The Davos Road to Serfdom

A recent tweet from Alexandria Ocasio-Cortez: “In a modern, moral, & wealthy society, no American should be too poor to live.” There is nothing remarkable about this empty trope. Scratch any leftist. Out it comes. Even those on the right of the political spectrum might nod along in unthinking moments. The Archbishop of Canterbury and the Pope would nod along in their thinking moments.

Christian religious leaders are prone to flights of fancy. Justin Welby and Francis are keen on so-called inclusive capitalism to solve the ills of the world. Utopia in the here and now. Heaven can wait. Call it also stakeholder capitalism, if you prefer the nomenclature of Klaus Schwab’s great reset of capitalism.

A first thing to say is that this surreal transfiguration of capitalism has no correspondence with reality. It’s made up. A chimera. It cannot be brought to sustained life. At least not the life envisaged. It could morph into something which can be brought to life; albeit a dissolute life. It’s called socialism.

Would you buy a used electric car from this man?

A friend of mine, and fellow Christian, is fond of echoing Gottfried Leibniz (1646-1716) in asserting that the universe and all of its contents, animate and inanimate, could not have been better made. It’s an article of faith but impregnable. Try something. For example, if only those pesky tectonic plates didn’t move and cause devastating earthquakes. Okay, if you want to sit on a powder keg in flatland. Everything is on such a knife edge that serious tampering always leads into an abyss. Capitalism is like that.

Capitalism is “free-market capitalism,” or else it isn’t capitalism at all. Yes, I know, capitalism is always accompanied by cronyism and never more so since global-warming boondoggles took off, but that in itself speaks to its power to survive sleazy deals.

Schwab sets "stakeholder capitalism" against what he calls shareholder capitalism, which he associates with (scary) Milton Freidman. But shareholder capitalism is, in fact, another name for free-market capitalism. Owners looking primarily to increase their profits is the way shareholder capitalism, aka free-market capitalism, works to make everybody better off. It’s the reason why poverty in the industrialised world has continually trended down since the mid-eighteenth century.

Best to remember too that the term shareholder capitalism gives a distorted picture of capitalism. Capitalism isn’t just a collection of giant corporations. For example, businesses with from one to 999 employees, account for almost 60 percent all U.S. private sector jobs. Those wielding influence at Davos should put themselves into perspective. Private jets tend to beget arrogance.

How the one percent lives.

We need a better understanding of capitalism. It dispels flights of fancy. As I’ve previously argued, capitalism is akin to a “living system.” Living systems (see James Grier Miller’s defining work) are systems which self-organise and interact with their environment. They are open systems which resist entropy. The second law of thermodynamics has its way with all closed systems. Entropy eventually undoes them.

An open system must have inputs which are higher in complexity than its outputs. Among other things, this gives it the capacity to forestall decay and undertake repairs and renewal. Additionally, an open system must have what Miller calls “a ‘decider” which causes its components to interact optimally.

Only free-market capitalism meets the requirement of an open economic system. A complex brew of resources—raw materials, skilled labor, physical and financial capital, ingenuity, invention, innovation and entrepreneurship—freely interact to produce outputs in the form of goods and services. The “decider” is market prices, which govern where resources are allocated. As for relative complexity, consider the engineering ingenuity which forms just one part of the inputs in producing, say, motor vehicles.

Now consider so-called stakeholder capitalism. “Shared value creation” must predominate according to Schwab. “Environmental, social and governance (ESG) goals… should complement financial metrics.” Executive salaries “should align with the new measure of long-term shared value creation.” Large companies should “work with other stakeholders to improve the state of the world in which they are operating. In fact, this proviso should be their ultimate purpose.”

A fascist spanner in the works.

At every step the open system is stymied. Profitable opportunities can’t be seized. Instead, they are subject to almost never-ending processes to discover their compatibility with normative external aspirations. Executives are prevented from seeking maximum reward and thus businesses which can best employ their skills are denied their services. Large companies face the unenviable and impossible task of improving the world. How’s that for inducing entrepreneurial paralysis.

One way or another, stakeholder capitalism walls off the economic system. Nebulous social and environmental obstacles are put in the way of the system responding to market forces. Prices aren’t the decider. Result: entropy and misery. Increasing prosperity is not an immutable facet of human existence. Plenty of examples of economic regression, e.g., real wages in Argentina more than halved in the thirty years between 1975 and 2005. I’ll leave it to Miller:

Walling off living systems to prevent [free] exchanges across their boundaries results in death by confinement... entropy will always increase in walled-off living systems.

Of course, there are no absolutes in real economic life. It is not a question of there being walls or no walls. How formidable are the walls, is the question? As to that, I don’t sense stunted ambition among the elite at Davos. And recall that a festering ambition to reset capitalism preceded climate-change alarmism and Covid hysteria. These are large dollops of additional grist for their build-back-better mill.

I’m sometimes prone to put the Great Reset in the category of bad things which might come about. A mistake. It’s already afoot; enervation underway: ESG and its ugly sister EDI (equity, diversity & inclusion) permeate boardrooms. Green lawfare, subsidised renewal energy, and woke financial corporations and fund managers are putting fossil fuels out of business. Except, that is, when it comes to Russian tanks and planes. Now there's a thought.

