Blog Archives

Economic Decay Leads to Social and Political Decay

It seems my rant yesterday (Let Me Know When It’s Over) upset a lot of people, many of whom felt I trivialized the differences between the parties and all the reforms that people believe will right wrongs and reduce suffering.

OK, I get it, there are differences, but if the “reform” doesn’t change the source of the suffering and injustice, it’s just window-dressing that makes the supporter feel virtuous. Want an example? Let’s take the the “cruel and unusual punishment” for drug-law offenders, many of whom are African-American males whose lives are effectively hobbled by felony convictions and long sentences in America’s Drug War Gulag.

You want a “reform” that actually gets to the root and solves the source of the injustice? It’s simple: decriminalize all drugs and recognize drug use as a medical and social issue rather than a criminal-justice / Gulag issue. But that won’t happen because too many people are making too much money off the Gulag, which is now a public and private-prison Gulag.

(Other advanced nations have had success with this structural change. Maybe we could learn something from their examples?)

If you’re not ready to demand the full decriminalization of all drugs, then you’re not really interested in solving the problem; you’re just seeking virtue-signaling “reforms” that don’t upset the power structure. And since any real solution necessarily disrupts the power structure benefiting from the status quo, all the painless “reforms” are ineffective.

In other words, either go big and change the power structure or go home and stop promoting your own virtue. This is why the economy is floundering despite all the warm and fuzzy headlines about stocks rising due to the Federal Reserve lowering interest rates: we collectively refuse to consider structural changes in the way “money” is created in our perverse system–perverse because the way “money” is created guarantees soaring inequality.

(more…)

Tagged with: , , , ,

Unrealistically Great Expectations

Let’s see if we can tie together four social dynamics: the elite college admissions scandal, the decline in social mobility, the rising sense of entitlement and the unrealistically ‘great expectations’ of many Americans.

As many have noted, the nation’s financial and status rewards are increasingly flowing to the top 5%, what many call a winner-take-all or winner-take-most economy.

This is the primary source of widening wealth and income inequality: wealth and income are disproportionately accruing to the top slice of earners and owners of productive capital.

This concentration manifests in a broad-based decline in social mobility: it’s getting harder and harder to break into the narrow band (top 5%) who collects the lion’s share of the economy’s gains.

Historian Peter Turchin has identified the increasing burden of parasitic elites as one core cause of social and economic collapse. In Turchin’s reading, economies that can support a modest-sized class of parasitic elites buckle when the class of elites expecting a free pass to wealth and power expands faster than what the economy can support.

The same dynamic applies to productive elites: as I have often mentioned, graduating 1 millions STEM (science, technology, engineering, math) PhDs doesn’t magically guarantee 1 million jobs will be created for the graduates.

(more…)

Tagged with: , ,

If “Getting Ahead” Depends on Asset Bubbles, It’s Not “Getting Ahead,” It’s Gambling

Beneath the endlessly hyped expansion in gross domestic product (GDP) of the past two decades, the economy has changed dramatically. The American Dream boils down to social and economic mobility, a.k.a. getting ahead through hard work, merit and wise investments in oneself and one’s family.

The opportunities for this mobility in the post World War 2 era broadened as civil rights and equal rights expanded. The 1970s saw a disruption of working-class mobility as high-paying factory jobs disappeared, leaving services jobs that paid less or required more training, i.e. a college degree.

The U.S. economy took off in the 1980s for a number of reasons, including computer technologies, federal stimulus (deficit spending) and financialization (a topic I’ve covered many times). With millions more college graduates entering the workforce and the Internet creating entire new industries, the opportunities to “get ahead” increased across the social and economic spectrum.

But something changed in the aftermath of the dot-com bubble bursting. The fruits of financialization–highly leveraged debt gambled for short-term gains in markets–were extended to everyone with a job (or a willingness to lie) via liar loans, no-document loans and subprime mortgages.

(more…)

Tagged with: , , , , ,

Are the Rise of Social Media and the Decline of Social Mobility Related?

I’ve often addressed the decline of social mobility and the addictive nature of social media, and recently I’ve entertained the crazy notion that the two dynamics are related. Why Is Social Media So Toxic?

I have long held that the decline of social mobility–broad-based opportunities to get ahead financially and socially–is part of a larger dynamic I call social depression: the social decay resulting from economic stagnation and the decline of social mobility and financial security. America’s Social Depression Is Accelerating

Japan offers a real-world 29-year lab experiment in the negative social consequences of economic stagnation, a top I addressed back in 2010: The Non-Financial Cost of Stagnation: “Social Recession” and Japan’s “Lost Generations”

The conventional explanation of social media’s addictive hold is that it activates the human brain’s reward circuits much like an addictive drug: in effect, we become addicted to being “liked” and to checking our phones hundreds of times a day to see if we received any “likes”.

