Earth, Cosmos, and the Lump of Destiny

In the succession of nesting dolls I have nested the Economic Liberalism doll within the Industrialism doll.  This is because of the surplus energy afforded to other systems by the industrial which depend on the economy for funding.  In the last post I used the legal system in a functioning democracy to illustrate the cost of these systems with an unknown return on investment, regardless of whether or not it is measurable in financial (money) terms.  The succession then, in reverse order, of the middle three can be understood in this way:  Capitalism is an expression of the philosophical precepts which formed the culture of liberalism and turned surplus capital from industrial production into money.  

Industrialism can be seen as having captured (or harvested) energy for human purpose.  It took the embodied energy of coal and turned it into work in the economic sense.  Coal energy could be focused by machines to perform specific tasks and was capable of moving large masses of stuff much more cheaply than human labor can do, and do it on a much larger scale.  It was cheaper because it was more efficient, and efficiency gains could be measured by how many people or animals a machine could replace.  Over the subsequent centuries, the number of working people and animals that were replaced by machines steadily rose, and is the process called "creative destruction" by economists, the advent of which is widely regarded in economics textbooks as the greatest gift from the Hindu god Shiva.

Economic Liberalism and Industrialism were, for the most part, concurrent streams throughout history.  The Industrial doll was the necessary precondition for Economic Liberalism as we know it today because it provided the physical basis in the form of surplus capital to be invested in newer, more specialized jobs for the displaced ruralites as well as for the construction of liberal institutions in the cities.   For those who tout human innovation as the prime mover of this particular march of history* would do well to consider the primacy of industrial production in the development of subsequent economic theory.  Though a historical double helix of feedback between economic theory and industrial production certainly exists, it is not a chicken and egg problem.  Rather, economists put the cart before the horse in their history.  This is at the heart of the economist's delusion and why their forecasts of the future should be regarded as delusional.

The reason, as I've said before, is the concentrated energy that could be used to do physical work that is at the root of economic value.  Without it, economic specialization doesn't occur, large factories don't get built, cars don't get invented, and most of what the modern life has at its disposal does not come into being.  If Britain hadn't been blessed with abundant coal, then it would have run out of trees sometime in the 18th century, and, in fact, it more or less had run out of trees.  Coal was a second option that proved to have superior energetic qualities.  Economists coined the process "substitutability", a mythical process based on the ignorance of natural limits.  A glance at Britain's rise and fall as a coal producing nation really puts an end to the idea that natural resources can be replaced once they are gone.  What can replace coal?  China may provide an answer but, the way things are going there, I remain skeptical. 

And this, at last, takes us to the Earth doll.  Where industrial production meets the Earth and what it means for all the other dolls nested within it is the piece provided by the scientific inquiry begun in the seventies at the latest.  This is where the economy is cast as an energy system that must follow the laws of nature.  Human civilization, however you want to define civilization, is wholly dependent on the Earth.  Escaping the Earth, however desirable that may become, is not a reasonable option due to natural laws that extend well past the confines of the Earth.  We have been fed this techno-cultural delusion for the better part of a century now and it will only serve to add to the bitterness of disappointment when people generally come to terms with the dream's suicidal downside.  The Earth is the only accessible place to live.  I am strongly of the view that we should think of it as such.


*It is certainly warranted to highlight innovation as a main feature of the human skill set.  I have no quarrel there.  Chimpanzee innovation, for example, has been largely a dud and not worth investment capital.  It does not follow that human innovation can overcome all obstacles, which is born out by the historical record.

Below is a good introduction from the seventies to a more sustainable space exploration grounded firmly in Cosmic Law.

The Art of Choosing

So then, is it justifiable to include economic liberalism into the Nesting Dolls of Failure series?  Liberalism, economic or otherwise, is a very old and well-established set of beliefs, values, and assumptions that the western world has developed according to for over two centuries now.  They have been very successful centuries at that, and to think such a longstanding system could for whatever reason not function, collapse, and disappear from history seems like a stretch to most people, to say the least.  But to think about this sort of thing as an either/or proposition precludes a lot of good, ponderous fun and can instead lend itself to a lot of argumentative idiocy.

The phrase "argumentative idiocy" encapsulates very well the political situation in America, and probably others in the West, and serves well as an augury for the kind of collapse scenario I think is likely.  As the embodiment of the liberal experiment, American democracy appears very unsteady at the moment.  Others happen to be watching.  Vladimir Putin, for example, is watching.  Alongside the dysfunction of the institutions of democracy is the inability for the U.S. economy to export enough monetary mojo to the rest of the world to keep the America centered global system running.    One of the most inconvenient aspects of being a global hegemon in the modern world with a liberty and prosperity focus is that others (people or nations) feel they need to benefit from it.  What they, friends, enemies, frenemies, out their in the world see and hear from the mouths of elected, or unelected, officials in the U.S. is very likely both disheartening and heartening, depending on which one you are. 

So the twin abstract branches of liberalism, economic and political, are approaching full failure mode as is evident in the sclerotic behavior of its institutions and is a serious factor in the breakdown of global order.  A big reason for this sclerosis is the failure of the American imagination to think beyond the number two in determining how many positions it is possible to take.  Now, I'm as big a fan of the number two as anyone, but there are many other numbers of equal interest.  American politics is beholden to the number two to its detriment, and there's not much that can be done about it at present.  But thinking beyond "two" is a good and fruitful adventure and that is where this little essay is going.

Liberalism, as I said in the first paragraph, is a set of values, beliefs, and assumptions.  You could add to or tweak that as you like, but the main purpose of repeating that statement involves the number two.  This is what navel gazers call "the one and the many" problem.  You have a set (one) of beliefs, values, and assumptions (many) that formed, evolved, and developed (many) into our current system (one).  This one system has many smaller subsystems that interact with and feed back into the whole system.  Some of these systems are very localized and could operate independently of the larger system, or survive the collapse of the larger system.  Likewise, in the realm of culture, which is the habituated interior system of values, beliefs, and assumptions which people in the culture accord with, these things, concepts, ideas, can endure long after.  At the same time, many things people do in the present won't make sense later if underlying conditions render something untenable or not worthwhile. 

A kind of big example which might illustrate this is the fate of the idea and practice of free market capitalism.  Free market capitalism is both a beacon of policy as well as constitutes the rules of the road for economic behavior.  It is also the foundation for codes of behavior for individuals involving ideas of fairness and the social good imbibed by participants.  Across the whole spectrum of business owners is the pull of the logic of business which is in concert with the idea of free market capitalism but is not identical with it.  The many small scale business relationships that forms the web of the whole don't necessarily scale up to the grand scale of relationships that forms free market capitalism.  A local tire service center operates very differently from Abercrombie and Fitch.  It's nature changes somewhat.

Democracy has its own scale issue.  Democracy as a set of values and as a practice can scale up fairly well and once upon a time American democracy worked pretty well.  And, in a way, it still is working, just that, well, it isn't.  The scale issue with democracy I have in mind is the cost.  It is expensive to have courts of law, to enact inefficient standards that have little to no monetary return value but improve the quality of life, or that address fairness, or some other moral good that people generally want.  Large scale entities are more expensive, you could say, by nature.  They tend to be more efficient but they cost more.  It's not really news that the cost of the American enterprise has really gone of the rails.  In a serious crisis in which it may be urgent to direct resources where they are "needed", or where some powerful entity might appropriate resources and allocate them as that entity sees fit, then some other, weaker entity might have to go without.  That the U.S. federal budget deficit has a very large number with a minus sign before it means that eventually difficult choices (many) will have to be made. 

The U.S., the West, the rest of the world face a crisis of scale.  This is a scale that cannot be maintained and will scale down inexorably.  In the broadest sense, then, the one system breaks and many other, smaller systems emerge.  The choices people make and can make regarding their circumstances will involve values they possess at the time.  A process of weighing what is more, less, or possibly valuable will run in accordance with available resources (many but fewer, or less) and the habits of culture.  Americans, Earthlings, will have different notions about how that happens.  America (one) may decide to blow cash and resources in a long shot to kick Russia out of Ukraine in classic proxy war fashion.  But Americans (many) may wish to see this as a choice with multiple options, each affixed to some harsh realities, yet could at least weigh the costs of trying to save the One Big System at the expense of some better, saner possibility.

A Question, Re-asked.

This is going to be a short blog post.  This is the first time I have ever directly addressed the few readers I have.  Not sure how many of you there are but it's enough to say that you would not fill a small theater.  With that, I have decided that I need to clear some time in order to attend to other projects in music and fiction writing.  I have tried to maintain two posts per week published on Tuesdays and Fridays, but now I am only going to publish on Tuesdays.  The two blog per week rate has become disruptive but once a week is very workable.

