End of Empire - Quareness Series 123rd "Lecture".
When complex systems break down, they tend to have become internally stagnant with their resources and power structures "overconnected". Looking around today we can see much evidence pointing towards the fast approaching end of what we might regard as the last major economic empire of the past 800 years or so. It increasingly appears that the prevailing post World War 2 economic order can no longer adapt to the changes around its current cycle. And this is the case despite its ongoing attempts to establish greater resilience and to break up monopolies of resources and thought (and the lack of innovation they engender) which characterise all known complex systems when they become stagnant.
Looking across the current landscape of mental health disorders, population health outcomes, consumer debt levels, new business creation, wealth disparity, real income stagnation, government regulation, house prices, political polarisation, fragmentation of shared cultural values and many other areas, there is ample evidence of irresilience. We see a state of the world that seems to be increasingly insistent on a phase shift (what complexity theorists call a system release) that will lead to a reorganising of the prevailing world order...possibly liberating innovation and increasing the capacity to absorb future shocks and change. Indeed it seems that such phase shifts may have been characteristic of the end of all prior cycles of economic hegemony. We could soon witness the emergence of some post-capitalist organising principle possibly through the confluence of more sustainable energy sources, massive automation and the exhaustion of capital to find new markets for growth?
Once we see through the smokescreen kicked up by fierce partisanship, factional lobbying of narrow interests and the din of a 24/7 global news cycle, we might discern an entire world desperately trying to free up trapped "capital" in creative and spiritual resources, health and educational resources, relational and cultural resources, and economic and political resources...all of which have become stuck and stultified and trapped by monopolistic forces throughout our current lives. And we might also discern that this continues to occur against a real-world backdrop where we suffer from increasing discord and where systemic problems grow deeper. It's not unlikely then that we could be approaching a terminal crisis that might shake our current structures to the ground. Indeed it's arguable that such an earthquake may have already begun. Nanoscopically small and quietly transmissible, the current covid-19 pandemic could turn out to be a catalyst for this great release. Being transnational and slipping easily past geographic borders, it seems like a perfect spark to light the ample tinder of total system irresilience. It can capitalise on ignorance and childishness and disrupt societies that are unable to form coherent and cohesive policy responses. And it disrupts the social space our modern service-heavy economies with their international supply chains so desperately need. We could be looking at not alone a health plague for some but an economic and social plague for many.
A release phase most likely starts when the potential for change is highest and the overall systemic resilience is lowest. In recent years we saw something of these conditions in the great recession of 2008, at least in the West, where there was way too much debt, asset values (especially in housing) were an absolute bubble, and stock markets (Wall Street, etc.) had constructed a global house of cards on the basis of collateralised debt obligations and other complex derivatives. We had almost no system resilience because all of the resources were financed with debt and stacked like a house of cards, and it all came crumbling down with asset values wiped out, default on debts and banks caught short. However, if things had played out in the way needed (as the then condition of our complex system was signalling) we would have seen a massive amount of creative destruction. We would have witnessed inter alia - major bank failures, capital liberated back into new entrepreneurial hands, power reallocated amongst a diverse set of participants, a rebalancing of the profit distribution between capital and labour, and a reinstitution of Glass-Steagal (the 1933 Act that imposed a firewall between investment banking and depository banking in order to protect depositors’ funds from bank gambling)...the repeal of which at the behest of the Clinton administration in November 1999 amounted to a major resilience-decreasing (and in hindsight disastrous) deregulation...for previous reference see my Greek Debt Quareness "Lecture" of July 2015.
What actually happened saw the needed release artificially aborted. In 2009 President Obama and other global political leaders agreed to support the global commercial banks and with the concerted policy actions by the US Fed, Bank of Japan, Bank of England and European Central Bank, global leaders moved too rapidly back through a mini-cycle that reorganised global resources using them to fuel another mini rapid-growth cycle (to the benefit mainly of the asset-owning globalists) and put us right back into the conservation stagnation where we were before (and where we remain today). After all that effort and money, the only difference is that we now have even more national debt than before (with asset bubbles everywhere) and voters remaining angry with the existing power monopolies as well as the system still dissatisfied with its level of resilience.
And yet there's a deep longing for structures that seek to cure massive power imbalances and tensions. It seems that the spring has been wound tighter and tighter for decades and desperately wants to release, but at every opportunity policy makers step in and continue to prevent the system from healing itself. Maybe they are not equipped with the consciousness or capabilities to navigate such a burgeoning metacrisis as it demands...even as we head deeper and deeper into more catastrophic release with every passing year? Whether the very likely worldwide depression ahead will provide the biggest opportunity yet for the system to rationally reorganise may well depend on the nexus between America's economic hegemony in the form of its status as the world's reserve currency, and the rapidly-changing political consensus inside the US itself as it relates to its internal political-economic philosophy. In blunt terms...if the United States doesn’t reorganise itself in order to also reorganise the global economic order as we know it today, the world may soon have no choice but to force a reorganisation upon us all.
Today we remember that the inadequate reorganisation after World War 1 accounted for the recurrence of more creative destruction just a couple of decades later in World War 2...which was only about thirty years from the start of the former to the end of the latter. And during that short time the geopolitical landscape morphed from a highly-nationalistic order to the internationalised one we've seen since. But the pendulum appears now to be swinging back the other way and although the process of creative destruction is usually quite fast relative to the other phases of the system, we generally can't know precisely where we are in our own cycle at any particular time. Nevertheless we can recognise today as a time of much division, disruption and opportunity for the agile.
The 2008 recession in shaking up power and transforming values, may have served as a warning that the old order was going and something new was underway. However, similar to the poor resolution of World War 1 causes, with its inadequate accommodation to prevent more system tension (and even the next world war), we've also had poor resolution of the forces that caused the 2008 collapse to begin with...
the last decade or so having been somewhat akin to the 1920s in its sky-high valuations of everything and widespread champagne lifestyles.
So here we are possibly at the end of a long period of fake economic progress built on debt, and after a possible thirty-year phase shift has begun. And suddenly out-of-the-blue along comes a tiny little virus...possible catalyst for a global depression ending our "roaring twenties" just like the great depression of 1929 ended its own boom period. Incidently that year also marked the terminal crisis for British hegemony when their cycle of dominance gave way as the US dollar became the reserve currency...a structural feature later cemented by the World War 2 victory some fifteen years later and its post-war world state reorganisation. Should history repeat itself, we could now be entering yet another period of economic disruption lasting some considerable time.
“There are decades where nothing happens; and there are weeks where decades happen.” - Vladimir Lenin. The overall point here is that we're almost certainly dealing with long cycles of adjustment...maybe even as long as thirty years...say 2008-2038. We could be facing into a decade plus of more shocks and adjustments with quite massive interim social and economic ups and downs before we get to the final, culminating disruption (terminal crisis) that will bring in the real reorganisation upon which a transformation age will finally take hold and grow. Hopefully this process of "realignment" will be better managed than heretofore so we can avoid the dangerous excesses of geo-strategic competition driven by our rapidly developing technological capabilities.
And there is room for optimism here given that we now know what such a system release does i.e. it frees up innovation even as it shatters connections. We know how it operates in that it destabilises existing power structures. We know that what it seeks is a return to higher resilience and better-functioning hierarchies. And we have some idea of what should come next i.e. chaos, innovation, experimentation and reorganisation on to an emergent higher form of better-adapted organisation (assuming no intermediate breakdown to a regressive lower form). Our hope can rest in such knowledge and our knowing the underlying mechanics at work i.e. break up of control of resources, increased freedom and experimentation, and increased system agility.
Sean.
Dean of Quareness.
July, 2020.