Monday, November 30, 2009

The madness of crowds

"No warning can save a people determined to suddenly grow rich." Lord Overstone.

I can’t confirm the good gentleman spoke (or wrote) that provocative sentence, but it’s a good one nonetheless (split infinitive aside). It means you can’t do nothing when crowds get mad (double negative aside). Depressions happen. Shit happens. All true, as far as that goes.

But guess what, “rich” has meaning in a particular context, one of differential advantage engendered by an ongoing competition over scarce goods and services. In such a system, any people can suddenly determine to become rich, because society, via various means, makes it very plain indeed that success is measured monetarily. Not all people fall prey to this message, but the vast majority does. Nice guys finish last. Survival of the fittest. You know the story.

My personal reading of this wee pearl of wisdom is that monetary systems are inherently destructive, because they falsely map a philosophy of scarcity over a situation of abundance. The dissonance set up by this false mapping has a number of harmful and unnecessary consequences. One is the calcifying of hierarchies as the “succcessful” secure their positions, the other is a tendency to consume unwisely, to make a passion of consumption because this demonstrates success. To be forced by an unwise paradigm to squabble over artificially scarce goods and services is to ensure cyclical collapse. As we become global in the force of our numbers, the ecosystem is being pulled ever more into our self-inflicted, unhealthy rhythm of overconsumption and collapse. We are now also able to poison it with newly invented chemicals. The abundance that might be sustainably nurtured is squandered because our management of it is informed by the wrong philosophy.

Because we encourage competition over scarce resources, we are obliged to expect the madness of crowds to crave what the “successful” have; riches. We tell ourselves, in all sorts of ways, that this is what life is about. What right does any of us have to bemoan this when it happens!

Wisdom will be finding the right place for competition, and the right place for cooperation. Once we have that, abundance will follow, whereupon we can allow people to be individuals at last, free enough to become whatever they can, with enough space in which to grow up, and make their own decisions. Monetary wealth need have nothing to do with it. Riches need be no carrot, poverty no stick.

Friday, November 27, 2009

But who would make the decisions?

Typically on my blog I don’t like to deal with the nitty-gritty of resource-based economies (I do that elsewhere), but felt it might be worth while having a little piece out there in the blogosphere addressing one particular issue, which has troubled me as it has troubled others. It is this: if a resource-based economy has no nation states, no political parties, no corporations and no medium of exchange, who makes the decisions? The idea that some automated process could make decisions of state, alarms people: That’s not how things are now! Humans do that work, always have done, always will do! Relying on machines or other non-human processes would be a huge, technophile-driven folly, the worst kind of scientific positivism.

So the question is a very important one, since it confronts us with our own ideas about what it is to be human and in control of our lives. Understandably, it is not an easy question to answer. But the reason it’s hard to answer is that the question itself is misleading. For example, if I were to ask: Who makes the decisions in free market economics, or crony capitalism, or casino capitalism, whatever you want to call the planet’s dominant system, what would the right answer be?

Politicians? They certainly put on a great show of making decisions, but what’s behind that show, and how much of it is real?

Mega-corporations? Perhaps, but only in part, and how do they coordinate themselves?

We The People? Not really; voting once every few years is hardly enough influence to say we make the decisions.

Consumers? A little bit, yes.

But maybe we should put all these factors together, call them the Invisible Hand, and say it makes the decisions. That is probably quite close to reality, but also perhaps at some distance from the way we mythologize the idea of leaders making big decisions, and free individuals making little decisions in their billions. Indeed, isn’t the Invisible Hand a blind miasma of various technologies enabling various crowd-behaviours, apparently incapable of true long term thinking? It is also, in a real way, an “automated” or “machine-like” process, beyond purely human, individual control. As such, what sense does it make to say the Invisible Hand “makes” decisions, in the way we think of humans doing so?

And while there is perhaps a certain wisdom in the Hand’s blindness, and maybe too a useful humility in accepting that long term planning is most often doomed to constant revision and change, it is only on paper that the Invisible Hand works this way, due to the impossibility of establishing a perfectly competitive market. In practice the Hand is not really blind, and is most definitely corruptible. Without perfect competition the Invisible Hand cannot function as theorized, serves instead the powerful few to the detriment of the vulnerable many. Only perfect competition can prevent the few from becoming overly powerful, and perfect competition is impossible. (Regarding long term planning, although a side issue to the main question, I do think a resource-based economy would be capable of this, since it would have a completely different set of priorities and built-in incentives.)

In short, this post’s question is not easy to answer, because it is the wrong question. There has never been anyone “making” decisions, nor will there ever be. There is an ongoing process of action and reaction, of various systems dynamically interacting, all giving rise to progress, change, suffering, upheaval, stagnation etc., always some mix of technology and human being. One without the other is almost inconceivable. Technology is, after all, human ingenuity made real.

What we should therefore be asking of all socioeconomic models, as one part of coming to understand them better, is how are decisions made. I here offer humbly an answer which is I think relevant to them all: Humans and their technologies jointly arrive at decisions. In monetary systems the technology we call money, in combination with government, central banks, the IMF, major corporations, as well as other technologies such as computers and database software etc., arrive at the major decisions (such as interest rates and the laws of business) that govern our lives, and steer civilization. The Consumer, by shopping, sends some signals to the listed institutions. The success or otherwise of these decisions is always open to debate – there is no such thing as perfection. Advertising influences very strongly what the Consumer does, so the Consumer is influenced by one powerful part of the status quo just outlined. “Freedom of choice” is illusory.

