Left Singularity

Winter is coming

Leftists are not troubled by the fear that the masses might revolt against the left, but rather each leftist fears he might fail to keep up with the ever changing line, find himself a few years, or weeks, or days behind the current ever changing political correctness, and find himself deemed a rightist. // Which historically halts only in bloodshed. There is no equivalent right singularity, as repressive right wing regimes forbid interest in politics, while repressive left wing regimes command interest in politics. // The left singularity is the same each time in its approach to infinite leftism, but differs chaotically and surprisingly each time in its ending short of infinite leftism. — James A. Donald

What we worry about most is that we’ll see a vicious cycle develop: poor governance hurts the economy, which radicalizes and polarizes public opinion, which leads to worse governance and worse economic outcomes… and so on down the line. — Walter Russell Mead

21st Century politics sees no need for truth. When government believes itself to be responsible for the economy and convinces the people of that, it has put itself into a box. …When recessions occur … it causes government to pursue policies which reinforce its lies. It is these policies which created the current economic crisis in the first place.– ‘Monty Pelerin’ (via Zero Hedge)

Dark Enlightenment begins with the recognition that reality is unpopular, so that the ‘natural’ course of political development, under democratic conditions, is reliably based upon the promise of an alternative. Pandering to fantasy is the only platform that delivers electoral support. When the dreams turn bad it is politically obvious that they have not been held firmly or sincerely enough, their radicalism has been insufficient, and a more far-reaching solution is imperative. Since either deliberate or merely inertial rightist sabotage is clearly to blame, the beatings will continue until morale improves.

This syndrome, essentially indistinguishable from political modernity, calls for a cybernetic theory of accelerating social deterioration, or self-reinforcing economic repression. The trend that dark enlightenment recoils from demands explanation, which is found in the diagram of Left Singularity.

A singularity, of any kind, is the limit of a process dominated by positive feedback, and thus driven to an extreme. In its pure mathematical expression, the trend is not merely exponential, but parabolic, asymptotically closing upon infinity in finite time. The ‘logic of history’ converges upon an absolute limit, beyond which further prolongation is strictly impossible. From this ultimate, impassable barrier, dark enlightenment retrogresses into political history, prophetically inflamed by its certainty of the end. Unless democracy disintegrates before the wall, it will hit the wall.

“Increased repression brings increased leftism, increased leftism brings increased repression, in an ever tighter circle that turns ever faster. This is the left singularity,” Donald writes. The principal dark hypothesis is evident: on the left slope, failure is not self-corrective, but rather the opposite. Dysfunction deepens itself through the circuit of disappointment:

As society moves ever leftwards, ever faster, leftists get ever more discontented with the outcome, but of course, the only cure for their discontent that it is permissible to think, is faster and further movement left.

It is necessary, then, to accept the leftist inversion of Clausewitz, and the proposition that politics is war by other means, precisely because it retains the Clausewitzean tendency to the extreme (making it ‘prone to escalation’). This is the reason why modern political history has a characteristic shape, which combines a duration of escalating ‘progress’ with a terminal, quasi-punctual interruption, or catastrophe – a restoration or ‘reboot’. Like mould in a Petri dish, progressive polities ‘develop’ explosively until all available resources have been consumed, but unlike slime colonies they exhibit a dynamism that is further exaggerated (from the exponential to the hyperbolic) by the fact that resource depletion accelerates the development trend.

Economic decay erodes productive potential and increases dependency, binding populations ever more desperately to the promise of political remedy. The progressive slope steepens towards the precipice of supreme radicality, or total absorption into the state … and somewhere fractionally before then, either before or after it has stolen everything you own, taken your children, unleashed mass killing, and descended into cannibalism, it ends.

It can’t eat the Petri dish, or abolish reality (in reality). There is a limit. But humanity gets a chance to show what it’s capable of, on the downside. As Whiskey commented (on this Sailer thread): “This Enlightenment is ‘Dark’ because it tells us true things we’d rather not know or read or hear, because they paint a not-so-lovely picture of human nature at its rawest.” Progress takes us into the raw.

Gregory Bateson referred to cybernetic escalation as ‘schismogenesis’, which he identified in a number of social phenomena. Among these was substance abuse (specifically alcoholism), whose abstract dynamics, at the level of the individual, are difficult to distinguish from collective political radicalization. The alcoholic is captured by a schismogenetic circuit, and once inside, the only attractive solution is to head further in. At each step of life disintegration, one needs a drink more than ever. There goes the job, the savings, the wife and kids, and there’s nowhere to look for hope except the bar, the vodka bottle, and eventually that irresistible can of floor polish. Escape comes – if it comes before the morgue – in ‘hitting bottom’. Escalation to the extreme reaches the end of the road, or the story, where another might – possibly – begin. Schismogenesis predicts catastrophe.

Hitting bottom has to be horrible. A long history brought you to this, and if this isn’t obviously, indisputably, an intolerable state of ultimate degradation, it will carry on. It isn’t finished until it really can’t go on, and that has to be several notches worse than can be anticipated. Left Singularity is deep into the dregs of the floor polish, with everything gone. It’s worse than anything you can imagine, and there’s no point at all trying to persuade people they’ve arrived there before they know they have. ‘Things could be better than this’ won’t cut it. That’s what progress is for, and progress is the problem.

That which cannot continue, will stop. Trees do not grow to the sky. This does not, however, necessarily mean that freedom will be restored and everything will be lovely. The last time we had theocracy, we had stagnation for four hundred years.

The explosive expansion of spending and regulation represents a collapse of discipline within the ruling elite. The way the system is supposed to work, and the way it mostly did work several decades ago, is that the American Federal Government can only spend money on something if the House of Representatives, the Senate, and the President agree to spend money on that thing, so no government employee can be employed, except all three agree he should be employed, so the government cannot do anything unless all three agree that it be done. A public servant, and indeed his entire department, was apt to be fired if he pissed off anyone. Conversely, the individual was free to do anything, unless all three agree that he be stopped from doing that thing. We are now approaching the reverse situation, where for an individual to do anything requires a pile of permissions from diverse governmental authorities, but any governmental authority can spend money on anything unless there is near unanimous opposition to them spending money.

Obviously this cannot continue. Eventually the money runs out, in that we shall have a hyperinflationary crisis, and revert to some other form of money, such as the gold standard. As that happens, the increasingly lawless behavior of the rulers against the ruled will become increasingly lawless behavior of the rulers against each other. Civil war, or something close to civil war, or the dire and immediate threat of civil war will ensue. At that point, we will have the political singularity, probably around 2025 or so. Beyond the singularity, no predictions can be made, other than that the results will be surprising …

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What We Deserve

Good? Probably not. But hard – oh yes (oh yes!)

Obama got what he wanted — a second term. Now the people who voted for him are going to get what they voted for… and what they deserve — a financial collapse that makes 2008 seem like the good ‘ol days.– ‘libertarianNYC’

Because when Maistre says that every nation gets the government it deserves, I believe him. Maistre didn’t think his great law was a law of physics. He thought it was a law of God. I am not a religious person, but I agree. History has convinced me that when laws of God are broken, bad shit happens. – Mencius Moldbug

Deserving’ must be the most useless and obfuscating word in the dictionary.– Maurice Spandrell

The mysteries of the ideological spectrum are deep enough to absorb endless exploration. Why, for instance, should there be an ideological spectrum at all? Are not human disagreements over social decisions naturally multi-dimensional? How can opinions about the optimum scale of government statistically predict attitudes to affirmative action, immigration, gun control, drug prohibition, abortion, gay marriage, climate change, and foreign policy? Does it not seem near-magical that the seating arrangements of the late-18th century French National Assembly continue to organize the terminology of ideological orientation up to the present day?

At times, however, perplexity recedes, and certain basic patterns emerge with startling clarity. This is evident today in the United States – the world’s great circus of ideological antagonism — in the wake of its latest, spectacular performance.

As polarization intensifies – which it does – the essential is expressed through the extremes, and the alternatives are simplified. Which is it to be: politics or economics? There can be no sustainable co-existence. One must utterly eradicate the other.

Either politics, or economics, deserves to be completely destroyed — politics for its incontinent lust for absolute power, or economics for its icy indifference to public concerns. The conflict of visions is irreconcilable. From the pure perspective of terminal politics, all market rewards are arbitrary and illegitimate, whilst from that of economics, people are entitled to precisely nothing.

Speaking on behalf of the political losers, Russ Roberts (at Cafe Hayek) adopts a light-hearted approach:

Talking about the election to many friends and family who had been rooting for Romney, I found their emotions ran the entire gamut from despair to despondency. Everybody was way down. I found myself unexpectedly blue as well. Our emotions were not so much caused by the Romney defeat. Few of us were particularly excited about him. It was the Obama victory that concerned us. … There was plenty to be discouraged about before this election. I’m not sure the election provides much new information.

