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https://www.oftwominds.com/blogmar21/tumor3-21.html

Do We Really Think a Band-Aid Will Heal a Tumor?

If we misdiagnose the disease, our treatment won't work. We're all familiar with medical misdiagnoses, which lead to procedures and prescriptions that can't possibly fix the patient's illness because the source has been missed or misinterpreted.

Medical diagnoses are often tricky, as many general symptoms can arise from a variety of sources.

Social and economic ills can also be tricky to diagnose, and the diagnosis is hindered by political polarization and sacrosanct orthodoxies which make it difficult to have a rational discussion in public about many difficult issues.

If we can't even discuss a problem, then that creates another problem, because problems that can't be discussed openly cannot be solved.

There's also a human tendency to choose the diagnosis with the easiest-at-hand solution. This allows us to quickly apply an approved solution and then declare the problem solved.

The current flood of financial stimulus is an example of this misdiagnosis and application of an easy solution which fails to address the underlying disorder.

The conventional diagnosis of the post-pandemic economy is that the only problem is people don't have enough money, and so giving them money to spend will cure the financial damage the pandemic inflicted. (Never mind that the economy was rolling over in 2019 long before the pandemic, which served as a catalyst in a sick, unstable status quo.)

Creating $1.9 trillion out of thin air and distributing it is painless: who doesn't like free money? But is a scarcity of cash the source of America's economic malaise?

The general view is that pumping free money into the economy will automatically increase employment, launch new businesses, increase profits and tax revenues, etc.

Yet as I discussed in my blog post on the velocity of money, Our Dead Money Economy, as the money supply expands in a parabolic fashion, the frequency that all this new money is changing hands (money velocity) is in a free-fall to historic lows.

Simply put, much of this money is either being saved ("hoarded" to economists who want us all to spend every dime of it), applied to debts outstanding (back rent, credit cards, etc.) or sent overseas for imported goods.

There is no guarantee that all this stimulus will generate the jobs, new enterprises, profits and tax revenues that are anticipated.

Distributing stimulus money and expecting this solution to fix America's economic malaise is akin to applying a Band-Aid over a tumor. It may well hide the problem but it cannot heal the disorder or save the patient.

My current work focuses on three dynamics that define any human civilization: the distribution of resources, capital and agency. Resources are straightforward--food, energy, shelter, etc.-- and capital is financial (money), tangible (tools, ownership of land and enterprises, etc.) and intangible (social and human capital). Capital productively invested produces income.

Agency is control of one's life and having a say in community/public decisions and having some control and power over one's circumstances.

When these three are distributed asymmetrically, where the majority of the resources, capital and power are distributed to an elite, the society and economy are imbalanced and prone to stagnation and eventual discord.

The statistics are unequivocal: income-wealth inequality in the U.S. continues reaching new heights. This is reflected in asymmetric access to healthcare and other resources, asymmetric ownership of income-producing capital and limited agency. ( Trends in Income From 1975 to 2018)

The bottom 90% of the U.S. economy has been decapitalized: debt has been substituted for capital. Capital only flows into the increasingly centralized top tier, which owns and profits from the rising tide of debt that's been keeping the bottom 90% afloat for the past 20 years.

As I've often observed here, globalization and financialization have richly rewarded the top 0.1% and the top 5% technocrat class that serves the New Nobility's interests. Everyone else has been been reduced to a powerless peasantry of debt-serfs who rely on lotteries and playing the stock market casino or hoping their mortgaged house on the Left or Right coasts doubles in value, even as the entire value proposition for living in a congested urban sprawl vanishes.

America has no plan to reverse this destructive tide of Neofeudal Pillage. Our leadership's "plan" is benign neglect: just send a monthly stimulus of bread and circuses (the technocrat term is Universal Basic Income UBI) to all the disempowered, decapitalized households so they can stay out of trouble and not hinder the New Nobility's pillaging of America and the planet.

The bottom 90% of American households receive a mere 3% of capital-generated income. That 3% might as well be 1% or 0.1%--it's inconsequential.

As for agency: Martin Gilens of Princeton University and Benjamin Page of Northwestern University are the authors of the study "Testing Theories of American Politics: Elites, Interest Groups, and Average Citizens."

Professor Gilens gave this brief summary of their conclusions:

"I'd say that contrary to what decades of political science research might lead you to believe, ordinary citizens have virtually no influence over what their government does in the United States. And economic elites and interest groups, especially those representing business, have a substantial degree of influence. Government policy-making over the last few decades reflects the preferences of those groups -- of economic elites and of organized interests." (Source: Foreign Affairs, January 2021, Monopoly Versus Democracy)

That is as definitive as soaring income-wealth inequality. Both are inherently destabilizing.

Meanwhile, central bankers, monopolists and the politicos whose campaigns are funded by monopolists are all frantically trying to convince us their Band-Aid will heal the metastasizing tumor consuming America. And if it doesn't, well, it was inevitable that the central banks would boost the wealth of the top 0.1% and leave the bottom 90% spiraling into the abyss; we really can't stop "technology" (heh) or "capitalism" (heh-heh). Consider this excerpt from the article:

"...high-tech monopolists (pursue) a strategy of encouraging people to see immense inequality as a tragic but unavoidable consequence of capitalism and technological change. But as Lynn shows, one of the main differences between then and now is that, compared to today, fewer Americans accepted such rationalizations during the Gilded Age. Today, Americans tend to see grotesque accumulations of wealth and power as normal. Back then, a critical mass of Americans refused to do so, and they waged a decades-long fight for a fair and democratic society."

