Wednesday, August 13, 2008

Idols of the Marketplace

As last week’s post suggested, the forces that keep American families stuck on an economic treadmill, trying to meet new and challenging conditions with old and increasingly dysfunctional responses, are by no means entirely economic in nature. Despite the polite fiction that all players in the economic game are rational actors pursuing their own interests in free exchanges, most of the decisions individuals make in the course of that game involve precious little of the sort of rational deliberation the fiction suggests.

To begin with, of course, a great many of the choices are enforced. I think it was Anatole France who pointed out that equality under the law, as often as not, amounts to forbidding the rich as well as the poor to sleep under bridges, steal bread, or beg for coins in the street. For many Americans, and most people elsewhere in the world, the freedom to exchange their labor for money amounts to a Hobson’s choice between sweatshop labor at poverty wages, on the one hand, and starving in the streets on the other. America’s caste system is somewhat more flexible than average, and its privileged classes long ago figured out the advantages of opening their doors to a trickle of aspirants from below, but access to economic opportunity in America still depends to a very large extent on how much money your parents made.

Yet the power of cultural narratives and myths, a frequent theme in these essays, also plays a massive role in leading supposedly rational actors into the irrational decisions that shape so much of our collective lives these days. The twilight of the household economy, the theme of last week’s post, is a good example. A number of my readers responded to the post with emails describing couples they knew who maintained two salaries, even though the costs incurred by doing so – professional childcare, commuting, office clothing, and more – far exceeded the income of the less lucrative of the two jobs. This is quite common nowadays, because the cultural narratives surrounding employment make it impossible for most American families to notice that their economic status might be improved noticeably by giving up one salary in exchange for full-time involvement by one family member in the household economy.

Behind the narratives that prop up this curious blindness, though, lies a broader pattern, and it’s this that I want to discuss this week. For reasons rooted in history, it’s difficult to talk about the theme I have in mind without stirring up passions of the most irrational and intemperate kind. Still, the attempt has to be made, because the narrative in question is turning out to be a massive barrier to constructive change as we approach the twilight of the industrial age. The cultural story I have in mind is the myth of the market.

The measure of a narrative’s power is the extent to which its believers miss the fact that it’s a culturally conditioned narrative, and treat it as an objective reality obvious to any unbiased observer. This condition is widespread enough in the case of today’s market mythology that it’s probably necessary to sketch out the narrative in some detail. In simplest terms, the myth of the market starts from the belief that all human economic activity naturally involves free exchanges of value in a free market, mediated by an accepted measure of value – that is, by money. The myth goes on to claim that any economic activity outside the world of market exchanges either doesn’t count, doesn’t contribute to prosperity, or is a bad thing that can only be redeemed by bringing it within the sacred precincts of the market. Finally, the myth insists, anything that restricts or regulates the choices made by participants in market exchanges is a bad thing, guaranteed to hinder prosperity, because the market itself – guided by Adam Smith’s famous “invisible hand” – inevitably maximizes the benefits received by all its participants, so long as it’s given the freedom to do so.

I have used the word “myth” here deliberately, with an eye both of its current meanings. Its older meaning – the sense possessed by its source, the Classical Greek word muthos – defines a myth as an important cultural narrative, a story that every full participant in the culture can be expected to know, that serves as a paradigm for some aspect of humanity’s experience of itself and the world. Its more recent, derivative, and polemical sense defines a myth as an important cultural narrative that happens to be false. In this second sense, proving that something is a myth doesn’t mean showing that it plays a crucial role in some society’s view of the world; it means showing that whatever it says about the world is untrue.

Now it so happens that some cultural narratives are myths in both senses of the word: they are crucial elements of a society’s view of the world, and they also make statements about the world that can be shown to be untrue. The myth of the market falls into this interesting category. Just now, in America and some other industrial nations, it plays a central role in defining how people think about the economic dimension of their lives. At the same time, some of its core assumptions, and many of the statements about the world that derive from it, are hard to support on any basis but blind faith.

This is where the intemperate passions I mentioned earlier enter the picture, of course, because the myth of the market is not simply a cultural narrative; it’s also an ideology supported by a great many people just now. There’s a complicated history behind its current ideological role. The grand geopolitical struggle between the American and Russian empires that occupied most of the twentieth century, and still makes headlines today, followed the usual custom and borrowed ideological garments to provide a scrap of decency to the clash of naked ambitions.

The American empire’s first choice of ideologies to counter Russia’s Marxist polemics was Christianity – this is why, for example, the words “under God” were tacked onto the Pledge of Allegiance during the Eisenhower administration, and why the word “Russia” rarely appeared in American political speech for more than two decades without the adjective “godless” in front of it. This turned out to be a bad choice, though, not least because it had little appeal outside America’s borders. A secular ideology had to be coined, and free market capitalism filled that need. It’s not accidental that many of its active proponents in recent years were Marxists during their years of adolescent rebellion in the 1960s; much of what now passes for economic thought in America simply takes Marxist assumptions and stands them on their head, in the same way that Satanists borrow most of Christian theology but root for the other side.

The Siamese-twin relationship between Marxism and today’s free market ideology can be seen most clearly, perhaps, in the insistence on both sides that the only valid position on the spectrum of possible relations between government and the economic sphere lies at the two extremes: either all economic activity should be controlled by the government, or the government should have nothing to do with the economic sphere at all. I doubt anyone just now needs to be shown that the Utopian promises of Marxism don’t work in practice, but the current ideology of the free market is another matter. Still, the evidence of history simply doesn’t support the claims made by free market advocates.

