Blog Archives

We Can Only Choose One: Our National Economy or Globalization

Does our economy serve our society, or does our society serve our economy, and by extension, those few who extract most of the economic benefits? It’s a question worth asking, as beneath the political churn around the globe, the issues raised by this question are driving the frustration and anger that’s manifesting in social and political disorder.

A recent essay examines these issues in light of Brexit, which the author sees as a manifestation of dramatic but poorly understood changes in Britain’s economy over the past 60 years:

How Britain was sold: Why we need to rethink the case for a national capitalism in the age of uncertainty.

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Beneath the Surface of Brexit

I’ve been asked to comment on Brexit. I’m happy to do so, but not by promoting a position yes or no, or by attempting to unravel the political machinations, as I have neither the knowledge nor the interest to do so.

What I can do is propose two beneath the surface contexts which might be useful in understanding what’s really going on. These are the impressions and opinions of a distant observer, someone who is neither an expert nor a resident of the United Kingdom / Great Britain.

It seems to me that geography is still salient. As an island sea power, England is close enough to the continental land-based powers of Europe to fear invasion or continental hegemony but independent enough to not rely too completely on continental European powers.

This is not just a consequence of its temperate weather (thanks to the Gulf Stream) or being an island; the historical reliance on sea power places it in the same general category as the other historic blue-water sea-power-based European nations: The Netherlands, Spain, Portugal, Denmark and Sweden.

These sea-power nations projected power and secured trading rights and colonies by controlling the seas and access points to interior lands, the so-called Rimlands.

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Jim’ll Brexit by Sketchaganda

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Johnson: UK has a lot to do before it leaves EU

Boris Johnson said last week London would begin the formal process for leaving the EU-block early next year by triggering Article 50 of the Lisbon Treaty under which London can leave the EU after a two-year negotiations period. But the United Kingdom has a great deal of work to do before it can leave the European Union, Foreign Secretary Johnson says.

Johnson also talked about immigrants, reiterating that Britain must regain control of immigration through the split form the EU.

Read more: UK has a lot to do before it leaves EU

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Brexit and the Derivatives Time Bomb

Brexit could trigger a $500 trillion derivatives meltdown, by forcing the EU to allow insolvent member governments and banks to write down debt. Italy is in financial crisis and is already petitioning for that concession. How to avoid collapse of the massive derivatives house of cards? Alternatives are considered.

Sovereign debt – the debt of national governments – has ballooned from $80 trillion to $100 trillion just since 2008. Squeezed governments have been driven to radical austerity measures, privatizing public assets, slashing public services, and downsizing work forces in a futile attempt to balance national budgets. But the debt overhang just continues to grow.

Austerity has been pushed to the limit and hasn’t worked. But default or renegotiating the debt seems to be off the table. Why? (more…)

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Brexit and the Crisis of Capitalism

Thousands of commentaries have been issued about Brexit in the past week. I’ve written four myself. Most discuss Brexit as the result of immigration issues, class war, political theater, a reaction against the European Union’s bureaucratic power, sovereignty, etc. Other essays focus on the potential upsides or downsides of Brexit.

What few if any commentators present is the idea that Brexit is a symptom of the Crisis of Capitalism.

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Brexit, a Step in the Right Direction: The Optimistic View

In the conventional narrative, Brexit is about immigration, escaping the EU’s bureaucrats of Brussels, class war or political theater. It may be about all of these, but beneath these surface issues lies a deeper dynamic: a recognition that the entire system is broken and a new arrangement of power, responsibility and risk is required.

In this view, Brexit is a positive step in the right direction, away from centralization and central planning and towards decentralized arrangements that enable more dynamic, localized solutions.

Longtime readers know that I focus on scarcity as the source of value creation: what’s scarce generates value, profits and high wages, and what’s abundant declines in value due to supply and demand.

Correspondent Ron G. views Brexit as a systemic step towards solving existing scarcities. Scarcity is not limited to goods and services; agency and autonomy can be scarce; responsibility that connects risk and return can be scarce; level playing fields can be scarce; rule of law can be scarce; opportunity can be scarce; entrepreneurial drive can be scarce; self-reliance can be scarce; social innovation can be scarce; social capital can be scarce, and the willingness to accept losses and the risks required to change the power structure can be scarce.

Political expediency can be over-abundant, as can protected privilege.

Ron submitted this photo and commentary on Brexit and scarcity:

Here are Ron’s comments:

“Mankind’s fundamental quest is to survive and prosper by solving scarcity.

BREXIT is simply a modern example of an old pattern of behavior that seeks to resolve scarcity, (the shrinking pie of economic opportunity and ownership), through reconfiguration of relationships to reallocate resources to enable more equitable equilibrium in supply and demand.