Distributing "free money" (much of which goes to favored industries and cartels) is a Band-Aid over the metastasizing tumor of perversely imbalanced distributions of resources, capital and agency/power.

If America cannot bear to discuss these realities (and structural solutions-- yes, there are solutions) openly, they will unravel the social, economic and political orders in a non-linear Cultural Revolution with a highly uncertain outcome.

Borrowing a quarter of the nation's entire economic output every year to prop up an ineffective, corrupt status quo is putting a Band-Aid over a tumor.

....

https://www.oftwominds.com/blogapr21/fatal-synergies4-21.html

America's Fatal Synergies

Why do some systems/states emerge from crises stronger while similar systems/states collapse? Put another way: take two very similar political-social-economic systems/nation-states and two very similar crises, and why does one system not just survive but emerge better adapted while the other system/state fails?

The answer lies in what author Geoffrey Parker termed Fatal Synergies and Benign Synergies in his book Global Crisis: War, Climate Change, & Catastrophe in the Seventeenth Century. Synergy results from "interactions that produce a combined effect greater than the sum of their separate effects." In other words, 2 + 2 + 2 + 2 = 8 is linear, while synergy is 2 X 2 X 2 X 2 = 16.

Given that the core function of states is the distribution of resources, capital and agency, we can distill the difference between Fatal Synergies and Benign Synergies into two questions:

1. What problems cannot be resolved by the financial system/state, no matter how many reforms are thrown at them?

2. Which groups have a meaningful voice in decision-making / governance and which groups are effectively voiceless / powerless?

The first question identifies the structural weak points in the system. These weak points could have any number of sources: they could be perverse incentives embedded in the system, elites caught up in their own enrichment, or even a willful blindness to the nature of the crisis threatening the system.

Here's an example in the U.S. system: corporations reap $2.4 trillion in profits annually, roughly 15% of the nation's entire output. Politicians need millions of dollars in campaign contributions to win elections. Those seeking political influence have not just billions but tens of billions. Those needing to distribute political favors will do so for mere millions.

Testing Theories of American Politics: Elites, Interest Groups, and Average Citizens:

"I'd say that contrary to what decades of political science research might lead you to believe, ordinary citizens have virtually no influence over what their government does in the United States. And economic elites and interest groups, especially those representing business, have a substantial degree of influence. Government policy-making over the last few decades reflects the preferences of those groups -- of economic elites and of organized interests."

This asymmetry cannot be overcome. Indeed, the past 40 years have witnessed an increasing concentration of wealth and power in corporations and their lobbyists and a decline of political influence of the masses to near-zero. Every reform has failed to slow this momentum, which is constructed of incentives to maximize profits, gain political favors and win elections.

In a similar fashion, the Imperial Presidency has gained power at the expense of Congress for decades--a reality that scholars bemoan but the reforms allowed by the system are unable to stop. So we have endless wars of choice without a declaration of war by Congress, one of the core powers of the elected body.

An analogy to these systemic weak points is the synergies of an organism's essential organs: if any one organ fails, the organism dies even though the other organs are working just fine. In other words, any system is only as robust as its weakest essential component/process.

Whatever problems the system is incapable of resolving have the potential to bring down the system once they interact synergistically.

The second question identifies how many groups have been suppressed, silenced or ignored by those at the top of the heap. If these groups have an essential role in the system as producers, consumers and taxpayers, their demand to have a say in decisions that directly affect them is natural.

Another group with understandable frustrations at being left out of the decision-making are those in the educated upper classes whose expectations of roles in the top tier were encouraged by their families, society and training. When these expectations are not met because there are no longer enough slots in the top tier for the rapidly proliferating upper classes, the group left out in the cold has the time, education and motivation to demand a voice.

In other words, those denied access to resources, capital and agency who felt entitled to this access will not be as easily silenced as those who accept their low status and restricted access to resources, capital and agency as "the natural order of things."

All the groups that are denied a voice and access to resources, capital and agency are in effect a sealed pressure cooker atop a flame. The pressure builds and builds without any apparent consequence until it explodes.

The more that power is concentrated in the hands of the few, the greater the desperation of the groups who are locked out of power. As their desperation rises, some of these groups are willing to go to whatever lengths are necessary to effect change.

The process of explosive demands for change erupting is difficult to manage once released. The system's essential subsystems may be destabilized--the equivalent of organ failure--and once destabilized, it's often no longer possible to restore the previous stability.

In this environment, the common good falls by the wayside and the system collapses.

In the context I've laid out, Fatal Synergies arise when access to resources, capital and agency are limited by elite hoarding or massive declines in available resources and capital.

Beneficial Synergies arise when whatever resources and capital are available are shared, if not equitably, at least in a process in which every group affected by the distribution has a voice in public decision-making.

Fatal Synergies arise when the identity of each group is based not on shared values and cooperation but on unyielding resistance to competing claims on the nation's wealth and income.

Beneficial Synergies arise when all groups have a voice and a say in the process of distribution, even if it is limited.

Crises reveal the problems the system is incapable of resolving. How we respond to those constraints and weak points is the difference between Fatal Synergies and collapse and Beneficial Synergies that generate successful evolutionary responses to pressing selective pressures: simply put, "adapt or die."

America's financial system and state are themselves the problems, yet neither system is capable of recognizing this or unwinding their fatal synergies.