Why the US Economy is in serious trouble

February 13, 2015 at 10:20 am (Economics, Future, General News, Politics, The Monetary System)
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By Mark Ciotola

How we arrived here

As EOS and Technocracy have long pointed out, our lassez-faire economic system is inherently unstable. Profits tend to accumulate out of the hands of consumers and concentrate into the hands of a few wealthy people. When the people who spend run out of money, then the people who save can’t get any more profits, and the whole system collapses. Ironically, during economic downfalls, many of the savers lose a lot of money, too, and even go bankrupt.

Upon the advent of earlier economic crises such the Great Depression, means were taken to prevent excessive concentration and control of wealth by the few. The founding fathers of the USA invoked an aggressive estate tax to prevent the emergence of an aristocracy and power that was was obtained by mere luck of birth. Antitrust laws were created to prevent monopolies. Labor unions were finally allowed to protect wages and the consumer spending so vital to the endurance of an economy. Banking legislation prevented the formation of banks that were too large to fail, and Glass-Steagall prevented banks from problematic conflicts of interest. Progressive tax rates diluted money out of the hands of the wealthy and some of it back in the hands of consumers, reducing dangerous build-ups and improving economic activity.

However, once the shock of the Great Depression ended, and memory of the social debt owed to the veterans of World War II receded, big business interests began to dismantle these economic protections. Progressive tax rates were significantly rolled back. Manufacturing was transferred on a near emergency basis to Japan and elsewhere to bypass North American unions. China was given most favored nation status by the USA that greatly accelerated this process. Banking “games” lead to the destruction and theft of the previously consumer-owned savings and loan associations. Glass-Steagall was revoked, allowing consumer banks to engage in especially risky investment banking operations. Such banks could now issue fraudulent consumer mortgages and package them into instruments for unsuspecting investors.

As consumers ran out of money, we increasingly became a “debt” economy. With domestic wages falling or frozen due to often subsidized foreign competition, consumers turned to home equity loans, student loans and credit cards to maintain their former standard of living. U.S. Federal Reserve chair Allan Greenspan called lenders heroes of the economy. As consumers could not afford to take on more debt, banks whipped up profits by doubling, tripling, etc. consumer loan interest rates. Rates exceeding 50% were common.

Finally, the wealthy couldn’t make enough money by actually producing anything or even lending to consumers at what were once legally usurious rates. They began buying and selling exotic financial instruments known by cryptic names such as butterfly options, derivatives, puts and calls. A particularly devastating was the “naked short”. It allowed a party to make large amount of money by selling millions of shares of nonexistent stock, flooding the market with this bogus stock until the market price of that stock collapsed and drove the underlying company out of business. The naked short sellers made fortunes, the newly unemployed executives received their $10 million golden parachutes, the laid-off employees received a few months of unemployment aid, and the pension funds/mom-and-pop investors received shallowly apologetic letters (if even that).

The only thing that saved the global economy from total melt-down was unprecedented government financial injections into banks, companies and certain national budgets (e.g. USA, China), and other stimulus measures.

An Economy on Life-Support

Supposedly, we learned our lessons after the Global Financial Crisis of 2008 nearly melted down the entire global economy. A few consumer protections were enacted. Banks were slightly more regulated, and given FDIC protection for their high-risk investment banking operations (this latter should really terrify you). Lending was tightened up for consumers. Pensions were cut. European economies adopted severe austerity measures. Numerous automobile manufacturers were sold off to China. Indeed, the global economy has regained some semblance of order.

Yet, DO NOT be deceived! This is clearly an economy on life support. The Global Financial Crisis has resulted in tremendously-increased concentration of wealth and consequentially has produced long-term damage to consumer spending. Once the stimulus ends, the economy will return to chaos. It may even do so with continued stimulus.

The following graph shows how ill the economy has become since 2008. This Sizzle Index is an indicator of US economic “heat”. (It was developed by a member of Technocracy). Notice the peak at the year 2000 due to the dot com bubble. A second peak during 2005-2006 represents the housing bubble. Then in 2008 and 2009, the US economy literally fell off a cliff during the Global Financial Crisis. The Sizzle Index decline was about triple the magnitude of the dot com/9-11 crash of 2001. This was an unprecedented drop in recent times. This you already know.

What you may not know is what happened next. Despite some improvement of the US economy, the Sizzle Index is not only highly negative, but it is still declining despite massive quantitative easing (a more polite term for stimulus). The life energy is literally draining out of the economy despite massive. The deflationary pressures on Japan and Europe show similar declines globally.