The despair of the Right is not the product of a single lamentable election result, but is grounded in the relentlessly gathering realization that it is inherently maladapted to politics. When the Right attains power, it is by becoming something other than itself, betraying its partisans not only incidentally and peripherally, through timidity or incompetence, but centrally and fundamentally, by practically advancing an agenda that almost perfectly negates its supposed ideological commitments. It builds that which it had promised to destroy, and further enthralls that which it had promised to liberate. Its victories mean ever less, its defeats ever more. To win is at most a lesser evil, whilst to lose opens new, unprecedented horizons of calamity, initiating previously unimagined adventures in horror.

Dean Kalahar captures the mood:

The electorates’ decision once and for all confirms a definition of America that values hopes, feelings and equality of results over the realities of human nature, history, and the foundational principles that hold western civilization together. There is now no doubt that the tipping point of geometrically increasing cultural decline has been crossed. … Our economic system has lost the culture war.

The left has its own frustrations, which its ever-greater approximation to total political dominion cannot appease, and in fact exacerbate. The more that it subordinates its enemies to its will, the more its will conforms to the image of its enemies – not the economy as it was, evasive and morally disinterested, but the economy as it was caricatured and denounced: narrowly and brutally self-interested, sublime in its gargantuan greed, radically corrupt, and irreparably dysfunctional. The cartoon plutocrat re-appears as the consummate political insider in a shot-silk Che Guevara tee-shirt, minutely dictating the content of legislation, and pursuing a career trajectory that smoothly alternates between the chairs of regulatory agencies and Wall Street boardrooms. Through a perverse, ineliminable double-entry book-keeping, the fiscal mountains of government largesse are registered, simultaneously, as an orgiastic feast of crony capitalist money creation. Public altruism and private avarice lock into exact logico-mathematical identity.

The gyre turns. ‘Right’ administrations become sclerotic big government bureaucracies, whilst ‘Left’ administrations become the cynical public relations façade for rapacious banking cartels. In either case, government equates to treachery, executed by a party that necessarily abuses its own political partisans. Since politics is ever-increasingly the preserve of the Left, this is not an oscillator, but a ratchet, with a predictable direction (into Left Singularity, “moving the electorate ever leftwards by making it ever more dysfunctional”).

The Right, the party of the economy, is losing all credibility as a Party, especially to itself. In the war of annihilation that contemporary ideological schism has become, the substitute, characteristic battle-cry could be confidently anticipated, even were it not already so distinctly heard: the market will avenge these offenses. Nemesis. Let the temple crash.

Expect to hear much more of this, however much it revolts you.

Things will fall apart (even more, far more …), or not, but in either case we will know what we really deserve. Reality is God, but which is the true religion?

In the immortal words of HL Mencken: “Democracy is the theory that the common people know what they want, and deserve to get it good and hard.”

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Regime Redecoration Randoms

Which lucky guy gets to take the blame?

Here in Shanghai, we receive the US presidential election results on Wednesday morning, making this the last chance to venture reckless predictions. Who gets to seize the poisoned chalice and assume responsibility for the financial collapse of the United States of America?

Feel the hate. Negativity reigns supreme in this election, with oppositional or defensive motivations almost wholly purified of positive contamination. According to The Economist, negative political ads have accounted for an unprecedented 90% of the total. The words of PJ Media commenter Subotai Bahadur distill the sentiment perfectly: “Romney was not my first, second, or third choice, but I will crawl over ground glass to vote for him.” To be fondly remembered as ‘the ground-glass election.’

Way of the Salamander. Urban Future isn’t inclined to deride Mormonism as weird (being weird is what religions are for), but there are bound to be significant cultural implications to the inauguration of a Mormon president in an unusually apocalyptic time. The Mormon faith is the science fiction version of Abrahamic religion extending an evolutionary bridge from man to God – a path of practical divinization. No surprise, then, to discover that there’s a Mormon Transhumanist Association. When combined with the irreverence that latches onto any decaying, chaos-wracked administration it could get seriously entertaining …but then we’d miss the classic version of Cathedral II (Return of the Clerisy), replaced by a strange re-make. Voters need to choose their flavor of ground glass carefully.

Prophet motive. At Zero Hedge, Strauss & Howe generational cycle-theorist Jim Quinn hangs on to the apocalyptic theme. He argues that – at the brink of the ‘Fourth Turning’ – Mitt Romney’s age, which places him in the ‘prophet generation’, makes him odds on favorite to lead the global superpower into Armageddon (so we have that to look forward to).

Reckless predictions?

(1) Discounting systematic media dishonesty points to a substantial Romney victory.

(2) Winning this one is going to have been the most stupid thing that the stupid party ever did.

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Bonfire of the Vanities

The road to hell is paved with good intentions

As an ideological mantra, ‘Never Again’ is associated primarily with the genocide politics of the 1940s, and in this context its effectiveness has been questionable, at best. As a dominating imperative, it has been vastly more consequential within the economic sphere, as a response to the Great Depression of the 1930s. Whilst ethnically selective mass killing is widely frowned upon, its attractions have been difficult to suppress. Deflationary depression, on the other hand, is simply not allowed to happen. This has been the supreme axiom of practical morality for almost a century, uniquely and distinctively shaping our age. We can call it the Prime Directive.

For the Western world, the 1930s were a near-death experience, an intimate encounter with the abyss, recalled with religious intensity. Because the threat was ‘existential’ – or unsurpassable – the remedy was invested with the absolute passion of a faith. The Prime Directive was adopted as a basic and final law, to which all social institutions and interests were subordinated without reservation. To question or resist it was to invite comprehensive disaster, and only a radically uninformed or criminally reckless heretic – a ‘crank’ – would do that. Anything is better than deflationary depression. That is the New Deal Law.

The consolidation of financial central planning, based on central banking and fiat currencies, provided the priesthood of the Prime Directive with everything it needed to ensure collective obedience: No deflationary depression without deflation, and no deflation with a well-oiled printing press. ‘Counter-cyclical’ inflation was always an option, and the hegemony of Anglophone economic-historical experience within the flourishing American century marginalized the memory of inflationary traumas to global backwaters of limited influence. Beside the moral grandeur of the Prime Directive, monetary integrity counted for nothing (only a crank, or a German, could argue otherwise).

The Prime Directive defines a regime that is both historically concrete and systemically generalizable. As Ashwin Parameswaran explains on his Macroeconomic Resilience blog, this type of regime is expressed with equal clarity in projects to manage a variety of other (non-economic) complex systems, including rivers and forests. Modern forestry, dominated by an imperative to fire suppression, provides an especially illuminating example. He notes:

The impetus for both fire suppression and macroeconomic stabilisation came from a crisis. In economics, this crisis was the Great Depression which highlighted the need for stabilising fiscal and monetary policy during a crisis. Out of all the initiatives, the most crucial from a systems viewpoint was the expansion of lender-of-last-resort operations and bank bailouts which tried to eliminate all disturbances at their source. In [Hyram] Minsky’s words: “The need for lender-of-Iast-resort operations will often occur before income falls steeply and before the well nigh automatic income and financial stabilizing effects of Big Government come into play.” (Stabilizing an Unstable Economy pg 46)

Similarly, the battle for complete fire suppression was won after the Great Idaho Fires of 1910. “The Great Idaho Fires of August 1910 were a defining event for fire policy and management, indeed for the policy and management of all natural resources in the United States. Often called the Big Blowup, the complex of fires consumed 3 million acres of valuable timber in northern Idaho and western Montana…..The battle cry of foresters and philosophers that year was simple and compelling: fires are evil, and they must be banished from the earth. The federal Weeks Act, which had been stalled in Congress for years, passed in February 1911. This law drastically expanded the Forest Service and established cooperative federal-state programs in fire control. It marked the beginning of federal fire-suppression efforts and effectively brought an end to light burning practices across most of the country. The prompt suppression of wildland fires by government agencies became a national paradigm and a national policy” (Sara Jensen and Guy McPherson). In 1935, the Forest Service implemented the ‘10 AM policy’, a goal to extinguish every new fire by 10 AM the day after it was reported.

In both cases, the trauma of a catastrophic disaster triggered a new policy that would try to stamp out all disturbances at the source, no matter how small.

