Posts Tagged ‘ How the economy works ’

The Wrong Side of a One-Way Mirror

Scientific American usually has a pro-business stance (think of all those wonderful advertisements) but once in a while something sneaks in that is good for the rest of us.

Take the article A Tale of Two Internets by Michael Fertik on page 13 of the February Issue. It is not available online. Here is the opening paragraph:

Imagine an Internet where unseen hands curate your entire experience. Where third parties predetermine the news, products, and prices you see – even the people you meet. A world where you think you are making the choices, but in reality, your options are narrowed and refined until you are left with merely the illusion of control.

He goes on to explain what Big Data is.

Many companies (and the NSF) are finding out everything about you. And using this information to personalize your Internet experience. This sounds innocuous enough – the Internet shows you only what you what you are interested in. But these guys can also show you only what they want you to be interested in.

And you have no way of seeing them do this behind their (not your) one-way mirror.

The Inner and Outer Self

The human situation is complicated, we can all agree on that. But in the last 500 years or so it has become much more complicated. But we cannot agree on that. Why? That is the subject of this posting.

Every organism is part of something much larger. All life is closely related – we are all built of cells, which are much the same the world over. Except for one kind of cells – nerves, which in the human brain have become incredibly complicated.

Actually, the right world to use here is not complicated, but complex. And complexity theory tells us something amazing – as systems become more complex new behaviors appear – out of nowhere. These are called emergent properties.

The human brain is full of these properties – as is human behavior, which is derived, somehow, from our over-developed brains. I want to talk about two of them – the inner self and the way we have become extended – the external self.

We have always been part of our technologies – this is what civilization amounted to: a complex of new technologies – including writing. And they have never been under control – we become whatever our technologies want us to become.

You may object that technologies do not have minds, and cannot will anything. You are right, technically. But practically, the combination of technology and people always results in people modifying their behavior to make maximum use of the newest, most successful, technology. This is what makes a technology successful.

This is most easily seen in warfare – a very human activity. A man with a spear is much more powerful than a man without one. And a phalanx of men armed with spears is more powerful yet. In such a situation the individual man disappears – and only the group remains. A transformation many find hard to resist.

This is the basis of the individual – group conflict. Which is usually resolved to benefit the group.

Modern history began with the Middle Ages – from which it emerged. Modernism was an incredibly complicated (or actually, complex) development – that people are now ignorant of – as they are of most everything. This posting is about how modern history evolved into post-modern history. Another very complicated development – which I can only scratch the surface of.

The big change involved the creation of mass production and mass man. This was a very clever idea – although not a new one. The Greeks had pottery factories operated by slaves, and hundreds of thousand of their pots still exist.

But the Industrial Revolution had something new - energy from fossil fuels – first coal, and then oil. And an explosion of new machines. This, as always, made a new kind of people – the human mass. Here again, this was nothing new. Ancient Rome was full of useless people who demanded bread and circuses - and got them.

But their modern counterpart was different – they could be put to work in the factories, manufacturing mass-produced commodities – at very low prices – to the immense profit of a few. This became know as Capitalism – whose most obvious feature was its ruthlessness.

But this is not what I started to write about. Completely unnoticed, something else was happening – people were extending themselves outward and becoming part of their technologies – which were themselves becoming more and more extended. As I said, this very important development has not been noticed – except for a few, and these have been ignored.

People could not resist this shameful new development – and they didn’t want anyone calling their attention to it. What was shameful about it? It meant they were abandoning their inner selves – which, after all, were their real selves.

Now I must start of the development of today’s subject – the difference between the inner and outer self. The outer self is all our possessions – which possess us. In the Computer world, this means we are networked all over the place. The Economy is also networked, which in practice means it can be manipulated by a few to their benefit. But this is nothing compared to the damage to our inner selves.

Every person, in the course of his (or her) normal development, develops his own personality. In Jungian terms, this is called individuation. And every individual is different. And is accepted as being different. In my little town in Costa Rica I can see this just by walking down the street, and taking note of the people there.

By contrast, if I go a two hour bus ride away to the Central Metropolitan Area (where most of the people live and most of the jobs are) the people have become homogenized – where everyone is much the same. And where everyone studiously ignores this.

I summarize – when people develop in externalized self, they lose their inner self. And cease to function as normal human beings.

You might ask “If you are right, why hasn’t this been noticed?” The answer seems to be “This is normal human behavior (which made it invisible to us) – but carried to extremes – which produced effects that we could not have anticipated.”

Of course, you will ask “What’s the solution?” My answer is “I don’t know, but the first step would be recognizing where we are – which seems impossible.”

Reconciling Capitalism and Democracy

Foreign Affairs keeps showing up in my inbox – and I keep ignoring it. But today I paid $2.95  for the article Making Modernity Work, and downloaded it. As I expected, it provided a self-serving history of the Modern world, intended to keep the world of business in power indefinitely. These intellectuals are apologists for that power structure – and I am sure they are well-paid to do so.

