Monday, July 22, 2024

Two Tidbits of Timeless Political Wisdom from Machiavelli

"Generosity" funded by debt or currency devaluation is the opposite of generosity: it is the ultimate taking.

Now that the air is thick with the burned-rubber stench of politics, let's consider two tidbits of timeless political wisdom from Machiavelli. Though often-maligned as the dark Lord of amoral cunning, my re-reading of Machiavelli's The Prince (completed in 1514, published after his death in 1532) reveals Mr. M. as a practical sort, not so much a promoter of devilish amorality as an observer wise to the vagaries of power.

Let's start with a famous excerpt from Chapter Six. The first is a translation in the modern vernacular; the second is an older more literal translation.

The Prince (PDF):

Here we have to bear in mind that nothing is harder to organize, more likely to fail, or more dangerous to see through, than the introduction of a new system of government. The person bringing in the changes will make enemies of everyone who was doing well under the old system, while the people who stand to gain from the new arrangements will not offer wholehearted support, partly because they are afraid of their opponents, who still have the laws on their side, and partly because people are naturally skeptical: no one really believes in change until they've had solid experience of it. So as soon as the opponents of the new system see a chance, they'll go on the offensive with the determination of an embattled faction, while its supporters will offer only half-hearted resistance, something that will put the new ruler's position at risk too.


The literal translation:

The Prince (PDF):

And it ought to be remembered that there is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of things, because the innovator has for enemies all those who have done well under the old conditions, and lukewarm defenders in those who may do well under the new. This coolness arises partly from fear of the opponents, who have the laws on their side, and partly from the incredulity of men, who do not readily believe in new things until they have had a long experience of them. Thus it happens that whenever those who are hostile have the opportunity to attack they do it like partisans, whilst the others defend lukewarmly, in such wise that the prince is endangered along with them.


What Mr. M. is describing here is the immense incentive of those who have been well-served by the status quo to fight tooth and nail to defend its current configuration to maintain their share of the gravy train. Those who fear losing will fight far more vociferously than those who hope to gain from an uncertain and risky change of regime.

This generates what I've termed doing more of what's already failed for if the status quo was actually functioning as wonderfully as its defenders' claim, then there would be little need to defend it against calls for a new arrangement.

What Mr. M. didn't describe is the helping hand of collapse: when the status quo finally unravels, those it enriched will embrace the magical-thinking delusion that it can be restored in some sacrifice-free fashion, and that because they benefited so handsomely, everyone else should support this restoration.

But it's too late for a painless restoration, and so the defenders of the old order eventually give way and bitterly accept the necessity for a new arrangement. Short of systemic breakdown, those who have been enriched by the status quo will actually hasten its demise, for in their desperation to cling to "what's good for me is good for everyone," they will devalue the currency, borrow sums that can never be paid, and deploy other artifices to prop up an unsustainable status quo.

Which brings us to the second tidbit of timeless wisdom: the enduring advantage of frugality over liberality. The word "mean" in this contexts refers to frugality, not cruelty, and "liberal" refers to generous spending, not Progressive politics. We start with the modern vernacular translation again:

Since a ruler can't be generous and show it without putting himself at risk, if he's sensible he won't mind getting a reputation for meanness. With time, when people see that his penny-pinching means he doesn't need to raise taxes and can defend the country against attack and embark on campaigns without putting a burden on his people, he'll increasingly be seen as generous -- generous to those he takes nothing from, which is to say almost everybody, and mean to those who get nothing from him, which is to say very few. In our own times the only leaders we've seen doing great things were all reckoned mean. The others were failures.

Nothing consumes itself so much as generosity, because while you practice it you're losing the wherewithal to go on practicing it. Either you fall into poverty and are despised for it, or, to avoid poverty, you become grasping and hateful. Above all else a king must guard against being despised and hated. Generosity leads to both. It's far more sensible to keep a reputation for meanness, which carries a stigma but doesn't rouse people's hatred, than to strive to be seen as generous and find at the end of the day that you're thought of as grasping, something that carries a stigma and gets you hated too.


