On Chaos

It would be a relief to take a break from the storm of incompetence and the lynch mob mentality that has overtaken our benighted leadership, but we are unlikely to have many opportunities to do so.  It seems to me that there are several questions hovering about that are not being addressed but are worth thinking about.

First, there is an assumption in Washington and in most of the press that the current economic crisis can be understood in relatively conventional terms.  In other words, we have seen this kind of crisis before.  That is as true when either conceptualized as a crisis caused by lack of regulation or as a result of governmental intrusion into the free markets;both approaches are conventional and ideologically consistent for their proponents and both miss the point that governments always interfere in free markets and the most important effort should be for government to focus on making the markets more transparent and responsible, rather than in attempting to manage the unmanageable. 

Second, there appears to be an assumption that "politics as usual", whether in the domestic or international sphere, will be adequate to deal with the consequences of the down turn.

I think there are good reasons to question whether either assumption is warranted; further, I believe that continuing to practice politics as usual has the real potential to exacerbate the economic crisis and precipitate international instability of a sort we have not seen in quite some time.

Part of what has brought the world's economy to its current straits can be understood as an effort to maintain a dysfunctional status quo in an increasingly dynamic world.  A "side effect" of the American experiment with liberal capitalism has been ever increasing wealth for the vast majority of Americans.  Even when wages have been effectively stagnant, the fruits of our technology have become increasingly available to even the more impoverished.  Consider that we no longer consider it unusual for a poor person to have a color TV, one or two video game systems, a computer, and at least one cell phone.  It is considered a disgrace that many poor people do not have high speed Internet access.  We have plenty of stuff.  We have more than enough food to eat (despite pockets of poverty) and we have more problems with obesity and diseases associated with affluence (Diabetes, High Blood Pressure, Cancer) than with malnutrition and diseases of poverty (infectious disease, especially.)   Yet our ever increasing hunger for more stuff, as more desires are created by our incredibly innovative form of techno-capitalism, has led us to mortgage the future to try to keep up.  Thus, we have had several iterations of bubbles bursting, only to be replaced by new bubbles in a race to stay ahead of our debts.  The current approach of taking on exponentially more debt (is trillion a real number or does its magnitude make it an irrational number?) in order to maintain purchasing power cannot work indefinitely.

(An interesting question for any Quants out there: if we assume we are in a Kurzweilian proto-singularity, can the rate of increase in our wealth stay ahead of our rate of increase of our debt indefinitely?  Please state your assumptions for any calculation.)

It seems to me that there is a mismatch between the reality we are struggling with and the conventional means we are using to try to contain the crisis in our economy.

There is another mismatch that is evolving in dealing with the strategic dimensions of the current crises. 

Under economic duress, societies regress.  In such situations a wise leader would be vigilant in looking for ways to preserve developmental advances and slow the natural regression that takes place when people are frightened.  There is an argument to be made that President Obama's video address to Iran is an attempt to appeal to their more mature instincts (though they have displaced very little evidence of actually having mature instincts) in an effort to defuse a longstanding source of tensions and disruption in a very important part of the world.  AT the same time, the message is quite likely to be understood in Iran as a tacit admission that the international community, as led by the President of the United States, is unequal to the task of limiting Iran's ambitions.  This has two corollaries.  An America unwilling or unable to directly confront Iran is also an America unlikely to be able to limit Israel, if Israel concludes that Iran is an existential danger. 

And therein lies the greatest danger.  As smaller nations and smaller groups of non-state actors gain in their ability to acquire and utilize more lethal technology, the lack of any international structure that has the ability to address and defuse such conflicts becomes more and more problematic. 

The UN is stuck in a 1950s paradigm, where a few large states do what they want and tolerate or facilitate those who oppose their enemies.  The Security Council and the various subsets of the UN are conspicuously devoted to delegitimizing Western style democracy, with efforts to have the international community sanction limitations on free speech, and overt efforts to preclude the West from actually defending itself.

(For more on this, see Elder's post on Falk's Law: Israelis must be sitting ducks.  Although he focuses on the attacks on Israel's ability to defend itself against terrorist assaults, it is clear that in a setting in which the international media is effectively allied with those who oppose the West, being able to conduct defensive operations against those who desire nothing less than the annihilation of the West becomes more and more problematic as time goes on.  When the arbiters of decency among us demand perfection, any use of force is fraught with the potential for our own undoing.)

This post is more inchoate than usual and that reflects my sense that we are in uncharted territory in a world in which the economy may well be in an oscillation that has escaped its ability to self correct and the international order, such as it is, is being replaced by mere anarchy as a response to American overreach.  In both related arenas, there is now no structure in place that can help dampen the perturbations to the system and those best situated to do so appear to be unaware of how parlous the times actually are.