What the market meltdown of October of 2008 and the subsequent resuscitation by the governments of the world have given the global citizenry is a whole lot of unease and doubt about the viability of the global economy. To be sure, the amount of unease and doubt among people varies quite a bit, but many fewer of them now see a future that could be called bright or prosperous. The numbers are well known enough and truly staggering. You don't have to look much further than the rates of unemployment and foreclosure to understand how bad things are for people. On top of this, wealth people once believed they had and now do not makes the unease, doubt, fear, anxiety and what have you thoroughly understandable. The lingering question is how deep does this go. People generally gather, or are open to the possibility, that this is a systemic crisis. But how big of a system are we talking about? What is the fluff economy and what has real value? What can be counted on to bring us our former prosperity? The questions can be iterated in many different ways.
Predictably, the people's confidence in the expertocracy is at an all time low. And it's no wonder that this is be the case given the near total failure of economists and other observers to predict the biggest meltdown since the Second World War. The question has to be asked: What are they looking at when they look at the economy? What is the value of economic models if they fail to see such an enormous crisis right before it happens?
A conclusion one might draw from all of this is that the system is even bigger than economists realize. One possible outcome from the continuation of the market difficulties is the need to scrap the way the economists understand their craft. Fortunately for us, there are plenty of different ways to look at the economy, from an academic or a practitioner's perspective, other than the reigning theoretical contraption of Neo-classical economics. The system, it turns out, is much bigger than the neo-classical economists ever dreamed, and someday soon we'll have to quickly and carefully move to some other modus operandi regarding our economic behavior.
The problems with neo-classical economics have been well-documented by critics from many different points of view but I'll just take a few of the foundational ones to illustrate what's being talked about. The neo-classical model holds that people are three things; they are rational, are utility maximizers, and have good information. This may seem absurd on the face of it but it serves as a theoretical basis for trained economists everywhere. That we are well-informed rational utility maximizers can be proven false, in my mind anyway, by one example. The great Beanie Baby Bubble (BBB) of whenever put to rest any questions about what people can become given the right circumstances. What it showed is that whimsy, fueled by too much extra money, informed by bad taste, and oblivious to quality is also an economic force. Now, this example convinces me that economics needs a serious rethink, but others may need more. This subject will be be touched on again. There's plenty more.
An even deeper problem with neo-classical economics comes from the fact that it completely ignores natural resources or natural systems except as commodities to be bought or sold. The thinking goes that resources are unlimited and that nature is a endless garbage dump. This, too, is absurd on the face of it, yet there it is. There are historical reasons for this that go back to the early days of the economic philosophies of the 19th century and it involves the scientific understanding of nature at the time and, though that understanding has certainly changed, economics has not tried to ground itself in natural science since. The thrust of the new economic thinking reconciles this and begins with energy as the lifeforce of all economies, as it is with all systems, natural or otherwise.
People losing there houses to foreclosure or their jobs to a bad economy may not find much consolation in this, or give a rip either way, but it is at least an attempt to get an idea of the magnitude of the system that is failing and point out that this failure is one whose roots can conceivably be traced back to centuries long gone. In a time when many people are compelled to think in quite short time frames, it is incumbent on others to think in longer ones. It is important also for people to appreciate how high-falutin' theories hatched in the brains of pasty academics and dead thinkers indeed have powerful impacts on the lives of anyone who lives in a civilization.
Next time I'll go into some of these new economic ideas and, for as exciting as they are, also go into why someone who sees the consumer society as the pinnacle of human achievement will likely be way less excited.
Sunday, March 28, 2010
Sunday, March 21, 2010
Followership-An Appeal
Not only does the US have a tremendous problem with it's leadership, it has maybe an even bigger problem with it's followership. At the present moment, the followership is disatisfied with it's leadership, and the relationship is a little bit strained. Not that I'm letting the leadership side off the hook but let's just put it aside for now and focus on the issues with the much larger group of followers and why it seems unable to make reasonable or coherent demands of it's leaders.
A follower is a citizen. It is one of the governed. In a democracy, citizenship comes with a set of responsibilties which those followers living under a different sort of arrangement, like a totalitarian single party dictatorship, are not burdened with. Democracy, you could say, is a relationship between the governors and the governed that requires a certain amount of work to be done on both sides in order for it to function properly. The relationship in a democracy is more mature than in a non-democratic system and citizens of a democracy not only have to be able to emotionally handle the relationship, but stay intellectually fit to be alert to what's going on. This demands the use of reason, a capacity and the patience to deliberate, the willingness to learn about the world, and truthfulness. That is what the country was founded on, after all.
