Saturday, August 27, 2011

The Rise and Fall of Narcissus Icarus

I

Look! Somewhere else again

the beautiful at play, two at least.
As new leaves inhabit shine
they bend,
arch,
curve.

The setting barely matters. Strength
of their young Now, its vibrant Forever
firm, capable of anything. Forget all

concern. Smiles reflect
and guile loves innocence …

Gaze –

eyes bright with momentum
ignite love, so very deep.

Beauty to eat. Thighs butterfly
wet wounds at me
an old age away
at one

glassy remove. Palm

out the distance
on morning trains of dirt-yellow grey.


II

Mind out, vision in, Voyeur
sees shoulder and neck, head
and face strained in loose skin
grey under oily sheen.

For now there is no motion but this.
No air con noise. Black hair
pooled on cotton sheets her fingers

nestle in white curls sprouting
from his big back. For now
her touch is dead.

The lines that slot their heads
side to side—eyes mutually closed,
hips thrust down and in—

fill the frame, the mirror
rippling out through the stillness
my reverie births, here,

by the hotel pool, clean, blue.
Alone in its sunned waters, at play,
two young nymphs reflecting

my imagination. Mine. Their men,
broad, overweight, over fifty,

waddle to poolside, cast words
into the air, share smiles.
What I know of this
I could fit on a postcard.

What I know shines back at me.
Fall forever into reflections.


III

God glitters in the pellucid pool,
there, of the washed pebbles, the wash
itself. Reach in

and He dissolves. If His Hand
is anything, it is the Shine touch kills.

Hypnotic meadow, colour’s vast expanse.
We fly at the sun’s reflective pane

forever busied missing it
by one impossible inch

as heat melts everything.

Wednesday, August 24, 2011

Money = Equals

(What follows here is a somewhat different run up at the conundrum of money and how it pertains to debt, and what both 'really' are.)


Ignorance ‘out there’ about money is about as endemic and deep rooted as possible, penetrating the highest halls of academia, flooding the busy offices of the world’s mainstream media outlets, and poisoning economic thought and study as far as the eye can see. My own studies have yielded repeated gems of ignorance even in works that are otherwise excellent exemplars of academic rigour. The problem is that our cultural notions of money remain almost totally unexamined, even though money is key to society. Somehow we are generally prevented from debating this enormously important topic as openly and widely as it deserves.

Our collective ability to pierce money and understand it has only recently begun at the level of popular culture (the Internet is instrumental in this). Bernard Lietaer, Stephen Zarlenga, Ellen Brown, David Graeber, Charles Eisenstein, Bernd Senf and Franz Hoermann are some of the authors I know doing fine work on the money myth, and there are many others I’ve still to get to. Yet even now, most people think (or feel) that money is (or should be) a thing with ‘intrinsic’ value, that it is, in some inescapable way, real wealth. Our deep history tells a different story. Money’s origin had far more to do with measurement than store, was far more about keeping track of stuff than being something ‘intrinsically’ valuable (even though there is utility value in keeping track of value!).

With that in mind, perhaps we shouldn’t be talking about a linear progress from commodity money to information money, but of a return to information money, albeit in a new form. Graeber talks of money as debt, debt as a promise, and suggests the type of question we should be asking is what kind of promise, and how those promises are generated and administered. The launching pad for this post, however, comes from Ellen Brown’s article, “Time for a New Theory of Money”.

The concept of money-as-a-commodity can be traced back to the use of precious metal coins. Gold is widely claimed to be the oldest and most stable currency known, but this is not actually true. Money did not begin with gold coins and evolve into a sophisticated accounting system. It began as an accounting system and evolved into the use of precious metal coins. Money as a “unit of account” (a tally of sums paid and owed) predated money as a “store of value” (a commodity or thing) by two millennia; the Sumerian and Egyptian civilizations using these accounting-entry payment systems lasted not just hundreds of years (as with some civilizations using gold) but thousands of years. Their bank-like ancient payment systems were public systems—operated by the government the way that courts, libraries, and post offices are operated as public services today.

[...snip...]

The unit of weight was the “shekel,” something that was not originally a coin but a standardized measure. She was the word for barley, suggesting the original unit of measure was a weight of grain. This was valued against other commodities by weight: So many shekels of wheat equaled so many cows equaled so many shekels of silver, etc. Prices of major commodities were fixed by the government; Hammurabi, Babylonian king and lawmaker, has detailed tables of these. Interest was also fixed and invariable, making economic life very predictable.


The point I’d like to make here, one which Brown does not address, is that the notion “equals” is a 'wisdom' vital to developing the concept of money, as is the idea that “value” is measurable (value which is to be stored for practical reasons (see below)). Eisenstein talks about equivalence in “Sacred Economics”: “Money is homogeneous in that regardless of any physical differences among coins, coins qua money are identical (if they are of the same denomination). New or old, worn or smooth, all one-drachma coins are equal.”

Money cannot therefore be the thing denoting it, it can only be the agreement (or fiat) about the measurement of value (and/or a price system generating ongoing value measurements via supply and demand). The giant question is, can there be a unit such as Value=1? Readers of “The Ascent of Humanity” will be familiar with a tribe of ‘primitives’ called the Piraha. Its members cannot understand counting, cannot be taught numbers above 1. For them, everything is unique, hence 1+1 is an impossible question (as is 1=1), cannot be imagined, its utility cannot be discerned. If there cannot be two of anything, what then is 2? Without “equal”, without a uniform unit of some kind, you cannot have money, nor counting. I see this as a profoundly important observation. An attempt to assess or measure the value of value—e.g., of grain relative to cows—can only occur in societal conditions generating the need for such measurement, including extracting taxes, paying wages, selling slaves, controlling economic activity, explicit tracking of debt and ownership, etc. At its deepest level, therefore, money arises out of the belief that nature can be controlled and measured.