With that said, I have thought about what was said in the last post, specifically the question at the end regarding the pile of coal and the subsequent history of economic liberalism.  It is an open question.  Another way to put it might be:  What can be accounted for in terms of the institutions which rose alongside real, legally sanctioned advances in the liberties we now consider normal, whether they are civil, labor, or economic, which developed subsequently and logically from the great benefit of simply having machines do almost all the work for what ultimately became industrial capitalism.  And by work I mean physical work, not a job as, say, a cashier or a waiter.  Or even as a construction worker, because, even if workers wear out their bodies in the performance of the job, that effort is miniscule compared to the work the machines are doing.  To visualize the difference, imagine the amount of work a container ship from China is doing and what the same amount of work done by people swimming that distance with some sort of manufactured good in tow.  The number of people needed runs in the bajillions, and the only good thing to be said about this manner of oceanic trade is that it would be effective at creating full employment.

But think about the year 1776.  In that year came the American Declaration of Independence as well as the publication of "The Wealth of Nations".  Go back one year and you have the formation of the British company Boulton and Watt, by James Watt and his partner, Matthew Boulton, which made them both wealthy men.  In the space of a year you have three major components of economic liberalism in place.  The entire American experiment, as they sometimes call it (whoever "they" are), has occurred since then.  Of course, it's called an experiment for the reason that the founding of the government and the principles supporting it came out of the liberal notions of the time.  The entire American national experience is therefore not separable from liberalism or from the growth phase of capitalism. 

So then, what happens to the freedoms advanced during this time?  What are, in the words of the founders, the natural, inalienable rights in light of what sprang from the notions of natural rights as a part of the liberal philosophy?

To Be Rich and Free

That capitalism has a limited lease on life for biophysical reasons is a reasonable conclusion to draw given that it depends on the steady increase of available resources.  Ignorance of the biophysical realm in economic thought constitutes a fatal conceptual blind spot in the field of economics and in the assumptions of capitalists.  There is no widely understood and accepted theoretical model describing the link between economic activity and biophysical processes that is taught in university economics departments outside the University of Vermont and some select few small sub-departments around the world.  But this has not always been the case, although it has been the case for quite some time.  In the early days, the linkage between the natural world and economic value was more obvious and more felt through day to day experience.  Over the course of capital-industrial growth, as the efficiency benefits of job specialization were fully exploited, economic inquiry became divorced from natural scientific and philosophical consideration sometime in the late 1800's.

The greatest figure in the early formation of capitalism is undoubtedly Adam Smith whose tome "The Wealth of Nations" articulated the link between the largesse of the Motherland to the value of manufactures and markets operated by the citizenry.  Smith didn't invent capitalism any more than he did the manufacturing processes he described in his book.  What he did was observe what was happening in the economy and thereby hit on some brilliant observations.  One of those was the value of efficiency in manufacturing.  Another was the value of the market as a price discovery mechanism.  Together they form two primary tenets of a capitalist system. 

But it was not yet capitalism.  What "The Wealth of Nations" did was produce the argumentative feed stock for the advent of capitalism, which required a change in the laws regarding principles of ownership, deal-making, etc. in order for it to become systemic.  So what Smith did was produce an extremely long work advocating economic liberalism.  Which is to say, he applied liberal thinking to the arena of economic activity already happening in the cultural milieu. 

In Smith's day, land was the origin of wealth.  Rich people owned land, poor people did not.  It was not possible to be rich without owning land.  In Smith's day people worked as cartwrights, wainwrights, wheelwrights, cobblers, millers, weavers, blacksmiths, and so on and on.  But mostly people farmed, and mostly it was somebody else's land that was farmed.  Land also provided lumber, stone, minerals, and grazing for animals.  Most people walked in 18th century England.  Many fewer of them rode on a horse or in a horse drawn cart.  Boats were powered by the wind or by rowers who were powered by potatoes and mutton.  Sounds like a boring world to live in by the standards of today, but that was the way of life as told by the novelists at the time.

And truly it was a hard life according to us, with most of their everyday lives spent expending quite a bit of bodily energy doing the things necessary to keep living.  Now we expend energy lifting beer cans and potato chips to our mouths.  Or we go to the gym to burn off the extra.  But the connection to the land as the ultimate store of value was understood by the people who owned it or worked it.  It was obvious to them because there was no other conclusion to draw.  We moderns don't think that way because it isn't true anymore.  It's possible to be wealthy without owning land.  What's also possible is for most people to live in a comfort and ease that is rivaled only by what the rich experienced in 18th century England.  How is this possible?

A capitalist credits capitalism for this turn of events.  The great good fortune of the modern world was made possible by the tornado of technological innovation that was ignited by the capitalist spirit.  And there is plenty of evidence for that claim, it's just not the whole story.

Adam Smith had a colleague at Glasgow University whose name was James Watt, inventor of the Watt steam engine.   The Watt steam engine was a breakthrough design of previous steam engines and ultimately enabled the production of things on an industrial scale.  It was only then that the process of capital formation could begin.  This is the case because the amount of concentrated energy in the coal could allow for a very long period of innovation on that basic design.  The efficiency gains of the steam engine would grow exponentially for many decades after Watt's first design.  Before long, the steam engine was able to replace all of the jobs mentioned above and many others besides.  The steam engine was not possible with any other fuel source found in England, hence, capitalism likely would not have come into being.

The same isn't necessarily true of economic liberalism.  Markets are "the thing" with economic liberalism and markets are certainly a longstanding feature of human society.  What markets, or the Market, can achieve is certainly worth pondering as they are great information generators and so can be analyzed and interpreted rationally.  But this is rather vague and is something people have always done in some form at least since the Neolithic Era.  In terms of the liberal aspect of Smith's idea, the notion of the market as a manifestation of the free individual could be trumped by the scarcity market, at least for a while.  But there is an ebb and flow of relative freedom throughout history and geography.  The durability of the free market as a cultural meme will be faced with many challenges in the form of economic crises but the idea of freedom in business affairs could certainly re-emerge over time.

The question, in terms of the entire economic liberal project of the past several centuries is:  How much of it was due to the burning of a mound of coal for the purpose of pushing steam through a cylinder? 

Reality as a Harsh Mistress

Now that I'm on record for predicting the death of Neoliberalism I will now declare that it will happen sometime in the future.  If that seems like a cop-out, then so be it.  In my mind, a better question to ask addresses why it will happen.  Another might regard what will it look like.  What are the signs be that would indicate that it is indeed dying?  Does it have to die?  In one way, at least, it's an unremarkable statement to say that it will die given what it is.  Ruling ideologies come and go over the course of history, elites and other authorities get swapped out, assumptions about how things work prove not to work, and after a tumultuous decade or two, things move along.  In post war American history, and the post war history of the core industrial economic powers, a change in a ruling ideology has happened essentially once, more or less peacefully, and most people who are not historians or politically charged people wouldn't automatically point to it as one of history's grand events.

This particular grand event is generally referred to as the Reagan Revolution, or some other such name, and it ushered in the Neoliberal political-economic modus operandi.  Corporations were allowed huge tax loopholes, certain laws, like immigration laws, were unenforced, and private industry was deregulated.  Let the market figure it out, keep the meddling fingers of government out of the pie, and you will have a better outcome for everyone.  This pile of notions was set against the left liberal system which had developed according to the economic thought of John Maynard Keynes.  Politically it has been derided by Neoliberal opponents as "Big Government", "Socialism", the "Nanny State", and other such epithets, and is how most of the electorate understands it.  But peering into the economic heart of it, you can cut down the difference between them to "demand" vs. "supply", in historical order, with the demand side saying "give people money" and the "supply side" countering with "give them cheap goods and services".

The system that was significantly informed by Keynes reigned supreme from World War II to the 1970's, when stagflation and a powerful resurgence of the economic/religious conservatives via the Republican party.  It's main thrust economically was the assertion of power of financial elites to determine policy along the small, non-intrusive government thinking of Milton Friedman, who was the brain behind the Reagan Revolution.  That the continuation of Neoliberalism throughout every administration since Reagan has come to benefit financial elites is essentially what America signed up for when they elected Reagan.  In other words, it was predicted and predictable that money would go to the top, and the results are in on that score.  The slowing growth rate in the American economy has been a concurrent trend alongside the concentration of wealth at the very top, a trend that is also seen globally, and so what the rich in the end have bought themselves is a rich source of resentment and class conflict.  A thing to watch in considering how the future might unfold.

That the growth rate of the U.S. economy since the advent of Neoliberal policy making doesn't mean that the Keynesian system would still work like it did in the 50's and 60's.  All the chart on growth rates shows, and all that needs to be shown, is that the tenets of Neoliberalism don't hold water in the face of this decline.  Lowering the tax rate, and enabling businesses and owners to keep more of the pie, doesn't translate to higher growth rates.  That the belief lives on is only because it is an ideological first principle that is tenaciously believed in, but once first principles are proven unfounded in a big way, the belief in it tends to follow.  Whenever this eventuality emerges, the U.S. will be tempted to return to a Keynesian system.  Probably, it will be compelled to do it, and there likely will be a political battle over it.  However, it wouldn't look much be the Keynes of the 50's and 60's, but would look more like the Keynesian system of scarcity in operation during World War II. 