So who makes the decisions nowadays? Nobody does. The lion’s share of “decision making,” when you really think about it, is made by technology, a particular technology called fiat money. For as we all know, if an idea or plan does not make financial sense, it does not make sense at all. Money talks. Money decides. Money is a technology, a very human invention, not an act of god.

So the only difference between a resource-based economy and contemporary monetary systems would be the technology deployed to partner humans in arriving at decisions. With the scientific method in the driving seat, not money, arriving at decions would be a more reasonable and healthly process than the profit driven, perpetual GDP growth dependent decision making process we struggle with today. Furthermore, as much of societal infrastructure as possible would be automated, making the material side of life as transparent and smooth flowing as possible. Without the hassle of making a profit or earning a decent wage, without the endless complexity of tax law, money supply control, interest rates, exchange rates etc., the range of decisions to be made would be reduced to more functional areas, such as soil health, air and water cleanliness, energy, and providing abundance.

In a resource-based economy, only things that made sense – to the best of our ability to determine this – would make sense, as distinct from their money making/saving potential. The absence of the profit-motive, the freedom from appeasing sponsors and financiers generally, of meeting bogus, money-dependent deadlines, would mean long term thinking would more likely rise to prominence. As today, no one would make decisions, as today they would be arrived at, but as an improvement over today, priorities such as the ecosystem and human dignity would be front and center. There’s nothing wrong with that, and nothing, other than fear of our own ignorance, to be afraid of.

The main obstacle between us and mature, radical change, it seems, is the way we have mythologized ourselves to ourselves, and our reluctance to give these myths up. Putting away childish things is hard, but, I fervently hope, not impossible.

Tuesday, November 24, 2009

More on growth

As an addendum to yesterday’s post, I want today to throw in a quick thought exercise on GDP growth, in the form of a metaphor. Economics has defined growth in a very clumsy way as expanding GDP. If we see socioeconomic models as subsystems of Earth’s ecosystem, and not as theoretical ivory towers looking down on and removed from the world “out there,” we quickly recognise that economic growth occurs at the expense of other subsystems of that ecosystem. In another system – the human body – when one of its subsystems grows perpetually, we call it cancer. While it depends on perpetual growth of its own produce (goods and services to be consumed by itself), economics can only be “cancerous,” from the point of view of the system which houses it. It can only see perpetual growth as “healthy” if it ignores the ecosystem which hosts it.

Ignoring the ecosystem is flat out stupid. It can indeed be made sick in the way a human body can be made sick, it just takes a bit longer, and is far harder to diagnose. It can “heal” itself though, right itself, find a new equilibrium, at the expense of the cancer that ailed it. This rediscovery of some new equilibrium would likely destroy our civilisation. Reassessing economics’ definition of growth is, for this reason, somewhat of a priority.

Monday, November 23, 2009

A scarcity of unfettered thinking

Economics is not a science, it is an art. Its pioneers may have had noble intentions, such as the most equitable and sensible distribution of goods and services possible, they may have wanted to maximise the good and minimise the bad, but there seems to have been a collective failure in the predictive power of economics in recent years, or at least, perhaps thanks to the internet, such failure is now more famous than ever before. Physical laws tend not to undergo such perturbations (quantum mechanics aside). Economics seems to have become the art of obfuscation in the way philosophy can be, in the way religion can be. Centuries ago great minds debated how many angels could dance on the head of a pin. Today economists debate how many derivatives can dance at the head of an economy.

We have a problem, do we not, when something as simple as direction of price, that is inflation and deflation, cannot be predicted. The experts of this dismal science cannot agree; is inflation coming, or is it deflation, or is it both at the same time, or maybe stagflation? Surely this is a sign that something is very wrong in the kingdom of Denmark.

The typical reaction to this pressure is to prove ever more strenuously that one’s own opinion is the right one, to shout louder in more and more complex terms why it is that one has been right all along. A lifetime of effort and study have been invested. This is not a small matter of betting on the wrong horse at the tracks. These are career defining times for many, and the pressure is intense. The punter wants to know why the experts screwed up. Even the Queen of England has asked her pointed question. Why did economics experts fail?

So what qualifies me to take a stab at this most difficult of questions? Absolutely nothing. I am a two-time university drop-out, a daydreamer, and a poet/novelist of questionable skill. But I am also a concerned and interested human being, who has come to believe, passionately, that it’s up to “We The People” to chance our arms and help the experts out, whether they like it or not. I am prepared to risk opprobrium, or worse, ringing silence, in the faint hope that my own small effort here helps in some tiny way to clear heads, and focus attention on the right areas. This is my take on what is wrong with our kingdom.

Folks, we need to get back to basics. If the big guys and girls can only squabble like children, and make mistake after mistake, when it is unclear what mistakes even are, what latitude predictions must be granted, we’re not going to find the reasons for this chaos at the top end of this discipline. We have to look at its foundations. To my inexpert eyes the whole structure is wobbling. There can only be two possible explanations for this: 1. it wasn’t put together right, or 2. the real world out there is so full of unknowable and uncontrollable variables theory can’t keep up with it. Either way, by my lights we are obliged to focus our attention in the basement. Economics 101 needs to be revisited.

There are two main foundation stones to consider in such an exercise, one is scarcity, the other is ownership or private property. Both are assumptions. My question here is this: are they justified?