Deeper into the money story we have explicit debt, a direct corollary of “equal”. The notion of an explicitly measurable credit/debt axis, though balancing and balanced, can, I feel, only arise out of the Separation Eisenstein talks of; Self from NotSelf, Me from You, Us from Them, Mine from Yours, Body from Spirit, etc. But why must a benefit be opposed by an exactly equal detriment? Isn’t that pure negation? Can anything be net-created at all? How is there change? We say every action has an equal and opposite reaction, but what is the opposite action of a smile? More fundamentally, what is an action? It is true that if energy goes there, it leaves here, so in that narrow sense credit/debt might be understandable. But what is energy, exactly? Information, perhaps? Are those two one? I don’t think so, and that is a VERY weird thought. On with the article:

Grain was stored in granaries, which served as a form of “bank.” But grain was perishable, so silver eventually became the standard tally representing sums owed. A farmer could go to market and exchange his perishable goods for a weight of silver, and come back at his leisure to redeem this market credit in other goods as needed. But it was still simply a tally of a debt owed and a right to make good on it later. Eventually, silver tallies became wooden tallies became paper tallies became electronic tallies.


Note how perishable is bad. Surely decay can only be a bad thing if we are too frightened of death, age, decrepitude, of the circle of life? This fear too has its roots in Separation. Note also the inescapable progression from store to bank to debt/credit. If I deposit something I own with you (ownership is vital), you owe me it back, or, you hand over an equal amount of something, so as not to owe me. But that something (silver, gold, paper, money, ledger entry) becomes a claim on other people’s product, a.k.a. society’s debt to me generated by my contribution to it as measured by some weight of silver/unit of value. And they must equal, otherwise the process is unfair, unjust, ‘game-able’, etc. But they cannot be equal. Nor can we really measure how much of that contribution was a product of my work, how much is owed to the soil, how much to slaves on my farm, to the sun, rain, weather, etc. The whole process is fraught with difficulty even at the simplest level, and very vulnerable to manipulation and corruption.

Next comes the implicit zero-sum of money-based thinking (which Brown arrives at discussing modern alternative money types):

Consider, for example, one called “Friendly Favors.” The participating Internet community does not have to begin with a fund of capital or reserves, as is now required of private banking institutions. Nor do members borrow from a pool of pre-existing money on which they pay interest to the pool’s owners. They create their own credit, simply by debiting their own accounts and crediting someone else’s. If Jane bakes cookies for Sue, Sue credits Jane’s account with 5 “favors” and debits her own with 5. They have “created” money in the same way that banks do, but the result is not inflationary. Jane’s plus-5 is balanced against Sue’s minus-5, and when Sue pays her debt by doing something for someone else, it all nets out. It is a zero-sum game.


Something bugs me about all this. There are two important money-related things happening when Jane bakes cookies for Sue. One is the dead material, including the energy, used to bake the cookies. The other is the effect doing such has on Jane’s and Sue’s (‘friendly’) relationship. How would this market process sound to us if we were to discover Jane and Sue are in fact sisters? In what way is baking someone cookies a favour if it is immediately ‘paid for’ with an exactly corresponding debt? Any potential gratitude disappears into the hole called “-5 favors”. Sue need feel no gratitude to Jane whatsoever, since now she explicitly owes the Friendly Favors community 5 favours. And what if those favours were iPads, or houses? How many cookie-favours equal one house-favour? And yet the idea of money as a favour is powerful.

Inescapable in a money-system is a unit of account, which needs market-trading to be organic and flexible (Value cannot = 1), which at least implies competition and profit, profit being reward for success, which is part of sorting the good ideas from the bad. We cannot escape failure (and shouldn’t try to), which with an explicit money-measure means indebtedness, which tends to accumulate, which is something no one wants happening to them (The Stick). Logically an accumulation of wealth must also occur (The Carrot), potentially (always?) followed by corruption aimed at keeping the playing field favouring the successful (since they’ve ‘proven’ themselves successful, this is of course justified; ‘survival of the fittest’ and all that), and so on. And history delivers this pattern again and again, with excessive income gaps preceding breakdown and revolution. Can we escape history's rhyme? Should we? Sort of and sort of. Neither money nor poverty can buy you love or joy, and the oscillations they set up are increasingly destructive. We risk our own extinction in pursuit of an illusion. The pattern has gone global.

Surely, then, the area of concern should be trading itself, or, more accurately, the paradigm and social infrastructure in which trading takes place, the functions and expectations it fulfils. At this point reference to Marshall Sahlins’ work on reciprocity would be helpful.

Sahlins ("Stone Age Economics" p193ff) divides reciprocity into three types; generalised, balanced and negative. Generalised reciprocity is ‘pure’ gift-giving with no expectation of return. Balanced reciprocity might be transparent agreements between clans or friends where the exchange is as equal as can be; no profit allowed at the cost of the partner, mutual profit being the point. Negative reciprocity includes tricks and subterfuge, what in economics might be called “information asymmetry”, such that maximum profit is sought at the expense of the partner.