At Zerohedge, The World Complex elaborates on the history of fire suppression in the United States:

The forests of the southwestern United States were subjected to a lengthy dry season, quite unlike the forests of the northeast. The northeastern forests were humid enough that decomposition of dead material would replenish the soils; but in the southwest, the climate was too dry in the summer and too cool in the winter for decomposition to be effective. Fire was needed to ensure healthy forests. Apart from replenishing the soils, fire was needed to reduce flammable litter, and the heat or smoke was required to germinate seeds.

In the late 19th century, light burning — setting small surface fires episodically to clear underbrush and keep the forests open — was a common practice in the western United States. So long as the fires remained small they tended to burn out undergrowth while leaving the older growth of the forests unscathed. The settlers who followed this practice recognized its native heritage; just as its opponents called it “Paiute forestry” as an expression of scorn (Pyne, 1982).

Supporters of burning did so for both philosophical and practical reasons — burning being the “Indian way” as well as expanding pasture and reducing fuels for forest fires. The detractors argued that small fires destroyed young trees, depleted soils, made the forest more susceptible to insects and disease, and were economically damaging. But the critical argument put forth by the opponents of burning was that it was inimical to the Progressive Spirit of Conservation. As a modern people, Americans should use the superior, scientific approaches of forest management that were now available to them, and which had not been available to the natives. Worse than being wrong, accepting native forest management methods would be primitive.

Spelling out the eventual consequences of the ‘progressive’ reformation of forest management practices probably isn’t necessary, since – in striking contrast to its economic analog – its lessons have been quite thoroughly absorbed, widely and frequently referenced. Ecologically-sophisticated environmentalists, in particular, have become attached to it as a deterrent model of arrogant intervention, and its perverse consequences. Everybody knows that the attempt to eliminate forest fires, rather than extinguishing risk, merely displaced, and even accentuated it, as the accumulation of tinder transformed a regime punctuated by comparatively frequent fires of moderate scale with one episodically devastated by massive, all-consuming conflagrations.

Parameswaran explains that the absence of fires leads to fuel build-up, ecological drift towards less fire-resistant species, reduction in diversity, and increased connectivity. The ‘protected’ or ‘stabilized’ forest changes in nature, from a cleared, robust, mixed, and patch-worked system, to a fuel-cluttered, fragile, increasingly mono-cultural and tightly interconnected mass, amounting almost to an explosive device. Stability degrades resilience, and preventing the catastrophe-to-come becomes increasingly expensive and uncertain, even as the importance of prevention rises. By the penultimate stage of this process, crisis management has engineered an impending apocalypse: a disastrous event that simply cannot possibly be allowed to happen (although it surely will).

Parameswaran calls this apocalyptic development sequence The Pathology of Stabilisation in Complex Adaptive Systems. It’s what the Prime Directive inevitably leads to. Unfortunately, diagnosis contains no hint of remedy. Every step up the road makes escape more improbable, as the scale of potential calamity rises. Few will find much comfort in the realization that taking this path was insane.

‘Black-boxes’ (or flight recorders) retrieved from air disasters are informative in this respect. With surprising regularity, the last words of the pilot, announced to no one in particular, eloquently express an acknowledgment of unattractive but unmistakable reality: “Oh $#it!” Less common – in fact, unheard of – is any honest address to the passengers: “Ladies and gentlemen, this is your captain speaking. We are all about to die.” What would be the point?

Everything to be realistically expected from our ruling political and financial elites can be predicted by rigorous analogy. This flight doesn’t end anywhere good, but it would be foolish to await an announcement.

Unencumbered by official position in the Cathedral of the Prime Directive, ‘Mickeyman’ at World Complex is free to sum things up with brutal honesty:

We have lived through a long period of financial management, in which failing financial institutions have been propped up by emergency intervention (applied somewhat selectively). Defaults have not been permitted. The result has been a tremendous build-up of paper ripe for burning. Had the fires of default been allowed to burn freely in the past we may well have healthier financial institutions. Instead we find our banks loaded up with all kinds of flammable paper products; their basements stuffed with barrels of black powder. Trails of black powder run from bank to bank, and it’s raining matches.

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New Year Cheer

There’s a lot of ruin in a global madhouse

2012 is a year that arrives pre-branded. It’s the last opportunity to end the world on schedule. By the end of December the window for apocalyptic profundity will have closed, and it’s back to the hazards of random, meaningless catastrophe.

Perhaps a prophetic consensus will have emerged by the fall, but right now the outlook is foggy at best. Trawling through the Web’s most excitable 2012 sites doesn’t bring anything very definite into focus. Once discussion advances beyond the fairly solid foundation of the Mayan long count, and the Fourth Age of Creation (lasting from August 11, 3114 BC, to December 21, AD 2012), things spin off into chaos with disconcerting rapidity.

Whether the earth is destined to plunge into a black hole is a matter of (at least limited) controversy, but the fact that just about every imaginable species of prospective calamity or transformation is being sucked into the 2012 prophetic vortex is easily confirmed by anybody with a web browser. Even the basic genre remains unsettled, with expectations veering wildly from celestial collisions, solar flares, and super-volcanoes, to spiritual awakenings, cosmic harmonizations, and countless varieties of Messianic fulfillment. According to the sober forecasters at 2012apocalypse.net: “The Mayans, Hopis, Egyptians, Kabbalists, Essenes, Qero elders of Peru, Navajo, Cherokee, Apache, Iroquois confederacy, Dogon Tribe, and Aborigines all believe in an ending to this Great 2012 Apocalyptic Cycle.” They missed out Mother Shipton, Nostradamus, Terence McKenna, Kalki Bagavan, and Web Bot, yet somehow the Cracked crew remain unconvinced.

As an aside, the best line UF has yet seen among the deniers (sorry, couldn’t resist that), is this deliciously self-undermining specimen from Ian O’Neill: “No one has ever predicted the future, and that isn’t about to change.”

In an increasingly desegregated cultural landscape, it’s not easy to separate out secular history and sensible opinion from the orgiastically gathering End Times festival, and – strangely enough – the world process isn’t doing much to oblige. Ritualistic predictions-for-the-year-ahead posts on politics and economics sites are practically indistinguishable from the 2012 Armageddon-is-here prophecies, although the sane side of prognostication is characterized by a greater uniformity of unrelenting bleakness: Comprehensive economic collapse, aggravated by administrative sclerosis, and accompanied by escalating international conflict / social disintegration, amidst the enraged screams of splintering civilizations (and a ‘Happy New Year’ to you, too.)

Goldbug Darryl Robert Schoon demonstrates some professional hedging, but he doesn’t even try to keep impending financial crisis from spilling out into cosmic immensities:

The ending of the Mayan calendar in 2012 is as misunderstood as the interplay between credit and debt and supply and demand; but the coincident collapse of the current economic paradigm and an arcane indicator of change should not be dismissed. … The current great wave [of rising prices] began in 1896. That it could crest and break in 2012 could be a coincidence. Or, it may not.

Science, technology, creative culture, and enterprise are likely to spring some upside surprises, but the degenerative horror of the world’s hegemonic Keynesian political economy – combined with increasingly irresponsible neoconservative democracy-mongering — has ominously synchronized itself with the darkest visions of the 2012 cults. A patently dysfunctional mode of socio-economic organization, based upon fake money, belligerent idiocracy, and electorally-enabled looting scams, is aggressively imposing itself – with an almost incomprehensible absence of self-reflection — upon a world that already has plenty of indigenous pathologies to contend with. The resulting New World Order, entirely predictably, is a lunatic asylum, and even its most functional components (such as Singapore and the Chinese SARs of Hong Kong and Macao) are networked into the collective delirium. When the Euro, Japanese Yen, and US Dollar collapse (probably in that order) the financial and geopolitical tsunami will wash over everybody. If that doesn’t happen in 2012, history has no sense of narrative climax at all.

On the ‘bright’ side – for all the can-kickers out there – the words of Adam Smith that have defined 2011 continue to resonate. “Young man, there’s a lot of ruin in a nation,” and even more in a global system. Perhaps the slow-motion disintegration of hegemonic neo-fascism Keynesian social democracy will spin itself out beyond the horizon of the Mayan calendar, which would really give us something to look forward to …

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Suspended Animation (Part 5)

Engines of Devastation

Does Postmodernism still seem cool to anybody? — Probably not. Having sold whatever simulacrum of a soul it might have had to the fickle gods of fashion, it has learnt more about the reign of Chronos than it might have expected to – the kids get devoured, and it’s on to something new. What was accepted for no good reason gets discarded for no good reason. In political science it’s called democracy (but that’s another discussion).

Clearly, there’s something profoundly just about the disappearance of postmodernism into the trashcan of random difference (what’s ‘in’ has to be new, preferably meaninglessly so). It’s even ‘poetically just’, whatever that means. But it also destroys information. Although Postmodernism was certainly a fad, it was also a zeitgeist, or spirit of the times. It meant something, despite its own best efforts, at least as a symptom. The disappearance of reality that it announced was itself real, as was the realm of simulation that replaced it. At least in its death, it might have amounted to something.

