Ian Welsh

The horizon is not so far as we can see, but as far as we can imagine

Category: Economics Page 17 of 89

The Lack of Belief in Good

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On September 16, 2021

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Are humans good, bad, or neutral?

It’s an old philosophical debate and not just in the West. Confucius thought they were born neutral, for example, while the later Confucian Mencius felt they were good, noting that everyone who saw a child fall into a well would be horrified. Others, including many Confucians and the Christian church, with original sin, have felt that humans are born bad, and they have to be made good.

This is also the general view of the ruling ideology of the West: Ecnonomism. Humans are greedy, selfish, and only care for themselves. Popular biology, derived from books like Dawkins “The Selfish Gene” and 19th century social Darwinism has led to similar views.

If you think humans are bad, the question becomes how do you get them to do good? Traditional Christianity’s answer was, “Hit them while they’re kids, a lot, that’ll make them good.” (spare the rod, spoil the child), which can be judged fairly by Christianity’s record: “judge by the fruits” being reasonable when dealing with people who claim to follow Jesus.

Economism’s answer is, “If they’re greedy and selfish, give them rewards for doing what you want.”

Strangely, giving lots of rewards to bankers, CEOs, executives, and politicians has not made them better.

Now, of course, a pure selfishness/greed/incentives disciple might reply, “But they are the ones who decide what they get rewarded for, and that doesn’t make them good. You have to reward people for doing good!” But those same disciples are the folks, or descendants of the folks, who argued that the only thing corporate executives were responsible for was raising stock prices, and that giving them stock options was how to do that.

Didn’t work out. Teaching greedy people to be more greedy by rewarding their greed had the results one would expect: even more greed, in a lovely spiral upwards, while the middle and bottom of society had its heart cut out.

My own observation has been that when incentives are removed people are more likely to do the right thing. You don’t want doctors to own stock in drug companies, or make more money the more surgeries they do. Conversely, punishing surgeons for bad results actually lead to surgeons being unwilling to do risky surgeries which were still medically indicated: they wouldn’t want their success/fail rate to go down.

I’ve written in the past that I consider most humans neither good nor bad, but weak. They do more or less what their group wants. But really I’d say that humans, absent fear and incentives, have a slight bias to good. Most people like helping people, don’t like hurting people, and so on, as long as they themselves are not hurting or blinded by greed.

The moment a lot of people become chronically scared or greedy, however, that goes away. The scared are defensive and ready to be angry and hate, the greedy become sociopathic or even psychopathic, concerned only for themselves and, sometimes, a few people around them. Furthermore, incentives always cause tunnel vision — people pursuing incentives ignore everything that doesn’t get them to the incentive, and even well designed incentives leave out much that should be done.

As horrible as the idea is to us, the best thing to do with people is for leaders to be selected because they are kind and good, to set goals for oganizations without significant incentives (this doesn’t mean don’t track and correct), and remove fear from people. Make sure they know their needs will be met, and that no one wants to hurt them, and that help is available.

In such circumstances, strangely, people blossom. Happy people are more productive. About half of business literature can be summed up as, “If you treat employees well, they are way more productive, but most bosses are cunts who don’t want to do this, despite a huge preponderance of evidence.”

But when people are happy and not scared, of course, not only can you not get most of them to do evil, they don’t act servile and hop-to-it at your every command. For most bosses, ordering people around is the primary pleasure of the job (no, don’t pretend), even more than profit.

And since, with neoliberalism, they can be rich and have scared serfs jumping at their every statement of “frog,” recompense having almost no correlation with productivity or even profits, they can have the best of both worlds: rich and with what amounts to slaves, without the responsibility of caring for their servants.

This lies at the heart of all the screams about how Covid has made people unwilling to work at shitty minimum wage jobs, and government needs to stop giving them money, so they have no choice but to go groveling back to their masters for work they hate that may not even pay rent on a one-bedroom apartment.

If you insist on saying people are bad, then treating them badly, if you must be obeyed and show no concern for your slaves, then don’t be surprised if you live in Hell, and if the only thing keeping Hell from your own doors is having a TON of money.

There is another way, and maybe one day, having tried every evil thing, we’ll give it a shot.

