Economists are scratching their heads over the dawning of 2016 about as vigorously as a kindergarten class with an outbreak of lice. 2015 went off like a damp squib with official estimates for economic growth at a globally imperceptible 1.9 percent or so. The wizards at Goldman Sachs have revised their estimates for growth down nearly 20% from just a year ago – not very heartening when you consider the numerator in this equation. Commodity dependent economies ranging from Australia to Venezuela are looking at the most bleak economic forecasts in recent times courtesy of the lower demand for oil, copper and other extractive industry resources. Profits are shrinking in most major sectors; costs of capital are at their subsidized nadirs, and the ability for the great capitalist hegemonic illusion to remain propped up is about as resolute as a drunken reveler the morning after Mardi Gras.
Seventy-one years since the Bretton Woods grand imperial utopian experiment and it looks like the unconsidered assumptions of this Icarian dream have finally been melted by the sun. Next stop – a watery grave marked by melted wax and feathers. Allow me to broaden the metaphor.
Leading up to Bretton Woods, the United States and its allies were fighting a motivated, technologically unified foe led by Germany and a ruthlessly ideologically emboldened Japan. In the ideological morass oozing from the Great War a few decades earlier, the world was in the labyrinth of faux socialism that would make the most astute minotaur pine for a sudden death. Franklin D Roosevelt and his vice-president Harry Truman were busily placating a largely impoverished populace with grand projects that would forever prove the beneficence of big government. Marx and Engels had been sufficiently long dead and forgotten so as to make the Soviet Union a festering ground for the metastasis of communism – a lovely extreme but for the autocratic tyranny of those who determine what is in the best interest for all “others” while they themselves live in cloistered opulence. Germany knew that the solution rested in the elimination of the “others” while Japan, with its centuries of bigotry and classism, knew that they were more German exclusionists than Great Experiment capitalists or communists. So, in or around 1945, the world decided to set itself on a collision course with 2017.
Now before you go off trying to decipher the significance of 72 years (which may be a wonderful diversion for some of you), let me simply offer the following comment. The life expectancy of humans on Earth right now is 71 years. It is merely informative to realize that the social and political experiments that were constructed to institutionalize capitalist socialism (pensions, social securities, and the like) are likely not going to survive the generation for which they were designed. But allow me to return to the Icarus metaphor.
When We The People were advised that governments were going to care for what communities once saw as their purview, we were giddy and strapped on the wings fashioned in the shop of a master craftsman (Daedalus in our story). Being the designer of said wings our paternalistic overlords knew that wings of wax are best not used in proximity to the sun. But unlike Daedalus, not only did our patrons not advise the risks of solar approximation, they encouraged it. Using the cunning wax of central bank manipulation and the seemingly innocent feathers of industrialized consumption, they created the thermals that were euphemistically called “economic growth”. And away their charges (literally, in each sense of the word) flew. Daedalus had King Minos – both patron and prison warden – to escape. FDR’s great experiment had the petro-dollar as both patron and prison warden. Both end in heartbreak when the children fly too close to the sun.
The melting wax in our metaphor is the growing illiquidity of the great promises that were made a generation ago. In the past few years, we’ve seen Portugal, Italy, Greece, Syria, Spain, Venezuela, Japan and Brazil struggle with the fact that social promises unkept lead to social and political upheaval. To date, these countries have had incremental albeit inconsequential impact on the global stage courtesy of Central Bank manipulation. However, as the U.S. social security illiquidity comes due in 2017 (first hitting the elderly and the indigent) and as other economies follow suit in close proximity, the reduction in “growth” will rapidly accelerate into a paroxysm far more destabilizing than 2008. Not to worry, we could have Donald Trump as President so we should be just fine… ummm…. maybe I should consider moving now!
Now these impending challenges are just that. Challenges. We created them and we can resolve them. But it takes a healthy dose of optical physics and courage to get a view of the solutions.
First: parallax. Parallax is the optical illusion in which objects closer seem to be larger and more mobile than objects seen at a distance. Bretton Woods was a great example of the error in reality created by confusing parallax for objective reality. Just because the “other” was further away didn’t mean that we could ignore “them”. And now that “they” – countries like India, China, Brazil, and much of the African nations – have become increasingly economically engaged – “they” are closer meaning that their size and movement appears more consequential. China, for example, always mattered. But now that they appear to be larger and move more nimbly, they’re suddenly deemed important. “They” were always important. And when “they” was a euphemism for “cheap” and “enslavable” “we” didn’t care. But know that “they” are “we”, we have to care.
Second: aperture. Aperture is the process of selective narrowing and collimating of a reflected field of view to achieve depth of view and focus. When one limits one’s perspective, it’s easy to find monolithic solutions. When one opens perspective to include a wider range of inputs, pluralistic reality becomes much more evident and requires more actors to be fully informed and engaged.
To weather the coming economic storm and achieve more of a dive than a cataclysmic fall into the watery abyss, we need to bring ourselves into closer proximity to each other and we need to expand our informed engagement! That requires a commitment to learn, stretch our awareness, and lessen our dependence on paternalistic systems that were built not to care for us but to disintermediate our care for our neighbor. As we enter 2016, make a commitment to share your wealth, compassion, and industry with someone you didn’t include in your circle in 2015. And, with any luck, we’ll find a more reliable way to fly.