Solutions are only possible outside these ossified, self-serving centralized hierarchies.
Correspondent Dan F. asked me to reprint some posts on solutions to the systemic problems I've outlined for years, most recently in How Much Longer Can We Get Away With It? and Checking In on the Four Intersecting Cycles. I appreciate the request, because it's all too easy to dwell on what's broken rather than on the difficult task of fixing what's broken.
I've laid out a variety of solutions to structural problems in my many books, and I'll attempt a brief synthesis in this post.
1. The dynamics of stagnation are built into the system. Centralized systems optimize specific solutions to a specific set of problems that prompted the development of the system.
In the U.S., the empire that resulted from the global effort to win World War II and the Cold War competition with the Soviet Union spawned centralized bureaucracies to manage the complexities and budgets of this new era.
In effect, the system was optimized to the circumstances of 1950 or perhaps 1960. Though circumstances have changed, the system remains essentially unchanged, except bureaucracies and budgets have ballooned in response to the dynamics of bureaucracies: the initial purpose erodes and is replaced with self-aggrandizement of insiders and bureaucratic bloat.
As the systems optimized for a bygone era start failing, due to the erosion of accountability and transparency as insiders mask their self-serving ineffectiveness, the organizational structure attempts to meet the challenges by doing more of what's failing: since every layer of bureaucracy now has a constituency that will fight to the death to maintain its power, budget and perquisites, a ratchet effect is the dominant dynamic: budgets and power cannot decline due to resistance, but the path to increases in power and budget is well-greased.
Since the structures are optimized for a bygone era, the institutions are fundamentally incapable of responding effectively or reforming themselves. The universal solution to failing institutions and hierarchies is to throw more money at the failings in the doomed hope that doing more of what's failed will magically solve the systemic problems.
The Lifecycle of Bureaucracy (December 2, 2010)
As a result, solutions are only possible outside these ossified, self-serving centralized hierarchies.
We see this dynamic in all the major public-private structures of our economy/society: higher education (solution: make students borrow even more trillions, or have the government borrow more trillions); healthcare (government needs to borrow more trillions), and national defense/security (government needs to borrow more trillions).
The failings and ineffectiveness of the systems themselves are ignored, lest insiders lose power and budgets.
2. Democracies have a fatal flaw: politicians win re-election by promising something for nothing: more benefits and entitlements and lower taxes. The gap between higher costs and declining revenues will be filled by government borrowing.
All this additional borrowing will be paid by the magic of "growth", which will expand tax revenues at a rate that exceeds the cost of borrowing.
But demographics, resource depletion and the diminishing returns of a consumer economy fueled by rapidly expanding public and private debt have sapped "growth" in fundamental ways. Ironically, borrowing and spending more to spur "growth" only hastens the diminishing returns of increasing debt to fund consumption today.
Democracies are thus optimized for rapid "growth" and are ill-suited to transition to DeGrowth, i.e. less of everything for the vast majority of the citizenry.
3. When faced with fiscal crises, central states/banks inevitably succumb to the temptation to print/borrow currency in whatever sums are needed to fill the shortfall of the moment. This profligate creation of currency seems to be magic at first; everyone accepts the "new money" at the current value. But eventually gravity takes hold and the currency's purchasing power declines, as the real economy (the production of goods and services) grows at rates far below the expansion of currency.
Even the greatest empires in human history have been unable to resist the "easy" solution of devaluing currency as the means of fulfilling all the promises that were made in less trying and more prosperous times.
4. The progression of centralized power slowly but surely replaces the self-organizing, resilient, decentralized structures of civil society with tightly bound hierarchical centralized structures that are increasingly ineffective (as outlined above), increasingly costly and increasingly brittle/fragile, i.e. increasingly prone to failure or collapse.
This replacement of resilient, localized civil society by a central state is so gradual that the loss of civil society is not even grasped or understood: the economy and society are hollowed out without anyone even noticing, as the apparently all-powerful central state accumulates power over every aspect of life, supposedly for the benefit of all.
5. The only currencies that won't be debauched by insiders desperate to maintain the illusion that the status quo is permanent are decentralized, distributed non-state currencies that are accessible to everyone with a mobile phone or digital connection.
6. Traditional forms of money such as gold and silver are fine for those who are already wealthy and thus have the means to buy and stockpile precious metals, but for the billions of humans who lack wealth, the only real solution is access to a digital currency that is created and distributed specifically to everyone who labors on behalf of their local community.
This is the purpose of my CLIME system: the community labor integrated money economy, which creates and distributes non-state digital community to everyone who performs work that benefits their local community.
7. Existing systems optimized for bygone eras and maximizing the security and wealth of insiders are doomed to fail. Throwing money at these systems only speeds the dissolution of the entire financial system.
Solutions will only arise outside the control and boundaries of existing systems, as all structural solutions threaten to obsolete or replace existing structures, displacing all the incumbents and insiders who benefit from the continuing failure of the institutions they manage and control.
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My new book Money and Work Unchained is $9.95 for the Kindle ebook and $20 for the print edition. Read the first section for free in PDF format. If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.