This phenomenon is known as FOMO, fear of missing out: fear of missing out on some emotion-stimulating “news” or a “like” from someone in our network.

The innate addictive appeal of social media is pretty clear, but is that all that’s at work here?

(more…)

Tagged with: ,

Here’s What We’ve Lost in the Past Decade

The past decade of “recovery” and “growth” has actually been a decade of catastrophic losses for our society and nation. Here’s a short list of what we’ve lost:

1. Functioning markets. Free markets discover price and assess risk. What passes for markets now are little more than signaling devices to convince us the economy is doing spectacularly well. It is doing spectacularly well, but only for the top .1% of 1% and the class of managerial/technocrat flunkies and apologists who serve the interests of the top .1%.

2. Genuine Virtue. Parading around a slogan or online accusation, “liking” others in whatever echo-chamber tribe the virtue-signaler is seeking validation in, and other cost-free gestures–now signals virtue. Genuine virtue–sacrificing the support of one’s tribe for principles that require skin in the game–has disappeared from the public sphere and the culture.

3. Civility. As Scientific American reported in its February issue (The Tribalism of Truth), the incentive structure of largely digital “tribes” rewards the most virulent, the most outrageous, the least reasonable and the most vindictive of the tribe with “likes” while offering little to no encouragement of restraint, caution, learning rather than shouting, etc.

The cost of gaining tribal encouragement is essentially zero, while the risk of ostracism from the tribe is high. In a society with so few positive social structures, the self-referentially toxic digital tribe may be the primary social structure for atomized “consumers” in a dysfunctional system dominated by a rigged “market” and a central state that no longer needs the consent of the governed.

Common ground, civility, the willingness to listen and learn–all lost.

(more…)

Tagged with: , , ,

Our Economy Is Failing Our Society

One of the most unrecognized dynamics of our era is the structural dependence of our society on our economy. One set of pundits, politicos and academics wring their hands over the fragmenting of civil society (the rise of disintegrative, divisive forces and the decay of integrative forces) and decry the rising inequality that is our economy’s dominant feature, while another set of pundits and academics celebrate the economy’s remarkable adaptability or focus solely on reading financial tea leaves (interest rates, Fed policy tweaks, unemployment rates, etc.)

Those few analysts who escape their respective silos/academic ghettos rarely get past generalities such as the erosion of social mobility, a dynamic that is clearly economic and social. But the precise mechanisms behind the secular erosion of social mobility are lost in platitudes about how A.I. and robots will free us all to be poets or consumers of a vast and endlessly enjoyable leisure.

The key understanding that’s lacking is that economic structures organize and limit the social structures underpinning civil society. To understand why civil society is disintegrating on so many fronts (public health, civil discourse, etc.), we must understand how our economy has failed to support the social structures required for an integrative, inclusive civil society.

(more…)

Tagged with: , , , , , ,

Want Widespread Prosperity? Radically Lower Costs

It’s easy to go down the wormhole of complexity when it comes to figuring out why our economy is stagnating for the bottom 80% of households. But it’s actually not that complicated: the primary driver of stagnation, decline of small business start-ups, etc. is costs are skyrocketing to the point of unaffordability.

As I have pointed out many times, history is unambiguous regarding the economic foundations of widespread prosperity: the core ingredients are:

1. Low inflation, a.k.a. stable, sound money

2. Social mobility (a meritocracy that enables achievers and entrepreneurs to climb out of impoverished beginnings)

3. Relatively free trade in products, currencies, ideas and innovations

4. A state (government) that competently manages tax collection, maintains roadways and harbors, secures borders and trade routes, etc.

Simply put, When costs are cheap and trade is abundant, prosperity is widely distributed. Once costs rise, trade declines and living standards stagnate. Poverty and unrest rise.

(more…)

Tagged with: , , , ,

The “Secret Sauce” of the Byzantine Empire: Stable Currency, Social Mobility

One of my reading projects over the past year is to learn more about empires:how they are established, why they endure and why they crumble.

To this end, I’ve recently read seven books on a wide variety of empires. The literature on empires is vast, so this is only a tiny slice of the available books. Nonetheless I think these 7 titles offer a fairly comprehensive spectrum:

(more…)

Tagged with: , , ,

Will Any Future POTUS Matter (Other Than Launching More Wars)?

