‘Mourning, Money, and the Meaning of Life’ Trends Issue- The Evolution of Global Finance and the New Economy

The collapse of the Global Financial System 2008 – ongoing, was a rude shock to many people. As the global housing market imploded, the global banks imploded, global governments were rocked, and our societies are changing as well. For some an entire lifestyle has been up ended, and a new way of looking at the world has begun. There is even a new slang. The Jan 10, 2011 Urban Word of the Day was the phrase “When the economy picks up” which is described as a ‘common beginning or ending to a phrase’. This phrase ‘can provide and excuse for why one has not yet done something, or it can suggest a vague intention of doing something later, or it can add credibility to an idea that is a pipe dream’.

Several research papers have come to the conclusion that individuals that lost large amounts of money are close to 25% more likely to expect a crisis in the next 5 years compared to those who did not lose anything. This effect lasted for 12 yrs onward and the size of the loss correlated with the size of influenced expectations. The conclusion of this paper was that during a banking crisis, household losses have real and long lasting effects, and that these effects risk a long term drag on the economy. The financial collapse led us to realize how much of our economy was tied up in the FIRE sector. The bloating of the financial sector was a sign of unhealthy, unsustainable growth, that while politically advantageous to numerous administrations in various governments, was always a timebomb waiting to go off. The financial system, in many countries had grown too large. It ceased to be an means to an end, and became the end itself. In some ways it was a reflection of the change of values in society where money became our Gods. The stock market became a symbol of our success. When it fell in 2008, the hopes of many nations fell with it.

Many emergency measures were done to revive the patient, but the disease still remains. For a full recovery deep global financial reform must occur. In his book “The Stiglitz Report: Reforming the International Monetary and Financial Systems in the Wake of the Global Crisis” (Joseph E Stilglitz, 2010), Stiglitz described the conclusions that the UN Commission he headed.

“The crisis is not just a once in a century accident, something that just happens to the economy, something that could not be anticipated, let alone avoided. We believe that, to the contrary, the crisis is manmade: It was the result of mistakes by the private sector and misguided and failed policies of the public.” 

Stiglitz also chimes the mantra that ‘a better world is possible’ and quotes Ghandi’s vision, ‘where the fight for social and political change is not reducible to a fight between good and evil , but a struggle for Truth, in which each of us must take personal responsibility… Stiglitz however, has yet to outline how one can motivate all players in the financial sector to buy into the mantra of real change. Business has returned from those dark days in the fall, with some stimulus help, and everyone wants it to go back to the way it was. Procyclical overdrive policies forever! Some are starting to change. Compensation has been redesigned to reduce risk taking behaviours at some progressive firms, but more change is required on a global scale at a structural level. The evolution of the global financial system is still waiting to happen.

The general public meanwhile has a different take. They are often out of money, out of a job, and angry at their losses that they will not easily forget. The bubble economy that they were usually the last ones into, was forged by increasing demands for returns. Blowing up the bubble was favourable to many administrations. Procyclical policies plus, as the real economy stagnated. It had been overdrive into thin air. Informational asymmetries, as Stiglitz describes, favoured those who were told more. A global deluge in leverage blew the global asset bubble up and reality eventually threw in the needle. The problem was not the work of one man, nor many men, but an almost global belief that the financial market was itself a Godlike entity, that was ultra-efficient and self-correcting. How mortal it was, in the end.

Our understanding of money has changed. Money has become highly mobile and can exist in ‘flash markets’ that exist for only fleeting seconds. High frequency trading can buy and sell thousands of shares before you finish blinking. One can hold thousands of dollars in wealth one day, and have little the next day. The banks can be broke one day and recapitalised the next. Credit gave us what seemed to be an endless supply of money. What does money mean anymore? The Tofflers in their book ‘Revolutionary Wealth‘ speak of the rise of the ‘prosumer’ -those who produce what they consume, and of those who toil without pay in their economies, of a hidden nonmonetary economy. Will this nonmonetary economy enlarge in a time like this? Can the currently unemployed be reeducated for the information age or be engaged to volunteer in socially beneficial projects?
Stiglitz speaks of many global structural changes. Ones that take into account future issues such as global warming/climate change, rising food and energy costs, protecting developing countries, and trying to reduce poverty. He speaks of many countries who protect their economies with large reserves, which can contribute further to global imbalances, and of countries designing their stimulus with themselves in mind versus a global perspective. The various difficulties in coordinating tax codes with countries, never mind expanding the debt obligations of a country’s citizens for another country, is overviewed. Regulatory failure and the needs for global regulation, global courts, global economic governance are reviewed. Our global economy has far outgrown the ability to manage it.