Trading can only be about negative reciprocity, if such profit is its goal. The persistence of the myth that ‘free’ markets deliver maximum social good shows us how far we still must go to see our species as one family whose members should engage only in generalized and balanced reciprocity. Large, differential profit is still the sign of good business, the indicator of success, and by the dubious logic of economics business success leads inexorably to a successful society. And yet isn’t it by now abundantly clear that the Invisible Hand is a failed myth, that trickle down was a cynical and empty promise?

Reorganizing our paradigm to provide a framework in which trade and exchange can include investment of accumulated wealth yet be free of negative reciprocity will not be easy (at the simple level, Friendly Favors is a case of balanced reciprocity, but I don’t see how it could scale up). The challenge I see is how, even in crude outline, to walk the path towards a resource-based economy. Parts of it will be negative interest rates (demurrage), guaranteed income (social dividend), re-localization (the break up of the state), but what is clearer and clearer to me is that, from here, we cannot know what a resource-based economy will actually look like. For example, if money is a promise somehow denoted by a unit of account, perhaps we will never do without it. Will our language one day be free of “Thanks, I owe you one”? I doubt it, but who knows.

I’ve wandered off in a direction Ellen Brown probably wouldn’t have foreseen as a response to her article. No short article can cover all the bases, nor do I agree with anyone on everything (not even with myself), and yet I have a hard time disagreeing with Ellen Brown’s conclusion, which may surprise some of my readers:

“We have emerged from the financial crisis with new clarity: Money today is simply credit. When the credit is advanced by a bank, when the bank is owned by the community, and when the profits return to the community, the result can be a functional, efficient, and sustainable system of finance.”

Even treading the path to a RBE will require a new definition of money, and a new role for our banks—neither can be switched off over night, probably never. Whatever fulfils the function of a bank—which should be democratically redistributing community-accumulated wealth back into the community—whether that entity is internet-based, or located in an actual building, that function is inescapable, even should there be no money in the way we understand money today. What seems inescapable, and healthy, is a transparent method for democratically managing the excess fruits (profits) of the community’s efforts, a system we can trust because it is open, clear, simple to understand, and staffed by people we know and can talk to if need be. Local is therefore key. Guaranteed income is likewise key for those of us who, for whatever reason, are not quite as ‘useful’ to the economic sphere of the community as others. What may not happen is a forgotten, poverty-drenched sector of society that can find no way to dignity, and becomes alien at the edge of life. What may also not happen, is that the economic sphere is thought of as the most important.


(Here are some rough thoughts in reaction to this post:

Money is a promise frozen as an exchangeable debt which has utility proportionate to society's need to trade goods and services in some kind of market. If trade is unnecessary, so is money.

"Money is a promise" to pay. To pay what? Goods and services? Kinda. Couldn't we say that goods and services are promises to pay money? Bank of England notes are promises to pay the bearer the amount denoted on them. This is incomprehensible, but because it is everywhere and state-sanctioned we accept it unquestioningly.

Money is a moment-to-moment enabler of the belief that it is a promise to repay a debt--it works! If I have 'earned' money, I have 'earned' promises from society to hand over those goods and services of equal value I choose to purchase. The money I hold is society's debt to me. It is an indication of a relationship, a standing between me and society as measured by credit/debt.

Banks of the western model profit from this debt/credit accounting/monitoring via usury. Should they? They are providing a service, so why should they not be rewarded? They should be, but that line of inquiry is a dead end. Why money? Because trade? Why make explicit an accounting of debt and credit? Because trade? Why trade? Scarcity. Labour. Property.

If banking were automated, it would need only to be fed the amount of energy it needs to run. The admins sorting out the inevitable problems would have to be paid though! By whom? By society. Society would owe them a debt. What if those admins had fun doing their work, and needed no explicit reward, as in open source software? What if work done to keep the system going were rewarded generally by the functioning of a RBE? What if debt and credit were not explicitly tracked? What if it were culturally understood that we all benefit from doing what we can to keep such a system going, hence there would be no need for a money-accounting as an explicit attempt to measure value and track credit/debt. We need only track resources and ecosystem health. For starters, value cannot be measured. Attempting to do so has proven vulnerable to all sorts of heinous and unforeseen side-effects. Because money-rich is better than money-poor, having (explicit) money as part of society becomes a pressure to game the system so as to get rich and stay rich.)

Wednesday, August 17, 2011

Money, Debt, Reserves, Money and Debt

[ADDENDUM (yes, here at the top!): This post contains factual errors which were pointed out to me by Sigi. Happily (in my eyes anyway) my error, when corrected, does not lead to a different conclusion. The voluminous comments to this post are therefore a very important part of it. And, no doubt, I shall be returning to this topic and MMT generally, in due course. 22.08.2011]

I had a wee exchange last week (I think) with rebeleconomist over at Naked Capitalism, who suggested I did not understand that banks have reserves backing their loans (or some such formulation of same). Rebeleconomist appears to support, or think sound, the current money creation system of FRB (fractional reserve banking). Today I had a look at Steve Keen’s “The Roving Cavaliers of Credit” again, wanting to brush up on the data of money creation upon seeing it referenced in Eisenstein’s “Sacred Economics”, so copy-and-pasted the article into a word document at work (naughty me) for leisurely perusal. As I reached the bottom of the web page I noticed , scrolling into view, a comment-exchange between Steve Keen and “Spike1606”, along the lines of ‘the amount of money in existence at worst only equals debt, but mostly exceeds it’. Steve Keen appeared to agree with this assessment (the chat happened early April this year) despite his article demonstrating the opposite. He also claimed not to be expert enough on the fine details of Central Banks and commercial banking generally. I was shocked. I still am. Naturally I ran straight to Wikipedia.

