Equalities R Us

A recent article at sciencedaily discusses an interesting discovery from human brain research illustrating a seemingly hard-wired aversion to income inequality (hat tip Naked Capitalism).

“In this study, we’re starting to get an idea of where this inequality aversion comes from,” he says. “It’s not just the application of a social rule or convention; there’s really something about the basic processing of rewards in the brain that reflects these considerations.”

As someone who believes we culturally misunderstand competition and cooperation, that both concepts need to be re-addressed and re-analysed, and who agrees strongly with the main thrust of “The Spirit Level,” a work packed with statistics proving what recent brain research seems to be confirming, I am nothing but encouraged to see such research yielding these types of results.

But, is it not possible that the brain lighting up in the way described in the experiments, is a consequence of social convention’s influence on biological wiring? Isn’t the brain’s wiring organized mainly by the process of socialization we all go through? A perhaps suitable analogy for what the brain is not is a cup unchanged by the information poured into it. I do not believe in Locke’s tabula rasa, far from it, but do believe that our wiring, that is, the way our biology takes shape as we grow from baby to adult, is shaped by our environment to a powerful degree. An oft used analogy I like is the baby in the box, kept alive magically in the dark for say ten years, unexposed to light and sound. With zero environmental influence, a human cannot become what its biology would become with the right environment stimulants working upon it.

Of course we must consider the chicken and egg aspect of this too. How would humans come up with the idea that fairness is morally good unless something in their nature nudged them towards this? This sensitivity to equality could well be an organic outgrowth of the human social animal. But even here, unless the brain of every human on the planet reacts to income inequality the same way (and here I’m assuming brains shaped by the Lloyd Blankfein mould would not), environmental variables such as a culture of greed for monetary wealth could perhaps “switch off” this sensibility. It would be interesting to know how widespread and uniform such reactions are.

So, knowing where wiring ends and environment begins – to fixate for the purposes of this short discussion on what is ultimately an unsatisfying boundary line – is not easy, and will occupy human effort for some time to come. I find that very exciting.

Camerer, too, found the results thought provoking. “We economists have a widespread view that most people are basically self-interested, and won’t try to help other people,” he says. “But if that were true, you wouldn’t see these sort of reactions to other people getting money.”

(Insatiable Debt) Monster Inc.

I’m not a fan of any main stream outlets, but figures can speak louder than words:

€560bn matures in 2010
€540bn matures in 2011
€522bn German banks exposure to Greece, Italy, Ireland, Portugal and Spain

That’s some heavy duty debt in a debt saturated market. The UK and the US are staring at similarly eye-watering numbers. All of it must be rolled-over, which means renewed on different terms, and if the Telegraph’s Evans-Pritchard is to be believed, terms yet more costly for Governments everywhere. That means steeper interest payments, which means less money for fuelling the general economy, which means higher unemployment and deepening crisis. I’m not expert enough to predict sovereign defaults, but I think the call that this is a Bad Situation is a sound one. The important and interesting inquiry is into how things have come to this pretty pass.

There are all sorts of complex arguments about usury and reward for risk, but they mostly assume the current model can’t be beat, that interest is a must when money is created (otherwise it would be free), that “free” markets will take care of everything, and that Governments must borrow the money they need from financial institutions. These are assumptions. There are sound alternatives. Ellen Brown’s Web of Debt is fascinating on this topic, and there is even talk of a resource-based economy in the more fringe areas of debate (which is where I like to paddle). Whatever your preference, the logic that systemic change is essential – real change mind you – is unassailable. There now follows a short blurb on that logic in my own uncopyrighted style. No trademarks here.

As all Governments worldwide borrow at interest to fund their ventures, so debt-repayments rise as the additional money to cover the interest charged is also created as interest bearing debt. Because money is created as debt, the cost is higher than the amount created, so debt can only grow. With the exception (I think) of the tiny island of Guernsey, all money worldwide is brought into existence as interest-bearing debt. Money is therefore debt. This elegant system has unsurprisingly yielded a Debt Planet, where small matters (non-profit making) like education, health and infrastructure wither and die for lack of funding. The bright evidence of this process is there in the data presented above. There is much more if you care to look.

The debt monster bellows to be fed. It is a spoiled brat who will only eat money, morning, noon and night. We turn everything we can lay our imaginations on into money and hurl it desperately into the monster’s gaping maw, in a futile bid to keep it at bay. But it just gets bigger and hungrier. The only effect feeding the beast can have is to make it bigger, and the bigger it gets, the more food it needs. It is, after all, made of maths.

This is a design problem inherent to the system we humans created. We – not God, not Mother Nature – created this beast. We can uncreate it.

The system is wrong. Money is wrong. We need a redesign.

