from Norbert Häring
According to its own description, the World Economic Forum is “THE international organisation for public-private cooperation” and has as its main objective “to improve the state of the world”. The foundation, founded in 1971 by German economist Klaus Schwab, lacks neither power nor self-confidence. For years now, almost all the world’s major heads of government have made the pilgrimage to the annual meeting in Davos to pay their respects to multinational corporations and billionaires.
The World Bank, a close collaborator of the Forum, has made it a strategy to only support development projects that the member companies of this club can earn money from. The United Nations (UN) have been made highly dependent on the money of the corporations and can do practically nothing that does not promote their interests or even runs counter to them. Even the International Monetary Fund (IMF) now acts quite unabashedly as a door-opener for multinationals when it is supposed to help a poor country in difficulty or assess its financial system.
So this powerful organization, the World Economic Forum, has been working for nearly 50 years to make the world a better place, with great success, it claims:
The World Economic Forum has developed a reputation as a trusted platform for informed collaboration and cooperation between all stakeholders – reinforced by a track record of success over five decades.
However, if you watch the short film that the Forum has released to get you in the mood for the Great Reset, you can’t help but judge that it has either failed miserably in its main objective, or – more likely – that it wants to improve the state of the world just for its members. In this case the huge profits of the large corporations and the increasing inequality of income, wealth and power would signs of great success.
The film’s mapping of the current situation consists of a hectic sequence of dystopian scenarios: garbage dumps, epidemics, protests against inequality, environmental destruction… Then, on an old computer, the reset button is pressed, and suddenly all is well. Images of shoals of fish in the blue ocean, beautiful green landscapes, happy babies…
After this not so subtle introduction, the video continues with an extremely high profile line-up of testimonial-givers. They include the British heir to the throne, the head of the International Monetary Fund and the Director-General of the United Nations.
So that you don’t have to do it, I have watched it, until my capacity for cliché intake was exhausted at about the middle of the film. Klaus Schwab declared at the beginning that “Now is the time to design the system for the post-Corona period.” UN Secretary General Guterres and Prince Charlestalked about peace on earth and a harmonious society in harmony with nature. Nothing about how we get there.
Improving the state of the world (for the rich)
IMF boss Georgieva stressed the urgency of overcoming the digital divide, i.e. ensuring that US digital companies can make money in every corner of the world. Then she drifted into unintentional sarcasm when she, the head of the organisation that has forced the dismantling of social benefits all over the world for decades, emphasised how important it is “to invest in people, in the social cohesion of society”. One must make the social systems more efficient, she seriously demanded, while her people on their missions in poor countries were probably working on about a dozen social reduction programmes at the same time.What she did not even mention, was the possibility of creating additional IMF money, the so-called special drawing rights (SDR), and distributing it preferentially to developing countries that have fallen into existential distress as a result of Corona. Nor did she mention the possibility of debt relief.
The boss of Mastercard, Ajay Banga, finally explained how the transition to the Great-Reset-paradise can be managed “from the point of view of the companies”, at least in principle: “In order for it to work, the private sector must make it part of its business model”, i.e. be able to make money from it. Otherwise it won’t work, we learn. To do this, you need “enormous trust between the private and public sectors, which is very difficult to achieve”. But thanks to Corona, there is more of that trust now. States now entrust companies with much more data for free processing. More of it, and all will be well.
If politicians and noblemen are only interested in spreading euphonious phrases, and the corporations only want what they have always wanted, namely to earn money, then why all the big boost with star cast?
The path is the goal
The answer lies in the planning for the Great Reset, not in its highly unlikely implementation. They took a page from the Buddhist playbook: The path is the goal. It’s not about a new start, but about steering and monopolizing the discussion about a possible radical new start. Freely based on the motto: If a movement could become dangerous for you and you cannot defeat it, establish yourself in the front row of it.
I’m certainly not the only one who came up with the idea of calling a book-project “Reset”. Subtitle: “How Capitalism Works and How We Can Overcome It”. This kind of thinking is in the air, when in such a deep economic crisis the richest people in the world gain many billions in wealth and the stock markets act – after a brief moment of shock -as if nothing had happened. However, before the World Economic Forum also came up with the “Reset” label, I had already changed the somewhat abstract working title to the more concrete one: “World by the nose ring: How the corporations are taking power and what we can do about it”.