“Within almost all modern nations, special institutions (such as the Federal Reserve System in the United States, the Bank of England, the European Central Bank, the People's Bank of China, and the Bank of Japan) exist which have the task of executing the monetary policy and often acting independently of the executive. In general, these institutions are called central banks and often have other responsibilities such as supervising the smooth operation of the financial system. There are several monetary policy tools available to a central bank to expand the money supply of a country: decreasing interest rates by fiat [encourage lending—Toby]; increasing the monetary base [government borrowing—Toby]; and decreasing reserve requirements [encourage lending—Toby]. All have the effect of expanding the money supply.

The primary tool of monetary policy is open market operations. This entails managing the quantity of money in circulation through the buying and selling of various financial assets, such as treasury bills, government bonds, or foreign currencies. Purchases of these assets result in currency [synonymous with “money” it seems—Toby] entering market circulation (while sales of these assets remove money from circulation).

Usually, the short term goal of open market operations is to achieve a specific short term interest rate target. In other instances, monetary policy might instead entail the targeting of a specific exchange rate relative to some foreign currency, the price of gold, or indices such as Consumer Price Index. For example, in the case of the USA the Federal Reserve targets the federal funds rate, the rate at which member banks lend to one another overnight. The other primary means of conducting monetary policy include: (i) Discount window lending (as lender of last resort); (ii) Fractional deposit lending (changes in the reserve requirement); (iii) Moral suasion (cajoling certain market players to achieve specified outcomes); (iv) "Open mouth operations" (talking monetary policy with the market). The conduct and effects of monetary policy and the regulation of the banking system are of central concern to monetary economics.” [My emphasis.]


The middle paragraph is key. Though brief and incomplete it wields the jargon of banking in precisely the manner which so confuses the layman (me included). What is money? All sorts of things, like M0, M1, M2 and so on? Sort of. Is it debt? Not according to orthodox economics. The money which is really really money is “high powered money” (see italicized sentence in quote below). Hence selling debt-instruments into the economy takes ‘money’ out of the economy in exchange for bonds, treasuries, etc. What would that ‘money’ otherwise be doing? Creating inflation, one assumes—in that it is (part of) commercial banks’ reserves which enable the extension of credit—hence the need to remove it from the economy. Is it exclusively high powered money which is removed from the economy when these sales occur? How could anyone know? High powered money is not marked to denote it as such, though I suppose its ‘initiating existence’ in particular accounts at commercial banks is a kind of marking. If these accounts were repositories only for transactions with the Federal Reserve, and if bonds and treasuries bought from the Fed could only be purchased with money out of these accounts, that might be a way of tying high powered money directly to such federal monetary operations. And yet even if things were that tight, such money, though “high powered”, was created as debt and is owed back to someone, somewhere.

So what is high powered money? Wiki again:

“In modern economies, relatively little of the money supply is in physical currency. For example, in December 2010 in the U.S., of the $8853.4 billion in broad money supply (M2), only $915.7 billion (about 10%) consisted of physical coins and paper money. The manufacturing of new physical money is usually the responsibility of the central bank, or sometimes, the government's treasury.

Contrary to popular belief, money creation in a modern economy does not directly involve the manufacturing of new physical money, such as paper currency or metal coins. Instead, when the central bank expands the money supply through open market operations (e.g. by purchasing government bonds), it credits the accounts that commercial banks hold at the central bank (termed high powered money). Commercial banks may draw on these accounts to withdraw physical money from the central bank. Commercial banks may also return soiled or spoiled currency to the central bank in exchange for new currency.” [My emphasis.]


(I suspect that 10% figure is quite deliberate, or dependent on whichever definition of money is required to produce it; everywhere else I see assertions of 3-5%. Perhaps it needs to be 10% because FRB requirements are, classically speaking, 10%. Neat, huh?)

So, “purchase of these assets” involves “high powered money”, which is money credited to accounts at commercial banks, money which can be notes and coins. Where does this money come from? Thin air in effect, but in terms of being ‘backed’, it originates from the Government—not from commercial banks—that is, it is backed by The People’s future labour. The CB ‘creates’ ‘new’ ‘money’ in exchange for acquiring and then selling on government debt (in the form of bonds, treasuries etc.). So this “high powered money” originates as debt. This “high powered money” is (part of) the “reserves” of commercial banks.

But what does that mean, "reserves"? In which accounts? Government accounts, business accounts, private accounts … bank accounts! So that money belongs to the various account holders, not to the bank, and yet it represents reserves, debts which are assets (or is that the other way around?). Furthermore, all high powered money is owed by the government to the central bank (or other owners of the initiating debt instrument) upon maturity of the debt (plus interest of course). Who owns the central bank? That is the topic of many books, but private interests it is, otherwise it is The People borrowing from themselves at interest. Which is weird. Even the British Central Bank, “purchased” by the Labour government shortly after the second world war, was paid for by borrowed money which came from unnamed entities. Do you think the British Government have paid that debt off? Austria’s central bank was recently nationalised. I wonder where the government got the money to buy it. Perhaps from the ECB. Who owns that? Smaller European central banks. And so on.