One of the issues missing was a discussion on ‘resilience’ as a concept in designing a future global system. In our highly multi-linked world, should we think that even with all our planning and change-could collapse come again? What would be our final goal and associated contingencies for managing global imbalances? While we are making movements on developing new schools of economic thought, how do we deal with an undulating global economy? Do we compete always, or can we develop new ways of international co-operation that are not just back slapping.  The questions are numerous and unanswered.

Year End Commentary 2010

Year End Commentary 2010

“Today the world’s nations are interdependent, like mountain climbers on a rope. They can either climb together to the summit or fall together into the abyss”     
                                                                    Mikhail Gorbachev April 1987

When the USSR dissolved from history, many of us simply felt that this was the West in triumph. However, now that the west has begun to hit the cusp of a radical transformation of our own, we may begin to ask – ‘what is really going on here?’ There are a few conceptual frameworks to see these changes, perhaps best described by one of the original futurologists Alvin Toffler, in his trilogy of books ‘Future Shock’,(1970) ‘Third Wave’,(1980) and ‘Powershift'(1990). One conceptual theory called Panarchy would call this the Omega or release phase going towards the Alpha or re-organization / renewal phase, where we have shifted towards another level or regime, in an evolutionary viewpoint. In societies that once were heavily industrialized, unions lament the loss of their industry to China or other newly industrialized countries, and economists lament the damage we have done to the value of our currency and economy. If this global financial collapse is simply a developmental change process to a new information age and a restructuring of our global currency and the meaning of money, are we really dealing with the issues in a forward looking manner? Interestingly enough, the man who coined the term ‘perestroika’ and ‘glasnost’ and who unleashed the change forces pent up in his own country and allowed it’s transformation to occur- Mikhail Gorbachev, was well acquainted with the Toffler’s. Whether we are speaking of ‘ecological phases’, or ‘waves’, we are speaking of transformative change.

We are facing the emergence of two major macro collapses. First, and already in process-the global financial collapse and eventual re-organization, and secondly, the recent emergence of what will be large scale changes in the global climate. We have been delaying real transformation for a long time. As Toffler put it, many in the ‘second wave’ even long to go back to the ‘first wave’. The ‘third wave’ is upon us and many institutions are still trying to stop real transformation, as once the ‘first wave’ tried to stop the changes representative of our ‘second wave’. Humans unfortunately, are often loath to change. We are at a point where if we do not chose change fast enough, a monstrous change will chose us, but perhaps not in the way we envisioned. We will be driven to change but will it be the ‘Golden Age’ or will it be the ‘Four Horsemen of the Apocalypse’, or somewhere in-between. Our problems are quite large and require more than just our grid locked governments and agencies to act on our behalf. We must begin to act for ourselves and our children as a collective group in a positive manner, with focus, persistence, and calmness. Eminent scientists such as James Lovelock speak of utter devastation, the loss of billions of lives, and there are many books naming various end of the roads we face whether it be the end of cheap energy, ecological collapse, or other calamity. The ‘third wave’ is upon us, but must be engaged fully and utilized in a manner that allows us to optimize a bad situation.

Writers such as Thomas Homer-Dixon in the book ‘Up Side of Down…’ speak to us of the concept of a social ‘catagenesis’ and of being in ‘moments of contingency’ where immediate actions, and where being prepared or not, will determine our evolutionary pathway; while Graeme Taylor speaks of us as being at ‘Evolutions Edge’, the title of his book. Both books have broad systemic overviews. Added to these, Toffler’s works stand the test of time to also offer an excellent conceptualization of our past, present, and future.

