Episode 35
Transcript:
Carl Sagan:
I'd like to close by just saying a few words on the kind of perspective that this problem as related problems posed to us. Here is a problem which transcends our particular generation. It is an intergenerational problem. If we don't do the right thing now, there are very serious problems that our children and grandchildren will have to face. It is also a global problem. It is no good if just one or two major industrial nations take major steps to prevent a major increase, still further in CO2 and other greenhouse gases because other nations, their industrial development caused the problem by themselves.
So here is a sense in which the nations to deal with this problem have to make a change, from their traditional concern about themselves and not about the planet and the species, a change from the traditional short term objectives to longer term objectives. And we have to bear in mind that in problems like this, the initial stages of global temperature increase, one region of the planet might benefit while another region of the planet suffers.
And there has to be a kind of trading off of benefits and suffering. And that requires a degree of international amity which certainly doesn't exist today. I think that what is essential for this problem is a global consciousness, a view that transcends our exclusive identifications with the generational and political groupings into which by accident we have been born. The solution to these problems requires a perspective that embraces the planet and the future, because we are all in this greenhouse to other. Thank you, Mr. Chairman.
Peter Joseph:
A good afternoon. Good evening. Good morning, everybody. This is Peter Joseph and welcome to revolution now, episode 35, January 12th, 2022. The opening audio was from the 1985, US congressional testimony of the late great scientist, Carl Sagan on the subject of the greenhouse effect, an issue that actually wasn't as obscure as some might assume back then. Scientists had been speaking about this problem for quite a while, only to be generally ignored for decades after.
It's even clear that the oil industry's own internal scientists knew what was happening and even predicted in their own internal documents, today's atmospheric consequences with a high degree of accuracy. So why was nothing done? Well, I think we all know the answer to that, for the same structural reason the once epically profitable tobacco industry operated with immunity for decades long after they definitively knew internally their product was addictive and caused sickness and death.
When you're making billions of dollars through your company and across an industry as a whole, especially with a critical industry, such as energy, which inevitably links to geopolitical power for competing nation states, not to mention a source of major state income through taxation, motivation to change such existing establishments becomes limited by the system's incentives. Financially successful companies and individuals generally don't want change nor do governments benefiting from those activities, which is yet another unworkable structural characteristic.
Just add that to the long list of problems inherent to the system, endogenous to the economic system, empirically observable. Something Mr. Sagan implies at the end, narrow short term interest, which comes at the cost of long term destruction. And it isn't some kind of psychological hangup, it's a structural incentive problem. And people love to talk about creative destruction in society, through entrepreneurism with the assumption that there's some kind of fluid competitive self-regulation in market dynamics that always brings to the surface, the most efficient, safe products and practices while making obsolete the more inefficient.
However, the kind of efficiency in question here is actually market efficiency, not scientific or technical efficiency. And there's a big difference between the two as I've touched upon before. To do something right technically is very different than to do something right to maximize profits and income. Once again, technical efficiency is the enemy of market efficiency, because markets require perpetual turnover rewarding in fact, limited poor designs when no one is the wiser. In fact, as an historical footnote, keep in mind that before the new deal upon the great depression after the 1930s with FDR, regulatory agencies really did not have that much power or even exist in most industries.
It was through the consumer rights movements of the early 20th century that you finally saw citizen power, so to speak, come forward and try to make sure things were safe. If the power of markets actually brought to the surface, the most efficient and ultimately safe technologies and goods through self-regulation, none of these regulatory agencies would've been required, even though the great flaw in all of this, of course, is that the core competitive incentives of market still prevail.
And most of those regulatory agencies now have been compromised to one degree or another. Something I'm going to talk about more so in a little while. The foundational competitive ethic of the system, as I've always argued, transcends the playing field, so to speak. And people find ways to bring their advantage forward. Hence, when you look at modern regular institutions today, like the FDA and beyond, along with government itself, it's one giant revolving door of business.
