Thursday, December 30, 2010

Capitalism is Dead! Long Live ???

"Were this system improvable, such would already have happened within the last 80 years. Instead we see an insoluble problem in the absurd Capital Market Theory.

Allegedly, all participants in a free market possess the exact same information and future expectations. Were such at all possible in the real world, all participants would value all goods in this market in the same way, that is, assign the same price. But that would mean no transactions whatsoever would take place since no profits would be possible. With identical information and future expectations price and value are judged identically by all market participants. In those conditions no one can make a profit, either through buying or selling. Instead there are only losses due to transaction costs." Franz Hoermann

Unless, perhaps, price/value includes ‘profit.’ But, how could price actually do so in a perfect market? Knowingly paying others profit would be a form of cooperation, antithetical to perfect competition. And even if we did endow homo economicus with sufficient generosity to say, “Sure, I’ll pay X% above your costs,” that X% would be so low as to prohibit accumulation of capital, and hence prevent capitalism from functioning. Hence, capitalism cannot be ‘pure’ in the sense of a perfect market or perfect competition and still be capitalism. It is systemically geared to increase concentrations of capital, otherwise the very leverage required to expand society’s productive and consumptive capacities would be impossible. Capitalism is Wealth-and-Power-Concentration by definition. It is top-down elitism as socioeconomic system. It can therefore be neither free nor democratic in the sense its champions would have us believe. The only freedom capitalism ensures is that afforded by one’s purchasing power. Yes, one can ‘work hard’ and perhaps earn more, but people’s chances of accessing such freedom diminish as power and wealth concentrate and hunker down. Then corruption becomes the norm and decadence sets in.

The question society must ask itself is this: “When the costs of capitalism outweigh its benefits, how do we go about changing course?” After all, one property all systems share is mortality.

The argument that capitalism is Nature mapped to the economic sphere, and therefore not a system as such, and therefore immortal, is mere propaganda. Nature’s composition – as seen by those who assert capitalism’s robust naturalness – looks like this: competition in the true Hobbesian manner of each against all; selfish genes determining behaviour; creative destruction ensuring renewal and change; pitiless, merciless, randomly mutating evolution ensuring survival only of the fittest. But this perception of Nature is an ego-based projection arising from incomplete information garnered over the centuries. The view afforded by the latest science is very different.

Nature is in fact cooperative first, competitive second. Genes are not controllers of behaviour, they react to the environment; environment has primacy, not some unaware double-helix firing off instructions, via proteins, from an imagined control center. Creative destruction is not everywhere evident; there are exceptions, wisdom being one of the most important, institutions the most pernicious. And Lamarckism is making a slow comeback; random mutation as lone engine of evolutionary change is an incomplete idea; there is also intent.

Capitalism does not mirror Nature. Even if it did, it would only do so for a while; Nature is Change, is in fact Everything, and humanity is seamlessly, irrevocably, beautifully embedded in it, changing it as it changes us. Capitalism is indeed a system born of an ideology serving an elite, and can only be so. It has been a lever to linear growth of a certain type, and has successfully harnessed humanity's inventive genius in pursuit of that growth. To paraphrase Eisenstein, it has monetized (made scarce) everything it could, but can take us no further. To the extent it lived, it is now dead. Certainly it was never what it's defenders said it was, and that growing realization is a kind of death.

The alternative is some form of loose egalitarianism motivated by environmental concern, a model based on abundance and cooperation rather than scarcity and competition. (And by the way, neither socialism nor communism are it, for they too are elitist.)

If humanity wants to transition to such a system, in my view it must be one which can benefit sustainably from the fruits of centralization while avoiding its dangers and incorporating decentralization too. This is, in my view, only possible via a radical reorientation of our goals and desires. By demoting money’s socioeconomic role while promoting true wealth as arising from community- and ecosystem-health, open access to a relevant and optional education, etc., the necessary ideas and solutions should arise. What we call this system only history can reveal. Right now, to me, the best name seems to be “Resource-Based Economics.”

Sunday, December 26, 2010

Cooperation and Competition: Mother and Child

It increasingly seems to me that competition can only occur within the context of cooperation. I imagine this is already obvious to many, if only intuitively.

My new favourite magazine, “Sein”, has dedicated its latest issue (No. 185, Jan 2011) to cooperation, or, “The Evolution of Unity”. Some bullet-points from the magazine’s first article “Cooperation with Evolution” (as usual translated by me):

Biologists are discovering cooperation and symbiosis in bacteria, plants, trees, between animals of different species, among humans and in biological and social systems.
Core physics research recognizes that we can only correctly apprehend the structure of reality, if we include the environment of the observed phenomena in our research.
Game Theory is discovering that nature everywhere prefers cooperative solutions.
Modern research into living biological and social systems is discovering circular flows, interdependencies, feedback loops, self-organization, diversity, and adaptability as the ground rules of cooperation.
Educational science and research into creativity recognize the value of teamwork and cross-discipline cooperation.
The political sciences are dedicating themselves to possibilities of international cooperation. The social sciences increasingly assert that cooperation between human and nature, between social systems, between States, classes, social groups and individuals is a primary requisite for humanity’s survival.
And even the globalized economy has been experimenting for years with new combinations of cooperation and competition to cope with today’s challenges.

Of course I am not quoting ‘proofs’ here, yet I am confident that anyone checking up on the veracity of these assertions would not have to look far to find supporting evidence. Here’s an example of the kind of thing listed above which I found a while back: “The “selfish gene” concept as presented by reductionists of all stripes is arrant nonsense.” (Miranda Wrongs.) And I urge everyone to buy and read "The Spirit Level: why greater equality makes societies stronger" by Wilkinson and Pickett.

Back to the Sein article and the main point I’m making here, “It is being discovered everywhere that competition only makes sense, only exists, within the broader framework of cooperation. Cooperation is the higher order principle of life and evolution.” This is a dramatic statement, fully in opposition to the prevailing views readily found and promoted, relentlessly, gullibly, in the mainstream. Not that the idea is new, far from it. Peter Kropotkin’s “Mutual Aid” was written over a hundred years ago, an erudite and expressive work laying out in considerable detail and with sound logic how fundamental to nature cooperation is. Buckminster Fuller (and many others) were pro cooperation and sharing over their entire working lives. I’m sure that no matter how far back we go, we’ll find great thinkers propounding the role of cooperation in nature. And at the mundane level, though we recognize the importance and value of striving to achieve, of competing with others to discover more of our own abilities, don’t we daily promote sharing and cooperation as virtues? Don’t we consider selfishness unworthy of praise? Don’t we chastise our young when they behave selfishly? Why do we behave in this way locally while culturally asserting that only competition and selfishness deliver the ‘efficiencies’ modern society needs?

In the anachronism we call economics competition is still widely perceived as the mode which delivers the best results. Communism is held up as the only possible alternative to aggressive competition; ‘look what happened to Russia/East Germany/Romania!’ Here’s an example from another German magazine, Focus (October 2010), in which Patrick Pelata boasts about Renault’s secret battery technology as a game winner in the race to mass-produce economically viable electric cars:

When VW stated that the technology would first be ready for the mass-market in 2030, they obviously had less information than we did.

So why not share the best technology known to man in the interests of environmental health and improving living standards everywhere? Open it up! End intellectual copyright law! Develop a different and more inclusive idea of what victory is. In what big-picture way is it good to ‘beat’ the competition if such holds back the cross-fertilization of ideas the whole human race now so desperately needs? When one facet of society ‘wins’ at the cost of the rest, how beneficial is this ‘victory’ even to the ‘winner?’ We could (because many can) culturally perceive the whole planet as the system that is affected by our efforts, instead of the Us against Them, competitive, fear- and scarcity-based stance we are currently imprisoned and suffocated by. We are all aware of how development in alternative fuel forms has been retarded for economic reasons.

To branch out into ecology, Paul Hawken, in “The Ecology of Commerce”, describes ecosystem breakdown on St. Matthew Island over a twenty year period during which imported reindeer had ‘the upper hand’ against the indigenous vegetation, and ‘won:’

A haunting case of such an overshoot took place St. Matthew Island in the Bering Sea in 1944 when 29 reindeer were imported. Specialists had calculated that the island could support 13 to 18 reindeer per square mile, or a total population of between 1,600 and 2,300 animals. By 1957, the population was 1,350; but by 1963, with no natural controls or predators, the population had exploded to 6,000. The original calculations had been correct; this number vastly exceeded carrying capacity and was soon decimated by disease and starvation. [ ... ] By 1966 there were only 42 reindeer alive on St. Matthew Island.

Likewise, if the wolves of an ecosystem ‘won’ against the deer such that they ate the last of them, the wolves would die of starvation. Outright ‘victory’ can only be pyrrhic. Competition has to occur within the context of a dynamic and cooperative balance, otherwise the system tips into collapse, and recovery can be so slow as to be impossible from the point of view of the ‘victor.’

Of course there are nuances and complexities a small blog-post such as this one must leave to one side, for example the absence of competition from natural predators in the story quoted above, but the point relating to balance is valid generally.

To conclude I’d like to turn to Gregory Bateson’s criteria for viable and sustainable living: 1) Health, the ability to exist within the environment; 2) Competence, the ability to feed needs from the resources of the environment; and 3) Adaptability, the ability to change with the changes in the environment.