Consider its greatest mystagogue, Jacques Derrida, and his once widely celebrated ‘concept’ of differance (yes, with an ‘a’), a term within a series of magical words that mark the undecidable, ungraspable, unpresentable, and ultimately inconceivable ontological non-stuff that supplants real events, through an endless succession of displacements and postponements. We can’t really say anything about it, so we have to talk about it endlessly, and entire university departments are required to do so. It’s ridiculous (and so it’s over). But it’s also, quite exactly, the globally hegemonic culture of Keynesianized, macroeconomic, programmatic stagnationism, and that isn’t over yet, although its morbidity is already highly conspicuous. Unlike faddish academic Postmodernism, its death is going to be really interesting.

Long before the Derridoids got started, Keynes had taught governments that differance was something they could do. Procrastination – the strategic suspension of economic reality through a popularly ungraspable series of displacements and postponements – quickly came to define the art of politics. Why suffer today what can be put off until tomorrow, or suffer yourself something that could be somebody else’s problem? Postpone! Displace! In the long run we are all dead. Reality is for losers.

Differance as it really works is a lot cruder than its reflection in Postmodern philosophy (and what could be philosophically cruder than an appeal to the notion of ‘reflection’?). For instance, it is fished out of the ontological abgrund and processed by specific public policy mechanisms, sustained by concrete institutions in ways that are to a considerable extent economically measurable, within elastic but most certainly finite geographical and historical limits. Crudest of all, and ultimately decisive, is the circumscription of derealization, by the real, and the return of the apocalyptic, no longer as a phantasmatic avatar of the ‘metaphysics of presence’ (or false promise of a real event), but as an impending real event, and one whose process of historical construction is in large measure intelligible. Real differance didn’t ‘deconstruct’ the apocalypse, it built it. It’s not even that difficult to see how.

At EconLog, David Henderson has posted his notes from John H. Cochrane’s December 3 talk at Stanford University’s Hoover Institution conference on ‘Restoring Robust Economic Growth in America’. There’s no mention of differance, but there doesn’t need to be.

For nearly 100 years we have tried to stop runs with government guarantees — deposit insurance, generous lender of last resort, and bailouts. That patch leads to huge moral hazard. Giving a banker a bailout guarantee is like giving a teenager keys to the car and a case of whisky. So, we appoint regulators who are supposed to stop the banks from taking risks, in a hopeless arms race against smart MBAs, lawyers and lobbyists who try to get around the regulation, and though we allow — nay, we encourage and subsidize — expansion of run-prone assets.

In Dodd-Frank, the US simply doubled down our bets on this regime. … 

Bailouts delay a painful economic event (postponement) whilst transferring financial liability (displacement). Risk is restored to virtuality, as disaster is turned back into a threat, but it isn’t the same threat. By any remotely sane method of accountancy, it’s now worse. Significant virtual deterioration is substituted for actual discomfort. That’s the cost of derealization.

How do things get worse, exactly? — In plenty of ways. Start with ‘moral hazard’, which is a polite way of saying ‘insanity’. Actions are decoupled from their consequences, removing the disincentive for craziness. The result, utterly predictably, is more craziness. In fact, anything that systematically enhances moral hazard is simply manufacturing craziness. It’s dumping LSD in the water supply, although actually probably worse. So bailouts drive us insane and destroy civilization (no one really disputes that, although they may try to avoid the topic).

Oh, but there’s more! — Much more, because all these displacements don’t just move things around, they move them up. Risk is centralized, concentrated, systematized, politicized – and that’s in the (entirely unrealistic) best case, when it isn’t also expanded and degraded by the corruption and inefficiency of weakly- or cynically-incentivized public institutions. This is trickle up – really flood up – economics, in which everything bad that ever happens to anybody gets stripped of any residual sanity (or realistic estimation of consequences), pooled, re-coded, complicated by compensatory regulation, and shifted to ever more ethereal heights of populist democratic irresponsibility, where the only thing that matters is what people want to hear, and that really isn’t ever going to be the truth.

“Mess up enough, and you probably suffer or die” – that’s the truth. It’s a message that doesn’t translate into the language of Keynesian kick-the-can politics, which is folk Postmodernism. The nearest we get, as the jaws begin to close on the bail-out bucket chain, is “We’re going to need a bigger boat.” After innumerable episodes of that, we’re all huddled together on the Titanic, and things are kinda, sorta, looking OK. At least the band’s still playing …

When abstracted from its squalid psychosis, the pattern is mathematically quite neat. It’s called the Martingale system, better known to Americans as ‘double or nothing’ (and to Brits as ‘double or quits’). Cochrane already touched upon it (“the US simply doubled down our bets”). Wager on red, and it comes up black. No problem, just double the bet and repeat. You can’t lose. (If you like this logic, Paul Krugman has an economic recovery to sell you.)

What appears as disaster postponed is, in virtual reality, disaster expanded. The Wikipedia entry on the Martingale system helpfully connects it to the Taleb Distribution, otherwise known as scrounging pennies in front of a steam roller. The persistence of small gains makes this business model seem like a sure thing — until it doesn’t.

Nassim Nicholas Taleb and Mark Blyth expand on the idea in Foreign Affairs, with application to various aspects of the current (or impending) crisis. Asking why “surprise [is] the permanent condition of the U.S. political and economic elite” they trace the problem to “the artificial suppression of volatility — the ups and downs of life — in the name of stability.”

Complex systems that have artificially suppressed volatility tend to become extremely fragile, while at the same time exhibiting no visible risks. In fact, they tend to be too calm and exhibit minimal variability as silent risks accumulate beneath the surface. Although the stated intention of political leaders and economic policymakers is to stabilize the system by inhibiting fluctuations, the result tends to be the opposite. These artificially constrained systems become prone to “Black Swans” — that is, they become extremely vulnerable to large-scale events that lie far from the statistical norm and were largely unpredictable to a given set of observers.

Discussing this article at PJMedia, Richard Fernandez glosses and sharpens its conclusion:

Part of the problem is the consequence of [the elites’] own damping. By attempting to centrally manage systems according to some predetermined scheme they actually store up volatility rather than dispersing it. By kicking the can down the road they eventually condemn themselves to bumping into a giant pile of cans when they run out of road. … But the elites cannot admit to surprise; nor can they admit to bad things starting on their watch. Therefore they keep sweeping things under the carpet until, as in some horror movie, it spawns a zombie. To make systems robust, says Taleb, you’ve got to admit that you can make mistakes and pay the price. You will have to in the end anyway.

We aren’t in Postmodernism anymore, Toto. We’re nearer to this:

The wavelike movement affecting the economic system, the recurrence of periods of boom which are followed by periods of depression, is the unavoidable outcome of the attempts, repeated again and again, to lower the gross market rate of interest by means of credit expansion. There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved. (Ludwig von Mises, Human Action)

Or even this:

Great is Bankruptcy: the great bottomless gulf into which all Falsehoods, public and private, do sink, disappearing; whither, from the first origin of them, they were all doomed. For Nature is true and not a lie. No lie you can speak or act but it will come, after longer or shorter circulation, like a Bill drawn on Nature’s Reality, and be presented there for payment,- -with the answer, No effects. Pity only that it often had so long a circulation: that the original forger were so seldom he who bore the final smart of it! Lies, and the burden of evil they bring, are passed on; shifted from back to back, and from rank to rank; and so land ultimately on the dumb lowest rank, who with spade and mattock, with sore heart and empty wallet, daily come in contact with reality, and can pass the cheat no further.

Observe nevertheless how, by a just compensating law, if the lie with its burden (in this confused whirlpool of Society) sinks and is shifted ever downwards, then in return the distress of it rises ever upwards and upwards. Whereby, after the long pining and demi-starvation of those Twenty Millions, a Duke de Coigny and his Majesty come also to have their ‘real quarrel.’ Such is the law of just Nature; bringing, though at long intervals, and were it only by Bankruptcy, matters round again to the mark.