From the enormous interest of the readers of my blog in these topics, I conclude that the feeling that something is going terribly wrong and that a reset is really necessary is very widespread in society. Thus, for those who benefit most from the current situation, there is an urgent need to control the discussion and to either isolate or embrace all those who (could) come up with powerful radical ideas early on. And this is exactly what the Great-Reset-exercise is for.
The next annual meeting in Davos is to be a “twin summit”: On the one hand, the usual rendezvous of the corporation leaders and billionaires with the heads of government and the media. On the other hand, all important stakeholders are to be represented, at least digitally, to help plan the Great Reset. “Stakeholders” is a managerial buzzword for representatives of groups with a stake in the companies’ actions, which have been hand-picked by the companies themselves.
The “Great Reset” will require us to integrate all stakeholders of the global society into a community with common interests, goals and actions.
Let’s take a look at the list of stakeholders that the World Economic Forum is convening. It seems to be somewhat exhaustive, if one takes the following at its word: “The announcement of the ‘Great New Start’ was made by H.K.H. The Prince of Wales and Professor Schwab during a virtual meeting, followed by statements by UN Secretary General António Guterres and IMF Executive Director Kristalina Georgieva. Their statements were supported by voices from all stakeholder groups in world society, including
- Victoria Alonsoperez, founder and CEO of Chipsafer, Uruguay, and a Young Global Leader;
- Caroline Anstey, President and CEO of Pact, USA;
- Ajay S. Banga, Managing Director, Mastercard, USA;
- Sharan Burrow, General Secretary, International Trade Union Confederation (ITUC), Brussels;
- Ma Jun, Chairman, Green Finance Committee, China Society for Finance and Banking, and member of the Monetary Policy Committee, People’s Bank of China;
- Bernard Looney, Managing Director, BP, United Kingdom;
- Juliana Rotich, Venture Partner, Atlantica Ventures, Kenya;
- Bradford L. Smith, President, Microsoft, USA;
- Nick Stern, Chairman, Grantham Research Institute on Climate Change and the Environment, United Kingdom.
Microsoft, BP, Mastercard, an investment company, an IT start-up, garnished with a trade unionist and the head of an American development organization, who was previously a banker and advisor to the World Economic Forum, these are the “voices from all stakeholder groups in world society”. Environmental protection is represented by a Chinese official who has taken up the phoney cause of Green Finance and an economist who advocates at least the modest sum of one percent of the gross domestic product be used for measures against global warming.
If the whole thing was just about discussions between these representatives and profiteers of the status quo, it could safely be ignored, even if it is supported by the Who’s Who of “global governance” (world government).
But the core of the program is something else: Schwab said, according to the Forum’s press release, “The ‘Great Reset’ will require us to integrate all stakeholders of the global society into a community with common interests, goals and actions”. In the video, he is even more explicit about the claim of monopolizing the debate: “This initiative will integrate everyone in the world who has a voice and who has a particularly innovative proposal to improve living conditions.”
The squid extends its tentacles
In order to find all these people worldwide, the World Economic Forum will, over the next six months until the Davos meeting, extend its tentacles, which it has so far left largely hidden. Its network of nearly 10,000 “Global Shapers” in 428 cities (hubs) and 148 countries, will be activated for the purpose. The shapers are something like the junior organization of the World Economic Forum. Its purpose is to identify high potentials who could become influential in business, politics and culture at an early stage, let them network with each other and to introduce them to the World Economic Forum.
If they prove to be sufficiently ambitious and manageable, their careers will be promoted. In this way, Klaus Schwab and the members of his club have someone in an influential position in business, politics or culture almost anywhere in the world whom they can call if they need to know something or need a favor.
For the purposes of the Great Reset, the World Economic Forum has declared these Global Shapers to be the representatives of the young generation, who are to ensure that the reform plans are in the long-term interest of future generations (of elites). In the next six months, the young established people are to identify people in the catchment area of their hub who are pushing noteworthy reform initiatives. They are to invite them to participate digitally in the Davos Great Reset Pauwau via their hub.
That is then only the beginning. Whoever turns out to be potentially impactful and therefore dangerous will be embraced and made to feel important, flown to conferences in all parts of the world, lured with job offers, stipends and other support, imperceptibly entangled in a web of dependencies from which he or she cannot free themselves without fear of falling into insignificance.
This initiative will integrate everyone in the world who has a voice and who has a particularly innovative proposal for improving living conditions.
