JOHN ROBB

PARASITIC PREDATION

Some Boydian logic -- a new construct for decision making -- to brighten your day. Not likely.  However, the aim of this brief is not to convince you.  Instead, it is to get you thinking in new ways, to challenge assumptions, and spur creativity -- all of which is essential to our collective long term success.

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Back in 1974, the long running connection between improvements in worker productivity and wage growth was severed.  Median per capita wages for individuals have stagnated since then, replaced with measures of growth in house hold income (two workers instead of one) and growth derived from growing the labor pool (mostly illegal immigration).  During this time, the money derived from productivity improvements over the last decades (which would have doubled the incomes of American workers under the post-WW2 to 1974 social contract), was shunted to capital markets under the ideological assumption (seen in Greenspan's thinking)  that these markets would make better investments in future prosperity than individuals.  That assumption has been proven false.  The money was gambled away or spent on lavish increases in the lifestyles of oligarchs and their underlings.  

However, it would be bad enough if it ended there, with the realization that two generations of American wealth was squandered by capital markets in a frenzy of excess.   It won't.  There is increasing evidence that this group of "oligarchs" has ideologically captured all forms of US governance in a situation similar to what we have seen in emerging markets.   The situation in the US today, particularly to those that saw it first hand while at the IMF, is very similar to what they saw in past crises in Argentina and Russia (in their view, our situation is worse than Japan).  Here's a couple of posts that warrant further reading:

The Quiet Coup by Simon Johnson (the Atlantic)

Re-emerging as an Emerging Market by Desmond Lachman (Washington Post)

Comparing the US to Russia and Argentina by Glenn Greenwald (Salon)

This development has major implications for those of us that think about the future of warfare.  The devolution of the US economic system into crony capitalism, replete with the parasitic predation of oligarchs, paints a picture of warfare punctuated by:

rampant crime, rapidly declining military/government budgets, inopportune withdrawals from foreign adventures/development efforts (money for this dries up), corporate armies, deep urban decay, spot starvation/health crises, broad privatization of public goods (theft or fire-sale prices), widespread poverty, etc.  

To think that a parasitic oligopoly (akin to Russia's) can't happen here, despite factual evidence to the contrary (trillions of $$ given away to bank/hedge funds/etc. without the slightest reform, hope for economic return, or accountability), is a failure of decision making due to doctrinal/ideological rigidity.  However, if it's true, a move to the primary loyalties of manufactured tribes (gang, clan, sect, etc.) by a large segment of the population will be almost inevitable.  Many of these new groups will both defend and advance their interests through violence.  

Posted by John Robb on Friday, 27 March 2009 at 08:49 AM | Permalink | Comments (26) | TrackBack (0)

Wednesday, 25 March 2009

JOURNAL: More on Banksters

I mentioned at the time I wrote this brief, that viral violence targeting the barons of global finance was likely incoming (but that it wasn't here yet).  Here's a small addition to that trend line (that builds on the thousands of death threats that have been received).  In the UK, vandals hit the home of the former CEO of the Royal Bank of Scotland, 'Sir' Fred Goodwin (he and his family have already fled the country).  Windows on the ground floor of the home and his Mercedes S600 were smashed.  E-mails from a group claiming the attacks said,

We are angry that rich people, like him, are paying themselves a huge amount of money, and living in luxury, while ordinary people are made unemployed, destitute and homeless. This is a crime. Bank bosses should be jailed. This is just the beginning.

The Real Systemic Risk 

This leads me to a broader topic.  The real systemic risk we face isn't from a financial seizure.  That risk is mild in comparison to the risk of a widespread collapse in legitimacy.  Due to excesses (too many to name), legitimacy is rapidly draining from the global financial system and the networked groups that give it their primary loyalty (like Fred above).  In recognition of this, nation-states should hold this system at arms length to limit damage to their own legitimacy.  Given the constraints on resources faced by nation-states, a plan that would bulk up legitimacy would focus on reorganizing financial institutions (not bailing them out) and repairing the balance sheets of individual citizens (the only group in the chart to the left that is still loyal to nation-states).  That isn't happening and the damage incurred from this mistake will be significant.

NOTE: The other thing that the inset chart tells us is that this crisis is due to debt, overreach, and insolvency.  Until the US collectively writes/pays off $20 trillion plus in excess debt, not much will change.  Transferring debt from financial firms to the government (as in the Paulson/Geithner plan), only accelerates the decline of nation-states relative to an already dominant global financial/economic system.  

Posted by John Robb on Wednesday, 25 March 2009 at 10:44 AM | Permalink | Comments (20) | TrackBack (0)