By Mark Ciotola

Figure by Mark Ciotola

Nowhere to go

Interest rates earned by large investors are at historic lows, due to ongoing stimulus. Meanwhile, these near-zero interest rates are devastating to retirees, and pension funds are in serious trouble. The Federal Reserve has been hoping to bring interest rates back up slightly, but the markets have been extremely resistant.

Federal Reserve must be terrified about recently increased volatility in stock markets. If the economy tanks again, there is nothing left of interest rates to cut!

Technocracy predicted this!

One may ask why we are trapped in such a doomed economic system? Technocracy pointed out these problems, but people have tended to turn to illusory Libertarian-sounding gimmicks. When wealth becomes too concentrated, lobbyist- driven legislatures cut taxes to allow money to “trickle down” to consumers. When wages fall, they open up more foreign competition to reduce living expenses. When consumers can’t borrow enough to make up for those lost wages, banks get deregulated and numerous consumer bankruptcy protections end. Do you see the pattern?

Endgame

The world probably won’t end due to this economic dead end we are racing towards. However, the situation may get so bad that many of us will wish we were dead: children we can’t support, the slavery of endless debt, and the environmental destruction of unrestrained economics. We either have to change our way to doing things or face a future conceivable only from the worst science fiction films.

Mark Ciotola is an academic researcher on the San Francisco State University. His interests are spanning a wide area, from Fast Entrope and the e th Law to Physical history and economics, Intellectual property issues, Carbon Labeling, Energy Accounting and Brown Dwarf and Exoplanet Atmospheres.

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Our historical roots – on EOS and Technocracy Incorporated (similarities and differences)

February 5, 2015 at 3:15 pm (Culture, EOS, Future, Ideology, Psychology, Science)
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By Enrique Lescure

Introduction

The Earth Organisation for Sustainability was formally born in 2006, though the movement clustered out from a web community associated with Technocracy Incorporated. The first generation of EOS activists were closely interacting with younger members of Technocracy Incorporated (“Tech.Inc”). This association was largely broken in 2006, due to the fact that the EOS members were increasingly skeptical to the “katascopic model of administration”. Most of the forums were barred for people not coming from North America, and the EOS subsequently galvanised in our own forums, of which these are the current incarnation.

EOS has received two forms of criticisms for our previous relationship with Technocracy Incorporated. The first type of criticism is that it is naïve to establish our roots in an organisation with a controversial name (“Technocracy” usually has negative connotations), and the second was that we would have some kind of secret agenda, aiming to install a dictatorship of scientists and engineers.

This post will aim to define what Technocracy Incorporated wants, what EOS wants, similarities and differences and how these correspond to the respective zeitgeists of the era.

Why does this post exist?

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By Enrique Lescure

The Venus Project – another organisation very much inspired by Technocracy Incorporated – vehemently denies any connection with Tech.Inc. While The Venus Project mostly establishes that they exist due to the “inspired genius” of Jacque Fresco, they do affirm that they have connections with Buckminster Fuller’s ideas. There are assertions that Tech.Inc inspired Fuller as well, which if that would be the case would mean that TVP (The Venus Project) indirectly claims to be descended from Tech.Inc anyway.

The EOS could theoretically have done the same thing, and stressed our roots in the more well-known environmental movements. We could have claimed that the theory of Energy Accounting originated with us, and we could have changed the name of the technate concept.

That would however be dishonest, and give the impression that we have something to be ashamed of – something which is more than ridiculous.

While we are not a new version of Technocracy Incorporated, we owe much of our theories to the groundwork they built during the 1930’s, which we have expanded on. At the same time, we have rejected a few aspects of their design, and we are based around partially different value systems.

So this post exist to define how we are using terms in a different manner, and partially explore in which ways we use the same words but mean different things by using them.

What Technocracy Incorporated is (and was)

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Howard Scott, founder and leader of Technocracy

Tech.Inc nowadays seems to largely have ceased with any research and seems to be an organisation which mostly is centred around the US Washington State and the Canadian province of British Columbia – which as areas are very close to one another.

The organisation is centred around the Technocracy Study Course (1934), and the Technocratic Technical Continental Design (1972), which are still upheld as the foundational goals of the Tech.Inc design. During the later half of the last decade (2001-2010), a conflict emerged within Tech.Inc regarding the status of the 1972 document, which the critics claimed was a flawed text since it 1) was compiled briefly after the death of Howard Scott and 2) allowed for the formation of civil society associations, which the critics asserted would open up a venue for “propaganda” and “mind control”. Some individuals within Tech.Inc were also attacked for being too friendly to what would later become the EOS.