Or else, one resists and withdraws from the embrace from the beginning. Then, one may have to watch how other reformers with less fear of being corrupted are stylized into beacons of hope.
In this way, the World Economic Forum hopes to make sure that reform movements do not get out of control, for example, those who want to tax away some of the wealth of the mega-rich, or who would strive to ensure that this obscene wealth does not come about in the first place, by reducing the excessive, anti-competitive intellectual property rights, or by strengthening the rights of employees, or by forcing big corporations to pay taxes like everybody else.
That is how it works, albeit rarely presented as openly as in this reform prevention project of the elites called the Great Reset. If they come for you, you know now, what they want from you.
Real-World Economics Review Blog 
Don’t forget a new branch of government employing thousands of bright young researchers to establish true costs and goods of products and services,
Where does the income from free market adjustments go? That’s for autonomous democracy to work out.
Good heads-up, thanks Norbert Häring. They will never come for me. I am an obscure, powerless, nobody and trenchant critic of neoliberal capitalism on almost unknown blogs. Your heads-up is certainly a reality check reminding us of how totally powerless we are as atomisitic individuals. The people without a voice (that’s 99% of us) need to join together in solidarity. We need to construct a power system outside all of the existing structures. The question is how to do this?
I don’t think it’s up to any one person to prescribe how this new power system of the people will arise. It will actually arise organically and emergently, if it arises at all. We will start to know it as we start to see it. Certainly demonstrations and resistance will be a part of it. But there may be much more to it than that. Cyber revolution may well be part of it and I don’t mean political and criminal hacking. That is playing into “their” hands and inviting reactionary repression. Cyber revolution may well mean;
(1) Sharing critical ideas on-line and changing consciousness.
(2) Creating new social currencies and social sharing sites including freeware, shareware
and large “commons” which undercut and bankrupt digital for profit corporations.
(3) Deliberately avoiding shopping at large stores and buying the products of large corporations wherever possible. (This won’t always be possible.)
(4) Organizing “flash demonstrations” and “flash strikes” online.
(5) Organizing digital strikes and remote strikes.
(Home and remote workers can strike while remaining dispersed. It is not possible for riot squads to sweep them from the streets if they are not on the streets. Home visits by authorities are a different logistical challenge for authorities and strikers alike. Snatch and intimidation squads could be used by the reactionary authorities. Again, on-line conferred communication and agility would permit a distributed mass exodus to other points unknown or to gather. Avoidance of phone tracking and other tracking will be an issue. The people could use technology and personal mobility to continually move, coalesce and disperse in manners confusing to the authorities during strikes and civil disobedience.)
(6) We can’t forget voting and we must turn out and always vote for the left-most candidate available. Doing this on a rolling basis over sequential elections could move the Overton Window to the left. In addition, left groups could attempt to join certain parties and swamp them with new more left-ish candidates.
These are just a few ideas off the cuff. Others will have many more that are better than mine. It stands to reason that the 99% can defeat the 1% if the 99% organize their own power systems and bypass or take over many of the standard power systems of society. The elite circuits of power we will never reach. We must bypass them and eventually starve them of social power and money power inputs and then fully dismantle them. Thus one goal of left politics must be to dismantle all national and international political organizations which are not democratic and open to all the people. How to do this will be complex and far reaching.
The only great re-set I can see is one where employee terms and conditions are reduced along with the range and quality of public services under the guise of dealing with coronavirus. It is already happening in the UK with British Airways and the NHS withdrawing face to face appointments with GP’s in all but extreme requirements.
Thanks to Norbert Haring for alerting us all to this ” Great Reset” envisioned by the World Economic Forum . I did take the time to actually watch the video, since I and my colleagues have been pressuring all these global players in what I have termed the ” global casino “, who are now becoming suitably panicked !
However , I urge all my colleagues and networks to engage actively in this ” Reset” , since it will likely reinforce powerful vested interest if we ignore its reach. Some good new in our new global survey with our partner Globescan : “BEYOND GDP” finds that 72% of the public in eleven countries still favor expanding GDP to include stats on health, education and environment ( see Press Release July 29 at CSRWire http://www.csrwire.com , http://www.globescan.com ). This 2020 survey results are similar to our surveys in 2007,presented by me at the European Parliament ( http://www.beyond-gdp.eu ) and followed in 2009 and 2013. All these survey are also at http://www.ethicalmarkets.com . Of course ,GDP also still needs an asset account to balance all the public investments countries make in their infrastructure and public goods and services , but are only recorded on GDP as “Debt” .