As a prelude to BREXIT, housing in Britain, in particular, had become out of reach for those that have labored under the assumption that hard work, education, and a good job would lead to an ability to own a home, which many young Britons now find economically out of their reach; many Britons blame the government’s monetary policy of zero percent interest rates for inflation and unaffordable housing

In another sign of frustration, a few years ago a graffiti sign expressed a sentiment of the youth in Britain, one of them posted at Bell Lane near Liverpool St. Station, it read: ‘Sorry, the lifestyle you ordered is out of stock.’

The Bank of England has continued policies that have contributed to the exasperation expressed through the referendum, this along with the burdens of having an open country and economy that increased labor supply which in turn increased demand for housing and available credit to driving the asset bubble.

This type of scarcity, being seen in Britain, is very common throughout history and is generally driven by the confluence of interests that connects and drives centralized, unified policies between bankers, merchants (in today’s world global corporations) and governments.

Turning back the clock a bit, I would like to include a couple of quotes by an amazingly brilliant and eloquent commentator in economics, Fredic Bastiat in his writings from 1850:

“I do not dispute their right to invent social combinations, to advertise them, to advocate them, and to try them upon themselves, at their own expense and risk. But I do dispute their right to impose these plans upon us by law – by force – and to compel us to pay for them with our taxes.”

“Self-preservation and self-development are common aspirations among all people. And if everyone enjoyed the unrestricted use of his faculties and the free disposition of the fruits of his labor, social progress would be ceaseless, uninterrupted, and unfailing. But there is also another tendency that is common among people. When they can, they wish to live and prosper at the expense of others.”

While old tools based in centralized control have held the power bases together, and have been useful to the management of empires, they have have become outdated and are an inadequate means of resolving the complexities of bringing equilibrium in supply and demand and the distribution of power.

New forms of social connection for production and consumption have emerged and are replacing centralized models; distributed models, even in formally centralized systems of energy and water, are coming online at a rapid pace.

These systems are fueled by the realization of democratic economy and autonomy, connected through a digital technology template; more distributed and socially self-aligning, this combination of digital conduits and marketplace opportunity fit lock and key into humanity’s biological need for autonomy and dignity of choice.

To those like me who have been compelled to study foundations and dynamics in human systems as a means to understanding better choices, BREXIT is not a surprise but simply an the most recent public demand to bring about a more acceptable outcome.

BREXIT is a symptom of an inadequate system for meeting human needs, driven by many converging factors, factors shared by all modern economies: underlying complexities growing due to connections to a more globalized world, and an inability to resolve scarcities through centralized systems of management and control. This underlying complexity will only continue to grow.

Centralized control by any domain keeper are but a delusion, as I believe there will be no wresting back control from the decentralized solutions that are growing in a scale and complexity beyond their toolsets and bandwidth.

I believe we have entered a critical but wonderful age, the age of reemergence of decentralization and decentralized governance; may we preserve this opportunity for the gift that it is to life, liberty and property.”

Thank you, Ron, for placing Brexit in a more expansive and insightful context.

A Radically Beneficial World: Automation, Technology and Creating Jobs for All is now available as an Audible audio book.

My new book is #14 on Kindle short reads -> politics and social science: Why Our Status Quo Failed and Is Beyond Reform ($3.95 Kindle ebook, $8.95 print edition) For more, please visit the book’s website.

 

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Understanding Brexit: The Powerless Press Their Thumb in the Eye of the Power Elite

The premier strategy for retaining power is to give the powerless a carefully managed illusion of decision-making and autonomy. Having a say over one’s life and choices is called agency, and it is the illusion of agency that makes democracy such a powerful tool of control.

The second most effective means of maintaining power is to limit the choices offered the powerless. Offering the powerless false choices, i.e. the choice between two functionally equivalent options, provides the comforting illusion of agency while insuring that the status quo Power Elites remains in charge, regardless of the choice made by the powerless.

For example, give the powerless a choice between Tweedle-Dum (Republicans/Tories) and Tweedle-Dee (Democrats/Labour). Whomever they elect, the self-serving Power Elite of entrenched interests and wealth remains firmly in charge, for the Power Elite speaks with one voice through two mouths, one Establishment Democrat/Labour, the other Establishment Republican/Tory.

If the powerless get restless, make them fearful. This is easily managed via external threats and dramatic predictions of economic doom should the Power Elite be threatened.

If fear has lost its edge due to over-use, then whip up social controversies that divide and conquer the powerless. Divisive, hot-button social controversies are easily staged and media-managed; these serve to distract and fragment the powerless in endless culture wars.

The powerless get very few opportunities to express their dissatisfaction with their gradual impoverishment and powerlessness, and few opportunities to register their disapproval of the Power Elite. They know complaints go nowhere, petitions are ignored, and demonstrations accomplish nothing.

So when a rare chance to stick a thumb in the eye of the Power Elite comes along, they take it. The Brexit vote was just such an opportunity.

Though the benefits that flowed from membership in the European Union may well have been substantial, many people did not have any direct experience of those benefits, which largely flowed to a handful of privileged classes: young, well-educated workers in finance, people who bought housing in London before the huge run-up in valuations, and workers providing services to the wealthy foreigners and highly paid financial professionals.

