The latest threat to the global recovery

[2 As and a B]

The latest threat to the global recovery - state capitalism

A fascinating new book is about to hit the shelves. Called The End of the Free Market it argues that all-powerful governments from around the world will be the new driving force in the global economy, skewing the decision making process away from individuals, companies and the market towards states, political interests and authoritarianism.


By Kamal Ahmed
Published: 12:11PM BST 02 Jul 2010

Stated in one bald paragraph it sounds a little apocalyptic. But Ian Bremmer, the highly respected author who is president of the Eurasia Group in the United States, makes a compelling case. The financial crisis has left Western capitalism nervous and risk averse, constantly under attack from a body politic keen to take advantage of public anger over the events of 2007 and 2008. Issues like the control of the banking system, remuneration and the failure of so much of the financial sector, whether Northern Rock, Lehman Brothers, AIG or Royal Bank of Scotland, has created a fundamental crisis in confidence.

At the same time, and with little of the same scrutiny, cash-rich governments from the Middle East and Asia are taking advantage of this malaise. Bremmer argues that, with the collapse of communism little more than a generation ago in historical terms, China, Saudi Arabia and Russia are now the leading players in this new era of state capitalism.

The battle for the rights to energy and food are at the forefront of the new trend, coupled with what Bremmer describes as the ability of such states to "buy" their citizens loyalty. He suggests that the development is a threat to long term global recovery.

Of course, in the UK, Europe and beyond, the state or state representatives are playing a far greater role in the lives of those corporations that generate profits. Every move against the banking sector has a knock on effect for businesses. As banking executives tirelessly argue, for every extra £1 they are ordered to keep on their books (a protection against a future crisis) £15 is lost to the economy.

That is basic function of the banking industry - leveraging money and managing risk to enable the economy to grow. As I have said before, five years ago a banking CEO had little need to worry about the workings of the Chancellor's mind. Now it has to be at the heart of every decision making process.

Bremmer's new book takes apart this new trend analyses the possible outcomes - not least the threat to the United States as the world's leading economic powerhouse. George Osborne describes the book as a "powerful anaysis". The economist, Nouriel Roubini, says it is "indispensable".

With fears of a double-dip recession stalking Western economies, the question is whether Bremmer has alighted on the central trend of the next decade and beyond. Is this a trend we should fear? Has the market system brought it upon itself, a dose of medicine richly deserved?

I look forward to your thoughts.

Kamal

http://www.telegraph.co.uk/finance/comm ... alism.html

This...

The battle for the rights to energy and food are at the forefront of the new trend, coupled with what Bremmer describes as the ability of such states to "buy" their citizens loyalty.

But it has always been about access to energy and food (and water) hasn't it? And now also access to resources for industry. And it has always been about the ruling elite "buying" the loyalty of the populace hasn't it? Government subsidy, anyone?

I'm reading a very interesting - no, absolutely mind-shattering - book (published 1988) at the moment about the collapse of complex societies. There is a lot in it about the collapse of the Roman empire and it is all frighteningly close to the way things are going - the stages in collapse - in today's world, of which this 'The End of the Free Market' book describes part, and in part by omission.

Actually I think the book's author is probably unknowingly describing part of the collapse process as this interview with Nouriel Roubini seems to suggest that he is engrossed in the detail, using certain assumptions about "the free market", rather than looking at the big picture historical trend. (That interview also includes a link to a reciprocal interview about Nouriel Roubini's book, "Crisis Economics: A Crash Course in the Future of Finance".)

[RenewableCandy]

Why are states seen as worse entities than today's corporations?

What's the book you're reading? Tainter? Diamond??

[RogueMale]

Why are states seen as worse entities than today's corporations?

What's the book you're reading? Tainter? Diamond??

It must be The Collapse of Complex Societies by Joseph Tainter. It's excellent, but could now do with a new edition covering what was learned from the collapse of communism in the USSR/Eastern Europe, the failure of Cuba to collapse, and also an examination of the PRC and North Korea. It also only covers the Earth. That may seem a strange thing for me to write, but if you read up on Fermi's paradox you'll understand what I mean.

I must read Jared Diamond's book on Collapse. I was very impressed by Guns, Germs and Steel, as well as this essay: http://www.ditext.com/diamond/mistake.html.

[2 As and a B]

Yes, it is Tainter's book. Has anyone read that and Diamond's as well, for comparison?

Tainter's book approaches collapse from the viewpoint of archaeology and draws general principles. Or rather describes various collapses, sets out a proposition - briefly, that societies tend towards complexity and declining returns on increasing complexity make them vulnerable to stress-induced collapse - and uses that to explain historic collapses in detail.

I knew a bit about the Roman empire before, but not of the variety of stresses they experienced and the solutions tried, which are very similar to the modern day. Particularly striking were the debasement of the coinage, hyperinflation and pushing the tax burden on to future generations till even they couldn't have paid it. An amazing book, and well worth the price as it will bear rereading and rereading.

I agree, an updated edition would be most welcome. Here is a short 2001 commentary by Tainter accessed from the Tainter Wiki page. And a 1996 paper, Complexity, Problem Solving, and Sustainable Societies, accessible from here.

