INDEX - ECONOMYwww.islandbreath.org ID#0806-35
SUBJECT: ECONOMIC COLLAPSE
SOURCE: JUAN WILSON email@example.com
POSTED: 18 OCTOBER 2008 - 8:30pm HST
The Flight to Abstraction
image above: The Nasdaq Big Board displays trajectory of value of many high tech stocks
by John Michael Greer on 15 October 2008 in thearchdruidreport.com
My decision some two and a half years ago to launch a weekly blog on the future of industrial society has had its share, or more than its share, of unexpected results. The original plan was to start a conversation about the future within the contemporary Druid community, which is not precisely one of the largest religious movements in America these days, and I would have considered the project a success if the blog’s total readership topped fifty. That The Archdruid Report somehow failed to stop there still astonishes me.
Just as unexpected has been the impact on my own writing process. Some writers, like the hero of Edward Gorey’s wry tale The Unstrung Harp, have orderly habits: on November 18th of alternate years, with the creaking predictability of an old orrery, you can be sure that Gorey’s protagonist Mr. Earbrass will start a new novel. By inclination, at least, I fall on the other end of the spectrum, and it happens as often as not that I sit down at the keyboard Tuesday evening with no notion what my next post ought to be about. What astonishes me is that the muse has always come through, though there are times I can almost see her distractedly pulling down random volumes from the bookshelves of Parnassus, looking for scraps to toss me.
Very often, though, it’s her more improbable tidbits that bring the most unexpected insights. I can think of no other excuse for this week’s post, for the idea at its core came out of a moment of mental collision hard to describe in any other way. That moment arrived on the weekend just past, when I looked up from a paperback copy of Giambattista Vico’s New Science to the surreal skyline of Las Vegas at night.
Now it’s probably worth saying up front that of all the cities I’ve ever visited, Las Vegas is my least favorite: a garish urban cancer that apparently exists for the sole purpose of proving that it’s possible to take a barren, scorpion-infested wasteland and make something even worse out of it. I was there for a conference that took advantage of the cheap rates offered by a third-rate casino hotel, and would not have gone there otherwise. What made Vegas an unlikely source of inspiration that evening, I think, is that it takes modern industrial society’s least laudable features to their furthest extreme; its utter disconnection from nature, its insatiable appetite for resources, and its promotion of distraction and greed as the highest goals of human life mirror the worst features of the world three centuries of industrialism have built.
That made Vico a particularly apposite commentator. Giambattista Vico lived from 1668 to 1744; he spent his career as a teacher of rhetoric at the University of Naples, and devoted his off hours to one of the great intellectual projects of his time. His masterpiece, Principles of a New Science Concerning the Common Nature of Nations, appeared in three editions of increasing complexity, the last one after his death, and was almost completely ignored for most of a century thereafter. When it finally found its audience in the mid-19th century, its influence was profound, and continues to this day.
The New Science, as the work is generally known, was nothing less than the first modern attempt to make sense of the laws governing history. Vico was perhaps the first modern Western thinker to recognize the parallel historical trajectories of his own society and that of classical Greece and Rome; using those as his two test cases, he attempted to sketch out “the course the nations run,” the process by which a society rises from barbarism to civilization and falls back to barbarism again. With only two examples to work from, Vico inevitably jumped to many conclusions that don’t always hold up well in the light of a broader view of world history, but some of his ideas are astonishingly prescient, and his basic intuition – that societies go through broadly similar stages on the way from their initial rise to their final collapse – remains central to any attempt to make sense of history on the grand scale.
Vico’s argument is complex and difficult to summarize, but one of its core themes – the one whose relevance to the present struck me most forcefully that night in Las Vegas – is the role of abstraction. A wide range of social phenomena, Vico pointed out, focus entirely on specific concrete realities in the early days of a culture, and evolve toward abstraction over the lifespan of the culture. Law codes start out as lists of rules for specific cases, and broaden into statements of principles covering infinite variation in practice; words leave behind concrete meanings – how many people nowadays recall that the verb “understand” once meant literally “to stand under,” in the sense of upholding or supporting something? – and take on ever more nuanced meanings; religion begins in the shattering impact of the numinous on individual lives, and diffuses into elegant theological notions disconnected from the realities of human experience.
So, too, economics. Vico barely mentions the economic sphere – as a scholar of rhetoric and law, his interests lay elsewhere – but the economic history of the Western world fits his scheme precisely. The cultures that clawed their way back up from the bitter dark ages that followed the fall of Rome knew only one form of real wealth, agricultural land – a habit of thought that still survives in the phrasing that calls land, and only land, “real property.” The warrior aristocracies that threw back the last barbarian invasions from Europe and imposed a tenuous peace on their battered societies defined themselves by their landholdings; possession of a “knight’s fee” – enough land to support a single armored horseman – was the one requirement of noble status in those days. Money existed in the form of coinage, but most people went from one year to the next without ever seeing any; nearly all goods and services moved through customary patterns of exchange in which market forces had no place.
