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How we got into this mess
A brief history of the 20th century in the US as it pertains to the current financial crisis.
There is in some obscure corners of the blogosphere, in my opinion, a quietly present "society of letters" -- unconcerned with "monetization" or "reputation" or "Web 2.0" or any of that per se but simply interested in a participatory, open, literary environment. A new form of mindful, social exchange.
As a modest example I'll point to one obscure blog I quite like. I recommend setting aside some hours and reading it from start to current. It's quite interesting. See: Mauberly: An Unwise Owl Gives a Hoot".
I quite like the writings on Mauberly and one recently drew a response from me. The author has been expressing grave concerns about the current financial crisis and, to just give a "lead-in" taste to my original work, here is some of his stuff to which I recently replied. From his post of Wednesday, December 03, 2008 Mauberly writes (brutally excerpted here):
I replied; and this being a brief history of the 20th century and how it pertains to how we got in the mess we've so often been discussing here... I thought I'd share it here:
"Systemic fraud" is a theory, it's just not a complete one and not exactly an economic one.
I am seeing systemic fraud combined with criminal negligence and a cultural loss. The cultural loss, from bottom to top of the economy is a loss of a sense of entitlement to empire where formerly that sense was concomitant with an Enlightenment moral obligation to strive for competence and industrial achievement. We used to be, as a culture, creatures of the Enlightenment. We believed either in the perfectibility of reason and of the individual or at least believed in pretending we believed in that perfectibility.
The Founders were fine examples, dabbling in science, craft, industry, letters, politics, farming, trade, martial affairs, theology, classical studies, etc. They stood only partly as outliers -- as exceptionally competent people. They stood as well as examples: of what was, in principle, possible to anyone who is not natively dim.
And that experience of the Enlightenment man inevitably gave rise to a sense of entitlement to empire. If a population is systematically deprived, by social arrangement, of the individual right to self perfection then the Enlightened man is perfectly entitled to seize that social arrangement and, forcibly if necessary, reshape it. The Enlightenment man's competence is the wellspring of his hubris.
Thus the westward expansion and the war on indigenous nations. Thus the industrial and railroad ages. Thus the massive hydrologic engineering of the western territories. When Mr. Carnegie or Mr. Ford undertook their projects they combined the fruits of science and technology with a mission to raise the common man -- and of course the hubris to hire Pinkerton or send company snoops around to investigate the lifestyles of line workers. The very invention of the middle class was seen as a balance between industrial requirements on the one hand, and a vague idealized vision of what it would look like if all of the workers could grow into being Enlightenment men.
Tragedies of history occurred, of course, but there was an economic side effect of these developments: a multiplying of various forms of competence within the population, a multiplying of material ambitions, and a vast extension of the built environment to include lots of tools, factories, rolling stock, communications grids, power grids, water and sanitation grids, education grids, library grids, and on an on.
Whatever the pluses and minuses of Enlightenment man's first go at empire, the indisputable fact on the ground was that it positioned us with all of that latent productive capacity (resources, tools, competence) just as the conflicts of the early 20th century broke out.
We also went through that period with the Depression, of course, and this points towards an interesting difficulty in the evolution of the concept of Theory in the Enlightenment culture: It was inconceivable, in the 18th, 19th, and much of the 20th century that there would be natural phenomenon that could not be usefully theorized. Enlightenment man was engaged in the project of trying to perfect a prosperous society of competent individuals and to escape a society based on the subjugation of the individual to a regressive, anti-intellectual authority. Enlightenment man wanted to and presume he would eventually "know everything" and then just "act intelligently". Everything that mattered was presumed to be ultimately knowable, probably controllable, and at the very least predictable. Fascinated with the conceptual simplicity yet utility of taxonomies, Enlightenment man built out knowledge in great categories: natural science, engineering, ..., economics.
Crashes in the 19th and early 20th century showed up an intellectual crisis for no good theory was emerging to prevent such events or even usefully predict them. This was a source of great collective frustration that laid bare a possible failure of the Enlightenment project as then conceived and, in any event, meant we did not handle those crises particularly well when they happened. We'll return to this...
