Erectile alchemy and bubble addiction

12. IX 2018

Priapism, named after Priapus, the Greek god of fertility who sported an oversized, eternally-erect penis (so large, in fact, he used it to frighten away anyone who tried to plunder his gardens), is a condition that causes persistent and sometimes painful erections, which last for four hours or more without sexual stimulation. Apart from ED pills, anomalous blood flows in and out of the penis can be caused by a range of disorders and diseases, like sickle cell anemia, leukemia, multiple myeloma, and penile cancers, or abuses of certain prescription medications, alcohol, and some illicit drugs. Priapism can cause serious complications. The blood trapped in the penis is deprived of oxygen and can damage the penile tissue. An erection that lasts longer than four hours is a medical emergency. Untreated priapism can result in damage or destruction of penile tissue and permanent erectile dysfunction.

Economic bubbles have had a special place in American culture for the last 50 years. They encapsulate the essence of the ultimate male obsession: Everything has to be pointing skywards, from male reproductive organs to luxury condo towers, to economic growth, stock market charts and the yield curve. Bubbles hold the key to understanding the essence of American political conservatism and its ongoing transformation.

Behind this fetishized fantasy is the troubling decline in productivity growth (and economic potency in general), together with desperate attempts to bring back good old days, with governments ready to deliver temporary libidinal surrogates of any sort irrespective of their long-term consequences.

During the post-war decades, America, at 3% productivity growth, was open and welcoming, promising (and delivering on that promise) to enlighten and enrich the lives of anyone who took part in the great American project. The economic potency in those days was palpable. Each generation was doubling its standard of living; libidinal forces were abundant, optimism unshakeable, and belief in a better future consistently gratified and rewarded.

After years of misguided interpretation of the theory of comparative advantages, the American locomotive jammed in 2007. The America of today, with 1% productivity growth, has become a get-rich-quick-if-you-can landscape, xenophobic, polarized and libidinally disinvested, with rampant inequality and the highest rate of incarceration on the planet, where every subsequent generation is practically guaranteed to be worse off than its predecessor, and where 96% of people that are born poor remain poor. In today’s America the future looks more like a threat and less like a promise.

Productivity growth (5Y moving average) and bubble economy

The two bubbles of the late 1990s and early 2000s, which briefly interrupt the monotonic decline in productivity growth, announce the beginning of a new era. The Internet bubble is not without merit — it presents the arrival of a genuine technological innovation and a paradigm change — an entirely novel production process, and introduces cognitariat as a new social class. However, its biggest shortcomings are related to the creation of a new mindset: an overnight lottery winner as a new type of entrepreneur and a general change of direction in the political economy. The second, the housing bubble, is much closer to the traditional definition — overconsumption financed by debt. It bears direct responsibility for the utter impotence of the third, and the largest of all bubbles, the government debt bubble, and for the current predicament. Even after nearly a decade of unprecedented government subsidies and budget deficit spending, productivity growth has descended (and still remains) below 1% (the lowest post-war levels), just as it was declared that the economy was on the way to recovery in 2015. The effect of the entire $7tr bubble remains largely undetected by the basic barometers of economic wellbeing. It is precisely the extended duration of the housing bubble, mistakenly identified as a sign of economic potency, which has compromised the hopes of a robust recovery. The current flaccidness of productivity stands as a reminder of the fallacy of the underlying political economy.

Bubbles economy as an ideological core

However, despite their repeated failures, we still seem to be unable to shake off our bubble addiction. Bubbles sit at the core of the right wing populist delusion — no longer a political movement, but a state of mind. This pastoral fantasy has evolved into full-blown alchemy, which continues to insist without any base in reality and against common sense – and economic orthodoxy is reluctant to disagree — that in order to live happier and more meaningful lives and secure prosperity and a better future, all we need is a new magic pill.

Millions of angry gun-wielding Podunk residents, the excluded who represent the excess of the population and now live at or below the poverty line, have become the most vocal cheerleaders of the existing stock market bubble, disguised as the economic boom. They use it to rationalize the toxicity of their favorite ideology and see no reason to be concerned about the true source of their short- and long-term hardship and erosion of quality of life.

Their ignorance is not merely the absence of knowledge, but an outcome of cultural and political struggle. The current political economy has morphed into agnotological[1] capitalism – the systematic production and maintenance of ignorance as a major feature that enables the economy to function by allowing the creation of bubbles. In its background there is a programmatic effort to eliminate the potential for dissent. This effort relies on the creation of systemic unknowns where any potential “fact” is always already countered by an alternative of apparently equal weight and value, which renders engagement with the conditions of reality contentious and a source of confusion. In this way, participants in bubbles remain unaware of the imminent collapse until after it has happened.

