Economics has run its course. Scarcity is no longer: superseded by wealth spirals and enterprise over restrictions in material circumstance. This was unforeseen by Economics’ forefather Robert Malthus in 1798. It has now become fashionable to artificially engineer scarcity in two ways: environment and knowledge (artificial because they possess no opportunity cost). These are two components of our experience, of our language, which are ubiquitous and free-standing. Orthodoxy of environment is used by an institutional and political system increasingly aware of its own obsolescence. All this despite unparalleled standards of living attained through twentieth century economic phases of stability, affluence and growth. Economics ran its course to satiation. World Bank, Wealth Spirals, Body Language and Jerusalem is about transformation, and is based on two tenets:
1. Scarcity
2. Liquidity
1. Scarcity
A standard definition of scarcity goes something like this: finite material resources satisfying demand by allocation in market-based price mechanisms; with most scarce materials and skills becoming most valuable in attaining to material prosperity. Scarcity as a primary driving force of modern life has caused ideas since an age of Enlightenment. Manifest in engineering, art, science, politics, law, medicine, finance and many other occupations. Pre-enlightenment these ideas were residue, before they progressed to replace less rational beliefs.
History has subsequently been created from political and economic approaches to scarcity allocation. An ideological battle ensued between centrally controlled markets (prominent in Soviet Russia) and free markets (prominent in America). With Berlin’s Wall collapsing it was said history had ended: this free market approach had won out.
Which raises two questions: is what manifests now permanent? And if not, what now resides? Modern life remains, material development occurs and history keeps getting made. Yet where are new ideas coming from?
With Berlin’s Wall collapsing, it followed modernism had failed because some beliefs and aspirations of modern thinkers had not been realized. Post-modernism came to float on a tenet that because media is omnipresent and shows reality, that it is reality. After all, what is reality but what we believe in? This pursuit of realisation – as far as I can make out – drives history.
What this means for a scarcity-orientated history – and by history I mean human experience which leads us into a sensory present moment – is it has found its way to a point of satiation. Of superabundance. It has enough. It is coming to a point where it cannot consume any more than it already has. This goes back to fundamental economic theory, as told by Adam Smith. Growth is needed to provide for food, clothing, and shelter. Growth is achieved, Smith revered, by market size: as it becomes bigger, it allows a greater degree of specialisation and therefore lower cost of production; and hence an economy is subject to increasing returns. A spiral of wealth is created.
This wealth spiral was then multiplied by international trade. Everyone’s market could be expanded to mutual enrichment. Capabilities increased with experience: knowledge became embedded in skills and continually developed and improved. Learning by doing. Scarcity became a story of mind over matter. It has now reached a point whereby knowledge is producing an economy of its own increasing returns.
That valedictory phrase a knowledge-economy: it follows a stage of development whereby tangibles such as food, property, clothing, commodities – a stage of development superseded by its knowledge component which made a market in and use of them – means that an economy in knowledge (an economy of intangibles) as a result of communications, information and computer technology, is a revolution occurring just like its Industrial precursor: through occurrence, build-up and breakthrough.
Since Berlin Wall’s collapse, western societies are no longer encumbered by restrictions in ideas or political thinking (as in McCarthy style witch hunts), and a gradual internet phenomena has meant knowledge has become an objective of its own. Anything can be Googled. A knowledge economy is different to physical capital in that it doesn’t amortise: it builds on its own dynamic. It can occur instantaneously. It does not advance, it realises. Knowledge economics is strictly speaking a contradiction: it [knowledge] is non-exhaustible. Infinite. It is unscarce because it cannot be economised. I only use knowledge-economy as phraseology because I am presently unable to articulate it as anything else.
This is because knowledge goes further than any intangible and tradable electronic or digitalised commodity. A definition of knowledge is impossible precisely because it is individual. Knowledge resides in us along with its ideas. It is intuitive because it is imaginative, and is imaginative because it allows us to move beyond a satiated state of consumption. This is why intuition becomes Capital in a knowledge-economy.
And its affect on business cycles is clear: past economic fluctuations have been due to changes in physical stock building and capital investment, causing rises and falls in aggregate demand. In a knowledge economy these are not so significant if at all. This is why predicting different phases of macroeconomic cycles is becoming difficult, and when wealth spirals have made these cyclical transitions so flat as to make them irrelevant to non-economists, economic language has become increasingly arcane in purporting to them. In fact many Institutions are becoming increasing redundant to their original purpose of economic stability – such as IMF and World Bank.
Set up after World War II as a response to 1930’s world currency failures, an august International Monetary Fund (IMF) was designed to help countries meet their Bretton Woods obligations of fixed currency rates (currencies were pegged to American dollars, which in turn were pegged to Gold). After 1971, as Bretton Woods accords fell apart, this IMF had little to do. Currencies became free floating, and global levels of liquidity have risen ever since. Its bureaucracy became reinvented as a saviour of developing countries' monetary crises.
Complexities and interconnectedness of today's global monetary system compared to Bretton Woods signed in 1944 and in 1971 when it fell apart - today, something like a trillion dollars are traded in currencies everyday versus nothing just after World War II – are vast.
Both World Bank (making longer-term infrastructure loans) to shorter-term IMF loans operate with little supervision, extreme secrecy and no regulation. Investors being taxpayers: all these tens of billions of dollars have come from taxpayers. Predominately America, with Europe and Japan each is making significant contributions.