WWII concluded and what the economic theories tell us about the status of our nation at that time hardly matters at all. What actually mattered most was the built environment and the deployment of competence among the population. WWII beefed up the "average level of know-how" by quite a lot. WWII left us with quite an impressive industrial machine.
Along side the evolution of the built environment along Enlightenment ideals came a countervailing motion: the martialization of the young sons of the elite. Everyone (who was anyone) had officers in their families and the most prominent socialites had quite high ranking officers and quite high ranking captains of industries that had become accustomed to being subordinate to the martial order. The educations of that generation of elites had been interrupted from the war and would not resume. Alcoholism was in a boom phase. Fads like a fascination with Freud gave that generation plenty of excuse to turn their backs on their elders and allow their interrupted pedagogy to become a pedagogy of bratiness.
And that's, if you ask me, where it began to end:
"Rank" in high society had at one time been, at least nominally, earned by objective achievement. One built a railway, or a system of factories and supply chains, or an electric grid and it was on the basis of those tangible contributions to productivity that the incidental monetary rewards were understood to be at least an approximation of "just". But, after WWII, after the martialization of this class....
"Rank" meant "office". The Enlightenment project of objective, real production began to wane and instead the society erected a competition of "relative competence" to be judged by who holds what offices and who consumes what, who gives or takes orders from whom, etc. This is psychologically understandable: that generation suffered from an interrupted pedagogy and was dragged into WWII and made officers. They emerged well-placed but tired, emancipated prematurely from their parents, used to military-style rank privileges, and feeling triumphant. For a time, the productive capacity their parents had laid a foundation for flourished as it directed attention to peace-time possibilities. The invention of the "middle class" was elaborated on extensively and the vision drifted to suburbia, two-car garages, fine and shiny school districts, and consumerism to find purchasers for all of the clockwork mechanisms, heating elements, electric motors, microwaves, televisions, airplanes, etc. that the war effort had left us well able to build cheaply.
This was the first sign that Enlightenment man had exited the stage. Consider "the TV dinner" as a cliche but important example: it makes absolutely no sense whatsoever in an Enlightenment world view. The convenience touted for it is false: simple competence can produce better with scarcely more effort -- the TV dinner is a crutch to cover for permanent incompetence. Moreover, even at its inception, the TV dinner is a shocking waste of perfectly good factories and perfectly good commodities. But notice that the TV dinner fits the martial model very well: it is a kinder and gentler M.R.E. for the (civilian) "enlisted" in the emerging corporatism. What happens when you take a large extended-army (counting both official troops and their subordinate and compliant industrial supply chain) and cut them loose, with drunkard snobbish kids at the helm, armaments intact? They organize as mercenaries, of course. And what is something like a TV dinner if not a guerilla action by a subset of corps to try to take and defend "territory" within the geometry of the puzzling, suddenly purposeless phenomenon of middle-class consumerism?
Things continue like that for a while and the baby-boom occurs. That will be the first generation subjected to the experiment of a pedagogy dominated by the shiny new school system built out by the returning WWII elites. Freud for the elites begets Dr. Spock for the masses. The militarists spin a narrative of the communist threat to prop up command and control thinking. Corporatism of this particularly martial variety flourishes, the concept of "corporate loyalty" takes a brief stint on stage, the toy industry explodes.....
The vision of "competence" shifts from "Be someone like Jefferson: a man of many trades, good at many, productively engaged in his society in ways that many appreciate," to "Be," and again, a cliche but a true one, "like the Cleavers. Preach the faith to your kids. Buy them lots of stuff. Honor your boss and take pride in your subordination to the corporate project. Enjoy your fine suburb. Your children and their children will continue the same and flourish. Here, have a TV dinner."
Among elites, skepticism becomes something discredited -- an indulgence of the idle. This particularly happens around questions that Enlightenment man left unresolved as he exited the stage: particularly the economy. Elites "take sides" between monetarism and Keynesian policy setting and fight the battles not much through solid reason but more through jockeying for rank -- as if what is taught about the economy will therefore be what is true.