Track the economic history of the United States in the 20th century, for example, and an interesting pattern emerges. Until the 1920s, a free market ideology far more principled than its current equivalent dominated American politics; government kept its hands off business until the crash of 1929 and the Great Depression made that politically impossible. During the Depression years, politicians imposed an alphabet soup of regulations on the American economy, and those remained in place until the early 1980s, when most of them were removed. If the myth of the market is to be believed, the American economy should have been more prosperous before the mid-1930s and after the mid-1980s than in the intervening period.

The problem, of course, is that this isn’t what happened. Until the 1930s, the American economy was racked at regular intervals by a disastrous cycle of booms and busts that drastically limited American prosperity and made severe economic depressions a frequent experience. As the New Deal took hold, the economic cycle damped down to livable levels, and the United States entered the longest period of general prosperity in its history. That prosperity waned in the 1970s as US oil production peaked and began to decline, but the deregulation of the 1980s did not bring it back. For most Americans, per capita income in constant dollars has declined since the early 1970s, and many other measures of effective wealth have slumped accordingly; the rate of infant mortality in America today, for example, is roughly on a par with that of Indonesia.

What has returned, and in spades, is the old cycle of boom and bust. Since the beginning of the Reagan years, speculative booms and their inevitable implosions have once again become a dominant feature of the economic landscape. So far, the US government has responded to each popping bubble by ignoring its own free market rhetoric and flooding the economy with borrowed money. There seems to be some doubt about whether that strategy will work in the aftermath of the most recent incarnation of the process, the real estate frenzy of 2002-2006; one way or another, though, US government, corporate, and individual debt has soared to unsustainable levels after these binges of borrowing, and a reckoning cannot be avoided forever.

Of course it’s possible to argue that the regulations established in the 1930s and eliminated in the 1980s had nothing to do with the period of relative economic stability and rising national prosperity that arrived in the 1930s and ended in the 1980s. Look beyond US borders, though, and the same patterns show up. The nations with the highest standards of living today, for example, are not those that have embraced an unrestricted free market, or for that matter those that have subordinated all economic activity to the political sphere. Rather, they’re nations that have found a middle ground, leaving economic activity in private hands but regulating it where necessary for the public good, and in particular, preventing it from indulging in the self-destructive excesses it pursues when left to itself.

That middle ground, granted, lacks the simplistic good-and-evil categorization that makes for a popular ideology these days. It’s pragmatic, it’s sloppy, and it requires constant tinkering and a willingness to deal with the reality of conflicting interests. All that can be said for it is that, by and large, it does seem to work better than the alternatives.

Well, that may not be quite all that can be said for it. One of the fundamental axioms of ecology is that an ecosystem becomes more stable and productive as it becomes more balanced. Cycles of boom and bust are common in marginal ecosystems, where nothing controls populations except the crude forces of food supply and starvation; as ecosystems develop complexity and richness, subtler factors come into play, and conflict and chaos give way to equilibrium. Economic systems may well be subject to the same rule.

Political systems certainly are; the success of democratic systems of governance, after all, depends precisely on the extent to which they establish and maintain a balance of powers in which no one has unchecked authority. Today’s market economies may be badly in need of a dose of the same medicine. Part of the countervailing force that’s needed to pull them out of the vicious cycle of speculative boom and bust will likely come from government regulation, but the same principle may need to be applied in other ways, not least to keep government power from ballooning further out of control than it already is.

Just as it’s clearly not true that the unregulated market automatically brings prosperity – the invisible hand, it turns out, is quite capable of giving us the finger – the issues raised in the last two posts suggest that it’s also not true that all economic activity ought to be subject to the market’s vagaries. Economies outside the market system could play a large role in helping to balance out the market’s wobbles. The household economy is one potential balancing force; another could come from local economies driven by the very different forces of reciprocity and custom, in which surplus products are exchanged as gifts between neighboring families. Other economies beyond the market also deserve exploration.

The crucial thing to keep in mind, it seems to me, is that subservience to the intellectual idols of the contemporary marketplace may well turn out to be profoundly counterproductive in the years ahead of us. The market economy is already having to deal with rising transportation costs and the twilight of the short-lived global marketplace, and will shortly have to face the desperate need to retool our lives and productive capacities to meet the requirements of the dawning age of scarcity industrialism. In such a context, remaining stuck in a rigid, ideologically based stance about the proper relationship between the market economy and other sectors of society may be a luxury we can no longer afford.


<joelsanda /> said...

There's another reason for two working parents when the cost far outweighs the immediate economic benefit - fear of losing one of the jobs, which could mean losing the house and losing health insurance.

David said...

Another nice post, JMG. Thanks.

Do you feel up to prognosticating about how long before the current mindset of dumbed-down binary oppositions gives way to a more nuanced style of thinking? I feel as though we've just about hit the extreme position in lunkheaded and polarizing public discourse, not to mention the degree to which we yield power to authoritarian and uncontrollable organizations (corporations). But each new extreme gets out-extremed by the new one, and the ideology of the market continues to be our only hope -- or so we like to tell ourselves. The only way out of this hole? Keep digging.

Sometimes it seems to me that, as a culture, we have all but lost the capacity to compromise, to negotiate, and to engage diplomatically with others. The winner-takes-all zero-sum picture of the world is everywhere. And as things become more difficult and tenuous for many folks, my worry is that nuanced thinking will come off looking like weakness and vacillation rather than as careful contemplation of all variables. So polemical thinking has a built-in positive feedback loop, and I wonder what can break that loop.

Maybe the answer is something like "widespread instantiations of working models based on carefully blended theoretical positions" which can bubble up and quietly supplant the failing brittle orthodoxies... but doesn't that seem like a crazy longshot? (Which is not to say that it's not the only shot, long or otherwise.)

As always, thanks for sharing your thoughts.

porterbill said...


Both Capitalism and Marxism rest on a number of assumptions - both are about the allocation and managment of resources and neither are able to deal with depletion of a fundemetal resource like oil.

Neither has the tools or the scope to address major trend reversals like the geologic depletion of oil.

