The irony was not lost on the Italian archaeologist giving us a private, after-hours tour of Trajan's imperial forum. Something something the new tech emperors, something something privileged access.
It got particularly surreal when she would bring up money. "That road was built by Mussolini to connect his office to the colosseum as his own triumphal route. He built it over the remains of parts of the fora. We want to remove it but Italy has no money." Cue laughter from the group.
I've heard funnier jokes, if I'm honest. There was a stark difference between the Rome I visited this week and the Rome I visited about five years ago. It's a lot more hollow today. The Old Town reminds me of nothing quite so much as Carcassonne: pretty buildings that house tourist shops, luxury products, mediocre restaurants and nothing else. Gone were the few remaining little shoemakers and such. Almost nothing in the way of an actual local economy. The taxi ride out to the airport painted an even worse picture: shuttered independent businesses.
Five or six collapses ago, Rome was at the heart of a vast, centralising, extractive mechanism... harvested wealth flowed toward it. Eventually, the cost of running a government built on harvesting wealth-particularly the army- got too expensive, confidence drained from the economy after the capture of Valerian, and so Gallienus debased the currency by watering down and eventually removing the silver from the coins so as to pay for his army. It didn't work. Romans hoarded the higher quality coins and stopped spending because they feared collapse. Which then quickly followed because they had stopped spending.
Today Rome is on the edge of a centralising extractive mechanism, rather than in the middle of one. It also no longer has control over the value/quality of its currency. Typically when an economy weakens, you devalue your currency relative to your trading partners so your exports get cheaper and your domestic demand turns more to domestic supply rather than imports (which have gotten more expensive). When you can't devalue your currency, you have to devalue internally. That is... remove cost from your operation because you cannot reduce the price of your exports. And labour is the largest cost for any organisation. If you don't remove this cost, then your business fails. Or you get a government bailout which does nothing because it is paid for in increasing taxes and operating costs/red tape... which impacts your competitiveness. Centralisation is how you get near-negative bond yields whilst simultaneously having a youth unemployment rate of around 30%. (In a further repeat of Roman collapse, this high unemployment rate and negative growth rates leads to a collapse in confidence which leads to the hoarding of euros we see in Southern Europe, which leads to deflation. Bank runs will be next, particularly in Greece.)
It was in this context, in Rome, that I read Rhyd's excellent and righteously angry piece on poverty. I was only briefly poor growing up, and that was because my father was re-training as a psychiatrist. (Also it doesn't snow in Newcastle, Australia.) After he had retrained we weren't poor, though a series of business failures meant we were in debt for most of my childhood. But at no stage did we suffer from food insecurity, for instance. The times in my adult life I have been properly poor have been associated with moving countries and thus living entirely without a support network. I will return to that. This is my way of saying I have no context for the experience Rhyd recounts, nor do I have his experience at the coal face of mental health and substance abuse intervention (though almost half my family works in mental health). And it seems to me that Rhyd has both correctly identified the enemy as well as the barrier to useful discourse, but I want to suggest some alternate names for them, at least just for the duration of this post. The reason for this is I want to posit we are more aligned in terms of required next steps than may be immediately obvious.
- For 'capitalism', see centralisation.
- For 'Middle Class', see monoculture.
Because in all of human history, nothing has lifted more people out of poverty and into the middle class than capitalism. Nothing. It has spent the last two centuries generating levels of wealth in the west never before seen, and it is currently doing to same thing to the developing world now, which is a big part of why we are feeling the squeeze. If the total wealth of the planet is a hundred bucks, we have spent the last fifty years in possession of 95 of them. Now China, India, Africa, Russia and Brazil want some.
Let the world's most famous transgender economist -it's not currently a hugely competitive category, unfortunately- Deirdre McClosky, explain. (She should be the one to do it, as I got this idea from her.)
I depart from McClosky in her characterisation of the most recent crash as 'not bad by historical terms' for two reasons: we're not out of it yet and it has one heck if a hiccup left (below), but also because she largely helped to create it, given that the Chicago School were so intimately involved with the creation of mortgage backed securities. (Remember them? Now we also have them for auto loans and student debt. That's going to go great.)
The data are in. Capitalism reverses inequality when it is functioning correctly. When it disfunctions -when it centralises- it extracts decentralised wealth and puts it in the hands of a tiny elite... particularly so in the case of modern America where the system of governance in areas such as military and healthcare have been majority-privatised.