We are already experiencing the powerlessness of POTUS.

We all know the POTUS (President of the United States) has the power as Commander-in-Chief to engage the nation in senseless, costly, needless wars.We also know the POTUS has a media-saturated bully pulpit to set an agenda and fashion a cultural tone for the nation.

But beyond the power to wage war and dominate the media spotlight, does the President have the power to solve the structural problems that are eroding the nation’s economy and social contract?

This chart summarizes one such problem: wage earners are receiving a diminishing share of the nation’s output (GDP):

A second related problem is the national income that is flowing to wage earners is increasingly flowing to the top 5%:

If the president can’t solve the nation’s systemic problems, then he/she no longer matters. The President, outside of declaring war, is nothing but a source of “news” chum for the media feeding frenzy aimed at grabbing eyeballs to maximize advertising revenues for the media’s corporate owners.

Analyst Gail Tverberg explained why the political machinery of POTUS cannot change the downward trends in household earnings in a series of insightful essays, most recently Overly Simple Energy-Economy Models Give Misleading Answers.

Tverberg considers the costs of finance/debt and complex hierarchies in the matrix of energy production and consumption, and references the work of Joseph Tainter on the systemic impact of the rising cost of complexity.

In a similar vein, I have often mentioned The Upside of Down: Catastrophe, Creativity, and the Renewal of Civilization by Thomas Homer-Dixon.

In summary: successful civilizations generate sufficient surplus to invest in complex hierarchical communication-command-control mechanisms which boost productivity and generate additional surplus. The cost of these complex systems continually rises while the increases in production eventually plateau and decline in an S-Curve:

The net result is a society with higher costs and diminishing returns. Eventually the costs of maintaining the status quo exceed the benefits of maintaining the status quo hierarchy and the society decays and collapses.

My own work has focused on two dynamics of the cost of increasingly unproductive complex systems. One is privilege, which can be defined as unearned wealth and power. Privilege is by definition unproductive, and a drain on the economy and society. Once the privileged class (i.e. the protected class that shifts risks and taxes to the unprotected/non-elite classes) expands and social mobility decays, the economy collapses under the dead weight of the privileged class.

I covered the history and dynamics of this process in The Lesson of Empires: Once Privilege Limits Social Mobility, Collapse Is Inevitable (April 18, 2016).

The second dynamic is the destructive consequences of a self-serving political-financial elite that is structurally incapable of real reform because real reform will collapse the high-cost structures that enable the concentration of wealth and power.

I explain these dynamics in Why Our Status Quo Failed and Is Beyond Reform.

I know this runs counter to the media-supported delusion that POTUS is the most powerful person on Earth, but in reality it no longer matters who’s president. The inevitable collapse of a debt-based model of complexity, energy extraction and consumption is already baked in.

The only potentially positive role of any President would be to downsize the unrealistic expectations of the citizenry to align with real-world dynamics. But downsizing expectations doesn’t get you re-elected, so the political reality is that future presidents will no longer matter in terms of solving the critical problems we face in the coming decades.

We are already experiencing the powerlessness of POTUS: the campaign for the office of President has already been reduced to two poor players that strut and fret their hour upon the stage, a tale told by an idiot media, full of sound and fury, signifying nothing.

My new book is #3 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.

Tagged with: , , , , , , , ,

The Lesson of Empires: Once Privilege Limits Social Mobility, Collapse Is Inevitable

The next few years will strip away the illusions of “growth” and reveal which dominates our society and economy: privilege or social mobility.

Among the many lessons of empires is one shared by virtually every empire:once the privileged few limit the rise of those from humble origins (i.e. social mobility), the empire is doomed to rising instability and collapse.

Just as a reminder of how wealth and income are increasingly concentrated in the top of the wealth/power pyramid:

The greater the concentration of wealth and power, the lower the social mobility; the lower the social mobility, the greater the odds that the system will collapse when faced with a crisis that it would have easily handled in more egalitarian times.

When the economy is expanding faster than the population and the tide is lifting all ships large and small, the majority of people feel their chances of getting ahead are positive (even if the actual chances remain low).

But when the economy is stagnating, and they see those at the apex of the pyramid still amassing monumental gains, the majority realizes their chances of securing a better life are declining.

The natural result is frustration, anger and a disavowal of the corrupt status quo: in other words, precisely what the U.S. is experiencing in this election cycle.

