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.