Special interests dominate all the regulatory institutions and government itself once again. And that is not a corruption, that is a natural gravitation of the competitive nature of the system, and it will not go away by moral outcry or legislation or whatever. And as an aside, the outcome of all of this in this evolution is not just the consequences of disproportional income or wealth, inequality, oppression or whatever kind of problem you can think of associated to the political system traditionally.
What we're seeing now is a kind of alienation that's absolutely unprecedented in Western society and across the world where people have lost so much faith in the dominant institutions that we have that a general mistrust of basically everything organizational has emerged. And not productively so, because they don't understand what the causal roots are. If you don't understand the systemic roots of this phenomenon, what do you do? You blame politicians, you blame groups.
You develop conspiracies about what's happening in the world to limit this or that, because you have no systemic understanding. In effect, a kind of uncritical skepticism has emerged, not critical thought, just impulsive skepticism that is just as dangerous as acquiescing to whatever the establishment says. Come to think of it. I really need to do an entire podcast on what's happened out there in the complete distortion of priority and the polarization and of course, the Trumpian phenomenon, which has such a deep synergy to this caustic evolution where people are effectively so disenchanted that they're willing to vote for lunatics out of spite because they hate the establishment so much.
Anyway, back on point here, the main issue is competitive market dynamics, inherently paralyzed progress, which directly contradicts the mythology that competition and the profit incentive push people toward relevant innovation. There's no question people are constantly innovating by force of the fundamental coercion of the scarcity model that capitalism is defined by. But just because someone comes up with a useful idea, there's no guarantee it will ever be implemented due to the counteracting competitive self-preserving forces of the structure.
Which begs the question, in fact, what kind of organization and design principles underscoring it would allow for the necessary obsolescence and fluid advancement of technological economic progress? Well, first, what we do know is that it would not be a structure that allows for loyalty to a given design or idea at any given point. No incentive to paralyze or hold onto a given state because that state is currently providing to you with market share.
The incentive becomes doing the right thing to create transient, adaptable, industry fluid products that benefit everyone in the end because of the efficiency that's created. And if anyone wants to read more about new design initiatives of this nature in an advanced non-market industrial system, you can read my book, The New Human Rights Movement, or perhaps check out the lecture from, I think, 2013, which was called economic calculation in a natural law resource based economy.
Now, stepping back to a larger view of all of this, the same problem of institutional paralysis obviously applies to pollution and other market externalities in terms of problem solving. How many more COP climate change events can we endure, year after year, realizing no one is really accomplishing anything, subservient to business lobbyists and economic growth. Same for all the failed global regulatory approaches to the loss of biodiversity and so forth.
Pretty much everything is compromised and nothing is being solved. And the problem is countervailing feedback loops of this nature are simply too powerful. And hence business dynamics, no matter how outspoken the CEOs or stakeholders, they inevitably fall back on protection rather than allowing for or facilitating needed change. It's just a natural reaction. Why? Because established industries want to remain as established. Contrary to conspiratorial thinking, once again, most business people don't sit around maniacally spinning their thumbs in disinterest or apathy about the world around them.
There are certainly no doubt indifference and psychological sickness and criminal corruption prevalent across major corporate institutions just as it's prevalent in major political institutions. But that's actually a secondary problem when you look at the big picture, not to mention those problems are also consequential with the incentive system, but they're more overtly corrupt and criminal.
The frightening fact is, it's the vast majority of people that actually, without any shame, think they're doing the right thing as they rationalize kicking the can down the road year after year, when it comes to these crises. A CEO just wants to make money making himself look good before passing to throne to the next CEO. And the new CEO, or even management in general, then do the same shortsighted thing over and over again.
Each assuming somebody else will step in and eventually do what probably has to be done, but it's not happen on their watch because they have a mortgage to pay and they got to put their kids through college and so forth. And by the time motivations do change due to increased negative market externalities, it's usually too late, as we are seen right now across multiple crises, not just the climate crisis. And frankly, it likely will not be until corporate and political office buildings are literally on fire or flooded that relevant environmental change will happen on the economic level.