What Keynes and Neoliberalism share is one; they are both fundamentally capitalist systems, and, two; they both assume growth is natural and will continue forever.  And, to complicate things a little bit, these both share the last assumption with Karl Marx.  Note that I didn't say that they all share innovation but, even though I think that is true, it is a human characteristic to be innovative and not exclusive to these ways of thinking.  It is the character of innovation that I think needs to be examined.  It's useful to point out that some innovations, like the comb, don't advance once an optimal design has been discovered.  Markets haven't bet on new comb designs for thousands of years.  With that said, capitalism has worked through two systems in postwar 20th century America, and we are witnessing the failure of the second.  So why would I, as a blabospheric opinionator, insist that capitalism is at serious risk of ultimate failure?  Wasn't Marx wrong about that?

In a partial answer to this, I'll give a preview of what can be said about the Earth doll.  From a natural resource perspective, the Earth is poorer in resources than it was at any time before the present.  It is, in an absolute physical sense, a different world.  The American system of capitalism has proven very effective at exploiting resources at a faster and more effective clip than rival systems.  This is the very reason the U.S., with its huge endowment of natural resources available at the founding of the nation, was able to eventually attain the status of global superpower.  My old friend the Maximum Power Principle is a part of the Earth doll, and capitalism follows it's dictates better and more competitively than other systems.  The MPP is a part of the flow throughout the nesting doll analysis.  It is an energy flow, if I can be permitted to put it into Yoda-like language, that all Earth-dependent dolls must obey.  The energy flow is currently being reduced by the reduction of available energy in the form of fossil fuels.

I don't view capitalism as an ideology.  Some do.  Capitalism is best approached as a system that emerged from a set of particular historical and energetic conditions.  The historical element was the scientific/natural philosophical aspect of the Enlightenment that could be employed to build machines, as well as to comprehend the nature of the energy used by the machines.  The scientific/natural philosophical mind could also be used to inquire into something called the "market" and into the specialization of labor around the idea of a machine.  The machines could only work with enough concentrated energy that work overcome the inefficiency of the machine, to overcome the costs of building the machine, and generate a financial return great enough to reinvest into increasing the scale of the operation.  These are the necessary conditions for capitalism to function. 

Capitalism does not historically work in the absence of sufficient surplus.  It is why in times of total war, which was World War II for America, capitalism has been suspended.  The wartime economy in America was devised by John Maynard Keynes and it worked quite well compared to previous wartime economies, when belligerent governments would buy off the market and cause hyperinflation.  It was deemed at the time to only be possible with a near total governmental control over wartime output.  There is, after all, only one buyer on the market for a tank, or for a fighter plane.  Soldiers in the field also eat food and so rationing of food and all the basics other was in effect throughout the duration of the war which kept prices stable.  The wartime economy becomes an economy without surplus, as every bit of surplus that can be reasonably squeezed out goes to the war effort. 

The fate of capitalism is closely tied to the fate of Neoliberalism.  The reliance on cheap, easy credit needed to make Neoliberalism work is at the same time heavily reliant on cheap, easy fuel.  For now, the thing to watch is the credit, because it is, and has been, the main driver of the economy since at least 1980.  But credit, as well as energy, has been increasingly more available throughout the 20th century, and, if I were to look for another great money making scheme, it would be in the form of summary history bumper stickers.  The 20th century bumper sticker would read:  Credit got cheaper.  (I think it's best, for public safety reasons, to make bumper stickers succinct.)  Credit is a market measure of the future.  It is not a fail-safe measure, however.  A clear sign that the Neoliberal, and by extension the capitalist, experiment has reached a point of sweaty-palm desperation about the future is the amount of credit pushed into the system by traditionally non-market participants, or at least, participants outside the Neoliberal ideal.  And here I'm talking about Central Banks, and these institutions are the holdouts in the castle keep of Neoliberal capitalism.

And just to further that point a bit by way of quitting this blog post for now, just look at a simple chart and decide for yourself what it is telling us market participants.  It is a chart of the past several years of the S & P 500.

So, is it third time's a charm?  Or is it three strikes and you're out?  What would cause the line pointing upwards to heaven to maintain its assent?  Recall the graph on economic growth rates since the 70's I posted in the last blog.  Why would this continue to go up given that the underlying reason for its valuation keeps declining?  Neoliberals, and libertarian minded folks (more on them later), call for market discipline.  Constantly, and eternally, sounds the call for market discipline from these people.  It makes me think of the recent film release of "50 Shades of Grey".  Like the Earth doll, the capitalism doll is not the same as it was before.  The world is physically, politically, and, to invent a word form, expectationally a different place.  Will the rest of the world be patient with another market failure in the U.S., or in Europe, or Japan, or China?  The result of true market discipline that comports with the ideals of the true capitalist would, I suggest, likely spell the end of that system.   The system could very easily lose both its credit and its credibility all in one market disciplinary blowout.  Now, I haven't seen the movie "50 Shades of Grey", but from what I've heard about it, it sounds like some harsh discipline.  People who know me might be relieved to hear me say "that's not my thing", and I'm probably in line with most people that way.  The same probably holds true for market discipline.

Matryoshka Meditation and the Death of Neoliberalism

In a recent blog by John Michael Greer I learned about the death of the author of one of the seminal books on the global ecological crisis that is now in its opening chapters.  The book is "Overshoot" by William Catton and is the most concise book I've ever read about the ecological perspective on human civilization.  Greer's eulogy has in it a concise summary of the ecological argument against the indefinite continuation of technological progress and human ecological expansion.  In a bit of bitter irony, "Overshoot" was published in 1980, the year ecology-informed environmentalism died as a political concern. 

In a way, it's completely understandable that Americans generally would veer away from a perspective formed during the long bummer we now call the 1970's.  Back then, the intellectual authority of the scientist was greater than it is today, and much of the erosion of this authority has to do with the battle between science and commerce, which science plainly lost.  And, no, I don't attribute the collapse of scientific reasoning in America purely to the counter-revolution of religious belief.  It was rather the alliance of religious and commercial political forces, combined in the Republican party, which shared a common cause against scientific reasoning, or any other kind of reasoning.  Paradoxically, the attack on science was born from a very reasonable conclusion, which goes something like this:  If we do as the scientists say, then our bottom line is fucked.  As it turns out, that was an astute observation.

Industrial commercial interests don't require much convincing to ignore natural law when it runs counter to its needs.  As it heedlessly obeys the Maximum Power Principle, commerce can deny its existence, or, at the very least, its implications.  "Nature will take care of itself" I've heard it said from libertarian minded economic agents.  No argument there.  It surely will take care of itself.  We just won't like the manner in which it does.  As Greer, and Catton, point out, the laws that determine the success of the industrial economy are the same that will be responsible for its undoing.  In other words, Nature will take care of itself.  We can't pick and choose which laws to follow and which laws to break.  Or which laws to make and then obey, as is the case with the global banking system. 

For most people, the gloomy scientific inquiry of the 1970's has been disproved or forgotten as their predictions have not borne out the way they said they would.  The world has added a few more billion people since then, the economy has about doubled since 1970, the march of technological progress goes on that make life better, the price of commodities has remained stable...oh wait, scratch that last one.  The political victory of Neoliberalism capitalized on the failure of the gloomy predictions to show up in time.  The reason this is so has a lot to do with the subject of time.  More specifically, it has to do with different scales of time that are observable.

To better understand this, I will meditate on my brand new Matryoshka dolls.  These represent a historical time scale.  Each doll is a manifest historical occurrence, with the latter ones nested in the previous.  Each one is also acting simultaneously in the present in a dynamic way.  Beyond the scale of the Earth doll, nothing matters.  The Neoliberal doll is the most recent and therefore has the shortest time scale.  Because of how Neoliberalism is conceptualized (markets, free trade, information, etc.), it relies on shorter time scales for its justification as well as operates day to day, week to week, and by and large the historical knowledge base it draws from only dates back to the end of WWII. 

With all this in mind, the gloomy prognostications of 1970's scientists worked on a different time scale than the market.  The immediacy of the oil shocks of the 70's gave the disaster forecasts a corresponding perceived immediacy, but the true time scale they had in mind was over decades or a century.  Think about global warming, which is also a product of the 70's, to get an idea of what time scale scientists were thinking on.  In terms of resource depletion and industrial production, the world was certainly able to keep going the way it was going.  In fact, that's exactly what happened.  But doing so physically changed the Earth so that it is not the same Earth now as it was in the 1970's, or the 1920's, and so on.  The United States was once the largest producer of almost any mineral you can think of.  It was the world's greatest producer of oil, and its largest exporter.  The lesson of resource depletion was almost learned in the 70's, after oil production reached its all time peak.  You need look no further than the production peak for the origin of the economic trouble seen in the 1970's.  This event aligned with the interest of scientists to research the relationship between nature and the economy.