Many households have seen their quality of life and living standards stagnate or decay during the U.K.’s membership in the E.U. The benefits touted by the Power Elite are either illusory or too modest to matter to these households, and their rage has only grown as the Power Elite tried to browbeat them into approving a membership that yielded no benefits to their households.

The Power Elite simply repeated what has worked well for 60+ years: tout the systemic benefits of E.U. membership, confident in the belief that some of these benefits have trickled down to the lower economic classes, and stoke fears of economic decline if the Powers That Be don’t get their way.

Unfortunately for the Power Elite, the benefits of E.U. membership, financialization and globalization have been concentrated at the top of the pyramid: the already wealthy got wealthier, and the young, well-educated, mobile, entrepreneurial class had enhanced opportunities to generate private wealth or at least secure an excellent salary.

A third privileged (i.e. protected) class includes all those benefiting from direct E.U. subsidies.

Those outside these classes saw little if any benefit.

The slow decay of living standards and social mobility was crystallized into anger by the Brexit vote, which was intended to be yet another rigged, illusory choice. The masses were supposed to be persuaded by either the list of goodies that flowed from membership or from fear-mongering about the catastrophic consequences of Brexit.

But neither worked as planned: the benefits were too diffuse or too concentrated in the hands of a few to be persuasive in terms of self-interest, and the fear-mongering only increased awareness of how much the Power Elite wanted a Remain outcome.

Will Brexit hurt the classes that did not directly benefit from E.U. membership? Perhaps. Perhaps it was not in their self-interest to vote for Brexit. But the immeasurable pleasure in depriving the Power Elite of their “democracy” legitimacy was worth any potential sacrifice.

The sense of having a real say, and possessing actual agency, is very empowering, and very rare, for members of the lower-middle class and the working class today. the wealthy and powerful are accustomed to vetoing anything that impairs their wealth or power, and they’re accustomed to either winning over or distracting the powerless.

Thus it was a shock when the powerless took the rare opportunity to stick a thumb in the eye of the Power Elite by depriving them of something they wanted.

Is this childish, or self-defeating? Perhaps. But when the system erodes a citizenry’s sense of agency, they have little to lose by relishing the chance to use the same power the wealthy constantly wield without any qualm or hesitancy: the power to say “no.”

I am indebted to longtime correspondent G.F.B. for this topic suggestion.

A Radically Beneficial World: Automation, Technology and Creating Jobs for All is now available as an Audible audio book.

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‘Chaos’ If UK Leaves EU‏ – Blair Warns of BREXIT

– Ex-Prime Minister warns uncertainty would hit UK economy and cause ‘chaos’
– ‘BREXIT’ would cause the “most intense period of instability” since WW2
– Seeks to portray Tory policy as disingenuous and cynically putting economy at risk
– Uncertainty caused would have negative consequences for British economy and sterling

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Tony Blair has entered into the British election campaign debate in support of David Miliband on the issue of what he regards as the Tories reckless attitude to Europe and the potential ‘BREXIT’.

Blair will address his former constituents in County Durham today strongly urging them to support Miliband, who he praised for his “real leadership on the EU” while portraying David Cameron’s EU policy as disingenuous and reckless. (more…)

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EU and Greece Running Out of Time – As Bank Runs Intensify, Bail-Ins Likely

EU and Greece Running Out of Time – As Bank Runs Intensify, Bail-Ins Likely

– EU and Greece running out of time as talks end “in disarray” – again
– Greece warns Merkel of ‘impossible’ debt
– Concerns Greece out of money by end of April
– Friday’s “agreement” in Brussels falls apart hours later as protagonists fail to agree on specifics
– Greece now insolvent – will run out of liquidity by end of April
– Greek banks on verge of collapse as runs continue – €1.5 billion emptied out of banks last week alone
– ‘Grexit’ could propel gold to over $2,000/oz
– Cyprus style bail-ins look increasingly possible

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Greece’s place in the Eurozone is as precarious as ever as talks between Prime Minister Tsipras and European leaders in Brussels broke down – hours after reaching general agreement – and Greece warned Germany that it will be “impossible” for Greece to service debt payments due in the coming weeks if the EU fails to provide short-term financial assistance. (more…)

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‘BREXIT’ Poses Risks To London Property, FTSE and Sterling Assets

‘BREXIT’ Poses Risks To London Property, FTSE and Sterling Assets

  • Political uncertainty beginning to impact bond and property markets
  • UK bonds and stocks at all time record highs and ‘bubbly’
  • FTSE looks overvalued and ripe for sharp correction
  • “Air of caution in the run-up to the general election” hits London property
  • City of London has most to lose from Brexit
  • Brexit may isolate UK – “North Korea option” – or lead to strong, independent UK, like Hong Kong
  • Real diversification remains only “free lunch”

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With all the focus on Grexit in recent weeks, investors have not paid much attention to the risk posed by ‘Brexit’ or the possibility of the UK leaving the European Union.

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