I think most of what we call “economics” (at least in the political
sense of the word) is a relic of the Cold War. Back then, indeed back to
the beginning of this century, economic (or, dare I say, “holynomic”) theory
was the basis of life and death struggles between militant rival ideologies.
Not just Democracy versus Communism, but also Fascism, Naziism, Bathism,
and others, they all had economic components. The leaders of the rival
ideologies claimed that their particular economic truth would lead to a
paradise on earth for humanity (if only the right people were in power).
Understand, this was not a college debate between rival theories, but a
life and death struggle of my TRUTH versus your TRUTH. And, any debate
served merely to advance the cause of the TRUTH; that is, to force my TRUTH
down your unwilling throat (unless, of course, I had the police on my side,
then debate was unnecessary). So, under the stresses of these conflicts,
economics evolved into a collection of pseudo-religious doctrines that
had little to do with the real world. The Cold War created a divide between
real world economics and economic ideology.
The Ideological Divide
Truth, in human societies is usually about the meaning and purpose
of my tribe. Understand, human societies are held together by a set of
shared beliefs and values. So, a social truth is usually a mixture of dogmatic
statements (ideally chanted in a ritual, not said) and things mystical.
Once the ultimate meaning and purpose of a society is defined by rival
economic ideologies, then economics stopped being an ecoscience.
The Socialists turned politics into a kind of religion and economics into
a dogma. Then, the communists used economic theory as the fundamental justification
for violence, oppression, and totalitarianism. Later, the conservatives
in the west reacted and turned Capitalism into a dogma. The issue was not
who’s economics worked, but who’s truth was true. The economic dogmas of
the Cold War had little to do with the real marketplace. For example, here
in the United States, the pundits preached a form of free market Capitalism;
vaguely based on the economics of the 1790’s. But, the nation practiced
a system I call Corporatism (the academics have not given it a name yet);
a new economic system based on the economic realities of high technology.
Understand, Corporatism gradually superseded Capitalism, beginning about
the turn of the century. The nation finally abandoned classic Capitalism
in the late 1930’s because it didn’t work. The businesses ran by the old
capitalist owners (that is what a capitalist is by the way, an owner) could
not compete against investor owned corporations. The reason was that corporations
tended to do a better job at managing large organizations, at raising large
sums of money for research and mass production tooling, and at having labor
peace (because workers and unions can be stockholders too). Also, corporations
were not subject to the risks associated with Capitalist owners. For example,
what if Mr. Big becomes mentally ill or a cocaine addict? Or, what if Mr.
Big’s best friend is a con man? Or, is Mr. Big’s nephew really capable
of taking over the firm when he retires? These kinds of issues never came
up in corporations because they are associations; the stockholders form
a collective capitalist. If one investor loses his marbles, it doesn’t
effect the association. So, economics forced a shift from businesses run
by individual capitalist owners to investor owned corporations. This was
a simple shift, but it led to a new kind of economics (one that academics
still tend to ignore). Capitalism was abandoned because it could not compete
in the modern economic world; and what we call “Capitalism” today, isn’t
Capitalism. But, no one said anything about the economic incongruities
because of the ideological wars. The switch from capitalism to corporatism
could not be officially noticed because the fundamental meaning of our
society was being defined in terms of economic dogma; and people were too
caught up in the ideological struggles of the Cold War. Meanwhile, over
in the Soviet Union the Communist Party preached an economic theory called
“Scientific Socialism.” Basically, the idea that a covey of (very smart)
managers in Moscow could run the entire Russian economy for the good of
all the people. But, the Soviet Union practiced a garrison economy based
on the needs and methods of the military. An economy that only worked because
it was well lubricated by organized crime, and covert inclusions of private
enterprise where needed to prevent total collapse. Understand, the real
economy had little to do with the theory preached by the party (just like
in the United States). And, the leaders of the Soviet Union were (on behalf
of their people) willing to bear any burden and pay any price for Socialism
(just like the leaders of the United States). When it was all over, the
Soviet Union was an economic basket case. But, its leaders could take consolation
in this, the United States was the worlds largest debtor nation and, furthermore,
lead the industrial world in several key indices; murder rates, violent
crime, percentage of it’s citizens in prison (third highest), drug abuse,
and educational failure. The Cold War was a disastrously expensive undertaking.
Today, we are still living with the ideological relics of those times.
The economics of preach this, practice that, and teach all the little children
to believe in the holynomic truth. But, what happens when the little children
grow up and become the next generation of leaders? What happens when the
leaders cannot understand economics apart from someone’s truth? And, what
happens when the truth doesn’t work? That is our problem today.