Change is the only constant. Jared Diamond lists inability to adapt to changing circumstances as one of the main causes of civilizational collapse. He claims that status quos typically find it impossible to change, a problem Bob Geldof termed “Institutionitis.” Our institutions grew up out of a belief in elitism, competition, scarcity, perpetual growth, greed, selfishness, and so on, beliefs which were ‘effective’ in a particular direction. They have driven us to a globalized, but deeply fractious society struggling to deal with the forces urging it on, failing to recognize the consequences of its successes, riven with corruption, and bleeding all manner of poisons into all manner of blood streams, physical and spiritual, this beautiful planet hosts.

If we care about our lives, if we care about how to carry on sustainably, we must be flexible and embrace the full gamut of connotations brought to our cultural attention by new research into the fascinating relationships between competition and cooperation. In my view capitalism itself has been exposed as 'out of date,' and profoundly so. Only post-scarcity or resource-based economics offer the breadth and depth of thinking required to define a new path forward to a new way of being. Only by being open in this area of our thinking can we be adaptive enough to survive.

Thursday, December 16, 2010

I Am Not

There’s nothing I can zero in on and say, “That’s it!” Actually, there is no “it.” I have Charles Eisenstein to thank for this new knowledge, though he has others to thank too. That chain goes backwards forever. There is no “it” to be isolated, identified, and profited from.


A few days ago my younger daughter asked me where her tongue ended, how deep in her throat. Sadly, she has me for a father. I told her there are no beginnings and endings in the way our eyes and fingers suggest. What is Tongue without flavours, without odours, without saliva, without digestion, stomach, sound? I pointed out that my back is painful because my shoulder is still very stiff from the operation in August, which happened because I rode a bike to work, and crashed twice in three years, and so on, and on. I said that I don’t play with my children in rough and tumble games because of those crashes, and that she and her sister will remember this, that their Slightly Broken Dad will always be of them, in their associations and memories. And so on, and on.

I get depressed sometimes. Today I imagined rubbing myself out of the universe. But what am I for such an idea to make sense? How can what I am be taken from Universe? Impossible. I do not exist in a way that allows me to become null. Nor does anything else. We understand existence very badly. (And change is the only constant.)

To be is not to be. Eisenstein points to ‘being’ as our profoundest core concept; reality made up of ‘objects in existence.’ Objects, discrete, each Other to one another, sometimes affecting each other in physical ways, though mostly not. A lonely and cold reality, pitiless and pointless. Seeing this as a fallacy requires the upending of almost everything we ‘know,’ yet this is precisely what we are going through.

So what is competition, and what is cooperation? We cannot even know if asking such questions makes sense until we’ve developed a better understanding of reality. What is human nature? What is profit? Success?

People debate economics and money, finance and society, but the debate, the discussion, the thinking, is wrong at the very outset. I set out in this blog to question assumptions as deeply as I could, and found in Charles Eisenstein’s work a process of questioning that has undone me so deeply that I no longer exist.

Confession to the contrary: I want to be loved and respected. I write to be respected for what I write and how I think. Failure to achieve these ego-goals—goals I was taught to desire by my environment—depresses me. My depression seeps out from me into my family and beyond, into the future, unravels in unknown ways. And yet I don’t exist. I am patterns of change changed by the patterns of change I change by being changed by them. The universe is itself as everything, and Toby Russell is a verb, as are we all. And in this paragraph are contradictions I have not time enough to undo.

There, I got that off my chest.

There is no economics, there is reality. It is change, and it is everything.


Demote money, promote wealth.

Sunday, December 5, 2010

Austrian Economist says Money is Obsolete

The sharp-eyed will already have noticed I changed my tag line yesterday. My daughter's discovery of a free magazine in a 'green' store in Berlin has lent me the strength to be bold.

On this blog I've questioned economics' domain assumptions to the best of my ability, written oodles about them and the discipline's controlled refusal to deal with its base assumptions scientifically and openly. I have concluded it is so deeply flawed, so irretrievably rotten, the only way forward is to redefine the way humanity operates on planet earth as a species capable of civilization. Furthermore, Charles Eisenstein has convinced me with his writings that the depth we must go to in order to properly clean out our Augean stables is right to the notion of ourselves as separate beings isolated among 'other' separate and beings. The 'I'm alright Jack,' or 'me against you' core of our entire philosophical inheritance is wrong, not because it never made any sense – it did – but because we are writing a new story. Defining the way forward is our task now, as the old way rapidly collapses. The revolution is now, and is not being televised. It is, however, turning up here and there, and gathering momentum.

So, what is this magazine? It's called “Sein” (“To Be” or “Be”), and December's issue (no. 184) is called “Eine Zukunft ohne Geld?” (“A future without money?”) There are many articles for me to read, but I wanted to share with you (via my translation) the one that excites me the most. So, without further ado:

“Crash as liberation – life after money

The renowned Viennese professor of economics Franz Hoermann criticizes the economic sciences as political propaganda, says the current system has failed and expects a fundamental system change. The professor of the University of Economics of Vienna is respected by his peers, and a member of, among other institutions, “The Testing Committee of Accountants” [not sure about this translation – “Pruefungsausschuss fuer Wirtsschaftspruefer”]. Nevertheless, he has dared, in an interview with The Standard, to call our current financial and economic system obsolete, the economic sciences unscientific and “political propaganda” and banking a con game. Last but not least, Hoermann believes the final system crash is right around the corner, perhaps as early as next year.

Florian Roetzer interviewed the lateral thinker for Telepolis, and the interview appears here in a shortened form with friendly permission of the author.

Florian Roetzer: You say the current financial crisis is different from its predecessors.

Franz Hoermann: What we currently observe developing in the global economic system represents no single, unpredictable catastrophe which can be overcome in some foreseeable time frame, after which the old rules of the so-called free market system would work again. It is far more the case that the multi-millennia old monetary control of individual humans and whole societies can no longer be kept upright. I believe we are in the midst of the final systemic crisis, not merely weathering some temporary storm with standard political and financial skills. We therefore desperately need other base assumptions for a global, sustainable society.

The economic sciences don't offer these base assumptions, they would in fact be a “Great Scam” and an instrument of power of our Overlords?

Franz Hoermann: Sadly, the economic sciences have often been exposed as mathematically faulty, and therefore as unscientific and a pure propaganda tool of the financial elite, by, among others, Nobel Prize winner George Stigler 50 years ago (by the way, the details on this can be read in “Debunking Economics: the naked emperor of the social sciences” by Steve Keen). All these competent rebuttals were simply suppressed or ignored. Their logical consequences were never followed through, because such would have meant the end of an entire, and very politically powerful, profession.

What could replace the present system?

Franz Hoermann: The Internet, and the innovative transaction models enabled by it, are inexorably displacing the traditional money system. In our society money is becoming, increasingly quickly, obsolete – goods and services could be distributed in totally new and innovative ways, in which possession of a standardized medium of exchange would no longer be necessary. The possibility of (almost) instantaneous contact with (almost) any person through modern communication technologies, combined with the emerging spirit of cooperation rather than competition, further combined with continuously improving production technologies targeted to environmental health, can raise human society, sustainably, to their next developmental stage: peaceful coexistence on the basis of spiritual rather than materialistic evolutionary models.

The money masters are not going to be pleased with that.

Franz Hoermann: Of course. Since societal power in free markets traditionally lies, first and foremost, with the money masters, the financial elites try desperately to sustain the appearance of the necessity of money's continued existence – in the most extreme case even by reference to the ongoing global crisis, the very crisis so visibly raising questions about money worldwide. But since money is really only about the rules of distribution of goods and services in a society, and since these rules are made far simpler and more flexible through modern technologies such as internet-based databases, as opposed to the use of metal coins feigning intrinsic value, even this threatening scenario will not deeply unsettle ever wiser communities. Flowing on from simple changes in decision making structures, these communities will reorganize their provisioning of goods and services in the most efficient, fair and flexible manner possible.

That sounds like a soft transition and is very optimistic. How might such a smooth transition look, which preconditions would have to fulfilled.

Franz Hoermann: The most important precondition for this is first an honest and taboo-free information exchange between the financial elite and the wider public. On the one hand, the fear of loss on the part of society's pyramidal tip must be understood and soothed, and on the other hand we must try to prevent the broader public from suddenly seeing the elites as con artists and liars, then erupting into violence.

It's absolutely true that many members of the (political and financial) elites could not have foreseen the so called crisis, because their very education blinded them to it, an education which has for many decades now guaranteed that these people could not recognize the absurd basis of our economic system (money is only created as unbacked debt, 'out of thin air', which must then earn the banks profit through interest, interest which is not present in the money supply).

Is it not far more likely that a “final collapse” of the ruling system would lead to chaos, violence and the collapse of most production infrastructure, and worst of all the Internet?

Franz Hoermann: That depends on how the majority experience this collapse. Will the majority experience it negatively, as a collapse, or can the crisis initiate the freer development of creativity, individuality, and spirituality? If we can show ordinary people that cooperation yields better results than competition, as well as give them more freedom to decide for themselves (e.g. time management, how we do what we do, shaping of the social and technical environment etc.), then we really can see the opportunity in this crisis, and complete the long overdue transformation of western society.

