Problems vs. Predicaments
November 5, 2011
It can well be argued that human culture has been shifting slowly out of equilibrium since we stepped out of Nature’s gift economy and began to mine the Earth for our need and then our greed. This began with the so-called Agricultural Revolution, by which humanity began to dramatically alter the environment to force it to grow more food than it would otherwise, creating the first regular surpluses (and, inevitably, the first cyclical shortages and consequent poverty and starvation).
Food surplus equaled wealth. Wealth equaled power. Power required protection in the form of police and armies, and an increasing number of non-productive functionaries to manage the new economy and to control the masses who became increasingly enslaved to the whims of the elite. This non-productive sector included the clergy and the institutionalization of universal spirituality into dogmatic fear-and-reward-based religion.
It required thousands of years for this slow paradigmatic shift to result in increasing inequality and class division, power hierarchies, disease epidemics, famine, ecological devastation, degeneration of human culture and a generalized malaise of the human spirit. The slowly-increasing temperature and volatility of human experience was given little notice, just as the frog in the slowly heated pot of water fails to recognize that it’s getting boiled alive.
Fueled by the relatively recent discovery and exploitation of the Earth’s buried sunlight and stardust (coal, petroleum, natural gas and uranium), this gradual slide became an avalanche of social and environmental destruction in the past 300 years of the so-called Industrial Revolution. The power of industry and capital to manage, manipulate and concentrate wealth at the expense of everything and everybody else was magnified another order of magnitude by the so-called Cyber Revolution with its instantaneous global communications networks and the consequent ability to accelerate financial trading to millisecond scales (as of 2009, 73% of all equity trading volume is done by “high-speed trading” using computer algorithms).
With each so-called “revolution” of global human culture, the stability of society has diminished, pushing daily experience farther from equilibrium. The shift away from equilibrium (or “sustainability”) results in ever-increasing cyclical disequilibrium, wilder swings from high to low, or what has come to be called “bubbles” and “bursts” (feast or famine, or deluge and drought in climatic terms). We have created a schizophrenic manic-depressive global human culture – a culture far from equilibrium, which exhibits extreme behavior as the norm and is dissociated from reality.
Recent research by economists Jonathan A. Parker and Annette Vissing-Jorgensen at Northwestern University reveals, not only the astounding volatility of wealth among the elite, but also the inevitable mirroring effect this has on the rest of society.
They report that, during the past three recessions, the top 1% of earners (those making $380,000 or more in 2008) experienced the largest income shocks in percentage terms of any income group in the U.S. When the economy grew, their incomes grew up to three times faster than the rest of the country’s. When the economy fell, their incomes fell two or three times as much.
The super-high earners have the biggest crashes. The number of Americans making $1 million or more fell 40% between 2007 and 2009, to 236,883, while their combined incomes fell by nearly 50% – far greater than the less than 2% drop in total incomes of those making $50,000 or less, according to Internal Revenue Service figures.
During the 1990 and 2001 recessions, the richest 5% of Americans (measured by net worth) experienced the largest decline in their wealth, according to research from the Federal Reserve. As of 2009, the richest 20% of Americans showed the largest decline in mean wealth of any other group.
“Yet the rise of the manic millionaire,” (according to a recent article in the Wall Street Journal: “The Wild Ride of the 1%“ *) “marks something new in the U.S. economy and will increasingly be felt by the rest of the country. With the wealthy now at the center of the political debate, from the Occupy Wall Street protesters in New York to the tax battles in Washington, portrayals of millionaires and billionaires are being shaped more by partisan ideologies than economic realities. The story of more volatile wealth may not fit neatly with either party’s agenda, but it offers a clearer view of the rich – who they are, how they got there, and how they will drive our own economic futures.”
“Though often described as a permanent plutocracy, this elite actually moves through a revolving door of riches, with some of today’s nouveau riche becoming tomorrow’s fallen kings. Only 27% of America’s 400 top earners have made the list more than one year since 1994, one study shows.”
“It wasn’t always this way. For decades after World War II, the top-one-percenters were the most steady line on the income and wealth charts. They gained less during good times and lost less during contractions than the rest of America.”
In other words, the wealthy in America used to be rich because of their conservative and prudent management of money (in addition to often unscrupulous exploitation and political manipulation). Today’s rich earned their wealth by the imprudent and unrestrained manipulation of the economy, and are the primary cause of the economic roller coaster.
“Suddenly, in 1982, the wealthiest broke away from the rest of the economy and formed their own virtual country. Their incomes began soaring higher during good times. The top 1% of earners more than doubled their share of national income, to 20% as of 2008. Looking at another measure, the richest 1% increased their share of wealth from just over 20% to more than 33%.”
“Those surges were often accompanied by mini-crashes, even though the direction over time was always up. A top 1% that had once been models of financial sobriety set off on a wild ride of economic binges.”
“This marked a new personality type in the history of wealth: the High-Beta Rich. ‘High beta’ is a term used in financial markets to describe a stock or asset that has exaggerated up and down swings with the market. Tech start-ups and casino stocks have high betas, for example. Yet studies show that today’s rich have higher betas than many of the riskiest gambling stocks.”
“What created high-beta wealth? The rise of the high-betas and the rise in inequality started at the same time, suggesting they have a common cause [my emphasis]. Simply put, more wealth today is tied to the stock market than to broader economic growth. A larger share of today’s rich make their fortunes from stock-based pay [like Mitt Romney], shares in publicly traded companies, selling a business or working in finance.”
“Because the stock market is up to 20 times more volatile than overall economic growth, the market-based fortunes of the wealthy are now more unsteady. Fast-moving global capital is also creating more asset bubbles, which have become their own self-destructing wealth machines.