(My writing helps pay my rent and buys me food. So please consider subscribing or donating if you like my writing.)

The Simplest Explanation for Western Decline

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On September 9, 2021

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Is just…this:

Similar numbers can be found in most fields.

This is related to the computer productivity paradox: Computers and the telecom revolution have not noticeably increased productivity.

The reason is simple enough — they weren’t used to create productivity, they were used to create control, to allow managers to micromanage employees without actually being in the presence of the employee all the time.

No society can stay healthy with this sort of admin bloat; admin are support, meant to help the people who actually do the job. If your tooth-to-tail ratio is higher than 2:1 or 3:1, something’s probably wrong.

In my personal life, at my last megacorp job I saw multiple waves of computer “improvements.” Every single one of them increased control and reduced the workload employees could handle. I know this for a fact because I measured it, in part because it was my job, in part because management refused to admit that their shiny new programs were actually slowing productivity, and, until I forced them to admit it, they wouldn’t  hire more people.

Furthermore, each wave of “upgrade” de-skilled the job further, making the employees do what the computer said, and removing their discretion. All of this was intended to raise the bottom, but what it mostly did was lower the top; the most productive, most highly-skilled employees suffered the greatest productivity losses, were the most unhappy, and tended to leave, because the job had become semi-automated, and no longer involved actually doing the job.

As a general rule, no one should run something like a hospital who is not still involved in hands-on client care — probably a nurse or doctor. No one should run a university who is not either still teaching or an active student. This principle can be applied more generally, in that no one can properly manage anything they still don’t do. This is often recognized in the business literature, but, understandably, CEOs and executives almost never want to actually perform the real work of the business, nor will they excuse themselves from interfering with those who do and, thus, actually understand what is needed.

At most, upper management can set general goals. They should never be in charge of deciding how to achieve them. This is the opposite of how we run things, but it wasn’t always entirely so: Auto and plane companies used to be run by engineers, insurance companies by underwriters and actuaries, hospitals by nurses and doctors, and universities by Senates of Professors.

One issue is that front line workers often really want to do front line work: Professors don’t want to administer, they want to teach or do research, doctors want to treat patients, etc.

But if you give administrators power over you, you never get it back. University Senates hired administrators, and a few decades later discovered the administrators were running the show, were able to order profs around, and were the highest paid people in the university (outside of the football coach), while doing no actual teaching or research, and understanding little to nothing.

It is also important to understand that while it’s certainly better if you have done the front-line job at some point, that you lose that knowledge quickly. Ten years out, and you’re clueless — you’re just another administrator. Managers and executives have to keep their hands in, or they wind up clueless.

Bottom line: We can’t afford to let anything important be run by people who aren’t actually practitioners. They don’t know what they’re doing, and they spend most of their time building bureaucratic empires that do nothing but act as modern courtiers. In the best case, they do no harm other than sucking up resources, but in most cases they try to justify their existence by trying to tell the front lines how to do their jobs and make things worse.

If we want to fix our society we have to get rid of this admin bloat, along with the cluelessness it represents.

But what usually happens, instead, is some form of societal collapse, which strips out administrators in a more brutal and effective fashion.

That’s what where we’re headed.

(My writing helps pay my rent and buys me food. So please consider subscribing or donating if you like my writing.)

It’s Not Your Money

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On September 7, 2021

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You also didn’t earn most of it.

It seems like every time I discuss taxation, some libertarian will waltz in and say: “It’s my money, and I don’t see why the government should be able to take it.”

So let’s run through why, no, it isn’t your money. We’ll start with two numbers. In 2005, the income per capita for the US was $43,740. The income per capita for Bangladesh was $470.

Now, I want you to ask yourself the following question: Are Bangladeshis genetically inferior to Americans? Since not too many of my readers think white sheets look great at a lynching, I’ll assume everyone answered no.

Right then, being American is worth $43,270 more than being Bangladeshi, and it’s not due to Americans being superior human beings. If it isn’t because Americans are superior, then what is it?