Meanwhile, quietly, Benoit Mandelbrot and others notice that, in fact, there is a broad range of natural phenomena which can not be controlled particularly well, or even predicted particularly well, and financial markets show all signs of being such a phenomena. In effect, it is if the captains of finance are locked in a tooth and nail fight over whether lay goat entrails upon the alter or draw pentagrams on the floor and light candles while, strictly speaking, the literature exposes the essential off-the-point mysticism of both approaches.
As the top of the command chain falters intellectually, and the middle-class becomes a restless army questioning its commanders, the elites begin a project not only of abandoning the Enlightenment but of actually dismantling its good works. Well-designed urbanism is replaced by urban planning. The domestic steel industry is beaten to the ground. In industry upon industry training stops and valuable equipment is sold off and loaded on boats to be taken abroad. The art of farming is replaced by the habit of dumping barrels of oil on to otherwise sterile land and squeezing as much corn syrup into TV dinners as possible. One week the effects vindicate Keynes, the next week the monetarists -- in any event, given the death of skepticism, at any given time some subset of the clueless elite appear to be "vindicated" by the "latest numbers" even while, overall, they're collectively dumbing down the middle class, destroying all recollection of the ideal of the competent individual, and always ratcheting up the degree of militarism. The concept of "corporate loyalty" gives rise to a "higher loyalty" in which workers are expected to accept layoffs with a smile and just, quick as a snap, "go retrain yourself".
The net effect is a nation that has many of the foibles of the corrupt, lies-to-itself Soviet system but with a pseudo-individualistic (ghost of the Enlightenment) hegemony for the workers.
By the 1980s, the computer science departments are producing a heck of a lot of smart-asses who have their own militaristic sense of entitlement (to high salaries, to being unquestioned as to the meaning of their work, etc.). We get, from this, huge growth in the IT industry.
A subset (I speak from first-hand knowledge) of the grad students of that era are, well, truly brats of unprecedented degree. If their peers are going off to low six-figure jobs fresh out of school, well then, these guys want to be able to retire at 30 and they bring to bear just a marginal degree of computer science chops but a very high degree of chops at playing systems of rank. These are the guys who will drop in to the weekly departmental "mixer" where the students and faculty are dressed casual, drinking, sneaking out for smokes, and angling to get laid -- but these guys show up for 5 minutes in a suit and tie, brag they're off to a meeting, and leave. And, where do they wind up? Why, at the high paying jobs that none of their better peers can stomach considering: at the financial firms. The famous "State Street" case before the Supreme Court (look it up) tells you much of what you need to know: that case created an industry that was happy to suck up the asshats from the CS departments (and the rest of that society was happy to see them go and unconcerned with what they might do). And they went off and invented CDOs and CDSs and they went off said "we're so smart, we don't need no Glass-Steagal" etc.
And here we are.
The US is losing empire because, after WWII, we remembered that we were supposed to enjoy a kind of empire of a sort but we forgot why. We forgot what initially separated us from all the other empire contenders. We went from *reluctant* empire builders, obligated to expand because we were Enlightenment men, to *eager* empire builders because that's all that we really remembered as one of the goals. The middle class adopted what I guess could be justly described as a slave mentality, in line with that -- competing only for relative material advantage with one another rather than for some broader competence. Our "empire" is collapsing because for more than half a century we've been busy forgetting why were building it.
The built environment and the distribution of competence is where we are. We've a dearth of factories, the various grids have failed, we've a self-enslaved middle class, skepticism is discredited, corporate loyalty has been replaced by a kind of class subordination (middle class workers must be loyal to *all* corporations, as when (many, many) HR reps will tell you they will never recommend to hire any worker who ever says anything bad about a former employer)..... we've trashed the productive capacity that Enlightenment man built up.
There's hope, but not for smooth sailing. Some kids around my region, for example, are making a hobby out of learning (rather late) stuff like metal-smithing and machining and crochet and so forth. There are a lot of neo-bohemians who half-remember and are moving back towards Enlightenment man. There's a ghost of a chance for some good to come of all this.
But.. .returning to your words: "systemic corruption" -- well, it was a long time coming. See?