This has over-stated Debt-to-GDP ratios for decades ! If valuable public investments were recorded on an asset account ( as in proper balance sheets) , Debt-to-GDP ratio could be cut by up to 50% with a few keystrokes Feedback welcomed !
“Of course ,GDP also still needs an asset account to balance all the public investments countries make in their infrastructure and public goods and services , but are only recorded on GDP as “Debt” .”
More generally, credit has served its purpose when it has done what it was given for.
Hazel,
You’re reflecting a misunderstanding of GDP. GDP measures only the flow of currency through the production-and-consumption economy (during the prior 12 months). It does that quite accurately by compiling expense data from the financial reports both industry & government agencies are required by law to submit, and it verifies that compilation by independently compiling income data from those reports. (The two compilations should equal as every expense is another’s income. Any difference s booked to a Statistical Discrepancy account, which is routinely monitored.).
It does not measure any of the currency flows in the FIRE (Finance, Insurance, Real Estate) economy. The Federal Reserve Board has been attempting to do that with its FFA (Flow of Funds) accounting, but the best that can be done are estimates, not measurements. There’s an active FOFA program working on a methodology to incorporate both economies into a single financial statement (which I see as impossible & fear it could result in a corrupted NGDP).
Consolidated stats on health, education, environment would certainly be desirable, but they too would be estimates.
Hi ED Zimmer : Of course GDP is only a cash flow statement . That’s precisely why it ‘s inadequate. Even Simon Kuznets pointed out why it should not be used as an overall measure of social progress ! see our Euro Parliament proceedings from 2007 at http://www.beyond-gdp.eu.
I am glad that Ed Zimmer wrote. “GDP measures only the flow of currency through the production-and-consumption economy.” Currency is nominal not real. The corollary of Ed Zimmer’s statement is: “GDP measures nothing real.”
GDP measures the flow of the entirely nominal numéraire. The numéraire measures the social-fictive dimension of “value” in the floating base unit of the numéraire, usually dollars. The only way to objectively measure anything real is to measure in a scientific dimension and to use an objectively defined base unit. See the SI (International System of Units) table.
The above argument does not state that money is unusable. Clearly, it is usable. We have the empirical proof that it is established by state edict, produced by state fiat and used by people for purchases and trades of goods and services in our current political economy system. Leaving aside our personal views on political economy, this kind of reality of money, its use in exchanges, is a (constructed) social fact in modern extant economies.
Where the mistake is made in macroeconomics and national accounts is to assume that the numéraire can be used in aggregation and used to aggregate unlike things in the dimension of “value”. Objects and processes may only be validly aggregated in the same dimension. The base unit for measuring the aggregation dimension must be scientifically objective, reliable and stable. Money is none of those things. (See Blair Fix – “The Aggregation Problem – Implications for Ecological and Biophysical Economics.)
What does this mistake of aggregating in money (as in GDP calculations) mean in practice? While it is pragmatically possible to use money for trade and exchanges, it is not scientifically valid to aggregate in the money “dimension” to get a true picture of the overall real economy system or to get a true picture of the effect of the real economy system on the systems of ecology and biosphere. The only way to get a true picture in those arenas is to measure real things in real dimensions and categories and do so scientifically. This alerts us to the true nature of GDP and other macroeconomic numbers. They are tools of propaganda and nothing more. They are the tools of propaganda of the capitalist system. If any non-objective or doctored “picture” is used to “inform” people then the only purpose can be indoctrination. These numbers are used to justify decisions not to make decisions. This distinction is crucial.
The political economy system of capitalism makes a priori assumptions and decisions and then uses macroeconomic numbers to justify the decisions. That the decisions precede the number calculations is clearly demonstrable by real examples. Conditions of war and of civil crisis demonstrate this fact very clearly. These are conditions where, as in the Wizard of Oz, we see the curtain of “good governance” and “fiscal responsibility” twitched aside to reveal the true order in which the levers of power governance and fiscal governance are pulled. The political power lever is pulled first, the fiscal lever is pulled afterwards to ring up the necessary doctored numbers to justify the decision.