Neither are dependable for situations outside their intended parameters.

Economics and politics cannot create oil, coal or uranium - these are geologic processes; some day, perhaps soon, the growth trend of the last 100 years will reverse.

IMO the prosperity of the mid-20th century has less to do with the type of economic system or the political system, but rather is more a function of the application of technology that improved productivity.

With the depletion of oil, declining productivity is sure to follow in either a Capitalistic or Marxist or Middle of the road political-economic system. Declining productivity and decreasing per capita energy availability will impact all political and economic systems. I see no politcial or economic system that can retool societies. The result will IMO become a painful and protracted population decline over many generations overshooting on the Dieoff by as much as recent trends have overshot to the upside.

Limits to Growth are reasserting themeselves much as Malthus predicited, just that the Industrial Revolution intervened and took the Overshoot to levels unforeseen by Malthus. The Industrial Revolution enabled technologic and population increases leaving humanity much like yeast that have grown on a sustained diet of sugar until they overpopulated the petri dish or caribou that have grown in numbers beyond the carrying capacity.

Classic reads on the current dilema are OVERSHOOT by William Catton and GEODESTINIES by Walter Youngquist.

Dwig said...

JMG: The crucial thing to keep in mind, it seems to me, is that subservience to the intellectual idols of the contemporary marketplace may well turn out to be profoundly counterproductive in the years ahead of us. There are several people already proposing alternatives, notably Paul Hawken (natural capitalism), Herman Daly (ecological economics), and Michael Shuman (reviving local economies). There are also societies, such as in Argentina, where circumstances have forced people to "make other arrangements" and come up with creative eonomic systems (sometimes including local currencies).

I'd like to make a proposal: for the next 3-4 weeks/posts, let's focus away from recounting the well-known ills of our current false myths and failing narratives, and onto examinations of the emerging alternatives that show some promise, whether as-yet-untried proposals or actual works in progress. Included in this, of course, would be more on various aspects of culture conservation.

Speaking of which, I have been working -- painfully slowly -- toward capturing a representative sample of the C.C. dialogues on this site, and putting them into a wiki where, I hope, a group larger than just myself will collaborate to create a resource on the subject. If nothing else, an outline of the topic with a few leaves on the branches will be a good start. Within a week or so, I should have the first cut, which is just a collection of the comments from each post, organized by the post title.

Isis said...


This probably belongs in the comment section of your previous post more than here, but since you're still talking about related things...

I think that the high divorce rate might just have something to do with the fact that so few people today are willing to stay out of the formal economy and focus on the household economy. Some 50% of all marriages now end in divorce. So suppose a couple gets married, has a kid or three, and decides that it doesn't make economic sense for both adults to work. The spouse with the lower earning potential stays out of the formal economy for 10 years, and then the couple divorces. This person then has to go back into the work force, after having lost a decade of potential work experience. This translates into a considerably lower income later.

Basically, I'm saying is that the nuclear family is today a more fragile thing than it was a few decades ago; for better or for worse (and sometimes it is for the better, while other times, it is for the worse), people are quicker to get a divorce (rather than try to work things out) when things get rough. And there is less of a community support/pressure to work things out. Hence, reasonably enough, people become reluctant to invest themselves in the household economy as fully as they would have a generation or two ago. And that, in turn, makes the traditional nuclear family (mom, dad, kids) even less essential, and therefore more fragile. A vicious circle, really.

John Michael Greer said...

Joel, health insurance is certainly an issue, but if keeping the job costs more money than the job brings in, you'd be more likely to keep the house by quitting the job and saving the money.

David, my guess is that the current obsession with rigidly dualistic orthodoxies is a reaction to the thing that everybody feels coming and nobody wants to talk about -- the fall of America's empire and the coming of the deindustrial age. Ever watched a dysfunctional family trying to ignore an unmentionable reality? What looks like lunkheadedness, it seems to me, is exactly the same sort of defensive reaction in overdrive. Your answer, then, is that we'll get past the current fixation when the reality we're trying to ignore comes crashing through the mental walls we've raised against it. That will probably take a major crisis -- but then we seem to be headed in that direction just now.

Porter, I read William Catton's Overshoot when it first came out in 1981; few books have influenced my thinking as deeply. When I learned from my publisher that Catton had agreed to do a back cover blurb for The Long Descent, I was pretty much over the moon.

To respond more directly to your comment, though, of course you're quite correct -- all of the current systems of political economy assume, without ever recognizing it as an assumption, that the job of an economic system is to share out ever-increasing wealth. The idea that the economic systems of the future will have to cope with sustained contraction, over a period of centuries, is totally outside their frame of reference.

Dwig, what do you think I've been doing by bringing up the rebuilding of the household economy? As I see it, new ideologies aren't actually all that useful just now; when the ship is sinking under your feet, discussions of boatbuilding theory need to take a back seat to the far more homely and practical skills of tying on a life jacket and getting into a lifeboat.

On another level, I'm unconvinced that theory is actually that useful in shaping any ecosystem -- and a human society counts as an ecosystem, as I see it. There have been any number of attractive theories about how to make a better society; those that have been put into practice generally turn into nightmares if they don't simply fall apart. Edmund Burke's logic, which seems convincing to me, is that societies that work have to grow; they can't be made. What I'm trying to do is offer some of the raw materials out of which a new society can grow in the ruins of the one falling apart around us now.

Isis, an excellent point. It may become less relevant as the market economy comes unglued and formal employment becomes very scarce, but we'll see; in the meantime, it might be useful to see if solutions to this sort of trap are evolving.

Emily G. W. Lilly said...

As usual, an insightful read!