The Struggle
For most of this century the United States has been (or at least has
seen itself as being) in the forefront of the struggle against totalitarianism.
As struggle continued, the leaders of the United States, more and more,
adopted a fanatical mindset. Only forty years ago, our leaders were willing
to fight a thermonuclear war that they knew would, at very least, kill
one eighth of the human race and destroy western civilization; all to defend
an economic theory. Think about it, is any economic theory worth that?
And, thoughts of fanaticism aside, we are still living in the shadows of
those times. Much of the political dialog in the United States today is
still dominated by the old arguments about Capitalism versus Socialism.
Between the proponents of Capitalism (with it’s unintended consequences)
and of Socialism (but it does not work). For example, consider the ongoing
arguments over health care reform. Back in 1993 the Clinton administration
proposed sweeping reforms. The basic idea behind the reform proposals was
to replace the old hodge podge of medical insurance systems in the United
States with a national system of health care collectives (called alliances
to hide their true nature) managed by (very smart) experts in Washington.
The reforms were based on standard Socialist theory, and were opposed by
the usual people for the usual reasons. Eventually, the reform proposals
collapsed in Congress. It didn’t matter; the reforms would not have worked
for the usual reasons of socialist inefficiency and corruption. However,
to me the real health care problem was (and is) the attitudes of the people
who were arguing. There were (and are) alternate ways to fix the health
care system that had a better chance of working. But, no one in the debate
was willing to consider ideas outside of conventional thinking. That is,
outside of the theories of Adam Smith and Carl Marx. The cold war mindset
of truth prevailed, and the nation lost. Actually, because of the cold
war mindset, it is difficult to introduce any kind of economic thinking
not based on Capitalist or Socialist theory. Everything has to fit into
neat little categories. So, the real struggle is with the mindset of dogma.
Simply getting people to see things as they are, not as they ought to be.
Its time to get out from under the shadow of the Cold War.
The Real Political Divisions
I tend to divide politicians into unusual categories because it helps
me understand today’s politics. Liberal, Conservative, Radical, and Reactionary
are all based on the world as it was sometime between 1880 and 1920. As
Corporatism replaced Capitalism in the west, and Communism took hold in
the east, these labels became incresingly irrelevant. But, the old labels
could not be abandoned because of the Cold War. In my view, there is a
two way political spectrum of ideology; from Parliamentarian to Authoritarian,
and from Libertarian to Collectivist.
The Parliamentarians believe that government should be by the consensus of the governed. That is, a government by politicians (and lobbyists). Elect a congress and have them argue about the issues until they come to a compromise that hopefully doesn’t hurt anyone too much. On the other hand, the authoritarians believe that the government should do what is best for the nation regardless of the opinions of the people. Ideally, they want a “compassionate” government for the people, but not of the people. A government that guides all the little sheeples into the green pastures and by the still waters. But, there is a problem, authoritarians assume that the government is being run by the righteous elite (as defined by some book, or religion, or ideology). But, running the government puts the righteous in a world of temptation. So, who keeps the righteous righteous? In a republic, corrupt leaders are eventually dealt with (look at the travail’s of President Clinton, or the fall of Richard Nixon). In an authoritarian regime there is no watchdog, so the nation can fall into chaos. Also, many people have authoritarian views to fill emotional needs, because of a continuing childish need for a strong parent. Since I cannot have a strong mommy or daddy, I’ll make the government my parent. Other people have an emotional need to relate as a parent, so they tend to become authoritarians also. Interestingly, I think the conservatives tend to favor government as daddy, and the Liberals as mommy. Also, sometimes a society can be gripped by social paranoia (usually about terrorism or violent crime) and become more authoritarian. However, authoritarianism isn’t all wrong, in times of disaster and conflict the government should behave that way. But, in more settled times people have differing interests and lifestyles, so your green pasture is my field of weeds. Ultimately, the choice (or spectrum of choices) between Parliamentarianism and Authoritarianism depends on circumstances. In times of disaster or conflict, Authoritarianism works. In settled times, Parliamentarianism works. There is no one right answer.