As for the Middle Class? McClosky makes the very good point that they have been the source of around 90% of all innovation over the last two centuries. Which makes sense when you stop to think about it. The poor are understandably occupied with little things like food, warmth and shelter. The rich? Why the hell would they want innovation when the status quo is working out so well for them? Here's an excellent presentation talking through the concept.
Thus, for me, where I read people railing against the 'Middle Class', I read them railing against monoculturalists: those sitting on the couch, drinking the Kool-Aid, thinking everything is fine because they are told it is fine by MSNBC, thinking the prospect of another Clinton presidency is probably a good thing (or maybe Bush? Why not, eh?), generally unwilling to pop the hood and see if the engine is even still running... a fear reaction because deep down they know it isn't. Deep down they know that it is not all that great that more than half of all Americans cannot come up with $400 emergency cash without going into debt, or that only 44% of US adults are employed for more than 30 hours a week.
But we will look. We will look because you will see the hijack -you will pinpoint it down to the year. We will see capitalism capitalisming normally, with everyone getting richer -some faster than others, to be sure- and then we will see... actually let's just look.
See how the share of total incomes was stable between the end of the war and around 1980, ie during the time of America's great industrial expansion? Remember that date.
There it is from another angle. It's almost as if something happened coming out of the 70s to do with the increasing availability of credit, particularly for those in the upper, investing classes. Like someone turned on a spigot and just plugged it into property prices and the stock market. Does that sound like the 80s to you? That sounds exactly like the 80s to me. But we all got richer, right?
You tell me.
We all bought a lot of shit, to be sure. But how did that happen when there has been no growth in all but the top incomes? Oh yeah, they worked us harder and harvested/centralised the profits. This is the exact same period where Britain and America de-industrialised and switched to an economy where consumption rather than the creating of things accounts for 70% of GDP. How do you get growth in an economy that runs on consumption? You make its citizens consume more than they earn. The rest is made up in private debt, because wages have flatlined:
Capitalism working, then not working:
Capitalism not working, zooming in:
How is this accomplished? That QE thing is a giveaway. The government issues loads of bonds (IOUs) which are swapped for free money at the Fed, which is ploughed into buying securities. When a government issues a bond, it is a promise to pay the bearer a specific amount of money at a later date. Your money. Your taxes go to paying the interest on those bonds, and then their eventual full repayment. So your money is sending the S&P 500 into the stratosphere while you remain under-employed on stagnating wages. Feels great, right?
What is so egregious is that this wealth transfer -which is the polite way of describing how you have been robbed- went to prop up people who had failed. Capitalism only works if it can work like the Australian bush: periodic fire laying waste to malformed institutions. Here's a guy being interviewed by St Taleb himself:
[W]hat’s hidden beneath all the aggregate income-inequality data is much cross-sectional downward mobility, in that most people in the right tail of income spend very little time there. The transience of success is assured by natural entrepreneurial capitalism, and is precisely what works about it: unseating the top, driving out the lucky and unworthy. Without this dynamic, capitalism doesn’t work. It isn’t even capitalism, but rather oligarchic central planning. Yet modern government chips away at this dynamic in so many ways, most significantly by providing floors and safety nets to crony bankers and other financial punters. What irony that the same people who today loudly endorse a global wealth tax to rein in inequality were also the very ones saying guys like us were nuts for opposing the bailouts back in 2008!
What does any of this have to do with Rhyd's impassioned call to actually face and start discussing the kind of crushing poverty he sees every day? Well, where do you think the pitiable amounts that go into frontline services comes from? In the US, the story is already dire:
And all that spend?
The private economy cannot take anymore debt, which is one of the main reasons you see a decline in the real economy. As for government debt, they can just print more bonds, right? Here's Martin Armstrong explaining why that is not the case, and that a huge correction is coming later this year. But first, here's the extended trailer for his documentary, for context. (Try and see the film if you can.)
Onto the bonds, then.
I agree with Rhyd that a sizeable chunk of the pagan/magical world utterly refuses to even look at the fact that there are no sausages left in the metaphoric shop. Much of this is because we refuse to contemplate how they are made in the first place. And this is not a minority problem. It is the definition of a majority problem when half of the richest country is one fender bender away from getting into debt. As for Britain? We're also still feeding people from the last hiccup:
And if Martin is right, then 2007 wasn't even the dress rehearsal, that was the table read. So my question to you is... In the last forty years, western capitalism has been hijacked by a centralising force that literally stole all growth away from you and used it to build a monstrous, privatised war-and-finance-machine that is now teetering under its own debt and being dismantled, Jenga-style, by the rise of the alternate financial systems I have been telling you about for years (and which people are only just starting to mention). Do you expect the war machine to show largesse to the likes of you as its edifice collapses around it? Ready for Hillary!