I’ll start with scarcity. Economics defines scarcity as infinite wants versus finite resources, which sounds like an eternal problem where there can only be too many people competing over too few things. It’s insoluble. People are greedy, insatiable even, and there’s only so much stuff out there. Hence we need the clean and cold arbitration of a medium of exchange – a prerequisite for the market place – so that a price mechanism can, in a totally impartial manner, distribute the scarce stuff amongst the greedy competitors. The market may well be hard, even cruel at times, but life is like that. Take a look around you. Nature is competition. Unfair in the particular, certainly, but fair over time.

And yet I am not insatiable, and neither is my wife. All joking aside, I don’t know any people so greedy they can’t be satisfied. In short, I don’t think wants can be infinite. Not only can there only be a finite number of people on the planet, this finite number of people cannot exercise the finite total of their wants simultaneously. Wants are brought to the market place in fits and starts, over whole lifetimes, finite lifetimes. The load is always changing. Furthermore, should there be some people incapable of “having enough,” whatever that really means, they are physically constrained from exercising their endless greed, from bringing it to bear on the market place in totality, by the limits of their purchasing power, by the size and number of their homes, by the size of their stomachs, their need for sleep, recuperation, indeed by their very mortality. Wants cannot be infinite. They can change, they can exceed supply, but they cannot be infinite. This, to me, is very important.

It therefore makes sense to define scarcity as finite wants versus finite resources. That sounds like a totally different type of problem to the classical definition. I’m not implying scarcity is not a problem, rather that economics has defined it badly, and this fallacious definition adversely effects the entire structure. The definition needs to be reassessed, and the following types of question asked: Is scarcity a design problem, i.e. solvable? Can humanity’s incredible ingenuity produce goods and services in abundance? What does abundance do to economic theory? Is scarcity a good or a bad thing? For example, technologies such as cold fusion, radiant energy panels, and the STAIR battery could make clean and renewable energy abundantly available to everyone on the planet. (As an aside, this need not be about peak oil, but simply about new technologies making old ones obsolete. The Stone Age did not end for lack of stones!) What effect would clean abundant energy have on the energy industry? On tax revenues? On centralisation itself? Establishing a sensible definition of scarcity, dealing with it thereafter as a design challenge, has profound implications.

On to the second foundation stone. Ownership is an idea, albeit one that seems to be natural; tigers with their territories, for example. But, because ownership is a very old human word drenched in a particular history, a mountain of law, and deep entanglement throughout economics, politics and culture generally, we need to subject it to closer inspection.

Tigers have no clue about ownership as a concept. They simply operate in a particular boundary, inside which the amount of prey necessary for the tiger’s ongoing survival can be sustained. That is not ownership in the legal sense, that is an operational function of tiger-type living. Tigers cannot want more and more territory because scarcity increases value, nor hoard to take care of themselves in their old age. Humans, on the other hand, both understand and are vulnerable to ideas, unlike other animals. This is a crucial distinction. Human behaviours change according to the type of society in which they are raised. A quick look at hunter-gatherers, at the Alouette Eskimos, at the history of the people of St Kilda demonstrates this.

Ownership is an idea that effects human behaviour, not a part of our biology which effects our behaviour. A better word for it might be “access.” Ownership affords exclusive access to a thing. Exclusivity, in this sense, means, at least functionally, “sufficient.” Ownership affords the owner sufficient access to the thing owned. Ownership is furthermore a necessary legal concept because of scarcity. Without scarcity the need for ownership vanishes, transforms into abundant access to that which we need and want. Functionally speaking, it is the access that is important, not the paper actuality of the legal sense of ownership. If you have ownership without access, you have nothing. Access without ownership, on the other hand, is not a problem. Renting a home, for example. Or borrowing a friend’s book, or hiring a car, etc. To collapse the above into one sentence: The idea of ownership has a particular utility (sufficient access) whose importance is dependent upon the conditions (scarcity) in which it operates.

Private property, it turns out, is an anomaly in our biological history. Of course there are for hunter-gatherers issues such as mating partners and the whole “selfish gene” meme (a gene cannot be selfish, it has no sense of self!), and yet doesn’t private property, as a defined and understood concept, really have its roots in farming? Farming is a technological solution to some of the negatives of hunter-gathering, a way of coping with the uncertainty of weather and other natural challenges. My point here is that a human technological development gave rise to the need for the legal concept of ownership. Might further technological development give rise to its demise? If the arc of our development is currently towards abundance and away from scarcity, could ownership become a redundant concept? What effect might this have on economics?

Because I don’t want to write a hugely long tract, I will close with some further, brief points. Technological unemployment is real and not a lump of labour fallacy as orthodox economics posits. It describes the slow, ongoing trend of replicating human abilities via mechanical means. Human abilities are finite. Therefore, due to our technological progress, we are rendering human labour progressively less necessary to the economy. This has a negative impact on purchasing power, and on money itself, since money derives its value ultimately from human labour, whether it be sweat-of-the-brow grunt work, or high level creativity. This is a problem economics must address, unblinkered.

Economics should not lock itself away from physics, sociology, psychology, history etc. Economics is central to society because money is central. It is too important to leave alone, to rot incestuously in its own unexposed juices. Because the things we really value – after the material side of things have been taken care of – cannot be valued monetarily; friendship, trust, the ecosystem, family, community, love; and because money makes revenue generating parts of society more “important” than non-revenue generating, we have a built-in problem with money’s relative importance. That is, it tends to concentrate to itself and cause overly powerful, monopolistic power accrual whereby “business” and “politics” necessarily fuse (as if they were ever separate!). Because perfect competition is impossible (another foundation stone of economics), because rational and perfectly informed market participants are impossible, excessive profits are systemically unavoidable.