But what about extraterrestrial life? How would that be relevant to the subject matter of the book?

I was very impressed by ... this essay: http://www.ditext.com/diamond/mistake.html.

Yes, me too. Very much along the lines of what Tainter was to publish the following year. This is a nice summation:

Forced to choose between limiting population or trying to increase food production, we chose the latter and ended up with starvation, warfare, and tyranny.

A hard choice, which we still, for the best of intentions, continue to get wrong in so many ways by increasing complexity and hence dependency on events beyond the individual's or the state's control.

[PS_RalphW]

Jared's book covers much of the same ground, but at a much more readable level. His attitude is that societies collapse for similar reasons to Tainter's but that politically they chose to collapse, by dogmatically ignoring the warning signs, and failing to adapt to their changing environment, or follow the more sustainable behaviour of nearby societies.

When hewrote it he as upbeat aout the US's prospects because he saw grass roots people adapting land use, etc. in his local state.

I suspect he is less upbeat now, but he is not an out and out doomer.

[2 As and a B]

I haven't read Diamond's book, but it strikes me that developed societies don't have the political option of choosing to change, and the more developed the less the political option as the vested interests of the elite and the clamouring of the lower classes for handouts gets stronger and stronger.

Most here would likely agree that the way out of our current dilemma is by reducing all the things that are driving us to the cliff-edge such as consumerism, energy consumption, pollution, taxes, bureaucracy, militarism, nationalism, surveillance, and so on and return to a simpler, more community-based way of life, but what government is going to - has the choice to - turn the volume down on these?

[RogueMale]

But what about extraterrestrial life? How would that be relevant to the subject matter of the book?.

This is why I mentioned the Fermi paradox. The galaxy is very big (and the nearby Andromeda galaxy M31 is even bigger), and they must surely contain numerous inhabitable planets on which intelligent life could evolve. If it has, you'd expect much of it to have evolved, and developed civilizations far in advance of ours, and you'd expect at least some of them to have embarked upon a programme of galactic colonization. This hasn't happened: there are no signs of advanced extraterrestrial civilizations. There aren't even any signs of attempted radio contact. So either intelligent life capable of building advanced civilizations is an extremely rare occurrence, or it doesn't last very long when it appears. A likely scenario is that it uses up its planetary energy reserve before it's able to colonize nearby planetary systems.

It's worth searching the web for detailed discussions of this, but I'll answer the commonest objection: that even the distsance to nearby stars is enormous and it would take many generations to get there. This doesn't matter if the civilization builds robotically controlled, self-replicating probes. These are somewhat in advance of our civilization, but not by much. And all it needs is one extraterrestrial civilization to succeed.

[RenewableCandy]

Yes I'd heard of this and it's an interesting point. However, it is possible that a type of life has evolved which has the technological ability to investigate the whole galaxy, but alongside this has evolved the wisdom to just not be arsed.

Another possibility is that whatever has evolved, occupies a completely different "characteristic time" to us, so we don't see it and it doesn't see us. Imagine, for example, life on a very cold planet. It would react to events, and communicate, with a "characteristic time" of, say, decades rather than seconds as we do.

Conversely there might be something that operates on a molecular scale using radioactive decay as its energy source which has a "characteristic time" much faster than ours.

Imagine the difficulties involved in trying to communicate with either of these two types of life.

[Lord Beria3]

Very interesting stuff.

I used to be a UFO buff, and read alot of literature about that subject, and although its been years since i have gone back into this strange world, i came out with a number of conclusions.

The roswell crash was real and aliens did crash in 1047, there is a wealth of circumstanical evidence that a UFO and alien bodies were discovered and there was a coverup.

After this incident, the fog deepens, and it becomes very hard to discern between myths, disinformation, truth and nonsence. However, i personally think that there are intelligence extra-territerial civilisations out there, who have had some form of interaction with Earth.

However, in case i am wrong, which i may be, as there is no 100% evidence at Roswell, and i accept this, than the theory that any intelligence civilisation dies out due to resource/energy depletion is a very sound theory.

[2 As and a B]

But what about extraterrestrial life? How would that be relevant to the subject matter of the book?.

This is why I mentioned the Fermi paradox. The galaxy is very big (and the nearby Andromeda galaxy M31 is even bigger), and they must surely contain numerous inhabitable planets on which intelligent life could evolve.

It's a numbers game for sure, but Earth's conditions (for evolution of carbon-based life as we know it) are complex - right size, right distance from its star, molten iron core giving protective magnetic field and plate tectonics, moon giving tides, evolutionary path leading to intelligent (tool-handling, self-aware) life, not destroyed by impact. An important, and unanswered, question is "How did life on earth start?" (a broader question than "How did life start on Earth?" as it allows 'life' to have started elsewhere (in the locality of our star) and to have drifted down to Earth from space. And the companion question "How easy is it to start (our carbon-based) life?" - it may be very difficult, or very easy.