There are clear examples of this from recent Australian history. One example occurred when Australia was embroiled, in a somewhat token manner, in the Middle Eastern Wars in an effort to ingratiate itself with its ally and master, the USA. At the time in question, the low level of unemployment payments in Australia was a political issue and indeed it had been a perennial issue. The government’s line was that it had to balance the budget. No extra funds could be found for unemployment benefits or other social issues for that matter. Then, the USA put pressure on Australia. We were not doing enough in the War on the Arabic Peoples, um, I mean the “War on Terror”. Suddenly, our government found $500 million extra Australian dollars to fly missions and drop bombs in the Middle East using our small but relatively high-tech Air Force.
The next clear example comes from the COVID-19 pandemic and we will all be able to relate to this. Once again, pre-pandemic, the goal was a balanced budget and no government debt. No monies (and thence no real resources) were available to lift the miserable rate of unemployment benefit and improve other social programs. Suddenly, when faced with economic and societal breakdown due to closures necessarily enforced to deal with the dangerous pandemic, the dollars were found (electronically “printed”) to pay “jobseeker” (a much raised unemployment benefit) and “jobkeeper” (a benefit really paid to employers to help keep people on). We can note that business people (big firms and small petite bourgeois owned firms) love it when the subsidy dollars flow through them.
The point is that the flows of the real resources, real goods and real services of the nation can be adjusted, by political fiat, in times of crisis, existential or political, to any level and in any direction at political will, within the parameters of what is possible in the real and political power spheres alone. Money has nothing to do with the decisions or the feasibility of the decisions, but only has to do with facilitating the exchanges necessary to implement the decisions. In this sense, money is logistics, simply part of the delivery system.
There is no reason that such radical changes to the flows of the real resources, real goods and real services of the nation should be limited to war and pandemic crises. We know well that many social crises have festered under the rule of neoliberal or late stage capitalism. There is no reason not to make the same radical changes to solve these chronic crises and then keep these radical changes in place permanently.
Managing the economy and the environment must be made subject to science, for production and impact options (using the production and impact sciences), and then subject to democratic decision making on the options. Thence decisions must be made as to what real resources are available, what the priorities are and where the real resources are to be deployed. This must all be done at the statist, dirigist and command level. Yes, in important matters (like halting climate change) we do need to institute a command economy. A command economy in a democracy is not the same sociopolitically as a command economy in an authoritarian state. If you hold the view that it is then you hold that both sides of WW2 were indistinguishable, as they both ran command war economies, and that for the post-WW2 era it would have made no practical difference for human rights who won WW2.
Advances in science, technology, computing power and data gathering capacity now make it possible for a command economy system, using real data of real parameters (not nominal numéraire data) to plan the essential real aspects of the economy and to meet real human needs. Again, if your thinking recoils from this conclusion, it means essentially you are rejecting the possibility of democratic command of the economy and ceding that command to cartels of corporations. You are acquiescing and acceding to corporate dictatorship as the rising corporate monopolies take over more and more of the world economy. The space and power vacuum left by ceding such democratic command and control will be and is being filled by the corporate capitalist governance of the world. It is under that system that the real power decisions are made behind the cloak and veil of money. It is under their aegis that the common people and the environment are being destroyed. Money is propagandistically reified as the “reality” which logically and imperatively justifies the dictates of corporate capital.
Money is properly a tool of the exchange system and nothing more. It is not a measure of anything at the macro and real levels, nor a decision metric useful for managing real systems. Any decision for the command, control and management of society by money is a decision for corporate capitalist dictatorship.
Ikonoclast,
Blair criticized RGDP (IMO, rightfully), not NGDP. NGDP does have some value & can be measured in dollars to measure purchasing power (or just “count” – after all, what’s flowing through the P&C economy are just “tokens”l). If, for example, each month, every restaurant in the country reports its sales and costs for that month, we know what the restaurant industry’s sales and costs were for that month — and we know what households spent in restaurants that month — and that is one sub-account in GDP’s Personal consumption expenditure account. That’s real data – nothing fuzzy about it.
And it can be useful to those trying to manage the economy. Using the restaurant example, due to the quantity and geographical disbursement of restaurants throughout the country, composite restaurant financials hold quite steady. If there’s a significant change, it’s important to those trying to manage the economy to explore what caused the change and whether and how to correct it. Even looking at the data over time can tell us something (not just in questionable RGDP use), but in realistic relative spending patterns, eg, restaurant consumption increasing or decreasing relative to grocery consumption, imports increasing or decreasing relative to total domestic consumption, etc.