Competition over scarce resources is a monopoly-creating mechanism, an inherent property of markets, “free” or otherwise. Economics must address this problem honestly and openly. After all, money is less important than we are; without humans it has no meaning or use. This logic needs to find a place in economics, before we experience global civilizational collapse, due to generations of irrelevant education, eroding topsoil, diminishing drinking water, less and less healthy air, etc. For these reasons and others, money must be demoted. We need a new economics capable of coping with such a concept, capable of coping with reality as it is, not as we theorise it to be. Establishing a new economics is up to us. All of us.

Thursday, November 19, 2009

The strange magic of economic growth

What is economic growth? Basically, rising GDP, which means producing an increasing amount of goods and services. But I believe that answering this question properly demands of us that we look at growth generally.

"Out there in the real world" growth appears to be energy exchange. For example, a system has some mechanism (such as eating and digestion) for taking in energy, then converting this energy into growth and/or work, expels waste, and does this for as long as it stays cohesive. Entropy takes its toll, of course, and the system eventually collapses. Another point to consider is that the amount of energy in the universe has not changed one bit since the big bang. Therefore, growth is ongoing exchange of a finite amount of energy circularly between different energy-cycling systems. Growth is part of a cycle requiring "borrowing" energy from "out there", then returning it via waste and work.

Economic growth must surely obey these laws. Economics cannot entertain a definition of never ending growth without defying the laws of physics -- for every action there is an equal and opposite reaction. Economics must take the universe into account, must -- more prosaically -- take the ecosystem which supports all economic activity into account. So, if we hear politicians and economists claiming credit for some growth miracle via the correct handling of the economy, we are obliged to ask at what cost this growth came. Whence the energy that fuelled it? What handles the waste? Where the cyclicality? When will the entropy come, and how?

To my mind, what we have been witnessing these last millennia is humanity's improving ability to do more with less, as Buckminster Fuller used to say. There are no economic miracles, only miracles of human ingenuity, or, to put it another way; technology has been increasing our productive efficiency. Without technology there can be no economic miracles. Where would we be without the plough, or without the domestication of the horse? What use wisely timed changes in the base rate, what function the injection or retraction of money into and out of the economy, how relevant skilled tweaking of the tax code without technology delivering improving efficiencies? Surely economic "growth" is nothing more than the benefits of technological developments distributed (to whatever extent) throughout society! There can be no such thing as perpetual economic growth, there can only be the distributed benefits of technology, be it a plough or a super computer.

Also worth remembering is that the success afforded us by our ingenuity, resulting in our numbers on this planet now nudging 7 billion, has come at the cost of other energy exchange systems, such as rain forests. This is neither a good nor a bad thing until our impact on the ecosystem brings to an ugly halt our ability to sustain civilisation. So, while I believe the planet we were so fortunately born on is abundant in all that we need to live in high quality, we need, at 7 billion and rising, to be very aware of our cumulative effect on it. This awareness should not only include what we consume and how sustainable that consumption is, but also what we bring into existence (I'm thinking of chemicals etc), which the planet is then forced to eat and digest for the first time in its long life. When we create a thing, we are responsible for it, but can only ask the planet to process it one way or the other. Wherever we throw things away, we are doing so on the planet. Are our economic models taking sufficient account of this most obvious truth? Or is their wierd understanding of growth in fact a threat to civilisation?

Should we be learning a new and healthier way of understanding growth? I believe so. Should we strain every sinew to develop a socioeconomic system that does not depend upon growth? Abso-bloody-lutely.

Sunday, November 15, 2009

The profit conundrum

First of all, what is profit?

Economics defines it as money which accrues to the entrepreneur (or owner) after all costs of production have been paid, or, more simply: that portion of revenue he can keep for himself once he's paid all his bills. Nowadays, with corporations and the Universe's most complicated tax code, this simplified picture is rarely observable in the real world, but I think it suffices for my purposes here.

The definition implies need. It gives rise to the question of amount: how much is good? how much is enough? Of course, the more profits we earn, the richer we become, all things being equal. (That's one of my favourite weasel-expressions of all time: "all things being equal" -- all things have never been, and will never be equal.) Ultimately though, no one really needs to be rich, and therefore profits are unnecessary as soon as their amount exceeds that which the entrepreneur needs to live her life. And yes, how much an entrepreneur actually needs is also open to debate, a debate that can have no conclusion.

As I understand it, economics resolves this little conundrum by reference to the market, and a particularly heavenly form of market place where "perfect competition" reigns. In a perfectly competitive market all participants are rational and perfectly informed about price and, for example, what's going on over there at Joe's Emporium, who's trading gold over at Sarah's at what quantities, what new products are coming out next week, which are the best products, etc. etc. etc. In this beautiful world profits are kept to a bare minimum because the competition is just so damned fierce. No one can monopolize anything; the other market participants, being perfectly informed, would be on to it in a shot! Imagine that, a market of total transparency. So, excessive profits simply cannot last much longer than a couple of units of perfected time, aka two shakes of a lamb's tail. Why oh why can we not establish such a wonderful system? Well, because people are not rational, and cannot possibly be perfectly informed. It follows therefore that profits are a problem.