But the world still had lots of resources, and still does now, and the Neoliberal political force, funded by the capitalist class, could puncture the long term view of scientific research.  But it did not invalidate that research, as events have shown.  Neoliberalism won because people are by nature short term thinkers.  They were by and large willing to push back against a gloomy environmentalism after the big oil fields in Alaska and the North Sea flooded the market and dropped the price of oil.  The computer revolution was at the same time gaining huge efficiency benefits in the form of globalized markets in labor and finance.  This had the effect of expanding what ecologists call the carrying capacity of the energy system we know as the economy.  But as is evident, this has run headlong into another law, and there is no better indicator of it than the one represented in the graph below:

In my mind, this is a graph what the Law of Diminishing Returns looks like slamming against the Neoliberal experiment.  Overlay a chart showing the 3.5x increase in debt accumulated since 1980 and you can see the death of Neoliberalism quite clearly.  It is only a matter of time.  For all the efforts of information technology and of the expansion of the carrying capacity of the global economy, the U.S. and the rest of the world are struggling mightily.  There are no new frontiers to explore, no new exploitable continents brimming with resources being formed or discovered.   The ones we live on are just that much less able to support our current lifestyles.  What of that next doll, Our Lady Capitalism?

The Nesting Dolls of Failure

Having often wondered about the utility of the Russian Matryoshka, or nesting, dolls, not that they need a purpose, I did hit upon an educational or referential utility they might serve as they otherwise sit on a desk or a shelf collecting dust.  For example, if I ever have a reason to recall the order of Soviet Premiers, or, in a similar vein, the succession of Rush Limbaugh's ex-wives, I can maintain a record, and satisfy a need for visual pleasure, in the form of nesting dolls.  But nesting dolls can also be useful to ignite the mental faculties by representing concepts in which one is nested conceptually, and physically, inside a larger one.  For example, the biological classification system from species to kingdom with the species the smallest and innermost doll to kingdom as the largest and outermost doll could make a set.  Maybe somebody has already capitalized on this idea and made no money at it, which would be consistent with every other idea I've ever had. 

But the idea sure to capture the imagination of consumers of nesting dolls everywhere, as well as net me a large amount of cash, is the Nesting Dolls of Failure.  I don't have a detailed physical description of the individual dolls yet, but the conceptual frame I think is ready to go.  Imagine, though, that these dolls have hit the market and you have ordered a set from Amazon.  Once you've thanked the UPS delivery human you obey the greedy impulse to promptly tear open the box.  Now that you've dispersed the packaging randomly across the floor, you behold a series of the most beautiful objects you have yet beheld.  Coupled with this rapturously aesthetic moment is a mild, nagging guilt that you paid too little for them.  You determine to get on with life.

After setting them up neatly in a row, from left to right, the smallest doll to the largest you flip the on switch to your groovy lamp, light some sandalwood incense, and summon the ponderous self. 

So, the dolls.  The smallest doll on the left is called "Neoliberalism".  The second in order is called "Capitalism".  The third is "Economic Liberalism".  The fourth is "Industrialization", and the last?  The last and largest doll is called "Earth", which, you note happily, is both a concept and a physical place.  The contemplative blood is already flowing.

Fast on the heels of this insight is another.  There is a two-wayness in the conceptual flow, you realize, encapsulating both time and space.  From left to right the temporal flow goes backwards in history, and each successive concept is dependent on the larger one which preceded it.  "Ah yes," you think, "Neoliberalism is just the current and dominant form of capitalism!  Others can exist and work but they have been squashed by the international banking system."  But what of Capitalism?  It, too, is a system, one which emerged from the philosophical ruminations and scientific observations of Enlightenment thinkers who would often hang together in coffee shops. This formed the bedrock of Economic Liberalism that developed later, once Industrialization was underway. 

"That leaves the Earth," you think", "the place where people live.  It comes before all the others and, heck, without it I wouldn't need to think at all.  It's the biggest concept of all, really, if you think about it."  Turning it around, starting with the Earth as a three dimensional thing housing all the other dolls, comes the spatial insight.  That all the other dolls fit inside of the Earth doll means all the others are dependent on the Earth doll.  "Hmm," you wonder, "how does the Earth fail?"  You think "nah, the Earth can't fail, unless it's struck by an enormous meteor, or attacked by the Death Star.  And I can't do anything about either eventuality, anyway."

You suddenly feel ripped off.  You feel a disruption in the contemplative flow.  A weakness in the mind tool has been discovered and the grooviness of it has been dispelled.  You are incensed and vow to yourself to tell all your friends not to buy a set of  Nesting Dolls of Failure.  Resolving to end this experiment, you go to put out the Sandalwood and google the latest on Bruce Jenner when a further insight hits:  It is the failure of the Earth to support the subsequent physical outcomes represented by the nesting dolls that is the proper way to look at the entire series of dolls.    "What of all the rest?"  you say out loud.  "The other dolls are causing the failure!  Dammit!"

Disappointment in the dolls has morphed into anger at them, but it quickly occurs to you how childish that is.  You sit down and think further.  There is an order to the failure, that the failure which begins with Neoliberalism moves into the future, a century perhaps, through the others.  Some of it will be conceptual failure, and some of it will be physical failure.  Some of it will be concurrent.  Some of it won't be complete failure.  A fractal like motion picture* passes before the mind's eye, which you attribute to the sandalwood, and a moment of clarity is at hand.  You realize that the Neoliberal doll is the most expensive to maintain and the Earth, the largest doll, and in a delicious Zen-like paradox, is the cheapest.  Wow!  Thus blown away you then begin to think about how much that is represented by these dolls is worth keeping and what cannot be kept.

Then you realize how paltry the sum you paid for these dolls was and resolve, in the new economic spirit shown by the rather gloomy band Radiohead, who only charged for their 2007 release "In Rainbows what people thought it was worth to them, to send even more money to the inventor of the Nesting Dolls of Failure.  Just cash.  Nothing traceable.  And by choosing to do this you have glimpsed a realm of possibilities about some radically different way people can live on the planet, even if it is somewhat idealistic.

And to emphasize the point, here is a song from "In Rainbows" that, with the help of some more sandalwood, might even be relevant to what I'm talking about.

*  This isn't crazy talk.  If you think about what is happening in Europe with Greece as a fractal expression of the larger global economy then broader patterns emerge.  Weaker economic agents are being squeezed by larger, richer entities protecting themselves from a broader decline in overall wealth.  Likewise, Europe as a weaker entity to the U.S. is losing out to American relative strength.  Inside America, the poor getting squeezed by the same forces is an internal fractal expression of the global tendency towards the same in virtually every country.  In other words, the process can be seen on large and small scales, which is what a fractal shows.

A Radical Notion

I'll tell you one thing, the stock, bond, and oil markets have been through some major swings lately.  The stock market continues to have moves of more than 1% almost every day.  The 10 year treasury bond yield in the U.S. has risen almost 7% today.  And oil is flailing about like a schizophrenic octopus.  Who feels confident in this market?  Who among us can state clearly what is happening?  The market is one of those devises supposed to give guidance but I think in the era of central bank debt money infusion the market does not reflect what it's built to reflect, and that is the price of things.  What can be confidently said about what the market is accurately reflecting is widespread uncertainty, a condition markets hate more than anything else, except perhaps absolute decline in available energy, but this is not on the radar screen for them. 

It doesn't take much digging to appreciate the scope of the uncertainty markets are dealing with.  Pick a country and it probably has something to do with it.  Nepal?  I'll give you that it doesn't factor much in global market madness, but there aren't many n the list.  Look at the major economies.  The bright shining star of the global economy is the U.S. for the reason that it still is growing, at least nominally.  For this reason there is a powerful belief in the U.S. that what the U.S. does is working.  So, yea America!  All that needs to be done now is to have every other nation in the world control the world's reserve currency.  Problem solved.  Call that a sarcasm interlude.  But the world ex the U.S. is doing quite badly.  Japan is serving as the pathfinder for China in the quest for intractable debt deflation.  Europe is a political economic mess with its strongest economy, Germany, falling into the deflationary trap.  Bond yields for the German Bund is now lower than Japan's rate, which has had the lowest rates in the industrial world since 1990 until now.  How long the U.S. can stay positive in terms of growth given that the entire rest of the world is falling down seems to me a good question to ask.

All the problems in the economic world can be reduced to a single problem, and that problem is growth.  Growth sufficient to repay the credit that is taken to generate growth, to be more specific.  There has to be a project worthy of investment that produces a big return to justify the credit taken on by the investor.  What has happened is that no project has been able to garner a return big enough to sustain the credit which has been extended.  For a little historical perspective, if you go all the way back to early 2014, the idea was that several growth engines were revving up in the form of emerging markets.  The main ones were called, or still are called, the BRIC countries:  Brazil, Russia, India, and China.  The BRIC's, emerging from the darkness of ignorance to the luminescence of liberalized markets, had begun the process of large scale manufacturing and raising standards of living through consumption that would justify all the issuance of credit that was to grow the global economic pie.  Which of these countries is not in trouble now?  I haven't heard anything specific about India so maybe they are doing all right.