The only thing that I take issue with is your claim that the US had a free-market economy prior to 1929--it actually hasn't had one since before the Civil War, when the beast now known as a corporation first became a legal measure (and was promised to be made illegal again by Lincoln). Corporations from day one were given unfair protections by the government that allowed them to pollute and abuse workers without the threat of reprisal (ie lawsuits) by those they negatively impacted.

I've also heard some very good arguments that the boom and bust cycle is more closely tied to the Federal Reserve (created at the beginning of the 20th century, and in this line of reasoning the cause of the crash of '29), and going off of the gold and silver standards (gold in 1933, silver in the '70's).

Regardless of the cause of the current economic mess that we are in, you make an excellent point about how the home economy can smooth out the bumps for individual families and communities!

dragonfly said...

It certainly will take a major crisis to dismantle the current entrenched plutocracy. I doubt discernment and rational thinking will take over any time soon.

Todd said...


Also see Elizabeth Warren's excellent The Coming Collapse of the Middle Class for an empirical argument that the transition to households where both adults work has led to more risk of failure (defined as bankruptcy), not less.

jewishfarmer said...

Like Isis, I think that often two parent working families aren't only (which is not to say this is not a large part of the issue) vulnerable to market orthodoxies. There are a host of issues, some true, some probably not. Women have a good reason to fear the violence of men in their lives, historically speaking, and economic entrapment is one of the methods that such violence has been enabled.

The unfortunate truth is that often (not always) the "second" income is female for a host of reasons - both the biological realities of pregnancy and nursing (these can be overcome, but only in high energy ways - electric high efficiency breast pumps, refrigeration or formula - costly and difficult) and the problem of equal pay. And most women of my acquaintance do fear economic servitude - partly for rational reasons (because they or their mothers experienced it, or because they look around them and see the circumstances of women after divorce as opposed to men, because they've had an abusive boyfriend or two, because they know women who have...) and partly for irrational ones (the narrative of capitalist feminism deplores the idea of "dependence," and implies that no dependencies could be mutual or strenghtening).

Obviously, you can't cover everything, but I do think sometimes it is worth sorting out what is myth and what isn't.

My own bet for a practical economic reality (like you, I think the theories may not be valuable, and may be destructive) is a peasant economics - neither capitalist nor marxist, but market based, relational, imperfect, subject to failures, but also able to keep people sustained within the informal reaches of the economy when the formal ones fail.

Excellent piece,


John Michael Greer said...

Emily, the problem with the claim that the boom and bust cycle is a product of the Federal Reserve system is that the US economy spent the entire 19th century going from boom to bust and back again, and the Federal Reserve didn't exist then. As for corporations, remember that I'm talking about current "free market" ideology, which has forgotten Adam Smith's cogent criticisms of joint-stock companies. Of course we don't have a free market system, but the myth that we do is a potent force.

Dragonfly, discernment and rational thinking are pretty much always the peculiar habits of a minority. I wish that weren't true, but that's what history shows.

Todd, thanks for the link!

Sharon, very good points. Something like a peasant economy is certainly one of the real options just now, though it's not necessarily the only one.

Seaweed Shark said...

I confess a somewhat cynical reaction to this eloquently written post, because I have found that critiquing the supposed governing meta-narrative of others is a waste of effort. People in thrall to the narrative never listen to the critique. Those who listen, usually do so only because we are already disaffected by the narrative and the world shaped by it.

Disaffected thinkers have been criticizing the pride, greed and complacency of the world for centuries, and yet people still go right on preferring ourselves to others, fighting over things that don't matter, and doing whatever appears convenient at the moment. Most will still be doing so a hundred years from now.

The genius of the American founders was that they created a government that works all right much of the time, even though most of its citizens and leaders are self-centered, bigoted, short-sighted and unreflective. Whatever system fulfills that role in the troubled future must do the same. Where is that system now? Is it being born, or adapted from the existing one? Must it be religious? Are some already participating in variations of it? These hopeful questions are what interest me, not the follies of the wretched old world order.

Danby said...

I've also heard some very good arguments that the boom and bust cycle is more closely tied to the Federal Reserve (created at the beginning of the 20th century, and in this line of reasoning the cause of the crash of '29), and going off of the gold and silver standards (gold in 1933, silver in the '70's).

The boom-bust cycle is caused by fractional reserve banking, not by the federal reserve. Fractional reserve banking goes back well into the middle ages, where it was first practiced by goldsmiths. The only real effect of the Federal Reserve system is to explicitly make the currency a debt instrument, which all banknotes are anyway, under the control of a central authority.

Fractional reserve makes our industrial economy possible by freeing up huge quantities of personal wealth for commercial investment. That's what makes for the boom part of the cycle. It also frees it up for bad investment, which is what makes for the bust part of the cycle.

By pumping money into the economy in bad times, the Fed has been able to revive a flagging economy. Unfortunately there are limits to the practicality of this approach, as the Japanese discovered in the '80s. The flip side is that the easy credit has to be withdrawn in the face of a bubble, such as the boom of the last decade, or the home mortgage bubble of the last few years. If it is not, the bust sets in, as we see in the collapse of the financial markets occurring now. The Fed is technically able to withdraw the credit when a bubble occurs, but so far has shown a lack of the moral courage to do so.

A hard metal-based currency, by itself, will really do nothing toward eliminating the boom/bust cycle. Look up our country's worst depression, the 1893 panic, which ocurred under an explicitly metal-based currency. The Federal Reserve was an unsuccessful attempt to prevent a recurrence of 1893.

BTW, the whole "The Fed is the cause of the boom/bust cycle, eliminate the Fed now" story is one of the free-market myths John is addressing above.

tristan said...

I think there is a fundamental misunderstanding of capitalism and free market economies. Capitalism does not guarantee a living wage for all - quite the opposite in a free market there will always be losers and some of those losers will fall low enough on the market scale to die. This is one example of the capitalist process called "demand destruction". On the other end of the spectrum there will be those who have become so fat on the profits they have amassed in a capitalist system that they collapse due to misallocation of resources, greed or decadence. This is also a recognized process of capitalism.