It’s important to recognize that there are two different economies, P&C & FIRE. P&C uses only flow measurements. Measurements in FIRE are (IMO) impossible because they’re trying to add stock measurements. One can do rational balance sheets on specific segments of the FIRE economy, but to do one financial statement representing the FIRE economy (or both economies), I consider hopeless. NGDP gives a reasonable representation of the P&C economy at a given instant in time. Trying to spread those measures over time (eg, RGDP) make them less reasonable. And trying to accumulate those measures over time into assets & liabilities just compound the errors.
The FIRE economy is totally out of control. (I’ve called it the “big gambling casino” in the past.) Does anyone think stock market prices have any relationship to business profits (or even potential profits)? IMO, we should be trying to minimize the FIRE economy rather than “measure” it. With today’s technology, banking should be public. It’s lending function should be totally private, with business owners taking the full lending risks. And what purpose does insurance serve these days. We pile up huge funds of tokens to cover risks that the Federal government is better capable of funding. (Making lending wholly private should take care of the corruptive practices in real state, as well as those in venture capital & private equity.
So, I’m is full agreement with what I “think” you’re saying.
Ed Zimmer,
I emailed Blair Fix about our previous little controversy over RGDP and NGDP. Blair replied and indicated my view was basically more representative of his ideas, albeit expressed in a way he would not express them.
A few other points. Real data about a nominal (notional) quantity is not real data about a real quantity. Nominal dollars (in both senses [1]) don’t tell us much over time or across polities. Across businesses, and in a polity and at a point in time, they might tell us something about real quantities. Over time both nominal and “real” dollars are pretty much useless for macroeconomic understanding of the real economy.
I certainly agree the FIRE economy is totally out of control. That is an example of an arena where heterodox economic thinkers, with radical differences in other arenas, can still agree. We should try, within our polities, to get re-regulation to control the FIRE sector and completely hose it down so to speak.
Note 1. The two senses are “nominal” as in not inflation adjusted and nominal as in a notional quantity, not a real quantity. Money is notional. Tomatoes are real. There is a problem with nomenclature here because economics mixes nomenclature up compared to the ontology or real (material) and formal “objects”. My human body is a real object. My online nickname Ikonoclast is a formal object. I sometimes term formal objects like money “notional” to emphasize that they essentially are made-up notions (social fictive constructions).
Ikonoclast,
I later asked Blair to critique my Magic Money Tree writeup, which he did & agreed with what I wrote, including my answers to the Addenda questions: Is GDP a compilation of real data? Is it useful? Is it accurate?
I suspect our differences stem from different interests: your’s from “understanding” the economy & mine from “how it should be managed”. I see the P&C economy as being just one big P&C business. In managing a P&C business, the earnings statement is the key financial tool. A very close eye is kept on it & when the net earnings deviate from expectations, one immediately digs down through the income & expense accounts to find the reason for the deviation & assess the options for correcting it. The balance sheet yields little management information. At best it tells one their financial safety margin & growth potential, neither of daily concern to a P&C business & I fail to see why it should be of any concern to a monetary sovereign managing a P&C economy.
The balance sheet plays a much bigger role in managing a FIRE business. Whereas aggregating P&C business earnings statements is relatively straight forward, aggregating their balance sheets is fraught with problems given all the permissible variations in depreciation, amortization, and accruals. Trying to do that with FIRE business balance sheets looks much more difficult, bordering on impossible.
Ed Zimmer,
You write,
“I suspect our differences stem from different interests: your’s from “understanding” the economy & mine from “how it should be managed”. ”
I agree with that statement. I would add that my interest is in us understanding our economy in order to radically change it.
If one is interesting in managing something to the best possible level, as you suggest , then one is accepting that the founding principles of the enterprise are still sound; in this case the entire global and national economies. If one is interesting in understanding in order to radically change it, then one is suggesting the founding principles of the enterprise are unsound and only radical change to a new system will save the situation. The latter is what I am suggesting.
Capitalism is fundamentally unsound. Capitalism has internal and external “contradictions” which will destroy it and us and the biosphere, more or less concurrently. Rather than talking about “contradictions”, which is old Marxist terminology [1], it is better, in the light of further scientific progress, to use complex system and feedback thinking. A “contradiction” is really a feedback, especially a negative feedback.