The purpose of this blog primarily is to address the question of what is going on. That the followers largely don't know is painfully evident in the demands many of them make. It seems odd to me that voters would hold politicians accountable for rising gas prices, for example, yet tell that same government to stay out of the operations of the free market. Then they demand a lower gas tax even though that very same tax money is used to subsidize the oil industry so that it will fund exploration for new oil. In a similar vain, it is common for people to complain about how everything in America is made in China yet will line up at Walmart on the morning of Black Friday to buy all the stuff made in China. These are two tiny examples of the contradictory behavior of a lot of Americans. Hopefully they are representative enough for you to get my point.
More alarming than simple incoherence is that many people in this country are angry, for one reason or another, about the direction the country is headed. I wouldn't try to tell an angry person that it is wrong to feel angry about the situation in America, but it's important to keep in mind that people often direct their anger at the wrong things or are angry for the wrong reasons. There's a lot of that going on these days. If you couple anger and incoherence in the same person then you have someone who is ripe for exploitation by another who sees opportunity in all the anger going around. The Tea Party movement is made up exclusively of people like this.
As difficult as it is to comprehend someone who is incoherent, it is not difficult to see how that person, scaled up to a movement, can undermine useful collective measures to change course when this particular collective rejects collective action as a first priciple. The black hole of Tea Party ideology is that the very individualistic program they wish to foist onto the body politic most favors the corporate power that is ripping them off via the government they seek to tear down. Rather than regulate this corporate power, they would rather blame those among us who use, and abuse, welfare. Likewise, they would blame unions which demand living wages from the corporations for the exportation of manufacturing jobs instead of looking more systemically at the decades-long downward trend of manufacturing in America and other advanced economies.
These decades-long political disputes miss something altogether larger and more fundamental. The U.S. decades-long decline is due to things we cannot stop no matter how hard we we may wish we could. The underlying reasons we are losing ground, by many measures, can be traced to the simultaneous need for growth and the impossibility to grow. I'm not simply referring to economic growth, but growth of the whole enterprise. What I am positing is that, even if we'd done everything "right" since the 1970's, when the downturn arguably began, we would still be faced with decline, economic or otherwise, for reasons that may or may not be widely known or acknowledged. The effects of our decline are apparent enough as things are right now, but we've managed to conceal an underlying fatal flaw in the systems that have been erected and expanded since that time as a part of the drive for economic growth. The flaw is diminishing returns, a flaw we can't do much about if the system demands growth for survival. At some point the economy will start to eat itself, like a body without food will eat itself.
In one sense, I agree with the Tea Party movement and with conservatives generally. Things are getting unwieldy and too big to mange. So the Tea Party movement and conservatives are, in their own pre-conscious way, perceiving the diminishing returns of complexity. I appreciate that a movement based on decomplexification of the American system is hardly good fodder for bumper sticker manufacturers, but a general realization of this point, of complexity as the illness and economic malaise as merely a symptom, then a more thoughtful discussion on where we go from here might ensue. To extend the metaphor a bit further and apply it too another related issue, the debt is a symptom, not a cause of our decline. The conservative mania over the public debt misses the deeper roots of our predicament. Growth is the end we cannot achieve but our system depends on growth for it's very survival. That is why we borrow. If we did not borrow, we would descend wildly into a depression.
The link above has a chart that tells the story of the U.S. predicament with it's debt. But the blogger holds some of the myths about growth and economic freedom that will purportedly attain that growth. But, the chart says a lot about the longer trend and some of the commentary I am sympathetic to. But anyone who is willing to take back the power ceded to the banks has to be equally willing to accept the reduction of our financial well-being that will go along with it. The necessity of taking down and shrinking the financial industry is so that it does not take the taxpayer down with it. Eventually, the "money" will have to be written off. This means deflation. And even if the nation manages to avoid the worst of it it will mean the end of growth. Stagflation may be the best we can hope for. With food and energy prices likely to rise and stay high, high enough at least to kill growth, we could be even faced with an inflationary depression, something probably not deemed possible by economists at the moment.
The acceptance of this outcome could lead to a different set of prescriptions based on more modest expectations and a fuller sense of historical actuality. We are a superpower losing it's grip on the status quo. This is a historical process that will last several decades into the future. We should be wondering about a reasonable place for us to bottom out in a way that does not tear the fabric of society apart.
A follower is a citizen. It is one of the governed. In a democracy, citizenship comes with a set of responsibilties which those followers living under a different sort of arrangement, like a totalitarian single party dictatorship, are not burdened with. Democracy, you could say, is a relationship between the governors and the governed that requires a certain amount of work to be done on both sides in order for it to function properly. The relationship in a democracy is more mature than in a non-democratic system and citizens of a democracy not only have to be able to emotionally handle the relationship, but stay intellectually fit to be alert to what's going on. This demands the use of reason, a capacity and the patience to deliberate, the willingness to learn about the world, and truthfulness. That is what the country was founded on, after all.
