Category Archives: Economy
John Lanchester, writing for London Review of Books, offers a dire warning about the status of Britain’s big banks that likewise speaks loudly to all of us living over here across the pond, since we’re in a similar situation:
As the new governor of the Bank of England, Mark Carney, takes up his job, it’s a good moment to reflect on the nature and scale of the work ahead of him. In the rear-view mirror, he can see how our banks reached their current condition — a story full of failure, scandal, greed and incompetence. That, as far as the overall picture of modern Britain is concerned, is the fun part. The difficult thing is looking forward and trying to work out what to do next. That’s because in their current condition our banks are an existential threat to British democracy, a more serious one than terrorism, either external or internal. As Andrew Haldane, director of stability at the Bank of England, put it in a historical overview a few years ago, ‘there is one key difference between the situation today and that in the Middle Ages. Then, the biggest risk to the banks was from the sovereign. Today, perhaps the biggest risk to the sovereign comes from the banks. Causality has reversed.’ Yes, it has: and the sovereign at risk is us. The reason for that is that in the UK bank assets are 492 per cent of GDP. In plain English, our banks are five times bigger than our entire economy. (When the Icelandic and Cypriot banking systems collapsed the respective figures were 880 and 700 per cent.) We know from the events of 2008 and subsequently that the financial sector, indeed the whole world economy, is in an inherently unstable condition. Put the size together with the instability, and we are facing a danger that is no less real for not being on the front page this exact second. This has to be fixed, and it has to be fixed soon, and nothing about fixing it is easy.
More: “Let’s Consider Kate“
From an essay published on May 21 at The New Inquiry and bearing the teaser line “Just because we can hear the black helicopters doesn’t mean they don’t exist”:
The modern conspiracy theory is a mythologization of capitalism. That humanity writhes in the grip of a power alien to itself is so palpable that the expression of this reality assumes countless forms in the popular imagination, permeating pop culture, politics, and the persecution anxieties of our booming psychiatric industry. Films like The Adjustment Bureau and television programs like Burn Notice capture the zeitgeist with the laughable simplicity of its most trite tropes, trench coats and all. The novels of Dan Brown append cheap noir to rich cultural pseudo-histories in order to make them more entertaining. The wildly popular television program Ancient Aliens became a cash cow for the History (!) Channel by attributing the greatest historical achievements of scientific discovery and collective activity to little green neo-Calvinist deities from outer space. And never mind the “9/11 Truth Movement” and the shocking contention by some of its leading ideologues that the Federal Emergency Management Agency could organize a poker game, let alone a secret network of underground internment camps in which Art Bell and Alex Jones will soon argue over the top bunk.
In all these expressions, which blur entertainment and information in a manner consistent with the present cultural imaginary, human or extraterrestrial agents are depicted as consciously directing world events behind the backs of those who live them. Though countless colorful theories fall under the umbrella of “New World Order,” and this canon has enjoyed a febrile explosion since the election of the suspiciously other Barack Obama, their basic structure is largely universal. Most importantly, any good conspiracy theory proceeds from empirical premises which are manifestly true. In the vein of Dan Brown, stray facts are woven into vast interconnected webs by tenuous strings of causality and barbaric modus ponens proofs. Historical and social phenomena which are in fact intimately intertwined by the total social relation of capital are instead linked superficially by cheap literary devices.
. . . The irony of the increasing rationalization of society toward some mythic equilibrium is the intensification of paroxysm, of violent crisis, of catastrophe on a heightening scale which it has ensured. The crises inherent in the capitalist cycle now grip the entire planet, leaving destitution in the wake of periodic booms, leaving entire regions to starve, evacuating capital from entire cities and letting them rot while the local ruling class throws up their hands. In the major developed countries, the transition from hulking welfare state apparatuses to militarized police forces maintaining order indicates the increasingly reactionary tendency of states, faced with simply containing the results of a disordered market by brute force, rather than even pretending to curb the causes of destitution and hopelessness among the poor.