China here is of primary importance and I'll have to do a blog post or three or four to talk about China.  But that this state of affairs the world has found itself in has emerged leads one to ask two questions.  In order of importance:  Why has this happened and what do we do about it?  For the most part the question that will be asked is "What do we do now?"  What has been the case is that central banks have ensured the survival of the banks by insuring the banks.  I firmly believe that if this had not happened the world would be hundreds of trillions of dollars poorer right now.  Had governments not gotten involved in bank saving and economy stimulating everybody would be worse off, including the obscenely rich.  Given the nature of political economy, however, the chance of governments not getting involved was exactly zero.  President George W. Bush and his team proved that ideology calls in sick when markets suffer cardiac arrest.  This should send a message to anyone alive that the Free Market of Neoliberalism exists in a narrow band of society determined by fairly set conditions and is, at the end of the day, not truly separate from the nation-state.  Some other way of thinking about it has to be formed and not in a way so favorable to the super upper class.

Of the three questions above, the one that will get most asked is "What do we do now?"  This is a good definition of what it means "to scramble".  Scrambling around for quick fixes and dealing with immediate concerns characterizes a lot of human history, at least the exciting parts.  What is happening as the clock ticks between the EU, the IMF, and French and German banks on one side, and little Greece with its new government on the other, is a lot like scrambling.  If it's like a card game with a lot of money in the middle of the table, neither side can say what cards they themselves truly hold.  I suspect that the Neoliberal side is operating under the moral conviction that Greece needs some market discipline.  Greece is betting that the EU is sufficiently afraid that a Greek exit from the Eurozone would be a disaster.  Underlying these assumptions is the fact that Greece is suffering both a financial and humanitarian emergency due to the EU insistence on market discipline.  The EU is afraid of how any debt forgiveness for Greece could then be demanded by anyone else who has a similar debt crisis.  That list is potentially very long and includes the largest economies in the EU outside of Germany.

In other words, the stakes are huge.  My hope is for debt forgiveness.  In fact, I hope that debt forgiveness becomes a general global trend.  The world is in a situation with no good outcome but a managed decline seems better than an unmanaged one.  The reordering of the banking system according to principles based on human need, in the face of climate disruption, and because  of the shrinking scale of the human economy would be more sanely implemented than they would through a crisis/scramble model.  What's likely to happen is that more and more economic and banking functions will be performed by government so that people can be employed and money can continue to flow.  Depending on what information lives inside the skulls of people, this could be a positive eventuality.  Dare I say that then we could plan for a different world economy based on local production and smaller scale enterprises?  The Keepers of the One True Religion don't like that kind of talk.

Homo Politico-Economicus

So, I had to skip Friday's post to get my drumming body in working condition, which I mostly achieved.  Call it a musical interlude.  In the meantime, of course, a lot has happened in the world of human affairs all leading into the deep, dark primeval forest of "who knows?".  The main driver of events is finance as the global economy struggles to pay for itself, with conflicts arising over who gets paid and who does the paying.  Being a typical American, the word which signifies the social organization called "Greece" immediately pops into my skull.  Actually, I can only guess at what is popping into the skull of a typical American, but what is happening in Greece, I'd argue, is even more important than determining what was the best advertisement aired during the Super Bowl. 

It's been about a week since the election of Syriza and now the scrambling, bluffing, game theory strategies, and finding politically acceptable ways to call a debt default something else (or not) is the main subject occupying the skulls of European leaders.  The stakes are high, to use a little Vegas parlance, but this cute way of putting it hardly encompasses the inherent risk of miscalculation by all parties involved.  The declaration by the German government that the Euro as a currency and the Eurozone as an ongoing concern could survive a Greek default and exit from the currency is about to be tested.  Whether the EU or the currency can survive or not looks like an open question and I expect Germany won't allow the thesis to be tested given all the uncertainty in the financial and political spheres.

And these two spheres are not easily teased apart.  They are dimensions of human activity tightly bound together and success in one dimension is heavily dependent on the other.  This is what makes ideology such an interesting subject able to both clarify and confuse.  In the last post I talked about the radical ideologies of the Greek election in light of the primary ideological forces which constituted main features of the 20th century.  Alas, we are not so different today and, in the broader field of basic human activity, the 21st century isn't different at all from the past.  If this sounds defeatist or gloomy, well, it's simply a perspective, and the reason to take a perspective is to reveal something truth-like about the situation.  Likewise, if it's true that history is a nightmare from which we are trying to awaken, then it's a good idea to have a notion about what it means to be awake.

What's happening in Greece represents a failure of and a challenge to the System.  The EU is a subsystem of the wider global System which has an ideology backing it called Neoliberalism.  A better name might be Paleoliberalism because it is a sort of revival of earlier, say, 19th century, liberalism based on the political economic thinking of people such as Milton Friedman and Friedrich Hayek.  Neoliberalism has been the dominant ideology across the globe since Thatcher and Reagan made it so.  The political aspect of Neoliberalism is well known:  Small government, free trade, maximizing private sector participation in the economy as opposed to government planning, etc.  For reasons I've already discussed, this system is coming to an end, collapsing due to the impossibility of satisfying its insatiable hunger for debt.  It could be said that Europe is socialist, and that is true to a point, but at the heart of it is capitalist production and that is what pays for all of it.  European banking is fully a part of global finance and operates according to the dictates of the system, which is defined by the Neoliberal ideology. 

In the wake of Neoliberalism's failure comes the old timey radicalism of Marxism and Nationalism.  Both of these ideologies have revolutionary implications and each seeks to impose some other regime.  An interesting note on the Greek election is that, in order to gain a parliamentary majority, Syriza had to form a government with the right wing Independent Greeks party, which is nationalist.  Greek nationalists don't have all their ducks in a row the way the left seems to and so couldn't form a single party alliance in the way Syriza did, but the revelation here is that, even though these two parties don't agree on anything else, they can unify in order to end the Neoliberal-informed policy of economic austerity that has been imposed on Greece by the EU.  This is an important consideration, especially for the elite who, it appears, are starting to sweat, because it means that a full-on challenge to the power of global finance can come from both left and right in concert regardless of what other differences they might have.  So how the Syriza government performs and how the Greek electorate perceives events will be watched closely.

How events unfold will revolve around the risks around whether Greece stays in the Eurozone or is ejected from it.  If Greece were an isolated incident or that there were somehow no other broader context to consider, then it would be a relatively simple matter.  As it is, though, the Greek situation is not just for Greeks.  What is happening is a culmination of powerful historical currents that are pointing to a fundamental reordering of human life.  In the economic realm you have a global deflationary pressure that is undermining attempts by governments and their policy makers to restart economic growth, making an all out debt deflationary spiral likelier with each passing day.  This is especially true in the EU, but China and Japan are at significant risk as well.  In geopolitics, Russia is waiting in the wings having extended it's good will and offering an alternative trading block to the Greeks should Greece leave the EU.  Unifying the theme is generalized discontent over the economic inequality as the logical end to Neoliberal ideology that the world over is blaming on the system that Neoliberalism has produced.  If, or when, that system fails to produce, then people in all parts of the Eurozone, and then the world, will be looking for alternatives.  This is what Greece represents.

So what began with the credit blowout and market crash in 2008 in New York City and shook the global financial system is now coming back to the center (New York) from the periphery (Greece) in a deflationary high tide that is flowing through Berlin.  The human adaptive strategies of cooperation and conflict will be employed.  What happens in the EU and with Greece will, to put it mildly, set the tone for what happens after that in terms of the overall contractionary environment.  The German electorate will have a large role to play in this.  How broadly Germany defines its own national interests will have a big impact on the future.  I frame it this way:  If Germany decides to give up some of its wealth through debt forgiveness to Greece for the sake of its broader political self-interest, then it is a zero sum game.  If Germany does not do this and lets Greece leave the Eurozone, then the result is most likely a negative sum game.  In other words, everybody looses, and the world officially enters a new phase.

In periods of crisis the trust horizon diminishes.  Cooperation takes a back seat to conflict when people don't know who they can trust.  There are good reasons for foreign governments not to trust Greece.  But the issue is much larger.  How nations behave towards each other as the global economic pie shrinks will flavor how well or poorly humanity scales down the wealth mountain that can no longer be financially justified in the face of resource constraints.  The EU, as the pinnacle of international cooperation in the good times, will be a lab test for how the ideals of a global society could possibly be maintained.  And that will depend on what goes on within their skulls.  Maybe some exciting, new, and realistic ideology could replace the three main contenders based on the Ecologist Party, the lone Green Party in the Syriza coalition.  With that I'll raise a glass to hope.

The Greek Experience

This past week or so has seen some telling events around the globe that are worth watching in light of the Grand Thesis of this blog.  Almost simultaneously was the death of King Abdullah in Saudi Arabia and the deposition of Yemeni President Sadi by a Shiite faction named for their leader, Abdulmalik Houthi.  The third event is the election of Alexis Tsipras of the Syriza party as Prime Minister of Greece, to the utter dread of European financial elites.  What happens next is anybody's guess, it's why we play the games after all, but my interest lies in not only what it portends but what it says about how contemporary politics shake out ideologically in a society under duress.