So “high powered money” originates as debt, becomes “reserves” which are monies owned by account holders and owed by the government to holders of the corresponding debt instruments, “reserves” which act as a base from which new money can be lent into existence in the commercial sphere by commercial banks. And loaned money can buy things, so always ends up in some seller's account and can be exchanged for notes and coins. I.e., commercial bank credit-money can be 'transformed' into high powered money. Throughout the system, the monies mingle with rampant abandon. Some of it might be in your pocket right now, or in your bank account. And, legally, you own it, owe it to nobody. And yet it is owed, by someone, somewhere.

(And this is only the conventional theory. “The Roving Cavaliers of Credit” demonstrates that it is actually commercial banks which initiate expansion of the money supply. The research the article cites shows how the central bank is forced, from time to time, to fill the holes in commercial bank balance sheets in order to keep the system going. (Also known as TBTF.))

In the end, money is either created as an explicit debt, or it is not. This is an inescapable binary. Whether we reference reserves or high powered money, treasuries, gilts, or notes and coins, we are denoting money created somehow. The differences are of liquidity, or ease of use in economic exchange. Money does not grow on trees (or does it?—are not economies as natural as trees, are trees ‘lazy?’), so, logically, must be created by something somehow. Is it owed back to its source (plus interest), or isn’t it? If, at every step of the way, ‘money’ is created as a debt, and furthermore as a debt bearing interest, then the amount of ‘money’ out there cannot be more than the debt owed. Money is always debt if it is created as debt. And because of interest, principal must be less than what is owed. P < P+I. Always. The only way to assert otherwise is to have jargon definitions of ‘money’ in its various forms, such that only “high powered money” is money, and the rest is somehow vapour, or “nets to zero”, or is ‘credit’ to be expunged, etc., and yet even with that concession, with reserve requirements at around 10% (allegedly), the claim that ‘money’ exceeds debt in the system seems untenable to me. Bank run, anyone?

Look at the third paragraph of the first quote, which informs us the Central Bank’s goal is control of short term interest rates (with an eye to inflation). The interest rate is like the gas flame under the economy’s pot. Control it, and you control the intensity at which the economy cooks. That’s the theory. What we see today after years of historically low interest rates (“cheap money”) and anemic to zero ‘growth,’ is that this theory is obviously insufficient. Japan is a case in point. The system ‘works’ when the economy can grow, but breaks down when it can’t. That’s happening now, with government repeatedly forced to borrow on behalf of us all. The explanation for this phenomenon is debt collapse in an economy at peak debt levels (including a slowly changing Zeitgeist), which equates to a collapse of the (effective) money supply, in an economy which is not growing, which means it can no longer borrow more money into existence. All that fresh “high powered money” out there finding no matching economic activity to make it ‘real,’ except in commodities, stocks and other stock market shenanigans, the rises of which we might see as deferred inflation. Apparently, all those jargon distinctions are of no real use. Label it as you will, money created as debt is debt.

What backs debt? Put another way; what backs money? Certainly not reserves or high powered money, since that originates as debt. Money does not back money (yes it does: “I promise to pay the bearer on demand the sum of five pounds”!), as gold does not back gold. Perhaps a thought-exercise would be helpful:

Imagine I create a trillion TDs (TobyDollars) at home for my family to become an economy at last. There it is, TD1tr. Sitting on the kitchen table, twinkling in the moonlight. What is it valuing? At first, absolutely nothing. I have to spend it into our wee economy for it to have any meaning. Before we Russells have economic activity between ourselves, the money has zero ‘value,’ or no utility. Maybe I start paying my daughters for smiles, and they pay me for hugs and play time together. (I won’t list what my wife and I might pay each other for. Too boring.) At first, a hug might cost TD100m, a smile TD10m, but as the number of things we do for one another ‘grows’ (tying each other’s shoe laces, pouring each other’s milk, buttering each other’s toast, massages, story telling, use of the piano, etc.), so the price per exchange falls in classic, market style.

What backs money is therefore economic activity, or buying and selling. So if we are to prevent inflation, when we create new money it needs to be met by some amount of new economic activity (new goods and services), as equal in ‘value’ to that money as possible. So, in an economy in which the money supply is forced to expand (P < P+I is an equation for a Ponzi or Pyramid Scheme), growth of economic activity backs money (or debt, the terms are synonymous). In an economy where money is created as debt, such that the created amount is destroyed upon final repayment, leaving only the interest behind in the hands of the lender, we have a screaming need for constantly increasing (on average) lending and borrowing. This is why recessions and depressions are Bad, and growth is Good. This is why economic activity is Good.

And even if money is not created as debt—as in my example above—the (household) economy becomes instantly ‘indebted’ or beholden to money as soon as it is there to be used—why else create it. Money is, in its broader systemic effects, a claim on and a systemic pressure to engage in economic activity, or price-based exchange (buying and selling). The economic principle of thrift we all know—living within one’s means—is in fact impossible to adhere to when money is designed in such a way as to demand growth, since, in time, this can only lead to humanity demanding too much energy from its environment, as well as asking it to process too much waste. And since growth appears to be forced upon us by social hierarchies such as nation-states and corporations (in their current forms), which, in deeper history was selected for as a consequence of attempting to control nature through farming, it is clear that we, as a species, still have a lot to learn about true economics, what we might call the ecology of economics. Right now there’s too much jargon and not enough sense.

Friday, August 12, 2011

Hierarchy and Anarchy

[Warning: this is tentative, exploratory material!]

