How did we get into this mess – and how to get out of it

You would have to be blind Freddie to think all is well in the world. We have the European Union on the brink of collapse, the USA about to go into a double dip recession, revolutions sweeping through the Arab world, Pakistan a nuclear power close to becoming a failed state, global recession likely and persistent environmental problems which are not being addressed by our leaders. So how did we get to this point and what can we do to rectify the situation?

 

The problems started a long time ago at the time of the industrial revolution when increases in technology made agriculture and mining easier, it took less people to provide our basics. We put people to work in factories instead and encouraged mass consumption. The solution to this horrid state of affairs was communism which when put into practice created the most rigid and despicable autocracies known to history.

 

We then used financial services and market gambling too keep the money moving which lead to a couple of world wars, and the great depression. After those human disasters we tried a combination of state owned enterprises and free markets this lead to the 1950’s boom and created rigid bureaucracies both in globalised companies and state run enterprises and eventually stagflation ensued in the 1970’s.

 

Since then we have patched the dyke with bubbles. Dot.com then housing and derivative bubbles all of which created more work in the financial markets, in PR and marketing and the game of spin and project management. We became sand castle builders. Creating new management systems and complex deravatives, implementing them then breaking them and building again as shown in the charts for professions in Australia and the USA (Charts) employment in agriculture, mining and manufacture have been in decline or at very low levels while production has increased. In Australia mining output has increased threefold since the 1980’s while employment in mining has barely increased. Even construction during the housing boom did not employ more tradies to actually build the homes but more project managers to control the output making the process more top down, and more rigid. While management and professional services, particularly in financial services has increased dramatically.

US employment by profession

Australian workers by occupation (source ABS)

australian employment by industry (source ABS)

Australian employment by industry (source ABS)

The Problems:

 

The fundamental problem is twofold; first is the distribution of the means of exchange – money, the other is the structures we create to accumulate resources – the more rigid they become and the more hierarchical the more likely they are to catastrophically fail.

 

Income

 

In order for a market to work it needs many buyers and sellers with the means of exchange (money) relatively equally spread. Milton Freidman realised this when he proposed positive taxation and so did Adam Smith :

“The whole of the advantages and disadvantages of the different employments of labour and stock, must, in the same neighbourhood, be either perfectly equal, or continually tending to equality. If, in the same neighbourhood, there was any employment evidently either more or less advantageous than the rest, so many people would crowd into it in the one case, and so many would desert it in the other, that its advantages would soon return to the level of other employments. This, at least, would be the case in a society where things were left to follow their natural course, where there was perfect liberty, and where every man was perfectly free both to choose what occupation he thought proper, and to change it as often as he thought proper. Every man’s interest would prompt him to seek the advantageous, and to shun the disadvantageous employment.” (Adam Smith “An inquiry into the nature and Causes of the Wealth of Nations”Chapter X”

 

The most common ways we distribute the means of exchange are interest, profit, wages, gifts (including welfare), and baksheesh or Greek speed (this includes referral fees, commissions, and trailing fees – payments for your position and who you know). The last category has increased greatly for those in positions of power over the past few years leading to an increase in inequality. The most common form of income for the majority of people is wages. But to receive wages you must have a job and jobs in low skilled industries are almost non-existent thanks to technology.

 

In the 1980’s Barry Jones like many others realised this problem in his book Sleepers Wake his solution was a guaranteed basic income for all and an increase in leisure and educational services. Unfortunately the internet popped up and we decided leisure services, like making movies, writing books, and making music should not be paid for instead we would download them for free. As with educational services we now have free access to university research papers, commentary, and academic journals. So income has been moving from the mass of humanity to a few elites who can garner income from interest, profit and baksheesh and they use this money to gamble on financial products in a high value few players market. Financial markets turnover more than 100 times global GDP in their gambling activities. In Australia that equates to 100 trillion dollars a year mainly on foreign exchange derivatives. This has exacerbated the second problem hierarchical rigidity.

 

Rigidity

 

As elites become isolated from the people affected by their decisions such as BP executives and the little people of the Gulf coast they start to think in lock-step imagining they are thinking independently when they are all making the same mistakes together rocking the bridge to collapse. Because of their wealth power and status they force their decisions on all those lower down in the system crowding out dissent and adaptability to change.

 

Theories from thermo dynamics and information theory can help us understand how ordered systems are prone to failure. Geoff Davies in his 2004 book Economia uses convection of fluids to show how the movement of  a fluid requires external heat but also instability in the distribution of this heat to arrive at a dynamic system. He states that “we need to open to change if we are not to languish and stultify”. When a system becomes ordered from the top down communication is stifled and the system grinds to a halt. It looks stable but instead it is like a rubber band stretched wide ready to snap at the slightest change in the external environment.

 

Information theorist call the point at which a system reaches complex order the bifurcation point, the rigid system either splits becoming two or more ordered systems or rapidly collapses into chaos. We seem to be collapsing. The world creates life from the imbalance between biological and non biological systems creating constant change and exchange of energy and information which self orders into fluid systems. The more we work against this by implementing top down cover all ideologies or management theories that stifle free will and adaptability the more stress the system is under and the more likely we are to tumble into chaos.

 

Solutions

 

We need a interim system to bring about fluid interaction and many small players in the market system I suggest the Flow Siphon Flat Payment (FSFP) which siphons a small amount 8% from all real market money movements and 0.5-0.05 % from financial markets (similar to a Robin Hood tax) and pays each person $22,000pa this will take money from the financial markets and trickle it down to those playing in real markets lubricating them and making them more robust to external environmental changes.

Chart of order to disorder

 

If we combine this with monetary democracy whereby we use money as a vote for our values we can monetise markets which have become free or reliant on marketing manipulation to garner income such as information and entertainment industries. Use your $22,000 to support those you learn from and that make you happy. This should decrease manipulative spin and create a more knowledgeable society it may even clean up our representative democratic system.

 

Increasing the spread of power should also have beneficial environmental outcomes because we will no longer need to increase consumption to increase work to spread wages. And evidence shows that a more empowered populous does bring better environmental outcomes because those effected by poor water quality, poor air quality actually get to a say in fixing it.

Also see: Brain, community, universality – three modes one whole

Fluidity – how to create a society in harmony with our planet

David J Campbell

7 Responses to How did we get into this mess – and how to get out of it

  1. Pingback: Wealth Condensation: Why the Rich Get Richer (and the poor poorer) | JeSaurai

  2. We absolutely love your blog and find almost all of your post’s to be exactly what I’m looking for. can you offer guest writers to write content to suit your needs? I wouldn’t mind creating a post or elaborating on most of the subjects you write regarding here. Again, awesome website!

  3. Jazmin,

    Of course. I need new contributors, have a look at the submissions page for more info.

    http://iwillknow.jesaurai.net/?page_id=12

    I look forward to your articles.

  4. Pingback: Live stream video – Occupy Wall Street Protests | JeSaurai

  5. Pingback: Fluid Society | JeSaurai

  6. Pingback: Proof the FSFP works | JeSaurai

  7. Pingback: How did we get into this mess – and how to get out of it « Economics Info

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>