Why? Because money is power, or a lever to power. As I discussed earlier, monetary systems depend on money (duh!), so those who have the most money can, should they choose to do so, use it for power and shaping things to their continuing advantage. We call this corruption. Corruption and money, like scarcity and money, are inseparable. You can't have one without the other. So, because there can be no such thing as perfect competition, profits must by definition become excessive, and the system inherently vulnerable to corruption at levels of intensity that lead to cyclical and systemic collapse. I imagine this sounds familiar.

For me, a human being concerned with the ramifications of transitioning to a resource-based economy, this presents a problem. Not only do I not believe in prohibition, I believe the healthiest socioeconomic systems are those which allow their members the maximum possible freedom. Since transition away from money requires money, there will be profits; no perfect competition is possible. Therefore corruption remains a serious problem during transition, lowering the chance of success considerably.

At the moment the only suggestion I have is the redesign of money, combined with a conscious decision to set up a societal infrastructure for making money slowly redundant, is the way to address this problem. We would need a money that cannot be accrued, that "expires" in some way, as it did in the Wörgel system of pre-war Austria. But this is a very delicate problem indeed, whose solution is beyond my humble powers. It needs thorough discussion.

Friday, November 13, 2009

There is no such thing as a Right

You’ll likely think this entry’s title cynically titillating, a small man’s petty attempt to attract attention with a cheap piece of sensationalism. It’s not. I mean it sincerely -- and besides, I hardly have the audience that would make such a tactic appropriate ;-) .

Rights are ideas born of liberal thought, whose focus is the self, the individual. In this tradition individuals have Rights to things like “freedom” and “the pursuit of happiness.” Seen in isolation there is nothing wrong with this, but the idea gives rise to important questions: From where do these Rights come? Who defends them? How are they enshrined? How do they manifest in the body? These are not easy questions to answer, and it is not my intention to try. Mine is a more general inquiry.

Is it sensible to adhere to a philosophy which revolves around a notion of defensible Rights, Rights which forever need protecting against one kind of tyranny or another? Doesn’t the unintended logic of vulnerable and fragile Rights mean inexorable drift to dependency on collective power, produce in fact a populace of individuals reliant on a mighty state for the protection of that which is “rightfully” theirs anyway? For no matter how noble the intent, how necessary the idea of Rights for our civilizational progress, is there not an intrinsic weakness in this idea that leads to tyranny, that unwittingly reintroduces, in modified form, the very beast it sought to conquer? Does not the struggle to defend and claim Rights foster dependence, where it should foster independence?

We don’t actually need Rights, which are anyway just ideas we came up with (as powerful as ideas are). Rights are not “real” things like frienship, trust and respect. We need instead, I suggest, to invert the idea and recognise our obligations, to ourselves and to each other, as well as to the ecosystem of which we are a part, in which we are embedded. A willingness to recognise and fulfil our obligations is a sign of maturity and independence, qualities the vast majority of us lack. If we felt ourselves obliged to understand the world and its systems to the best of our abilities, such that we benefit from each other’s ongoing attempts to become what we are becoming, there would be no need for a mighty collective power to defend Rights to this, that and the other. Obligations don’t need defending, for they encourage cooperation and commitment to ongoing, general betterment. They need to be recognised, understood, and lived. Rights are inalienable and therefore unlearned, requiring no wisdom to be demanded, nor any sense of the consequences when they are acted on. Obligations are learned and then owned, almost as a process of osmosis.

We should not want the Right to pursue happiness, like a child pleading to watch TV after doing its homework! We should recognise our obligation to pursue happiness, simply because the more happy people there are, the happier we are as individuals and as societies. Having the Right to “freedom” means nothing unless we understand the responsibility “freedom” brings with it. Far better to learn about the complex relationships between things, and contemplate what freedom means within this context. Only then can we recognise our obligations as individuals given shape and proportion by the society in which we live. We don’t need to learn passively a list of Rights we all happen to have been born with, we need to understand our role in the world and the obligations this role brings with it.

And none of what I have said here should be taken to mean I believe in force. I think it possible to set up an open system of education in which children want to understand these things, in which they are encouraged to learn how to learn independently , within the context of the interconnectivities of life. A forced obligation is no obligation at all, it is an order. As Carl Gustav Jung said, "Free will is doing gladly that which we must do."

Monday, November 9, 2009

The twin evils of GDP and global population growth

Global population growth is predicted to peak by around 2050, which is less than two generations away. If we look at growth rates by region, we see that affluent areas are growing more slowly than poor, with, in 2005, Europe reported as having 0%, North America 1%, Oceania 1.1%, Asia 1.2%, Latin America and the Caribbean 1.4% and Africa 2.2% population growth. This increase in population growth rate across the regions is almost the perfect inverse of the regions' relative affluence. Going forward, population growth does not appear to be our major problem, at least not in terms of space for living and feeding the billions. Indeed, the "cure" for unbridled population growth seems obvious: global affluence and a decent education for all, something we seem presently unable to afford.

Our socioeconomic models, on the other hand, suffer from terminal problems. They have evolved around the assumption of perpetual GDP growth, and cannot function without it. Perpetual GDP growth may prove very hard to sustain once global population starts falling, even before considering the exponential function and impact on the ecosystem we are blindly devouring to the bone. Coupled with what I see as steadily declining demand for human labour due to technological developments (aka technological unemployment), it seems our current economic model needs to be looked at with a very fresh set of priorities as well as bold thinking. Were we to think long term more readily, say over a generation forwards, surely we would clearly recognise a pressing need to examine all reasonable proposals to deal with the real and urgent problems I briefly mention above. Proposals, that is, that can reasonably address all of these issues!