The problem is that we as a species would really prefer not to have to step over dead bodies in the street. We will if we need to but it is a bit distasteful. Fortunately, we came up with a solution. As long as their are very cheap or free inputs into the capitalist system and we don't have to account for waste we can have a growth oriented system that will provide enough excess that it will be very rare for someone to starve.

The other problem that we have encountered is that as a species we don't seem able to easily see pyramid schemes. Slap a little lipstick on one and we will buy into it. This leads to booms and busts. And that leads to people losing their resources. But we found a solution to that as well. All we need to do is cover over losses buy borrowing money from people who cannot complain about it and who we never need to payback. Those people are future citizens who have not been born and that process is called deficit spending.

Sadly both systems have their limits. We do not have unlimited resources inputs, we cannot ignore our waste and at some point the debt gets so large that no one will buy that it is ever going to be paid back. Now in a purely capitalist system we would just suffer the misfortunes of our very bad decision making. Capitalism does not care whether we live or die. But we care (very much thank-you). So we are now scrambling to find some way to push off our reckoning.

But even if we could it will just mean a darker tomorrow.


Dwig said...

I guess I wasn't very clear about the nature of my proposal: by "emerging alternatives" I didn't mean just theorizing, and certainly not ideologies. Short-term lifeboat planning is definitely one of the alternative topics I had in mind, along with reviving household economies; also, Sharon's combination of what, how, and why on her blog is an eminent example of the kind of thing I had in mind. My main point was a reaction to the amount of time and energy spent in some of the recent topics on diagnosing the disease, to what seemed to me to be the detriment of working on the cure(s). Sorry if I came across as unappreciative; I certainly didn't intend that. Maybe I'm too impatient.

As to I'm unconvinced that theory is actually that useful in shaping any ecosystem: Personally, I think theory and action can and should be complementary. Do you think that the Catabolic Collapse theory is useless in our endeavor of shaping a society that can navigate the decline as gracefully as possible? (I do agree with you about the uselessness, and even danger, of utopian theories that insist a priori that people should think and act in a particular way.)

And re: Edmund Burke's logic, which seems convincing to me, is that societies that work have to grow; they can't be made. I agree strongly, and have made the point myself at times; in fact, I believe it's true of all living systems. It's for that reason that I speak and think, for example, of "growing community" rather than "building community".

Picking up on Sharon's "peasant ecnomics", I just came across an example of it on Orion.

Bill Pulliam said...

I find it amusing that people believe that the value of a precious metal is somehow more real than the value of a paper or electronic currency. Why is gold valuable? Because people agree it is. It isn't just because it is scarce; scarcity per se only creates value if the scarce thing is actually necessary for some essential task. So gold is valuable because we agree it is. The dollar is valuable because we agree it is. Fundamentally both are just arbitrary placeholders and symbols, not anything "real."

RJ said...

I found "A Wealth of Nations" an excruciating bore, divorced from the reality of life on a finite planet. Of course times were different back then, perhaps resource depletion was inconceivable.

The monetary myth survives only through the belief that a currency might be exchanged for energy, and that an ever expanding economy will always be available to service ever expanding debt. Geology and biosphere degradation will indeed harpoon that myth.

I wonder what the dismal science will proffer in the way of prognostications once reality sets in. Something tells me economists might be a bit behind the curve.

mike said...

John Michael, you've refreshed my appreciation for Karl Marx's shrewdness. And it was shrewd to talk about capitalism rather than "the economy" or "the free market." I think Marx wanted us to keep in mind that whatever the economy or the free market might be (only the part we can see of a deeper, more harrowing work), capitalism was a project, a mission, under the control of a minority of people to pauperize the maximum number of people to the maximum extent of misery. Capitalism was war without let or scruple against people who thought it was just business. And when you have pauperized pretty much everyone, it doesn't make a difference what kind of economy you've got or whether there's oil or coal or unstable atoms to run it on. If all that's left is acorns, and you've got all of them and most everybody else has none, then your mission as a capitalist (war)is still a smashing success. Of course, nobody much reads Marx or Marcuse or anyone else who warned us a long time ago not to get too clever with the details. So it's disheartening to see so many smart and well-meaning people tell us what's what about the Federal Reserve and explain the metabolism of market economies. The sort of thing makes you strangely protective of the systems, an wanting to get the scoundrels out of them so the systems can have a chance to work. Can't you just hear people in the future saying, "Give the acorn economy a chance to work!" Except when we get to that point, it'll be clear enough that the "economy" was a roundabout way of getting most of us killed. I think Marx is due for rereading, just so we don't think it's natural causes killing us.

John Michael Greer said...

Shark, I don't see my work as a matter of "criticizing pride, greed, and complacency." Rather, I've noticed that many of those who think they're rebelling against the ideas of their culture are simply rehashing them, and I've noticed that in some cases, at least, it's possible to bring this to their attention, with good results.

Dan, exactly. Until the early 1930s, people who used the phrase "Great Depression" were referring to the 1890s. It's not the Fed, and I'm by no means sure that it's purely a matter of fractional reserve banking, for that matter. My guess is that when the market comes to dominate more than a certain fraction of all economic activity, feedback loops cut in -- but that's a subject for another post, of course.

Tristan, granted. Saying that a free market system "works" simply begs the question -- works at what? Once you pose that question, in turn, you've crossed the border between fact and value.

Dwig, thanks for the clarification. One difference between our viewpoints, though, is that I don't think there is a "cure" -- the fix we're in is not a problem that can be solved, but a predicament that can only be lived with. My sense is that a clear understanding of the nature of that predicament can help guide tactics for dealing with it, and for making educated guesses at the resources our descendants might find useful in building something after the Long Descent bottoms out. That's about as much as I think it's realistic to try to do, though.