Things are really bad -we need to talk about it without falling prey to cognitive dissonance- because the outgoing archon would sooner shoot you eight times in the back than decentralise any of its power or wealth down to where it is needed (where it came from). In fact, they would rather start a war to get themselves out of this debt hole. It's been done before. If only there were a world leader available to lie about and paint as a dangerous, expansionist... oh, wait. Is that why NORAD is moving back under Cheyenne Mountain after abandoning it a decade ago at the end of the Cold War? (Be very interested in all this growing EMP chatter. Yes, it will kill hundreds of millions of people but it has the exciting benefit of wiping out all bank records, too. So bye bye government debt!)
You know what I am going to say
I'm a bit worried about sharing videos of financial forecasters and Chicago School economists because so many of us are stuck in a Left/Right paradigm that emerged with an industrial economy 150 years ago. There is no Left/Right! Today there is central and decentral. And also, you should all know my policy on differing voices by now. Because there is -if not actual good news- then the beginnings of a possibility to create some.
Here is my favourite silicon valley aspie homo (a longer list than trans economists, inevitably) explaining why he is "short New York, London and Washington" and "long Texas and California." (Hint: they're less global/central and more decentral/inward.)
That's a view of the medium term from a slightly-damaged, billionaire-genius. His life is not our life. But in an inevitably hermetic way, some of the changes associated with the emergence of decentralised opportunity fractal their way down to our level.
Decentralisation runs on open networks that are analogue/digital. It represents a return to that emergent local capitalism that brought millions in the west out of poverty and into the Middle Class, except this time it is doing it with the -judiciously applied- network amplification effects afforded by the digital age. AirBnb now facilitates 22% more nightly stays than the entire global Hilton chain.
Thanks to the mobile revolution and a confluence of other factors -- 35 years of wage stagnation, entrepreneurs challenging ossified business models, the appeal of convenience, environmental concerns, and affinity for social interaction – access has become the new ownership, at least from a consumer perspective.[..]
Global revenues in these sectors, which amount to $15 billion today, could reach $335 billion by 2025, according to PwC.
It may be that companies themselves, by failing to increase wages sufficiently over the past few decades, have brought the situation on themselves. When cash is tight, sharing to earn extra income (by, say, renting out a room through Airbnb or preparing food for strangers through EatWith) makes a certain amount of sense.
As for how a decentralising trend impacts growing western poverty (although poverty is declining rapidly on a planetary basis), the short answer is I don't know. No one does. It is emergent. There are bright spots, trial programmes. Ex-NYU business students have set up a way to use mobile technology to get restaurant food to the homeless at the close of business. A Dutch retirement home is offering free accommodation to university students in exchange for spending a guaranteed amount of time with their residents. (That is a fucking wonderful idea, by the way.)
What we do know that this vast control mechanism that has been built out of debt that we are paying the interest on is going to be of little use, and less use as it collapses. So my version of Rhyd's loud declaration that we need to stop avoiding this issue because it makes us feel icky is we also need to stop avoiding the fact it is getting worse and no amount of committee meetings will change Sauron's mind. Do not be so eager to clang your cup against the bars and call over your jailor. Every economic disruption in the last century has been used to harvest us of more power and agency. So let's bullet point what I want you to know and talk about:
- I want you to know what money is and how it works, even if you don't have any.
- I want you to know how that lack of monetary awareness is used by a privatised, global warmongering apparatus to rinse you of whatever you have left.
- I want you to know that it is luck -and nothing else- that determines the initial economic and health conditions of every human on earth. You are not special or chosen. You are lucky. I am lucky. Magical folk should know better than to pretend luck does not exist, lest we attract its ire.
- I want you to hear Rhyd's anger because I only have charts and he has experience. My charts show me that his experience is coming for more people, not less.
- I want you to know this will be really, really difficult and that the solution will never come from Washington or Westminster.
I don't know how any of this plays out but I do know that the next steps are horizontal rather than vertical. We hit the iceberg a few decades back. There is no point trying to get to the bridge to give the captain a list of your demands. Make for the lifeboats.
See you there.