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BUFFETS AND BREADLINES
Is The World Really Broke Or Just Grossly Mismanaged?
By KIMON VALASKAKIS
AuthorHouseCopyright © 2013 KIMON VALASKAKIS
All rights reserved.
NEO's Opening Keynote
Friends, let me welcome you to this marvelous island where we have given ourselves the pleasant task of thinking about the world and proposing feasible solutions to its problems. I will lead the debate throughout, but will entertain all sorts of questions, comments and challenges in the spirit of the Platonic Dialogues which have inspired this three week seminar.
You will note that Plato conveyed all of his philosophical and political ideas through dialogue with characters. Successive generations of philosophers have preferred straight analytical prose to popularize their theories. I myself have written all my books and articles in straight prose. This time, let us experiment with dialogue.
The Agenda is ambitious. We resolve to consider the 2008 Financial Crisis as a major world event which has revealed both severe cracks within, but also great opportunities for, the World Economic System.
Today, in mid 2013, we are living the major sociopolitical tsunami which has followed the financial earthquake of 2008. Other crashes are sure to come, but even if there were none, the huge effects of the 2008 Crisis will be with us for a long time.
Our goals therefore are as follows:
1. To understand where we are and how we got to what we will call POINT A.
2. To try and define where we want to go, which we can call POINT B (in the singular or plural).
3. To identify paths that are both feasible and desirable in going from A to B.
Our first week will be devoted to the analysis of Point A; the second, which will take place in a few months, will define the contours of one or more Point Bs; and the third week will dwell on the strategy necessary to help realize these objectives.
In essence, a think-tank for two weeks, and a do-tank for the third, lest we be accused of just being dreamers on a dream island and nothing more.
Don't you think, O.T, that it is presumptuous for us to try and do ourselves what has evaded the scores of experts at the IMF, the World Bank, and the OECD for decades?
Possibly, but I say, why not? We are not mandated to change the world by anyone but ourselves. We are just a bunch of citizens, and if I may be so bold as to mention without arrogance, we are of high intellectual caliber, willing to apply our intelligence and knowledge to contemporary problems.
I believe that there are three features of our Athena Trilogy which make it worthwhile and not just another me-too seminar, like the hundreds that take place all the time.
First, by the very composition of the group, we are combining a think-tank and a do-tank. We have assembled both thinkers and actors in this gathering, which is a good thing. It will ensure that we will stay on track.
Second, we are dealing with a variety of issues which go well beyond the 'plumbing aspects' of the world system, i.e. financial regulation, deficit to GDP ratios, unemployment statistics, into the realm of philosophy. We are trying to connect the dots, uncover hidden inter-dependencies and conversely highlight the uncoupling of previously closely-paired variables. In most of the other meetings, the dots are not connected at all, and inter-dependencies are altogether missed.
Third, we are reviving what I consider to be the most persuasive and efficient of all pedagogical techniques, the Socratic Dialogue method, though within the context of modern technology. The metaphor of our group sponsoring this event, the New School of Athens, is PLATO WITH AN IPAD, the marriage of modern technology and perennial wisdom. Today, while we converse, any of us can summon knowledge through his/her smartphone or tablet to support or challenge a position, while remaining in the spirit of dialogue.
True enough, and this is why I consented to come. Although, I must say, I tend to mistrust blue-sky intellectuals, seeking never-never lands and concocting unreachable utopias. I am a practical man. I like to do. I get tired of pompous intellectuals, and I hope this bunch does not fall into that category.
On that note, NEO, I understand, from your outline of the agenda, that we will be spending the whole of the first week on diagnostics. Isn't this a colossal waste of time? Surely we know what the problem is. What is missing is the solution. So why not skip diagnostics altogether and focus on solutions.
In my opinion, the first week is the most important. I believe that the absence of credible solutions comes from the fact that we have not understood the problem, and therefore misdiagnosed it.
Let me recount for a moment a true anecdote. Some years ago I was involved in a development project in Cameroon and experienced quite suddenly a very severe and high fever. The Yaounde doctor whom I consulted told me that it was probably either Falciparum Malaria, a particularly virulent strain, or Hepatitis B. I asked him what were the remedies. He answered that, were it malaria, it would be a large dose of quinine, while for hepatitis B, it would be antibiotics.
"Give me the quinine then" I said. "Not so fast", the doctor answered. "If I give you quinine and you have Hep-B, you could die on the spot".
