boomer aging angst and severe economic deflation.

The management of economies of scale; especially since 1993, has been fleeced and pilfered from within by the Pluto in Leo generation, and their parents, who are coming to an end as the ruling oligarchy, now in their mid-80s.

These are world planetary transits at work. We cannot halt the passage of transits, nor the motions of time. Generations age, and they come and they go. The world is at a crossroads into a new future.

We are now living in historic times.

The Cardinal Crisis
Future Shock:
Are Times Changing Too Fast?

By Theodore White; mundane Astrolog.S
Global Astrology

When I was a kid, I came across a curious book called Future Shock, by the sociologist and futurist Alvin Toffler. The book appealed to my budding sense of world history, and I read this book during the first year of my astrological education at the age of 10.

The early-to-mid-1970s was a time of lots of expansive thoughts and talks about the future. It was the space age matured in a brand new decade - the start of the post-modern age.

Most people turned to forecasters of every ilk to predict the future. My own early reading and training in astrology added to the dimension of context I would later synthesize into a mundane outlook of history in all its context, including cultural, economic, political, technological and social.

Most of the orthodox historians, and futurists were not versed in the complexities of astrology. Many did not believe the future could be forecasted.

I felt different about this since I had already heard and read of a French mundane astrologer named Michel Nostradamus who did a pretty good job forecasting hundreds of years into the future by application of the science of astrology.

From the 16th century, mind you.

I knew the future was always in motion, but astrology was the answer to forecasting since we know where, and what kind of aspects the planets relative to the Earth will be at any time by our astronomical calculations.

This gives the astrologer a superior logic, and great advantage over conventional forecasters not skilled in the use of the science of astronomical forecasting and prediction.

Still, the conventional talk of Nostradamus in the 1970s were usually full of errors, especially about the science of astrology.

Moreover, the rationalistic skeptical bias of conventional science blocked any kind of deep understanding, much less basic knowledge, of astrology in general, and mundane astrology in particular.

The pop-culture views of astrology were as rampant and widespread in scientific circles then as they are now.

I was surprised by this, even as a elementary school student nearly 40 years ago. Most of the adults I knew back then, when asked by me to name the planets in our solar system, in a row from the Sun, could not do this. These people included some pretty "smart" people who snickered at the very term "astrology."

Can't name nine planets in a row. In your own solar system? But can roll eyes and snicker at astrology, a celestial science you know nothing about?

I found that curious.

Meanwhile, there were other people who had the astrological knowledge and who shared it with me. This got me thinking about science in general, and history in particular when it came to trends, and forecasting applying astrological principles.

So, I took the route of scientific astrology, which I found natural to my understanding, and from there, looked upon the transits of the world as a mundane historian, and a forecaster.

Back in the 1970s, a global convergence was underway I later discovered that had more to do with how people would absorb all the information, knowledge, and technology confronted by them on a daily basis.

One night, I watched a documentary by the famed film director Orson Wells that year of 1972-73. Though dated, it is a healthy reminder of what the world is experiencing at this time in history under the Cardinal Crisis transits.

This documentary would later have a profound impact on my thinking about world transits, and how people would be forced to incorporate and synthesize the rapidly speeding technological world which offered so many decisions to be made that it caused some people to go into a kind of "shock."

Toffler argued that when society experiences great structural change, such as the coming a revolution from an industrial society to a "super-industrial society" that the changes overwhelm people.

This occurs because of accelerated rates of technological and social change can leave people disconnected from the world as they suffer "shattering stress and disorientation" from the information overload – and, in the term Toffler coined, are thus "future shocked."

Toffler says the majority of social problems are symptoms of future shock. The term is sometimes used to describe a particular kind of psychological state of individuals and entire societies.

Toffler says his best definition of Future Shock is -

"Too much change in too short a period of time."

We live in a similar age. The advent of technology and the Internet has caused a type of "future shock" to occur with the onset of the global banking crisis and generational transition now underway.

The impact on society during the next ten years will reveal how successful or poor the last 28 years of the Saturn/Pluto economic cycle  has proven.