I will not attempt to refute their arguments, that would only be a waste of my time and yours. I will only copy this excerpt:

Few “classic” liberals insist that the State should play no role in the economy, and few serious conservatives, at least in England and on the Continent, believe that the Welfare State is “the road to serfdom.” In the Western world, therefore, there is today a rough consensus among intellectuals on political issues: the acceptance of a Welfare State; the desirability of decentralized power;a system of mixed economy and of political pluralism.

The author is carefully ignoring a basic fact – that Americans do not accept this consensus at all – they believe just the opposite. They are not interested in reconciling anything – and reject anything intellectual out-of-hand.

On its home page,  it reviews the book Rule and Ruin about the American Republicans. Europe is aware of America – and doesn’t like it.

However, if you are interested, here is the link to How We Got Here: the Rise of the Modern Order. There is some good stuff here – but if you are like me, you are skeptical about the present system, and see it was a vast failure instead.

How Capitalism Kills Companies

Wired.com - Felix Salmon: How Capitalism Kills Companies

This yet another article about Romney and his lies. People get upset so easily now, you would expect them to upset about this. But, strangely enough, this doesn’t seem to bother them. What gives?

As I keep saying, this is another example of unconscious behavior, where you have to make an educated guess about what is really going on under the hood.

My guess is that people are saying to themselves “So he lies, what’s so unusual about that? It’s a normal part of business (to say nothing of politics), and everybody does it. He might make a good president.”

The Slump Goes On: Why?

I got a report card today from WordPress today, about my blog’s performance last year. The most popular posting for the whole year was Excellent Analysis of the Financial Crisis. The link here was an article in the New York Review The Slump Goes On: Why?

I went back and read it again. It made me rethink my opinions of Ben Bernanke. He is a banker all right, but he is capable (or at least was capable) of criticizing the industry.

It really is a good article, you might want to read it too. Things are not as simple as we like to think – and the global economy is a case in point.

The second-most popular posting was John Dewey: The Lost Individual. I just looked it over again, and I was impressed too.

Living in the End Times

It’s ironic that I am now writing about the End Times, when that was part of my family’s religion. They considered themselves Latter-Day Saints. They were certainly not Saints, but they were living in the Latter-Days all right. Their existence was a both a product and a symptom of those times – whose main event was the Industrial Revolution. They were refugees from that revolution, and like most refugees they had no idea what had happened to them.

Even worse, they had no idea of how mentally damaged they had been by it. They were part of the mass that could understand nothing but violence and destruction. They were actively creating the End Times they were part of.

We are looking at the results of their efforts, which are still on-going. And like them, we have no idea of what is going on either.

What is going on, in case you are interested, is the collapse of The Global Economy. We now live in one vast economy which includes both the West and the East. There are vast areas on this map that are not part of this economy, but only backwaters of it – the whole continent of Africa, for example, or Central Asia, or Latin America, where I live.

I live in Costa Rica, but I have a fast Internet connection, and a company that flies my mail in from Miami. This week I got the January 2012 Harper’s Magazine – and immediately I went into information overload. There two main articles in this issue, one about the Mortgage Mess, and one about crime in Mexico.

Both are part of the same picture, and both are about greed and corruption – the same forces that brought down the Roman Empire two thousand years ago. But I should add one more force – the mass who only thought of their immediate needs and who went along with whatever everyone else was doing – and who were incapable of independent thought. They made the situation much worse.

Perhaps the gods looked down on them, observed their self-destructiveness, and let them go ahead and do it. As they are doing in our time.

But before I sign off I want to make a few comments about the articles. The Mortgage article was written from two perspectives, which is one too many. Start in the middle of page 29, where it talks about MERS (Mortgage Electronic Registration Systems).

This centralized database facilitated the buying and selling of mortgage debt at great speed and greatly reduced cost. It was a key innovation in expediting the packaging of mortagage-backed securities.

This would be damnation enough, but to add insult to injury, it didn’t do even that – it just plain didn’t work. And no one noticed, until some homeowners started challenging it in the courts. The courts haven’t decided yet whether to follow the law or follow the money. The public’s future is being decided for them – since it cannot decide it for themselves.

Now for the article about Mexico. Back in the late Forties and early Fifties we used to spend our year-end vacations in Mexico, after driving there from our home in Illinois. It was a nice country at the time, and we enjoyed being there (and enjoying the power of the dollar). I can’t imagine what it is like now – but it is certainly not somewhere I would want to live. America has gone to hell, but Latin America has gone there faster. Costa Rica is an exception, but its days are numbered.

Dishonesty by Another Name

Open Democracy – Risk, tricky stuff

This is an excellent article – but understanding it will take some concentrated thinking on your part. He takes you through a line of reasoning, step by step. Each step is not hard, but as you go along you will get the uncomfortable feeling that something very fishy and very basic is going on – something that you don’t want to know about.

You will say to yourself “Things can’t be this bad!” and stick your head in the sand, along with everyone else. Or get worked up about something entirely irrelevant – and insist that is the problem instead.