"Banking was conceived in iniquity and was born in sin. The bankers own the earth. Take it away from them, but leave them the power to create money, and with the flick of the pen they will create enough deposits to buy it back again. However, take away from them the power to create money and all the great fortunes like mine will disappear and they ought to disappear, for this would be a happier and better world to live in. But, if you wish to remain the slaves of bankers and pay the cost of your own slavery, let them continue to create money." Attributed to Josiah Stamp, former director of The Bank of England.

The Ballad of Joe Stack

There is most certainly something theatrically ironic in a self-made man of the national vanguard of capitalism quoting the following in his terrorist/homicide/suicide note (Yves Smith's take here):

"The communist creed: From each according to his ability, to each according to his need.
The capitalist creed: From each according to his gullibility, to each according to his greed."

And there is a clear whiff of the cloying and rude in commentators analysing his kamikaze attack on the IRS, his background, and what it all might mean. Whenever I engage in analyses of this kind, even just in my own thoughts, I feel I am spoiling something precious, but this has resonance beyond the personal, beyond Mr Stack’s interpretation of reality and his decision to attack. There is no such thing as The Truth, there are only shifting views of an ever changing enormity far beyond any individual’s or collective’s grasp, and yet it is not only helpful – in a stumbling and haphazard way – to try to understand, we cannot help but try. We are curious, intelligent, social. Joe Stack (how poetically close his name to Joe Sixpack) has shot out a bright flare, a harsh light in which, before it fades, we are obliged to study ourselves in all our naked glory.

To anyone who will listen: Please don’t use this event to see irreconcilable differences and certain doom, that tea-baggers are idiots (or justified), that some people are born crazy, or some other half-baked, beer-and-chips wisdom, and then stop there. We live in and are shaped by a system which has been built up on various assumptions we figured out hundreds of years ago. No matter how great the economic genius, none escaped the trap of basing his theory atop untested, unscientific plattitudes about human nature, nature itself, competition, scarcity and so on. To a very large extent these assumptions are still with us today. Economics and money-creation are absolutely pivotal to modern society. Recognising how flawed our system of self-governence is, and how shaped by it we are, demands of us humility, patience, sympathy, compassion and caution, but also a fierce determination to correct, peacefully, those elements of our understanding that suffer as a consequence of those earlier errors of judgement.

Violence is always a failure of spirit, of intellect, of wisdom, but, as good things come from bad, and bad from good, so all events, no matter their hue, are opportunities to learn.

More thoughts on value

I want to take a brief look at the Labour theory of value (LTV), which has been occupying my thoughts of late.

In this view, basically speaking, all economic value – value being denoted by price via trading in a market – derives ultimately from the amount and type of labour expended in bringing a good or service to market (where demand for that good arises, in theory, by mentally calculating how much labour the purchaser would save by buying it). The price would of course also include raw materials and energy costs, but even these found their value via the labour it took to bring them to market. For example, should all energy be freely and inexhaustibly available to all, and unpossessable too (like air), it would not contribute to price/value. This is the case with air; it can have no value economically because it is everywhere available to everyone without any effort (lung diseases excluded).

In this theory then, only those things it takes labour to create or acquire can ever have any economic value. To bring this idea into some focus; if there were but one access point, planet-wide, to an infinite amount of clean drinking water, the abundance of the water would be secondary to the ability of the lucky nation that hosted this resource to generate economic value by controlling supply. This control and distribution would constitute labour of course, as would constructing infrastructure to enable efficient distribution. The price would be determined by demand and supply, where supply (rationing) is manipulated to maximise profits. (I imagine the government would be very tight-lipped about the amount of water! Rumours the supply was infinite would be branded fantastical.) In this example, the environmental and national conditions allowing easy domination of the resource are the key factors, labour's role being dependent on those conditions.

In LTV, money is therefore a tool which, in part, measures the value of the work expended to produce a good or service. And yet the very nature of money creation also strongly influences price; banks have the task of judging the capacity of the individual, corporation, institution or nation recipient of its largess, to repay, via their efforts in the labour market or by raising taxes, the money created for them in the form of an interest bearing loan. Interest is variously: a reflection of risk; a valuation of the labour expended by the bank loaning the money; and a “technique” for making money a “serious” business, that is, for not making it too cheap, too easy to come by. As a side note and contrary to classical economic wisdom, it is private banks lending out money that leads money supply (according to Steve Keen’s research). A Central Bank, then, has the task of trying to keep money supply reflective of economic activity by tuning interest rates on its loan injections, or draining money from the economy by calling in those loans. The success of its efforts are reflected by inflation or deflation, by growth or contraction. People working hard to make a buck cannot control this side of the equation, no matter how skilful their work, nor how hard they work or try to find work. Value, as reflected by price, fluctuates in the economic winds brought into being by the machinations of central banks.

