The end of economic failure


On 17th September the Adbusters Media Foundation is planning to occupy Wall Street. Their demands are inpsired by the revolutionary fervour of the Arab Spring, and include a desire to radically reimagine the anachronistic, disjointed legacy systems of the world economic order. The Bretton Woods system was replaced by a diverse hybridised system where some currencies are pegged and others float. Some large organisations have mainframes computers dating from the 70’s which they have never been able to power down for fear of organisational metdown, around which newer technologies have been implemented via crude interfaces. The global financial system, in a similar way, is a melting pot of exchange rate systems arbitrarily hooked togather with each other to present a global economic whole. In many ways it would be infitely preferable to have the kind of revolutionary reworking and modernisation of the global economic system in the way that Adbusters argue for. I think their occupation of Wall STreet is laudable for its idealism, but perhaps the solution should be found a different way.

For at least 40 years, in Britain and in other countries, evidence has been accrued of an economic cycle of boom and bust, with a cycle length of 6-7 years. One of the main reasons for this could be attributed to herd or flock behaviour by large groups of investors. As confidence in a future economic upturn grows, more and more people will start investing in the market. At some point the confidence of some members of the group may start to flag but the overall confidence remains. The behaviour of flocks is such that if a flock of birds is grounded and a threat becomes visible, no bird will fly into the air until another bird flies first. As such, if you were to run towards a grounded flock of birds, in most cases it will remain calm until you are a few feet away at which point they will all fly up almost instanatenously.

After about 6 years of solid ecomomic growth, invariably there will be breaking points where people start to lose their confidence in the system. Invaribaly this leads to confidence meltdown which is rapdly follows by the ecomony sliding into recession. A new system is needed which is not mandated for the tabulisation of the ecomonic confidence of a large mass of people. Crowd behaviour, mass behaviour, flock behaviour, herd behaviour – these are the contemporary models used to understand ecomomic cycles and ecomomic behaviour in the modern world. What is needed is some kind of executive legal reality or grundnorm which can underwrite ecomonic confidence without it needed to be reinsured amongst the confidences of tens of millions of people. A reductivist view of economic confidence and the flux of the world ecomimy is that it is the consensual hallucination of tens of millions of human psychological interactions. If a genius, machine or agent existed that could run the world ecomony and excise from it the structural faults caused by the failures in mass psychological human market interaction, a period of ecomomic confidence could ensue that could see the real end of boom and bust and the real end of man made ecomomic catastrophes.

Such an approach would necessarily entail assimilation by nation states and currencies into higher structures of meaning – Britain joining the Euro, or South American countries possibly starting their own ecomonic union and currency, for example. The normal barriers against these kinds of assimilations are notions of national or ethic identity or national automony. Perhaps when everyone truly realises that there is a global network of ecomoic confidence that many people are card carrying members of, run by a presiding genius, that such identities can be reconceptualised. 

Majid Salim


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