But with a Fortunatus’ Purse in his pocket, through what length of time might not almost any Falsehood last! Your Society, your Household, practical or spiritual Arrangement, is untrue, unjust, offensive to the eye of God and man. Nevertheless its hearth is warm, its larder well replenished: the innumerable Swiss of Heaven, with a kind of Natural loyalty, gather round it; will prove, by pamphleteering, musketeering, that it is a truth; or if not an unmixed (unearthly, impossible) Truth, then better, a wholesomely attempered one, (as wind is to the shorn lamb), and works well. Changed outlook, however, when purse and larder grow empty! Was your Arrangement so true, so accordant to Nature’s ways, then how, in the name of wonder, has Nature, with her infinite bounty, come to leave it famishing there? To all men, to all women and all children, it is now indutiable that your Arrangement was false. Honour to Bankruptcy; ever righteous on the great scale, though in detail it is so cruel! Under all Falsehoods it works, unweariedly mining. No Falsehood, did it rise heaven- high and cover the world, but Bankruptcy, one day, will sweep it down, and make us free of it. (Thomas Carlyle, via Mencius Moldbug, but cited all over the place recently)

Here it comes.

[Tomb]

Suspended Animation (Part 3)

The dead hand of the state

I wish I was saying it’s going to happen soon… this is the longest running crisis in which people have been giving false dates, people turning up for summits saying it has to be resolved, nothing happens and people go away and the sky doesn’t fall in… sooner or later the sky will fall in, I’m just not clever enough to know when it’s going to be.
— Anthony Fry, UK Chairman of Espirito Santo Investment Bank (to CNBC)

Europe will adopt the American solution. The ECB will not allow large banks to default. It will inflate to buy the bad assets or else buy the bonds of the governments, so they can make payments. Then the bankers will put this money into excess reserves. New lending to businesses will cease. The West will go into permanent recession or no-growth stasis. The governments will absorb an ever-larger percentage of the region’s capital: bond sales. Private firms will not be able to borrow at low rates. Capital development will crease.
— Gary North (here)

The new millennium is teaching us vastly more about zombies than anybody could have anticipated. Long gone are the virile, predatory vampires that once populated horror stories about capitalism, sucking out the vital essence of the proletariat in gothic fortresses of ‘dead labor’. Instead, shambling worm-eaten wrecks mill about aimlessly, whilst augmenting their numbers in obscure cannibalistic circuits that defy rational comprehension and which are, in any case, too hideous to steadily contemplate. Fiends have degenerated into ghouls, who do not hunt and feed to strengthen themselves, but only to carry on, prolonging their putrescent decrepitude.

A 2002 Guardian story about “Japan’s zombie economy” prefigures a number of later, and more general, revelations. In particular, it identifies the spreading zombie apocalypse with the slow-motion collapse of Keynesianism, as ‘stimulative’ monetary and fiscal policies (zero interest rates combined with massive government deficit spending) lose their magical powers of revitalization, and instead merely perpetuate an interminable state of undeath. Hyper-stimulation is required just to hang on to the flatline.

Of course, being the Guardian, the solution is obvious: “what the economy needs now is a good dose of inflation.” For undead Keynesians, there’s no malaise too deep for an invigorating wave of currency destruction to solve. This is where the zombie metabolism really gets interesting. By the end of the decade, America had gone full zombie itself, and begun to realize that this wasn’t just some weird Japanese thing it didn’t understand, but an altogether more general and radically mysterious phenomenon. Ben Bernanke’s Federal Reserve pushed US interest rates to the floor (ZIRP) and began to incontinently monetize public debt (QE) whilst nationalizing private debt (TARP), using every available policy instrument to direct the economy in an inflationary direction, at maximum velocity. Nothing much happened. Zombies don’t do fever.

At this point, the questions come flooding in. For instance: why is anybody still buying Japanese or American government bonds? Isn’t it obvious that this paper represents nothing except a slice of unredeemable debt, promising an insulting return, ‘guaranteed’ by a structurally insolvent entity, and associated with policies more-or-less explicitly oriented towards deliberate currency destruction? What are people thinking? To answer that, it’s necessary to venture a little deeper into the zombie world.

The idea of the US Dollar (or Japanese Yen) as a ‘safe haven’ might sound like a joke, and you’ve probably heard it before:

Joe Dollar and Jacques Euro are camping in the woods, when they suddenly hear the terrifying snuffles of a famished carnivore, getting closer. Joe begins hastily pulling on his running shoes. “What are you doing?” asks Jacques. “You can’t out-run a bear market.”

“I don’t need to outrun the market,” Joe replies. “I just need to outrun you.”

At Asia Times Online, Martin Hutchinson envisages a financial crisis endgame that “eliminat[es] the government debt markets that have formed the centerpiece of the last three centuries,” returning the world to the market-based money and free banking regime of 1693, before the creation of the Bank of England. Paradoxically, however, the prospect of collapse raises the financial potency of the state to an unprecedented level, as the ‘safety’ it promises disconnects from questions of economic competence and reverts to something far more atavistic and Hobbesian. Once everything starts to buckle, credibility attaches to the biggest, meanest, and most ruthless provider of mafia-style ‘protection’. Relativistic (zero- or negative-sum) power politics takes center stage.

A pedestrian but informative financial report from Bloomberg sets it out clearly:

Jim Chanos, founder of the Kynikos Associates Ltd. hedge fund, said that while the chances of a recession may be increasing, the U.S. economy is the “best house in a bad neighborhood”

The US Dollar might be nothing more than the “best looking horse in the glue factory,” but once the financial logic of zombie apocalypse takes over, the implications can be far-reaching. Bloomberg continues:

Ten-year Treasuries erased losses after the U.S. sold $29 billion of seven-year securities at a record low yield of 1.415 percent, wrapping up $99 billion of note sales this week. Ten- year yields fell four basis points to 1.88 percent after climbing as much as four points earlier. The rate is up from a record low of 1.67 percent on Sept. 23.

U.S. Treasuries maturing in seven to 10-years have returned 14 percent this year, outperforming a 9.3 percent return for the broader Treasury market, according to Bank of America Merrill Lynch indexes, as of yesterday [Nov. 23]. 

It’s worth taking a moment to digest these numbers. Nobody expects average US inflation over the next seven years to come in under 1.415% p.a., or under 1.88% over the next ten, so the yield is sheer racketeering. Yet this blatant assault on the lower colon of savers has been compatible with a one-year return of 14% (!) — they’re begging for it. Seriously, who cares if Bernanke is lighting up a fat Cuban with a large bill lifted straight out of their pocket? It just makes him look badder, and that’s what they’re paying for. Gold sounds good in theory, but it doesn’t come with its own attached gangster organization, so hanging onto it through the zombie interlude could be difficult. It’s safer, by far, to invest in the alpha state.

Because this Hobbesian zombinomics is political and relativisitic, there are epsilon states at the other end of the trade, as well as a beta state caught in the middle. Europe isn’t a state at all, of course, which is how the (interminable) final phase of zombinomics got started. Before it changed, however, the EU conjuring act seemed to be going pretty well. Every Eurozone member state issuing government debt in the common currency paid yields that were broadly harmonized, as if Europe was a financially sovereign entity, standing united behind its paper. The realization that economic sovereignty remained national, even after the alienation of monetary sovereignty to the European Central Bank, came as something of a shock, and bond spreads gaped accordingly.

The hallucination of ‘Europe’ as a united, honorary alpha state, rapidly degenerated to reality, recoding government bonds as zombie apocalypse security scrip. Suddenly, Greek bonds stopped having anything much to do with the ECB, and started to mumble promises in Greek – ultimately, that the Greek state would do whatever it took to secure redemption, whilst mobilizing its Olympian powers to maintain social discipline if necessary. A flight for the exits immediately ensued. Ditto, with variations of speed and intensity, for all the epsilons (= PIIGS).

Where to flee? That’s the zombinomic question par excellence (searching for the best looking horse in the glue factory). First choice, for the keenest Hobbes readers, was to head straight to Mr. Big, a.k.a. Benny the Yank, wait politely whilst he finished smoking a mirved nuke, and then beg for protection (that’s your 14% one year jump in the value of a 10-year US Treasury bond, right there). The second choice — more appealing to old-fashioned types who thought economics still counted for something – was to look for comparative financial responsibility closer to home.

Briefly, this route led to genuine quality, but zombinomics quickly resumed its grip:

Switzerland sparked fears of a new currency war on Tuesday [Sept. 6] after it pegged the Swiss franc against the euro in an attempt to protect its economy from the European debt crisis.

The Swiss National Bank in effect devalued the franc, pledging to buy “unlimited quantities” of foreign currencies to force down its value. The SNB warned that it would no longer allow one Swiss franc to be worth more than €0.83 – equivalent to SFr1.20 to the euro – having watched the two currencies move closer to parity as Switzerland became a “safe haven” from the ravages of the eurozone crisis.

… which brings us to Germany, and the latest chapter in the zombie saga — comic or tragic, and probably both, ironic to the point of absurdity in any case. Ruined, shrunken, divided, and traumatized by guilt, post-war Germany sought above all to bury its nationalistic aspirations in Europe. What became the EU was for Germany – as Algeria was for the French foreign legionnaires – a place in which to forget. Now the bond ‘market’, in its increasingly desperate search for a big, tough, disciplinary state (a global beta will do fine), is determined to dig the Teutonic Leviathan from its grave.