Erectile alchemy

Bubbles are economic erectile pills — false signals that something can happen out of nothing. They have a special allure, in the same way Ponzi schemes do – when easy money is readily available, we don’t need a rationale. Economic bubbles have become a juncture where erectile fantasy has become the main cultural dimension. The surge in transient virtual wealth they create is the extended erection we read about on ED pillboxes. The duration of extended bubbles is their most troubling aspect; the longer they last, the bigger the damage they create. So, why does the obsession with bubbles still persist?

According to medical statistics, priapism brought on by erectile dysfunction drugs is extremely rare — more than 100 million erectile pills are sold every year with fewer than 100 cases of priapism reported; that is less than one in a million. However, it is quite possible that there are many more cases of extended priapism caused by the ED pills than medical statistics show. They are just not being documented. If anything, the warning itself could be seen as a clever advertisement incentivizing the users to look for those “gold nuggets” that would trigger one such episode. Why not? Who would complain about having too much of a good thing? “If I get a four-hour erection, I’m not calling a doctor, I’m calling my friends”. Reporting protracted erections would be the most un-American thing to do.

And this is the actual point where the erectile fantasy of bubble economy will meet its maker. Do we not need libido first? Erection will come by itself after that. Or will it? This issue is, and will remain, the central theme of the ongoing political struggle for decades to come. The future of our civilization depends on its outcome. Pills, no matter how different and potent, will never work in the long run, and they have consequences.

 

[1] The concept of agnotology was first introduced by Robert N. Proctor as the study of culturally induced ignorance, particularly the publication of inaccurate or misleading scientific data. In his book, Never Let a Serious Crisis Go to Waste: How Neoliberalism Survived the Financial Meltdown, Verso (2013), and numerous interviews and essays, Philip Mirowski argues usefulness of agnotology for explaining the post-2008 socioeconomic transformation. This paragraph is largely a summary of his thoughts on the topic.

 

Complexity curse: From low productivity to social fragmentation

3. IX 2018

Sooner or later, everything turns into shit (2nd law of thermodynamics)

Economic productivity is one of the most important indicator of the wellbeing of a society and a fundamental determinant of its standard of living. It determines how prosperity is metabolized and how quality of life improves with time. Productivity is defined as the quantity of output produced by one unit of an input within one unit of time. An increase in physical productivity causes a corresponding increase in the value of labor, which raises wages. This is why having an education or on-the-job training is sought after by employers; it increases the productivity of workers and makes them more valuable assets to the firm.

Here is an example of how it works in practice. An employer offers you $15 to dig a 25 square-foot hole in his backyard. Suppose that you have insufficient capital goods (your bare hands or a spoon), and it takes you three hours to dig a hole to his specifications. Your labor output is worth $5 per hour. If you had a shovel instead, it may have only taken you 30 minutes to dig the hole; your labor output just rose to $30 per hour. With a big enough crane, you may have been able to dig it in five minutes with a labor productivity of $180 per hour. It is clear how the quality of life of a crane owner, which is a direct consequence of his high productivity, differs from the rest of the crowd.

Economic productivity is the source of libidinal forces, the alpha and omega of economic potency, and the ability to better the human conditions. It regulates social entropy, defines the arrow of time, shapes our expectations of the future, and provides mechanisms that sustain our capacity to desire. Abundant productivity enables future generations to live better than the previous ones. Low productivity, in contrast, means both short- and long-term hardship and erosion of the quality of life.

For almost half a century, productivity growth in developed world has been showing a troubling secular trend. In the last decade, developed economies all have entered a stagnation trap from which they seem to be unable to find a way out. This is illustrated in the chart, which shows the history of productivity growth in the US. The bold red lines indicate long-term averages across different regimes. Except for a relatively short period of two successive transient bubbles (internet and housing), there is a clear decline of the average from 3%, in the post-war decades, to 1% in the last ten years.

US productivity growth (5Y moving average)

The decline in productivity growth has profound social implications. A 3% productivity growth, as seen in the two post-war decades, means that the standard of living doubles for every new generation[1]. In contrast, a productivity growth of 1% requires three generations to double the standard of living. However, if we take into account the rise of living costs, in an economy with 1% productivity growth each subsequent generation will have less of everything than its predecessor. It is particularly interesting that productivity growth has been descending to a near all-time low in the last five years, to below 1%, just as it was declared that the economy was recovering from the post-2008 recession. This point in itself deserves special attention.

The death spiral of productivity growth is an example of Tainter’s law, a general pattern whereby investing in complexity inevitably generates decreasing marginal returns for the systems that uses it. Insisting on the same methods, even when they have ceased to work, sets a civilization on track for collapse[2].