Within fifty years these bureaucracies had thousands of well-off employees, entrenched in fortified bureaucracies, steeped in esoteric economic theories - funded by expensive universities and graduate schools – their staff accompanied with all amenities of modern corporate life.
These institutions have come to emblemise a modern filariasis of western client state sociality. A sociality of dependency, creating habits of procrastination as time elapses without objective. A sociality of public spending largess. As liquidity has altered during this time, there is a reducing authority nascent within these institutions purpose. It is this ever changing liquidity which raises its own question. In an improved material surround of comfortable mobility and choice, then what is there left to gain? What objective does liquidity serve?
2. Liquidity
In absolute terms, liquidity refers to incompressibility which undiscordantly offers no resistance to change in shape. Change which isn’t guttural or vowel-like. An exact definition is difficult, which is maybe why we stare at water so much – said without irony or exclamation - and in monetary terms liquidity definition is a preoccupation of economics and broker-traders alike. Perfect liquidity probably reflects an immediacy of time and material to cash convertibility without cost. Post World War II liquidity reflected an asset-based concept [of this convertibility] however an exact definition today is difficult because a benign environment of low interest rates has blurred liquidity with credit availability. Money matters, but credit has come to count.
Perfect liquidity has created an explosion of algorithmic programs which hunt out pricing anomalies in world markets, even if they exist only for fractions of a second. Another example of how knowledge has not only built up, also how quickly it moves through technology.
Latency and arbitrage, and a corporate pursuit of growth and profitability creates a flatness of thinking because we literally don’t have time to think: we mimic our own imagination. Money is a promissory note to pay its bearer on demand. This is why money mimics its own liquidity: otherwise, what was printed on notes would read as literature. This shortfall of promise (despite Bretton Woods which in 1944 led to subsequent years of stability, affluence, prosperity and growth) has come to create an unsatisfactory and aimless preoccupation with identity and purpose. In turn this has given rise to irrationality, superstition which is beginning to artificially engineer scarcity. In turn this is affecting how we look upon liquidity.
An emerging orthodoxy of received wisdom believes changes in atmospheric content of carbon dioxide are caused by humans and will cause a problematic warming. Newspeak of alarm feed on primate fear which believes we must stop climate change by reducing human carbon dioxide emissions. This newspeak is derived on information gained from World Bank and UN sponsored panels (like its IPCC -Intergovernmental Panel on Climate Change) which, as its name suggests, advises government panels on climate change. This means its advice is political as much as scientific.
Scientific language which can be difficult to those uninitiated, is increasingly opposing ampflied rhetoric of human activated temperature changes. Any counter claim from science that there is no case yet where any climate-sensitive environmental parameters have been changing at a rate exceeding its historic natural rate (or that environmental phenomena fluctuates at its own rate as part of its normal planetary workings) will be met with counter-claim from government newsmanagement speak that human causation is unequivocal.
Reality becomes irrelevant so long as there is a suspension of disbelief. Just as a feared Y2K threat to computerised government and business in 1999 created endeavour without basis, so global warming orthodoxy potentially can create new industries on a basis of carbon dioxide economics. Carbonomics as some already call it: this is economics based on environment scarcity. An absurdity.
Just as in Adam Smith’s view, where money drives human activity in resource allocation, trade and value creation; in this carbon economy it is thin-air which brings buyers and sellers together in a post-material zero sum gain. Liquidity as Carbon Credits is already reality, a boon with City traders. They already exist alongside other assets like commodities, bonds and shares.
Never mind that IPCC geological predictive tools used to measure climate change produce different results to satellite measurements which indicate an absence of global warming since 1979 (that is, a period of time where human dioxide emissions have been increasing rapidly), never mind that dangerous human-caused climate change is not upon us: these are markets without artifice. Carbon credits are a promise without deliverance. Satirists who poked fun at Thatcher’s state industry sell-off by saying she’ll eventually privatise oxygen; this is in fact moving toward Orwellian absurdity.
An ungood absurdity of reduced vocabulary. Blandness which is encouraged in archetypes of apocalypses and redemption. A regression. This is why more sophisticated levels of liquidity are needed: bringing a promise beyond restraint. William Blake’s hymn Jerusalem has had patronage from many sources, because of its myth creation based on promise: a motivated language bringing new thoughts, images, and worlds into being.
A language which isn’t subservient to instruction or knowledge. Language which isn’t just limited to articulating sounds or object reference. For Blake, through language God became as we are. Liquidity as fountains of living water. This was Blake’s regard for imagination. Reality as genius; without prognosis or prescription for a new society.
This means an ending to minimalist thinking, where individuals are unconnected to history or ideas or sociality. An ending to preponderance with macroeconomic growth planning, which is rationalised to serve our needs (where inflation serves as a commission). Productivity as national statistics becomes newspeak. Where intuition is Capital, capacity becomes entirely imaginative. An ending to anxiety which promotes miasmic environmental economics which has continually been left standing since Malthus first warned of increasing populations causing land shortage and ecological stress. Blake believed problems language are naturally liable are not problems to be remedied, rather possibilities to be embraced. For perfect liquidity in this world, language becomes its own objective.
Jonathan Gulson
16/4/2007