The answer is that if it isn’t individual, it must be social. On the individual — but still social — level, Americans are, in fact, smarter than Bangladeshis because, as children, they are far less likely to suffer from malnutrition. However not suffering from malnutrition when you’re a baby, toddler, or young child has nothing to do with you, and everything to do with the society you live in and your family — two things over which you have zero influence (perhaps you chose your mother, I didn’t!).

Bangladeshis won’t, on average, get as good an education. They won’t get as much education either, since every child is needed to help earn a living as soon as possible. For most Bangladeshis, there’s no room for the extended childhood and adolescence to which westerners have grown accustomed, which often stretches into the late twenties or even early thirties, amongst those seeking PhDs or becoming doctors or lawyers.

When a Bangladeshi grows up, the jobs available aren’t as good. If he or she starts a business, it will earn much less money than the equivalent American business. If he or she speculates in land and is very successful, the speculation will generate much less wealth than it would in the US.

I could go on and on. I trust the point is obvious: The vast majority of money that an American earns is due to being born an American. Certainly the qualities that make the US a good place to live and a good place to make money are things that were created by Americans, but mostly they were created by Americans long dead or they are created by all Americans working together and are not located in the individual.

The same is true of the really rich. Forbes keeps track of the world’s billionaires and almost half of them are in the US. This is because US society, and the US government in particular, is set up to create billionaires. Your odds of being a billionaire take a massive jump if you’re born in the US. Your odds of being a billionaire if you’re born in Bangladesh? Essentially zero. Now, one could point out that billionaires are still so rare that the odds are always essentially zero; how many billionaires are in your circle of friends? Nonetheless, in 2005, the US had 371. Coming in second, Germany had 55.

Bangladesh, you won’t be surprised to hear, had zero.

If you’re a billionaire in the US, you’re a billionaire in large part because you live in the US.

So, if you’re American, a large chunk of the reason you make a lot of money (relative to the rest of the world) is that you are American. The main cause of your relative wealth is not that you work hard or that you’re innately smarter than members of other nations (though you may be because you weren’t starved as a child). It’s because you were afforded opportunities that most people never had and those opportunities existed due to the pure accident of your birth or because you or your family chose to come to the US. The same is true of most first world nations.

Immigrants understand this very well. There’s a reason why Mexicans, for example, are willing to risk death to cross the border. Their average income is $7,310, compared to the US average income of $43,740. They won’t make up all the difference just by crossing the border, but they’ll make up enough that it’s more than worth it. They haven’t personally changed, they don’t suddenly work harder now that they’re across the border. They don’t suddenly become smarter or stronger. They just change where they live and suddenly the opportunities open to them are so much better, their income goes up.

So let’s bring this back to our typical libertarian with his whine that he earned his money and the government shouldn’t be allowed to take it away. He didn’t earn most of it. Most of it is because, in global terms, he was born on third and thinks he hit a triple. This doesn’t mean he hasn’t had to work for it, but it does mean that most of the value of his work has nothing to do with him (and Ayn Rand aside, it’s almost always a him).

Now, in a democratic society, a government is the vehicle through which the population, as a whole, chooses to organize collective action. Government, imperfect as it is, is the closest approximation to the “will of society” that we’ve got.

Because the majority of the money any American earns is a function of being American, and not the result of their own individual virtues, the government has the moral right to tax. And because those who are rich get more from being American than those who are poor, it also has the moral right to take more money from them.

More importantly than the moral right, government has the pragmatic duty to do so. The roads and bridges that government builds and maintains, the schools that it funds, the police and courts that keep the peace, the investment in R&D that produced the internet, the sewage systems that make real estate speculation possible, and on and on, are a huge chunk of what makes being American worth so much more than being a Bangladeshi. Failure to reinvest in both human and inanimate infrastructure is like killing the golden goose, and the US, for decades now, has not been properly maintaining its infrastructure, let alone building it up.