When market “experts” discussing the flow of capital sound like meteorologists groping to account for the weather, this is not a coincidence, nor are they’re being disingenuous. Chaos rules the day, though it is backed by the forces of “law and order,” a “hybrid monster” as the bald man remarked, the former referring to legal statutes aimed at responding to crime, and the latter aimed at extra-legal (and often illegal) intervention preventing hypothetical crimes and generally molding the social terrain. The chaos underlying modern life and the scrupulous social order which protects and enforces it appears as a vast global intrigue against those who reproduce it with their daily work. And in a way, it is.
In short, somebody would have to be bat shit crazy not to develop a conspiracy theory about the centralized interconnectivity of these conditions.
More: “I Want to Believe“
Original “All-Seeing Eye” image by de:Benutzer:Verwüstung [Public domain], via Wikimedia Commons.
From The Chronicle of Higher Education, a thought-provoking examination of the ins and outs, both philosophical and practical, of the contemporary reality of disasters, catastrophes, and “resilience” — a word and concept that, as the article points out, is currently all the rage among scholars and policy wonks:
In all, [Japan’s earthquake, tsunami, and nuclear meltdown] is the costliest natural disaster of all time, with the World Bank estimating the damage at $235-billion. The full extent of disruption might not be known for years. The Tohoku earthquake and subsequent Fukushima Daiichi meltdown echoed other major catastrophes — acts of nature, of the market, or of terrorists — that we have endured over the past several years. Those events also created ripple effects in a highly interconnected world, revealing the urgent need to be able to absorb such shocks — because we are certainly going to see more of them.
. . . Most approaches to resilience, [Joseph] Fiksel [one of the founders of the Center for Resilience at Ohio State University] complains, resemble traditional risk management: Identify a set of risks, calculate the probabilities, and do what you can to mitigate those risks. Those techniques, says Fiksel, don’t account for the unexpected — the so-called black swans — and they don’t acknowledge the rolling, compounding effects that disruptions can have in a hyperfast, hyperconnected world.
“We tend to get locked into economic and technological patterns that constrain us in terms of our ability to evolve and cope with new challenges,” he says. “What we really need is to operate with variability as the norm.”
Consider what has hit us hardest in recent years, how some of these disruptions came from or led to other woes: September 11, 2001; the 2003 Northeast blackout; the oil shock of 2008; the mortgage crisis and the Great Recession; Deepwater Horizon; the intense droughts; Hurricanes Katrina, Irene, and Sandy.
There are surely more disruptions to come. Stephen E. Flynn, a security expert and former military officer who is co-director of the George J. Kostas Research Institute for Homeland Security at Northeastern University, ticks off the most likely threats: a breakdown in the power grid; interruption of global supply chains, including those that provide our food; an accident at one of the many chemical factories in urban areas; or damage to the dams, locks, and waterways that shuttle agricultural products and other goods out to sea. The No. 1 threat, he says, is a terrorist attack that prompts lawmakers and a frightened public to shred the Bill of Rights or overreact in another way.
. . . Thomas Homer-Dixon, director of the Waterloo Institute for Complexity and Innovation and a professor at the University of Waterloo who has long focused on studies in systems and resilience [and also the author of the much-discussed 2006 book The Upside of Down: Catastrophe, Creativity, and the Renewal of Civilization] . . . . takes an approach that’s more radical than what most policy makers and security experts are comfortable with. Resilience, he insists, comes from a process of creative destruction, as coined by the Austrian-American economist Joseph Schumpeter. Schumpeter described the way that capitalism brought about new businesses and new products from the destruction and discard of old businesses and products — a notion that has been adopted to describe the renewal of cities, information systems, political structures, governments, and so on. Our economic and political systems, Homer-Dixon says, are resilient because they have embraced a Schumpeterian framework, in a constant cycle of ruin and reinvention.
As for what creative destruction means for communities and societies, Homer-Dixon readily admits he doesn’t fully know. But the outline of the idea doesn’t always sit well with his audiences. “Fundamentally, it is a very threatening idea for vested and elite interests,” he says. Recently, when he spoke to civil servants in Canada about resilience, “they thought I was completely insane, or they were terrified,” he says. When most bureaucrats talk about resilience, they are talking about bouncing back to the status quo.