That Greece is under duress is certainly beyond dispute.  With a 25% unemployment rate, with nearly 60% of Greeks aged 18-24 unemployed, AND with half of all Greeks living below the poverty line, "under duress" seems like a nice way to put it.  At issue now is the Greek public debt and the austerity program imposed on it by creditors that has not enabled Greece to do anything but suffer under a form of national debt peonage.  Greek membership with the EU and whether or not it will or should be continued is the major question Greek political parties now arrange all their positions around, and 36% of them went with the radical left coalition of parties that make up SYRIZA. 

Greece has, like virtually every parliamentary system, a pretty healthy list of political parties.  The two dominant parties since World War II have been the New Democracy center-right party and Pasok on the center-left.  Syriza, as a coalition of Marxists, Leninists, Trotskyites, Greens, and Socialists, won at the expense of Pasok, which only took about 3%.  The results of the election are in the chart below and show an interesting admixture of new and old parties with both left and right radicals gaining against the old regime of Pasok and New Democracy.  The emboldened radicals can be generally classified into Marxist, or Marxian, and Nationalist/Patriotic camps with a decidedly anti-Neoliberal platform as represented by New Democracy.  Golden Dawn, the only neo-Nazi party on the ballet, won almost 6% despite the inconvenience of having its candidate in prison for business fraud (most certainly a trumped up charge).  This last is instructive of how blinkered societies under duress can get when it comes to voting.

A lot of characters of the alphabet have been used lately on what the implications of this election could be, and I personally don't have a strong view on the relative strength of all the possibilities, but ripples in the fabric of the West will be felt.  The size of the ripples and how strong the ripple effect is depends on at least two main considerations.  One is miscalculation of the impacts of a Greek exit from the Euro zone, or from it's currency, and how financial markets deal with that.  The other is the direct financial impacts of a credit write down by western financiers of Greek debt, if that were to occur, and how many other debt addled states like Italy or Spain would expect the same sort of arrangement if it does occur.  One thing is clear, though, in considering all of this is that Greece can in no way pay the debt it owes to Western banks.  Something will give here and it matters a lot who or what gives. 

But I would consider this election to be a preview of what is to come.  The broad parameters of the left/right split in Greece is not terribly different from other nations, in Europe especially but even in the U.S., in terms of ideological perspectives that are employed.  Greece is, of course, at the breaking point, but other nations aren't so far behind them.  In the event of a deep recession, or even the slow bleeding of the current conditions of near zero growth and falling prices, eventually other nations will be forced to default or to negotiate a substantial debt forgiveness.  Whatever the case, somebody pays, and it would be the lenders in the form of the world's largest banks in conjunction with the governments and central banks of the rich economies (read Germany, US, UK, etc.). 

This very readily fits into the broadly defined left wing narrative based on Marxian/liberal analysis.  The notion of class struggle as described by Marx can be easily overlaid on the current situation that the Greek case exemplifies.  In other words, it is believable for a desperate polity.  In a Marxian political platform there is a whole lot of hope that can be applied, as is the case with the promise(s) of Tsipras in Greece, of a new era of fairness and equitable distribution of wealth that can form the basis of a just and peaceful society.  He has no stated intention or desire to leave the European Union,  He also has not stated anything like I have said in this blog about economic growth for industrial capitalism having come to an end.  Nor does he say anything about resource depletion and a need to reduce consumption.  So Greece is holding on to hope that a return to the benefits of EU membership can be had again at some point once the debt overhang problem is resolved.  But the EU itself is one strained beast and desperate in its own way on a much bigger scale.

This is where nationalism enters the picture, and the logic of it fits a likely narrative of the future when the scale of human systems shrinks.  Nationalism is exclusionary by definition and so is willing to shut out the don't haves.  It's parameters are bounded by socio-cultural markers of relatedness.  That it has an ugly past, what with Fascism and Nazism, is well known, but it actually sprang from the Romanticism of the 19th century and informed much of the artistic expressions in music, painting, and literature of the time.  The story of how a self absorbed, non-other-people-hating 19th century composer crafting delightful melodies based on folk melodies of his home country turned into the most violent and atrocity filled conflict in human history is a very long one, but it happened.  As a consequence, nationalism has been a dirty word since the end of World War II.  And it's no wonder that it has, but really nationalism has been just a manifestation of an innate human tendency to positively identify with a group of people you didn't choose to be a member of, and the survival of which your own is heavily dependent on.

So the political lines of the present and extending into the future I see as a battle between the class struggle revolutionary and universalist model of Marxism and the circle the wagons fuck the other guy tendencies of some new form of Nationalism.  The ability of a democracy to encompass these tendencies will be severely tested once the growth model has proven not to work.  The Greek experience is a test run of how this could conceivably unfold.  People around the world are looking for different ways of doing things and they tend to use more well worn paths in choosing radical alternatives.  There are certainly other possible ways, and in this I am decidedly more on the left, but presenting dubious green-growth models of a high tech future does not feel correct.  And nobody, not even or especially the Greeks, want to contemplate having something less than what they already have based on a notion that they have too much.  Therein lies the rub.

The Stravinsky Principle

As 2015 chugs along with all of its promise and peril, I think many conceptions of how this thing called civilization actually works will be under scrutiny.  The most important civilization for everyone involved is the American-led Western civilization as it winds down as a going concern.  There are many layers to consider even in just describing the functioning parts of the current civilization and it will take some time for the culture to find the means to explain why things are happening the way they are.  In this circumstance, like many others in life, creativity is an available mental tool that can and will be employed.

The question of how that creativity is employed is a good one to ask.  Quality matters here and I suspect that a number of principles currently relied upon by the culture will be either outright thrown away or seriously (hopefully) reconsidered.  What replaces these abandoned notions will spring from the understanding and interpretation of events applied to our individual and collective actions.  Ideally, actions have thoughts attached to them, and it is the thoughts I want to address and, more specifically, how those thoughts are formed.

So, if a creative, imaginative response to the ongoing, staged crises of civilization is to successfully minimize and contain the likely stupidities people will generally engage in, like, say...violence, it will have to begin with the individual mind.  A good individual mind to start with on the subject, truly, of creativity is that of Igor Stravinsky, if for no other reason than I know a little something about it.  In "Poetics of Music", a series of lectures he gave at Harvard University in 1939-40, he describes his observations made on the workings of his individual creative imagination.  He is, of course, the only witness to this process.  What makes it interesting is that he is a good observer, something he believes all good artists are and need to be.

In this sense, what's good for the artist is good for everybody.  A good artist renders a faithful version of reality.  Faithful to the subjective view of reality, that is, but still has to be set against real reality, however you want to look at that.  But observation as a necessary component to being a good artist also means depth of observation and not contenting oneself with the frivolous or fantastical.  Of course, that, too, is a subjective judgement, and rather than embark on some philosophical journey into the heart of the reality question, Stravinsky's observations of the workings of his own mind I think has to be considered truthfully rendered.  So what am I talking about?

It is the blank page problem for the writer, the block of stone problem for the sculptor, or any other condition of absolute freedom that, in truth according to Stravinsky, is paralyzing for an artist.  At least, that is Stravinsky's understanding.  He is pointing to a common misconception, even in his day, about what an artist truly does and faces in the use of the creative imagination.  For those who are not artists, the misconception lies in the sense that artists do whatever they want to do in absolute freedom.  This is the paralyzing condition and not the condition which allows for, in Stravinsky's case, a ballet to be invented.  This happens through imposing limits, or recognizing the limits of the form.  In music it's useful to limit yourself to a scale or a key and discover that within this constraint at least one can begin to create and discover the inexhaustible possibilities even a simple seven note scale offers.

But to create means to impose, or to realize, a progressive series of limitations on the work and ultimately is what distinguishes the work from incoherence or chaos.  In contemporary America, I suggest there's something to learn from this.  We here have an incoherent and overly democratized ideal of what creativity means and how it functions in the mind and in the culture.  In other words, creativity is a word largely functioning without a clear meaning, having been degraded by marketing campaigns based on "innovation" and "creative solutions made easy" to cover everything from office supplies to child rearing to portfolio management.  Underlying this is a message of limitless potential for the individual and society.  Anything is possible, and don't even talk about constraints.  Against this is a backdrop of national misdirection and incoherence regarding our own state of affairs and even who we are as a people. 

The misconception of the popular notion of creativity is echoed in the general use of the word freedom.  There are two primary sources for the misconception of what we think of as freedom in our public understanding.  The first I think emerged from the intellectual leftovers from the Blank Slate conception of the human mind coming out of mainly the political left and embodied in the now largely defunct nature/nurture argument. The left took the nurture side which I summarize, not too simplistically, as meaning a child's mind can be, given the proper environment, infinitely elastic and that each child has an equal opportunity to be whatever he or she determines if raised accordingly.  Given enough Baby Mozart, well, each child can be a Mozart?  How about a Stravinsky?