And money itself is something that government provides for its people. It’s not your money, it’s the US’s money and it’s a damn good thing too. If you don’t believe me, try issuing your own money and see how many people accept it. Some will, because when an individual issues money, it’s an IOU (which is essentially what money is). I’ve written a few in my life. In every case, the person I gave it to was less happy to receive it than he would have been to get some nice crisp dollars. And I rested my IOUs on dollars, that is, I promised to repay in my country’s currency. Barring the use of accepted currencies, you’d have to issue an IOU saying: “I will repay you with a bundle of rice.” Or gold or a service. This raises the question of enforcement (one thing even libertarians admit the government should do): What if I suddenly refuse to meet the conditions of the IOU? Even an IOU is based on the sanction of the government. If it isn’t, it’s worth only as much as the good will of the person issuing it or the strong arm of the person holding it.

So, no, it isn’t your money, and it’s a good thing it isn’t. And while you may have worked your butt off for it, you also didn’t earn most of it. The value you impute to yourself (“I’m worth my $80K salary”) is mostly a function of where you live, where you were born, and of who your parents are.

Originally published Feb 9, 2008.  Republished 2010, April 15, 2015 and Sept 7, 2021.

Let’s kick this to the top another time for a new generation of readers. This one of foundational and IMPORTANT.

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As Employers Cut Their Own Throats: How They Could Save Themselves

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On September 6, 2021

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From the Washington Post:

You will remember that employers squealed they were having trouble finding workers, so Republican states ended extra EI benefits.

The end result? No more workers, but businesses were harmed by reduced spending.

Whoops?

One of the many fundamental “errors” in neoliberal thinking is that you want workers and recipients of government aid to not have a lot of money. After all, they’re a cost.

But every business’s employee is a bunch of other businesses’ customer, and every aid recipient is also a customer. Smart businessmen, or ones who have learned from experience (a.k.a., those who remembered the Great Depression) know this, and want high wages. It’s not a competitive disadvantage if everyone has high wages. Likewise, generous government benefits are good for business.

So smart businessmen want a high minimum wage without exceptions, and generous benefits.

One of the few real insights of modern economics is “marginal” thinking. For decision making, it doesn’t matter what the average cost of something is; what matters is the cost of the next unit — the next widget you make or the next employee. This means that supply matters a lot. For a job for which 100 people are applying, every open position puts employers in the cat seat.

If there are three, a lot less so. If there is one job-seeker per three open slots, well, you’re going to have to raise wages, both to compete and to increase the pool. I recently read an article where a homecare business was complaining that there was one person per ten open positions, but they also noted they paid a couple dollars less an hour than retail and menial labor jobs.

Anyway, even if the Covid death toll seems large, it’s the effect on marginal workers that matters. Add to that that many workers who kept their jobs are not going back to offices and the geography of jobs has also changed. People who run businesses in fancy, high-priced suburbs without any real transit, can’t expect nearly as many cheap workers, because they can’t afford to live in that suburb and traveling to it is hard. You create enclaves that price out blue collar and service workers, you need to go to them, and not vice-versa.

In the larger picture, an ongoing pandemic that just keeps killing and killing, and is killing the poor and minorities in much higher numbers, is naturally going to lead to a tighter job market. While the rich have gotten a lot richer because of Covid, the long-term affect is going to be higher wages.

There will be attempts to avoid this, as with making homelessness illegal, mass-evicting people, then throwing them in prison and using prison labor, but even that has its limits, when there are just less people.

This is a lesson Europe learned during the Black Plague (the people who survived were treated much better than those who lived before), but Europe didn’t fuck up the Black plague deliberately because it was making rich people richer.

Our wealthy are fundamentally stupid in fairly awe-inspiring ways, because they’ve spent the last 40 years destroying the very environment they will need — social, economic, and physical — for their own future prosperity, and indeed, survival. They think their money will protect them from the wasteland they’re creating, but that’s a bad bet.

Oh, I guess the older ones weren’t stupid, but if you’re filthy rich and not at least 60, I wouldn’t be fucking up Covid, destroying the social fabric of the West by encouraging right-wing authoritarianism, destroying democratic legitimacy, and crashing biodiversity while screwing up the climate.

Might come back to bite you on the ass. If you actually care about your kids (obviously you hate everyone else’s kids), you might find all this foolish, too, if you weren’t someone whose only talent is making money by hurting other people.

Anyway, one of the few silver linings coming out of this will be increased wages, unless the rich and their politicians can move hugely to forced labor. Understand that forced labor is the play: That’s why they’re cutting benefits, to force people back to work. It just didn’t work. That’s why they’re criminalizing homelessness, and there will be more policies along this line.