Howard Scott played an important role for Technocracy Incorporated. He developed Thorstein Veblen’s theories and assembled the scientists who made the original calculations for the Energy Accounting system, amongst them M. King Hubbert. He was the chief engineer of Tech.Inc between 1932 and his death in 1970. It can be argued that his leadership style very much could be seen as reminiscent of Jacque Fresco and Peter Joseph Merola, and that he often could alienate partners and allies. The movement very much declined after the Second World War.

What does Tech.Inc advocate?

The short summary is that Tech.Inc advocates a centralised hierarchical (katascopic) continental-wide resource administration of the North American continent, handled by technicians, scientists and engineers, with the goal of distributing an even access of all resources to all of the citizens.

Three concepts frame in this design.

Technocracy – expert rule, meaning that experts within the various sequences (departments) make all the decisions new org chartregarding their aspects of the production system, and are appointed by being elected by their peers.

The North American Technate – a centralised resource administration which would “abolish” political bodies, courts and corporations, and administer the North American continent as one single economic and technical area, using massive rationalisations to reduce labour hours.

Energy Accounting (Tech.Inc Variety) – All citizens receive for every two years an energy quota, which they could use to gather the consumer items they demand. In the original design (TSC 1934), production was centralised in a Fordist manner and was probably meant as a planned command economy, where experts made decisions based on surveys on how people’s consumer patterns would look like for the nearest period.

The Ideology of Technocracy Incorporated

Technocracy Incorporated has claimed that ideologies are “monetary-based-systems” related to “the Price System”, and that Tech.Inc is non-ideological and merely wants a “rational administration” of the North American continent. I would argue that the individuals representing Tech.Inc are probably honest when they believe that they don’t have an ideology, but I would argue that there is an ideology underpinning Tech.Inc, albeit not unique for Tech.Inc (which I do not mean as an insult, EOS’ ideology is for example probably not unique for EOS).

In the broadest possible sense, Tech.Inc’s ideology can be summarised through their statements “The Highest Possible Standard of Living for the Greatest Possible Number of People” and “a technical, administrative area“. In short, it is a worldview built on the idea that the purpose of society (or in the case of Tech.Inc, the technical nodes of control) should be to provide the members of society with a high standard of living. This should be achieved by the benevolent technical expertise and leadership of experts, who are supposedly neutral and who do not suffer from biases and interests (unlike politicians and capitalists).

This form of ideology can be called technical managerialism, and is built around the ideals of a consumer society. During theUrbanates 1930’s and the 1940’s, when socialist governments started to be elected into power into some European countries, they de-facto moved away from the worker’s struggle as a principle (since you cannot be reelected if you trash your country’s economy through class warfare) and instead moved in to embrace managerial experts who came to engineer the welfare systems of Europe and (to a lesser degree) North America, Australia and New Zealand. A similar process happened in the USSR, which after the Second World War tried to move towards centralised administration of “soft” issues, such as housing, consumption and recreation.

In Sweden for example, a type example of this ideal was the rise of cheap housing units, mass-constructed during the 1960’s, with their own communal gardens, gymnastics halls, saunas, club houses and communal kitchens. Similar projects existed both in continental Europe, North America, the Soviet Union and the developing world – with the probable epithome of this architectural tendency being the capitol of Brazil, which was entirely planned after the prevalent ideals of that era of late high industrialism/early consumerism.

Thus, the thinking of Technocracy Incorporated did not represent a small group of isolated and marginalised figures, but was rather a part of the mainstream of the early and middle 20th century. It was very much the definition of Late Modernity.

Flaws of that type of thinking

There are several flaws with this type of thinking.

The first flaw that I can see with the traditional technocratic type of thinking is the assumption that technicians and engineers – at least when unimpeded by the price system – will act objectively and for the objective good of all members of society. This thinking is very much based on the ideas of Positivism – that scientists are neutral observers of the world who are disconnected from prejudices of class, gender, race and cultural background. Also, the argument follows from the idea that human behaviour is governed very much by the prevailing economic system, and that when we have a post-scarcity society, humans will naturally become less territorial and domineering.