If it has, you'd expect much of it to have evolved, and developed civilizations far in advance of ours, and you'd expect at least some of them to have embarked upon a programme of galactic colonization. This hasn't happened: there are no signs of advanced extraterrestrial civilizations. There aren't even any signs of attempted radio contact. So either intelligent life capable of building advanced civilizations is an extremely rare occurrence, or it doesn't last very long when it appears. A likely scenario is that it uses up its planetary energy reserve before it's able to colonize nearby planetary systems.

My guess is that technologically advanced civilisations burn themselves out PDQ and we have missed radio contacts in time; Star Wars and Star Trek are fantasies that assume a new, unlimited power source (dilithium crystals if I remember correctly from Star Trek) and all other resources available on demand!

It's worth searching the web for detailed discussions of this, but I'll answer the commonest objection: that even the distsance to nearby stars is enormous and it would take many generations to get there. This doesn't matter if the civilization builds robotically controlled, self-replicating probes. These are somewhat in advance of our civilization, but not by much. And all it needs is one extraterrestrial civilization to succeed.

Maybe they're heading our way right now!

[RogueMale]

Yes I'd heard of this and it's an interesting point. However, it is possible that a type of life has evolved which has the technological ability to investigate the whole galaxy, but alongside this has evolved the wisdom to just not be arsed.

Yes, that might apply to some advanced civilizations, but it's unlikely that all advanced civilizations except ours would behave like that.

It's worth reading up on an idea called "The Great Filter".

[Lord Beria3]

Maybe there already here but we haven't noticed...

[SunnyJim]

I haven't read Diamond's book, but it strikes me that developed societies don't have the political option of choosing to change, and the more developed the less the political option as the vested interests of the elite and the clamouring of the lower classes for handouts gets stronger and stronger.

Most here would likely agree that the way out of our current dilemma is by reducing all the things that are driving us to the cliff-edge such as consumerism, energy consumption, pollution, taxes, bureaucracy, militarism, nationalism, surveillance, and so on and return to a simpler, more community-based way of life, but what government is going to - has the choice to - turn the volume down on these?

Yes, this is a great point. I have long felt the same way. There is no choice, either on society or individual scale. The system has had sufficient time to mature to fix rigid structures that must be adhered to, and around that has evolved a structure that prevents any change. In this case the major structures preventing adaptation are our financial system (charging of interest which necessitates continual growth - which has led to ever increasing consumerism, energy consumption, regulation, etc), and our legal system which has the primary purpose of enforcing ownership and laws pertaining to the financial system.

On an individual level, there is no get out clause. You can't 'opt out' of the society. There are few acceptable lifestyles you can legally follow that don't involve becoming involved in ownership, debt and law.

[DominicJ]

Thanks for the heads up I'll stick them on the reading list.

Why are states seen as worse entities than today's corporations?

Because if you dont like Tesco, you can shop at Asda, buy direct from a farmer or grow your own.
If the governent nationalises the food production and distribution network and allocates you certain quanities of specified fruits, vegetables, meat and dairy each week, you cant buy from another supplier, there isnt one.

Regarding Fermi
Its actualy within our ability to build ships that could reach our local stars.
http://en.wikipedia.org/wiki/Project_Or ... ropulsion)
At 10% of light speed Alpha Centauri is 44 years away, so its a one way trip, even for a new born. I'd be an old man before we landed and most of you would be dead.
Thats assuming the rocket ship powered by farting nuclear bombs makes it to AC, and that there is something to land on once we got there.

But assuming we got there, and there was a there, the landers would have a 50,000t ship to strip for parts and 50,000t of cargo to build New New New York with.
Any volunteers?

[the_lyniezian]

Lot of interesting points here.

Firstly the whole business of interstellar travel and the possib9lity of alien life.

Yes, it might be possible to send some sort of spacecraft to Alpha Centauri in a matter of years using nuclear propulsion, but obviously there are all the questions pertaining to nuclear explosions, and if not the safety of them, then the public fears are an obstacle. Second, there is the question of- for a manned mission- permitting life support for that length of time. Prolonged exposure to solar and interstellar radiation could possibly kill, and there are the health impacts of zero-gravity (you'd need a sort of centrifugal pseudo-gravity like in 2001: A Space Oddysey).

The likelihood of any intelligent life out there is probably fairly minimal, even if one were to assume no God is directly involved in bringing it about. How many millions of species have existed on this planet, and are thought to have evolved and died over millions of years? And out of them, how many have developed the level of intelligence and technological sophistication we have? Erm, just us, as far as we know. And for how long in our history have we been able to communicate by radio? About 100 years. How long have we been travelling in space? About 50 years. A ridiculously small proportion even if like me you take YEC seriously. We are also the only planet in this solar system we know to have developed advanced life- there may be microbes elsewhere, or have been, and whatever exoplanets have been discovered one wonders about (mainly Jupiter-sized things). If there are one or two technologically-advanced civilisations out there, the distances will be far more than Alpha Centauri, and the practicalities of just covering that distance make the whole exercise seem futile.

That's by the by, I suppose. What's more pressing is the supposed ability of natios to buy their citizens' loyalty, the general inability to opt-out of The System, and so on. I suppose even for those who wish to become self-sufficient, there's still the question of buying land and the resources to grow your own food, collect your own water &c., and assuming that is sorted and you have no debts, there's still the council tax to pay...