Bill, no argument there. The fetishism that makes people think that soft yellow metal is more than just another commodity is likely to be a notable casualty of the age ahead of us.

RJ, of course Smith didn't deal with resource depletion -- he was living in a society that mostly ran on renewable resources, and fossil fuels had only just barely begun to be tapped in any big way. I find his work useful, though limited by its lack of ecological context (another set of ideas not yet invented in his time).

Mike, I have to say I don't share your fondness for Marx. His work, it seems to me, is simply a rehash of Judeo-Christian apocalyptic under a light glaze of secular social thought, and of course he had to have a Satan-surrogate, so Capital filled the bill. Even so, I don't recall him ladling on the conspiracy-theory rhetoric of motiveless malignity the way you've done just now; that's a more recent habit, and a less creditable one.

Stephen Heyer said...

I have to agree with both isis and jewishfarmer (Sharon) that fear, or perhaps just acceptance of, the probability of relationship breakup is one of the main factors contributing to the high level of two income families.

I was going to make that comment myself but isis and Sharon did it earlier and better.

Bill Pulliam said...

Since we're talking about narratives and mythology here, I think a bit from a work of fiction is appropriate.

I often think about a scene from "A Morbid Taste for Bones" by Ellis Peters when I think about past and probably future highly localized economies. Set in 12th Century Britain, a Norman pryor from the big city of Shrewsbury is attempting to bride a landlord in a remote Welsh village. The Norman offers him a bag of coins, which the Welshmen stares at in bewilderment, finally responding, "What use do I have for money?"

bryant said...

It is interesting to me that we are nineteen comments into this essay and yet no pro-market vitriol has emerged. Are there rants you are declining to post JMG?

I found "A Wealth of Nations" an excruciating bore, divorced from the reality of life on a finite planet.

I also found Wealth of Nations to be a difficult read; the style was florid and fairly obtuse(English has changed considerably since the late eighteenth century). I did find it ultimately useful though. While reading it, I discovered that Market Fundamentalists(of the Milton Friedman sort) have seriously misrepresented Adam Smith's thoughts. Market Fundamentalist referenced Adam Smith to justify things that he specifically opposed in his writings. Subsequently, I read Road to Serfdom by F.A. Hayek and discovered the same thing. Both men recognized that free market can only use to solve certain problems, and that other must be the domain of the community and government. F.A. Hayek has a wonderful discussion about the things that the free market cannot do but which we need done nevertheless...oddly, Market Fundamentalist's never quote that.

The "formal" economy has indeed expanded beyond its traditional and useful boundaries. Many people I know are eager to relegate the "formal" economy back to its more limited role and I believe that expanding the household and neighborhood economy is one way to do it. Simply take a newly canned jar of jam to your neighbors across the back fence and you have begun. Then build a stile so you don't have to walk all the way around the block.

Danby said...

I will agree with you that not all economic depressions are caused by fractional reserve banking. They are caused by malinvestment of large quantities of wealth. A big one is equivalent to taking the wealth of a community, piling it up in a big pile, and setting it on fire. The role of fractional reserve banking is that it is very efficient at ferreting out all the wealth of a community. Look at the current mortgage meltdown. Without fractional reserve banking, yes there would be some speculators who had bet on perpetually rising home values who would be hurting badly, but only the excess liquidity created by FRB could have spread it so far into the general population. Some communities in California may wind up with 3/4 of the homes foreclosed. Virtually every financial institution in the US is in very real danger of collapse, many leveraged at 200:1 (only 1/2 of 1% of capital is retained as reserve).

Interestingly, while reading up on the Panic of 1893 yesterday, I found out that the Panic of 1873 (imagine 2 Great Depressions 20 years apart) was actually caused by equine influenza. Equine Influenza is extremely contagious and the infection rate approaches 100% of the horse population in a given area. The infected horse is simply incapable of working, or often even standing. Most horses recover in a few weeks. Although the mortality rate in 1872 was 10%, many of those deaths were due to starvation of horses who were unable to graze.

Imagine if you will that virtually every car, truck, motorcycle and free-standing internal combustion engine in the country were unavailable for a period of about a month. A major fire burned unchecked in Boston, as no horses were around to pull the fire engines. Ships sat in harbor laden with goods, unable to unload into the already full docks. Even trains could not run, as the coal for their engines could not be loaded. Newspapers went unprinted, since many presses were actually operated by horse-power. Even the US Cavalry and the Apache tribe were reduced to warring on foot for the duration of the outbreak. Whatever goods were delivered were delivered by hand barrow.

Fortunately the outbreak occurred in October/November, and the grain had already been harvested, otherwise there might have been mass starvation of humans as well as horses. Still, the impact of an major reduction of economic activity for 3-4 weeks was enough to drive the economy into a depression.

John Michael Greer said...

Bill, nice quote -- Peters did an excellent job of catching the flavor of her setting, including its very different economic dimension.

Bryant, I'm just as surprised as you are. I've only had to reject one comment so far on this post, and it wasn't a pro-market rant. Not that I'm complaining, mind you, but questioning the market's infallible wisdom has always seemed to draw a fair-sized horde of market fundamentalists; this may be a harbinger of something interesting.

Danby, no argument there -- fractional reserve banking is a great way to amplify speculative booms and busts, and certainly it's done a fine job on this one.

DeadBeat Dad said...

With reference to the return of a more traditional family structure…Nobody can predict the appearance of family structure or American society a century from now.