And there is yet more to price than labour and central bank competence. Perceived scarcity, status, cachet, fashion, advertising etc., influence price strongly, as do monopolistic and cartel powers. Were labour to be the sole determinant of price, our world would be a very different place. While it is true that advertising is labour, it is not labour that affects the quality of a product, it affects demand. Demand is not a product, except in the sense that suppliers manufacture demand for their products via advertising, a process which is probably worthy of a separate post.

So economics has a perception of value particular to its area of study. I find this unsatisfying, because air is obviously valuable, as are friendship and trust, and many other things whose exchange cannot be affected monetarily, and yet economics cannot value them. While mission creep is something it is often wise to avoid, it is unwise to ignore wisdoms from other areas of life which are valid generally. Furthermore, money's (and by association economics') relative importance in deciding the day-to-day running of nations and international relations demands of us that we make the study of economics as inclusive of societal and ecological considerations as possible, or we risk running aground. To firewall economics off from e.g. sociology, psychology and ecology, to make appeals to the scientific method via mathematical models riddled through with assumptions and maybes at the expense of societal cohesion and health, is to wilfully lock a discipline away in an ivory tower. To my mind this firewalling is, at a very high level, deliberate, for economics as we have it today is purposefully the art of obfuscation. How can the discipline which most controls monetary policy by its theories, fail to take into account the health of society and ecosystem?

My intuition tells me value is one area humanity needs to look at very carefully indeed. It is a slippery concept, arising from relationships between things, and is not in any way an absolute thing (perhaps nothing is). I don't believe there is such a thing as “intrinsic value” for example, but Plato did. Indeed, I would put my money on it being impossible to define value to everyone's satisfaction, but that might be a Good Thing. At a minimum, merely recognising this difficulty at a deep cultural level would be only good, I feel.

So how helpful is it to humanity to associate price with value?

Money is a Door to Spirit

Something funny has been going on for a very long time. The more skillful we have become, over the millennia, at explaining rationally what Universe is, the more abstractly we can represent back to ourselves our interpretations of The Way Things Work. We are pulling ourselves higher and higher up into the air by our own bootstraps. We are climbing up on logic, building culture and collected wisdom on top of themselves. Money is a vital part of this process, one which is, I suspect, leading somewhere, a direction likewise of our making.

There is a vertiginous, dizzying aspect to such musings; nowhere can we put down our feet and be certain we have struck solid ground. The spiritual corner of my thinking believes the "physical" reality we call Universe is an ongoing creation we collectively have created as a playground for learning about the power of creativity. (By "we" I mean some form of "consciousness," but I'm not going to get into that here.) If my brief description sounds like an ouroboros, I mean it to. We cannot build on anything solid, because there is nothing solid. Except perhaps consensus, which is very hard won, and even harder to change, though change it does. "Solidity" is that which we determine to be solid, as we prod at the stuff of reality with ourselves; our imperfect knowledge and imperfect senses. The process is circular, a feed-back loop which spirals in a direction we can call progress or decay, depending on our preference.

Money measures value, but value is unclear, subjective. Money started out as something valued by everyone, light enough to carry around, that did not rot like apples or meat, and could be exchanged for traded goods and services produced to surplus. This valued thing has progressed from cowrie shells, beads, gold and so on. Now it is value in the abstract, now money represents value itself, is value, and we agree on this point sufficiently for money to “work.” The old adage "you can’t eat money" may well be true, but that hardly matters; the locomoting energy of billions of people scrabbling around to earn enough to stay alive keeps the whole show going. No one really wants to pull the curtain back, no one really wants to expose the hollowness that throbs at the heart of everything. That would say too much about us, about how we deceive ourselves, and we don’t want to know about that – yet. But I think it’s going to happen anyway, because our collective refusal to do the work necessary to see money in all its vaporous illusion cannot stop its inbuilt flaws from bringing about its own upheaval.

Money is a tool that will teach us that it doesn't matter, that life is a sometimes brutal game, and that our imagination is very powerful. It will teach us too that our relationship with our environment defines us and shapes the future. We are the environment, the environment is us. Money has focussed our attention hard on the antithesis of spirit, on zero-sum competitive games, on greed and ambition, on fear of want on a planet of almost boundless bounty, but in leading us through those doors will take us to a door that will prove its downfall. Opening it will be brightly painful. On the other side of this door is a way of being so alien to us, we can barely discern its faintest outline from where we stand now.

I don’t like predictions, but something in my water is increasingly whispering to me that this one is true. Coming soon to a theater near you.