With twin memories of Weimar hyper-inflation and statist hyper-assertion still vivid, Germany is stubbornly holding out against the full-zombie option of (monetary and fiscal) financial debauchery counter-balanced by Hobbesian security politics. This reluctance to throw itself into the spirit of the age has, naturally enough, exposed it to relentless international vilification, and the pressure will only increase. It could all get unpleasantly interesting.

[Tomb]

Suspended Animation (Part 2)

Whatever happened to hell?

“It can’t carry on like this … but how many weeks have we said that for?”
— Justin Urquhart Stewart, director at Seven Investment Management (via James Pethokoukis here)

To make a protracted topic out of this phenomenon is to offer a hostage to fortune. Everything could go over the cliff tomorrow. Perhaps it already has (and we’re just waiting, like Wile E. Coyote, for the consummating splatter).

Greens have been dealing with exactly this question, for a while. After Paul Ehrlich had his credibility torched by Julian Simon, in the most intellectually consequential wager in history, he responded in frustration: “The bet doesn’t mean anything. Julian Simon is like the guy who jumps off the Empire State Building and says how great things are going so far as he passes the 10th floor.”

If environmental catastrophe is structured like this, according to a pattern of durable unsustainability, or disconcerting postponement, there is no obvious theory to account for the fact. With economics, things are different, to such an extent that the entire political economy of the world, along with the overwhelming preponderance of professionalized economic ‘science’, has been geared over the course of a little under a century to crisis postponement as a dominant objective. If the New World Order follows a master plan, this is it.

For ideological purists on the free-market right, laissez-faire capitalism is the ‘unknown ideal’ (although early 20th century Shanghai approached it, as did its student, Hong Kong, in later decades), but it requires no purism whatsoever to acknowledge that the Great Depression effectively buried it as an organizing principle of the world, and that the system which replaced it found political and intellectual expression in the ideas of John Maynard Keynes. Commercial self-organization, which built industrial capitalism before anyone had even the sketchiest understanding of what was happening, gave way to the technocracy of macroeconomics, guided by the radically original belief that governments had a responsibility to manage the oscillations of economic fortune.

In the words of Peter Thiel (drawn straight from the free-market id):

… the trend has been going the wrong way for a long time. To return to finance, the last economic depression in the United States that did not result in massive government intervention was the collapse of 1920–21. It was sharp but short, and entailed the sort of Schumpeterian “creative destruction” that could lead to a real boom. The decade that followed — the roaring 1920s — was so strong that historians have forgotten the depression that started it. The 1920s were the last decade in American history during which one could be genuinely optimistic about politics. Since 1920, the vast increase in welfare beneficiaries and the extension of the franchise to women — two constituencies that are notoriously tough for libertarians — have rendered the notion of “capitalist democracy” into an oxymoron.

As Cato’s Daniel J. Mitchell puts it, more narrowly:

A vibrant and dynamic economy requires the possibility of big profits, but also the discipline of failure. Indeed, capitalism without bankruptcy is like religion without hell.

Because hell’s a hard sell, political and economic rationality have been heading in different directions for 80 years. Even the tropical latitudes of purgatory have proven to be socially combustible, and popularly sensitized politics – which need not be formally ‘democratic’ – tend (strongly) to flee Molotov cocktails in the direction of macroeconomic management. The crucial Keynesian maxim, “In the long run we are all dead,” is especially pertinent to regimes. Who’s going to regenerate deep economic recovery, if the route to it lies through gulfs of fire and brimstone that are fundamentally incompatible with political survival? History, redundantly, provides the obvious answer: nobody is.

The accursed path not taken, across the infernal abyss, has become so neglected and overgrown with weeds that it is rarely noticed, but it is still graphically marked by the advice that Treasury Secretary Andrew Mellon gave to Herbert Hoover as the way to navigate the Great Depression (advice that was, of course, dismissed):

… liquidate labor, liquidate stocks, liquidate farmers, liquidate real estate… it will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up from less competent people.

In recalling this recommendation, as an unacceptable option, Hoover commemorates the precise moment that capitalism ceased to exist as a politically credible social possibility. The alternative – which has many names, although ‘corporatism’ will do – was defined by its systematic refusal of the ‘liquidationist’ path. Coming out stronger on the other side meant nothing, because the passage would probably kill us – it would certainly destroy our political careers. In any case, it was a long run solution to a short term problem, scheduled by volatile popular irritability and election cycles, and in the long run we are all dead. Better, by far, to use ‘macroeconomic policy’ (monetary mind-control) to artificially prolong unsustainable economic euphoria – or even its jaded, hung-over simulation – than to plunge into a catastrophe that might imaginably have been delayed.

It doesn’t take a Schumpeterian fanatic to suspect that such ‘creative destruction (but without the destruction)’ is unlikely to provide a sustainable recipe for economic vitality. When evaluated realistically, it is a formula that programs a trend to perpetual stagnation. Stagnation as a choice.

Because money serves as a general equivalent, and thus as a neutral, non-specific, purely quantitative medium of exchange, it is very supportive of certain highly-consequential economic illusions, of a kind that macroeconomics has been especially prone to. It can easily seem as if ‘the economy’ consists essentially of undifferentiated, quantitative aggregates, such as ‘demand’, ‘gross domestic product’, ‘money supply’, ‘land’, ‘labor’, and ‘capital’. In fact, none of these things exist, except as high-level abstractions, precipitated by the monetary function of general exchangeability.

An understanding of Schumpeterian creative destruction requires, as a preliminary, the recognition that capital is heterogeneous. When expressed in a monetary form, it can appear as a homogeneous quantity, susceptible to simple accumulation, but in its productive social reality it consists of technological apparatus – tools, machines, infrastructures, and installations – representing irretrievable investments, of qualitatively distinctive kinds. The monetary equivalent of such industrial capital is derived from the market values attributed its various components, and these are extremely dynamic, virtual, and speculative. Since the value retrievable from liquidation (and ultimately from scrap) is generally a small fraction, or lower bound, of capital asset value, the ‘capital stock’ is estimated with reference to its productive usage, rather than its intrinsic worth. Schumpeter was careful to break this down into two very different aspects.

Firstly, and most straightforwardly, industrial capital is a resource that depreciates at a regular and broadly predictable rate as a function of output. It is consumed in the process of production, like any other material input, but at a slower rate. Creative destruction, however, refers to a second, far more drastic type of capital depreciation, resulting from technological obsolescence. In this case, capital stock is ‘destroyed’ – suddenly and unpredictably – by an innovation, taking place elsewhere in the economy, which renders its anticipated use unprofitable. In this way, large ‘quantities’ of ‘accumulated’ capital can be depreciated overnight to scrap values, and the investments they represent are annihilated. The hallucination of homogeneous capital is instantaneously vaporized, as painstakingly built fortunes are written down to nothing.

Several points suggest themselves:

1. The violence of creative destruction is directly proportional to its fecundity. The greater, deeper, and more far-reaching the innovation, the more colossal is the resulting capital destruction. At the extreme, profound technological revolutions lay waste not only to specific machines and skills, but to entire infrastructures, industries, occupational categories, and financial systems.

2. The cultural implication of creative destruction far exceeds issues of ‘moral hazard’ and ‘time preference’. The victims of industrial change waves – whether businesses, workers, or financiers – are not being punished by the market for imprudence, slackness, or short-sightedness. They are ruined by pure hazard, as the reciprocal of the absolutely unanticipated nature of technological invention (occurring elsewhere). Neither the creation, nor the destruction, is remotely ‘fair’ – or ever could be. (Although Dawinian ‘virtue’ lies in flexible adaptability — Hong Kong always does OK.)

3. Massive capital destruction expresses technological revolution. Macroeconomic analysis (measuring homogeneous aggregates) will always miss the most significant episodes in industrial evolution, since these do not register primarily as growth, but rather the opposite. Hell is a hothouse.

4. A policy environment designed to preserve macroeconomic aggregates (e.g. ‘wealth’ or ’employment’) necessarily opposes itself to the basic historical process of industrial revolution, because destruction of the existing economy is strictly indistinguishable from industrial renewal. For that old stuff to be worth anything (beyond scrap) we have to keep using it, which means that we’re not switching over. To cross the gulf, we have to enter the gulf. (Like most things in this universe: harsh but true.)

5. Real historical advance is now politically unacceptable. Either politics wins (eternal stagnation) or history does (political collapse). Interesting times (or not).

