Central Planning and The Fall of the US Empire  

Posted by Big Gav in ,

John Robb has a look at the causes of America's decline - Central Planning and The Fall of the US Empire.

One of the most interesting underlying reasons for the decline of the Soviet Union, and soon the US, is misallocation of resources due to a reliance on central planning.

Misallocation in this context means that year after year, decade after decade, the wealth of a nation is spent on the wrong things. The wrong projects are funded. The wrong infrastructure is built (or not built -- the US is 38th in the world in Internet connectivity and falling). The wrong things were bought and so on. Eventually, the accumulation of bad investment made the USSR so fragile that even the smallest shock could topple them.

The reason for this failure was that the Soviets relied on central planning. A system of economic governance where small group of people -- in the Soviet Unions case bureaucrats -- had all the decision making power. They decided what was spent and where. Even with copious amount of information, they decided badly.

Why did they decide badly? The massive economy of a modern superstate is too complex for a small group of people to manage. Too much data. Too many uncertainties. Too many moving parts.

The only way to manage an economy as complex as this is to allow massively parallel decision making. A huge number of economically empowered people making small decisions, that in aggregate, are able to process more data, get better data (by being closer to the problem), and apply more brainpower to weighing alternatives than any centralized decision making group.

Of course, the misallocation due to centralized decision making wasn't supposed to be a vulnerability of the West. To allocate resources in our economy, we had a conceptually more efficient mechanism: markets. Markets are supposed to be a mechanism that allows massively parallel decision making.

Those assumptions are proving false. The succession of market bubbles, the global financial collpse of 2008, and the recent US debt problem is prima facie evidence that gross misallocation has occurred for decades. The wealth of the West, particularly the US, is being spent on the wrong things year after year, decade after decade. We are now as fragile as the Soviet Union in the late 80's.

What happened?

Central planning took over the decision making process in the US, both through the growth of government and through an unparalleled concentration of wealth.

The parallels between the rapid growth of US government bureaucracy and the Soviet bureaucracy is straight forward. As more and more of US economy was controlled by a narrow group of decision makers allocating government resources, the more sluggish the entire economy became (most of this was due to massive growth and mis-allocation in entitlements and defense). Further, the ability of government bureaucracies to extend their decision making to remaining majority of the economy through regulatory action, is also a form of centralization. However, even with all of this government growth, it's is still not enough to account for the level of misallocation we are seeing.

There's is something else at work.

The answer is that an extreme concentration of wealth at the center of our market economy has led to a form of central planning. The concentration of wealth is now in so few hands and is so extreme in degree, that the combined liquid financial power of all of those not in this small group is inconsequential to determining the direction of the economy. As a result, we now have the equivalent of centralized planning in global marketplaces. A few thousand extremely wealthy people making decisions on the allocation of our collective wealth. The result was inevitable: gross misallocation across all facets of the private economy.

To see what this extreme wealth concentration looks like as a distribution, we don't have to look further than income distribution in the US (classic power law). The liquid wealth of those on the extreme left of the curve completely outweighs the 99.5% of the population to the right (the distribution is FAR more skewed than most people even imagine -- Republican or Democrat). This graph would also be a good way to demonstrate how decision making in a bureaucratic dictatorship in a country like the Soviet Union looked like before it collapsed.

The result of central planning in the US has finally hit the wall. The list of problems is endless. The misallocations range from the dangerous $600 trillion derivatives market to the destruction of the US middle class (by exporting jobs and the substitution of income with debt).

The end result is that our economic and political system has become very fragile. All it will take is is one extremely bad decision and the cascade of failure that follows will catch everyone off guard.

Glenn Greenwald has a look at a different aspect of the same problem - A prime aim of the growing Surveillance State.
Several weeks ago, a New York Times article by Noam Cohen examined the case of Aaron Swartz, the 24-year-old copyright reform advocate who was arrested in July, after allegedly downloading academic articles that had been placed behind a paywall, thus making them available for free online. Swartz is now being prosecuted by the DOJ with obscene over-zealousness. Despite not profiting (or trying to profit) in any way -- the motive was making academic discourse available to the world for free -- he's charged with "felony counts including wire fraud, computer fraud, unlawfully obtaining information from a protected computer and recklessly damaging a protected computer" and "could face up to 35 years in prison and $1 million in fines."