“Adaptation and innovation often require shock and crisis,” he says. “It can be a violent and messy process, and also really essential to real adaptation and real changes, instead of changes at the margins.”
More: “After Catastrophe”
A new short documentary from the CBC titled The Monarchs of Money explains in hair-raising and gut-punching detail how “The world’s central banks have printed unimaginable amounts of money in recent years. Neil Macdonald explores what this means for the global economy and for your financial well-being.”
There’s also an accompanying written report, billed as the first in a series of articles to be collectively titled Power Shift, “on the rise of the central bankers and the global imposition of cheap credit”:
Quietly, without much public fuss or discussion, a new ruling class has risen in the richer nations. These men and women are unelected and tend to shun the publicity hogged by the politicians with whom they co-exist.
They are the world’s central bankers. Every six weeks or so, they gather in Basel, Switzerland, for secret discussions and, to an extent at least, they act in concert. The decisions that emerge from those meetings affect the entire world. And yet the broad public has a dim understanding, if any, of the job they do. In fact, these individuals now wield at least as much influence over the lives of ordinary citizens as prime ministers and presidents.
The tool they have used to change the world so profoundly is one they alone possess: creating money out of thin air. There is an economic term for this: quantitative easing. More colloquially, it’s called printing money. Since the great economic meltdown in 2008, these central bankers have probably saved the world’s economy from collapse, and dragged it into the unknown at the same time. The amounts they have created are so vast as to be almost incomprehensible — trillions of dollars in pounds and euros, among other currencies.
. . . [T]here are two big concerns with what this new central banker elite has done. One is that no one really understands the consequences of pumping such vast amounts of money into the world economy. It’s already distorted the prices of certain assets, and some fear hyperinflation or market crashes are inevitable (the subject of tomorrow’s column). The other is that it’s caused a massive shift in wealth, from savers to borrowers, and is taking money out of the pockets of almost everyone approaching or at retirement age.
. . . Most of that generation grew up believing that if you save and exercise prudence that you will earn at least a modest return on your hard-earned money to keep you comfortable in your old age, perhaps along with a pension. But the money-printing orgy of the last five years looks to have shot that notion to smithereens. Very deliberately, the central bankers have punished savers, pushing interest rates so low that any truly safe investment — and older people are always advised to play it safe — yields a negative return when inflation is factored in.
. . . The plain fact. . . is that central bank- and government-imposed solutions to disasters caused by irresponsible, greedy, foolish behaviour are almost always carried out on the backs of the virtuous.
— Neil Macdonald, “The ‘monarchs of money’ and the war on savers,” CBC News, April 29, 2013
This is brilliant dot-connecting, big-picture journalism of the most valuable sort. Thank you Daniel Gill for the tip!
In a review of Why I Left Goldman Sachs: A Wall Street Story, the new (October 2012) book by Greg Smith — who also wrote last year’s bombshell piece “Why I Am Leaving Goldman Sachs” for The New York Times — Michael Lewis makes the following cogent, riveting, and frightening observation about the current world of American high finance and the way it has now mutated into a Frankenstein-like entity and manifested a monster-amok scenario, such that insider confessions and whistle-blowing are rendered meaningless, since the system is effectively operating autonomously, without regard for human morals and meanings.
He also offers one of the most succinct accounts of the real history and nature of the financial crisis in the collusion of Goldman Sachs (and by extension the rest of Wall Street) with government power, the better to pursue an agenda of unfettered greed by gaming the whole system from top to bottom, that you’re likely to read anywhere.
In the end, the reader puts down Why I Left Goldman Sachs a little mystified. Why exactly did Greg Smith leave Goldman Sachs? What did he hope to achieve? If it’s change he is after, his particular story comes too late. If, say, back in 2004, someone such as Greg Smith had stepped forward and explained to the world what was going on inside Goldman, he might have spared us all a lot of pain and trouble. But today’s insider confessions feel like vain and useless acts. And what would he have us do, four years after the Great Collapse, to fix the system, or to change in any way his former employer’s behavior? The dystopia often imagined in the world of artificial intelligence — in which computers somehow take on a life of their own and come to rule mankind — has actually happened in the world of finance. The giant Wall Street firms have taken on lives of their own, beyond human control. The people flow into and out of them but have only incidental effect on their direction and behavior. The firms may not be intent on evil; they aren’t intent on anything except short-term profits: they’re insensible. If anyone attempted to seize control of one of these strange machines and impose upon them a clear moral direction, the machine would hit its own button and he would be ejected.