The literal translation:

Therefore, a prince, not being able to exercise this virtue of liberality in such a way that it is recognized, except to his cost, if he is wise he ought not to fear the reputation of being mean, for in time he will come to be more considered than if liberal, seeing that with his economy his revenues are enough, that he can defend himself against all attacks, and is able to engage in enterprises without burdening his people; thus it comes to pass that he exercises liberality towards all from whom he does not take, who are numberless, and meanness towards those to whom he does not give, who are few.

We have not seen great things done in our time except by those who have been considered mean; the rest have failed.

And there is nothing wastes so rapidly as liberality, for even whilst you exercise it you lose the power to do so, and so become either poor or despised, or else, in avoiding poverty, rapacious and hated. And a prince should guard himself, above all things, against being despised and hated; and liberality leads you to both. Therefore it is wiser to have a reputation for meanness which brings reproach without hatred, than to be compelled through seeking a reputation for liberality to incur a name for rapacity which begets reproach with hatred.


In other words, limited-spending frugality allows the ruler to be generous to the many by keeping taxes low. While generosity initially generates a warm and fuzzy feeling for the ruler, the eventual result of opening the spigots of the money reservoir is either the bankruptcy of the currency--the ultimate rapacity, as everyone's money is consumed in a great bonfire--or much higher taxes imposed as the only means to stave off insolvency.

Here is Federal debt--a parabolic increase in "generous" spending, "generous" until the consequences show up:



Here is total public-private debt: Everybody's borrowing and spending "generously" until the banquet of consequences is served, and Mr.M.'s rapacity which begets reproach with hatred is the main course.



In summary: "generosity" funded by debt or currency devaluation is the opposite of generosity: it is the ultimate taking. There is indeed an amoral cunning to this fake "generosity" and the temporary illusion of "wealth" it creates, but Mr. M. is not promoting this artifice, he is making the case against it.



My recent books:

Disclosure: As an Amazon Associate I earn from qualifying purchases originated via links to Amazon products on this site.

Self-Reliance in the 21st Century print $18, (Kindle $8.95, audiobook $13.08 (96 pages, 2022) Read the first chapter for free (PDF)

The Asian Heroine Who Seduced Me (Novel) print $10.95, Kindle $6.95 Read an excerpt for free (PDF)

When You Can't Go On: Burnout, Reckoning and Renewal $18 print, $8.95 Kindle ebook; audiobook Read the first section for free (PDF)

Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States (Kindle $9.95, print $24, audiobook) Read Chapter One for free (PDF).

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
(Kindle $5, print $10, audiobook) Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake (Novel) $4.95 Kindle, $10.95 print); read the first chapters for free (PDF)

Money and Work Unchained $6.95 Kindle, $15 print)
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Friday, July 19, 2024

Twisters on the Horizon: Is This Decade a Re-Make of 'That 70s Show'?

If we're in a re-make of 'That 70s Show', the plot twists--and twisters heading our way--may be far wilder than we can currently imagine.

I've often written about the 1970s, as it is a profoundly misunderstood decade in so many ways. As one example, the enormous expense of retooling America's industrial base to clean up pollution and become more efficient that I described in The 1970s: From Rotting Carcasses Floating in the River to Kayak Races (January 22, 2023) added to the stagflationary dynamics of the decade (trillions invested with no immediate increase in productivity or profits) but eventually paid enormous dividends in the decades that followed.

I often discuss cycles, and there are various theories about cycles. One is that all economic cycles share certain traits, for example, an unsustainable expansion of credit that leads to defaults and writedowns (the Kondratieff cycle, the business cycle), or an unsustainable expansion of the money supply.

Another theory holds that we don't repeat the most recent downturn, we repeat the one before that. In this scenario, we'll experience not a repeat of the stagflationary 1970s but the Crash and Depression of the 1930s.