You’re a unit of production, expected to work for poverty wages, and they want to keep it that way even during a plague, even if they have to force poor people to keep working and send your kids back to schools w/out masks or proper ventilation.

This is who the rich are. Who we are, as a group, is people who accept this or even support it.

Meanwhile, employers of low-wage workers should be asking governments to increase the minimum wage significantly ($24/hour in the US, minimum, with automatic increases based on cost of living), not to help workers, but to help themselves. They could ask for transition subsidies for a couple years, and most of them would be fine, and making more money.

But we’ve trained our employers to be idiots, concentrating only the bottom line and not the top line.

(My writing helps pay my rent and buys me food. So please consider subscribing or donating if you like my writing.)

Three Simple Policy Heuristics

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On August 31, 2021

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A number of people (and most of those who run our societies) don’t understand the policy default: “Be kind.”

There is a widespread belief that life is shit, “hard choices” have to be made, and those hard choices usually involve someone else suffering and dying.

Life may well be lousy, but most “hard choices” don’t have to be made, and those hard choices are one of the main reasons why life is lousy for so many people.

The most important thing to understand is this: Harm ripples, kindness ripples. People you hurt go on to hurt other people. People who are treated with kindness become better people, or more prosperous people, and go on to help others. Yes, there are exceptions (we’ll deal with those people), but they are exceptions.

First: Do no harm.

Again, people who are abused, go on to abuse others. Rapists were often raped before they raped others. People who have no money can’t buy other people’s goods. People who are crippled physically, mentally, emotionally, or socially cannot contribute fully to society and tend not to make those around them happier or more prosperous. Rather the reverse.

While it is necessary to imprison some people for committing crimes (though far fewer than most societies imprison), it is not necessary to make having been convicted an economic death sentence. People who can’t get living wage jobs (or any job at all) when they get out of prison gravitate back to crime.

We don’t want people raped in jails, because many become rapists themselves and virtually all are damaged by it. When they get out of jail, we have to deal with that damage. We don’t want them stuck in solitary confinement for long periods of time because brain scans show this inflicts traumatic brain damage, and, yeah, we wind up having to deal with those people when they get out.

If someone runs out of money, we don’t want them to lose their primary residence. Even if you are soulless, you shouldn’t want a society that creates homeless people; it takes far more money to support someone on the street than it does to pay for almost anyone’s mortgage or rent. We don’t want people who are sick to be denied health care because they become pools for disease. We’re treating these people eventually anyway (when they turn 65 or become so poor they qualify for Medicaid), which is far more expensive than dealing with their illnesses when they first present themselves.

We don’t want to destroy other countries (Iraq, Afghanistan, Syria, Libya, etc.) because their people become refugees with whom we must then contend; this produces scads of angry people, some of who may wind up killing us, and it further ruins their economies, rendering them unable to buy our goods (except our weapons).

Damage to others who live on the same planet as you can comes back to haunt you. Damage to others in your own society will come back to haunt you.

So, first, do no harm. Yes, there are exceptions, but they are radically rare. Almost every bit of harm we do to others through government policy is a bad idea. The only common class of exception is covered in rule three.

Second: Be kind.

As the harm you do others comes back to you (insofar as you are “society”), so the good you do comes back to you. I almost don’t know what to say about this, as it is so brutally obvious. Happy people are better to be around. Prosperous people are better to be around. Healthy people are better to be around.

Only when goods are legitimately scarce is there reason not to help make other people better off, and, in those cases, it is only applicable to the scarce goods, and only until you can make the goods no longer scarce. Short on food? Ration and plant more crops.

But in today’s society, all the significant shortages of the goods which matter most are artificial; we have more than enough food to feed everyone. The US has five empty homes for every homeless person. Europe has two empty homes for every homeless person. Clothing is cheap as hell. Access to the internet is vastly overpriced. Our main sink is just carbon: We need to spew less of that, and we can do that. Our second main limitation is the destruction we are imposing on biodiversity, but we could produce our food with far less impact on the environment if we wanted to, and, even in the short term, we’d be better off for it.