I always say a resource-based economy will take a few generations to introduce. When we think in that kind of time scale, we expose both how pressing the challenges we face are, and also that the idea of a resource-based economy, initially so alien and loony, suddenly makes more sense, seems even pragmatic, wise and doable. But just because it is a distant prospect in terms of becoming an up and running system, does not mean we shouldn't start early tests now. We can, and The Venus Project have worked out how.

Friday, November 6, 2009

Money as incentive

I watched this last night ("How open source projects survive poisonous people") and it blew me away. At about thirteen and a half minutes in, Brian Fitzpatrick (the other presenter is Ben Collins-Sussman) tells the following story:

"Ben and I worked in a different company where we dealt with different clients and we said, you know, 'yeah, you should use this method where people can write consistent log messages.' And this guy said, 'I can't get my developers to write consistent log messages!' And our friend Carl just about choked on his own tongue, because, he's like, 'I have an open source project over here with about 35 UNPAID VOLUNTEERS, who follow this insanely detailed log message specification for EVERY check in that they do! So don't tell me that you have a problem with your paid developers, if I get the people coming off the internet for free to do this.'"

One of the most stubborn beliefs people have about money, is that you need its rewards and incentives to get unwanted work done. The above quote shows, as does open source software generally, that the quality of outcome, the passionate desire to do good work, is, at least at times, a better motivator than money, even within a capitalist system, in which we are bombarded day and night with a cultural message that preaches exactly the opposite. I find this incredible and profoundly inspiring.

Thursday, November 5, 2009

Can manufacturing be the world's job saviour?

This sentence caught my eye today (I saw it at Econospeak):

"Among the 1.3 billion Chinese people, approximately 800 million have, accordingly, no buying power".

That's a chunk over 50% of their huge population without significant purchasing power. I find this compelling evidence in support of the slow process of technological unemployment generally, especially in light of outsourcing towards China, and in light of the graph I put together in an earlier blog. In that graph East Asia is the worst performer in the global employment-to-population stakes. That is, East Asia from 1998 to 2008 experienced falling employment relative to its population, during a period of intense outsourcing, and, in China's case, electrifying GDP growth. As the article I quote from mentions, China (and other countries) cannot be the recipient of jobs from elsewhere unless they keep wages low. Having high numbers of their population desperately struggling with poverty is part of this gruesome equation.

Why should this be evidence of technological unemployment? Because if human labour were in high demand, China's trick would be impossible to pull off. In detail technological unemployment is almost impossible to prove. One has to find instances of redundancies explicitly due to some technological innovation, and show that that innovation, in reducing the cost of producing some good or service, does not lead to an equal amount of employment elsewhere in the global economy in time honoured trickle-down style. That is not an easy task, and certainly way beyond my limited resources. Similarly, new companies can start up on the back of some new technology and employ less people to produce more stuff than they might otherwise have done. Such a thing would not show up in the statistics as evidence of unemployment growth.

In simple terms, we produce more and more stuff with less and less human labour. That is the pattern. Without the technological developments replacing what human labour once did, demand for human labour would increase, and would be visible in rising wages and higher purchasing power. On top of this, demand needs to keep up with (including purchasing power) the ever increasing quantities of stuff available for purchase. Were demand truly infinite (as in infinite wants), who knows what miracles of consumption we might pull off (forgetting for the sake of discussion the little issue of the ecosystem). But wants are not infinite, wages must be kept low, technological developments do mean producing more with less people, and so we have a major problem.

Unless, of course, we begin testing, with a view to pursuing, a resource-based economy. Blocking this endeavour are two major factors. One is a status quo which would cease to hold the reigns of power should such a direction be adopted, the other is our love-hate relationship with labour and money. We believe strongly, without really looking at it, that money is the only incentive out there to get unwanted things done, to reward good work, to demonstrate success etc. Because this seems to have been the case for millennia, we think it a fact of life, as ordinary as air, as inevitable as death. If this were true, then I'm afraid we would be marching ourselves to our doom.

There have been exceptions to this mode of living, with no money as incentive mechanism, and without waged labour as indicator of societal usefulness, all of which produced vastly different behaviours from their "citizens," citizens who were (or are) as genetically homo sapiens sapiens as are we.

So after all that I return to this post's title: Can manufacturing be the world's job saviour? No, it can't. Quotes are easy to come up with, compelling arguments far harder, but this one is eye-catching enough to use:

"Within ten years, less than 12% of the U.S. work force will be on the factory floor, and by the year 2020, less than 2% of the entire global work force will still be engaged in factory work."

It's the soft skills that are hardest to replicate technically, not the manual. But even there, artificial intelligence and other database softwares will wreak havoc with employment over the coming decades. The only thing that can stop this is civilizational collapse. Lets learn to embrace the process as the emancipation from unwanted slog that it is, and construct a different society that can maximize the benefits of humanity's ingenuity equally for all, while keeping human dignity and the ecosystem at the very forefront of our concerns.

Wednesday, November 4, 2009

The priorities of money

Please read this article on the sustainability of medicine. In my view it highlights one unfortunate consequence of all monetary systems generally -- despite the fact the article looks solely at the US system -- namely that money can only assume too much control and power. What follows here is my simple take on how money is guaranteed to do so, no matter which monetary system it operates in.

