Of Two Minds: Isn’t It Obvious We Need a New System?

From Charles Hugh Smith at Of Two Minds, Isn’t It Obvious We Need a New System?

Why do we tolerate such a corrupt, undemocratic, exploitive, elite-dominated system? Because we have no other choice? No, we do have a choice.

Isn’t it obvious that we need an alternative economic system that isn’t controlled by corporations, the government and the central bank for the exclusive benefit of insiders and elites? Isn’t it obvious that the current system has failed the majority of participants, and hence the ubiquitous sensations of:

1) being ignored by the insiders / elites who run the current system to their own benefit

2) being trapped in an economy that’s been stripped of social / upward mobility

3) being stripmined / exploited by domestic and globalized elites

4) disgust / frustration with the self-enriching political class that serves corporate/elite/insider interests above all else.

My 50 years of work have given me a ringside seat in how the economy has changed from inclusive to extractive. My jobs have ranged from agricultural field worker to running my own yard service to hospitality to construction to print media (free-lancer) to financial services (quant shop) to non-profit education to political rabble-rousing (unpaid) and my current profession as marginalized, misfit author-blogger (my specialty appears to be getting shadow-banned by Big Tech monopolist extractors).

My colleague Mark Jeftovic explains how systems can be inclusive or extractive. Systems that automatically bail out the greediest, wealthiest socially-useless speculators via the Federal Reserve are not just extractive, they’re exploitive and predatory. The Reversion Will be Mean.

Extractive systems are also intrinsically fragile in crises as the trapped / exploited behind the oars tend to abandon ship at the first chance, and the real-world sinews of the economy have been weakened by the bailouts and financial engineering. In effect, the fragile, brittle shell doesn’t need much of a shock to implode. (If you want to see this process in real time, look around you.)

Yes, finance was extractive in 1970, but it was a much smaller part of the economy. Back then, finance was less than 5% of the economy. Now, by some measures, it’s a third of the economy.

Yes, corporations bought political influence and exploited everything within reach but their reach wasn’t as global and their rapacity not quite as refined. Sociopathic exploitation such as stock buybacks and Big Pharma advertising directly to consumers were illegal.

The economy was not dependent on endless asset bubbles and bailouts of the most venal speculators. The Federal Reserve whines that it has to bail out the greediest scum of the nation again and again and inflate one asset bubble after another because otherwise this sucker’s going down.

Over the past 50 years, the ladders of upward mobility have splintered. Now making all the sacrifices to follow the conventional script (get a college diploma, etc.) don’t lead to secure employment. The fundamental backdrop of the economy is that labor’s share of the economy is in permanent decline: the value of labor has been in a freefall, a freefall masked by bogus “low inflation” and other trickery. (See chart below)

In 1970, costs for essentials were low and regulatory burdens on small business were modest. You could rent an apartment for a week’s pay or less. (Even in expensive Honolulu I could rent a studio apartment for half a week’s pay.)

Even in the mid-1980s, I could get a building permit for an entire house in one day; now the process takes weeks or even months.

Now costs and regulatory burdens have soared to crushing levels. This plays perfectly to government bureaucracies, which have monopolies on the power to raise junk fees, penalties, etc. at will, and Corporate America, whose core drive is eliminate any and all competition so profits can soar on the basis of monopoly, not on superior products or services.

People feel ignored because they are ignored. People feel trapped because they are trapped. People feel stripmined because they are being stripmined. People feel angry at the political Establishment because they no longer live in a democracy.

Can we be honest for a change and admit that ours is an extractive system in which anything goes for the wealthy and powerful and winners take most?

The few pockets of the economy not under the thumb of corporations, government or the central bank– for example, the cash / informal economy–are still dependent on corporations, government and the Fed for their currency, government subsidies and products/services.

Isn’t it obvious that we need an alternative system that isn’t run for the benefit of elites and insiders? What would such a system look like?

One, it would be voluntary / opt-in. Nobody would be forced to participate. All anyone would need to bring is a willingness to be useful and belong to something doing good work on behalf of the community rather than a bunch of parasitic, predatory billionaires.

Two, it would be self-organizing, meaning there is no ruling body that can be corrupted. Bitcoin is a real-world example of a self-organizing system. There is no cabal at the top who can be corrupted; bitcoin is distributed and decentralized. It is self-organizing, as is Nature.

Three, the operations of the system would be automated so human bias would have few opportunities to carve out unearned privileges. Note that most of the systems you interact with are fully automated. (Try reaching a human being in customer service.) The only difference is these systems are secret “black boxes” designed to maximize the profits of cartel-monopoly corporations, not serve the nation or its communities. They only serve the owners, 2/3rds of whom just so happen to be the top 0.1%.