This is the essence of Tainter’s argument[3]. A civilization forms when some benefit accrues from greater complexity[4]. Benefits of complexity are realized through cooperation – the proverbial “whole is greater than the sum of its parts”. However, in the initial stage, although benefits of increasing complexity rise, during their evolution, complex systems spontaneously generate endogenous mechanisms of self-sabotage.

Tainter’s Law

The primary source of self-obstruction is the new protagonist that emerges on the scene: the coordinator[5]. He is the guardian of the new paradigm, which champions complexity as the main and, ultimately, only strategy. The marginal benefits of complexity eventually begin to decline. Beyond a certain point, their intensification produces less additional benefit, putting its beneficiaries to more and more stress. But, as the community/organization now only knows how to use a single strategy, a superstructure is in place that cannot be gracefully abandoned. In the last phase, as benefits of additional complexity taper off, vast resources need to be invested in entirely unproductive ways, such as desperate attempts at regime legitimization: The competitive monument building, or the lavish parades held for each new, short-lived emperor. Eventually, the burden of civilization becomes greater than any benefit it provides and the society collapses[6].

Destruction of cooperation and self-sabotage in corporate organizations

Yves Morieux, offers an illustration of how the last phase of complexity is realized in the current context of developed corporate structures[7]. Behind persistent declining trend in productivity are the three basic tenets of corporate management that act as the main pillars of self-sabotage: Performance, Transparency, and Accountability.

Transparency implies audits and compliance — where does my role start and end. Accountability creates conditions for failure (in a compliant way): Who is accountable? Instead of creating conditions to succeed, we obsess on knowing who is to blame in case of failure. Performance: People put energy and effort in what can be measured, i.e. their individual performance, but not in cooperation.

However, cooperation is how you allocate your effort. Cooperation means taking a risk by giving up the ultimate protection, your own performance, to enhance the performance of those to whom you are being compared, for the sake of cooperation, in order to achieve the optimal result[8]. People are continuously being discouraged and disincentivized to cooperate. If when they cooperate, people were worse off, why would they cooperate? The three basic tenets of corporate management are doing injustice to effectiveness. The more complex the system becomes, the more structures we add that emphasize the three tenets. They trigger a counterproductive multiplication of interfaces that not only add people (non-productive ones), but also create obstacles. The more complicated the system, the more difficult to see what is happening. So we need meetings, reports, conference calls, etc.: people spend 40-80% of time wasting their time[9]. This is the politics of deliberate sub-optimality.

MBA nation or cannibalization of the social landscape

The false premise, which has become the defining characteristics of American politics and, to some extent, the culture as well, has been that a society is essentially the same object as a corporation, just a bigger one, that skills you learn in an MBA program are the same skills you need to manage a society, and that successful corporate managers are, by default, also good national leaders. However, this is not the only social damage of this fallacy. When applying the lessons from corporate culture to society, one inevitably also imports the underlying mistakes of that culture. And so, in the same way a rising complexity creates its own mechanisms of self-sabotage, the essence of the neoliberal approach to social organization is inhibiting the mechanisms of social cooperation. Social atomization, the cult of individuality, the creation of homo economicus as a model citizen, competition as the only and ultimate criterion for everything, the obliteration of welfare, the destruction of empathy, and the entire conservative system of values, all of these structures are instruments of social fragmentation and annihilation of the tissue that makes society different from a collection of individuals. All this leads to barbarization of the social landscape with the degree of polarization that has reached the point where political consensus is no longer possible and democracy no longer works. Politics has become a problem instead of a solution. The net result? The quality of life is already deteriorating and this trend will be reinforced with each subsequent generation as the whole continues to shrink smaller than the sum of its parts.

Under the crush of social entropy, with its ever-increasing complexity as the only strategy, we are facing the same destiny as many civilizations have in the past. The future has already become impossible and without the clear picture of the future, the present cannot take off. Like the boy in Kafka’s story, A Country Doctor, our social and economic system already inhibits the world of undead. Rising complexity is the fatal wound depriving it from the capacity to die. Only when that wound heals, will the system be able to collapse.

 

[1] If one generation is about 20 years, then (1.03)²⁰ ≈ 2

[2] Yves Morieux and Peter Tollman: Smart Simplicity: Six règles pour gérer la complexité sans devenir compliqué, Manitoba (2016)

[3] Joseph A. Tainter, The Collapse of Complex Societies, Cambridge University Press (1990)

[4] The term complexity is generally used to characterize something with many parts where those parts interact with each other in multiple ways, culminating in a higher order of emergence greater than the sum of its parts.

[5] Akshay Ahuja in Dark Mountain Project (19, March 2012)

[6] Akshay Ahuja, ibid.

[7] Yves Moreieux, ibid.

[8] Yves Moreieux, ibid.

[9] Yves Moreieux, ibid.