And beyond that, another mechanism of this paralysis and drive towards inefficiency is simple, basic cost dynamics. So someone discovers a combination of a non-patentable medical treatment. Something that's readily accessible, occurs in nature yet appears to have some efficacy due to some anecdotal evidence somewhere. So it needs to be tested through the scientific method to make sure- controlled studies. Well, a pharmaceutical company, knowing they can't patent this thing, meaning they have a limited amount of money they can make is not going to have much motivation to move forward resources with testing because it's not going to increase their bottom line in a relevant way.
Similar to this, and it just popped into my mind from the movie Fight Club where basically human health is secondary to profit once again. You might remember the scene where the guy works with the insurance company. He goes and looks at a car that caught fire due to a defect in the car itself. And the equation is, will it cost more to deal with lawsuits or will it cost more to do the recall of the car model? And if it costs less to deal with lawsuits from this problem, they will not recall the car basically allowing for future deaths.
The scene might have been fiction, but insurance come companies actually do that. It's called calculation of negligence. So those are two observations to keep in mind. Between a disinterest in things that cannot substantially increase profitability, which are sidelined, regardless of efficacy, regardless of safety and having corporate or institutional stakeholders that simply don't want to rock the boat because their livelihoods depend on the existing income infrastructure -
we see perpetual paralysis of solutions and efficiency. No conspiracy required. So to round out this tangent filled opening section, let's now return again to the Carl Sagan opening and touch upon the two things he points out which have larger order implications. First, this problem of atmospheric pollution transcends national borders. While second, it transcends short term single generational interests. Needless to say, if we care about future generations and the ecosystem, a global approach is obviously required.
It's almost as if nature itself is showing us the kind of social values we have to create if we're going to survive, isn't it? And the ultimate realization is we cannot have a social structure rooted in competition that exploits scarcity for competitive advantage on multiple scales and expect a positive outcome in the long term. And it's worth pointing out one general consequence of this entire dynamic. And that is how insanely fragile the entire financial market system really is.
In our truly incredible age of technological capacity, we have an economic system where if you stop consumer behavior for just a few days; if you stop cyclical consumption just for a few days, the entire whole economy collapses. Think about that for a second. We saw the ramifications of this when COVID-19 started with the shutdowns. The fragility of both the financial system and the general mainstream system is so severe that all it takes is people to stop moving money around for a little while to basically shut down civilization. That's lunacy.
All right, enough of all that. Let's now shift gears and return to our prior focus on common myths and propaganda started many episodes back. We are on number six now, which is the classic fine, vintage, apologist argument that "what we have today, isn't capitalism." This intriguing notion is mostly defended by the conclusion that government and regulatory institutions are interfering with sacred market integrity.
And therefore, the problems we are seen in society are really the result of that interference, not the system itself. Now I'm sure most have heard this claim before out there. And like most everything in this field, it's a very dangerous half truth. And note there are also vague claims that a lack of morality in society also hinders this proper functioning of capitalism, but we're not going to talk about that highly least subjective idea today.
Other than to say, when you live in a scarcity driven economy, built upon competition, where there is no security for your survival built in, people are no doubt going to vary their ethical behavior based on their needs. And a central problem is that when you really look at the system, there really is no viable, measurable moral foundation to begin with. Market trade is a process of seeking advantage, not mutual benefit and effectively a near zero sum game.
So of course, people are going to cheat because people are inevitably going to lose and they don't want to. It's psychologically and sociologically naive to declare humans should simply behave some certain way within this kind of system, a system that is fundamentally oppressive to the already by structural default. When you see inner city gangs that are built upon crime and violence, inevitably when you track back the origins of that behavior and group identity, as these things evolve their own cultures, it's rooted in deep scarcity and oppression, almost universally.