"Ok then, give me the antibiotics", I countered. Again, "not so fast", he responded, "falciparum is fatal in half the cases if not treated early. We cannot afford to make a mistake".
In desperation I said, "how can you find out what I have?" A blood test, he assured me, would give us the answer. However, because of budget cuts, no blood test could be performed in Yaounde for at least three weeks. We would have to act now. "I cannot give you a firm diagnosis without such a blood test because my professional reputation would be at stake", said the good doctor. "I will therefore ask you to tell me what you think you have and I will cure the disease that you will have identified. But the responsibility of diagnosis will be entirely up to you".
"Incredible" I said. "You are asking me to make a self-diagnosis, while you, a trained physician, refuses to do so. OK, so be it". I went outside, did a heads or tails. Heads turned out malaria and ended up being right. I was treated with quinine for eleven days and subsequently survived to tell this story.
Extrapolated to today, I believe that we have been greatly mistaken in our diagnosis of the current world predicament. We are applying austerity measures to get out of the 2008 Great Recession, believing that the main problem is scarcity of resources, with not enough to go around. What if the opposite were true? That the problem was not scarcity at all, but mismanaged abundance? We could be applying the wrong cure and ending up killing the patient.
For this reason, I believe that we should spend a good third of our time on uncovering the real issues. This is part of my more general 'theory of errors' to which I will refer at a later date.
SCHEHERAZADE (A French Algerian doctoral student)
I have heard you talk about the "Theory of Errors" and its importance. Given its relevance to today's challenges, why don't you tell us more about it?
All right then. With the permission of the group, I will.
Permission granted. I too am quite intrigued by this concept.
Well then, consider the following proposition: contrary to popular belief in rational human behavior, errors are much more frequent that we would care to suspect. This is even true when everyone is rational and even super-intelligent.
In any zero sum game when there must be a winner and a loser (chess, poker, football, baseball, tennis), obviously one of the two players will miscalculate. If there were never any miscalculations, no two-person games would ever be won or lost.
Take the extreme of learned thought: two eminent lawyers pleading the opposite end of a Supreme Court case. One of them will prevail, while the other will lose. In all cases of zero sum activity, i.e. one winner only, where chance is not a factor, the loser or losers will have committed a mistake.
I would go so far as to say that, in win-lose games, half the people are wrong all the time. This is by definition true. What this means is that errors are ubiquitous and not exceptional at all. My own research on the matter has led me to conclude that half of all errors can be attributed to diagnostics, hence the importance of attaching a special focus on it. A flawed diagnosis is indeed the mother of all errors. Hence, a correct diagnosis is the sine qua non of effective policy, while its absence dooms entire projects.
I hear you. Your points are well taken. But surely, with intelligent people and sophisticated institutions, prestigious universities, democratic governments, and informed media, the 'shelf life' of errors cannot be very long. They are sure to be spotted quickly and corrected. Don't you agree?
I wish I could, C.W. If errors were self-correcting, then our problems would be minimized. But there is a class of errors which are persistent and stubborn. They are usually related to inertia, urban legends, conventional wisdom, and are unfortunately not self-correcting. Prognostic and strategic errors can be self-correcting, but the difficult ones are the diagnostic errors. These tend to be indefinitely sustainable, in the pejorative sense of the world.
ANGUS MC THRIFT (a Scottish Professor of the Philosophy of Psychology and History of Media and well known for his ability to invent puns, epigrams and soundbytes to convey profound meaning in the simplest of terms)
I agree with NEO. Self-correcting errors depend almost entirely on learning. If there is no learning, errors tend to be repeated. Witness a fly trying to get out of a room and hitting the window repeatedly. There is no learning there. It will continue to do so until it drops of exhaustion.
Also consider the famous answer by Alexander the Great when he was asked if he became an able general as a result of his experience in 20 previous battles. He answered, "Not at all. My donkey attended all of my battles, yet he is still a donkey."
Unless you are receptive to learning, the lessons of your mistakes, you are condemned to repeat them ad infinitum.
The point was also admirably made by Thomas Kuhn, in his well-known book The Structure of Scientific Revolutions, in which he claims that a paradigm shift is needed for a true intellectual revolution, not merely tinkering at the margin. Such a paradigm shift is difficult to achieve because it goes against the grain of an established mainstream, controlled by editors of scientific publications, university chairs and political appointments. This mainstream is likely to resist true change.