You expect the ultimate crash next year, what will happen?

Franz Hoermann: When the US-Dollar can no longer fulfill its function (the Euro too by the way), the US will break down into individual states, as did the Soviet Union. They will then try again to introduce local currencies. Should you search the Internet for long enough, you will discover that the Deutsche Bundesbank allegedly has provisions for printing a new D-Mark, which some representatives from politics and economics have already openly called for. Whether a return to the old system (state-level currencies still created as debt by private banks) would be better (which we had before the introduction of the Euro), or if we'd just be going in circles, each can decide for himself.

As we've seen, a real systemic collapse would require the insolvency of the big banks. But can't this insolvency be continually prevented by governments and central banks?

Franz Hoermann: That's not entirely correct. There are two conditions, which, when they strike at once, can and will initiate systemic collapse. First, the states' or currency zones' money supplies must visibly come only from central banks, through the buying of bonds, the so called monetization of debt. The FED has been practicing this actually for a long time now, totally unabashed, and behind the scenes the ECB is already embarked on the same course.

This shakes the faith in the affected currencies so deeply and finally, that it can only be restored (if at all) through a consequent currency reform. The second condition lies in the inability of the indebted nations to make any more interest payments. This situation will arrive, viewed mathematically, in 2011, in the large indebted nations. When no more interest can be earned, and the central banks keep on printing money for government bonds, then the entire world will recognize those bonds as worthless, and simultaneously also money itself – this is precisely the situation central banks have wanted to avoid for decades, but they have nevertheless got themselves exactly there!"

That's my translation, word for word as it seems best to me.

Another thing I want quickly to mention from the magazine is 'Give and Take Centers' ("Gib und Nimm Zentrale"), shops where you go in and take what you want for free. You also deposit there what you no longer need. There are 3 of them in Berlin, and 50 in Germany. I had no idea, but think it is a wonderful idea, and embodies the nature of the gift as a flow from person to person, place to place.

I shall be writing more on this in due course.

Saturday, November 27, 2010

Giving Wealth a Chance

“In a monetary system there is an inherent reason for
corruption and that is to gain a competitive advantage over someone else.” Jacque Fresco

One of money’s great shortcomings is its tendency to accumulate to itself. The rich become richer, the poor poorer. Countering this, capitalism’s most beguiling selling point is the arbitrary way money-flow, as affected by buying and selling, acts as an impartial force for democracy and social good (The Invisible Hand). Vote with your wallet, communicate your desires with your spending power, and keep government out of it. We all know the argument.

But the poor cannot simply 'vote' how they want – many can barely afford food – while the rich get far too much of a say, and do their level best to keep it that way.

In the US, the idea of redistributing income is seen as socialist, and therefore evil. However, capitalism is by definition a distributor and redistributor of wealth via the price mechanism, using so-called rational or enlightened self interest to drive this forward. But, instead of the theoretically predicted 'creative destruction,' humanity has repeatedly endured too much hoarding and accumulation under capitalism's aegis. Today we have Too Big To Fail, but the pattern is the same across the centuries; stubborn social divisions leading to decadence and corruption. This is generally predicted by the quote opening this piece.

Monetary wealth is capitalism’s implicit goal, its sign of success, the carrot to poverty's stick. Poverty is the horror to be avoided at all costs. Inescapably this dynamic will tend to entrenched social divisions, and we have indeed seen this throughout history. Humans, being highly intelligent and social, have 'escaped' the law of the jungle by establishing dynasties and institutions for protection of 'our own' (be that race or class or creed) down through the generations. Now we have immortal legal persons known as Corporations, cheating death, and hoarding power and wealth like there were no tomorrow. Soon there won't be.

Lopsided and therefore unhealthy distributions of money are like stagnation in an ecosystem, when dynamism is suffocated and rot (decadence) sets in. Wide and deep money-flow simply cannot persist over time at sufficient speed and depth unless the system is designed from the ground up to affect this. A guaranteed income, aligned with demurrage (negative interest) and the other suggestions I list below, would not ‘redistribute income’ in the sense of 'theft,' but ensure healthy money-flow, keep democracy working, prevent stagnation and persistently deep income inequality, and promote growth only where it is healthy to do so. This post is a rough and discussion-oriented attempt to list goals and priorities as I see them, and part of an ongoing attempt to redefine wealth.

Core socioeconomic elements:
1. Guaranteed income from birth to death
2. Negative interest of 4% on all money
3. One tax – sales tax, simple, no avoidance possible
4. All money spent into existence by state
5. 100% reserve banking (if banking is at all necessary (see below))
6. (?) One currency worldwide (???)

Full employment, with work to be redefined at the cultural level
Open, optional education geared to maturity and creative problem solving, not rote
Constant or increasing amounts of fertile topsoil (other cultures have managed this)
Clean air
Constant or rising water tables of clean water
Ever falling crime rates
Full automation of grunt labour where this is good for society and the environment
As close to 100% recycling as possible (adherence to cradle-to-cradle design principles)
Goods built to last for as long as possible
Building of ‘intelligent’ eco-cities and new transportation network (ET3)
Speedy transition to renewable energies
Health system focused on prevention, not cure
Decreasing emphasis on ownership, increasing focus on access
Where feasible, goods and services to be given away for free

All of the above under the following directive: demote money, promote wealth.

(Some thoughts on my thoughts: Persistent and deep money flow throughout all parts of economy including return to govt. ‘coffers’ (trash) guaranteed by points 1,2 and 3 – hoarding would be virtually unheard of. Investment in new production could be funded by the 'community' on Internet sites designed to raise interest in new ideas (this would be very democratic and give the term 'purchasing power' real meaning). Otherwise government could enable new production, in which case either ‘normal’ money would be spent into existence, or ‘fixed-life, single-purpose’ money that ‘expires’ after having fulfilled its function. We need only a healthy aversion to risk, not horror of it. (Could banking be entirely automated? It need simply be storing money and tracking its movement, money being mere numbers.) Assumed/expected at the outset is less (I really mean “less”) economic activity. I seek the death of the pursuit of ever increasing monetary profits and Perpetual Growth, and the demise of the very notion of 'money is wealth.' I am not against growth (whatever that is), I am against forced growth.)

Implemented in full, the above suggestions would change economic activity and society beyond all recognition. We have lived for centuries in a culture whose central premise – at least the elite's propaganda tells us this – has been the ‘naturalness’ of the struggle for existence, where ‘civilized’ reward is accumulation of material goods and a subsequent demonstration of one’s societal value via conspicuous consumption (certainly over the last century). Changing course towards a resource-based economy is by necessity a radical departure from the Money-Wealth paradigm, which is, to my mind, far past its sell-by date (it had its uses) and the hidden heart of the battle ground.

Thus I am uninterested in the thinking of those who, either explicitly or implicitly, remain trapped in the dying story. Judged through the grey-tinted spectacles of the current system, the above suggestions can only seem unworkable. And it’s true, they are unworkable ... in the current paradigm. They are valid, however, as parts of the process of hewing a new path forward into the uncertain future. What the above cannot engender, systemically, are the familiar ‘successes’ of the current mode; ostentation, non-stop economic ‘growth,’ differential advantage, and so on. Unlikely therefore are: huge houses; ownership of multiple, expensive cars; exploitation; poverty; crime; cronyism; moral hazard; political corruption; concentrations of wealth and power, and so on. As such, to the untrained eye, all this seems no doubt to be the ravings of a dangerously socialist mind.

And no, such negative socioeconomic phenomena, currently so pervasive and endemic, are not the organic and inevitable consequences of human nature. Homo sapiens sapiens were strictly egalitarian for the vast majority of their existence on earth. It is the current system which goes ‘against the grain,’ to the extent there is a grain. Witness the suicide and depression, the perversity of paedophilia and the sex industry generally, the inhumanity of exploitation, the very existence of the word ‘decadence.’ Watch children’s insatiable curiosity purposefully extinguished by a schooling system designed to dumb us down for the industrial age, for uneasy subservience, for insatiable consumption. Feel your own yearning for honesty and integrity, recognise your despondency and cynicism when you fear they may never come.

Nevertheless, ideals and rhetoric have never been enough on their own. Practical considerations are always paramount. Is the direction I promote workable?

A joyous spending into existence of the negative-interest money a society needs to tick economically is but Stage 1, the key turning in the ignition. The social engine must keep turning over in some kind of dynamic balance, after it has been sparked to life. While money is needed for enabling economic activity, money must continually move from place to place, from person to person – as far as possible without exception – or gangrene will set in, in the form of gross imbalances. Perhaps it is helpful to think of money as society’s blood, which has to reach the very tips of the remotest limbs to keep society healthy. (Cutting off ‘unneeded’ fingers and toes, or Culling the Poor, is not a long term solution; the current paradigm necessitates rich-poor divides by design. It is elitist and must, in the view of the elite, remain so, come what may.)