At this time, it looks poor, as many would already attest.

In this 1994 interview with New Scientist Magazine, Alvin Toffler explains his view of Future Shock further.

It is interesting that the time of the interview took place during the waxing global square of Saturn and Pluto, which was fixed by 1993-94, as the world struggled once again to emerge out of another recession.

Alvin & Heidi Toffler:
Still Shocking After All These Years

Alvin & Heidi Toffler
The New Scientist
March 1994

Alvin Toffler burst into the limelight in 1970 with the publication of Future Shock, a book that caught the spirit of the age with its challenging vision of a society being torn apart by the "premature arrival of the future."

It became a worldwide best seller. Since then, he and his wife Heidi (who recently owned up to her half of the creative effort and put her name on their books too) have published a string of influential books:

The Third Wave (1980) and Power Shift (1990) form a trilogy with Future Shock. 

Each one and the Tofflers' most recent book, War and Anti-War, takes a different lens to explore the technological and culture forces shaping the future.

Although the Tofflers are often thought of as the world's most famous futurologists, two words that are definitely not in their vocabulary are "predict" and "trend."

"We believe nobody can predict the future," says Alvin. 

"We'll read the stuff that comes out of mathematical models, but we'll read it with a degree of skepticism. What we have constructed is a model of historical and social change."

That model is seen most clearly in The Third Wave, which maps out three gigantic waves of change. 

The First Wave corresponds to the agricultural revolution which dominated human history for thousands of years. 

The Second Wave - industrial civilization - is now playing itself out after 300 years of dominance. 

The Third Wave is crashing over us right now, having started with the birth of a postindustrial, high-technology, information economy in the 1950s.

The transforming power of technology always plays a central role in the Tofflers' books, but their first love was not science. 

Both studied English at New York University and then plunged into the Bohemian world of postwar Greenwich Village, writing poetry and planning novels. 

"I was your typical liberal arts student. Math and science were absolutely the subject that gave me the most difficulty. 

"But for some reason, I knew at a very young age that technology was important, that science was important, and so I took a course in the history of technology and then read, read and read.''

The Tofflers' interest in technology (plus early left-wing leanings) even extended to working on a factory production line in their New York days. 

After that came years of journalism, with the Tofflers writing for everyone from Fortune and Playboy to the Annals of the American Academy of Political and Social Science, and acquiring a "dogmatic belief in never becoming dogmatic.''

Then, in the 1960s, the Tofflers were asked to write a paper for IBM on the long-term social and organizational implications of the computer. 

That gave them a period of immersion in technology. Future Shock followed soon afterward, when they were living in Washington DC and Alvin was working as a correspondent for a Pennsylvania newspaper.

What led you to write Future Shock? 

"Having spent several years watching the political process, we came away feeling that 99 per cent of what politicians do is keep systems running that were laid in place by previous generations of politicians.

Between 1955 and 1960, the birth control pill was introduced, television became universalized [sic], commercial jet travel came into being and a whole raft of other technological events occurred.

Our ideas came together in 1965 in an article called, 'The future as a way of life,' which argued that change was going to accelerate and that the speed of change could induce disorientation in lots of people.

We coined the phrase "future shock'' as an analogy to the concept of culture shock.
With future shock you stay in one place but your own culture changes so rapidly that it has the same disorienting effect as going to another culture. 

Were you surprised by the reaction to the book?