But over the next few decades, perhaps not much will change with the American family structure from where it is now. ( indicated by a glance at the comments from some of your readers ). Several of your readers, including Jewish farmer and Noah Scales in the prev post, showed a distinct concern that the return of traditional families could cause an increase in domestic violence…although your posts never mentioned it, several readers brought the topic up

This is a very serious issue for many folks, and definitely will affect family structure for decades to come. There also are also many occupational groups profiting from the non-traditional family. Our modern family structures are not just a function of energy flows, but also sweeping tides of culture and governmental structures which are quite powerful and long lasting.

It won’t matter if the last drop of oil is used up, there are huge numbers of people profiting ideologically and monetarily from non-traditional families. These interest groups will innovate so they can cling to their power, whether they be corporations, bureaucracies, professional associations, etc. The modern corporation laws, and tax structures, will not simply dissolve simply because some of us hope they will, or because oil runs out. Neither will the domestic violence laws, divorce laws, child support enforcement mechanisms & incentives, media portrayals, be changed in a way to encourage a return to a ‘traditional Leave It to Beaver', or 19th C. family. Not gonna happen in mine or my kids lifetime.

Most men who have been forced out of their homes can’t keep up with the government imposed obligations now, and your parallel non-market economy, is not going to change that a whit, and will not bring back a ‘traditional home’ as the norm.

You mentioned that history does not simply re-run itself in exactly the same way. Once a meme is established, it can endure. Just as technologic innovations tend to be retained, so will the ‘social inventions’ such as single mommyhood.

tristan said...

Tristan, granted. Saying that a free market system "works" simply begs the question -- works at what? Once you pose that question, in turn, you've crossed the border between fact and value.

Ooooo... succinctly put - I gotta remember that one.

To Bryant's comment - I do believe in the Free Market but I am with JMG on this. To paraphrase him "I believe that the Free Market is a very efficient mechanism." The question is "to what ends"? The Free Market does not care whether or not the economy of a slightly older then 200 year old country falter or even fails. The Free Market would have allowed Bear and Stearns, Freddie and Fannie Mac to fail. The Free Market has no problem with a depression so severe that it would include mass starvation. The Free Market is like Darwinian evolution - it has no feelings about winners and losers. It merely exists.


p.s. I wonder how my handle got changed from Avalterra to Tristan? I must have been on another computer.

John Michael Greer said...

DD, you'll notice that I nowhere said that the current situation is likely to bring back the "traditional" family -- the word belongs in quotes, because family patterns have morphed a great deal over the years, and the Beaver Cleaver family of the 1950s was never the norm it claimed to be. I'm simply suggesting that arrangements that allow for the rebirth of a household economy are likely to do rather better than ones that don't. My guess, though, is that extended families of the 19th century model -- which could include four generations, and could bring people with no biological relationship at all under one roof -- may be one place to look for ideas of the family structures that will emerge in the aftermath of the industrial world.

Tristan, the difference between the market economy and Darwinian evolution is that evolution is defined by nature, while the market economy is a very highly structured game controlled by formal and informal rules established by human beings. As Emily pointed out, for example, quite a bit of the way the market works now depends on the legal status of corporations; change that -- and a mass movement against the legal privileges of corporations is one thing the 21st century could very easily bring us -- and the whole game shifts.


My commen is simple: I've just read 27 of the most interesting and intelligent commentaries EVER on a blog!

I applaud ALL OF YOU!

It's good to know at least there are 28 people out there with brains; courage, and opinions. Diane

bryant said...

but questioning the market's infallible wisdom has always seemed to draw a fair-sized horde of market fundamentalists

It may be that you are lost from the gaze of the Divine Market, your commercial soul so blackened by your apostasy, that true believers cannot bear to bring themselves into your unholy presence...uh, or not. Hey, it's just a hypothesis!

It has always struck me that most "freemarketiers" cannot provide a definition of what constitutes a "free market".

For the record, according to Saint Adam Smith, a market is free if:

the buyer can decline to buy


the seller can refuse to sell

Using that definition, medicine in the USA is not a free market because if fails not one, but both conditions.
I believe that is one of the reasons that medical inflation has double, triple or even quadruple inflation in the remainder of the economy.

Siobhan Blundell said...

Thanks for the post, JMG. I read your posts every week, I find this blog fascinating.
I too am surprised that there seems to be very little comment from people who are pro the so-called free market. Perhaps they are too busy trying to make money, and have no time to read this blog.
JMG reminded me of how there is a tendency amongst people to view "the economy" as an entity by itself, like the weather, and forget that in actuality, unlike the weather, we created that economy. Having said that, it now appears that we can control the weather too, but adversely!
BTW, I am a great fan of Ellis Peters, my favourite being An Excellent Mystery.

Siobhan Blundell said...

I have just watched the Elizabeth Warren clip, the stats are mind-boggling. But it confirms what my spouse and I have experienced in our lives - we are all of us like hamsters on a treadmill, running faster and faster, but not even to stay in the same place; to stop from going backwards as quickly.

Mark said...

Your posts are awesome as usual, thank you.
I would like to relate some things about the last three posts. A few years ago I attended a Pot Luck dinner at a friend’s house. I brought some homemade homegrown bread, some homemade homegrown jam’s, along with some homegrown homebrewed beers. The hostess was disappointed that I would bring such “rough fair” to the party and she showed her displeasure. Well, to make a long story short, I am no longer friends with this person, and this opened my eyes to the perception of quality and value in this Market economy. Madison Ave. has messed up some of our perspectives on what is real.
Another way to put it: America (and to some extent, world), values and tastes have been dictated by the corporate profit imperative. The free market is all about what can make a profit, nothing else, real quality has been shortcut. That and we have been told that caffeinated Carmel colored carbonated sugar water is food.
Back to quality, nothing beats having a pint of a fine homegrown port of local hops fresh barley, a slice of fresh ground wheat and oat bread, with real goat’s milk butter and a smear of handpicked raspberry jam. Rough fair? It being far superior to the corn syrup, corn feed crap one has to labor for in some corporate cubical in some office building, for 40 plus hours a week, that and the added expense And cost, of a car to get one there.
Cheers to you for pulling back the curtain. I feel that the sooner our neighbors and friends can see what is behind the curtain, so to speak, the sooner we can start to heal our planet and our selves.