This may sound like a gross oversimplification, but I am stating it's ultimate implication.  In practice, of course, it never works that way and most people see this.  But why?  In terms of a broad based public discourse charged with ideological implications, it is what I call, as of about an hour ago, an eroded binary*.  I think this is a good name and what I mean by it is that, in the course of defending one position or the other, the limitations of each view are exposed.  Not to mention that new research has defeated the primacy of one over the other.  Neither is wrong, but neither is correct.  The memo, however, takes some time to be delivered to everybody.  The problem is, the true mechanism girding all the feedback loops between the human brain and the environment it lives in is a terribly complex research activity and many more billions of dollars would need to be spent to figure it all out.  Maybe Lamar Smith (R-Tx.) has a burning passion to get to the bottom of it.

Stravinsky's description of the workings of his own brain jives more with the latest brain research than the Blank Slate.  He does not consider himself free to do what he does, but instead is fortunate to be free to be what he is.  It's out of compulsion that he composes, and many, many artists (artisans?) say the same thing.  For that matter, so do so many others who sit at the top of their fields, and even some who don't.  From this angle, we make allowances in our lives, make decisions according to what we are in the first place driven by an internal force we don't really control.  What is that force?  Stravinsky called it a compulsion.  We don't all feel compulsion probably in the same way he did, but we all have our own respective interests in something.

Another majorly confused notion of freedom is emitted from the imaginary and rather adolescent view of political freedom coming from both the libertarian and the constitutional fundamentalist perspective of the right wing.  This is what's called negative freedom, or freedom from something, i.e. government.  Where ever adherents to this way of thinking believe humans are or should be going, they posit an ahistoric, idealized place ruled almost purely by market principles and laws around private property.  That they have no sensible answer to why government in any form is a feature pervasive throughout human history is enough to cast it as a medium brow attempt at a comprehensive philosophy.  What they don't include in their world actually accounts for much of what constitutes the world.

These two can ironically be traced to the same person in it's origin, John Locke.  Locke devised the Blank Slate in his epistemology, or study on the way the mind learns.  This seems to be the state of paralysis Stravinsky described, eh?  On a blank slate slate can be written anything.  Who does the writing in this instance?   The private property fetish of the right wing springs from Locke, as well, whose philosophy hugely informed the founding fathers.  Private property is the basis of individual freedom, says Locke.  All well and good, but the fight between Marx and Locke has the same eroded binary effect on the national conversation that the Blank Slate has.

In order for there to be a rejuvenated cultural creativity these arguments have to be superseded.  How that happens who knows but I would start with the possible informed by a realistic notion of limitations on what is possible.  A lot can be done with that in mind, even if it's not fully understood.  That's a part of the creative process, after all, trying to find the possible.  What is sorely needed in the U.S., and what I think should inform our actions is the re-establishment of artisan traditions.  What is a hobby now could well become the job of the future.  People's hobbies and amateur efforts reveal something in line with who they really are in the Stravinsky sense.  The path to happiness is paved with those stones.  In the face of declining world trade, and the high cost of globalization can no longer be covered, economies will have no other option than to re-localize.  This means smaller scale production to replace all the stuff, crap, and junk we buy at retail stores or on the internet.  Now is the time, while there still is time, and, well, there still is time, to be creative in this regard.

Because, as the Minutemen understood so well, these things do take time.  So I will leave you with d. boon's authoritative tenor on the subject.

*  The bathroom shower is a great place to think.

And Then This Happens.

Well, we're only 16 days into 2015 and it's already proving to be a humdinger.  Market volatility is pretty intense with daily market moves exceeding 1% almost every day, all but one it looks.  Oil keeps dropping, rising, dropping in big swings, and now there is a flight to safety into treasuries because people are afraid.  When I talked about Godzilla moments to look for in 2015, I guess I forgot to mention Switzerland.  It seems everybody else forgot to mention Switzerland as well, judging from headlines, for the Swiss National Bank just pulled a fast one on the Market, providing investors with a nice little wtf? moment.

But it looks like the SNB move is not quite a big enough stick to poke Godzilla to wakefulness.  He may be scratching his side, or rubbing his nose, or somehow reacting to whatever part of his body was poked, but he is not awake.  Regardless of his status, what the SNB did is instructive, and it would bode us well to glean some appropriate lessons from this move.

First of all, the move.  For four years the SNB has peg the Swiss franc to the value of the Euro.  Currency pegs are commonly used for the purpose of stabilizing exchange rates to smooth out import and export markets.  The peg is achieved through bond purchases so that the pegger can regulate the flow of money into and out of the country.  For example, China has pegged the yuan to the dollar for only Godzilla knows how long.  The Swiss pegged the franc to the euro to keep the value of the franc from rising so that its exports (watches, pocket knives, and chocolate) would be more competitive.  But there's more to it.  In Switzerland, Godzilla has a different name, and that name is Deflation.  The Swiss held the value artificially low compared to the euro so that prices in francs would stay high, thereby keeping asset values, like a house or stock portfolio, high.  Now the prices of those assets are plummeting throughout Swiss markets as the value of the franc rises.

The U.S. Federal Reserve did essentially the same thing, only less so.  Even Japan didn't out-QE the Swiss.  The battle of the currencies has been an ongoing feature of the global economy since 2008 as nations sought to defend their exports.  The U.S., with the recent discontinuation of the formal bond purchasing known as QE, has caused the value of the dollar to rise against other major currencies.  Now there is an anticipated raising of the prime interest rate in the U.S. by the Federal Reserve with the announced date being sometime midyear, which would cause the dollar to go up even further.  Whether that happens or not is anybody's guess, it is up to the Fed after all, but a rate rise is to be perceived as a message of strength and hope that the U.S. economy is truly on the mend.  This notion isn't entirely without justification if you look at the numbers, but there is, naturally, more to the story.

This other part of the story is deflation.  Deflation has been bought off through the various burnt offerings dished up and out by the Fed and other central banks, to the tune of $16 trillion dollars.  $16 trillion dollars is an interesting number.  It is roughly equal to the entire U.S. GDP.  It is also roughly equivalent in percentage terms to the amount the SNB has relative to Swiss GDP.  The SNB has $400 billion booked on the balance sheet, which amounts to 85% of GDP.  Is this 85% of GDP a magic number signifying the upper limits to QE?  Does global QE still have $40-odd trillion left to go before central banks have to collectively pull out?   These probably aren't the right questions.

These numbers show how tenacious the deflationary force is throughout the entire global economy.  It's taken the equivalent of the American GDP over five years to stabilize markets and to keep them from selling off everything they own.  We can thank Ben Bernanke for that, and I'm being somewhat sincere in saying that.  But as they, or They, say, there's no free lunch.  Somebody pays, and in this case it is the future that pays.  But, as we all know, the future becomes the present.  The future has become painfully the present in Switzerland, and migrating towards Europe, who will have to respond in short order.  The concern is that the future might be too expensive.  In fact, that could serve as a subtitle for this blog:  The Future is too Expensive.  And this gets me to what some in the media are saying about this.

The video below is from "Bloomberg Surveillance" on Bloomberg TV and the guests are Robert Albertson and Drew Matus, two fellas I didn't know existed until this morning.  They are both market creatures and live their market beliefs through their jobs.  The questions, answers, and statements here are packed with significance.  Everything they say says a lot about the situation and their own assumptions regarding what is and what should be.  Underlying it all, of course, is the problem of economic growth, that which cannot be allowed to falter.  Being good market people, they blame QE and government intervention as the primary, and only, barrier to achieving economic growth.  "It (QE) doesn't work", they proclaim, without stating clearly what QE is not working to do.  But that is just one of many points which could be made about the interview.  Here's the vid:

 Bloomberg Surveillance

There's too much that I'd like to comment on, so I'll be self-limiting.  Two observations, though, will satisfy me for now.  The first is that Albertson and Matus, when giving their perspectives on employment, contradicted each other.  Albertson said at the opening in his assessment of the effectiveness of QE cited labor force participation to support his judgement of QE.  His statement was accurate.  Labor force participation is indeed down to levels last seen in the early 80's.  Matus, in defending his position that U.S. interest rates should rise cited the unemployment rate which does not count people who have left the labor force.  The difference between them is great and begs the question of their value as statistics.  A low unemployment rate can justify all sorts of policy decisions, but the labor force participation rate says the U.S. economy has not recovered at all in terms of employment since 2008.

The other observation I had was about a minute into the video when Matus talked of normal investor behavior and normal central bank behavior.  He is talking about the Fed's interest rate, which is forever important to talk about.  During the clip he uses some form of the word "normal" three times.  This is his bias.  He believes in a normal growth rate for any economy that is unfettered, period.  A foundation for market fundamentalists is that, if one allows price discovery, the market will correct itself.  As a consequence of this belief, he advises, or would advise any government who asked for advice from him, to end government supports.  The question that naturally follows is:  What would happen?