Open-source software runs a great many enterprises and systems and does so without secret “black box” algorithms known only to the exploiters.

Four, it would have its own money, a cryptocurrency that comes into being in only one way: as payment for useful, purposeful labor that benefits the community in some way. All the technology for such a labor-backed cryptocurrency is already in hand.

My 50 years of work in a variety of sectors and jobs has made such a system “obvious” to me, and so I’ve written a book ( A Hacker’s Teleology) to explain how such a system would work and why it’s “obvious.” You can read excerpts of the book in this free PDF and read the story behind the book and the Introduction.

Why do we tolerate such a corrupt, undemocratic, exploitive, elite-dominated system? Because we have no other choice? No, we do have a choice. The first step to outline the values, processes and goals of an alternative system that actually works for everyone and our planet.

I’ve taken a stab at outlining such a system, so why not check it out? If you can come up with a better one, then get it out there for the rest of us to study.

We do have a choice. But we have to take it. If we’re unwilling to make any systemic changes, then we truly are trapped–not by them (whomever they might be) but by our own unwillingness to accept that systemic change is now necessary if we’re to have a future that’s beneficial to all.


Of Two Minds: Intolerance and Authoritarianism Accelerate Disunity and Collapse

From Charles Hugh Smith at the Of Two Minds blog, Intolerance and Authoritarianism Accelerate Disunity and Collapse

Scapegoating dissenters only hastens the disunity and disarray that accelerates the final collapse.
Authoritarianism is imposed on us, but its sibling intolerance is our own doing. Intolerance and authoritarianism are two sides of the same coin: as intolerance becomes the norm, the intolerant start demanding that the state enforce their intolerance by suppressing their enemies via increasingly heavy-handed authoritarian measures.
Intolerance and authoritarianism increase as instability takes hold and living standards decline. In good times, dissent and differences of opinion are not only tolerated but celebrated, as this freedom to hold a variety of beliefs serves to unify society.
In bad times, dissent and differences are viewed as mortal threats to the social order. Perhaps there is a human instinct when times become troubled to insist “we must all row together,” i.e. to seek a unity enforced by a rising intolerance that demands more authoritarian action by the state.
For example, in wartime, pacifist views that were previously tolerated become criminal offenses.
The irony here is this forced conformity doesn’t generate unity–it fractures society into bitterly warring camps as the middle ground vanishes into either/or extremism that sees authoritarianism (in support of our side, of course) as not just justified but essential.
Intolerance and authoritarianism undermine and ultimately destroy the unity that was generated by tolerance and a wide variety of beliefs and dissenting views. As our own insecurities increase, we fall all too willingly to the temptation to see others’ recalcitrant refusal to join our camp without reservations as the source of our insecurity.
In this mindset of insecurity, the “solution” is to force compliance by any means available so everyone is in our camp. And since some might be hiding the insincerity of their devotion to our righteous cause, the need for an Inquisition becomes pressing, so the insincere or closet traitors can be unmasked and punished.
But the Inquisitors themselves inevitably come under suspicion, and an Inquisition of the Inquisitors soon lays waste to those who hubristically held themselves as the arbiters of conformity. There is no way to escape this drive to dissipate insecurity by forcing conformity except the complete collapse of the social, political and economic orders.
This is the path to madness and complete social breakdown. But such is the power of insecurity and uncertainty that history records our self-destructive urgency to abandon the middle ground and a diversity of viewpoints and beliefs for the totalitarian uniformity of forced conformity.
But once rooted, intolerance knows no bounds and the snake of intolerant authoritarianism ends up eating its own tail. In an era of intolerance, ideological purity is a constantly shifting landscape of quicksand. Those at the top passing judgment on others’ ideological purity soon find their own purity is under attack.
Increasingly intolerant, repressive authoritarianism marked the final days of the Roman decline and fall. Rather than face the profound and novel crises directly and unify around the sacrifices needed to resolve the crises favorably, it is so much easier to blame everyone who doesn’t agree with our position as the source of the crises.
This is delusional, of course: crises have real-world sources, and scapegoating dissenters only hastens the disunity and disarray that accelerate the final collapse.

Of Two Minds: Pandemic Accelerating Trends That Disrupt Foundations of Economy

From Charles Hugh Smith at the Of Two Minds blog, The Pandemic Is Accelerating Trends That Are Disrupting the Foundations of the Economy

The problem is the economy that’s left has no means of creating tens of millions of jobs to replace those lost as the 1959 economic model collapses.

Fundamentally, the economy of 2019 was not very different from the economy of 1959: people went shopping at retail stores, were educated at sprawling college campuses, went to work downtown, drove to the doctor’s office or hospital, caught a flight at the airport, and so on.