It is for this reason alone that the unemployed are an economic ‘problem,’ with familiar societal and psychological problems all arising from this economic ‘uselessness.’ With a guaranteed income they would at least have sufficient spending power not to become ‘gangrenous,’ but would monthly need more money from the government, earning none from a paying job. By definition, the unemployed perform no economic activity which keeps non-taxed, existing money circulating, except spending. It would be absurd for a government constantly to spend more and more money into existence, just to pour it directly into the pockets of the unemployed. Some proportion of the money flowing through the economy must be taxed back to the government to prevent inflation, to keep money circulating rather than expanding. The amount of money in circulation should be increased only because of, or to enable, increased production, not otherwise (where the purpose of production is not the pursuit of monetary profit, but to improve society, be it for pleasure, leisure, transport, whatever).

The question is this: Does guaranteed income plus high unemployment plus a large state sector necessarily result in a too powerful and therefore corrupt state? Power corrupts, absolute power corrupts absolutely. Or, more fundamentally: By systemically preventing concentrations of monetary power, do we ensure concentrations of state power?

No. The Market can now be reintroduced as an efficient distributor of goods and services after money's importance has been systemically demoted. We could privatize education totally, health too, and much else besides, as long as wealth is culturally decoupled from money, and deep and persistent money-flow is systemically assured. The 'think global, act local' maxim can find its full voice too.

Guaranteed income flows to adults and children. School is optional so children and parents could choose; there would be healthy competition here. Health would be all about prevention, not cure. Transportation systems would be designed to render accidents impossible. Stress can be removed from the work place as egalitarianism flourishes, carcinogens and other toxins removed from food and other production processes. Cities would be designed for minimal energy use, maximum community, maximum safety and health. Crime would fall dramatically, police and army would become increasingly unnecessary.

In short, concentration of power can be avoided and market principles re-embraced without fear of wealth concentrations, the state's role can be minimized, the private sector expanded, by designing a money system to prevent wealth gaps from arising, and opening society up to true democratic processes.

The underlying premise here is that (non-sociopathic) humans need to feel needed. As a social animal, that urge is perhaps the main element of human nature, to the extent there is such a thing. Perfection is of course impossible, but a healthier blend of competition and cooperation, of 'collective' and 'individual' is surely possible.

The intense competition for unnecessarily scarce money has reached a sickening pitch of avarice that will surely end in blood globally, for, as much as national governments might like to believe otherwise, we live in an interconnected community of business and money, such that we can now safely say, “Nowhere is safe.” The arrival of the Internet has added a social layer to that interconnectivity which is working to undermine the status quo's grip on the hearts and minds of the so-called masses. The jockeying and jostling to stay in power is now totally transparent and will likely soon become war, war which cannot take us anywhere better long term, unless, by chance, a radically new consensus arises from its horrors. As I have echoed elsewhere, the entire ‘Self Against Other’ story is closing (to paraphrase Charles Eisenstein). A new paradigm is being written, but a third global war could well mean its stillbirth, hence the pressing need to do what we can now to prevent that possibility.

The above represents the direction towards post-scarcity economics as I imagine it. The journey is the destination. The means are the ends.

Saturday, November 20, 2010

All We Are Saying, Is Give Wealth a Chance

Foreclosuregate is one of those potential political and socioeconomic watersheds that make a guy like me hope, again, that deep change might well and truly be 'just around the corner.' But, before I stride forward and cry, "The Revolution is Come!" I ought first to confess that my intuition has been oft deceived by my fervent hopes. The mighty sheeple are about to stir from their propaganda-induced slumber! This time it's different! And yet, thus far, no matter what the indicators, no matter how flagrant the decadence and criminality, the expected fireworks have not been seen. Perhaps I'm expecting the wrong type of fireworks.

Observation 1; the revolution will not be televised. A strong argument can be made that Revolution is Now, though deliberately and skillfully ignored by the MSM. The status quo must, for its own protection, direct our gaze elsewhere, by presenting any information that might suggest 'the wheels are coming off' as normal business, humdrum hiccups and bumps along The One True Way. The MSM is The View of the World the status quo needs us to use, it is the window we are led to when we want to know what's going on 'out there.'

Some months ago, Yves Smith posted an article about the failure of the left to make hay while the sun shines, or rather, as capitalism's sun sets. It prompted some good debate, but my favourite comment came from an activist who lambasted the article and commenters for failing to 'get out there and act.' The commenter claimed to be part of a thriving community of people stepping out from the system and building a new one, of course unreported in the media. (I can't find the article, because I can't remember the title.) I wrote a blog on the opting out option, which I believe is an essential precursor of revolution, particularly today. Opting out is fairly bloodless in its initial stages, but should it generate momentum enough to upset the status quo's apple cart, attempts will be made to stamp it out. All systems want to live on and on, no status quo can be an exception to this, yet everything dies.

Observation 2; Foreclosuergate is massive and full of juicy stories of suffering and woe, so has to be in the mainstream to some extent. It furthermore follows an unbroken and ongoing succession of other scandals and robberies (bailouts and bonuses) I'm sure the majority do not want.

Is the great propaganda machine losing its grip? Not on everyone certainly, and where it is slipping, in different ways among different groups. The right is as dissatisfied as the left, each reacts differently, much as I hate to feed into what I see as cosmetic divisions fostered by the very propaganda I try to ignore. There is agitation and deep frustration, a yearning hunger for something else, but no real consensus. 'Divide and conquer' has worked well, though its harvest will be bitter indeed.

And yet, as Charles Eisenstein puts it, a millennia-old story is coming to a close. The heart of that story is 'self against other,' with its younger offspring, 'survival of the fittest,' 'nice guys finish last,' 'the invisible hand,' and Efficient Markets Hypothesis being but the latest iterations of it. The Guardians of this story occupy society's fulcrum as The Finance Industry, and have been in control of cultural definitions of money and wealth for a very long time. Since they possess the keys to the Money Making Machine, they get to shroud it in mystery while telling us, on a need to know basis, what success and wealth are. In short, they get us to want what they have to give; money. Therefore, money must be wealth, and monetary wealth must be success. Money must be the arbiter of all that gets done. 'Let Money; Price; and Hand, The Invisible take care of business, and everything will be just fine. Trust us. We know what we're doing.'

Faith in this tale is wearing thin, and the moles keeping on digging up the garden.

Recently, some US politicians have been getting a clue, and subjecting the Guardians' underlings to some half-way decent questioning. Yves Smith's article quotes a Congressional Oversight Panel paper:

While these documentation irregularities may sound minor, they have the potential to throw the foreclosure system – and possibly the mortgage loan system and housing market itself – into turmoil.

The guts of the Money Making Machine are at risk of prolapse, which means the status quo itself is at death's grim edge staring into the abyss. While they won't debate issues such as money and wealth, they will, and do, squeal about system collapse and the end of civilization, again (echoes of 2007-2008).

Chase Manhattan has been accused of perjury. The Republic of Ireland is facing its High Noon, an epic struggle that goes to the very core of Money Power, and the carrot society uses to propel itself 'forwards.' Regular Naked Capitalism commenter DownSouth posted the following:

Are the wheels starting to come off the corporate states? These are the anti-democratic governments that are underpinned by the ideology of state capitalism that emerged during the 19th century and became dominant in the West during the 20th century. Corporate states now rule over almost all Western peoples, as well as much of the rest of the world.

And let there be no mistake. American banking oligarchs are aware of the stakes, as became evident at Tuesday’s Senate’s Banking, Housing and Urban Affairs Committee hearing “Mortgage Services and Foreclosure Practices.” Senator John “Jack” F. Reed made this explicit in his comments starting at minute 2:15:35:

There’s a real question, I think: Do we have that time? And not just in terms of the individual homeowners but the economy. And if the economy gets worse for reasons not directly related to this—-sovereign debt crises overseas, etc—-then the foreclosure problem we face today, you know the bottom keeps slipping down, down, down, down, down, then this problem becomes really tremendous.

What is at stake here? The financier's will scream 'Life Itself!' or at least, 'The Good Life,' but I think it's our cultural definitions of wealth and money. The more often this putrid game repeats, the more often we borrow money to lend to those up to their eyeballs in debt to 'rescue the system,' the more ridiculous money seems to be. This soiling of money's 'good name' is behind recent attempts to bring gold back to the forefront as a 'store of value.' Solidity is sought as the ground beneath our feet crumbles away. People want something 'real' to hold on to. I don't believe gold can do it. Nothing can which is 'wealth as money or single commodity.' The rot is just too deep, the old story too old.

A new story is being written, people are opting out, the rich are eating themselves, and though mostly at the fringes and desperately ignored and finessed, this squeaks through into the mainstream, from time to time, as Catastrophe. For the mainstream it is a death knell, though allegedly 'fixable' with standard medicine. The old way is indeed dying. The Revolution is indeed Now, but is disjointed, straggly, leaderless and groping. As it grows down and out into society there will be increasing chaos, horror, collapse, and then something unknowable.

As I have come to see it and consequently promote it, real wealth arises spontaneously from healthy networks. A human being is a society of individual cells cooperating as one organism whose health depends on access to the right environmental conditions. Society is likewise a collection of individual cells (and clusters of cells) whose health depends on access to an appropriate environment. Wealth is a complex of relationships, not an 'out there,' detached object we can hold to ourselves like gold or money or property or land. The new emergent story is principally about this; systems interdependently embedded within other systems in a state of perpetual change. This is the counterargument capitalism and liberalism do not want to engage.