When the lights go out, expect not to see remorseful recanting elites but despotic measures to keep us energy-starved, newly-manufactured, serfs in check. Covid has given them practise runs. State premiers in Australia have shown themselves adept at tyranny, as have many U.S. state governors. As it turns out, mere novices compared with Canadian Duce Justin Trudeau. No shortage of willing Stasi, informants and Jobsworths to enforce rules. It’s time we stopped tiresomely pointing the finger at tyranny abroad and turned it inwards. Ask not for whom the bell tolls.

Do You Believe in Santa Claus?

Few 21st century adults believe in Santa Claus, at least not in the small-scale Santas in department stores, who are obviously employees, nor in the old man reputedly at the north pole who yearly presides over a supply chain of elves to deliver billions of presents each year on Christmas eve.

Yet many of these same sophisticated skeptics nevertheless believe in the existence of Santa Claus on a far larger scale, who give away trillions, convinced government can pay for things so taxpayers don't have to. According to the New York Times columnist and Nobel Prize laureate Paul Krugman, Washington could scare the public into accepting printed money by faking a space alien invasion:

“If we discovered that space aliens were planning to attack, and we needed a massive build-up to counter the space alien threat, and inflation and budget deficits took secondary place to that, this slump would be over in 18 months,” Krugman says, referencing an episode of The Twilight Show [sic; should be The Twilight Zone] in which an alien threat was manufactured to bring about world peace.

To them Santa looks like Joe Biden who has promised to make sure everyone, including foreign dictators who don't believe in Christmas, gets presents under the Christmas tree  paid for with debt.  "Just after midnight, the House passed a bill to raise the debt limit by $2.5 trillion, sending the bill to President Biden’s desk just in time for the deadline... that should allow the U.S. to pay its bills through 2022 and into 2023."

What's the matter, afraid of something for nothing? Don't worry the elves in Washington, D.C., have an ideology, called Modern Monetary Theory, to explain why all our debts will be paid by the Future. If government spend its it will come.

For these advocates of modern monetary theory, the insistence by both political parties that all the $550 billion of new spending be matched by offsetting revenue, known as “payfors,” goes against their belief that money is merely a tool for government.

MMTers detest payfors as wrongheaded thinking about money. Money only exists because of government spending, and under MMT, the government should just create as much as it needs to finance its projects. In a tight economy—like we have now—MMT might want offsets to new spending. But higher taxes or lower spending elsewhere would be aimed at avoiding inflation, not at balancing the budget... The most important claim of MMT is that a government need never default on debt issued in its own currency."

It's like having an irrevocable credit card. And it won't cause inflation, MMTers argue, as long as government taxes the rich enough to take the printed money out of circulation. "Taxes are, they concede, sometimes necessary to stave off inflation, and as a consequence, preventing inflation can require cutting back on deficit spending by hiking taxes. But the lower inflation caused by higher taxes is not an effect of 'lowering the deficit'; the lower deficit is just an artifact of the choice to raise taxes to fight inflation." So long as inflation is kept low enough to match the real rate of growth that somehow arrives from the future this process can continue indefinitely.

But this is intellectually unsatisfactory. Who is this future Santa? Why is the future necessarily fecund, such that humanity can rely on it to pay its debts? The probable answer is that life, if not stifled, gets "smarter" as time goes. It struggles to its feet despite government burdens. The definition of life is that it grows. It finds ways to turn natural "free energy" into information and intelligence that 'transformative' governments can use to pay their bills.

Entropy reduction is another way of saying bringing order from disorder. As Jeremy England of MIT recently argued, life may well have originated as process of dissipating the energy that was so abundant in the universe by inventing patterns. As England put it, "a great way of dissipating more is to make more copies of yourself.” Life turns energy into information and that energy was present at the outset, all the way back to the Big Bang or its equivalent. We discover it's Santas all the way down!

As far as the eye can see...

This Santa business turns out to be more puzzling than it initially seems. Gottfried Leibniz posed it as what may be the greatest philosophical puzzle of all, namely: why is there something rather than nothing? "The question is a challenging one because it seems perfectly possible that there might have been nothing whatsoever – no Earth, no stars, no galaxies, no universe." This puzzled even the great fictional detective Sherlock Holmes, who remarked to Watson in The Naval Treaty:

“Our highest assurance of the goodness of Providence seems to me to rest in the flowers. All other things, our powers our desires, our food, are all really necessary for our existence in the first instance. But this rose is an extra. Its smell and its colour are an embellishment of life, not a condition of it. It is only goodness which gives extras, and so I say again that we have much to hope from the flowers.”

In this Christmas season, when even the Davos Economic Forum itself has been postponed by the pandemic, it is well to recall that it is life that resets institutions, not the other way round. That the Great Reset has been reset should be humbling. As governments fruitlessly plot to control the climate as if it were some oversized air conditioner, in various countries humble life will work a miracle. Parents will give their children gifts they can hardly afford, especially in this time of inflation; a cheap sweet, a hand enhanced article of clothing, some plastic thing from China, paid for perhaps by dint of missed meals and foregone bus rides. And the earth will continue to move. For while nobody believes in department store Santas, Leibniz's question remains: "who lit this flame in us? No war can put it out, conquer it." What made life grow? Perhaps only faith can explain it.