The daily routine of the vast majority of the workforce was no different from 1959. In 2019, the commutes were longer, white-collar workers stared at screens rather than typewriters, factory workers tended robots and so on, but the fundamentals of everyday life and the nature of work were pretty much the same.

Beneath the surface, the fundamental change in the economy was financialization, the commodification of everything into a financial asset or income stream that could then be leveraged, bundled and sold globally at an immense profit by Wall Street financiers.

This layer of speculative asset-income mining had no relation to the actual work being done; it existed in its own derealized realm.

For decades, these two realmsthe structure of everyday life (to borrow Braudel’s apt term) and the abstract, derealized but oh so profitable realm of financialization–co-existed in an uneasy state of loosely bound systems.

If you squinted hard enough and repeated the mantras often enough, you could persuade yourself there was still some connection between the everyday-life economy and the realm of financialization.

The two realms have now disconnected, and the real-world economy has been ripped from its moorings, as patterns of work and every-day life that stretch back 70 years to the emergence of the postwar era unravel and dissolve.

The trends that are currently fatally disrupting retail, education, office work and healthcare have been in place for years. When I wrote my 2013 book about the digitized future of higher education in a low-cost union of high-touch and low-touch learning, The Nearly Free University, all these trends were already clearly visible to those willing to look beyond the models embedded in the economy for decades or even centuries.

Visionaries like Peter Drucker foresaw the complete disruption of the education and healthcare sectors as far back as 1994. Post-Capitalist Society.

The problem with this disruption is it eliminates tens of millions of jobs–not just the low-paying jobs in retail and dining-out, but high-paying jobs in university administration, healthcare, and other core service sectors.

The last real-world connection between everyday life and financialization was the over-supply of everything that could be financialized: the way to reap the big profits was expand whatever could be leveraged and sold. So retail and commercial space ballooned, colleges proliferated, cafes sprang up on every corner, etc.

Meanwhile, financialization’s unquenchable thirst for higher profits stripped everything of the redundancy and buffers required to stabilize the system in times of crisis. So hospitals no longer kept inventory because by the logic of financialization, all that mattered was maximizing the return on capital–nothing else could possibly matter in the derealized realm of speculative profiteering.

Now healthcare finds itself trapped between the pincers of financialization’s stripmining and the collapse of retail in-person demand–the financial foundation of the entire system. Under the relentless pressure of financialization’s stripmining and profteering, healthcare only survives if it can bill somebody somewhere a staggering amount for everything from office visits to procedures to hospital stays to medications.

Once that avalanche of billing dries up, the entire sector implodes: a sector that accounts for almost 20% of the U.S. economy.

Higher education is also imploding, and for the same reason: its output no longer justified its enormous cost structure. The same can be said of overbuilt retail and commercial space: the financial justification for sky-high rents have imploded and will never come back. The over-supply is so monumental and the collapse of demand so permanent, the gigantic pyramid of debt and speculative excess piled on all these excesses is collapsing.

A bailout by the Federal Reserve won’t change the fundamentals of the collapse of financialization; all the Fed can do is reserve scarce lifeboat seats for its billionaire banker-financier pals. (Warren, you know Bill, have you met Jamie, Jeff, Tim and the rest of the Zillionaire Rat-Pack?)

Despite the record highs in the stock market–the ultimate expression of financialization disconnected from the real-world economy–financialization is also imploding. Financialization still claimed a connection to the real world of income streams and the value of the collateral underlying all the speculative profiteering: the high rents paid by the restaurants on the ground floor and the businesses for office space above justified the high value of the collateral, the commercial building.

Foundational swaths of the real-world economy have been swept away, and so the collateral is largely worthless. Lots of people want their employer to start paying for business-class airline seats again so they can jet around the country on somebody else’s dime, staying in pricey hotels and attending conferences, but these activities no longer have any financial justification.

The economy of 1959 is finally expiring. The enormous time and money sinks of transporting humans hither and yon no longer have any financial justification.

The problem is the economy that’s left has no means of creating tens of millions of jobs to replace those lost as the 1959 economic model collapses. We all know that automation is replacing human labor, but the real change is the collapse of the financial justification for the enormously costly systems we now depend on to generate jobs: healthcare, retail, tourism, dining out, education, working downtown, and all the professions dependent on managing all this complexity.

While the elimination of low-skill jobs–a longstanding trend–is attracting attention, the implosion of the 1959 economic model and financialization will soon sweep away millions of high-paying professional jobs that no longer have any financial justification.