Stop and think once more about what has just happened on Wall Street: its most admired firm conspired to flood the financial system with worthless securities, then set itself up to profit from betting against those very same securities, and in the bargain helped to precipitate a world historic financial crisis that cost millions of people their jobs and convulsed our political system. In other places, or at other times, the firm would be put out of business, and its leaders shamed and jailed and strung from lampposts. (I am not advocating the latter.) Instead Goldman Sachs, like the other too-big-to-fail firms, has been handed tens of billions in government subsidies, on the theory that we cannot live without them. They were then permitted to pay politicians to prevent laws being passed to change their business, and bribe public officials (with the implicit promise of future employment) to neuter the laws that were passed — so that they might continue to behave in more or less the same way that brought ruin on us all. And after all this has been done, a Goldman Sachs employee steps forward to say that the people at the top of his former firm need to see the error of their ways, and become more decent, socially responsible human beings. Right. How exactly is that going to happen?
— Michael Lewis, “The Trouble with Wall Street,” The New Republic,
This piece from The Telegraph’s Jeremy Warner is supposed to be about the upside of the fact that we’ve transitioned definitively to a new era of elevated food and energy prices, but the upshot that Warner arrives at sounds less like a silver lining than a recipe for a Promethean desperate-dystopian transformation of human civilization into something akin to Soylent Green:
[T]here are more positive ways of looking at…the apparently catastrophe of a current spike in food and oil prices…which don’t entirely fit with the present mood of declinism that has come to instruct all aspects of debate around the global economy … It seems that every time Western economies show some sign of climbing out of the mire, along comes another oil price shock to push them back in. Meanwhile, the most severe US drought in 25 years has sent grain prices soaring, adding to the already debilitating effects on world food supply of a poor monsoon season in Asia and a bad harvest in Russia and Ukraine. In our own neck of the woods, high levels of rainfall have wrecked the annual harvest from potatoes to wheat, apples and Brussels sprouts. Looking at the phenomenon globally, this is the third such food price shock in five years. Previous such episodes have spawned mass riots, and the last one is often cited as a major factor in the Arab spring.
… So where is the positive in all this gloom? Nobody is pretending that high oil and food prices are anything other than extremely painful. But by rationing demand, encouraging efficiency, incentivising new investment and driving the search for alternatives, high prices also provide an absolutely vital market discipline … Malthusian catastrophe is neither inevitable nor actually particularly likely given these pricing disciplines. At prices like these, previously untapped hydrocarbon reserves suddenly become economically viable, as do great tracks of under-exploited agricultural land. The era of cheap and plentiful may already be a thing of the past, but is that really such a bad thing?
— Jeremy Warner, “Best to get used to high food and energy prices — they’re here to stay,” The Telegraph, August 29, 2012 (emphasis added)
Regarding those “previously untapped hydrocarbon reserves” that have “suddenly become economically viable,” it’s important to remember that the reality on (and also under) the ground when it comes to “developing” untapped hydrocarbon reserves is profoundly problematic, as seen in, to name just one example, the growing problems stemming from the rise of fracking. And on the food side, there is of course no lack of problems with the universal adoption of industrial farming practices, including troubling effects on the food itself, the land, animals, and people: physically, psychologically, spiritually. The assumption behind Warner’s views appears to be the same one driving most mainstream thought and rhetoric on these issues: that our industrial-technological way of life simply has to be maintained. For an updated view of what the reality of a future unfolding in this fashion might well look like, switch from Soylent Green and see the human and planetary wasteland depicted by Paolo Bacigalupi in Pump Six and Other Stories, which, in the words of Publishers Weekly, “explores a post–fossil fuel future where genetically modified crops both feed and power the world, and greedy megacorporations hold the fates of millions in their hands.”