We can not longer wait for some key player, as Gorbachev was, in unleashing the forces of change. We must organize, plan, act, and change our collective future together. We must focus to engage change in as fast and safe a manner as we can, and we must be much more open about the crisis we face. Denial is a common reaction to bad news, and we tend to wait to look for facts to prove our disagreement correct. We cannot wait until someone else sees the rain falling to tell us that it is raining outside for us to get our raincoats. The storm is here. Climate change has begun in earnest, and this statement is based on analysis, not just facts. We are behaving like the frog being slowly boiled in a pot of water. We have discounted small changes while the water temperature continues to rise.

We have to plan and act to adapt to our changing climate. Will we build domes over major cities? Should we biochar enmass? Are we testing small scale geoengineering now? Can we grow food in the oceans? Should we start resettlement of low lying areas now? Should we start with building an infrastructure in northern unsettled regions we could bring evacuations/migrations to? Are our current international organizations as functional as they could be? Will this crisis unite or divide us?
If there is a phrase we must speak of in 2011, it is ‘Rapid Transformation’.

It is not the strongest of species that survives, nor the most intelligent that survives. It is the one that is most adaptable to change.’                    
                                                                               Charles Darwin

‘Innocence Lost’ Trends Issue – The End of Network Neutrality and a Battle for the Control of the Internet

The principle known as ‘Network Neutrality’ allows Internet users to access any web content or applications they choose, without restriction or limitation…

In 1990, John Perry Barlow, along  with Mitchell Kapor, wrote a beautiful piece about the Internet in “Across the Electronic Frontier”

A quote…
‘Over the  last  fifty  years, the  people  of  the developed  world  have  begun to cross into a landscape  unlike  any  which  humanity  has experienced  before.  It  is a region  without  physical  shape  or  form…what  it  is  eventually  called,  it  is  the  homeland  of  the  Information Age,  the  place  where  the  future  is  destined  to  dwell…’       

There are many conceptualizations of the internet from ‘Ecommerce’, to ‘information highway’, to ‘social network’, to ‘cultural sound bite’, to ‘political governance and control’, to a massive collective – “the Borg”, if you will. The internet has become the transformational driver it was destined to become. It has and will further enhance all aspects of our lives, and as its importance continues to grow, so too will the war over control escalate into a fundamental battle of who and  what values will dominate, in what region. The nationalization/regionalization of the internet has already begun, as has a drift effect. Much like a slow moving creek that has been enlarged into a fast flowing river, the local growth and values have been watered down and washed away; and to continue the analogy, much of what we do now is a matter of going along with the flow. Who would have thought after the Korean war, that some American companies in the future  would be providing the Chinese government, the tools for controlling/ monitoring it’s population through the internet. China with 420 million users is by far the largest internet  market by population, although it is the industrialized countries that have the greatest percentage of users.

The internet has simultaneously become a method for both the powerless and powerful to influence the other, and the internet is destined to become a multilevel system. The American system is already developing a ‘secure’ level for commerce and important social and governmental functions. The most current example of this battle is the website Wikileaks, which has been at the top of most internet searches in recent weeks. A media storm has brewed thoughts and analysis in both defending and finding offence in what information has been released and why. In a balance between oneness and secrecy, democracy functions and flourishes. Heather Mallick wrote an article in the Toronto Star (6/12/2010) that spoke of the problems with anonymity and the internet, and endorsed the role of Wikileaks as being the opposite of anonymity, which perhaps is a little simplistic, considering how it gathers information. A battle is ensuing over who decides and why this balance is swung, one way or the other. The battle between Google and the Chinese government recently, is another event emblematic of this growing tension. Internet wars between countries have been readied, and espionage has taken a turn for the technical, but sadly nothing that ‘Q’ could have helped with. ‘Cyberbullying’ and ‘hackers’ have begun to be part of our lexicon, in the battle for the control of the internet, and by extension, our society. The darker side of a cultural phenomenon. To be sure, the term ‘cyberterrorism’ is not far behind. The questions for us to answer include how to safeguard this vital connection without losing the all of the ideals and idealists who built and developed this future technology in which we will live.

This is the internet’s age of a loss of innocence. Long gone are the words of John Perry Barlow,  as he wrote in 1996 in his treatise “A Declaration of the Independence of Cyberspace”…

‘…I declare the global space we are building to be naturally independent of the tyrannies you seek to impose on us. You have no moral right to rule us nor do you possess any method of enforcement we have true reason to fear…’