"I think that it touched a nerve. Remember we were coming out of the Sixties, countries were being torn apart, change was almost out of control for a period.
It touched a nerve, it gave a language, it introduced a metaphor that people could use to describe their own experience. 
Looking back to the 1970 when the book came out, how would you have done it differently? 
"The great weakness was the book wasn't radical enough, although everybody said it was a very radical book. The reason for that is that we introduced the concept of the general crisis of industrialism. 
Marx had talked about the general crisis of capitalism and the argument of the left was always that capitalism would collapse upon itself and socialism would triumph. 
We argued that both capitalism and socialism would collapse eventually because both were the offspring of industrial civilization, and that we were on the edge of a new way of life, a new civilization. 
Had we understood more deeply the consequences of that idea we would not have accepted as naively as we did the forecasts of the economists. If you think that economists are arrogant now, in the Sixties they were really riding high. 
They claimed we would never have another recession, and the reason was that we understand how the economy works, and 'all we have to do is fine-tune it,' as one economist told us. We were young and naive and we bought that notion. 
We should have anticipated that the revolution we were talking about would have hit the economy in a much deeper way.  
There seems to be some profound dislocation between this wave and all previous waves. Is there no going back? 
"I don't think you can understand today's changes without recognizing the revolutionary nature of these changes. 
We say we are going from a brute-force economy to a brain-force economy, and it's clear that skill and knowledge are becoming the central resource for economic activity. If I had studied economics I would have been taught that the factors of production are land, labour and capital. 
'Knowledge'' doesn't appear. 
Today, knowledge not only must appear in that list, it dominates the others. If you have the right knowledge at the right place at the right time, that means less labor, less energy, less capital, less raw materials and less time. 
All the other inputs of economic production for the conversion of natural elements into what we call wealth can be done far more effectively and efficiently through the application of knowledge.  
Is it computers that have been mainly responsible for this shift?
We are talking about knowledge in a much broader sense. I don't mean just computer data, I also mean ideas. I think we use the word almost in a sense of culture. What's really interesting is that we believe the nature of technology and the nature of the economy will drive the nature of social change. Which makes us sound like technological determinists. However, it is the culture that increasingly drives the technology and the economy. The economy is based on knowledge and that's based on culture. It's Marx stood on its head.  Are there limits to how adaptable culture is? How far can we go?
There are obviously circumstances where you have to make the change to survive, and there are other circumstances where if you make them too fast, you destroy. A good example is Russia. We had these economists rushing in with their attaché cases stuffed with Newtonian models, telling the former Soviet officials that they had to change overnight.
They had obviously not read Future Shock, and had totally ignored non-economic realities - the social, political, cultural and religious realities.
They were prime examples of Second Wave thinking, acting as though economics was a self-contained machine untouched by all these other forces and as though you could drive 250 million people into a new system in X number of days.
That's ridiculous and dangerous, and what they have given us is Zhirinovsky. Cultures have limits.

As you travel to different countries how do you feel that different cultures have reacted to these changes?

I think that the US is still the spearhead of this change, is still the leading edge of the Third Wave, that a lot of our increasingly inflamed racial problems, our unemployment problems, are directly related to transfer from a brute force to a brain-force economy, which does not provide employment, for example, for uneducated people and even for some educated people.

Europe has made a number of fundamental strategic errors and they have a lot to do with the Common Market and the European Union.

One of the things that has always struck me as absolutely stupid has been the contrast between the billions of dollars of subsidy for agriculture and the pennies put aside for research, Research budgets have been - in contrast with the US - minimal.

And at a time when every major company is trying to flatten the hierarchy, the European Union takes 12 bureaucracies and puts another one on top.

At a time when we are discovering that small businesses are more renumerable, the Brussels folks still think in terms of economies of scale.

The European Union should not be a bureaucratic, nation-based union - it will have to be a Europe of regions.

And it will have to recognize the importance of science and technology much more than even now, and it will have to break up the remaining centralized PTTs and accelerated the development of the electronic infrastructure.