Meanwhile, note that despite all of the recent triumphalist rhetoric about the supposed end of peak oil as a viable theory, the estimable Andrew Evans-Pritchard pointed out just a few days ago in The Telegraph that “Peak cheap oil is an incontrovertible fact.” And that, of course, is what the practical reality of our present energy-and-economy predicament has always boiled down to.
To assume that things have to continue operating according to currently reigning principles and trajectories is both the height of unconsciousness and a surefire method for stumbling directly into a true disaster via our very efforts to avoid one. How much more challenging and rewarding it would be to approach the present circumstance conversely by using it as an opportunity for learning to see through the old agenda and its assumptions, even if only on an individual and personal level. To quote Jesus, the Buddha, The Matrix, and Rage Against the Machine: wake up!
In the past half-decade, the name and legacy of Ayn Rand have become the subject of much prominent comment, debate, analysis, and punditry in the English-speaking press, where a swelling sea of multiform journalism examines her enduring and pervasive (some would say insidious and awful, while others would say heroic and wonderful) influence on American politics, culture, and economic policy. Nor is her influence limited to just one nation; as reported in 2009 in Foreign Policy magazine, she has become roaringly popular in India. This is precisely what her admirers would hope; one of them recently averred in The Guardian that Europe’s woes have resulted largely from its adoption of ideas and policies contrary to the Randian ethos of economic egoism.
The entry of Paul Ryan into the current American presidential race has naturally occasioned an explosive new surge of Randian journalism, since Ryan is an avowed admirer and semi-disciple of laissez faire libertarianism’s high priestess. (The public recognition and analysis of this fact is, however, not at all new.)
So in the midst of all this, it’s interesting to see what may be the single most useful — as in compact, accurate, engaging, detailed, and user-friendly — introduction to Rand’s life, work, and legacy appear not in an American publication at all, but in BBC News Magazine. “A Russian-American writer who died 30 years ago is still selling hundreds of thousands of books a year, and this week one of her former devotees, Paul Ryan, became Mitt Romney’s running mate in the US presidential election,” says the teaser/lead-in. “So why is Ayn Rand and her most famous work, Atlas Shrugged, so popular?” The article then proceeds to illustrate and answer that question. If you’re in need of an Ayn Rand primer, then this piece is for you, since it includes not only information about her life, work, philosophy, and influence but a rundown of prominent characters, quotes, and ideas from her books. It’s also even-handed, in that it explains the views of both Rand’s admirers and her detractors.
If you’re not informed about Ms. Rand right now, then you’re not clued in to one of the most significant philosophical conflicts — with real-world practical ramifications — that is presently informing (some would say deforming) American political, economic, and cultural reality. This is an opportunity to remedy that.
It’s 1,200 pages long and was panned by critics when it was published 55 years ago. Yet few novels have had an impact as enduring as Atlas Shrugged, a dystopian allegory in which captains of industry struggle against stifling regulations and an over-reaching government and one by one close down production, bringing the world economy to its knees. Rand’s philosophy, which she called objectivism, tapped directly into the American ideals of freedom, hard work and individualism. In novels like Atlas Shrugged, and her non-fiction like The Virtues of Selfishness, Rand argued for the removal of any religious or political controls that hindered the pursuit of self-interest.
… [M]illions were drawn to her central message of individualism and unfettered capitalism, even if they didn’t buy into her whole philosophy. In the 1990s, a survey by the Library of Congress named Atlas Shrugged as the most influential book in the US, after the Bible. And more than 50 years after publication, sales are booming … Beyond politics, the novel also had an impact in Silicon Valley, where entrepreneurs identified with its emphasis on heroic individuals and their work ethic. Some have named their companies or their newborn children after the author or her characters. Rand’s popularity is not confined to the US, however, with healthy book sales in the UK, India, Australia, Italy and South Africa.
… The emergence of the Tea Party — a wing of the Republican Party which favours a shrinking of the state — appears to be driving her recent resurgence.
— Tom Geoghegan, “Ayn Rand: Why is she so popular?” BBC News Magazine, August 17, 2012