Anyway, all that aside let's first remind ourselves what the traditional definition of capitalism is. Capitalism is the private ownership of the means of production driven by the mechanism of free trade. And within this, of course, there are numerous philosophical schools like the Chicago or libertarian or Keynesian and so forth. But we're going to keep everything as broad as possible for this discussion. The defining characteristic is where on the spectrum non-regulated free markets meet regulated state controls.
On one side, there are free market purists, which assume an unregulated open market without any intervention, no regulations, no laws or any kind of interference whatsoever. The market God will reign. This is the most natural gravitation of the system, the core theoretical foundation of free market capitalism in general. It is the philosophical foundation of the game as well upon which everything else is built. And we can talk a great deal about how that influence is carried over into other realms.
It's a very sick, philosophical worldview rooted in social Darwinism and a Malthusian perspective that really generates fundamental indifference to each other. But to the point, the ideal of the system is a self-regulating, self-correcting viable structure that dynamically generates various degrees of equilibrium without the need for intervention. That's the theory. And it's completely utopian, obviously. Mechanistically impossible, given the endogenous nature of the system due to the fact that it produces market externalities, such as pollution and poverty, which do not have direct market based solutions.
So you could have a system of this nature, a pure utopian market, but it would self-destruct almost immediately due to the externalities. So I hope everyone understands that. I've covered this a few times in prior podcasts. While someone may, for example, argue that a state designated nonprofit institution can be started, that gets income through donations, and then transfers it into salaries for employees who then turn around to try and help homeless people, that is anomalous to the theory and structure of market capitalism itself.
Why? Because there's no transactional return. Basically everything that isn't based upon profit seeking transaction is heterogeneous to the model. People working with the homeless are not selling them anything because obviously the homeless can't buy anything. And there's nothing in the core principle, the market structure that allow us for this. Hence, the contrived design of intervention. Which now brings us to the more moderate disposition on this spectrum from free markets to state controls.
And that is the fact that we ultimately recognize a mixed economy. Any reputable economist, even though I wouldn't consider any market economist reputable, but anyone that has any basic common sense will say that a mixed economy is required to some degree. It's impossible otherwise, as pointed out before. Free markets exist on some level with regulatory control by government on another level, trying to keep stability. And as I'm going to talk about more so in a moment, things get very muddy when it comes to modern definitions of capitalism from this perspective.
For example, charity, most free market economists like Milton Friedman will insist that charity is in fact necessary and a required feature of the system, yet charity and any other regulatory intervention is really only part of the system as a consequence of society's decision to create those controls to meet certain that are not attainable through market dynamics alone. And it's to our credit as humans that we do want to see general human concern, at least to the degree that we see generally capable in the more empathic side of our society, even though it's sickness overall.
And we do want to see generational sustainability. And those are the two areas where most regulatory intervention happens. Now, everybody remember the Watts Governor, a device that engineers use to help control an engine like a train based on feedback of what that engine is doing. If the engine runs too fast, the governor detects the problem and then adjusts the engine back to equilibrium. And hence the feedback process of give and take goes on and on. And while this is obviously one system design, someone came up with this to make it work, it's still composed of two basic parts.
The utility aspect that serves the role of the design in terms of propelling the train forward and the regulatory apparatus that tries to keep that engine in check. This is what humanity has tried to do with institutional regulation in the attempt to disallow market economics to fly off the rails or blow up civilization, which is precisely what it would do if it was completely unregulated.
Remember, once again, we have two dominant, destructive, reinforcing "positive," it's called, feedback loops, that without any intervention guaranteed destruction. These two loops produce an inevitable drive for infinite economic growth on a finite planet along with inevitable inequality. Inevitable economic inequality, distribution will always move towards extremes of most having little and very few having much. However, there's a third loop here that I want to get out of the way.