If what we've entered is not just an economic cycle but an era of social-political tumult, then we have to be careful not to assume we can predict which features will echo past cycles. Perhaps we will experience the stagflation of the 1970s in this decade, as financial excesses are worked out and monumental investments to retool our industrial base and infrastructure place a drag on productivity and profits. There is substantial logic in that scenario.

As the charts below illustrate, stagflation also crushed the stock market's speculative dynamic. In the financial realm, That 70s Show was characterized by a massive devaluation of the purchasing power of stocks as a result of elevated inflation and an equally massive decay in the speculative impulse to play the stock market, as the percentage of household assets in the stock market fell from 38% to 14%.

But what we might experience in addition to stagflation is something few seem to recall about the 1970s: the extraordinary unpredictability of events and crises. Consider the situation in April 1973, at the start of President Nixon's second term.

The Christmas Bombing of North Vietnam in December 1972 had brought all parties to the negotiating table again, and a deal bringing closure to the war in Vietnam had been signed. Inflation had flared up, a currency crisis loomed and Nixon had issued sweeping policy changes in August 1971, ending the convertibility of the US dollar to gold in international markets and imposing wage and price controls.

The general outlook in early 1973 was positive, and the Dow Jones Industrial Average (DJIA) topped 1,000 again, reaching a new nominal high. If any seer predicted the Oil Embargo / Gas Crisis that pushed Americans into long lines around gas stations in October 1973, or the kidnaping of media heiress Patty Hearst in February 1974, or the Watergate cover-up leading to Nixon's resignation in August 1974, or the attempt on President Ford's life in September 1975, they are unknown to the world.

If anyone predicted a decade of anti-Establishment domestic terrorism, their prediction is lost to history. The hundreds of bombings of Corporate America buildings, banks and other symbolic fortresses of the Establishment has been ably documented in the book Days of Rage: America's Radical Underground, the FBI, and the Forgotten Age of Revolutionary Violence.

If anyone predicted that the US dollar would lose two-thirds of its purchasing power from 1966 to December 1981, their prediction is not well known. What $1 bought at the market peak in 1966 cost $3 by December 1981, in the throes of the deepest recession since the Great Depression, a recession triggered by soaring interest rates and monetary tightening to crush the wage-price-spiral inflation that had become embedded in the economy by 1980.

Note that "Dow 1,000" in October 1982 was only "Dow 330" when adjusted for inflation since the peak in 1966-- $1 in February 1966 = $3.07 in October 1982. From the Dow's top in January 1973 at 1051.70 to the point when the Dow reached 1,012 in October 1982, $1 in January 1973 = $2.31 in October 1982. So "Dow 1,000" in January 1973 = "Dow 435" in October 1982. These data points are from the CPI Inflation Calculator (BLS.gov).



Few predicted the demise of the belief that "stocks only go up" and the market was a money-making machine available to all gamblers, oops I mean "investors."



If we propose that the 2020s will mirror the 1970s not in the precise dynamics but in the unpredictability of crises and reversals of all that is stable, known and reliable, then we cannot possibly predict what lies ahead. We can only anticipate twisters on the horizon that will be completely unexpected and potentially disruptive on a scale that stretches across culture, society, politics and the economy.

If we're in a re-make of That 70s Show, the plot twists--and twisters heading our way--may be far wilder than we can currently imagine.



My recent books:

Disclosure: As an Amazon Associate I earn from qualifying purchases originated via links to Amazon products on this site.

Self-Reliance in the 21st Century print $18, (Kindle $8.95, audiobook $13.08 (96 pages, 2022) Read the first chapter for free (PDF)

The Asian Heroine Who Seduced Me (Novel) print $10.95, Kindle $6.95 Read an excerpt for free (PDF)

When You Can't Go On: Burnout, Reckoning and Renewal $18 print, $8.95 Kindle ebook; audiobook Read the first section for free (PDF)

Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States (Kindle $9.95, print $24, audiobook) Read Chapter One for free (PDF).