Because in monetary systems it costs money to get things done, profit making, or revenue generating ventures have to be prioritized over loss making or revenue losing ventures. Furthermore, because being rich is necessarily better than being poor, there is an inherent pressure in monetary systems for money (and therefore power) to concentrate increasingly to itself over time. This means that profit making enterprises become increasingly important as the "freely" available pool of money shrinks. Profit making enterprises consequently become increasingly powerful too. Control the money, control the monetary system. This strikes me as an inevitability.

The linked-to article above, the Mike Shedlock comment on the economic madness of building new schools are potent reminders of how culturally vital things like health and education must come to lose access to adequate funding in monetary systems. Only by choosing to re-engineer or redesign society along resource-based economy lines, by choosing willingly and knowingly to wean ourselves off our dependence on scarcity and money, can those institutions which deliver true value be prioritized permanently, and not just while sufficient money is available for the more "noble" causes.

Biophysical economics: shiny, new and good?

This article appeared in Scientific American on October 23. I read it today and see its content as an important part of changing course at a civilizational level. The following quotes from the article represent the key issues:

"In 1926, Frederick Soddy, a chemist who was awarded the Nobel Prize just a few weeks before, published "Wealth, Virtual Wealth and Debt," one of the first books to argue that energy should lie at the heart of economics and not supply-demand curves."

""If you go from using a 20-to-1 energy return fuel down to a 3-to-1 fuel, economic collapse is guaranteed," as nothing is left for other economic activity, said Nate Hagens, editor of the popular peak oil blog "The Oil Drum."

"The main problem with neoclassical economics is that it treats energy as the same as any other commodity input into the production function," Hagens said. "They parse it into dollar terms and treat it the same as they would mittens or earmuffs or eggs...but without energy, you can't have any of that other stuff.""

We ignore these sound observations at out peril. And this isn't some idle chatter in the halls of academia. Economics is a co-opted quasi-science used primarily as a tool to maintain the status quo's grip on power. In the interests of humanity we need to give the dismal (quasi) science a thorough, apolitical and scientific going over.

However, I remain firmly ensconced in the optimists' camp, because renewable (solar, geothermal, wind, radiant energy) and other clean energy sources (cold fusion, Black Light's hydrinos) are sufficient to power civilization forwards for centuries. That said, the carrying capacity of the planet -- a shifting variable due to technology (see Malthus) -- needs also to be taken into close account. Assessing it to the best of our ability is a top priority. There's only so much soil and water; without one or the other we won't last very long at all.

That I support wholeheartedly The Venus Project's proposals might, in light of the above, seem, to the unversed in them, counter-intuitive or even idiotic. And yet it is abundance that encourages cooperation and a more balanced relationship with the ecosystem than scarcity, which encourages hoarding and greed. We are faced with profoundly radical challenges which require profoundly radical solutions. We are consuming ourselves to death, while the sociopaths at the wheel slam down on the gas pedal with increasing mania. It's up to us now folks. The system has become destructive and utterly corrupt. We must remove our support of it and demand open, honest and public discussions of all verifiable ideas that might offer hope.

As one of planet Earth's billions of humans I demand we put our best minds and strongest ideas to some apolitical process for sorting the wheat from the chaff, then act on the best of the proposals. Time is running out.

Tuesday, November 3, 2009

Banking, scarcity, greed and change!

Fractional reserve banking is a given in most discussions on the topic of money, lending, and Central Banks. Central Banks are lenders of last resort, “designed” by their architects to stabilize the financial system. The oft quoted ratio is 10:1, which means banks can lend out to customers ten times the amount of money they hold in reserve. The money lent out is of course not taken directly from their safes -- how could it be? you can’t lend out 10x more than you have! -- but created “out of thin air.” That this happens is non-controversial and neither good nor bad in and of itself. The system “works” in the way all games work; people agree to play along. Should there be a flaw in the design, the game will become unplayable at some point, and people will take a fresh look at the “rules of the game.” I think that’s where we’re at right now.

The dry theory is that commercial banks are fed money by Central Banks, and then lend on that money at a 10:1 ratio. Money is first created by the Central Banks, then pumped through the economy’s veins at a speed of 10:1 by the commercial banks we all know and love. Please read Steve Keen’s analysis of this process, which shows, contrary to the dry theory, that in fact the reverse is true. Commercial banks lend to customers first, creating money as debt into the system, then the Central Bank reacts later on, feeding money to the commercial banks as they see fit. This is a very important piece of analysis which tells us a lot about the system, which is nowhere near as neat and tidy as theory suggests (quite a shock!).

Of course, I’m looking at this through the eyes of someone who believes a resource-based economy is now the only logical direction to follow for humanity. That’s my agenda, which I make no attempt to hide. For me therefore, the most vibrant and bright aspect of the nature of money is it’s insoluble bond with scarcity. This fact has unavoidable consequences, one of which is hoarding, otherwise known as greed. This dynamic explains how it is that the dry theory of money creation is at odds with the dirty, messy, day-to-day reality of life on the ground. There is demand for money, commercial banks are where one gets this money, commercial banks must make increasing profits, they have a quasi-legal right to create money, hence they do so, even advertising to encourage customers to borrow more and more.

So the pressure in any socioeconomic system built atop the presumption of permanent and unavoidable scarcity -- which engenders money -- is towards debt-fueled growth, as people compete to “succeed” demonstrably in material terms, always seeking to outdo each other. Money cannot be other than a symbol of success, and must be scarce, therefore the inescapable pressure within monetary systems tends strongly to unsustainable “growth,” and cyclical boom and bust. Fractional reserve banking's history is littered with this pattern.