Since an engine and its Watts Governor is obviously not conscious, the engine that's being regulated has no capacity to change the way the Governor is designed to regulate it. It will always keep doing the same thing. Socioeconomic human control mechanisms are obviously not so simple. Unlike a machine humans have the ability to influence, creating their own feedback inputs into regulatory controls, Governor controls that dramatically alter those controls. In other words, we have the capacity to corrupt our own controls, which is exactly what you see across the failing world.
And this is where the hierarchy or scale of influence in system dynamics becomes really important to observe and what most people out there don't understand, which is why I argue against moral outcry and general regulatory assumptions because they barely work due to third feedback mechanism driven from the self interest at the core of the system. It has to do with the root socioeconomic orientation, as I call it in my book, with the foundation of our society born once again, from the neolithic revolution, 12,000 years ago, rooted in a scarcity competition, dominance and exploitative framework.
Those four words might trigger people, scarcity, competition, dominance, exploitation. They might seem like value or moral issues, but they're not. They are mechanical system dynamics built into the model that are immutable as long as the model of markets exists. They're quantifiable, in fact. Scarcity being the root observation, which is exploited through competitive behavior in the game. And once individuals or institutions angle successfully enough, their dominance, that forth word, becomes increasingly secure.
Hence, establishment preservation, once again, as touched upon earlier in this podcast. So what you have is not only a positive destructive feedback loop, reinforcing feedback loop of endless infinite economic growth, because the system is not designed to understand a finite planet with finite resources. Not only do you have the destructive, positive feedback loop, reinforcing feedback loop of the inevitability, of inequality, socioeconomic inequality, the creation of poverty and extreme wealth by system function.
Hyperbolically in fact, if it was allowed to. You now have this third feedback loop that forever compromises regulatory attempts to curtail these two prior issues. Now, obviously this third feedback loop, the control mechanism works to a degree, but clearly not good enough as we are slow flying off this cliff on multiple levels. And the reason so is that the mechanism of control we have is so limited because of the self-interested, competitive dominant forces, exploitative forces that want to maintain their wealth and by extension power disproportionately, that it becomes part of the entire game strategy to use regulatory institutions for one's competitive advantage.
Or limit the power of regulatory institutions for the same goal. I hope that makes sense. I apologize for the terminology. An example recently in America, there's been bills that have been tried to be passed that to whatever weak degree- the bills don't matter- But to whatever weak degree are trying to do something about say, climate change and get away from the hydrocarbon economy. One of the Democrat constituents, a Senator from West Virginia named Joe Manchin has decided to completely paralyze the process in disagreement, holding up the entire thing, refusing to pass it.
Now, why? Is there a conflict of interest? Obviously. The guy makes half a million a year from his coal investments and business relationships. Now people say, "Well, that's just corruption." No, it's not. That is the force of the system. And it's happening all the time on multiple scales, in a feedback process that forever sabotages attempts to regulate society for the better. And activists out there don't recognize this so they keep blaming people and special interests and all of that, not seeing the systemic force.
And they also look at localized situations and ignore the global. We live in a system of total global international dynamic trade with outrageous numbers of transactions happening every day across the global network. And hence, you can't understand what's in one country without understanding what's happening across the entire global network. Hence, while you can't just superimpose Scandinavian socioeconomic policies like Bernie Sanders advocates upon America and expect some kind of fluid application, it's far more complex than that.
And the bottom line here, and I'm going to stop at this point and return to this subject next time, because I'm running out of time and energy is that between these three feedback loops, the positive, reinforcing, destructive drive toward economic growth, the mathematically inevitable trade reality that when you set trade in motion, it's always going to concentrate wealth in the hands of the few and leave the majority poor coupled with the fact that the Watts Governor of our society, our use of regulatory institutions to counter those two things is compromised to such a degree that you're never going to see any true correction due to the short term interests of these special interests that dominate.
And so between these three feedback loops, you're all completely fucked unless you change the foundation of the entire thing. That is capitalism. Those three overlapping feedback loops define the structure. Thanks for listening. This is Peter Joseph. This program is brought to you by my Patreon and I will talk to one soon. Stay safe out there.