Transitioning from that old to this new will be, I believe, an unprecedentedly broad and deep planetary process, and the outcome is uncertain. But make no mistake, it is underway and cannot be stopped. The best we can do is give our energies to those processes we believe will promote societal and environmental health, hoping for a good outcome.

Sunday, November 14, 2010

Grundeinkommen (Basic, or Guaranteed Income)

I am now convinced that the simplest approach will prove to be the most effective — the solution to poverty is to abolish it directly by a now widely discussed measure: the guaranteed income.
Martin Luther King

Almost two years ago Susanne Wiest, a native of Bavaria now working in a Kindergarten somewhere in Mecklenburg-Vorpommern, started a citizen's initiative to introduce in Germany a guaranteed income. It is, to her great surprise, rapidly gathering momentum, to the extent that it is today the most successful such initiative, having collected around 50,000 signatures in the first few weeks of its life, and subsequently 90,000 fans on Facebook. It now has political support from the Green Party (Bündnis 90/Die Grünen), with Susanne Wiest having presented the idea to the Bundestag earlier this week (on 8th November 2010).

In brief, the idea is to give every citizen in Germany an income, regardless of age and gender. Wiest suggests €1,500 for every adult, and €1,000 for every child. The idea, for those smelling the overly controlling hand of socialism, is not to equalize income, but to equalize opportunity. For example, for those earning more than €1,500 monthly, the employer would pay €1,500 less than before. I.e. for someone earning €3,000, the employer would pay €1,500. In this way income differentials would remain while eradicating poverty, but society could still 'objectively value,' via the established price mechanism – while such remains necessary – the various job skills.

Furthermore, the scheme would put no pressure on the employer to compete with the guaranteed income on money terms, rather it would demand more creative and flexible employment contracts and work conditions. It would also almost certainly generate growing equality in the work place. A guaranteed income would be an instrumental element in creating a fairer labour market. Implemented carefully, and conjoined with a revolution in the money creation system, employment itself would be revolutionized for the better, with employer and employee equally dependent upon one another. Only in this way can the best that market processes have to offer operate to the benefit of society generally.

The idea that we today have a 'labour market' is of course a one sided joke where, currently and for centuries, the employer tends to be the one laughing. For example, most people in former East Germany cannot find decent work, and when they do it is for less than €1,500, for which they do 40+ hours a week. These are not market conditions, where people seeking work can pick and choose from the many jobs on offer; the unemployed are powerless, totally at the mercy of employers. A guaranteed income would quickly create a genuine labour market in which a job seeker would actually have some choice in the matter, have real bargaining power. Again, the idea is not to equalize income, it is to equalize the opportunity to live a life of dignity. Current welfare payments stave off starvation, but not much else, and certainly bestow no dignity on those receiving them.

Opponents raise the expected objections, which have been engagingly addressed by Professor Goetz Werner et al in a recent study. The principal objection is that too few would want to work. Werner's detailed survey of over 2,000 people, from the unemployed as well as different income levels, shows in fact a desire among the unemployed to work, among the employed to work less, such that the amount of work offered to employers would be more or less as today. And, because the nature of work, as well as the direction of the economy, would be profoundly changed were the guaranteed income to be introduced, the 'people are lazy' objection has no teeth.

In my case, I would want to work less at my job, say three days a week, or around 25 hours. I would also no longer aggressively save my money as I now do (I was unemployed for over a decade and have a very small pension pot), which means what I earn would not be hoarded. I would also have more time for my family and to fight for those environmental issues which mean so much to me, as well as do more for the elderly perhaps, and other socially worthy causes. I would also, with my increased spending power, buy only environmentally friendly products, many of which I currently cannot afford. This rough decision-set probably applies to many others in my approximate position.

'Freedom' is just a propaganda buzz word until the power and material security to be independent is available to all. The current system has failed miserably to deliver the very freedom it touts as its defining quality and crowning achievement. A guaranteed income, in conjunction with others, can deliver genuine independence, alongside recognition of interdependence, which would be so healing to all.

What concerns me about this idea is possible rampant economic growth and the unreadiness of society for the changes it would affect, if other needed changes are not simultaneously affected. I don't think a guaranteed income can be coldly introduced into the current system and be healthy for society, nor, perhaps, should it be introduced in one country alone. What would happen to immigration policy, for example? I don't fear inflation initially, since we have enormous overcapacity on the production side, but as society adjusted to the scheme, other changes, perhaps deeper and more upsetting to the status quo, would be needed to deal with that possibility. I seek such changes, but feel they would need to be transparently anticipated from the outset, baked into the guaranteed income cake in the form of a road map perhaps, as part of a broad and multi-pronged programme to change radically society's direction worldwide.

My interest remains the pursual of a post-scarcity, resource-based economy, but my focus is on how to get there, since it is a long way from here. I believe the way is growing clearer. Right now it looks likes this: MMT with 100% reserve banking + guaranteed income + revolution in education + the total embracing of technology/automation in the interest of humanity and the environment + revolution in economics. If a resource-based economy is a viable system, these steps, taken pretty much simultaneously or as linked steps in a bold programme for change, would lead us to that discovery.

Monday, November 8, 2010

"Free gold" — Shiny, New and Good?

Respect for Edwardo is why I took his invitation to look into "free gold" seriously, and acted upon it. Over the last few days I have spent much of my free time reading about it, and written many thousands of words in note form, with the plan to write a coherent article and post it here. In terms of being able to put something interesting and flowing together on this idea, I have failed, but it is not for lack of effort.

If I compare my efforts to understand MMT with those I've just expended struggling with free gold, the overriding impression is that the MMT promoters do their best to make a difficult subject accessible to the layman (see my first post on MMT), whereas the free gold promoters do their best to confuse what should be an easy enough concept. Indeed, the main proponent of free gold seems not to have written one article laying out, in introductory form, what free gold is about. I am not alone with this impression:

FOFOA’s blog consists of many extremely long and erudite posts that keep referring — often tangentially — to Freegold theory. This is a brief explanation of Freegold theory as I currently understand it, for those who are flummoxed by the enormous quantity of information on FOFOA’s outstanding blog. Source.

Goldsubject, the author of the above, says, "often tangentially". "Often" is not always. And yet even he fails to refer the interested to any article which explains free gold. I am forced to conclude there is none. My efforts yielded only tangential references, even in FOA's article entitled "Freegold":

the coming revaluation that I call Freegold. [... snip ...] But what is most significant about this ongoing redistribution of gold, the "important element of global monetary reserves", in preparation for the Freegold value reset, is that in countries like India, China and in the Eurozone this redistribution is even inclusive of us little people, not just the central banks, elites and giants! [... snip ...] I read where some of you say I am wrong about Freegold. That it won't or can't happen because country A isn't ready for it, or country B doesn't want it. Or that "the elite" will never allow it. Etc... etc... Blah blah blah... [... snip ...] Well, Freegold, or whatever you want to call it, is kind of like a runaway freight train coming right at us. It is not stoppable and it is not controllable. It has a mind of its own and too much momentum to do anything but prepare for its arrival. It is not for any elite or any country to decide when and if it happens. It is only for them and us to be as prepared as possible when it does. [... snip ...] This striking paradox WILL be corrected, by the way, through Freegold.

Sadly, the one article I found which should have been, as its title suggests, directly about it, mentions free gold five times, claiming it will cure all sorts of ills and even that it is unstoppable, yet it signally fails to explain how it will have these effects. The bold claims smack, to this reader, of salesmanship, an impression bolstered elsewhere:

Some day in the future we will know what that magic number was on October 10th, 2009. And anyone who went double that number, doubled their savings... and so on. Imagine if you put 20% of your savings into gold coins! Or 40%! How about 80%? Or even 90%! Or, God-forbid... 100%. So grab your calculator and have some fun with numbers!

I looked elsewhere for some clue about how free gold would function, what it actually is, and found Goldsubject's article quoted from above. His brief take looks like this:

Money, stocks, bonds etc. represent more wealth than really exists –> massive default inevitable –> paper no longer trusted to store value –> only gold is trusted to store value –> buying power of gold massively increases. Value of gold set by free market; money used for transactions; gold used to store value. The biggest and most dramatic revaluation in history.

Again I get the impression of snake oil and 'no way this can fail' type of thinking. A supporter of the idea trying to set it out for newcomers fails to explain how it would actually work.

But what really stuck in my craw was the anti-collective, anti-socialist slant that comes through very strong on multiple occasions:

If you would like to be an activist for a better world, this may not be the blog for you. But if you are a hard working producer and a saver worried about how to protect your purchasing power from the hungry collective, this blog may be just what you are looking for!

In other words, gold only gets in the way of man's socialist credit expansions.

Gold can still be held as a wealth reserve by the money-diluting collective

"socialist credit expansions"!? The vast majority of money in existence is created by privately owned companies whose profit-maximising business it is to loan money into existence. No collective here, no socialist programme to build schools for the nation, just good old capitalist money-making, in more ways than one. The resultant flavour of all this is very confusing; free gold is for the little guy, to protect him from the collective, a wisdom offered for free by someone working hard to make the world a better place for those who listen to him. Gold is set to increase in 'value' to some figure like $50,000 per ounce — whatever that really means — and then somehow be there for us all as a store of value while we use paper money for the day-to-day. The collective is served by this of course — even though they are greedy and grasping — because it will be the best system ever. It sounds to me like nothing other than the invisible hand, an untestable claim made centuries ago in the context of international trade, by a man who signally failed to explain value in the first and longest volume of his Magnus Opus, "The Wealth of Nations". Read his weird contortions and twists of logic if you don't believe me.

