A week ago, I posted this in another thread. Apart from one comment
to the effect that "this can't be so" things carried on with the usual
"Capitalist Pigs" and "Socialist Scum" way of thinking. I'm posting
here just for the record:
Y'all make yourselves comfortable, this one will take a little time.
I'll begin with the thought that to really mess up an economy, some
form of centralised decision making is needed. That's very different
from Adam Smith's invisible hand and its implied equal distribution of
power and insight that enable each individual to perfectly understand
the future and to have the fortitude to maximise his or her personal
outcomes irrespective of short term gains. Indeed, that perfection
presupposes that each individual is born into the world with perfect
knowledge. The real world is somewhat different.
In a way reminiscent of the Big Bang theory, microscopic advantages can
play out over long periods of time to create Empires and Catastrophes.
The key to this amplification is referred to in monetary terms as
compound interest. Compound interest sets in motion the idea that
something can grow exponentially forever. In a finite world, and given
differences that are far from microscopic, despite best efforts at
competition, one entity can eventually buy everything. This is the
perfect capitalist monopoly, something the game called "Monopoly" was
intended to demonstrate.
This illusion depends on the assent of a vast majority of the
population. The very idea of money is the outcome of a belief that debt
will be paid, and this in turn depends on social norms collectively
agreed. To the extent that monopoly and competitive capitalism
exists, it owes its existence to these conventions. There is thus
a paradox in the concept of Perfect Communism : The State owns
everything including the individual, but then requires the consent of
everyone for its existence. The Perfect Capitalist has a similar
paradox: his dependence on the legitimate monopoly of violence of the
State for his or her existence, but owning everything not owned by the
State.
Some may find difficulty in understanding that Perfect Communism and
Perfect Capitalism should coalesce to the same solution, but from the
point of view of an owned individual, these differences are at best,
academic. Individuals find economies of scale in mutual cooperation,
and such conflicts that do arise are settled in a market of buyers
and sellers. The mutual satisfaction of these deals is unavailable in
the winner-takes-all world of grand strategies, that usually forces
war onto one or more of the players.
For the State and the Capitalist, War is a convenience for demanding
complete subservience and loyalty in their populations, while at the
same time diverting attention from the conflicts of interest writ large.
Chief among these are the paradox referred to earlier: the moment that
Perfect Control is manifest, it becomes the moment that collapse begins.
Left to itself, the system would endlessly cycle through the rise of the
Individual, the rise of the State, the rise of the Capitalist, and into
Collapse. As a consequence, political and monetary systems have grown to
mitigate these long wave cycles, seeking to move to a quasi-stable
equilibrium that maximises the wellbeing of elite sectors within
populations. Despite protestations, it is clearly not in the best
interests of any elite that resources, information and power structures
should be diffused through the population because that would strengthen
the invisible hand of the majority to produce an outcome that may more
effectively promotes the interests of society as a whole.
Consider Durkheim's New Religion of the West: The cult of the Individual,
finding expression in the Enlightenment, in the French Revolution, and
more recently in the youth movements of 1960's, and 1970's. Did
prosperity bring individual freedom, or did individual freedom bring
prosperity? Can proof by contradiction provide an answer?
Consider, for example, the waging of war. As explained above, war is
almost never in the interests of the mass of individuals but most often
an unintended outcome of the narrow concentration of wealth and power.
Those waging war are certainly conscious of the enormous costs, but
calculate that the burden of these costs is either worth paying or
will be paid by others. Rarely are the costs paid for in advance, but
almost always by increases in public debt. Indeed, in today's world,
public debt, that burden upon the taxpayer, is the only available
recourse. Were the elite forced to pay for that war themselves it would
entirely negate the reason for their existence.
Thus the Elite faces a choice: War, and poverty for the masses, or share
as an individual and invite prosperity. Thus, individual freedom comes
first and prosperity for all follows.
Well, that's the theory. How does this work out in practice?
In the long run, you get a steady drift toward totalitarianism and the
pretence of economic "stability" followed by catastrophic collapse and
war. Keep an eye on economic inequality as this tracks the progress of
power moving into the hands of the PriviLeged.
In the near term? That depends on where you live. Nothing says
instability like the gulf between the actions of the ECB in propping
up the EuroZone's financial structure, and action in real life to
forestall a wave of migrants seeking a home in Europe. There are less
obvious contradictions in Asia, and in North America, but Europe is
the game in play at the moment. To state the obvious, Germany could
have transferred work to Greece, but preferred to keep the work
within its borders and to invite migrants from outside the EU to
grow its GDP. Weren't the Spaniards, Irish, Poles, Ukrainian workers
good enough, or desperate enough?
I'll give the EuroZone another two years, a little less if the UK votes
to exit this year, could be longer if they get lucky. All of the
leaders that could potentially hold the thing together are now damaged
goods, and well past their sell-by date. But to try to keep things under
control, there will be more pressure to reduce individual freedoms.
"We are all in this together" - well Mr Cameron, some are more "in it"
than others, and as Mr Hollande (18% popularity) found out, Edicts do not
always pass.
And what do the migrants, perhaps 80% young unskilled men do once
they set foot on a southern Mediterranean shore where the unemployment
rate among young unskilled nationals approaches 50%? Make matters
much worse, and they will keep coming until the balance of economics
compels them to stay in their home country, or migrate elsewhere.
That is almost as absurd as paying people to dig holes and others to
fill them in again thus boosting GDP and giving a fake impression of
growth. Or, in a more technically advanced setting, bomb a country's
infrastructure back to the stone age and them provide billions in aid
to rebuild it in exchange for resources.
Ah, yes, resources. Scarce resources. When resources become scarce,
they either get rationed or monopolised, and my bets are for more
rationing, which means more controls, more government, less freedom.
And that in turn means less growth, specifically, lower global
productivity, and down that road lies collapse via hyperinflation
and depression. Everywhere.
Hang onto your bitcoin, and neither a debtor nor a lender be.
PS: And the latest? There seems to be competition to see who can cause
the biggest unnecessary crisis in Greece (see IMF). Do they actually
think they are in control of this?
It's likely that "neither a debtor nor a lender be" needs some further
explanation, though I should point out that money was not the intended
focus of my earlier post.
If you are in business, borrowing and lending (extending credit) is
unavoidable. It goes with the territory. The advice really makes the
point that you should avoid placing your future in someone else's hands,
and most certainly to avoid borrowing in order to extend a loan
because that is the business of banks.
Today, much of the stigma is gone from being in debt, and the linkage
between debt and prison is gone. While forms of slavery still exist
in the world today, to most of humanity, the idea of owning another
person is repugnant. That enlightenment is recent, perhaps less than
200 years, and is perhaps the result of machines costing less than
people. It perhaps the benign face of Capitalism.
Regarding the question of why money must increase, the time preference
of consumers and others is the answer. See here :
http://www.zerohedge.com/news/2016-04-01/path-final-crisis"Market interest rates consist of the natural interest rate plus two
additional components: a price (or inflation) premium that reflects the
expected decline in money's purchasing power, and a risk premium or
entrepreneurial profit premium that reflects the perceptions of lenders
of a borrower's creditworthiness and generates an entrepreneurial profit
for those engaged in lending."
Maybe later I'll write something on the return of privilege (separate
legal status) for the Elite in Europe and elsewhere.