People need stuff: food, housing, safety, education. None of these things should be in shortage anywhere in the world, including safety. They are in shortage because we choose to act greedy, violent, and selfish when we do not need to.

Third: Remove the ability or reason for people to do harm.

Humanity is not a race of saints. It does not need to be. Most people are neither good nor bad, they are weak. They do what the social and physical environment disposes them to do, with the social environment being far more important in the modern era.

Still, some people are bad. The hard core is probably around five percent of the population. And many other people are damaged, because our society has damaged them. They take that damage out on others.

The most dangerous class of malefactors are incentivized to do evil. Think bankers, corporate CEOs, billionaires (almost all of whom do evil as routine). These people do evil because they profit greatly from it, BUT (and most of you will not believe this) what makes a profit in the modern world is overwhelmingly a social choice. The government chooses who can create money, what counts as profit, who is taxed how much, who is subsidized how much, what is property, how much it costs to ship by rail vs. road, etc., etc.

There are independent technological and environmental variables, but they are overwhelmed by social variables. Change the variables and you change the incentives.

The policy is simple: Take away incentives for people to do evil. Take away their ability to do evil (a.k.a., their excessive access to money.)

Those who continue to do evil, lock them up. Do it completely humanely, no rape, no violence, no solitary confinement. But make it so they can’t do evil. While they are in prison, try to rehabilitate them. Norway has half the recidivism rate of the US for a reason: Rehabilitation does work for some people.

When they get out, bring them back into society. Make sure they have housing, food, clothing, and so on. If they do evil again, lock them up again.

None of this is complicated, in principle. This is simple. This is straightforward. It is work, mind you, we must stay on top of incentives and ability, and not allow anyone to become so rich or so powerful that they are able to buy the rule-makers or be above the law.

None of this should be controversial, though it is. None of this is new, these strands of thought go back to Confucius, Ancient Greece, and beyond. They are only controversial because it is in the interest of many for these ideas to be painted as such. And many people, having done evil, develop a taste for it.

Running a society well is hard, in the details it is complicated, but in principle, it is simple. Do the right thing. Make it so that people do well by doing the right thing. Make it so people who do things that are harmful to others stop doing them.

When you want a good society to live in, inculcate these principles. Until then, know that you will only live in a good society briefly and by chance.

Originally Published September 3, 2015. Back to the top for a new generation of readers.

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Humanity’s Completely Broken Feedback Systems

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On August 10, 2021

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If you want to understand how we got where we are, it’s simple: our strongest feedback systems to our decision making people are telling them “everything’s great, stay on course!”

For over 40 years now the rich have gotten richer. Politicians have gotten richer. Corporate officers, CEOs and executives have gotten richer.

Money is reward, and the reward centers for our elites are going off like a slot machine that constantly pays millions. BLING! BLING! BLING!

Whenever someone says “you should do less of this thing that makes you more money and power”, which is essentially everything that needs to be changed from Covid (making them richer) to climate change (still more oil to pump, baby) to ending pharma patents (Bill Gates says NO) to fixing inequality or feeding hungry people or housing the homeless, well, their fortunes (or bribes) come from making these things worse.

Capitalism is supposed to provide a feedback system. It isn’t the best feedback system, but if forced or allowed to work (and only government can enforce it, which is why rich people can’t be allowed, as they always purchase the government) it makes individuals and corporations who can’t even make a real profit go bankrupt.

But in 2008, Bernanke, whose entire intellectual opus was “how do we make sure another FDR doesn’t happen by making sure the rich never lose their money and power again” started the process of shoveling money down the gullets of the rich. (Greenspan had been piping it in too, but maintained some pretense he wasn’t and tried not to actually print money obviously.)

Every major central bank in the world followed course and all the economic feedback systems broke. No matter what rich idiots did, they would never as a class be allowed to go bankrupt, or even not keep getting richer. Vast money funneled to the rich and inflation showed up exactly where one would expect it, in things the rich were bidding up (yachts, art, luxury apartments) and in whatever they were buying up to get a new revenue stream (housing, most recently, so rent will soon /really/ go thru the roof.)