The blindness for people who think this way comes from a lack of appreciation for the power of deflation.  The Swiss event gives us the picture.  Absent QE or other government support for the economy, the market would scream "get rid of money!".  This happens to be the same thing as saying "get rid of debt!".  One exclamation sounds horrifically undesirable, something no sane person would ever say.  The other is perfectly reasonable, even admirable, to say.  How can they be the same thing?  It is because money is credit.  Stop borrowing and watch the economy spiral down the toilet.  Ben Bernanke understood at least that, which is why he ratcheted up the Fed's balance sheet, saving the economy from a slow grind global depression.  A depression is a place from which money has taken a vacation.  So these investor's, if they get what they wish for, would soon find out they have no money to invest.  This is not a radical notion, because any historical view of the economy can only lead to the conclusion that depressions are normal, if infrequent.  The abnormal has been the very period in which the government has been most involved in the economy, namely, the post-War period.

A depression is probably like what Switzerland has entered into.  Switzerland is a small country with a small GDP.  It also happens to be a thoroughly connected country in the global banking system with an importance far beyond what its size would suggest.  Nevertheless, it appears containable.  We shall see, of course.  But what it gives us a glimpse into is the matrix of how the global economy operates and why it is struggling.  No market fixes are gonna fix it.  It is something that needs to be managed on the way down.  With QE we bought time.  We used the time to prop up a failing system.  Nothing has been done to address it during this time.  Now the problem is worse.

In the end, it's misleading to call it a problem.  The Swiss National Bank was faced with a dilemma.  They couldn't keep going and they couldn't stop.  However, they had to make a decision.  Either way a disaster was bound to occur.  They chose one way.  Really, the only way if they were to salvage anything from the future.  So, the lesson I take from this is that trust in a powerful institution has been seriously damaged.  Trust in institutions is the necessary precondition for functioning markets.  That is the story to watch.

The Real Godzilla

One of the funnest and most endearing features of the human mind is the imagination.  It alone, as an extension of the ability to abstract, makes the human mind a flexible instrument of survival which enabled us to out-compete every other species over the millennia.  We also derive pleasure in the exercise of the imagination in art, drama, music, myth, religion, etc. which help make the world comprehensible and fortify the psyche against the uncertainties of life and the certainty of death.   But the imagination is also a tool for rational thought, and in this way, science and math have in their making an imaginative component.  The reason is because the imagination allows us to devise a probability to expound on and to then intuit a possible explanation.  The rational proof comes after this.

There is a feedback loop in the brain which you could call learning.  Rational thinking becomes the bedrock for the intuition and feeds the imagination.  If rational thinking fails to inform the imagination the outcome is a badly conceived version of reality and the intuition fails to anticipate real world events.  Without good information the imagination becomes just a means for escape, which, to be fair, serves a psychological purpose as well.  But escapism comes out of either a lack of control and/or a lack of knowledge, both enduring conditions of life.  Then Godzilla shows up periodically and wrecks everything, forcing people to turn from escapism to actual escape.

Godzilla, in this case, represents the collective worry at the pretty reliable appearance of disaster.  Godzilla is an extreme case of this, to be sure, but has its origin in real life experience which makes his popularity understandable.  It's best to look at Godzilla as an industrial myth.  He is a god of destruction born of the advent of nuclear weapons.  The first Godzilla movie was released in 1954 and his manner of pulverizing Japanese cities reflected the then recent experience of the atomic bombing of Nagasaki and Hiroshima.  Over the decades the Japanese people have learned to live with fictional Godzilla ever looming, as they have had to with the actual disaster which inspired his creation. 

For the average Japanese, the atomic bombing was a random event.  It was as random as an earthquake or a tsunami.  This is the type of disaster, different as they are, that is expressed through Godzilla.  But the atomic bomb attack wasn't random.  Japan was warned beforehand and given an ultimatum, but the average citizen had neither control nor information that it was coming and therefore it appeared random.  This is a crucial difference.  Everything has a cause but the cause isn't necessarily known.  One of the benefits of the modern world is that the knowledge of the workings of the natural world gives at least an explanation for things without recourse to the supernatural.  But a key difference lies in the origin of the disaster.  The nuclear disaster embodied in the Godzilla myth is of human origin.

What humanity confronts now is the prospect of systemic failure.  This comes in two related forms.  One is what could be called the biophysical system, or the natural system of life on Earth.  The other is global civilization, or the interconnected human system of nations, economies, and culture.  Civilization is just a part of the biophysical system and emerged from it via the human mind.  Both of these systems are stressed, and when systems are stressed they risk failure.  A systems failure in this sense means a fundamental reordering of the dynamics of the system.  This all sounds clinical and innocuous compared to failure, but failure is in the eye of the beholder.  An earthquake isn't a failure, but it can cause failure of the human system that is affected.

So systems that depend on the stability of a wider system experience failure when the wider system fails.  This is the primary concern of climate change.  Adding heat energy to the climate system changes the dynamics of it.  Looking at past climate records it's easy to see that there have been long unstable periods lasting tens of thousands of years which had a number of different causes.  In fact, it's apparent that the contemporary climate, such as it is, has been a remarkably stable period, and it is likely not an accident that, after many, many thousands of years of climatic instability, human civilization was only able to thrive during this time.  Call it luck that it even happened at all and I can be sitting here looking at my computer screen.  With all that, though, climate is just one aspect of the biophysical system that is under duress.  Other aspects are likely to impact civilization before shifting climate does.

The question for the purpose of this blog post is what can be known about the nature of the particular broad based disaster people should be on the lookout for.  For starters, it's important to distinguish between data and information.  Information is useful to the brain, data is not.  Data has to be interpreted.  Additionally, not all information is equal.  Some of it is bad.  Knowing the difference between useful and not useful information takes a lot of effort.  Having a frame, a hypothesis, theory, or whatever fits the bill is necessary.  Doing this allows you to form a perspective and to compare the perspective to events.  Perspectives can change.  Looking at current events through the lens of a well-conceived perspective also allows you to interpret these events.

Developing a perspective is as much a matter of determining what isn't important as what is.  It's like sculpting a statue in this way.  It's all the stone you remove that makes the shape of the statue.  Removing absurdities from your perspective is like removing stone to form a statue.  A few starter absurdities from my own perspective are:  The economy will grow forever; the future will look like the past except better; the Earth is an infinite capacity dumpster.  This leads me to a wider perspective:  That which is not sustainable won't be sustained.  These all can fit into the points I made above about the two systems.  The human system of civilization is stressing the biophysical system it depends on and threatens to disrupt and cause both of them to fail.  How is it possible to tell whether it will fail or not?  Maybe it will only partially fail.  Maybe it won't at all and I'm just a Nervous Nelly.

To the last I say:  Read the signs.  It may come down to the fact that I trust scientific inquiry more than I trust economists and politicians.  Or oil executives.  Or maybe the more intuitive approach that begins with "infinite growth is not possible on a finite planet" accurately frames a predicament humans collectively face.  It's about reading the signs.  It may not be possible to know when Godzilla will show up (and really, he won't show up because he is fictional) but that it's possible to know when a system, or interconnected systems, is destined to fail.  The stress on these systems is well documented and the cause is understood.  It comes from the way we live. 


As an addendum, in the spirit of annual New Year predictions,  I will make a few of my own.  Except these are not predictions.  I'm not so foolish and my paycheck doesn't depend on it like it does for an investor.  Instead, I'll offer three potential Godzilla moments that I will be watching for in 2015, moments when something major gets wrecked, or, more accurately, causes a "discontinuity" in the normal flow of things. These are not in order of magnitude or importance.

The first likely origin of a Godzilla moment I've talked about plenty already is the ongoing shale oil bust in the U.S.  The falling price of oil is a disaster for these producers but the way it becomes our problem is through the financing of it.  This has been done by way of high risk debt, complicated hedging, speculative borrowing, and the creation of derivatives.  At the heart of it is a gigantic miscalculation of the return on these investments.  The collapse of the price of oil represented the Inconceivable for these people.  But alas.

The second ongoing event to watch for a potential discontinuity comes in the form of the finances of the nation responsible for the Godzilla myth.  Japan is leading the industrial world down the path to post-industrialism.  And by this I mean the failure of it, not the transcendence of it.  The thing to watch for is the success or failure (it won't succeed) of the gambit by Prime Minister Shinzo Abe in the attempt to jump start economic growth by flooding it with massive amounts of debt stimulus a la the Paul Krugman method.  Japan is at the outer edge of Keynesian style efforts to stimulate growth.

The last potential Godzilla moment begins sometime in the tomorrow range.  The election in Greece could bring in the SYRIZA party which threatens to default on it's loans to get out from under the austerity policy imposed on it by the EU.  Angela Merkel has stated publicly the willingness to let Greece leave the EU.  Nobody's sure where it will lead, but from my perspective, it raises the specter of miscalculation.  Is it possible to know the impact of the "Grexit" on financial markets?  Maybe.  But the prospect of miscalculation seems very likely to me.  And miscalculation rears it's ugly head in ways as diverse as warfare, auto purchasing, and polo matches.  The risk is there to ignite a calamitous feedback loop.