The NYT article explored similarities between Swartz and Bradley Manning, another young activist being severely punished for alleged acts of freeing information without any profit to himself; the article quoted me as follows:
For Glenn Greenwald . . . it also makes sense that a young generation would view the Internet in political terms.

"How information is able to be distributed over the Internet, it is the free speech battle of our times," he said in interview. "It can seem a technical, legalistic movement if you don't think about it that way."

He said that point was illustrated by his experience with WikiLeaks -- and by how the Internet became a battleground as the site was attacked by hackers and as large companies tried to isolate WikiLeaks. Looking at that experience and the Swartz case, he said, "clearly the government knows that this is the prime battle, the front line for political control."

This is the point I emphasize whenever I talk about why topics such as the sprawling Surveillance State and the attempted criminalization of WikiLeaks and whistleblowing are so vital. The free flow of information and communications enabled by new technologies -- as protest movements in the Middle East and a wave of serious leaks over the last year have demonstrated -- is a uniquely potent weapon in challenging entrenched government power and other powerful factions. And that is precisely why those in power -- those devoted to preservation of the prevailing social order -- are so increasingly fixated on seizing control of it and snuffing out its potential for subverting that order: they are well aware of, and are petrified by, its power, and want to ensure that the ability to dictate how it is used, and toward what ends, remains exclusively in their hands.

The Western World has long righteously denounced China for its attempts to control the Internet as a means of maintaining social order. It even more vocally condemned Arab regimes such as the one in Egypt for shutting down Internet and cell phone service in order to disrupts protests.

But, in the wake of recent riots in London and throughout Britain -- a serious upheaval to be sure, but far less disruptive than what happened in the Middle East this year, or what happens routinely in China -- the instant reaction of Prime Minister David Cameron was a scheme to force telecoms to allow his government the power to limit the use of Internet and social networking sites. Earlier this week, when San Francisco residents gathered in the BART subway system to protest the shooting by BART police of a 45-year-old man, city officials shut down underground cell phone service entirely for hours; that, in turn, led to hacking reprisals against BART by the hacker collective known as "Anonymous." As the San-Fransisco-based Electronic Frontier Foundation put it on its website: "BART officials are showing themselves to be of a mind with the former president of Egypt, Hosni Mubarak." Those efforts in Britain and San Fransisco are obviously not yet on the same scale as those in other places, but it illustrates how authorities react to social disorder: with an instinctive desire to control communication technologies and the flow of information.

The emergence of entities like WikiLeaks (which single-handedly jeopardizes pervasive government and corporate secrecy) and Anonymous (which has repeatedly targeted entities that seek to impede the free flow of communication and information) underscores the way in which this conflict is a genuine "war." The U.S. Government's efforts to destroy WikiLeaks and harass its supporters have been well-documented. Meanwhile, the U.S. seeks to expand its own power to launch devastating cyber attacks: there is ample evidence suggesting its involvement in the Stuxnet attacks on Iran, as well as reason to believe that some government agency was responsible for the sophisticated cyber-attack that knocked WikiLeaks off U.S. servers (attacks the U.S. Government tellingly never condemned, let alone investigated). Yet simultaneously, the DOJ and other Western law enforcement agencies have pursued Anonymous with extreme vigor. That is the definition of a war over Internet control: the government wants the unilateral power to cyber-attack and shut down those who pose a threat ot it, while destroying those who resists those efforts.