It is not ‘human nature’—via the heady cocktail of ambition, greed and selfishness—which makes hierarchy inevitable, it is environmental complexity. ‘Human nature’, coarsely understood as just defined, is a variable-complex of low relevance in the generating of hierarchical social systems, and is meaningless when notionally removed from its supporting environmental networks in an attempt to see it ‘for what it is.’ I argue here that we need not refer to this Hobbesian ‘beast within’ when seeking to understand social forms. Another line of inquiry bears more succulent fruit.

Premise: Not only can there be no such thing as equality across the universal spectrum (except in the abstract world of language and imagination), we should never even try to establish such in pursuit of social good. Just as the Piraha cannot count above one—even when shown how by concerned anthropologists—so we should recognize and celebrate the uniqueness of every single thing, at every scale, everywhere. As one consequence of having begun to look at reality in this light, I am beginning to entertain the possibility that the hierarchy-anarchy dichotomy I have been battling with in my thinking for some time now, should be thought of as nothing more than a cultural illusion, a transitional conflict generated by ignorance. These supposedly antithetical social arrangements are but projections from out of our cultural knowledge of Universe, knowledge which is painfully incomplete, biased and inaccurate.

For example, isn’t it always and only the case that, as Universe generates more data-detail out of its ever-changing reality, ‘tunes’ its fractal-resolution ever finer, it consequently generates yet more data-detail in a perpetual, multifaceted whirring around dynamic ‘balance?’ (See note on entropy below.) On our scale (humans and human societies are embedded subsets of Universe), the more information we discern then process and manipulate, the more we generate in the very heat of our efforts to understand, interpret and ‘control.’ We are as much a part of Universe as stars, asteroids and planets. So isn’t it the case that society becomes more ‘complex’ necessarily (albeit not in a linear fashion, but over time)? Musn’t this complexity give rise to social hierarchies?

Therefore, and to focus prosaically on the theme at hand, the chance for small human groups to remain forever ‘egalitarian’—a societal mode we project onto them from within our cultural and historical experience of hierarchy—is, from my newly emerging point of view, zero, not because of human nature and ‘born greedy’ arguments, but simply because the wild mess of environmental (or bio-social) pressures, stirred up with a societal soup of any complexity, is totally uncontrollable. Inescapably, people (trees, flowers, lions, antelope, ants) of varying qualities emerge from the environment producing them, not because of genetics per se, but because of the necessary complexity and vital unpredictability of the web of life. Genetics are a subset of and are embedded in Universe. They mean absolutely nothing whatsoever outside their context, their enmeshed reality. The manner in which genes copy themselves into ‘endless’ iterations of themselves is powered and slowly altered by external environmental circumstances beyond their control. Indeed there is no control, there are no actions; there is only response and reaction. Agency is an illusion.

Let’s look at two of the techniques for sustaining egalitarianism. Teasing: How can teasing to suppress alphas be effective for all time in the face of all that information ‘out there,’ to be discovered and interpreted? No way can we all know enough about everything to deal with ‘experts’ from multiple fields. The ‘You don't know what you're talking about!’ card can be played, and defended, increasingly successfully, as societal complexity increases. Teasing is effective in small groups where there is open access to manageable amounts of culturally generated data about reality, thereafter it becomes ever weaker. Imagining for a moment I could get sufficient ‘face time,’ how would I tease a Margaret Thatcher or a Tony Blair, a Joe Biden or Lloyd Blankfein to humility and humble acceptance of ‘egalitarian’ principles? Not only do I not have sufficient power, I have but limited experience of their worlds, and they would not understand where I was coming from. Killing: And as a pacifist, before even looking at the extreme difficulty and counter-productivity of such a solution, I cannot advocate killing people who disagree with me, or who have a more ambitious personality. Even people like Lloyd Blankfein. (You can relax now, Lloyd.)

Perhaps even more fundamentally, why would nature, via human behaviour, select for ‘egalitarian’ societies at the scale of hunter gatherers? Is nature moral? Does it care about fairness? Perhaps, but not as I caricature it here; nothing is that simple. Christopher Boehm confronts hierarchy and egalitarianism in “Hierarchy in the Forest”. He points out the life-and-death need for total trust among all members of the group, e.g., on potentially deadly hunting trips. If any member of the tribe has personal ambitions, that person cannot be trusted in such delicate situations and must therefore either be humbled out of their selfish egotism, or killed, for the sake of the group. ‘Primitive’ egalitarian societies are a harsh matter of survival in dangerous, non-surplus conditions, and have nothing to do with ‘rights’ or other political niceties. The egalitarian mode we perceive them as having 'adopted,' arises organically from the environmental conditions confronting the group. Hence, with the arrival of farming, surplus, private property, alongside the increasing complexity of social life, egalitarianism simply becomes the less effective social construct. For this stage of the analysis, morality is irrelevant, as is human nature, except that human nature is social and intelligently adaptive.

To recap, social hierarchy could be said to be an organic consequence of increases in generated intellectual information leading to increases in social complexity, coupled with changed environmental circumstances and challenges such as farming, surplus and private property. Over broader tracts of time, and speaking more generally still, the more complex things get, the more information we generate as we further understand Universe, cumulatively—standing on the shoulders of taller and taller giants—the less able we are to deploy effective teasing (and other) tactics to keep the playing field level, and the less appropriate egalitarianism becomes. An egalitarian social mode becomes an impossibility via person-to-person teasing in social and environmental conditions far different from ‘hand-to-mouth’ hunter gatherer tribes. Furthermore, as hierarchies establish, killing alpha males becomes harder, as they are surrounded by ‘hangers-on’, who become an early ‘army,’ ‘police,’ etc. Not to mention that specialization means upending the hierarchy sinks you too. Having specialized, you cannot survive on your own in the wild. Hierarchy breeds dependency on it. A hierarchy composed of equally abled jacks of all trades is illogical.