I've come away from my swim in free gold's waters suspicious about its purpose. The author FOA is anonymous, highly intelligent, well read, and fixed of purpose, and yet, to me, he 'smells' like a salesman. For all the interesting insights into many aspects of the global economy and finance and history, his message boils down to this; invest in gold and you'll make a killing, guaranteed. Maybe I've not invested enough time into his work, maybe I've missed something obvious, nevertheless I'll not do as he advises and continue with my own efforts to remove value from money and place it, notionally, where it has always been, in the networks that enable ecosystems and society to operate healthily.

For me, Soddy (and others) have the best idea about money:

Money now is the NOTHING you get for SOMETHING before you can get ANYTHING. "The Role of Money", p24.


Money exists not by nature but by law.

John Locke:

Observe well these rules: It is a very common mistake to say that money is a commodity ... Bullion is valued by its weight ... money is valued by its stamp.

Jerry Kohlberg on value and ethics:

Around us there is a breakdown of ... values in business and government... It is not just the overweening, overpowering greed that pervades our business life. It is the fact that we are not willing to sacrifice for the ethics and values we profess. For an ethic is not an ethic, and a value is not a value, without some sacrifice for it, something given up, something not taken, something not gained. We do it in exchange for a greater good, for something worth more than just money and power and position.

In my notes I wrote the following paragraph, and still think it sums up my feelings on this matter well:

If my father had purchased for me 100 ounces of gold 44 years ago, I would today have access to quite a lot of money. But in that time the quality of food has declined, crime has risen, literacy decreased, water tables have fallen, communities have fragmented, geopolitical tensions have increased, and so on. What then is the good of that increase in monetary wealth? What exactly has been stored?

It may well be that gold increases in monetary value through times of economic uncertainty, but that is not the issue here. The danger I fight, of seeing wealth stored in money while ecosystems and society rot, lies at the heart of the breakdown investing in gold is supposed to protect us from. It no longer can. The breakdown is now too wide and deep, and getting worse.

On that note, and as Bill Mitchell would say, that is enough for today!

Sunday, October 31, 2010

The Market, Gold, and other Myths

A talk given at the Committee for Monetary Research and Education, posted by Jesse on 22 October, caught my attention due to the high praise Jesse heaped on its author, Ben Davies. Ben Davies is an investment manager who claims to be having a hard time in the markets, which are not operating as they should. He begins by referencing Rumsfeld (Donald), Heisenberg, Popper and Soros, an illustrious group variously famous for their work on uncertainty, with Davies’ point being that The Market is about as uncertain a playground as you can get. His belief is that they whir quite closely around dynamic equilibrium unless interfered with. Sadly governments do interfere, then markets suffer, then we all do. It’s that simple, despite the uncertainty and complexity. One thing is crystal clear; The Market, in Davies’ world, is the god of truth and blind wisdom, and must not be tampered with, ever. It is beautiful in its awe inspiring complexity, merciless, all-knowing, rewarding and punishing participants with unerring accuracy.

We mortals, on the other hand, are cripples of imperfect knowledge, Davies laments. No matter how smart a particular Master of the Universe might be, “No one person can likely understand everything.” This is an honest admission, since perfect knowledge is one of the prerequisites for perfect competition, without which markets cannot work as Davies eulogizes. Nevertheless, he leaps deftly from all this uncertainty and imperfect knowledge straight onto the broad shoulders of Rational Economic Man, who sadly is not always allowed to be rational:

Rational behavior becomes irrational in the thickening of the maddening crowd until the crash wakes us from the insanity.

There is rational behaviour as a rule and things are generally fine, then folk get crazy and bubbles form. Accursed bubbles, blemishes on the beautiful face of The Market. How dare they!

How indeed. Davies blames government:

Intervention in or manipulation of markets by the state is such a distortion. Its acts postpone the day of reckoning for years or even decades. It creates false sense of equilibrium that ultimately gives way to disequilibrium and heightened instability. We have not experienced free markets -- that is, the invisible hand -- for decades.

Only The State can do this of course, no other person or entity. It wouldn’t be in a businessman's or corporation's interest I suppose, it wouldn’t be rational of them, because they understand full well that The Invisible Hand takes care of everyone, a beneficent Big Daddy quietly doing good by coordinating our rational, self-interested pursuit of ever more money far better than anything else possibly could. This is why there is never any fraud or other crime, or market manipulation from business, unless The State comes along and pokes its nose where it's not needed. Things were so good in the past, when Hand, The Invisible was free to work his magic.

But governments are peopled by the economically ignorant, and can’t keep their busy-body fingers to themselves. Nowadays, “financial markets are the mirror of state intervention, revealing our every hour of labor confiscated, our lack of personal ownership for our decisions, and the resources the state absolves us of.” If only government could be rational, like Economic Man, we wouldn’t be in this fix. Perhaps we should privatize it. Or establish laws making market intervention illegal. Maybe that would be a rational solution. Without government in the way, there’d be no crime, because The Market would be free at last!

Ah, Rational Economic Man, how I hate him. How I want to punch him in the mouth, knee him in the gonads, then, as he doubles over to vomit out his rationally consumed breakfast, stab a ball point pen into his neck. Is this rational of me, this venomous rage? Am I being infantile? Probably, but I don't care. I don’t even know what rationality is.
My wife met a piano tuner earlier this week, who told her the following tale. A musician friend of his could no longer play, and was forced to sell her grand piano. Its value was €15000, known to her at the time. She sold it for €4000. Obviously no one was prepared to pay €15000, right? Wrong. She had offers of €15000 from various parties, but sold it to the buyer who she believed loved her piano. This buyer could only afford to pay €4000. Rational, or irrational?

If we were indeed as rational as economics theory needs us to be, fashion would not be fickle yet pervasive, advertising would be a waste of money, we wouldn’t flock to watch sentimental, or horrific movies in our millions, and a million other ‘anomalies’ we indulge in daily. The world would be a very different place. We irrational, untrained ones know this, but worshipers of Market Almighty and orthodox economists alike won’t. On purpose. They belligerently refuse to allow a rich and complex human beast full play in their theories. They can’t. It would be too difficult. And economics would have to change from the bottom to the top.

Another element of Davies’ speech which irritated was about money.

Twenty years ago, according to the Forbes Rich List, there were 140 billionaires. Three years ago there were almost 500. This year there are close to 800, each with an average net worth of $3.3 billion. Why the surge? The "invisible hand"? No. Animal spirits? I doubt it. Did the world just get eight times more get-up-and-go? Hardly. So what then?

Money -- that's what.

Not money per se, Davies lambasts fiat debt-money (rightly, though fails to mention money is created by private banks), but reckons gold to be the ultimate money, and that what we are witnessing in gold’s price rise is the inexorable return to gold as money because, well, paper’s just paper, right? Anyone can print some of that shit off the press with some fancy markings on it, whereas gold has history, longevity, stays shiny, has heft, charisma, and can’t be created out of thin air. And that forever. Even the direction of the Earth's spin is uncertain for Davies; “Remember: Just because the sun rises in the east and sets in the west doesn't mean it always will. That, I know, is unknown.” But gold is eternal.

The fact that gold can be manipulated via clipping and other scams; can support debt-created money via ever thinner fractional reserves; is finite in amount on the planet (at least until technology can create it) whereas man’s economic imagination is infinite; that is has been the cause of deflations in the past, as well as inflations, Davies does not mention. No, everybody just knows gold is the real deal. All you have to do is look at it, so pretty and shiny. And though he does not mention store of value, his gold-love is dripping with that notion. For Davies, money is wealth, or should be. I’m sure he would agree with the following:

In most of the world's advanced economies, the local currency can be counted on as a store of value in all but the worst case scenarios. However, currency can sometimes come under attack as a store of value (such as in hyperinflation). In those instances, other stores of value have proved their consistency over time, such as gold, silver, real estate and art. The price of gold, in particular, will often skyrocket during times of national peril or when a financial shock hits the broad markets, as demand grows for other widely recognized stores of value. [Source]

I shouldn’t be disappointed, but I am. Have these people not read the story of King Midas? Have they not considered that a world suddenly robbed of all its gold would present humanity with a minor problem, but stripped of its soil humanity wouldn’t last another year? Similarly, if all notes and coins disappeared, along with all digital records of all money everywhere, we could recreate money and go through a system reset, or (small chance) try out a resource-based economy. Money does not make the world go around. Money is a medium of exchange, not a commodity. I’m repeating myself, I know, but this needs to be said again and again, because the wrong idea of money is out there still, and deeply so.

Money’s value and stability cannot possibly be intrinsic, in gold or art or anything. If they were intrinsic, inflation and deflation would be impossible. Money gets its value relative to goods and services available for sale. It is a legal invention, a fiat whether paper, gold or cow—there can be no market without some sort of state apparatus, however simple, laying down the laws of its operating, and no money without consensus—and represents value and performs stably only for as long as social, economic and environmental conditions allow it, not from inside itself.