The purpose of this blog primarily is to address the question of what is going on. That the followers largely don't know is painfully evident in the demands many of them make. It seems odd to me that voters would hold politicians accountable for rising gas prices, for example, yet tell that same government to stay out of the operations of the free market. Then they demand a lower gas tax even though that very same tax money is used to subsidize the oil industry so that it will fund exploration for new oil. In a similar vain, it is common for people to complain about how everything in America is made in China yet will line up at Walmart on the morning of Black Friday to buy all the stuff made in China. These are two tiny examples of the contradictory behavior of a lot of Americans. Hopefully they are representative enough for you to get my point.
More alarming than simple incoherence is that many people in this country are angry, for one reason or another, about the direction the country is headed. I wouldn't try to tell an angry person that it is wrong to feel angry about the situation in America, but it's important to keep in mind that people often direct their anger at the wrong things or are angry for the wrong reasons. There's a lot of that going on these days. If you couple anger and incoherence in the same person then you have someone who is ripe for exploitation by another who sees opportunity in all the anger going around. The Tea Party movement is made up exclusively of people like this.
As difficult as it is to comprehend someone who is incoherent, it is not difficult to see how that person, scaled up to a movement, can undermine useful collective measures to change course when this particular collective rejects collective action as a first priciple. The black hole of Tea Party ideology is that the very individualistic program they wish to foist onto the body politic most favors the corporate power that is ripping them off via the government they seek to tear down. Rather than regulate this corporate power, they would rather blame those among us who use, and abuse, welfare. Likewise, they would blame unions which demand living wages from the corporations for the exportation of manufacturing jobs instead of looking more systemically at the decades-long downward trend of manufacturing in America and other advanced economies.
These decades-long political disputes miss something altogether larger and more fundamental. The U.S. decades-long decline is due to things we cannot stop no matter how hard we we may wish we could. The underlying reasons we are losing ground, by many measures, can be traced to the simultaneous need for growth and the impossibility to grow. I'm not simply referring to economic growth, but growth of the whole enterprise. What I am positing is that, even if we'd done everything "right" since the 1970's, when the downturn arguably began, we would still be faced with decline, economic or otherwise, for reasons that may or may not be widely known or acknowledged. The effects of our decline are apparent enough as things are right now, but we've managed to conceal an underlying fatal flaw in the systems that have been erected and expanded since that time as a part of the drive for economic growth. The flaw is diminishing returns, a flaw we can't do much about if the system demands growth for survival. At some point the economy will start to eat itself, like a body without food will eat itself.
In one sense, I agree with the Tea Party movement and with conservatives generally. Things are getting unwieldy and too big to mange. So the Tea Party movement and conservatives are, in their own pre-conscious way, perceiving the diminishing returns of complexity. I appreciate that a movement based on decomplexification of the American system is hardly good fodder for bumper sticker manufacturers, but a general realization of this point, of complexity as the illness and economic malaise as merely a symptom, then a more thoughtful discussion on where we go from here might ensue. To extend the metaphor a bit further and apply it too another related issue, the debt is a symptom, not a cause of our decline. The conservative mania over the public debt misses the deeper roots of our predicament. Growth is the end we cannot achieve but our system depends on growth for it's very survival. That is why we borrow. If we did not borrow, we would descend wildly into a depression.
The link above has a chart that tells the story of the U.S. predicament with it's debt. But the blogger holds some of the myths about growth and economic freedom that will purportedly attain that growth. But, the chart says a lot about the longer trend and some of the commentary I am sympathetic to. But anyone who is willing to take back the power ceded to the banks has to be equally willing to accept the reduction of our financial well-being that will go along with it. The necessity of taking down and shrinking the financial industry is so that it does not take the taxpayer down with it. Eventually, the "money" will have to be written off. This means deflation. And even if the nation manages to avoid the worst of it it will mean the end of growth. Stagflation may be the best we can hope for. With food and energy prices likely to rise and stay high, high enough at least to kill growth, we could be even faced with an inflationary depression, something probably not deemed possible by economists at the moment.
The acceptance of this outcome could lead to a different set of prescriptions based on more modest expectations and a fuller sense of historical actuality. We are a superpower losing it's grip on the status quo. This is a historical process that will last several decades into the future. We should be wondering about a reasonable place for us to bottom out in a way that does not tear the fabric of society apart.
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