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
(Kindle $5, print $10, audiobook) Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake (Novel) $4.95 Kindle, $10.95 print); read the first chapters for free (PDF)

Money and Work Unchained $6.95 Kindle, $15 print)
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Tuesday, July 16, 2024

The Roots of American Populism: Are Trump and Vance Populists?

Let us hope that whomever ascends to the leadership is a populist in the full sense of the word, channeling Emerson and his fellow critics of what we now call neoliberalism.

What does it mean to say a politician is a populist? Over 30 years ago, Christopher Lasch observed in his book The True and Only Heaven: Progress and Its Critics that populism had been applied to such a wide swath of individuals and causes that it had lost any specific meaning.

This definition is a start: A political approach that strives to appeal to ordinary people who feel that their concerns are disregarded by established elite groups.

Lasch, if not alone among American intellectuals, was certainly one of the few who was deeply concerned with the roots of American populism, and with its critique of the changes in the American social, cultural and economic realms that were promoted by the status quo at the expense of those social classes diminished by those changes. Those who resisted these changes were deemed populists.

Lasch meticulously traces the roots of American 19th century populism through the influential Enlightenment era thinkers of Europe, the Protestant tradition's theological debates and American intellectual critics such as Ralph Waldo Emerson, of whom Lasch wrote: "his social views can easily be recognized, I think, as the views of a nineteenth-century populist. He has a populist distain for the fashionable life" which "fosters vanity, luxury and frivolous display."

Emerson's distain for the vanities of luxury was equaled by his distain for parasitic financiers, a position born of Emerson's religious beliefs. As Lasch notes, "Emerson believes in the moral value of manual labor." In other words, honest labor--what Emerson referred to as a calling--had a spiritual component. Here is Lasch: Emerson "would gladly sacrifice some of the 'conveniences' of civilization to the moral culture conferred by farming or a craft."

In his essay Politics (1844), Emerson "argues that the prevailing social arrangements allow 'the rich to encroach upon the poor.'" In Lasch's summary, Emerson held that "Society needs self-respecting men and women,, not a perfect set of institutions." He quotes Emerson: "Society can never prosper... until every man does that which he is created to do."

Emerson also held that those seeking to get something for nothing--the essence of the parasitic financialization and speculation Emerson viewed as a mortal threat--would eventually face a reckoning akin to karma: "A 'third silent party', Emerson notes, attends 'all our bargains'--nemesis or fate."

In the broad sweep of industrialization and financialization that took hold in the 19th century and utterly transformed America, populists viewed wage labor--being paid a wage rather than earning a living from one's own property and skills--was contrary to the American ideal and democracy, as only those with a stake in the system as owners could be entrusted to act in the interests of the nation as a whole, and only those with a path to ownership of their labor could reach their full potential and find their calling.

Let us turn now to the prevailing socio-economic arrangements in 21st century America, which are the result of 45 years of financialization and 30 years of rampant globalization, arrangement created not by forces beyond our influence but by policies promoted by political, social and economic interests on their own behalf.

These arrangements are quickly illuminated by a simple question: did they inflate your bubble or pop your bubble? In other words, did the bubble we each live in expand as a direct result of hyper-financialization and hyper-globalization, or was it popped by these forces?

That over 90 million Americans are expected to travel overseas this year offers a rough guide to the winners and losers in modern-day America: the 25% booking flights overseas who are reading articles asking if a $12,000 budget for a vacation in Europe is enough live in bubbles nicely inflated by financialization, speculation and globalization, while the bottom 60% are generally living paycheck to paycheck and cannot dream of having $12,000 available to spend on overseas travel.

In the America of today, a great many people have zero hope of buying a house in the city they grew up in and call home. Those who don't inherit a house or fortune, or who didn't choose their parents wisely have little hope of working their way through college with part-time jobs, as even state universities charge tens of thousands of dollars for tuition, fees and books, never mind living expenses.