The world couldn’t take the heat, so it got out of the kitchen. There’s cold porridge for dinner, and it’s going to be cold porridge for breakfast. Eventually the porridge will run out, but that could take a while …

… and here’s Ben Bernanke on topic: “I’m not a believer in the Old Testament theory of business cycles. I think that if we can help people, we need to help people.” (via Mike Krieger at ZH)

Cold porridge politics forever. Yum!

[Tomb]

Suspended Animation

Limbo starts to feel like home

According to Herbert Stein’s Law, the signature warning of our age, “If something cannot go on forever, it will stop.” The question is: When?

The central concerns of environmentalists and radical market economists are easy to distinguish – when not straightforwardly opposed – yet both groups face a common mental and historical predicament, which might even be considered the outstanding social discovery of recent times: the extraordinary durability of the unsustainable. A pattern of mass behavior is observed that leads transparently to crisis, based on explosive (exponential) trends that are acknowledged without controversy, yet consensus on matters of fact coexists with paralyzing policy disagreements, seemingly interminable procrastination, and irresolution. The looming crisis continues to swell, close, horribly close, but in no way that is persuasively measurable closer, like some grating Godot purgatory: “You must go on; I can’t go on; I’ll go on.”

Urban Future doesn’t do green anguish as well as teeth-grinding Austrolibertarian irritation, so it won’t really try. Suffice to say that being green is about to become almost unimaginably maddening, if it isn’t already. Just as the standard ‘green house’ model insinuates itself, near-universally, into the structure of common sense, the world temperature record has locked into a flatline, with surging CO2 production showing up everywhere except as warming. Worse still, a new wave of energy resources – stubbornly based on satanic hydrocarbons, and of truly stupefying magnitude – is rolling out inertially, with barely a hint of effective obstruction. Tar sands, fracking, and sub-salt deep sea oil deposits are all coming on-stream already, with methane clathrates just up the road. The world’s on a burn, and it can’t go on (but it carries on).

Financial unsustainability is no less blatant, or bizarrely enduring. Since the beginning of the 20th century, once (classically) liberal Western economies have seen government expenditure rise from under 5% to over 40% of total income, with much of Europe crossing the 50% redline (after which nothing remotely familiar as ‘capitalism’ any longer exists). Public debt levels are tracing geometrically elegant exponential curves, chronic dependency is replacing productive social participation, and generalized sovereign insolvency is now a matter of simple and obvious fact. The only thing clearer than the inevitability of systemic bankruptcy is the political impossibility of doing anything about it, so things carry on, even though they really have to stop. Unintelligible multi-trillion magnitudes of impending calamity stack up, and up, and up in a near future which never quite arrives.

The frozen limbo-state of durable unsustainability is the new normal (which will last until it doesn’t). The pop cultural expression is zombie apocalypse, a shambling, undying state of endlessly prolonged decomposition. When translated into economic analysis, the result is epitomized by Tyler Cowen’s influential e-book The Great Stagnation: How America Ate All the Low-Hanging Fruit of Modern History, Got Sick, and Will (Eventually) Feel Better. (Yes, Urban Future is arriving incredibly late to this party, but in a frozen limbo that doesn’t matter.)

In a nutshell, Cowen argues that the exhaustion of three principal sources of ‘low-hanging fruit’ has brought the secular trend of American growth to a state of stagnation that high-frequency business cycles have partially obscured. With the consumption of America’s frontier surplus (free land), educational surplus (smart but educationally-unserved population), and — most importantly — technological surplus, from major breakthroughs opening broad avenues of commercial exploitation, growth rates have shriveled to a level that the country’s people are psychologically unprepared to accept as normal.

It fell to Cowen’s GMU colleague Peter Boettke to clearly make the pro-market case for stagnationism that Cowen seems to think he had already persuasively articulated. In an overtly supportive post, Boettke transforms Cowens’ rather elusive argument into a far more pointed anti-government polemic — the discovery of a new depressive equilibrium, in which relentless socio-political degeneration absorbs and neutralizes a decaying trend of techno-economic advance.

An accumulated economic surplus was created by the age of innovation, which the age of economic illusion spent down. We are now coming to the end of that accumulated surplus and thus the full weight of government inefficiencies are starting to be felt throughout the economy.

Perhaps surprisingly, the general tenor of response on the libertarian right was quite different. Rather than celebrating Cowen’s exposure of the statist ruin visited upon Western societies, most of this commentary concentrated upon the stagnationist thesis itself, attacking it from a variety of interlocking angles. David R. Henderson’s Cato review makes stinging economic arguments against Cowen’s claims about land and education. Russ Roberts (at Cafe Hayek) shows how Cowen’s dismal story about stagnant median family incomes draws upon data distorted by historical changes in US family structure and residential patterns. The most common line of resistance, however, instantiated by Don Boudreaux, John Hagel, Steven Horwitz, Bryan Caplan, and Ronald Bailey, among others, rallies in defense of actually existing consumer capitalism. Bailey, for example, notes:

In 1970, a 23-inch color television cost $368 ($2,000 in 2009 dollars). Today, a 22-inch Phillips LCD flat panel TV costs $190. In 1978, an 8-track tape player cost $169 ($550). Today, an iPod Touch with 8 gigabytes of memory costs $204. In 1970, an Olympia adding machine cost $80 ($437 in 2009 dollars). Today, a Canon office calculator costs $6.65. In 1978, a Radio Shack TRS80 computer with 16K of RAM cost $399 ($1300 in 2009 dollars). Today, Costco will sell you an ASUS netbook with 1 gigabyte of RAM for $270. The average car cost $3,900 in 1970 ($21,300 in today’s dollars). A mid-sized 2011 vehicle would cost somewhere around $20,000 and last twice as long.

Another very crude way to look at it is that Americans are four times richer in terms of refrigerators, 10 times richer in terms of TVs, 2.5 times richer when it comes to listening to music on the go, 3,000 times richer in calculators, about 400,000 times richer when it comes to price per kilobyte of computer memory, and two times richer in cars. Cowen dismisses this kind of progress as mere “quality improvements,” but in this case quality becomes it own kind of quantity when it comes to improved living standards.

What seems pretty clear from most of this (and already in Cowen’s account) is that nothing much has been moving forward in the world’s ‘developed’ economies for four decades except for the information technology revolution and its Moore’s Law dynamics. Abstract out the microprocessor, and even the most determinedly optimistic vision of recent trends is gutted to the point of expiration. Without computers, there’s nothing happening, or at least nothing good.

[… still crawling …]

[Tomb]

Re-Animator (Part 2)

Expo transformers – the uninvited guests

What was inside the UK national pavilion at Expo 2010? Did anyone get in there? Maybe they could pass on the inside dope? Because one thing is for sure, if ‘Anglosphere’ cultural resonances mean anything, expectations can be pitched down to sub-basement levels. Like the UK, Australia did a good — even excellent job – with the outside of its pavilion, but its exhibition was, to be brutally frank, a disgrace. Vacuous, patronizing, revoltingly sentimental, and despicably cowardly – details would be nice, of course, but actually there weren’t any — it served to perfectly illustrate the collapse of Expo, from a festival of dynamic modernization to a whining indulgence in modernity’s most destructive cultural pathologies. Where once an exhibition, whether corporate or national, boldly declared: “This is what we’re doing (isn’t it magnificent?),” now they exhaust their attenuated energies exploring new, although consistently unimaginative, ways of saying “sorry.” Narcissistic guilt flaps pointlessly about the exhibition space like a shoal of stranded fish, dying on a beach.

Incredibly, the USA pavilion was even worse. Not only was the pavilion itself a prefabricated strip-mall insult, unworthy of comparison with a second-tier Wallmart, but the exhibition inside took the obsequious pandering of the Australians to a whole new level. We wanted a space shuttle or a predator drone and they gave us Hillary Clinton saying “ni hao” plus some nonsense about planting flower-beds in the ghetto. Anyone who left this pavilion without deep and abiding detestation for everything America represented itself as being probably thinks Barney is a pretty cool guy. This was the society once capable of staging the Chicago Expo of 1893, the New York Expos of 1939-40 and 1964-5, of making incredible things and exhibiting them, of depicting a compelling vision of the future, and now … morbid Spenglerian reflections were inescapable.

Wandering amongst these monuments to misdirection, bland meaninglessness, sugary PR, and piteous ‘please-don’t-hate-me’ concessions to the strident anti-modernist moralism of the age – which is to say, to sheer, ruinous decadence — consciousness pixilated out into semi-random dot-pattern, swirled kaleidoscopically by a storm of frustration that could only be relieved by barking out at the local Expo authorities, and beyond them at the city, country, and region that was hosting this event “Could you please stop being so danged polite!”