But on the other hand if you're saying that knowledge is so important, that knowledge is very portable item; does that mean that the leaps and overtaking will be so much more rapid?
They will, and they will come from strange places. Right now Silicon Valley is talking about the fact that there are companies buying cheap programming from India.
The Third Wave technologies are not going to be monopolized, they are going to proliferate rapidly around the world. Ideas are going to be very, very hard to bottle up, and your lead time in controlling that information is increasingly short. Isn't that a theme which you pick up in your new books, War & Anti-War? The basic argument is that as new civilizations emerge they bring with them new forms of warfare and new forms of warfare emerge, new forms of peace-fare are required.   The Industrial Revolution did not simply industrialize the economy, it industrialized warfare.  The machine age gave us the machine gun. Societies organized around mass-production, culminated in nuclear weapons, the ultimate in mass destruction. That came as a revelation to us. Never having had much contact with the military, we shared the common stereotypes.
We argue that to the degree that knowledge is in fact becoming central to the new economy, it is also becoming central to the new form of war. The US Air Force has just bought 300,000 personal computers. 
There will be more computers in the armies of the world than there will be guns. Just as in the economy you need skilled workers, you need skilled soldiers.
One of the things we discovered in writing this book was that you need smart generals. The generals we met researching this book, are super, super-smart. They have studied everything from aerospace to computer sciences to international relations. 
The other thing that interested us in the book was how an institution as large and recalcitrant to change as the US military went from complete demoralization after Vietnam - drug-drenched, bureaucratic, bloated and despised - to its performance in the Gulf War.
If you can speak of war as elegant, that was elegant. 
You paint in the book a very chilling prospect of this lean, mean intellectual, elegant fighting machine that can zap the hell out of First and Second Wave civilizations...
Yes, but the other thing I say is that you can't keep secrets and you can't monopolize this technology.
The proliferation of Third Wave technology has a profound military implication because the weapons of the future are going to come from civilian production - that's a fundamental change - and it's going to be possible for poor countries with minimal amounts of money to smarten their weapons. They're doing it right now.

You don't feel it's possible for the more advanced nations to constantly keep ahead?
War is not going to be fought just with material weapons, but with electronic terrorism. 
We know a former US intelligence officer, who is also deep into artificial intelligence and computers, who says that if you give him 20 people and $1 million, which is peanuts, he can shut things down.

They could shut down every computer, they could shut down the banking system, the ATM machines, the hospitals, transportation systems.

You only need one super-hacker, he could work for Terhan, he could work for Zhirinovsky.

So it isn't that the West or the US in particular has this lifetime lead. On the contrary, I think we are exceedingly vulnerable and the vulnerability is magnified by the ignorance of the public and the self-confidence.

You know: 'We won the Gulf War, look how well we did, we can do that to anybody, any place.'

So knowledge isn't necessarily wisdom?

Right now I don't think there is a clue in the White House as to what the interests of the US are in the emerging world.

I think that a vacuum exists because there is an intellectual error being made, a profound error.

For fifty years, the model was the Cold War and that explained everything. Now it's the end of the Cold War that explained everything.

And if we look back on this period in a hundred years from now, the historians will say, yes, there was this thing called the Cold War - it was like some big tribal conflict in ancient times, they had these big bombs they could kill each other with.

But in fact the most important thing that happened in that period was the emergence of a new civilization. You can call it postindustrial, Third Wave, or techno-tronic.

Basically the change in the relationship of knowledge to production and other social processes means that everything has begun to change. 

It has cultural dimensions, religious dimensions, and certainly scientific dimensions.

You're getting models of change that are what I would call essentially Third Wave models, certainly not mechanistic.
You mean complexity, chaos?
Yes, and these are not the classical theories of the industrial age.
If science begins to change its assumptions about change itself, that's pretty profound. 
If we are beginning to shift from the popular use of machine models to describe various things, to computer models, to biological models, then to ecological models, we are moving into a multi-logic culture.
There is a logic that goes with print, and we call that literal logic. Video has arrived and video has its own logic. Pictures have their own grammar, and computers too.
We are going from a culture dominated by literal logic to a culture in which there are clashing logics. And I think we are moving into an era in which we are going to explode existing cultures. Heidi and I are asked all over the world: "Can we become Third Wave and stay Chinese, or English, or Mexican?" The answer is you can't stay anything. The Third Wave permits and even encourages cultural diversity. You can define your own unique culture, but it isn't going to be the culture of the past and it's going to be configured out of elements that come into your culture from outside. When you have messages beamed to you automatically translated into your own language, and you watch television from Nigeria, or Fiji, or anywhere in the world, gradually you pluck pieces or elements from those cultures and you put them together. Then you create your own unique English-of-the-future culture, or Japanese-of-the-future culture. People do not simply relive the past." ~

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