The Libertarians believe that what is good for me personally or economically, is good for society as long as my choices do not directly hurt someone else. And, many personal businesses do benefit society, like growing food crops of sale or practicing medicine. However, having an arsenal of weapons in my basement is also OK., and you can have an arsenal in your basement too. What’s good for me, is good for society. On the other hand, the collectivists believe that what is good for my society is always good for me, regardless. So, society should be a like an ant hill; with all the little ants scurrying around and doing their duties for the good of the colony. But, the collectivist never confronts this question: Why should an ant do anything for the colony? What’s in it for me? In an actual ant hill, there is a genetic self interest. All the workers are the children of the Queen, and are infertile. So, the insects have a genetic interest in the success of the colony. In a human society; no one has a direct interest in the success of the society, but everyone depends on the society. If only for clean drinking water, and an uninterrupted supply of electricity. For society the secret is to put essential services in someone’s direct interest (for example, a power company), or to convince a majority of the people that a service is their best interest (for example, the public water supply). Understand, we all have at least two best interests, personal and collective. These interests regularly come into conflict, and the issues can be very complex. So, neither Libertarianism nor Collectivism is “right,” and the most workable solution is usually a compromise between the two. This is a perpetual conflict in human societies.
New Marxists, Old Marxists
In my view, there are Conservatives and there are Un-conservatives
(Inverted Marxists), there are Liberals and there are Un-liberals (New
Age Marxists). I call the Un-liberals “New Age Marxists” because, like
that other new age, they never seem to think about their ideas. They never
seem to ask where their ideas come from, or what their ideas are about,
or what the consequences of are. Everything is feeling and symbolism. At
least the old “died in the wool” Marxists were willing to give rational
explanations for their ideas. I call the Un-conservatives “Inverted Marxists”
because, like the good old fashioned Communists, they believe that the
government exists to implement economic reality for the good of us all,
regardless of reality. The only difference is that their economic ideal
is Capitalism, not Socialism. But, the method of implementing their ideas
is straight Marxist. Understand, in some ways both the Un-liberals and
the Un-conservatives are like old fashioned Marxists. They are both utterly
convinced of the rightness of the ideas. And, they both believe that the
government exists to implement their truths (regardless of reality) for
the good of everyone. What they will not see is that they have adopted
an authoritarian view of themselves as the national shepherds. A viewpoint
is only a few paranoid steps from totalitarianism.
The Real Divisions
The real political divisions are not between Liberals and Conservatives,
or Capitalist and Socialists; but between those who think, and those who
have a dogma. The real issues are spiritual and moral, for example; the
willingness to see things as they are, the willingness to think for yourself,
the willingness to think about your basic ideas (“reflection” is the traditional
term for this sort of thinking), and the willingness to accept that other
people might have different views for completely rational reasons. Understand,
the issue is not between rightful versus wrongful thinking. The world is
a complex place. We cannot see all things or know everything, so there
can be many ways to view most issues. But, to a dogmatist, there can only
be one right view; everything else is in error. Understand, there are degrees
of commitment to dogma. To the extremists, things are either white or black.
To the less committed, there are degrees of wrongfulness (graded, say,
from B to F, only political correctness gets an A). I think the level of
commitment has more to do with child abuse and emotional needyness then
belief. The dogma fills a void in the activist’s psyche. Anyway, trying
to explain economics to either a New Age Marxist or an Inverted Marxist
is nearly impossible. The deeper their commitment, the more their world
view is neatly divided between the TRUTH and error. Actually, their world
view is the source of their error. However, they agree on one thing; that
the government exists to implement economic reality for the good of everyone,
and that they should be the self appointed national shepherds. We need
to get out from under the shadows of the true believers.
The Real Economy
Ok, so what is the real basis of the economy? Paradigms. In the market,
every transaction (sale or what you will) has implications for both buyer
and seller. Sometimes a transaction implies long term commitments, like
a mortgage, but usually the implications are more short term. Sometimes
a transaction requires the maintenance of a huge infrastructure, like buying
electricity, sometimes not. Every transaction in the market has implications.
The implications create market paradigms (the informal rules that define
the market). Because different kinds of transactions have different implications,
there are differing paradigms that define different markets, or market
sectors. So, when we talk about economic systems, we are really talking
are rigid rules people try to apply to the markets. If the rules work,
we say our man made rules are TRUE. Perhaps because that is what our culture
taught us to say. If the rules don’t work, we say that they were never
tried, or that they were sabotaged by those people, or something else.
The rules have to work because they are being used to define what our society
is and isn’t. However, human economic rules work when they are aligned
with the market paradigms, and fail when they are not. And, because there
is no one mass market, or one universal economic paradigm, human rules
usually work here and fail over there. To say an economic system is true,
or false, is delusional (but usually politically correct). Finally, the
economy is not one mass market thing, based on one set of universal rules.
Instead, we have a collection of sometimes contradictory economies because
of the differing paradigms that direct the markets.