Davies’ analysis of money is woefully ignorant, and that Jesse touts him as eloquent and knowledgeable surprised me; I had held Jesse in high regard. There is a growing nostalgia out there at the moment for 'the real deal,' whether this be gold, or genuine capitalism, or rational behaviour, or the Invisible Hand unmolested and free. Perhaps those who love these notions can sense their end is near, and turn to such melancholy musings as Davies'. Whatever the reason for their increased appearance, the sentiments are as wrong now as they always were. I can only hope we are able to wise up to it this time around.

Saturday, October 16, 2010

Change in Econosophy

Just a short note to inform my tiniest reader-base that Debra and I have parted professional company. Having someone write on my blog was an experiment which produced sweet fruit, but in the end, in the blogosphere, I've discovered I'm a bachelor at heart. Econosophy is a small blog with small ambitions and a low profile. That's how I like it...

Thursday, October 14, 2010

Us AND Them

I'm still reading on idolatry, so won't get back to it for a while yet.
I've been padding through the economic blogs, and thinking about language.
Thinking TOO MUCH about language can send you to the place where Rabbi Akiba ended up (a mental black hole). (Thinking too much about quantum physics could probably send you there too, from the looks of a recent book review/interview I read.) Maybe, just maybe... TOO MUCH THINKING about anything can send you into a mental black hole.
The major inconveniences of consciousness.
On Naked Capitalism I told somebody that I think that, regardless of our extremely naive and destructively idealistic attitudes, the poor will always be with us. And because the poor will always be with us, the rich will always be with us too.
Because... in order for the poor to disappear from our society (careful, I mean BENEVOLENTLY and not through FORCED DISAPPEARANCE), I think that... the word "poor" would have to disappear from our language.
I see no immediately perceptible indication that the word "poor" is getting ready to disappear from our language(s). Do you ??
So, since the poor, and "poor" are not going to disappear from our society any time soon, what about the rich ?
Cut to some casuistics (not theological nitpicking, but case study, like starting from a practical example).
Two days ago my husband handed me the mini Big Ben alarm clock (shoddily made...) we bought in the U.S. on our last trip, and showed me a little thingamagig on the back with a graded scale in dots between two letters, F and S. He wanted to know what "F" meant and what "S" meant.
And I was stumped. I had to think for at least five minutes before FINALLY finding that "F" had to stand for "fast" and "S" was "slow". The alarm clock is organized in such a way that we immediately look for OPPOSITES. (Think distinctive opposition.)
Now we go back to "poor" and "rich". And you see why the words bounce off each other, and how they mutually define each other. They are in intricate relation.
You also should see from the above example WHY we polarize, and WHY and HOW MEANING emerges FROM polarization, in our language.
Think about that MECHANICAL little alarm clock. IF we make linguistic meaning emerge EXCLUSIVELY from polarization, then we will live in a.. black and white world, right ??
Let me see.. how many OTHER examples of polarization come to mind right now ?
Like.. + and - (I'm thinking of accountant sheets..)
And cops and robbers ?
How about... US (we are POOR, or getting there in our own eyes) and THEM (they are rich, rich, rich elites) ? That's pretty polarized too, isn't it ? ANTAGONISTIC, even, right now ?
Going back to the words "poor" and "rich", I feel like asking what does "THEY" mean ?
If you think about it, one of the MAJOR FUNCTIONS of the word "they" is to EXCLUDE people, to locate them outside. Outside of what ? Outside of.. "we", at the very least...
And so I'm saying that the word "they" exists... to stick people OUTSIDE. To exclude them (obviously, when it refers to people, and it doesn't JUST refer to people, it can refer to OTHER).
Behind this entire logical edifice of opposition there is... ONE "joining" word.
One..COORDINATING conjunction that RELATES the distinctive elements, but remains in the background.
It is the word... "or".
A little, little, word, right ??
But with BIG BIG implications.
One OR the other.
And the word "or"... it opposes... "and".
You AND me. The rich AND the poor.
I believe in AND.
AND builds a world where we can be together.
OR builds a world where.. we are at each other's throats.
I'm not saying that "or" doesn't have value. But.. it has value WITH "and".
And.. "and" is having a pretty hard time of it these days, I fear.

Sunday, October 10, 2010

The Real Tragedy of the Commons

One of the most important conditions for a perfectly competitive free market is perfect knowledge on the part of all actors in that market, buyers and sellers both. That perfect knowledge is an impossibility is of little interest to theorists pushing Efficient Market Hypothesis, and that it would in fact be against concentrating material success and for distributed equality is overlooked. What therefore caught my attention recently was how open information flow assists cooperation and sharing rather than competition, keeping the playing field level where it is actually practiced. In “Governing the Commons” 2009’s ‘Nobel’ prize winning economist, Elinor Ostrom, looks at real world examples of folk who have successfully escaped the supposedly water-tight trap of the Tragedy of the Commons. Of course, perfect knowledge is flat out impossible, but decent transparency among members of some particular scheme is very doable, helping otherwise mutually suspicious participants trust one another, so that they can share fairly a resource held in common without over-using it.

In the huerta (farms) of Valencia a robust non-ownership system for distributing the scarce water of that region has been successfully operated on a commons basis since 1435. Water is a vital and scarce resource, and yet the farmers self-organize to operate their particular solution for sharing equally among themselves the water they need for irrigation (“Governing the Commons” 1990, pp71-2). Theirs is a complex system including regular Thursday meetings of a lawyer-free, judicial committee to settle disputes, and has an amazingly low infraction rate of 0.008% (p75). This is long-term cooperation over many centuries for managing a scarce and vital resource, including maintenance of the irrigation infrastructure, in which all participants have equal access to all relevant information. It is but one example of many in that semi-arid region of Spain (see also Murcia and Orihuela, and Alicante).

In Alicante, where water is scarcer still, water rights are locally issued in the form of scrip, which can also function as money should its holder so desire. “Considerable information is made available by the irrigation community to enable farmers to make intelligent choices [regarding their scrip].” (p79) Indeed, a repeating theme throughout the book is the importance of all participants being fully informed as key in establishing trust. This is not about having good information for yourself then cornering the water market for profit, this is about helping sustain the community which sustains all. Note how sharing information helps the community, but how ‘information-hoarding’ would lead to profit at the expense of others. It seems to me that accumulating profit for self is the enemy of healthy community, over the long term.

The sharing system which most appealed to me though was developed in the Philippines (the zanjeras), again for irrigation:

biang ti dega [contracts] share an underlying pattern. The area is divided into three or more large sections. Each farmer is assigned a plot in each section. All members are thus in fundamentally symmetrical positions in relation to one another. Not only do they own rights to farm equal amounts of land, but they all farm some land in the most advantageous location near the head of the system and some near the tail. In years when rainfall is not sufficient to irrigate all of the fields, a decision about sharing the burden of scarcity can be made rapidly and equitably by simply deciding not to irrigate the bottom section of land. (p83) [My emphasis.]

Ah the genius of humans! See how an open, transparent setup sustains community and enables trust and sharing, rather than fostering perfect competition? See how important fairness is to us? Doesn’t reading that warm the cockles of the heart? It certainly cheered me up. And yet the word “fairness” barely makes an appearance in the entire book. Ostrom seems most concerned with the Benthamite idea of Economic Man, that rational, machine-like creature who lives solely to maximise profit:

I use a general conception of rational action involving four internal variables — expected benefits, expected costs, internalized norms, and discount rate — that affect individual choices of strategies in any situation. (p195)

Run that description of rational action by the Piraha, who cannot count higher than one, and see what sense it makes there! Recently, as I discussed in an earlier blog, economists were shocked to discover that humans might be hard-wired for fairness. The scholar of economics involved in the experiment tried to define fairness as selfishness, but it was a desperate and hollow attempt. I read “Governing the Commons” seeing our need for social fairness writ large in each of the success stories detailed, as well as in the failures (of which there are many), and yet those students of human behaviour who want to be cooly scientific studiously avoid notions of fairness. Indeed, there is a palpable and pervasive reluctance to consider ‘airy-fairy’ matters such as sympathy, empathy, compassion, charity and so on, in economics, a ‘science’ more important to the shaping of the human world than any other. Its blinkered insistence on pure, rational selfishness is a cultural straightjacket we need to escape, a straightjacket responsible for the real tragedy of the commons; ‘free’ market economics itself.