People are waking up the reality that the status quo exists to protect the privileged, period. When the serfs do all the right things–get a university degree, work hard, serve their masters well, etc.–they find that “getting ahead” has been redefined as “running in place to keep from falling behind” (i.e. the Red Queen’s Race).

One of my projects is to better understand what social, economic and cultural elements of empires enabled their rise and durability. I was especially interested in locating traits shared by virtually all empires that endured.

One key trait that all enduring empires shared was high levels of social mobility:in enduring empires, those of humble birth had multiple pathways to wealth, power and influence.

When social mobility is lost, all those denied access to the empire’s top rungs leave for greener pastures or devote their energy and ambition to bringing the empire down.

Social mobility is only possible if merit is valued more than privilege. When privilege locks up all the top rungs for cronies, the empire crumbles under the weight of incompetence, elitist squabbling, inefficiency and wasted resources, while the best and the brightest seek outlets for their ambition elsewhere–often in the ranks of the empire’s enemies.

Though ancient societies were by and large anti-egalitarian–slavery was an accepted norm–the enduring empires maintained very porous boundaries between classes. The Roman Empire, for example, accepted people of many ethnicities and origins as Roman citizens. A free citizen of a distant Roman province was as fully a citizen of Rome as a free resident of Rome.

In the Republic of Venice, the system was carefully designed to enable new blood to enter the higher levels of power. Commoners could rise to power (and take their families with them if their wealth outlasted the founding generation) via commercial success or military service.

The Eastern Roman Empire (the Byzantine Empire) offered multiple pathways to wealth and influence to the humbly born: the clergy, the army, trading, and service in the Imperial bureaucracy. (For women, the path to wealth and power was generally marriage into an influential aristocratic family. Many women gained great political power in the Byzantine Empire.)

After suffering the many indignities of the poor (and often warring) tribespeople of Mongolia as a young man, Genghis Khan instituted a highly regimented, merit-based system of rule in his sprawling empire. Success was more important than privilege.

The question, not just for the U.S. but for every nation, is whether the ladder of social mobility is real or if it is largely propaganda. Is merit and success more important than privilege? Or does society give lip-service to social mobility while heaping wealth and power on the privileged few?

The test is always economic crisis. When the pie starts shrinking, who’s piece gets trimmed to a sliver, and who’s slice gets bigger? I think we’re on the cusp of a crisis that started in 2000 but was short-circuited by central banks in 2000-2003 and and again in 2009-2016.

The next few years will strip away the illusions of “growth” and reveal which dominates our society and economy: privilege (sludgy toxic oil) or social mobility (clean refreshing water).

I recommend these books to anyone interested in the history of empires, not just their decline and fall, but their rise to dominance:

The Fall of the Roman Empire (Michael Grant)

How Rome Fell: Death of a Superpower (Adrian Goldsworthy)

War and Peace and War: The Rise and Fall of Empires (Peter Turchin)

The Rise of Rome: The Making of the World’s Greatest Empire (Anthony Everitt)

428 AD: An Ordinary Year at the End of the Roman Empire (Giusto Traina)

Genghis Khan and the Making of the Modern World (Jack Weatherford)

Byzantium: The Surprising Life of a Medieval Empire (Judith Herrin)

Venice: A New History (Thomas F. Madden)

The Upside of Down: Catastrophe, Creativity, and the Renewal of Civilization (Thomas Homer-Dixon)

 

Tagged with: ,

What Is the Minimum Investment Needed to Achieve Social Mobility?

Long-time correspondent Bart D. (Australia) posed a profound question: what is the minimum investment (in time, money and effort) needed to ensure one’s children have social mobility, i.e. a cultural/social passport to upper-middle class opportunities?

This chart illustrates why the question matters: those in the top rungs of the social mobility ladder are earning far more than the bottom 90%, and their opportunities to achieve more and earn more are also much higher.

Wealth and income inequality are rooted in asymmetries of human, social and cultural capital: (more…)

Tagged with:

Global Bellwether: Japan’s Social Depression

Beneath the surface wealth of bullet trains, cute robots and exuberant fashions, this is the Japan few outsiders understand: the one gripped by a deepening social depression.

This week I’ve highlighted the structural flaws of using GDP as a measure of “growth” and prosperity: GDP = Waste and What Metric Are We Optimizing For?

The conventional metrics of “growth” and prosperity have another fatal flaw: they do not recognize, much less measure, social depression, the social costs of economic stagnation and wealth inequality driven by financialization.

(more…)

Tagged with: , , , , ,