As the 1959 economy implodes, so does the tax system based on payroll taxes and property taxes. This article sketches out the perverse incentives for employers to invest in automation rather than hire workers: Covid-19 Is Dividing the American Worker (WSJ.com)

There are alternatives, but they require accepting the implosion of both the 1959 economic model and its evil offspring, financialization.

I sketched out an alternative way of organizing work, everyday life and finance in my book A Radically Beneficial World. There are alternative ways of organizing civilization other than the insanely wasteful and exploitive system we now inhabit.


Of Two Minds: Surviving 2020 – Plans A, B, and C

Charles Smith at Of Two Minds has an article on Surviving 2020 – Plans A, B, and C

As the bogus prosperity economy built on exponential growth of debt implodes, we all seek ways to protect ourselves, our families and our worldly assets. There are any number of websites, subscription services and books which offer two basic “practical recommendations:”
1. Buy gold (and/or silver) and don’t worry about timing the market as everything else will become worthless.
2. Establish a heavily armed and well-supplied hideaway before everything implodes.
My problem with these suggestions is that they are predicated on a decisive “end of the world as we know it” collapse of civilization.
While I am alive to the possibility of this cataclysm, an analysis of the many feedback loops which will slow or counteract such a decisive collapse suggests other alternatives are even more likely: my term for the slow, uneven decline of the credit/speculative-bubble era is devolution.
I cover feedback loops, historical cycles and why a lengthy devolution is as least as likely a scenario as abrupt collapse in my book Survival+ (free downloadable version is linked below).
In other words, I do not see planning for eventualities as “either/or.” I look at it in terms of three levels:
Plan A: dealing with devolution: government services are cut back, prices for essentials rise over time, fulltime paid jobs become scarce, the State (all levels of government) becomes increasingly repressive as it pursues “theft by other means,” i.e. the stripmining of private assets to feed its own fiefdoms and Elites; most assets fall in purchasing power (value) as the system’s financial props erode.
Plan B: When things become rationed/unavailable, services become sporadic, pensions stop being paid in full, spontaneous homeless encampments arise in heretofore “nice” areas, cities go bankrupt, small businesses go underground to survive the ever-higher taxes being levied on the few remaining productive enterprises, etc.
Plan C: if things fall apart: either move to communities where you or your family have roots (tough luck for all the millions of rootless Americans shifted around by corporate “relocations” the past 50 years) or turn to your neighborhood, town, friends, family, church and other social networks for cooperative strength.
The problem with putting all your resources into a “bug-out” strategy (Plan C) is that it might not come to pass, in which case you’ve misallocated your assets.
This is why I focus Survival+ on structuring a prosperity which will work on all levels. This prosperity has five basic parts:
1. Prepare for hybrid work by developing multiple skillsets, interests and contacts and understand that being productive and reciprocal is more important than getting paid (as I put it: “to take care of Number One, first take care of numbers 2 through 9.”)
2. Develop sustainable, overlapping social networks (self-organizing networks) in which you have more than one place to interact with the same person, i.e. at church or in the neighborhood. I call these non-State, voluntary networks transparent non-privileged parallel structures because they are independent of the State and Monopoly/Predatory Capital Elites.
3. Cut expenses to the bone so you no longer need a large income to “survive.” Consider lowering your taxable income by working less so you’re no longer working so hard just to pay taxes generated by high incomes. (Thanks to correspondent Stephen A. for noting that barter that results in gains is generally taxable. As always, check with the I.R.S. or a licensed tax advisor to confirm what income is taxable/nontaxable.)
4. Reach a new understanding of “prosperity”: health and social wealth are the “treasures” which money cannot buy. Yes, we all need some money, and preserving/growing whatever capital you do have will be difficult and time-consuming. There is no easy “one size fits all” solution.
5. Understand the importance and strength in building and maintaining personal integrity, the one asset we each control in totality and that no one can take from us. All reciprocal networks (financial, political, religious or social) depend entirely on trust, and the bedrock of trust is complete personal integrity.
Much of the devolution we now face is a direct result of the degradation of integrity. This moral/ethical component of financial implosion is glossed over by the corporate media because the Power Elites have implicitly undermined integrity and morality as a means of soldifying their control of the media and of the national income.
Yes, I know this all sounds wonderful, but how do you do it in real life? Well, life is and always has been a do-it-yourself affair. With 200 million+ employable people in the nation, what advice or recommendations can I possibly give to any one individual, when only that person knows their own interests, strengths and potential customers, clients, allies, competitors and mentors?
Let’s start with one simple truth: nobody knows the future. Thus everything we discuss now is contingent on a number of unpredictable interactions. To base our planning on one scenario is to risk misallocating our scarce assets and resources…(continues)