I detailed these realities in "Why Are You So Negative?" Good Question. 4 Answers from Real Life (4/25/24)

Wage labor--what has been correctly identified as wage slavery--is now the norm, along with its sibling, debt serfdom. I have addressed the decline of self-employment (not gig-slavery, real self-employment) for years, and the rise of debt as the means to attempt social mobility and grab hold of a middle-class life.

A rigorous analysis of IRS data in 2015 revealed that only 1% of the US workforce of 145 million earns a middle-class income from self-employment: Only 4.48 million self-employed earn $50,000 or more, and 3 million of those are partnerships or corporations, i.e. professionals such as CPAs, attorneys, etc. That leaves leaves about 1.5 million people who aren't in the professional class (those with advanced degrees and professional licenses and credentials) who earn a middle class living as sole proprietors. Here is the analysis:

Endangered Species: The Self-Employed Middle Class (May 2015)

As inflation in both essentials and assets have shredded the earnings and pathways to ownership of the bottom 60%, the lived reality of those who didn't get rich from financialization, speculation and globalization is one of precarity, where any unexpected major expense such as a medical bill, car repair, insurance increase, etc. is enough to push financial anxiety into the red zone.

Precarious: One Misfortune Away from Insolvency (5/14/24)

The 45-year decline in labor's share of the economy was not the result of fate, but of central state / bank policies promoted by those who benefited most from these policies. I covered these realities in The Bill for America's $50 Trillion Gluttony of Inequality Is Overdue (9/21/20). This quote from Time Magazine encapsulates how policy created inequality on an unprecedented scale:

"There are some who blame the current plight of working Americans on structural changes in the underlying economy--on automation, and especially on globalization. According to this popular narrative, the lower wages of the past 40 years were the unfortunate but necessary price of keeping American businesses competitive in an increasingly cutthroat global market. But in fact, the $50 trillion transfer of wealth the RAND report documents has occurred entirely within the American economy, not between it and its trading partners. No, this upward redistribution of income, wealth, and power wasn't inevitable; it was a choice--a direct result of the trickle-down policies we chose to implement since 1975.

We chose to cut taxes on billionaires and to deregulate the financial industry. We chose to allow CEOs to manipulate share prices through stock buybacks, and to lavishly reward themselves with the proceeds. We chose to permit giant corporations, through mergers and acquisitions, to accumulate the vast monopoly power necessary to dictate both prices charged and wages paid. We chose to erode the minimum wage and the overtime threshold and the bargaining power of labor. For four decades, we chose to elect political leaders who put the material interests of the rich and powerful above those of the American people."




I regularly repost this chart because it's a snapshot of what's wrong with the status quo in America and what will eventually unleash nemesis on all those living in bubbles inflated by parasitic finance masquerading as "central bank policy," "shareholder value" and "investing" in speculation.

Those who believe that there will be no blowback from becoming a nation where the bottom 50% own a near-zero 2.6% share of the nation's immense private financial wealth are living in a bubble in desperate search of a needle.



Unsurprisingly, those who benefited the most from the ascendancy of parasitic finance and globalization approve most heartily of their own management of the nation's institutions and policies. The bottom 99% have a decidedly less favorable view of the nation's self-serving elites:



All of which brings us to the potential ascent of the Trump-Vance ticket to leadership. If populism means anything, it means restoring the value of work and especially manual labor of the real-world essential sort that ChatGPT, apps, bots and marketing cannot do, restoring the ladder of social mobility and gutting the forces that have laid waste to all those who didn't have the opportunity to buy stocks and real estate before they skyrocketed to unattainable heights: hyper-financialization and hyper-globalization.

Nemesis is running out of patience. Let us hope that whomever ascends to the leadership is a populist in the full sense of the word, channeling Emerson and his fellow critics of what we now call neoliberalism. What counts now isn't political labels; what counts now is promoting policies that reverse the 45-year hollowing out of the nation--morally, culturally and economically--that benefited the few at the expense of the many.



