5 Minutes: Why the West Isn’t Working

The world isn’t working — it’s functioning, but similar to an electric car whose run out of electricity and is thus operating on diesel, we’ve kinda missed the point.

What explains the increasing economic & social inequality coupled with financial markets that seem impervious to obvious volatility?

The paradoxical state of the world:

• the inflation of technology as a solution and the inflammation of man as a problem
• the decreasing ability of governments to profit and increasing ability of corporations to govern
• the compounded economic instability from decades of middle class consumption and upperclass savings
• the juxtaposition of the decreasing value of work and the increasing price of assets
• the leftist political incompetence and the rightist social ignorance
• the fleeting nature of humanity and the permanence of humanity on nature.

These are the questions asked of our generation.

As to what the possible answers are, I don’t know. However, I have a theory for where to start.

The Invisible Hand

I believe that we have perverted the invisible nature of mankind and prescribed it to the invisible hand of capitalism.

Empirically, it makes sense to label & model our modern economic environments after the essence of the natural world.

The natural world evolves through the supply and demand of resources.

It creates a diversity of species, small monopolies of abilities, in order to avoid direct competition in the short-run, and thus support an equitable market.

The church mouse and the garden snake may be predator & prey but they’ve evolved specialized abilities that avoid direct competition of resources and allow them to divide up their territory equitably.

In equitable markets, regardless if natural or economic, the natural advantages of market players leads to an equitable allocation of resources according to their ability to survive.

Eagles survive on their ability to hunt just as Ford has survived on its ability to make cars.

However, we have forgotten that the natural world is only a market in the short term.

Equitable Markets become Circular Ecosystems

In the long-run, an equitable market becomes a circular ecosystem.

That is, the traits that once led one species to a fair & just advantage (or monopoly) will change, and over-time, become ineffective.

Predators that evolve claws are over time met with prey that gain shells, and vice versa. The evolution of Microsoft hardware is met with the revolution of Apple software, etc.

Within a circular ecosystem, there are trade-offs, advancements in predators that are then counteracted by adaptations of the prey, there are evolutions countered by revolutions.

In a circular ecosystem, one species cannot continue to dominate and continue to survive.

Our Political Perversions

And here is where our politics have perverted our economic model.

We cannot support an ecosystem where resources are held by the non-competitive and where value is maintained through the ignorance of natural evolution.

Therefore, what are the core drivers of the current economic instability due to our political perversion:

1. Opaque Taxation: It is basic arithmetic, that if you start with two equal pots of money and compound both at different rates, the pot with the higher interest rate will grow larger relative to the other pot indefinitely. That is, one “species” has indefinite ability to dominate without evolution and expects to survive. While I don’t believe that tax should be equal, and what’s fair is largely subjective, transparency of taxation is an important first step.
2. Equitable Healthcare: If one species is eliminated in a market, you can argue in a darwinian world that this is an example of “the fittest survive”. If one species is eliminated in an ecosystem, you enter a period of volatility across the entire circular value-chain. Healthcare is a prime example of a tangible circular ecosystem, not an equitable market. It is not in the interest of any species, large, medium, or small, for healthcare to be on an equitable basis. Disease is not a stock option to be traded.
3. Exchanging Education: Education is a prime example of the intangible circular ecosystem. Unlike healthcare, the benefits are more intangible and less certain. Choosing not to educate a child has a less clear impact than choosing not to keep them healthy. However, an educated child will become an educated adult, and may be the thinker we need to solve tomorrows problems. Treating education as equity we can exchange today is undermining our interdependence tomorrow.

Durable Fragility

There is a key juxtaposition between the fragility & durability of markets & ecosystems.

Markets support durable competition but fragile growth:

That is, the short-term rewards of success leads to robust hoards of continual competition, that at times, can undermine it’s own goals. Think of the growth of weeds in the yard, or CDO’s in the 2000’s.

Ecosystems are the reverse, they promote fragile competition but durable growth:

That is, the long-term rewards of success leads to robust advancements, but often at the expense of the market players. Think of the rise, fall, & legacy of many early dinosaurs, or the rise, fall, & legacy of the Mongol empire.

The key link between both markets & ecosystems is continual change. And continual change requires…change.

Therefore, our ecosystem will change in our lifetime — the question is: how? Will it be by the natural order of evolutions, or the man-made order or revolutions.

We have a choice, but time does not stop for anyone.

P.S. A note on Socialism

The theory of markets & ecosystems also explains why economic policies such as communism and socialism have failed to show sustained returns. This is because making everyone the same is not the best way to create an efficient ecosystem, whether in nature or in economic markets.

Markets may rely on short-term monopolies of abilities, but ecosystems depend on advancements in order to maintain their stability.

Therefore, ecosystems depend on fairness, not equality.