If we are trying to build a land-speed record car then friction and air-resistance are “internal” or inherent “contradictions” to the enterprise. Today we term friction and air-resistance as being negative feed-backs. As speed rises, friction and air-resistance rise and render it harder and harder to get more speed. The system (the speeding vehicle in the environment) approaches an asymptote: a top speed which the car cannot exceed.
Other feed-backs in systems operate differently. Some permit overshoot and then the positive feed-back of dangerous perturbations. Our land-speed record car may begin to get control oscillations in the steering. That is, the vehicle is capable of going faster than is safe considering the steering system. The oscillations may commence at 700 kph. The speed of 699 kph was tolerably safe with no oscillations. At 700 kph the oscillations begin. Once begun, they compound by positive feedback. The wobbles get worse. Slowing to 699 kph, to 698 kph, and so on do not stop the compound wobbles. The perturbations could destroy the vehicle or flip it before it slows to a speed where the extreme wobbles will cease. One hopes the driver has a drag parachute to deploy or he is dead.
The problem with capitalism is that it is essentially a programmed algorithmic system at the legal rules and financial rules level. It is a system on auto-pilot programmed to grow indefinitely and to (attempt to) continually accelerate that growth. It receives no or inadequate feed-backs from the real system it is in. It doesn’t see the sign “dangerous real asymptotes (limits) ahead”. It is programmed to accelerate on with the pedal to the metal. Its instrumentation reads only its internal characteristics and not the characteristics of the limiting real environment. It will overshoot the safe limits and the dangerous and compounding internal and external compounding feed-backs begin. Tweaking the system will fail when the system itself “unsafe at any growth rate” and can’t even put on the brakes safely. A switch to statism, socialism and a steady state or managed-decline economy is the safety chute. Sans that we are all dead.
Ikonoclast,
My bias is small-business capitalism with the smallest possible FIRE economy. The FIRE economy can’t be eliminated because the flow of business profits feeds it, but it can be contained by drastically discouraging rentier income. Coupled with revising government to emphasize local over national, I’ve not seen a better model. Do you have one, even a rough outline? My bias isn’t set in stone.
Ed Zimmer,
I agree with that bias as far as it goes but with caveats. I would argue that the need for natural monopolies will still be found to exist in a large inter-connected society or nation. Natural monopolies will include road and rail networks, power and water utilities, communication infrastructures and other distributed networks. These natural monopolies are best nationalized.
Many aspects of the financial sector are also natural monopolies in a fully connected society. Hence, the issuing of fiat currency and of debt money should always be nationalized. Pensions, health care, health care funding and life insurances should all be nationalized along with education.
To make large machinery, perform heavy engineering, high-tech engineering and build large infrastructures on contract requires large enterprises. For a period or indefinitely (as empirical outcomes and tests lead us) a proportion of large-business capitalism or large-business cooperatives like Mondragon may well have to be tolerated. I would lean to encouraging the Mondragon model.
There need to be limits on personal wealth and the passing on of patrimonial wealth. My son is an investor. What he uncovers in his due diligence before investing is quite revealing about capitalism and patrimonialism. He has researched a company in our country which is an old family business, operating for about 150 years. It is worth perhaps $250 million today and is in property and (commissioning) construction. My son uncovered the fact that it is building an entertainment center in a regional city and that it is getting two gifts (no other word for it) of one million and two million dollars respectively from local and federal governments to build this center.
The governments receive nothing substantial in return for these gifts apart from minor rights to use the center occasionally for events. Who knows, maybe this company regularly donates campaign funds to political parties? These free grants in the millions are essentially what is known in the trade as “grey gifts”. You or I would call it corrupt mis-allocation of government funds. By what rights or economic principles should private for-profit companies get large subsidies from governments?
Really existing capitalism as it is practiced in the West (I know less about the East) is riddled at all levels with this kind of corruption and massive subsidies to already rich people and corporations. Unless we end this corruption our system will decay further and probably collapse. This corruption has become serious, extensive, severe and destructive under late stage neoliberal capitalism. Patrimonial capitalism is the worst kind of rent-seeking corruption.
“The governments receive nothing substantial in return for these gifts … “.
But isn’t this the problem, Ike? As I see it, the way it should work is that developer comes up with a bright idea for improving the city, the government representing the people of the city credits the funds needed to build it, the builders spend the money back into the city, the city ends up with its entertainment centre, and (hopefully) the developers can given be given a grateful award for making a good job of it. Thereafter the city provides funds to maintainers and entertainers to enable them to entertain.