How then to proceed in a manner that engages those in the halls of academia still too timid to confront the bleedin' obvious; the beautiful and kaleidoscopic complexity of homo sapiens sapiens, but a youngster on this planet? I think McMurtry’s “The Cancer Stage of Capitalism” holds the key. We should start by addressing ‘need’:

A need for something exists if and only if, and to the extent that, deprivation of it regularly results in a an absolute reduction of its owner’s life-range capability. (“The Cancer Stage of Capitalism”, p153)

We can apply the term ‘need’ both to the healthy functioning of individuals (whatever an ‘individual’ is), as well as to society generally. In the human sphere, human-as-system and society-as-system are of course interdependent. For McMurtry a healthy society provides:

(1) Continuity of life-sustenance to members of the social body;
(2) Functioning contribution of members to the life-requirements of the larger life-organization to which they belong;
(3) Maintenance of the biophysical carrying capacity of the environmental life-host. (p104)

Systems function healthily or they don’t. A healthy system has, at a minimum, its needs met, where society should by definition meet the needs of its members. Humans and societies both are systems. This is a non-political aspect of reality we should all be able to agree on. However, Capitalism has signally failed to yield this base requirement; the healthy society. Yet still we cling. Our mainstream continues to laud ‘free’ and efficient markets. What do their ‘freedom’ and efficiency deliver? One example of many:

With 97.5 per cent of all foreign exchange transactions devoted in 1998 to predatory appropriations of the world’s money demand by currency speculators, the ‘constituency’ for instability of the global economic system appears, in fact, to have run out of control. Money investment which seeks to become more money without production of any life good or service has been known as long as usury, but never before as the dominant decision-structure of social life-organization. (p116)

We have an insane culture focussed psychopathically on profit for profit’s sake. Since Smith’s (co-opted) invisible hand and Bentham’s rational man, we have been labouring under the cultural belief that rationality is profit-maximizing selfishness (though the roots of this stretch back into antiquity), and that that particular type of ‘intelligent’ selfishness benefits society better than any possible alternative, because this invisible hand thing somehow smoothes all our squabbling and turns it into progress and prosperity for all. There can be no ‘rational’ argument against this water-tight hypothesis, because it is itself the product of pure rationality. The evidence is all around us. Shiny cars and buildings don’t grow on trees you know.

The evidence is piling up that the ‘post-modern’ way is rotten to the core, serves the psychopathic elite before all else, while efficiently trashing the life-host which enables our existence. Somehow, despite the evidence and the great thinkers bringing it to our attention, the mainstream remain so lost in the bullshit, even enquiring economists like Ostrom can miss the obvious. Karl Polanyi shows us the steps of this strange dance:

Liberal economy, this primary reaction of man to the machine, was a violent break with the conditions that preceded it. A chain-reaction was started - what before was merely isolated markets was transmuted into a self-regulating system of markets. And with the new economy, a new society sprang into being.

The crucial step was this: labor and land were made into commodities, that is, they were treated as if produced for sale. Of course, they were not actually commodities, since they were either not produced at all (as land) or, if so, not for sale (as labor).

Yet no more thoroughly effective fiction was ever devised. By buying and selling labor and land freely, the mechanism of the market was made to apply to them. There was now supply of labor, and demand for it; there was supply of land, and demand for it. Accordingly, there was a market price for the use of labor power, called wages, and a market price for the use of land, called rent. Labor and land were provided with markets of their own, similar to the commodities proper that were produced with their help.

The true scope of such a step can be gauged if we remember that labor is only another name for man, and land for nature. The commodity fiction handed over the fate of man and nature to the play of an automaton running in its own grooves and governed by its own laws.

So we have The Global Market, or The Price System, or money-value, running our lives; we have the idea that we must ‘earn a living’, exchange our freedom for a wage to be free; we are told efficiently transforming the planet into various types of commodity, forever and ever, is The Way To Live, and this in a well-known curve called Perpetual Growth. This is what we culturally believe, and deeply. We are confronted, then, with the task of killing our most cherished cultural beliefs to rescue civilization. Polanyi again:

As a matter of fact, human beings will labor for a large variety of reasons as long as things are arranged accordingly. Monks traded for religious reasons, and monasteries became the largest trading establishments in Europe. The Kula trade of the Trobriand Islanders, one of the most intricate barter arrangements known to man, is mainly an aesthetic pursuit. Feudal economy was run on customary lines. With the Kwakiutl, the chief aim of industry seems to be to satisfy a point of honor. Under mercantile despotism, industry was often planned so as to serve power and glory. Accordingly, we tend to think of monks or villeins, western Melanesians, the Kwakiutl, or 17th-century statesmen, as ruled by religion, aesthetics, custom, honor, or politics, respectively.

There is not only One Way, there are Many. Even trade can be diversely motivated. We are complex beasts, not binary machines operating on a simple profit=good/loss=bad duality. Don’t believe the hype.

We devise astounding means of communication, but do we communicate with one another? We move our bodies to and fro at incredible speeds, but do we really leave the spot we started from? Mentally, morally, spiritually, we are fettered. What have we achieved in mowing down mountain ranges, harnessing the energy of mighty rivers, or moving whole populations about like chess pieces, if we ourselves remain the same restless, miserable, frustrated creatures we were before? To call such activity progress is utter delusion. We may succeed in altering the face of the earth until it is unrecognizable even to the Creator, but if we are unaffected wherein lies the meaning?
Henry Miller

The real Tragedy of the Commons will be our failure to progress in the only way that matters; culturally. In the end, there is only The Commons, which is the entire Universe, in which there is enough to go around for all, if we choose to see it that way. The system devised by elitist control-freaks to prevent social nucleation, to encourage perpetual tribal tensions and mindless competition over shiny gadgets and widgets, deliberately blinds us to alternatives. It is not easy rescuing our free thinking from the labyrinthine prisons it is rutted in, but it can be done. If we are to survive, it must be.

Wednesday, October 6, 2010

Monetary Reform

Just briefly, I want to draw my tiny audience's attention to Stephen Zarlenga and The American Monetary Institute. Stephen Zarlenga has dedicated his life to monetary reform. Dennis Kucinich works in close affiliation with him, and the U.S. Green Party have recently adopted his monetary reform proposals (August 2010). Here is a sample from their statement:

3. The new money that must be regularly added to an improving system as population and commerce grow will be created and spent into circulation by the U. S. Government for infrastructure, including the human infrastructure of education and health care. This begins with the $2.2 trillion the American Society of Civil Engineers warns us is needed to bring existing infrastructure to safe levels over the next 5 years. Per capita guidelines will assure a fair distribution of such expenditures across the United States, creating good jobs, re-invigorating the local economies and re-funding government at all levels. As this money is paid out to various contractors, they in turn pay their suppliers and laborers who in turn pay for their living expenses and ultimately this money gets deposited into banks, which are then in a position to make loans of this money, according to the new regulations. [My emphasis.]

What excites me most about this reform and Zarlenga's work and efforts, is that they are accumulating significant momentum around the powerful recognition that money is not wealth. Let me repeat that: Money is not wealth. Money is a ticket denoting best-guess value, and which also enables complex trade and economic activity. It is not a commodity, nor can it possibly store value. It should not in and of itself create more money (interest or usury), it should not concentrate power and real wealth to the criminal few, while the multitudes suffer, desperately waiting to be needed for their labour by the powerful.

In the end, and for environmental and technological reasons, I strongly suspect, as do Jacque Fresco and Peter Joseph, that we will outgrow our need for money. In the meantime we need a money that can get us on the path towards a resource-based economy. Stephen Zarlenga and The American Monetary institute have designed a money capable of such a direction change, and have my full support. I wish them well.

Friday, October 1, 2010

A Stroll through the Shopping Center...

"Idolatry" is going to have to wait for me to calm down after sounding off...
This morning I was driving along the road to our local shopping center to go stick gas in the car. (We don't use the car A LOT, but we DO use it, and when we use it, it's nice to have GAS in it.)
I passed by the stretch of land where our local government is building an extension of what we call a "zone industrielle" here. An INDUSTRIAL ZONE. Aptly named, I think. And even more aptly named when you consider that in France, the expression "la zone" refers to a lawless no man's land. Universes away from.. a country, right ?
The local government tore up an expanse of relatively undisturbed nature to roll out its little ticky tacky boxes, with office space, and space for new... STORES for us to CONSUME from, little boxes that resemble.. ALL THE OTHER LITTLE BOXES in the already existing ZONE.
And while driving past it, I felt a... GREAT TEAR in my soul, in my heart for this thoughtless destruction that MANY will justify in the name of jobs (who are we kidding now ??) for people to put meat and potatoes on the table...
Continuing on further, I entered the shopping mall, and passed by a newly opened restaurant for businesspeople on site. I passed, and did a double take, with a very strange feeling, the foreboding feeling that I got while back in the mother country U.S. three years ago.
Everything was smooth, humming, that black plastic, metal, those cool tones of gray and white that caracterize SO WELL the MECHANICAL UNIVERSE that we have erected TO COMPETE WITH what MOTHER NATURE already does so well. IDENTICAL MASS PRODUCED OBJECTS : chairs, tables, etc. Food.. that comes out of boxes, and is already prepared SO YOU CAN FORGET WHERE IT COMES FROM. So you can forget that.. THERE IS AN OUTSIDE to all this inside.
Don't tell me that I'm imagining this, because I'm not.
It's there for EVERYBODY TO SEE, who WANTS TO SEE IT. This colossal and stupendous.. HUBRIS.
On the radio this morning, our national editorialist made the comment that people in Stuttgart were rioting over the local plan to cut down trees in their park. She said... "why should people get so upset about just cutting down SOME TREES ?? There must be something behind this..." Something like.. economics, right ?
Shall I remind you that last time I checked, "economics" meant the LIFE OF THE HOUSE.
NOT.. the life of the shopping mall...
I think she is just plain wrong to imagine that there is anything behind people's being upset about chopping down those trees.
I am getting more and more radical all the time, as I feel more and more like I am.. holed up in a bunker WHERE I DON'T WANT TO BE, but where I take refuge against the bulldozer that is mindlessly mowing down... our souls, and our civilization with it.