Well boy and girls things are that bad, and the baddest thing of all is our refusal to even try understand it. Let me repeat that: we have made a world so complicated we cannot understand it – because at the same time we have neglected ourselves as people – because we have concentrated on our wonderful things instead.

To put this another way: dishonesty has become systemic, and we cannot get it out of our system. Probably I should have said this first, because most will agree with this formulation.

China’s Real Estate Bubble May Just Have Popped

Foreign Affairs - A host of factors may undermine the country’s economic growth

Paul Krugman has worried about this also. From Foreign Affairs:

In a few cities, such as coastal Wenzhou and coal-rich Ordos, the collapse in property prices has sparked a full-blown credit crisis, with reports of ruined businessmen leaping off building rooftops; some are fleeing the country.

Sound familiar?

I have been writing about Our Monkey Brains, but so far no one has been interested. The general consensus is that if we ignore our problems – they will go away, all by themselves.

Americans Have No Control of Their World, and Don’t Seem to Want to

This is strange; the people at the top are obsessed with control; but no one else is the least bit interested in it. Being controlled seems to be what they want. They are flattered that powerful people want to control them; and are willing to entertain them for free – or at least for very little. They watch on as powerful forces combat each other, like spectators at a gladiator fight.

That they are the losers, no matter what happens, does not occur to them.

I can even see this happening in the Orosi Valley, an area area of little economic importance. Costa Rica was lately part of the Central American Free Trade Agreement, that was negotiated with the United States. Like all these so-called free trade agreements, it was not about free trade at all. It was negotiated, in secret, between the rich and powerful in Central America and their American counterparts.

The legislatures of Costa Rica and America were under extreme pressure to ratify it – which they did in record time. One of the effects of this treaty was to open up the telecommunications market, which had been a govenment monopoly, to foreign companies. This, in itself, was a fine thing - the government agency was completely incompetent.

What happened was that foreign companies eyed the market, and decided to go for the most profitable part of it – the cell phone market. The infatuation of people in undeveloped countries for cell phones is hard to imagine. They will sell their bodies to get one – if their bodies have any value. As they see it, it makes them all-powerful for a modest monthly payment.

Just down the road, in a tiny town, there already was a communications tower built by the government monopoly. A Spanish conglomerate immediately built a new one, and another one will soon be built – for cell phones only. This may sound like a fine thing to you – competition for the consumer’s business. But it can also be seen as a scramble for control – with the consumer’s role being nothing more than the resource being scrambled for. Before, they were small, independent coffee farmers. Now they are only pawns in the marketplace.

They have no control at all. They may get improved cell phone rates for awhile, but in the long run – which is what these companies are looking at – the Big Money will be in control, and they will have none. Foreign companies will be sucking money out of Costa Rica as fast as they can. The gap between the rich and the poor will become greater then ever. And the rich and powerful will become more powerful than before.

I have been speaking of Costa Rica, when I started out talking about America. But Costa Rica is only an economic satellite of America. It is trying to realign itself with China – but even if that succeeds, it will not be any better off.

They should be concentrating on keeping control of their own country – but like people everywhere, they are finding this impossible. They are selling themselves to the highest bidder – but since so many other countries are already doing this, they are not getting much in return.

Control has gone elsewhere and they don’t even want to know where it has gone.

Growth is Destructive

The growth I am referring to here is economic growth, usually measured as the GNP. An almost mystical meaning has been attached to this number; it would be no exaggeration to say that we worship it. But it is nothing more than our obsession to have more, more, more. But as a result we have ended up with less, less, less – especially less of ourselves.

This is not hard to understand, when you look at what actually happened. America is a textbook case. Before the White Men came, it was as rich in natural resources as a land could be. But this was only considered wilderness by them, and they proceeded to destroy it and convert it into something useful, such as farmland. Ecologically, this was a disaster – but they had no sense of ecology, only of profit. And they pursued that single-mindedly.

These people are now called pioneers, but for the people already here they were simply destroyers – of them, especially. Some of the richest ecosystems on earth were destroyed completely. Eventually a few wilderness areas were preserved – mainly because they had little economic value. These pioneers did not feel guilty at all – quite to the contrary, they felt proud of themselves for developing the land. The only regrets they had was that they could not develop it faster.

This mindset was, and is, crucial – something we should be striving to understand. But we cannot, because it also destroyed the mindset that proceeded it – the beginning of the Modern world that we call the Renaissance and Humanism. The details of this destruction are complicated, and include the Reformation and the Enlightenment. But the effects of the final result, the Industrial Revolution, were clear enough – we were turned into destroyers, through and through. And we thought this was normal behavior.

What I have described is what happened in Northern Europe, but what happened in Southern Europe was no better. The people who discovered and exploited the New World were some of the most ruthless in history. Latin America will never recover from their heritage.

To put this another way, a new kind of person was created that was not human, but something else we cannot even comprehend. But whatever they are, they are not interested in knowing about themselves. As I said in the beginning, they just want more.

Ironically, they ended up with less – for a simple reason: because their exploitation had destroyed the natural resources they had plundered – especially their human resources.

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