But of course the story does not end with the supposed ‘success’ of the hierarchical forms we see around us today. It just so happens that human social hierarchies such as nation-states and corporations are wired to grow perpetually as part of their design (and we should see corporations as a smooth ‘progression’ from the nation-state to a form that can grow beyond nation-state borders, while states provide the framework for population growth). They are therefore fundamentally self-destructive at increasing environmental cost, likely to the point of global eco-collapse if not arrested.

Today, we therefore have two (interrelated) choices if we wish to survive in civilizational form (facing, as we do, new environmental challenges such as peak oil, technological unemployment, peak debt, global warming, and other problems unprecedented in human history):

1. develop an anarchic socioeconomic infrastructure which permits the ad hoc emergence of (short-term?) hierarchical social organizations, which are systemically prevented (not forced) from bedding down, dominating and growing in reach and power (goal-oriented or project-based hierarchies); and/or

2. insist on pure anarchic social systems and work out new ways of preventing the ‘unwanted’ emergence of hierarchies in a modern, complex setting.

Right off the bat I have a problem with “insist” (a word I put there for precisely that reason!). It is totalitarian, profoundly divisive, is the deepest antithesis of what a new social form, from this point looking forward, ought, logically, to be about. Because it divides deeply to insist on a solution, insistence renders impossible the ever-emergent consensus, however fractious, an anarchic system would require, would strive to learn how to build. To insist on anarchy and only anarchy is to doom it at the outset. 'Mature' anarchy can only emerge organically from conditions conducive to its emergence (nothing unusual there!). And grass doesn’t grow faster if you shout at it. Hence my continuing interest in a resource-based economy, in which the infrastructure itself is sustainably organized (point 1.) to distribute the necessities (plus many luxuries) to all people everywhere. This infrastructure is a necessary precondition for generating the base conditions of anarchy (egalitarianism), out of which soil ad hoc and short-term hierarchical arrangements, perhaps even ‘institutions,’ can grow and then dissolve, at need, without being able to accrue power. Key is the ‘guarantee’ of a solid and environmentally friendly life-ground, a base providing everyone with the ‘equal’ opportunity to participate and contribute. The degree to which one enjoys one’s life will be up to each individual ‘equally’ (which translates to a loose definition of ‘freedom’ I can live with). The more one constructively gives, the richer one’s life becomes. Contribution rewards by definition, even when it includes failure and set backs.

Such a socioeconomics could include no fiscal debt in the formal sense, no private property, no bondage in the explicit sense of money and formal monetary accounting. Each of us would be obliged/free to play his or her part in the organic and ongoing rebalancings of Universe, adapted and reacted to in an emergent fashion. Without appeal to any sense of fairness or morality, we would get out, more or less, what we put in. And that is a morality I can believe in. A bio-diverse ‘equality’ I can take seriously.

However, in chicken-and-egg fashion, building such an infrastructure first requires what I’ve been calling here an ‘anarchic’ set up, that is, a society accustomed to and politically mature enough to cope with locally organized self-governance via direct democracy and consensus building. We are nowhere near that place. We are political and emotional babies. Before we can even begin to want to build a global RBE infrastructure, we have to re-localize, nucleate across the planet into a cultural sense of ourselves as but one species of many on planet Earth, and establish ‘self-sufficient’ communities interconnected via ‘harmonizing’ Internet-like software and databases capable of global resource tracking and management. Out of this a RBE might emerge, though the path will be stony indeed, before we even consider how difficult the first step will be.

To conclude, the two listed options are in fact one—minus the word “insist”— or are at least interconnected. We begin where we can, as discussed by David Graeber, to construct anarchic social organizations, slowly improve our consensus-finding techniques, and freely disseminate the wisdom we learn. Show ourselves and the world how it’s done. Invite participation from others. Remain open. Stay honest. Believe. And accept that hierarchical social organizations are unavoidable, even within anarchy. Nature is fundamentally anarchic with hierarchical arrangements arising from and collapsing back into it. Anarchy is the soil which enables hierarchy. Seeing them as opposites is wrong.



[Note to self: Complexity cannot increase infinitely. There will be retrenchments, failed-experiments, collapses leading to profound and broad changes of direction. In the manner of Keep It Simple, Stupid, systems can be too complex. Complexity does not equal wisdom. Accumulations of wisdom include rebalancings of complexity and simplicity as Universe ‘progresses’ ‘blindly’ through its many experiments with different forms of life.]

[Note to others: Entropy is not the sole fundamental property of Universe in my opinion. There are many, though change is the only constant! If entropy were the core property of Universe I could not be typing this. The self-organizational processes necessary, over the vast tracts of time from the alleged Big Bang till now, to engender life on earth and now human society and culture out of ‘chaos’ cannot be ignored. They’re here. We are it. Universe did this, and this miraculous (inexplicable) ‘accomplishment’ is not the result of entropy.]

Wednesday, August 10, 2011

Postcard from Everywhere

Holidays are always an aberration, a deviation from the day-to-day. Yet they’re also a smoothly stressed continuation in that you cannot leave yourself behind, and when a parent on a family holiday, your little group travels with you too, psychological baggage dragging holiday luggage across foreign soils. With this first contradiction firmly in place, I can proceed to the second: I always enjoy holidays, even when I don’t (and especially in hindsight). That factoid should tell you quite a lot about me.