The waning of the Middle Ages saw the gradual replacement of these customary economies with a new economics of precious-metal currency. Feudal tenure, by which farmers held the right to their land in exchange for specific duties defined by tradition, gave way to cash rents, and a significant part of the population moved away from the land to proto-industrial wage labor in the newly expanding cities. This was a step toward abstraction; gold and silver coins replaced fields of grain as the basic definition of wealth, and made way for concentrations of economic power far more extreme than anything the Middle Ages had seen.
Further abstractions followed. By the 17th century, banks began to issue paper receipts for gold and silver in their vaults, and these receipts could be exchanged like the coinage that backed them. The invention of the banknote was followed promptly by the practice of printing more banknotes than a bank’s gold and silver reserves would cover, on the assumption that most of the notes would never be cashed in for metal; when word of this practice spread, the first bank runs followed. In the same way, companies found they could bring in capital by selling shares of their future earnings; the purchasers of these shares then found that their prices could be bid up or down, and stock speculation was born.
Fast forward a few more centuries, and we arrive at today’s global economy, which consists primarily of the buying and selling of abstractions. The concept of wealth, which was once limited to the immediate means of production, and then shifted to mean the precious metal markers used to denominate the value of production, has now mutated into arbitrary numbers that can be wished into existence by a few keystrokes. When the US government announced a few days ago that it was investing $250 billion in the nation’s banks, for example, that money did not have to be pulled out of some imaginary bank account in the national treasury, much less extracted from the dwindling productive capacities of America’s remaining factories and farms; it was conjured into being by government fiat, in order to replace some even vaster sum of abstract wealth that more or less dissolved into twinkle dust over the preceding weeks.
What makes this pursuit of the abstract so dangerous, of course, is that abstract value is not the same thing as the concrete realities it once represented: green fields and grain in storehouses; strong muscles and the work they accomplish; or for that matter, factories, the resources that keep them running, and the products that come from them. These are real wealth; the layers of economic abstraction piled atop them are simply complex social games that determine who gets access to how much of this real wealth – and those games can become so complex., and so dysfunctional, that they get in the way of the production of real wealth. The flight into abstraction can proceed so far, in other words, that the abstractions interfere with the concrete realities underlying them.
This possibility became appallingly real in the week or so immediately preceding my trip to Las Vegas. The overnight interbank loan market – an economic abstraction so arcane that not even economists seem to be able to explain its function in ordinary English – froze up, and as a result stock markets worldwide panicked and crashed, erasing trillions of dollars in paper wealth in a single week. Desperation moves by the world’s central banks bought a few days of respite, but today’s trading brought another disastrous slump. (Connoiseurs of irony may find it worth noting that today was the birthday of economist John Kenneth Galbraith, whose The Great Crash 1929 anatomized exactly those speculative delusions that were rehashed in the last two decades and caused the current debacle.)
A stock market crash, it bears remembering, does not cause crop failures, labor shortages, or the destruction of industrial machinery. Its impact is purely on the fabric of economic abstractions built atop the real wealth of land, labor, and industrial plant. Yet that impact can be devastating; in the depths of the last Great Depression, the production of goods shrank to a small fraction of what it had been before the 1929 crash. There was still plenty of land, plenty of laborers, and plenty of machines, not to mention millions of families whose breadwinners would have liked nothing so much as a chance to earn money and buy products; the only thing that could not be made to work was the market where abstractions were bought and sold, and without its help, the real economy ground to a halt.
We are facing the same situation now, and official attempts to stabilize the economy are failing because they focus on the abstractions rather than the realities underlying them.
The $250 billion just poured down a Wall Street rathole, for example, could have been used instead to pay for the rebuilding of America’s rail network, with dramatic positive effects that would have resonated throughout the economy. Any such project would hire hundreds of thousands of workers across the spectrum of skilled and unskilled trades; locomotives and rolling stock would have had to be built, countless miles of track laid and upgraded, stations repaired or built from scratch, and every dollar spent on all these things would ripple outward through the economy, supporting businesses of every kind and refinancing local banks with deposits rather than loans. Projects of the same kind played a large role in helping many countries in the 1930s begin to pull themselves out of the morass of the last Great Depression.
Instead, the $250 billion has been assigned the task of making up for a portion of the largely imaginary wealth that has already evaporated from the balance sheets of banks. Abstraction has triumphed over economic realities, and the multiple impacts of that failure of imagination will be with us for a long time to come.
Island Breath: On Borrowed Time 9/28/08
Island Breath: The US Debt Rattle 9/18/08
Island Breath: Desintegration of System 9/17/08
Island Breath: Last Ditch Effort 9/15/08
Island Breath: Peak Global Economy 7/29/08
Island Breath: Fannie Mae & Freddie Mac Mess 7/14/08
Island Breath: The Perfect $torm Approaches 6/28/08
Island Breath: Report from the Bank of Banks 6/28/08