Now, as I pointed out at the time, the problem with all of this is that the real world exists, and so does a real economy in which items must be manufactured, food grown and products delivered. All of that has to be done in a world with weather, climate, animals, plants and an atmosphere.

Since all the feedback systems put in place by humans had broken (no one in power cared or cares about UN climate reports), we then had to wait for the world to start smacking us around.

That has started, with wildfires and northern hurricanes and so on (and Covid, to some extent), and the logistics system has proven itself to be fragile and easily disrupted exactly as many of us pointed out, while power and water systems and so on show their fragility as well.

But it’s not enough yet, this is all stuff the rich can ignore: have more than one home, have them off the grid, travel by private jet, etc, etc…

So the feedback will continue until it becomes so severe either the Proles do a Versailles on unresponsive elites or the elites feel more endangered than their bank accounts can make up for. (A hundred million+ dollars can buy a LOT of immunity. You may be dead before they feel it.)

This story isn’t new to regular readers, though, but I want to splice it with another thread.

Incentives.

I hate incentives. Loathe them. Every place I ever worked, the incentives did more harm than good. But it’s the mantra, the mindless ideology of our age that incentives work and you should align incentives.

Since we re-engineered our entire society to appear to do that, our societies have gone to shit for everyone but the one to three percent or so, but since feedback to anybody but them doesn’t matter, we continue.

I recently read John Ralston Saul’s “The Unconscious Civilization.” Or, rather, re-read it, but last time I looked at it was in the nineties.

Saul wrote a bunch of non-fiction books and they’re all bad except “The Unconscious Civilization”, which is brilliant. (They’re bad because Saul is of the old humanist tradition that insists on putting in as many references to the greats of the past as possible.)

But Unconscious Civilization is the publication of a series of five lectures by Saul and the limited time forced him to get to the fucking point. So, read it. (It’s scarily right about almost everything.)

One point Saul makes over and over again is the “value of disinterest”. Social decisions cannot be made properly by people who have an interest in them. Cannot be. We have run a 40 year (arguably 200 to 500 year) experiment on this, and it has failed and failed and failed. Elites need moderate negative feedback and to be insulated from the effects of their decisions which benefit groups.

Our society, as Saul points out, is all organized into interest groups, which half the audience is probably thinking is insane, because they think of interests group as things like environmentalist and people who want food aid, and not as corporations. (Though NGOs are definitely corporatist by Saul’s definition.)

People who have a strong interest can’t make good decisions for anyone but themselves about anything they have a strong positive interest in. It’s that simple.

If we want out of this mess, we have to break strong positive incentives. No stock options, for example. No surgeons flying around in private jets.

When someone’s interest is so strong it makes sense for them to burn the world down (and be clear, it did, because most wouldn’t still be here, and many figure their wealth will protect them), interest has failed. Incentives have failed.

Elites must be subject to the effects of their decisions, yes, but primarily on the downside.

It’s hard to see a way out of this now, because there isn’t one.

Instead the way out will be forced. When fear rises to the necessary level, those who betray society as a whole for their own interest will be dealt with. If they’re lucky it will be thru democratic norms, if they aren’t lucky, it will be the justice of the mob. In either case it will be too late to stop the worst of climate change and ecological collapse.

For you, a reader, the point is to internalize what went wrong and why, so you understand the conditions in which it will change and do not waste time on actions which won’t help. Moral ‘suasion will not work. The elites will respond to power and fear and nothing else.

If you can’t apply enough of that, or any movement asking for your help indicates their strategy doesn’t involve power and fear, then you need to prepare in other ways. In fact, as an ordinary person, you just need to prepare, because while you can do  your bit you do not have enough power to be determinative.

Politics is unlikely to save you and what you do will not determine if it does. So you must, with others, save yourselves.

(My writing helps pay my rent and buys me food. So please consider subscribing or donating if you like my writing.)

The New Age Of Vertical Integration

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On August 9, 2021

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When I was very young, conglomerates which controlled the entire chain of production were still somewhat popular. Companies didn’t like outsourcing or offshoring; if a widget went into their product, they wanted to own the factory, or eat least effectively control the supplier. Toyota had lots of suppliers, sure, but they were close the factories and they were under Toyota’s thumb: subsidiaries in all but name.