There have literally been so many efforts over the past several years to heighten surveillance powers and other means of control over the Internet that it's very difficult to chronicle them all. In August of last year, the UAE and Saudi Arabian governments triggered much outrage when they barred the use of Blackberries on the ground that they could not effectively monitor their communications (needless to say, the U.S. condemned the Saudi and UAE schemes). But a month later, the Obama administration unveilled a plan to "require all services that enable communications -- including encrypted e-mail transmitters like BlackBerry, social networking Web sites like Facebook and software that allows direct 'peer to peer' messaging like Skype" to enable "back door" government access.

This year, the Obama administration began demanding greater power to obtain Internet records without a court order. Meanwhile, the Chairwoman of the DNC, Rep. Debbie Wasserman-Schultz, is sponsoring a truly pernicious bill that would force Internet providers "to keep logs of their customers’ activities for one year." And a whole slew of sleazy, revolving-door functionaries from the public/private consortium that is the National Security State -- epitomized by former Bush DNI and current Booz Allen executive Adm. Michael McConnell -- are expoiting fear-mongering hysteria over cyber-attacks to justify incredibly dangerous (and profitable) Internet controls. As The Washington Post's Dana Priest and William Arkin reported in their "Top Secret America" series last year: "Every day, collection systems at the National Security Agency intercept and store 1.7 billion e-mails, phone calls and other types of communications." That is a sprawling, out-of-control Surveillance State.

One must add to all of these developments the growing attempts to stifle meaningful dissent of any kind -- especially civil disobedience -- through intimidation and excessive punishment. The cruel and degrading treatment of Bradley Manning, the attempted criminalization of WikiLeaks, the unprecedentedly harsh war on whistleblowers: these are all grounded in the recognition that the technology itself cannot be stopped, but making horrific examples out of those who effectively oppose powerful factions can chill others from doing so. What I tried to convey in my NYT interview was that the common thread in the Swartz and Manning persecutions -- as well as similar cases such as the two-year prison term for non-violent climate change protester Tim DeChristopher, the FBI's ongoing investigation of pro-Palestinian peace activists, and even the vindictive harassment of White House/DADT protester Dan Choi -- is the growing efforts to punish and criminalize non-violent protests, as a means of creating a climate of fear that will deter similar dissent.

It is not hard to understand why the fears driving these actions are particularly acute now. The last year has seen an incredible amount of social upheaval, not just in the Arab world but increasingly in the West. The Guardian today documented the significant role which poverty and opportunity deprivation played in the British riots. Austerity misery -- coming soon to the U.S. -- has sparked serious upheavals in numerous Western nations. Even if one takes as pessimistic a view as possible of an apathetic, meek, complacent American populace, it's simply inevitable that some similar form of disorder is in the U.S.'s future as well. As but one example, just consider this extraordinary indicia of pervasive American discontent, from a Gallup finding yesterday (click on image to enlarge):

The intensely angry "town hall" political protests from last August, though wildly misdirected at health care reform, gave a glimpse of the brewing societal anger and economic anxiety; even Tea Party politicians are now being angrily harangued by furious citizens over growing joblessness and loss of opportunity as Wall Street prospers and Endless Wars continue. This situation -- exploding wealth inequality combined with harsh austerity, little hope for improvement and a growing sense of irreversible national decline -- cannot possibly be sustained for long without some serious social unrest. As Yale Professor David Bromwich put it in his extraordinarily thorough analysis of the "continuities" in what he calls "the Bush-Obama presidency":
The usual turn from unsatisfying wars abroad to happier domestic conditions, however, no longer seems tenable. In these August days, Americans are rubbing their eyes, still wondering what has befallen us with the president’s "debt deal" -- a shifting of tectonic plates beneath the economy of a sort Dick Cheney might have dreamed of, but which Barack Obama and the House Republicans together brought to fruition. A redistribution of wealth and power more than three decades in the making has now been carved into the system and given the stamp of permanence.

Only a Democratic president, and only one associated in the public mind (however wrongly) with the fortunes of the poor, could have accomplished such a reversal with such sickening completeness.