Rising debt plays a role. While the rich are often portrayed as thrifty “millionaires next door,” the era of low interest rates and easy money has turned them into a leveraged elite. The household debt of the top 1% surged more than three-fold between 1989 and 2007, to $600 billion, and grew faster than their net worth.”
“The fallout from the ‘high betas’ is likely to grow. As the wealthy gain a greater share of wealth and income, they account for a growing share of spending, taxes and investments. The top 5% of earners now account for 37% of consumer outlays, according to Moody’s Analytics. The top 1% of earners pay 38% of federal income taxes. The richest 1% of Americans own more than half of the country’s individually held stocks, according to the Federal Reserve.”
“As go the high-beta rich, so goes America [my emphasis]. Their hyper-cycles will become our own, as the consumer economy, financial markets and tax revenues experience more rapid and extreme spikes and crashes.”
“The spending of the rich is even wilder than their incomes. The spending volatility of the top 10% of earners is now more than 10 times the spending volatility of the bottom 80%, according to one study.”
[* Read the rest of the Journal article if you'd like to develop some sympathy for the uber-rich who, like Jacqueline and David Siegel, had to abandon their project to build the American Versailles - the largest private residence at 90,000 SF - and move back into their 26,000 SF hovel, fire 14 of their 15 housekeepers and their private chef and lose their private jet to foreclosure because of tough economic times.]
Even if it were once true that it’s the wealthy who grow the economy and create jobs, in today’s casino economy the wealthy are the primary contributor to price and market volatility, the increasing instability of the global economy and the dangerously-growing disequilibrium of global human culture.
It is not enough to reform the economy – through regulation, tax policy or legal rulings – as the out-of-balance of the financial realm is but a holographic reflection of the disequilibrium of the global human cultural paradigm.
Each so-called “revolution” of the human cultural paradigm – from the natural gift economy, to manipulating nature for profit, to an extractive and exploitative technocratic economy, and to a globally-networked artificial system of instantaneous exchange – has led us further from equilibrium and deeper into a permanent maelstrom which now threatens all life on earth.
The Occupy Everything Movement, as well as the Arab Spring which inspired it, and the increasing role of workers’ organizations to once again demand their rights are evidence that people around the world are awakening to the economic and political disequilibrium that is a necessary consequence of the current paradigm.
Unfortunately, because this current state of affairs is the result of millennia of slow boil (in which the economy, the human population and the climate have experienced hockey-stick rises in temperature), humanity has not undergone sufficiently deep analysis of the problem or its causes and, hence, cannot imagine its possible solutions. More importantly, given our lack of attention to this long-simmering crisis and the generalized lack of political and social will to deal with it, we may be past the point at which solutions are possible.
It is widely acknowledged, by those who are paying attention, that global humanity faces multiple, interconnected and mutually-reinforcing crises – a perfect storm – including population overshoot, peak energy, accelerating climate change, sea-level rise, a 1000-fold extinction rate, massive pollution of air and water, widespread water scarcity, soil loss and nutrient depletion, decimation of ocean fisheries, habitat fragmentation, and the conversion of the earth’s forests into commodities and “productive” land. But it is not yet widely understood that humanity may be facing challenges that are so large, complex and autocatalytic that they are no longer mere problems in need of solutions, but predicaments that demand a response.
In other words, because “the chief cause of problems is solutions,” (Eric Sevareid, CBS news journalist from 1939 to 1977), we can no longer pretend that there are technological, political or economic solutions to humanity’s multiple crises.
A problem is a challenge that has a solution (or several) and requires analysis and intelligence. A predicament is a situation that has an outcome (or several potential outcomes) and requires creative response.
A predicament is a situation that is beyond mere solutions. If the developed world had taken dramatic sustained action in the 70′s perhaps we could have solved some things. Unfortunately the science is telling us it’s too late to reverse our impacts. The converging threats are no longer merely on the horizon – they are at the gate and under our feet, and will not submit to our usual methods of throwing money and technology at things that scare us.
When technology is not enough
A problem is best suited to detailed analysis, whereas most of the big picture problems of today are not problems at all – they are predicaments: they have a very large number of variables, not all of them known, the relationship between cause and effect indeterminable because of iteration (feedback), and they are also predicaments because there is no way back. Whatever emerges is not the same as the starting point. In short you can’t send a geek to fix it. Equally you can’t cope with an increasingly complex world by developing an army of geeks each of them thinking the problems just require a better toolkit: the curse of the utilitarian approach.
Problems are obstacles that can be overcome with enough sweat and determination. A predicament is something bigger. Something that can’t be tasked away, delegated, or bulled through, but only responded to.
Problems require analytic thinking. Predicaments, however, require interpretive thinking. To deal with predicaments, we must be able to put a larger frame around a situation, see it in the sweep of history, understand it in context. We must be especially alert to deeper paradoxical influences, and therefore the possible unintended consequences of any decisions that flow from that interpretation.
A flooded basement, for instance, is a problem with a variety of possible solutions. But if the flood has washed you out of the house and into the maelstrom, you can only respond by trying to keep your head above water long enough that you might – just might – be deposited at some point on dry land relatively unscathed.
“To my fellow swimmers there is a river flowing now very fast. It is so great and swift, that there are those who will be afraid. They will try to hold on to the shore; they are being torn apart and will suffer greatly. Know that the river has its destination. The elders say we must let go of the shore, push off into the middle of the river, keep our heads above water. And I say see who is there with you and celebrate. At this time in history, we are to take nothing personally, least of all ourselves, for the moment that we do, our spiritual growth and journey come to a halt. The time of the lone wolf is over. Gather yourselves. Banish the word struggle from your attitude and vocabulary. All that we do now must be done in a sacred manner and in celebration. We are the ones we have been waiting for.”