But this only half the story. What we are not hearing about is the entertaining of corporate developers with largesse during the building, and their being given an on-going stream of rent income from the city seeking entertainment. Perhaps worst of all, the excess money is being spend back not into that city but into the city of the developers. In the UK, that has happened not just with entertainment centres but with local government “private-public” finance and the updating of NHS hospitals.
What government pays for should end up being the communal property of those they represent.
Ikonoclast,
I fully agree with your nationalization of natural monopolies. I have reservations about your “big can only be done by big” assumption (“To make large machinery…”). That’s a set of blinders that’s become accepted (or increasingly accepted) over the past 50 years. That assumption leads to “playing it safe”, which leads to “stifling innovation”, which leads to poor results. For example, I’d like to see public depository banking, but to implement it I’d avoid the obvious choices & choose a small entrepreneurial entity active in open-source community.
Also (like you & davetaylor1), I dislike government money going to businesses (even when the problem is supply-side like today’s pandemic) rather than consumers. If both businesses and consumers can rely on consumers having consistent income, businesses will find a way to tap that income, even if businesses have to drastically change or start anew. (The restaurant industry’s move toward carry-out is a good example.)
Re “the big can only be done by big”, I meant only heavy engineering and high tech (and maybe not even high tech). In any case who knows? Nano-bots may one day do heavy engineering.
I may be too late to enter analogies, even so, I’ll do it anyway… Management of cosmic powered biology manifest as human has worse result probabilities than management of weather.
Okay, statistical representation has pluses and minuses, I’ll grant that much. Still, abstract reduction is one thing I have spent a life-time resisting outside the Lab. Robert Mailart, Albert Einstein, Nicholas Gorgesque-Roengen and Admiral Rickover are among those who explained this to me as I grew to see more clearly.
Management of tools that allow and support focus of distributed intelligence is possible to study and discuss. Management of cosmic powered biology manifest as human is attempting to tell the accelerating expansion of Cosmos how it should do it.
Hi Garrett:: Your excellent comment is not too late ! I was a friend of Nicholas Georgescu-Roegen , who appreciated my review of his “Entropy and the Economic Process” in the Harvard Business Review ( 1973) !
Thank you, It was maybe ’78 before I reached “Entropy and the Economic Process.”
I have continued this to a need for me to re-write genesis as a subject.
Imagine the perfection of absolutely nothing. There is nothing to be out of place. Perfect order. The shining void.
Now imagine a door into this perfect order. You open it and children rush in. Laughing children. Giggling children. Every one with greasy fingers clutching sticky ripe fruits
I’ve always looked at the ‘World Economic Forum’ and associates as engaged in reverse charity. In the western historical view of charity. Most corporations in this reversal are viewed as unable to survive without significant help in laws, banking, and economic planning that provide a structure in which each can accrue large amounts of money. The largest amounts possible. There is little concern about how this is done. Only that it is done. After all, these corporations are unable to make a living, fend for themselves, or “feed their kids” without such charity. They are poor and downtrodden souls who incompetently ricochet thorough life. Only the charity of others can save. To borrow from Charles Dickens. Maybe a little over the top. But still accurate, I think.
Excellent blog. Thank you so much.
Reading that kinda fascist crap they talk at ritzy Davos ‘bout that “Great Reset” (syn. Big Reset) sent shivers down my spine. How can those pomaded, Armani-dressed posterboys openly talk about their totalitarian plans to put mankind into technocratic slavery and destroy nature and then tell people that this would be kinda holy blessing for nature and man?
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Things like “The Great Reset must be absolutely irreversible” or “creative destruction”. What do they mean by that? Smashing everything into smithereens and then building their Orwellian dystopy onto the ruins? Are those guys moonstruck?
OK, the old world order has its weaknesses, but weaknesses can be ameliorated in a less destructive way.
If a house has got a broken door or window you needn’t tear down the entire house and build a new one.
Some of those guys even dream of an exchange of the global biosphere against a “smart anthroposphere”. What the heck does that mean. Replacing the wonderful global ecosystem, with its millions and millions of different species by a kind of park generated and sustained by machines?
The world ‘s goin’ nuts nuts nuts
Would anyone in their right mind believe this dangerous claptrap?
We are approaching very dark times the elite corporate power mongers will finally be able to play God over the worlds populace, the great cull is upon us.