John Michael Greer said...

Happy, thank you! One of the real pleasures of doing this blog, and hosting the comments page, is the chance to take part in intelligent conversations about these subjects.

Bryant, that's certainly possible. On the other hand, I've noticed that the free-market fundamentalists are lying noticeably low just now -- not surprising, as a few hundred million Americans are discovering the extent to which the invisible hand just picked their pockets.

Siobhan, a good point. Reification -- the habit of turning abstract relationships into things, and then assigning actions and virtues to those things -- is a widespread and common bad habit these days.

Mark, any time you want to come to my place with homebaked bread, homemade jam, and (especially) homebrewed beer, you can expect a hearty welcome!

Siobhan Blundell said...

Has anyone read a book by Philip Oyler, This Generous Earth, about a French village in the Dordognes, and the way they got their food and managed their land. Their "homegrown fare" was the best of what they produced, the premier grand cru, and they knew it to be so. The descriptions of what they ate and drank are mouthwatering, and they produced it all by themselves.

Siobhan Blundell said...

Forgot to add to my previous comment, they produced their fare all by themselves, but with the aid of horses and oxen!

Traverse said...

Thank you for this. I constantly argue with the free market zealots (and would argue with the government regulation zealots if any of them still posted anything...) about the need for middle ground, this post just put many of my arguments in a more succinct form and will be linked frequently in those threads.

John Michael Greer said...

Siobhan, thanks for the reference -- I'll check it out as time permits.

Traverse, glad to be of assistance.

Siobhan Blundell said...

Dear JMG, I made a mistook! It is The Generous Earth, not This Generous Earth. I have to admit, I am curious about the comments you have deleted - were there any long pro-market rants?

Siobhan Blundell said...

Dear JMG, I would also like to say again, thanks so much for your writing - clear, beautifully put, you even manage to inject some humour, which, considering the subject matter, is no mean feat.

Siobhan Blundell said...

More on the writing - your writing reminds me of John Kenneth Galbraith's writing, and the essay, the Long Descent, puts me in mind of O. Henry.

Danby said...

I've been reading Wendell Berry today, always a fruitful exercise. Here's a passage that particularly struck me from Peaceableness Toward Enemies: Some Notes on the Gulf War he wrote 17 years ago, on the occasion of the 1st Iraq war:

The "free market" theory holds that the use and distribution of the material goods of the earth should be determined exclusively by economics. It holds that all that is needed in order to have a sufficiency of goods is purchasing power. It discards any idea of local or national self-sufficiency in favor of a "world market," free of obstructions to international purchasing power. It proposes that no nation should protect or promote its domestic economy for the sake of self-sufficiency or independence. This is our government's aim in its continuing effort to revise the General Agreement on Tariffs and Trade so as to remove all local and national programs affecting agricultural production. The assumption is that we, as a nation, do not need to produce, or conserve, or use well, or protect the source of anything we need; money alone will determine the availability of goods. A further assumption is that a nation can generate sufficient purchasing power indefinitely, without a thriving, highly diversified domestic economy. The "free market" theorists assume, in short, that an adequate national economy may be composed of many consumers, few producers, and even fewer rich manipulators at the top. This theory attributes a kind of creative or magical power to money that money does not have, and that is dangerous enough. But it also and more dangerously involves an inevitable, large-scale dependence on foreign supplies.

XXIII. Under the rule of the "free market" ideology, we have gone through two decades of an energy crisis without an effective energy policy. Because of an easy and thoughtless reliance on imported oil, we have no adequate policy for the conservation of gasoline and other petroleum products. We have no adequate policy for the development or use of other, less harmful forms of energy. We have no adequate system of public transportation. We fought Saddam Hussein because our willing dependence on foreign energy had put us helplessly under his influence. Having defeated him in war, we are still under his influence, for what we have done to defeat him will continue to affect us, and inevitably for the worst.

But we must pay whatever price is demanded in blood, in ecological damage, and in money (or debt), because we are helpless to provide for ourselves what must be provided for us by suppliers in the Middle East and elsewhere.

XXIV. This neglect of domestic economy applies not just to energy but to all necessities. We are destroying our farms and farm communities, for example, keeping costs high and incomes low, for the sake of "competitiveness on the world market." The proposed revisions of the General Agreement on Tariffs and Trade would throw our farmers into competition with farmers of the Third World, thereby endangering agricultural economies both here and there. We are destroying our forests in the same way. We have allowed vital industries here to be destroyed by the importation of cheap goods from abroad. For example, we are now importing 59 percent of our textiles and clothing. Having just finished an oil war, we may expect sooner or later to be involved in a textile war, a food war-or a war over anything that we need but cannot provide.

Mary said...

Its older meaning – the sense possessed by its source, the Classical Greek word muthos – defines a myth as an important cultural narrative, a story that every full participant in the culture can be expected to know, that serves as a paradigm for some aspect of humanity’s experience of itself and the world.

JMG thank you for another great write. I would appreciate some titles to support this sentence above. Paradigms and their shifts are dear to me. I like the sound of "shrugging them off" but shift works also!

Gardiner Rynne said...

I enjoyed this post, but what I found most intriguing was your paragraph that hinted at comparisons between ecosystems and economies. While the low-hanging fruit of knowledge may have all been plucked, there remains an abundance to be harvested in cross-disciplinary exploration. I know of some economists who started out in physics and then "crossed over," bringing the richness of that discipline with them, but I don't know of any who have extensive training in biology (though there may be). Anyway, it would be great if you ever felt inclined to explore this further, or drop a link if you have already.