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Once the costs of Empire/expansion rise above the value of the spoils gained, the state is caught between the demands of its ever-growing army of dependents for higher tax revenues and the demands of the Plutocracy for greater tax relief.

As individual leaders within the state are inevitably beholden to sponsors in the Plutocracy, such appeals cannot be denied. Given the inevitable rise of state powers and taxation, the leaders are loath to cut either their powers or their power base--the bureaucracies and dependent citizenry that both feed on rising tax revenues.

As a result, the relatively powerless but productive middle class is squeezed for more taxes to spare the Plutocracy and those dependent on state largesse from any pain. This is the inevitable result of state and Plutocracy over-reach.

In an effort to forestall the collapse of its middle class while still increasing revenues, the state inevitably turns to two mechanisms: borrowing vast sums from foreign lenders and debasing the currency to create the illusion of increasing revenues/money supply.

Just as inevitably, the State eventually defaults on its foreign debt, and the currency collapses in value and is replaced with a new "good money" currency. In the decline/collapse phase, the impoverished middle class, a powerless underclass and a recalcitrant Plutocracy do battle for the diminished resources and State powers.

In cases such as the French Revolution, the Plutocracy is overthrown, however briefly, and replaced with a "revolutionary" ascendant class of political plutocrats. In cases such as the American Revolution, the middle class joins with enlightened segments of the Plutocracy to achieve a more balanced state structure. The Plutocracy agrees to these limits not out of selfless noblesse oblige but out of a long-range understanding that political and financial stability serves its own interests.

Increasingly Marginal Returns Lead to Collapse

One of the structural impediments to fashioning a true prosperity from the ashes of the bogus prosperity now imploding is marginal returns and the illusion of incremental change, two key topics I have covered many times on www.oftwominds.com.

Author Jeremy Rifkin describes this mechanism extremely well in his fascinating book The Hydrogen Economy. He illustrates the concept on a global scale by using the Roman Empire as an example.

Rome's early conquests yielded huge returns on "investment": large tracts of fertile cropland, significant treasure, productive populaces, etc. But as time progressed, more and more of the Empires' wealth flowed to the citizenry of Rome, and conquests of distant lands such as Britain yielded less and less return; garrisoning these distant territories began costing more than they produced.

Eventually even holding onto the now-exhausted croplands and restive populations exceeded Rome's dwindling wealth, and the Empire collapsed. There are many ways of accounting for empire-collapse, be it Roman or Mayan, but certainly "marginal returns" describes one element.

Here is how Rifkin applies the concept to U.S. farming practices:

"The pesticides also destroy the remaining soil. The soil contains millions of microscopic bacteria, fungi, algae, and protozoa, as well as worms and anthropods. These organisms maintain the fertility and structure of the soil. Pesticides destroy these organisms and their complex habitats, hastening the process of soil depletion and erosion.

American farms lose more than four billion tons of topsoil annually, much of it because of the high-tech farming practices introduced over the past half century. By the 1970s, the U.S. had lost more than one-third of its agricultural topsoil. The depletion and erosion, in turn, have required the use of ever-increasing amounts of petrochemical fertilizers to maintain agricultural output. Marginal returns have set in. More and more energy inputs are required to produce smaller gains in net energy yield..."

The Seductive Illusion of Incremental Change