The West is obviously spiraling down the drain, and what it needs, above anything, is some inspiring competition. In particular, and in 2010, it needed a western Pacific Rim, full-throttle development, blazing-a-path-to-the-future Expo that – purely by inevitable implication – maximized the humiliation of the senescent ‘developed’ world and jolted it with the roughest imaginable type of tough love from its path of decline. (Of course, the societies most in need of this shock therapy are too lost in the enthralling minutiae of their own degeneration to have noticed it, but still …) Instead, Expo 2010 remained scrupulously courteous, deferential to deeply decayed Expo traditions, and respectful of the multicultural piety that even the most wretched examples of systematic social failure have a dignity of their own. What it lacked was a massive injection of pure, unselfconscious, ethno-historical arrogance, based on unmoderated confidence in what was being achieved.

Perhaps this can be stated even more offensively: modernization should make people feel bad. Its most altruistic or epidemic function is to so thoroughly deride and humiliate all of those who are failing to modernize that eventually, after every excuse and projection has been attempted and exhausted, behavior is changed. Backwardness is made shameful, and thus corrected. That’s how history works. It began that way among the jig-saw principalities of Renaissance Europe, it worked that way in Japan (bringing modernization with the Meiji restoration), in China, long denigrated for its ‘stagnant Confucianism’, now big mummy of the Dragon economies, in India, finally lashed psychologically out of its absurd ‘Hindu rate of growth’ by the China model, and everywhere else that has ever climbed out of complacent sloth onto the developmental fast track. It’s long overdue to start happening in the West, because what has been happening there — for the best part of a century now — simply isn’t working, and this chronic social failure is nowhere near clear, painful, or embarrassing enough to the populations concerned.

Nothing would be better for the West than to have its nose rubbed in its own decay, the more abusively and insensitively the better. In order to accelerate the process, the entire treasure chest of colonial condescension should be re-opened and rummaged through, searching for whatever will best aggravate, provoke, and catalyze transformation, perhaps with strong insinuations of racial and cultural inferiority thrown in for spice. The lesson of history is that the human species is comfortable with inertia, and generally more than happy to gradually degenerate. One of the few things that ever stops people, and turns them around, is the transparent contempt trickling down from other, more dynamic societies. If Expo needs a ‘social dimension’, that’s it.

No doubt 2010 is still too recent for alternative or counter-factual history, for an Expo-punk (or X-punk) genre, searching out everything that might have been re-animated through the event — but the venture is irresistible. Call it Asia Unleashed 2010, an utterly impolite assertion of new socio-geographical realities that expresses, in raw and overwhelming style, the central truth of the age: the simultaneous de-westernization and radical re-invigoration of modernity.

Asia Unleashed could have borrowed heavily from the actual Expo 2010, adopting almost everything that was created by the host, in fact, and much else beside. The China Pavilion, Theme Pavilions, Urban Best Practices Area, Expo Cultural Center, Expo Center, Expo Boulevard, Expo Museum, and site landscaping, as well as the Shipping Pavilion, GM/SAIC Pavilion and exhibition, Telecoms Pavilion, Oil Pavilion, Shanghai Corporate Pavilion with all its stuff, Coca Cola Pavilion, plenty of the international pavilion designs, and even a few of the internal exhibitions … all keepers. What gets laughed out are the schmaltzy public relations videos, the sorry, sorry, really truly sorry song and dance act, the weren’t we awful performance, the Kumbaya Pavilion, the Environmental Hypersensitivity Pavilion, the Victimological Grievance Pavilion, the Beyond Growth Pavilion, the There Must Be A Gentler Way Pavilion, any national or corporate pavilion without exhibition objects (roughly half), almost everything bearing the imprint of tourist boards, media studies graduates, or diplomatic services, and every usage of solar panels that isn’t strictly tailored to commercial exploitation on a massive scale. In addition, any national pavilion based entirely on ethnic kitsch gets grouped together with others of its kind in an exotic tourism area, because it’s admitting to a complete absence of creative capability and needs to be mocked. No robots, no platform: that’s the rule.

Asia Unleashed also needs a lot of things brought in, most of all machines. Expo is all about machines, even though every Expo over the last half-century has been pitifully deficient in this regard. It scarcely needs mentioning that the entire Expo site should be pulsing, crawling, and twitching with robots of every type and scale, from industrial goliaths, automated submarines and space vehicles, through charismatic androids, to intelligent household appliances, Go players, robopets, and insectiform mechanisms. To push the process along, those countries and corporations with the laziest robot exhibits can be publicly ridiculed over the PA system.

Expo is an exhibition, and its historical sickness is perfectly tracked by the degeneration of this elementary conception into PR. Organizers at all levels, from the pinnacle of the international Expo bureaucracy (BIE) downwards, clearly need to be forcefully reminded of the difference. For instance, video technology is an entirely suitable object for Expo display, and videos themselves can quite appropriately play a supportive, informative role. To center an ‘exhibition’ upon videos, however, especially when they have been put together, using state-of-the-art advertising techniques, with the entire purpose of selling a national or corporate brand through image associations and spin, is a complete abnegation of responsibility and should straightforwardly be banned, or at least boycotted, derided, and rendered ineffective through inundating contempt. The only acceptable center of an Expo display is an object, preferably astonishing, fetched from the outer edge of industrial capability in order to concretely represent the trajectory of material progress. Displaying such objects – and thereby respecting audiences sufficiently to evaluate them for themselves – is the non-negotiable, basic function of Expo as an institution. If it can no longer accept this task, it should be terminated (by a giant robot, if possible).

Asia Unleashed is dedicated to the latest and impending phases of global industrial civilization, which should be more-or-less implicit in the fact that it is a World Expo, although sadly, it isn’t. There’s plenty of room for artworks and other singular cultural creations, but the emphasis is edgily modernistic. Green technology gets in because it’s technology, and the tourism industry gets in because it’s an industry, but in both cases the spin-meisters have been reined back hard, and the preliminary question insistently raised: “What, really, are you exhibiting here?” The only organizers who get to avoid such suspicious interrogations are the ones overseeing the erection of some fabulous structure that looks as if it comes from the set of a science fiction movie, or unloading partially-animated assemblages of glistening metal from mountainous stacks of shipping containers, because – clearly – they understand what an Expo is all about. The cyclopean space elevator anchor station, taking shape in the Extraterrestrial Resources Exploitation Zone, serves as a model for the guiding spirit of the festival. The machinery in the 3D printing pavilion printed the pavilion.

The mining industry employs monster trucks weighing 203 tonnes, with a capacity to carry 360 tonnes, they cost US$3 million each, their tires are four-meters in diameter, and driving one is like “driving a house” – why on earth didn’t Expo 2010 have one? Asia Unleashed most certainly would. For developed countries with the resources to put on an impressive show at Expo there needs to be something like a price for admission, and an awe-inspiring piece of industrial machinery fits the bill exactly. The Canadian tar sands are being criss-crossed by these monster trucks, and the Canada national pavilion should have been strongly advised to bring one over. Instead they brought … (hands up if anyone remembers).

All the imagination that has been squandered over decades in utopian speculations of the “another world is possible” type has been far more productively employed at Asia Unleashed, counter-balancing the tendency of advanced industrial capabilities to flee from the arena of spectacle. The monumental achievements and consequences of intensely miniaturized and softened technologies demand exhibition, from silicon chip fabrication, gene sequencing, and rudimentary nanotechnology, to cryptosystems, social networks, digital microfinance, and virtual architecture, even as they slip through their inner inexorable logic into invisibility. To present these frontiers of industrial capability rapidly, dramatically, and memorably to a highly-diverse, transient Expo audience requires the application of creative intelligence on a massive scale. The growing challenges of this task are worthy of the rising computer-augmented talents brought to bear upon it.

Asia Unleashed never happened, of course, partly because the international Expo institutional apparatus is locked into the Occidental death-slide, but mostly because it would have been impolite. Ultimately, postmodernist multicultural political correctness – today’s hegemonic globalist ideology — is an elaborate etiquette, designed to prevent the ‘insensitive’ identification and diagnosis of failure, and to elude, indefinitely, the blunt statement: “What you’re doing doesn’t work.” No Expo that remained true to its deep institutional traditions could avoid such a statement arising, implicitly, through contrast. Hence, Expo has been condemned to die, by inertial forces too profound for Expo 2010 to fully arrest, let alone reverse: Better decayed than rude.

From the wreckage of the Expo institution, however, Expo 2010 was able to extract, polish, and resuscitate a crucial modernist topic: the city as engine of progress. More on that in Part 3.

[Tomb]