Ah, Asia! Hierarchy-Central, materialist fleshpot for Caucasian rejectamenta, with shops slicking the bustling cities like too much sauce across a dish of cheap cuisine. Our last trip eastwards was December to January 2007-8. Since then I’ve changed my view of humanity and human society about as much as is conceivably possible for a 40-something leading a ‘normal’ middle-class life as father of a healthy, nuclear family of four. This time Asia met my new eyes and troubled me deeply. If I have a hard time selling steady state growth and resource-based economics in Europe and America; in Asia, where my contacts are either rich elites or poor home-help, such ideas are seen as little more than the deranged pontifications of society’s failures and loons. That said, the twenty-somethings and younger of those rich families (I’m talking very anecdotally here), with their exposure to the Internet, are showing signs of open-mindedness. Perhaps wealth’s glitter is rubbing off. Even in glittering Hong Kong.

Nevertheless, what was brought home to me most forcefully is the flat out impossibility of an idea like a RBE or even a demurrage currency, or even slowing growth down, being greeted as reasonable or worthy of discussion. My conversations with business people and bankers, as well as with their poor staff, was a strong reminder of how big the world is, how tightly united around the Story of Money (or what Eisenstein calls The Story of the Self) it is. Of course, this impression is hardly the result of rigorous research, even though the sample of people I talked to is representative of both rich and poor. Nevertheless, I don’t think it is wildly presumptuous of me to think of these conversations (and other impressions from TV news and other media outlets) as accurately informative and worthy of note.

Because direct democracy and other anarchic social forms strike me as necessary for humanity’s survival, the information from The Philippines, Hong Kong and China was sobering. Hierarchy is baked deeper into their cultural cakes than ours, even though we are still systemically yoked to it. Despite the ‘birth of the free individual’ preceding and subsequent to the French and American revolutions having done plenty to soften western culture to the idea of direct democracy and therefore to anarchy as a system, hierarchy and the Hobbesian monopoly-on-power the state is, are as endemic to the status quo as ever. After all, a “monopoly on power” is what the state is, by definition. Any solution within the context of the state is a perpetuation of hierarchy, elitism, scarcity and zero-sum competition. Truly translating the historical logic of the West’s revolutions will take further revolutions. In Asia doubly so. And everywhere the poor dream of being rich. For ‘rich’ to mean something, some majority or other has to be poor.

So the old conundrum seems tougher than ever. Humanity faces global challenges it must meet cohesively, under some loosely uniting vision, yet culturally we are fractious, stubborn, scattered, and suspicious of both The Enemy Other and The New. To engender a vision capable of uniting us, however loosely, we must begin locally. Translating local solutions of some anarchic form to others across the planet is proving very difficult, even with the Internet. Without it, such communication is simply impossible. Freely disseminating information is key, learning how different cultures understand your information is hard, but also key. No isolated anarchic system can hope to survive, nor could it hope to fight off attacks from corporations and nation-states eager to thwart it should it become too attractive to growing numbers of humans. Hard-earned wisdoms must be shared, successes and failures must be ‘advertised’ to all so that each can help all, rather than each be at war with all. A mighty challenge which will require on-the-fly development of a new cultural skill-set.

A further conundrum, one which concerns me deeply, is the birth and subsequent death of The Individual. This Cartesian mote of consciousness—potent, creative, active—does not exist as conceived, yet the idea of selfhood is, culturally speaking, a necessary precursor to empathy, which is a necessary precursor to ‘selflessly selfish’ interactions with other humans and the environment generally. The West is ‘ahead’ of Asia in this regard. Think Japan’s reactions to Elvis Presley and rock and roll. Think Hong Kong and China in the 1920s and 30s flirting with Western clothes and music. And yet the more unquestioning, almost subservient adherence to ‘The Way Things Are’ I detect throughout Asian cultures is also representative of a concern for the group above the individual ‘selfless selfishness’ implies. The dark side of this is the power of the state, ends justifying means, the needs of the many outweighing the needs of the few, and so on. How powerful should the group be relative to the individual? There is no simple answer. Death is anyway inevitable no matter what death ‘really’ is, and we fear it too much. Do we respect the famous Right to Life too much? The autarky I think is historically upon us, which we are obliged to embrace, upholds the ‘freedom’ of the ‘individual.’ Yet for such not to be a Hobbesian war of each against all, as predicted by the state, there must also be a very clear recognition of the primacy of the collective, as a network enabling the ‘freedom’ of each of us.

That is quite a conundrum.

There is no such thing as an individual. Conception of such first requires millennia of abstract language and culture, both of which are impossible absent society—no solitary wolf-child could come up with either. The word “self-conscious” turned up in the late 1600s; that’s a lot of social history and development as preparation for the concept. Society gave birth to the idea of individuality, just as it gave birth to the idea of empathy, a word perhaps 150 years old (it comes from the German “Einfühlung” which first appeared in the mid 1800s I think) which begins to dissolve the boundaries of that which spawned it. In that dissolution, perhaps, an ‘inter-individual’ can emerge, a paradox to us now, but hopefully as obvious as breathing to some future culture. Whatever future forms society evolves for itself must remain misty and frustratingly incomprehensible for now. We push forward not knowing where we are headed, only knowing we strive to do our best for humanity and biosphere alike.