My recent books:

Disclosure: As an Amazon Associate I earn from qualifying purchases originated via links to Amazon products on this site.

Self-Reliance in the 21st Century print $18, (Kindle $8.95, audiobook $13.08 (96 pages, 2022) Read the first chapter for free (PDF)

The Asian Heroine Who Seduced Me (Novel) print $10.95, Kindle $6.95 Read an excerpt for free (PDF)

When You Can't Go On: Burnout, Reckoning and Renewal $18 print, $8.95 Kindle ebook; audiobook Read the first section for free (PDF)

Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States (Kindle $9.95, print $24, audiobook) Read Chapter One for free (PDF).

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
(Kindle $5, print $10, audiobook) Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake (Novel) $4.95 Kindle, $10.95 print); read the first chapters for free (PDF)

Money and Work Unchained $6.95 Kindle, $15 print)
Read the first section for free


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Sunday, July 14, 2024

I Fear for Our Nation

I hope we gain the wisdom that we need each other, not as enemies but as colleagues, not always in agreement but respectful nonetheless.

I fear for our nation, and I am not alone. The echoes of the past are becoming louder, and I recall the decades between 1961 and 1981 with trepidation, for that era was marked by crisis, tumult, discord, civil violence, war, a near miss of nuclear war, extreme polarization and assassinations.

Many Americans sense the country never really recovered from the assassination of President John F. Kennedy in 1963, or from the assassinations of presidential candidate Bobby Kennedy and civil rights leader Martin Luther King, Jr. five years later in 1968. An attempt on the life of President Gerald Ford was narrowly thwarted in 1975, and an attempted assassination of President Ronald Reagan very nearly succeeded in 1981.

A terrible madness swept the land, as dozens of bombings and the bizarre kidnaping of media heiress Patty Hearst by a domestic terror cell pockmarked the 1970s, a decade marked by a failed presidency, revelations of domestic spying by federal security agencies and runaway inflation.

It was a very long night before morning dawned in America again. From the longer view, the twenty years of tumult can be understood as the political and social reaction to what changed in America in the previous twenty years of 1941 to 1960: America had been roused from isolationism to fight a world war, forced to protect allies in Europe and Asia from the threat posed by an expansionist totalitarian Soviet Union, and a century-old reckoning with the racial divide that made a mockery of our nation's principle that "all men are created equal" and should be treated equally before the law. The promises made by the founding documents of the nation had yet to be fulfilled.

The very success of our protection of war-devastated allies created an economic crisis of our own, as the old, less efficient industrial plant of America was outpaced by the new industries that arose in Germany and Japan with modern technologies, industries aided by America's open door to exports and the strong dollar.

The 1970s was a decade of economic adjustment with high costs to both capital and labor as the Energy Crisis and the need to tackle industrial pollution drove a multi-trillion dollar (in today's dollars) rebuilding of American industry, a process punctuated by recessions that caused great misery for those laid off and struggling with high inflation.

These sacrifices and conflicts eventually paid dividends. Inequality eased, high interest rates crushed the inflationary spiral and the investments in higher efficiencies and new technologies started paying off.

My fear is that we've entered another 20 years of tumult, chaotic conflict, infectious madness and discord, but without the resilience we possessed in the 1960s and 1970s, the resilience generated by low debt, strong domestic industries and supply chains, low levels of regulation, low-cost healthcare and education and much higher levels of civic virtue, community, national purpose, moral legitimacy and self-reliance than are visible today.

Whether we admit it or not, we are riven by rising inequality in wealth and opportunity, high debt loads and little consensus on how to get through the night in one piece and emerge better from facing the challenges head on. I fear the siren-song appeal of denial and magical thinking, as if a rocket to Mars or a new phone app or another AI chatbot will fix what's broken in America.