Again, I see this as neither good nor bad. Nature is cyclical. There are seasons, forest fires, extinctions, and other longer cycles, which need not be regular or predictable to be cyclical. However, there is are two unnecessary negatives in money cyclicality (if I may call it that), and they are entrenched divisions along rich and poor lines, and too much fear. In other areas of nature, change is freer in its scope, and no sticky divisions seem to arise. Humans can “artificially” maintain a particular, preferred balance, via law and governmental institutions, and solidify a status quo in such a way that change is slowed down and impeded, dangerously so. This system-calcification is enabled by many things, in my view though, scarcity is chief among them.

As I have argued elsewhere, scarcity is part perception, part fact. Hunter-gatherers confirm this, as did the islanders of St. Kilda. In perceiving abundance, one is prompted to share and cooperate, and deal with hard times with cooperative tactics, not competitive. Bernard Lietaer is very good on this point. Money exists as a tool to deal with scarcity, to enable complex trading of scarce goods and services, and by design encourages competitive and hoarding behaviours, fearful behaviours, inspires fear of want, of material poverty, etc. This dynamic leads to calcification of whatever status quo emerges out of the struggle to find balance -- all systems, human or otherwise, constantly seek balance (though never achieve it). This scarcity based, calcifying dynamic impedes change.

Change, however, is unstoppable, is the only constant. Everything is in a constant state of dynamic flux, never achieving a settled equilibrium. The less able we are, culturally and societally, to appreciate this, the more damaging and disruptive change becomes, and this is magnified further still as our culture becomes global. Part of the thesis which argues a resource-based economy is the best way forward for us all, is that it copes better with change. In that the direction seeks to end material divisions and make all mediums of exchange redundant, in that it calls for cooperative, not competitive behaviours, calcified divisions are less likely to emerge. Money is a tool, a lever for enforcing fixed divisions, and is therefore deployed by the “successful” against the “unsuccessful.” A resource-based economy is absent such a lever by design.

Meanwhile, change -- in the form of technological development -- continues apace even within the calcifying status quo, but our many, similar, worldwide Central Bank Fractional Reserve systems fail to adapt to it, seem incapable of understanding the consequences, refusing to look openly at the data, the technology, the mood, the slowly shifting paradigm. Technically speaking, how hard would it be to keep drinking water clean and abundant for everyone? Certainly not impossible. Sadly, in financial terms it makes next to no sense to do so -- the more scarce a resource is, the more money can be made from it, assuming demand. Is it technically impossible to prevent the further erosion of top soil? Not at all, but financially speaking, chemical fertilizers make sense, regardless of the consequences. Permaculture, hydroponics, organic farming techniques combined could provide sufficient food for all of us, in abundance, but, of course, this makes no financial sense. The solutions to the energy crisis are a concerted effort away from being ours, yet the resultant clean energy abundance makes little financial sense. Saving the ecosystem which supports us makes little financial sense, or at the very least threatens the current status quo.

We have unwittingly forced ourselves into a corner. Money and scarcity are locking us in. The solution is abundance and the cooperation this necessarily inspires. We are our own enemies here, because we have been socialized for centuries, maybe millennia, with a world view based on scarcity. If an uneducated schmuck like me can take a fresh look, we should all be able to. But that’s up to us, no one else. We are each of us obliged to make the effort to take on new and challenging ideas openly and unprejudicedly, if we want to minimize the damage the coming collapse will cause.

Sunday, November 1, 2009

More thoughts for this today

Thought 1: Money cannot motivate culture to solve the energy problem along lines that would remove money from the economy.

Cold fusion is on the verge of being a problem solved, and along with Black Light Power and 80% efficient radiant-energy panels will render the burning of fossil fuels redundant, and nuclear power too.

The problem is tax revenue. The technologies I have mentioned would likely, in combination, reduce demand for power plant energy considerably, which means for metered energy, which means massive loss of income for governments around the world, not to mention the rather powerful oil industry. A big headache for us all. Curing the world of its energy problems opens up a huge can of worms, unless energy stays metered and centralized. Our system was not designed to deal with this situation, with the solutions that are there waiting to be deployed. Clean, abundant energy for everyone is a pain in the buttocks for the current system.

We need a new system.

Thought 2: We are not ready for abundance, but it is coming just the same. We "know" money makes the world go round, that people are born greedy and lazy, and that the only way you get things done is by paying to get them done. Things have to make financial sense before they make sense, right? We have the tech and the know-how to alter the system dramatically for the better, but we can't. We have neither enough money (what a bummer) nor enough wisdom. So, we must ask ourselves and each other which of the things we are certain about -- like greed, scarcity, money and laziness -- are received wisdoms, or rest upon received wisdoms, and question them till we know.

Question all assumptions. We only have the one planet. Humans, love them or loath them, are fascinating. I think this fact alone makes us worth saving.

Thought 3: Can a money be designed that does not have a logical bond with scarcity, and which does not lead to it making virtually all "important" decisions? Could we automate money creation with some transaction tracking AI database software that monitored global economic activity and employment, removing money from and introducing it into the system as necessary? Imagine a totally secure, "no-notes-n-coins" currency, where all citizens had one account, where interest was unnecessary because no banking service would be necessary, where there was next to no overhead for storage. Then imagine only one tax, a sales tax on non-essentials, unavoidable and idiot proof. What would that be like? No more accountants and bankers for a start. Way smaller government and NO CENTRAL BANK. Crazy. But would it work?