I think the farm economy, or rather the federal farm welfare reaction economy, is a good example of miss alignment with market paradigms. The basic problem is that farming is generally not profitable enough to do well in our economy. There are several reasons for this. First, over production is necessary as insurance against crop failures. The consequences of a crop failure can be severe; on a personal level this can cause the farmer to go bankrupt, on the national level this can cause famine and economic collapse. So, over production is encouraged by governments around the world, and naturally prices are always too low. Second, farmers are not in a good position to pass on their costs because they are at the base of the economic chain. In bad times, middle men (like the traders at a commodities exchange) can pass their costs down the line and still make a modest profit, while basic producers are stuck with whatever the market dictates. And, of course, the harvested crops are perishable and cannot be stored for very long. Third, an average farm makes a big profit one year in seven, and modest profit two years in seven. Yet, we insist that farmers exist in the credit economy and borrow money at the market rates; in competition with much more profitable businesses. Eventually, there is an economic disaster in the farming economy (not the universal, one size fits all, mass market national economy we learned about in middle school). Then, the government has to react to prevent economic disaster (we don’t realize how much damage importing food can do to the economy by diverting money from more productive uses). Years later, reformers come and pass “Freedom to Farm” laws, rescinding the federal aid programs; and shortly thereafter another economic crisis hits the farm economy. The problem is that our economic rules do not work on the farm; and we cannot study the market paradigms and think up new economic rules for the farm sector because of holynomics. So, we are doomed to continual federal farm subsidies, and continual arguments because nearly everyone agrees that these programs are not right.
Conclusion
I think Holynomics is this nation’s fundamental economic problem. This
problem is not about our economic ideas, or the way we handle money, but
about our thinking. The problem is that in our schools, and in our politics,
we have a one size fits all theory of economic everything. Call it what
you will, “Holynomics,” or the “Economic Everything,” the problem is simple.
According to Holynomics the economy we really have does not exist, and
economic paradigms (the basis of our economy) cannot exist. Otherwise,
we couldn’t have a one size fits all theory of economic everything. Then
there is the moral problem. Our economic dogmas imply that someone (very
smart) created the economy, but we cannot decide who. Did Adam Smith create
the economy? Or, did Carl Marx create the economy? Or, was it Albert Einstein?
Or, was it Kermit the Frog. The thought that the economy might not have
been created by a very smart man (or men, or woman, or women, or some collection
of men and women) never seems to occur to those afflicted with this meme.
The thought that economics might be based on what happens in the marketplace
is alien to them. So, we have a problem, and it effects everything, but
we don’t know it.
Finally
Jesus once said (Matthew 6:22), “The lamp of the body is the eye. If
your eyes are good, then your whole body will be full of light. But, if
your eyes are bad, then your whole body will be full of darkness. If the
light within you is darkness, how great is that darkness!” I think Jesus
was talking about the teachings of the religious fundamentalists of his
day, and of how their TRUTHS blinded their followers. It was not that their
teachings and traditions were necessarily wrong. It was that their doctrines
were being used to cement a cultural blindfold. Perhaps the phrase, “Blinded
by the light,” is an apt description of this. I think there is a question
buried in what Jesus said: Do we accept the things we see in the world
around us (even if we cannot explain them)? Or, do we ignore anything that
does not conform to our doctrines? Note, history is full of examples of
this sort of blindness. I think that perhaps the Cold War economic dogmas
should be added to the list. Now, economics is not religion, and should
not be made into a religion; but that is what we have because of the Cold
War, a secular economic religion. So, when it comes to economics, many
of us still live in the darkness imposed by ideological truth.
I hope you enjoyed reading this.
If you want to know more about economic paradigms, please read What about Paradigms? While this essay is limited to an analysis of the conflicting economic paradigms at work in the computer business, it should be a good start. Also, please read The Real Troubles of Microsoft.
Parliamentarian - Someone who believes that government policies should be made on the basis of consensus between various interest groups in society. And, that there should be a specific place and institution where those policies should be debated and enacted into law (a parliament or a congress). This is different from Populism. The Populist’s preach a kind of democracy based on the will of the people. The idea that the majority should always rule regardless of the rights and interests of the minorities. Unfortunately, the will of the people is never clearly defined, and in some cases doesnt exist. Perhaps because the populist thinks this is, “the will of the people when lead by me” (a form of authoritarianism). On the other hand, consensus requires that most of the people agree to, or at least acquiesce to, the policies under considerations. <return>
December 3, 1999 - July 10, 2000