Economic suffering and anxiety -- and anger over it and the flamboyant prosperity of the elites who caused it -- is only going to worsen. So, too, will the refusal of the Western citizenry to meekly accept their predicament. As that happens, who it is who controls the Internet and the flow of information and communications takes on greater importance. Those who are devoted to preserving the current system of prerogatives certainly know that, and that is what explains this obsession with expanding the Surveillance State and secrecy powers, maintaining control over the dissemination of information, and harshly punishing those who threaten it. That's also why there are few conflicts, if there are any, of greater import than this one.

Foreign Policy has a look at the authors of "Future Shock" (whose work heavily influenced John Brunner's book "The Shockwave Rider" which did a good job of predicting many modern day trends)- Technology Will Take on a Life of Its Own ?.
They may be octogenarians now, but pick up a copy of the Tofflers' most famous books -- Future Shock (1970) and The Third Wave (1980) -- and you will quickly wonder why anyone bothers to write the redundant meta social and political commentaries that drown us today. These books, written when we were children, contain such stunning and prescient insights, encapsulated in elegant yet racing prose, that they ought to be essential reading four decades onward. Indeed, you couldn't be blamed for thinking they had just been published this year.

Terms and concepts that are on the tip of everyone's tongue today leap off the pages: the crisis of industrialism, the promise of renewable energy, ad-hocracy in business, the rise of the non-nuclear family, technology-enabled telecommuting, the power of the pro-sumer, sensors embedded in household appliances, a gene industry that pre-designs the human body, corporate social responsibility, "information overload" -- and yes, right there on p. 292 of The Third Wave, the phrase Wired magazine can't get enough of today: "DIY Revolution." No wonder the book has been dubbed the "classic study of tomorrow." (Of the very few things they seem to have gotten wrong, or at least not yet right, is widespread polygamist communes.) ...

IN THE THIRD WAVE, the Tofflers foresaw that advanced societies would no longer be content to see humankind as the pinnacle of evolution. Instead, they wrote, we are moving into a brave new world where knowledge will become an inexhaustible commodity and transform not just our economies but more deeply our sense of who we are -- and "not just for a generation, but forever," as they put it.

A generation later, it is time to revive the Tofflers' methodology as we try to understand an incipient future in which technology has insinuated itself into every sphere and nook of human activity -- from the manipulation and replication of DNA to space exploration -- and in which humans continuously seek ways to speed up their biological evolution to match the breakneck pace of technological evolution. The only way to do that is to incrementally integrate with technology, launching an era of change and innovation that we call the Hybrid Age. If the first wave was agrarian and tribal, the second industrial and national, and the third informational and transnational, then the Hybrid Age is what the Tofflers might call the "Fourth Wave." In this new era, human evolution has become human-technology co-evolution: We're becoming part of the machine, and it is becoming part of us.

There is no adequate word in English to capture this complex entanglement of humans and technology. The German word Technik comes closest: It means not just technology, but the mastery of the methods and processes that shape and steer it. In today's emerging world, Technik can be something of a broad index of preparedness for the future Hybrid Age. It rejoins the scientific and mechanical dimensions of technology with a necessary concern for its effect on humans and society. So while today we talk about promoting democracy, tomorrow we will realize we should be promoting good Technik.

Five characteristics differentiate this Hybrid Age from those that came before it: the ubiquitous presence of technology, its growing intelligence, its increasingly social dimensions, its ability to integrate and combine in new forms, and its growing power to disrupt, faster and on a larger scale than ever before in human history. ...

And it's not just business models that will be affected. Take the coming advent of do-it-yourself manufacturing. At first blush, the United States' first-mover advantage in developing these affordable designer devices will empower its mom-and-pop shops to tailor-make niche products at cut-rate costs, threatening China's manufacturing base while reviving the U.S. economy. But if China suddenly loses revenue to America's heartland, how will it continue to recycle its vast foreign exchange reserves into U.S. Treasury bonds? In the end, one technological innovation in the United States could lead to its interest rates skyrocketing and economy tanking (again). Be careful what you wish for: The Hybrid Age is also an age of disruption.


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