But business fashion changes, and the mantra of the day became “concentrate only on core business, get an expert to do everything else.” It often did reduce costs, but at the price of losing control. It didn’t work for everyone, General Electric under the over-praised but actually incompetent Jack Welch gutted itself. Following GE’s lead, other companies like the Big 3 auto producers started thinking they were financial companies and in the business of making money, not products.

Didn’t work out well for those who followed the fad whose business model didn’t actually support it.

But it did work well for many, at least in terms of increasing CEO and executive stock compensation. Growth actually slowed in the economy overall, but the economy in neoliberalism exists for companies, not companies for the economy, let alone society.

This era is now ending. Climate change is here, and infrastructure in foolish countries like America is failing repeatedly. China and the US are gearing up for a Cold War, Covid revealed that world shipping is fragile and not always cheap, and that no one can actually understand modern supply chains.

Supply officers panicked and started stockpiling goods, putting further pressure on supply chains and driving up prices for both shipping and materials, BUT if we didn’t have an era where trade and shipping and even production will become more and more subject to shocks, it would just be a passing fad.

But smart CEOS will now be reeling in their supply chains: rationalizing them so they know exactly where all the parts are made; the parts are made close to where they are assembled (if not in the same plant complex) and insulating them from problems with  3rd party shippers. The smart ones will pursue both vertical integration AND will have some geographic distribution (but not too much) so that geographical problems (wildfires, marine inundations, hurricanes, food riots) don’t shut them down entirely.

Those who don’t stand to lose their business entirely if a shock takes out a key part of their supply chain they don’t control or understand, or which supplies generally and is not bound to them.

We’ve been thru a very stupid era, and it’s not over yet, but it’s ending. Central banks can print money, but they can’t print machines parts, oil or food, and the limits of their power to deal with actual, real, non-financial shocks to the system are about to become evident.

Indeed, central banks, by funneling money to rich people and corporations which would have otherwise gone bankrupt have done almost everything within their power to make the system more fragile and worse run.l

When the food riots hit your country, remember to pay a visit to the central bank officers, past and present, to see how they are doing and to express your appreciation for their service. Perhaps you could also see the welfare of neoliberal politicians.

(Accurate job feedback has been removed from our elites, and they need it badly. When you have the chance, remember to help them out by providing it.)

Midas was a fool, but electronic bits are even more worthless than gold when the real world comes knocking.

(My writing helps pay my rent and buys me food. So please consider subscribing or donating if you like my writing.)

And The Mass Evictions are ON

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On August 2, 2021

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So, the evictions moratorium expired Saturday at midnight.

Over a quarter of renters are behind in some states, according to the Center on Budget and Policy Priorities think-tank.

Southern states are some of the worst affected, though some 16 percent of US households owed rent — about double the amount before the pandemic.

This wasn’t necessary, but the choice was made to not pay people to stay in place, and the money given for relief has mostly not been administered, presumably because the bureaucratic hoops are ridiculous.

only $3 billion in aid has reached households out of the $25 billion allotted to states and localities in early February.

Rental properties and single homes are being snapped up en-masse by private equity and other big investors. Eviction is in their interest, as it makes it easier to raise rent.

This is a watershed moment for real-estate in America: this is where it moves to being owned more by smaller landlords and individual owners (for homes) to just another corporate owned means of, well, rent extraction.

Remember that after 2008 banks deliberately held houses off the market to drive up prices, and you’ll understand what is going to happen to rent, which has already seen ridiculous rises. With large amounts of rental property now in a very few hands, it will be easy for a few people to decide to hold just enough properties off the market to drive up rents. It’s better for big institutional owners to have higher rent prices and some empty if that works out to more rent, and given shortages already exist, I’m betting that will be the case.

The era of cheap housing has been over for a while, but it’s going to be thrown in a coffin and staked thru the heart if big investors have their way.

We’ll talk more later this week, probably, about how wonderful and useful the homeless are and why they are treated so badly.

(My writing helps pay my rent and buys me food. So please consider subscribing or donating if you like my writing.)

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