In addition, evolutionary psychology shows that, as we age (both individually and as societies), there is a sort of hardening of the categories which goes hand in hand with the hardening of the arteries. It is difficult to teach an old dog new tricks. Out of habit and ritual, we tend to do things the same way every day.
This is why it is important to challenge the status quo. As a recent TV ad put it: "if no one had challenged the status quo, the world would be flat, E would not be equal to mc2, the feudal system would still rule, and democracy would exist only in philosophy books."
REA SYLVIA (a graduate student in psychology)
In fact, one of the most intractable errors is what some psychologists have called FALSE CERTAINTIES: The stubborn belief, that something, which is obviously false, is actually true. I think NEO will probably address this question later on in the week in connection with labor markets, where it is blindly believed that more corporate profits will create more jobs, a mantra widely held by the Tea Party in the US.
In some sense, we are all afflicted by false certainties, and uncovering them should indeed be one of our major tasks.
I would tend to agree. Let's do the diagnostics. Why not? We may uncover false certainties, but also possibly confirm others as valid truths and get them off the maybe list.
This being said, Mr. Chairman, let me suggest that we follow Woody Allen's timetable when he claimed that the three most important questions are (1) where did we come from? (2) where are we going? and (3) what's for lunch?
I suggest we now break to sample the wonderful buffet they are proposing to us at the beach restaurant.
Fully seconded QWERTY, and timely, because our next session will deal precisely with what I am calling Buffets and Breadlines, attacking head-on the central challenge of our time: scarcity or abundance.
The Scholars break for a tasty lunch of seafood and charbroiled fish with Greek salad washed down with retsina. For dessert, karpouzi (watermelon) and mangoes followed by Greek coffee. After a short siesta (power naps are de rigueur), they reconvene for the continuation of the opening session.
Before we can properly address the problem of inequality in the world (Buffets and Breadlines), I believe that we should get a historical perspective of how we got to our current state (Point A). This will help discover the roots of the problem and hopefully make a convincing diagnosis.
KEN HERNANDO (a radical leftist graduate student)
Are we going to go back to high school and the standard history lesson? Don't you feel we know how we got here and what the problem is and that we should instead concentrate all our energies on solutions?
No. I don't think so. Understanding the historical antecedents will held us to avoid repeating the same mistakes. Allow me to quote GEORGE SANTAYANA: "Those who cannot remember the past are condemned to repeat it" (1905), and more relevant to you, as a practicing Marxist, the words from the master himself:
—"History repeats itself, first as tragedy, second as farce." Karl Marx.
I have asked our resident historian ARNAUD Crosby to walk us through a short history of capitalism and economic crises
ARNAUD CROSBY-LAFFITE (a world-famous historian, Crosby has specialized in macro history, the long-term evolution of Mankind, and is a specialist on counter-factual conditionals. Burdened with an extremely busy schedule, it was a veritable tour de force to get him to accept to come to Corfu for a whole week.
Thank you Neo. What I will do first is give you an overview of significant historical events prior to the 2008 crisis, and then examine the chronology itself of the crisis from 2008 to the end of 2011. Does that sound ok with you?
THE EVOLUTION OF MODERN CAPITALISM
From the early modern period (1500-1750), Capitalism has been marked by business cycles: periods of intense euphoria and economic growth, usually accompanied by rising prices and a money illusion, which tend to stimulate entrepreneurial activity in the short-term. The cycles continue through investor panic and economic depressions. So the vagaries of the market are nothing new.
Towards the end of the nineteenth century, there was a significant downturn in the world economy, dubbed The Great Depression. The name was later abandoned when the twentieth century Great Depression 1929-1939 occurred and dwarfed the earlier downturn.
The shocks associated with the financial upheavals of every business cycle could be compared to earthquakes: an initial jolt and some aftershocks. As in the case of physical earthquakes, sometimes followed by tsunamis or tidal waves, financial earthquakes have similar characteristics. The economic disaster usually engenders a social sequel, and then a political upheaval, which can lead to regime change.
I have called this historical pattern F-E-S-P.
F is the financial earthquake,
E the impact it has on the real economy of production and consumption,
S are the social disruptions which result from the accompanying economic hardship,
P are the political consequences. P may take the form of democratic regime change or, more ominously, social conflict and-or international wars, as was the case following the 1930s Great Depression.
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