CHAOS-ONOMICS: Strangely Attracted to the Truth
Apr 23
chaos-onomics.com
"Distracted mortals! of what paltry worth
Are the arguments whereby ye are so prone
Senselessly to beat down your wings to earth!
One wooed the Law, one the Aphorisms, one
Coveted the priesthood, and another pressed
Through force or fraud to acquire dominion;
Dante Alighieri - The Divine Comedy
Reading the news these days breathes new life into the old expression, rearranging deck chairs on the Titanic. This is not to argue that the world faces an apocalypse but rather to touch on the curious behavior man exhibits when the objects of his faith fail him with many reflexively following ritual. The idea that the Titanic was unsinkable must have made for an interesting last few hours although I prefer the model of the effect of the Black Death on the Catholic Church as guide for a true collapse of faith in an institution. The Ancient Greeks coined a word still in use today which gets to the heart of the matter, hubris, overweening pride. I wonder how many members of the clergy wondered, quietly, how events might have followed a different path had the Church not taken credit for the successes of the time, thereby creating the hope among men that the Church could always fix what was wrong.
The news items which inspired these thoughts are the state responses to the SARS virus and Bush's backing of Greenspan for yet another term. It is sometimes difficult to imagine but only a few generations ago here in the US the idea that the federal government was responsible for an epidemic was silly. However, the Spanish Flu epidemic of 1918-1919 changed all that as the rising tide of nationalism during WWI led people to accept state intervention. This is not to suggest that such interventions weren't effective, by most accounts the sometimes forced application of new scientific techniques had positive effects. However, the comparative yardstick was quite low at the time. Fast forward a few decades and I start to wonder if people are prepared to deal with the notion that there are limits to man's ability to stall the progression of certain diseases.
In a move characterized by some as a positive step forward for the "secretive" Chinese, the mayor of Beijing was fired. To me this speaks to the cannibalization of any institution when faced with a crisis to which it has no solution. Imagine if the major news outlets ran a story which stated that, due to the need to keep trade flowing the people of the planet needed to prepare for an influenza outbreak which might kill a few million and there was almost nothing that could be done in the short run. Why it might make people sit up and wonder why they were paying so much in taxes, inter alia. The true test of hubris comes not when the pride is displayed but when the articles of pride, in our times, scientific progress in disease control and financial management in economics to name a few, are tested. I have no medical training so I cannot opine intelligently on the probable epidemiology of the disease but if NYC suffers in the same way that HK is currently suffering, faith in the state will be sorely tested. Indeed, it would be quite ironic that the state's ability to intervene in health matters would both be initiated (in 1918) and then questioned by an influenza outbreak. Ah the fickle fancies of the faiths of man.
Moving to President Bush's desire to keep Alan Greenspan, I am reminded of Senator McCain's quip during the last Presidential election cycle about doing a "Weekend at Bernie's" should the Fed Chairman expire. Talk about misplaced faith. According to Ari Fleischer, "The president thinks he [Greenspan] has done a very able job as a steward of the economy, making certain that we had the proper monetary policies in place." While more and more people are beginning to find their financial experience doesn't fit with the notion of Greenspan the maestro, the powers that be are willing to continue praying to this totem. Greenspan has often spoken fondly of one of his mentors, Arthur Burns, and he may well find that history sees them in a similar light, as those who reminded the population of the need to own Gold.
Perhaps I'm all wet on these views but it seems to me that those who think man has exorcised his superstitious faiths are about to learn a hard lesson. Science has few silver bullets which can stop an influenza outbreak given the need to keep trade routes open and Greenspan will not make the world economy better. This is not to argue that science, the state or central banks are total frauds, just that they have raised expectations beyond their ability to deliver.
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creative destruction
The more I read these days the less I feel needs to be written about these markets. The information, as they used to say on X-Files is "out there" all you have to do is look. With most markets still on reflex mode; "what....did that headline read Saddam was captured? buy, buy, buy", or better yet, "buy, buy, buy, hey we better come up with a rumour to explain all this buying!" my mind keeps turning to Schumpeter's notion of "creative destruction".
Capitalism, then, is by nature a form or method of economic change and not only never is but never can be stationary. And this evolutionary character of the capitalist process is not merely due to the fact that economic life goes on in a social and natural environment which changes and by its change alters the data of economic action; this fact is important and these changes (wars, revolutions and so on) often condition industrial change, but they are not its prime movers. Nor is this evolutionary character due to a quasi-automatic increase in population and capital or to the vagaries of monetary systems, of which exactly the same thing holds true. The fundamental impulse that sets and keeps the capitalist engine in motion comes from the new consumers, goods, the new methods of production or transportation, the new markets, the new forms of industrial organization that capitalist enterprise creates.
In other words, attempts to keep solvent a bankrupt production structure are doomed to fail, something of which the Japanese are well aware and the Americans are likely to learn despite their best efforts. Of course Schumpeter wrote of this resolve in trying to stem the tide of capitalist change, "People, for the most part, stood their ground firmly. But that ground itself was about to give way." The ground, in my view, is the purchasing power of the US$, the bedrock upon which the financial superstructure is built. The clock is ticking. Got Gold? |