I fear our buffers have been thinned, and our ability to make sacrifices for the future has been lost. Our moral foundations are in such tatters that getting rich by whatever means are within reach is now the "solution" to the coming storm, as if greed bled dry of ethics isn't a proximate cause of the coming storm.

My hope is that we gain the wisdom to see there are no easy solutions, no one-size-fits-all fixes, that solutions will be localized, partial, contingent on continual adaptation to changing conditions, and that this continual experimentation and evolution requires an acceptance of continual failures and a keen sense of humility about our limits.

I hope we gain the wisdom that we need each other, not as enemies but as colleagues, not always in agreement but respectful nonetheless.



Bastille Day July 14--vive la France, God Bless America



My recent books:

Disclosure: As an Amazon Associate I earn from qualifying purchases originated via links to Amazon products on this site.

Self-Reliance in the 21st Century print $18, (Kindle $8.95, audiobook $13.08 (96 pages, 2022) Read the first chapter for free (PDF)

The Asian Heroine Who Seduced Me (Novel) print $10.95, Kindle $6.95 Read an excerpt for free (PDF)

When You Can't Go On: Burnout, Reckoning and Renewal $18 print, $8.95 Kindle ebook; audiobook Read the first section for free (PDF)

Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States (Kindle $9.95, print $24, audiobook) Read Chapter One for free (PDF).

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
(Kindle $5, print $10, audiobook) Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake (Novel) $4.95 Kindle, $10.95 print); read the first chapters for free (PDF)

Money and Work Unchained $6.95 Kindle, $15 print)
Read the first section for free


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Friday, July 12, 2024

How Will We Distribute the Pain Ahead?

What is acceptable, and what is unacceptable? We'll soon have to decide.

I wish the transition ahead--the unwinding of all the distortions and sources of instability in our economy and society--could be painless. That would be ideal. But history suggests that hope is unrealistic. History suggests those in power will cling to whatever is working well for them even as the economy and society decay and decohere around them.

Denial and magical thinking are the order of the day. Rome is eternal, so there's nothing to worry about. If the peasants have no bread, let them eat brioche. And so on.

If the painless option is off the table, then the issue boils down to the distribution of the pain. Ideally, those least able to sustain further sacrifices will be favored at the expense of those better able to sustain sacrifices. But those most able to sustain sacrifices are those with the power to distribute the pain to others. This dynamic leads to those least able to sustain sacrifices being distributed the majority of the pain, to the point that they have so little to lose that abandoning the status quo becomes the least worst option.

The data collected by Italian researcher Vilfredo Pareto revealed a pattern throughout Nature and civilization of 80/20 distributions, what we call the 80/20 Rule or the Pareto Distribution: 20% of the sales staff make 80% of the sales, 20% of the populace ends up owning 80% of the property, 20% of the plants produce 80% of the seeds that sprout, and so on.

The Pareto Distribution distills down to 80% of 80% and 20% of 20%, or 4/64: 4% of the populace ends up with 64% of the property. In the U.S., the top 10% own 93% of the stocks, and it's likely the top 5% own 65%--in line with the Pareto Distribution. The bottom 50% own 2.6% of all financial assets.(See Federal Reserve chart below.) This is in line with the Pareto Distribution: the bottom 64% own about 4% of the nation's financial assets.

The issue thus becomes how best to avoid the dire consequences of the 4% at the top of the wealth-power pyramid distributing 64% of the pain to those at the bottom. Unfortunately, the pain will be distributed unevenly regardless of our intentions: highly paid people in unsustainably costly industries will be laid off along with people in more precarious jobs.



Our most realistic hope is to do our best to ease the burdens of those who will suffer the most severe dislocations and shift some of the sacrifices to those with sufficient means to cushion them from any real suffering. We can rethink our winner take most financial system, our duct-taped social contract, our enfeebled civic virtue and our waste is growth Landfill Economy.

Or we can let the system run to failure and let the Devil Take the Hindmost. What is acceptable, and what is unacceptable? We'll soon have to decide.





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