While it is partially true that humans to a large extent are affected by environmental factors, it is 1) also true that humans are affected by biological factors and by cultural factors, as well as by their own free choices, and 2) predicting human behaviour changes is possible, but never accurate. For example, the communal housing types erected from the 1950’s on to the 1970’s, have to a large degree been subjected to vandalism and mishandling by inhabitants – and often the vandalism has actually made the buildings look more interesting. These types of housing, devoid of culture, meaning and identity, turns into areas where people feel alienated from themselves and one another due to the compartmentalised design.

Graffiti-Street-Art-DAZE-LEPERThis follows another problem which both behaviorism and the kind of functional managerialism that flourished during the same time suffered from, namely a view of humans as consumer units. The idea is that humans basically are governed by their level of material comfortability, and that humans who are given a comfortable environment will become happy automatically.

As in everything, there lies a grain of truth in that. But if humans are not challenged and if their imagination is not stimulated, this materialism can soon turn into an existential psychological crisis, which will serve to stimulate consumeristic individualism and an inner sense of emptiness.

While driven by noble ideals, technical managerialism suffers from the following three problems:

Over-reliance on the impartiality of experts.

Over-reliance on behaviorist psychological models to evaluate mass behavior.

A lack of geist.

Similarities between EOS and Technocracy Incorporated

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EOS and Tech.Inc are both aspiring to the establishment of a Post-Scarcity Society, which would utilise energy certifikates to allow the tracing of product cycles throughout the system.

EOS and Tech.Inc both aim to create common resource areas which would be scientifically managed to create a desired outcome in terms of resource usage patterns.

EOS and Tech.Inc both ascribe to the foundation of physical thermodynamic flows as the foundation for socio-economic systems.

Differences between EOS and Technocracy Incorporated

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Technocracy – the main difference here is that EOS sees technocratic management more as a matter of methodologies than of managers. This means that our goal, rather than to have a hierarchical structure of engineers and managers, aim to instill throughout human civilization an appreciation, understanding and application of science – a new renaissance of learning and enlightenment. We want to give every citizen the opportunity to lead a project holon, to explore the stars, to dive with marine mammals, to study genes, nano-tech and ecology.

Tech.Inc puts an emphasis on management, while we put our emphasis on experiencing.

Energy Accounting – While actually defining the actual concrete system of Energy Accounting very loosely, it can be interpreted from TSC (1934) that it will mainly use surveys conducted by scientists to plan how the production plans should be formed. This is reminiscent of how The Venus Project has thought out their “Resource Based Economy”.

EOS on the other hand, imagines that the production of… well stuff… will largely be happen after people have allocated their energy credits. In this system, people use their allocation as a way to signal what holons they want to be responsible for the production of their items.

Another difference is that Tech.Inc did not originally envision for example using the Earth’s carrying capacity as a limit, and did not have any plans to use Energy Accounting as a mean to track the environmental effects from extraction to consumption to recycling. However, Tech.Inc suggested this later on as a proposal to solve the environmental crisis.

The Technate: The differences between the North American Technate and the Terran Technate Consortium is that the first structure is envisioned as a centralised industrial structure very much organised as a mega-corp, with sequences (departments) doing production orders from above and using centralised statistical analytics to reach decisions. It is a Fordian, Taylorist, Modernistic Structure.

The Terran Technate Consortium is envisioned more organically, as an integrated information market and a holonic system where holons cooperate and build up the system in a distributed manner. There will exist sequences as well, but these would not manage the production, rather they will oversee the process and give statistical input to holons to maximise the effects of their decisions.

This discrepancy is largely inspired by Distributed Systems Theory, and of course The Internet.

Internationalism – Tech.Inc wanted to limit the NAT to North America and a quarter of South America. The EOS believes that associations, groups and territories should be able to join and exit the TTC voluntarily, and our aim is a global resource administration area – or at least one as global as possible. The concerns are mostly of environmental nature. We live on one planet.

Environmentalism – EOS’ main aim is to reduce the usage of resources down below 100% of the Earth’s renewal capacity (right now we are using around 140% of the renewal capacity of the planet). We also want to devote a programme for reterraformation, moving away from mono-cultures to functioning eco-systems.

Democracy and associations – EOS wants to see a wide diversity of associations, clubs and cultures emerge and co-exist peacefully. The technate would not have anything to do with social issues, and there will be a parallel confederational system of autonomous communes, all adhering to a Constitution based around the principles that life is the most valuable thing in the universe. Tech.inc seems to besplit on the issue, with some members taking a libertarian approach while others are more restrictive. There will however be no democratic voting within the structure, and Tech.Inc has a position that criminal courts should be a part of the technate.

