The establishment of a predatory and deeply unstable global economic system - beyond the control of any group of nations - is in the process of gutting developed democracies. Think in terms of the 2008 crisis, over and over again. Most of what we consider normal in the developed world, from the middle class lifestyle to government social safety nets, will be nearly gone in less than a decade. Most developed governments will be in and out of financial insolvency. Democracy, as we knew it, will wither and the nation-state bureaucracy will increasingly become an enforcer for the global bond market and kleptocratic transnational corporations. Think Argentina, Greece, Spain, Iceland, etc. As a result, the legitimacy of the developed democracies will fade and the sense of betrayal will be pervasive (think in terms of the collapse of the Soviet Union). People will begin to shift their loyalties to any local group that can provide for their daily needs. Many of these groups will be crime fueled local insurgencies and militias. In short, the developed democracies will hollow out. John Robb ☀
Globalization is in the process of eviscerating traditional loyalties. In the 20th Century, loyalty to the nation-state (nationalism, often interwoven with ideology), was supreme. In today’s environment, a global marketplace is now the supreme power over the land. It has drained the power of nation-states to control their finances, borders, people, etc. Traditional ideologies and political solutions are in disarray as the fluctuating and often conflicting needs of the global marketplace override all other concerns. As a result, nation-states are finding it increasingly impossible to govern and the political goods they can deliver are being depleted. John Robb ☀
Over the last thirty years, the social compact that divided value produced by productivity improvements between workers and corporate/financial interests broke down. All the value from improvements (they were mighty) in productivity went to corporations/finance. Median incomes stagnated for 30 years and the illusion of growth was produced by the extension of cheap debt. It was also the driver behind the ahistorical rise in the stock market and ultimately the recent financial meltdown. That would be bad enough, but it’s getting worse. Median incomes are now on a downward track to give corporations the ability to return to profitability through increases in productivity (a massive 6.4% rise in the last quarter). John Robb ☀
…rentier interests are so overwhelmingly dominant in our society. There’s a couple of interpretations of how this plays out. One is that post industrial government is morphing into a system that exclusively protects and extends the interests of rentiers. Another is that the economic system grinds down, ossifies, rapidly destroying any entrepreneurial spirit. Regardless, it’s not a good sign. Another thing that really bugs me is the idea that most “financial innovation” is truly innovation in the entrepreneurial sense. It is, for the most part, innovations that yield new methods of gambling and predatory behavior (skirting regulation/propriety/morality) rather than innovation that creates net societal benefit. So, any attempt to lump the “risk takers” of Wall Street to the “risk takers” of entrepreneurs making new services/products is an egregious conflation of societal value and pure misdirection. John Robb ☀
Too bad all the benefits of decades of US productivity and economic growth were squandered on the delusional and ideological excesses of the financial capitalists. Imagine what the world would be like to today if incomes grew in line with productivity as per the 50-60’s social contract. Per capita incomes would be twice what they are today and the savings of US citizens would be powering the world economic machine. Further, since the gain would have been broad-based, it’s extremely unlikely the concentrated excesses of Wall Street would have happened at all. John Robb ☀
The allocation of this capacity exclusively to capital markets, rather than sharing that decision making with hundreds of millions of Americans, has produced a horrible result. Rather than investing the accumulated wealth of America in productive assets that yielded long term benefits, the money was invested in derivatives (illusory financial products) that yielded nothing of tangible value. In short, the narrow group of actors that operate within the capital markets made the decision to forgo the long and difficult process of growing investments in the tangible world in favor of the outsized returns available through investments in virtual products. That investment is now evaporating. John Robb ☀
Fear is a deep evolutionary response that changes our biology so that we can respond to danger. It’s regulated by a part of the brain called the amygdala and catalyzed by the hormones cortisol and adrenaline. Unfortunately, as the amygdala takes control, it deprives us of our higher mental functions and can induce everything from tunnel vision to time compression to extreme dissociation (out-of-body experiences). In short, in complex disasters, the biological-fear response can slow thinking so severely that it can kill you. John Robb ☀
I think we are going to soon realize (too late) that we severely damaged a key foundation of the US and the global economy — the US middle class. The combination of future market shocks and other black swans will make this painfully clear. IF we do make the transition to a market-state thinking, we will find the key health metric for the any government isn’t GDP growth/employment/etc. Instead, it’s the growth of median income and quality of life for a country’s residents (a soft metric), relative to competitors. John Robb ☀
Mexico’s army, due to low salaries ($330 a month) and bad conditions/treatment, already suffers an 8-9% desertion rate — these deserters are left unpunished due to an inability to pursue, prosecute, and imprison. That rate is is expected to radically increase as the war with narco-guerrillas in northern Mexico heats up. As a hint of what’s to come, between 2000 and 2006 (the Vicente Fox administration), of the 4,890 soldiers assigned to Federal police duties, all but 10 deserted (according to IAPA journalist Maria Idalia Gomez).
John Robb
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The neoconservative hubris that the United States can and should reshape the world has been a casualty of the Iraq war, both substantively and politically. The practical limitations on the ability of the United States to direct the destiny of other peoples and cultures, and the cost of such ambitions, have been exposed. Nevertheless, the three leading Republican candidates for president in 2008 - Rudy Giuliani, John McCain and Mitt Romney - cling to some version of the neoconservative vision.
Robert Robb
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