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?
Friday, February 27, 2015
Tuesday, February 24, 2015
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?
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?
Friday, February 20, 2015
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.
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.
Friday, February 13, 2015
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?
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?
Tuesday, February 10, 2015
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.
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.
Friday, February 6, 2015
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.
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.
Tuesday, February 3, 2015
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.
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.
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