Ideology – EOS is developing an ideology centred on three ground principles, stressing the value of life, the value of empathy and the value of enlightenment. Tech.Inc claims to not be an ideology but to be “science applied to society” (very much like The Venus Project).

Science – Tech.Inc wants to have a referendum to install a technate and give the technical managers power to make the necessary changes. EOS wants to test their ideas first in simulated environments, as well as in communities, locally and regionally, before proposing that anything is implemented.

Final words

From the University of Toledo, US

From the University of Toledo, US

The EOS has many roots, but the four main branches are the physical thermodynamical economic analysis done by (amongst others) Technocracy Incorporated, distributed systems, environmentalism and social liberalism.

Our goal is to help creating a socially and ecologically sustainable world, where biological diversity and the diversity of human societies is upheld, where people have the autonomous control over their energy, food distribution systems, their communities and their right for self-expression and self-determination.

We can only achieve this goal by finding new ways of managing the Earth’s resources, that allows us to see the ecological development of our beautiful planet.

Technocracy Incorporated deserves gratitude since they provided us with the understanding that we can use thermodynamics as a method of tracking ecological and economic processes. There are many ideological and structural differences between our organisations, and between the societies we envision. However, understanding these differences and the different ways we apply the same words can be helpful to understand who we (EOS) are, and what we aim to achieve.

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Q/A regarding Energy Accounting

February 1, 2015 at 10:39 am (EOS)
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By Enrique Lescure

Intro

I recently had a person send me several questions regarding EA to my FB profile. I could not answer immediately, as I was compiling the accessment of the project report to the County Board. Four days later, I was done, so I finally made a reply. I have decided to share it publically. The questions are in italics.

Q/A

I’m not sure I understood energy accounting properly. Each citizen is given the same amount of energy per period of time and it expires. What does the energy provide? Do you use it for purchasing food?

Energy credits are not actual energy, but rather is a method to track the resource flows from extraction to recycling. The energy credits represent the part of the production capacity which you own. The cost of a product is determined by the exergy cost of the entire production line, meaning that the “price” that is accounted for is based on extraction, the industrial processes, transports, as well as environmental effects of emissions and local disturbances at the site of production.

What if you have an energy intensive experiment to do, how do you get approval for that?

Write a project plan, the local sector board will look it through, and then either grant you the right to do so, reject it or come with recommendations.

If you need/want a rare/scarce resource, can the credits be used to acquire it?

Rare and scarce resources are usually energy expensive in generation. You can order such items, but the price will be dependent on the cost.

If it expires, doesn’t that create the incentive to spend it?

Yes probably. That is why the total amount of EC’s must be less than the planet’s carrying capacity. We need however need to test out long-term simulations in local and regional environments to see how users would behave. If groups of people to not use their share of production, then there is a potential inefficiency and even possible waste of energy. It is actually good for the Earth if people choose to consume less. I don’t see so much of a problem. Some holons will probably wither, but the system will adapt.

Others are blocked from production who may be able to create high energy goods, but it is in excess of their share, while others energy goes unused. This creates a black-market for collaboration or worse.

This question would actually require an article to require, since you take up three subjects in it. I will try to summarise:

1) There will be an income floor and an income ceiling, meaning that everyone will get EC’s and own a share of the planet, though the size of that share can vary during the course of an individual’s life-time. It is true that you cannot save EC’s, but that is because they represent production capacity.

2) People are not primarily producing as individuals, but as members of project teams, or holons, which are the equivalent of coops, companies and departments today. Most holons are small project teams, while some are very large and can consist of possibly hundreds of holons if necessary.

3) If people locally want to have for example local currencies, farmer’s markets, barter and similar, it is up to them to form their own rules (for example, if a community wants to illegalise alcohol, they are allowed to do so). The technate is not a government, but a communication service system. People are free to determine their relationship with the technate, but the relationship must be one of mutual benefits – I.E if a community wants to join the technate, it must be ready to connects it services to the technate.

Finally, how was the 25-50% real income increase calculated?

Zero taxation. However, it will vary between individuals, and also it is partially revised. You see, a part of the total shares of EC’s need to be distributed to special key holons which are providing fundamental infrastructural services, like electricity grids, road networks, railway networks, heating and so on and so on.

Thank you for your questions! 🙂

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