When society, itself, becomes too big to fail but has no one to give it a bailout. (or why I read Stowe Boyd)

In a post called "The Apotheosis Of Complexity," Stow Boyd quotes a guy called Ross Douthat who talks extensively about the consolidation of power in the world. The basic idea (I think) of Douthat's argument is that Globalism is ultimately a bad idea since it creates too much of a dependence on these connections--so when one part of the global economy fails, we all feel it. Now, personally, I think this is supposed to be a good motivator for all of us to work together to get along--of course, this ignores human nature (sometimes we just don't want to get along). But Boyd picks up on something Douthat ignores--the world isn't just connected by it's monetary system. Check out the commentary he included along with an extensive Douthat quote:

Everywhere you turn, there are increasingly powerful oligarchies pushing on one side and increasingly inbred elite politicos and policy makers pulling on the other, and the rest of us are out in the cold.

And we seem to have raised this conflation of interests to an almost celestial level. Whenever troubles arise, we want to connect things tightly together, like adding extra buttresses to a cathedral heeling in a strong wind, but not suspecting that the additional weight is undermining the foundation.

Worst of all, this increasingly fragile set-up guarantees maximum whipsaw whenever any jitter happens. Downturn in Greece? Euro drops, Wall Street sells, and bonds zip all over the place. A drought in Argentina? Food prices shoot up in South East Asia.

The only answer to complexity is to decouple the large fragile systems into smaller, resilient, more local systems. We shouldn’t have a single food economy, but tens of thousands of them, which a reasonable amount of cross-trading. The solution to energy can’t be a single unified world energy economy based on low-cost oil and coal, but myriad solutions based on local conditions, like solar, geothermal, wind, and, yes, coal, oil, and nuclear. The answer to Europe’s financial woes may not be the Euro, but a return to fiat currencies for the many nations of Europe.

But we seem to be headed for a local maximum for complexity, which probably foretells a local minimum for stability, as well.

A good time to short the markets, I bet.

via underpaidgenius.com

Nice little poke at the markets, there at the end :) While I disagree with some of the finer points of Boyd's argument, the overall theory is spot-on. Globalism is ultimately bad because it creates a system too big to support its own weight. When one support fails, the whole thing can come crashing down.

This is the world we're quickly coming to live in today. In many ways, America is already that world and is already suffering for it. The combination of a weak fiat currency, greedy bankers/brokers who want to take advantage of said fiat currency's ability to be manipulated, and the average joe's inability to understand how it all works are all huge tent-poles that have snapped like balsa under the pressure.

While I disagree with Boyd's idea that we'll need to stick with new and *old* solutions, any system that puts all of it's eggs in one basket is asking for trouble. The very model of how life evolves is a demonstration in diversification. The mother + father = offspring is evolution's answer to the "all your eggs in one basket" problem. Genetic diversification. A lifeform with three or four parents would be even more effective at surviving, because it would diversify the offspring's genes even more.

Of course, Boyd also includes the idea that nuke power and fiat currencies are necessary even after we simplify. This is where I disagree--they took cocaine out of Coca-Cola, didn't they? Nuclear power is cocaine--sure, it'll get you high, but it's very dangerous for your long term health. Likewise, fiat currencies (money not based on precious metals) are also cocaine in that the short term gains are compromised by long-term instability (we're living that instability now).

Without tangible solid objects to link our financial world to, manipulation is still too easy for folks who want to put greed ahead of everything else. This is, after all, what led many of our global economy's tent-poles to fail over the past few years.

However, the core of what Douthat and Boyd are saying is still sound--the bigger they come, the harder they fail.

But at this point, when our food, energy AND financial systems fail, who is left to give us a bailout?

Posted via web from thepete's posterous