Did Increased Income Disparity Help Cause the Depression?

Yves Smith ponders whether Did Increased Income Disparity Help Cause the Depression?:

I've been meaning to discuss how increased income disparity is bad for economic growth, because in the end you wind up with insufficient labor income to fund consumption (note that America's high consumption rate has been achieved by lowering its already low savings rate to zero) and too much capital chasing too few investment opportunities (even a sound bet will produce a bad return if you pay too much for it).

It turns out I was beaten to the punch by nearly 50 years, as Robert Reich tells us in his latest post, invoking former Fed chairman Marriner Eccles . Insufficient consumption is one theory of the roots of the Depression (the monetarist version has gained ascendance), but Eccles links the consumption shortfall directly to a shift in wealth towards the top. And some of the other patterns of the Twenties, such as debt-fueled growth, are worryingly familiar.

The capitalists forget that people need to earn money before they spend it (unless some shyster offers them cheap loans). When there is no money, there is no consumption, there is no economic activity, no matter how cheap the goods are.

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Ben Stein is Exxon Mobil

Naked Capitalism contends that Ben Stein is Exxon Mobil when Ben Stein tries to defend Exxon Mobil against an attack by Barak Obama:

No, Stein isn't willing to consider that high profits by Exxon Mobil in an essential product like oil represent a transfer from the have-nots to the haves.

Cut Stein's argument to its core, and it's blatant free market run rampant: we shouldn't interfere with the God-given right of any company to earn a profit because it will hurt the investors. But Stein goes further and claims that the interests of investors are identical with those of the US public. Was he asleep when they talked about class warfare in school?

In fact, a September 2007 Pew Research Center study found that the US population increasingly sees itself divided along class lines. There was an even split among respondents as to whether they agreed or disagreed with the notion that the country was split along economic lines, while in 1988, 71% rejected it. Similarly, only 45% today consider themselves to be among the 'haves.'

Emphasis in original

Interesting.

Unfortunately, recognition that classes exist does not usually extend to any deeper analysis of their origins. The deeply ingrained anti-communism of the US public would prevent any counternance of a Marxist analysis.

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Textbook economics meets the real world

Ross Gittins explains why Textbook economics meets the real world results in workers getting stuffed around:

When one sector is shedding labour at a time when another sector is desperate for more workers, this allows the expanding sector to attract the labour it needs without bidding up wage rates unduly. That is, the process helps limit inflation pressure.

Get it? The squeeze on manufacturing is happening not by accident but by design. All the textbooks will tell you that's the outcome the rise in the exchange rate is intended to bring about (given that the boom is happen in mining rather than manufacturing).

Remember the recent decision to close the Mitsubishi car plant in Adelaide? It's a classic example of textbook economics working in real life. As soon as they heard the news, mining companies from around the nation rushed to Adelaide to try to recruit the skilled workers they so desperately need.

It was fortunate for many of the laid-off car plant workers the mining industry was booming at the time. But it wasn't a happy accident. The same high exchange rate that was the inevitable consequence of the mining boom was what finally did in the car plant.

Of course, there'll still be tears and pain among the laid-off Adelaide workers and their families. Their treatment has been brutal.

The market system is a great way for societies to become prosperous. But no one ever promised that capitalism is gentle. It ain't.

Emphasis Mine

At least, he is honest.

One problem he overlooks is that not all skilled workers are interchangeable. Unskilled workers can be deployed easily from one industry to another because they need a minimum amount of training to be able to do the job. Whereas it may take up to ten (10) years for a skilled worker to be proficient at their skill.

Skills cause a lot of friction in the labour market as workers cannot readily move from one sector to another.

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Economy.com's Zandi on Homeowners with Negative Equity

Tanta compares notes with Economy.com's Zandi on Homeowners with Negative Equity and is a little bit worried:

With a 20% price decline (peak to trough), I calculated 13.6 million homeowners with zero or negative equity; Zandi's updated numbers put that at 13.8 million.

Zandi didn't provide an estimate for a 30% peak to trough price decline, but my 20 million estimate is probably pretty close. Note: I calculated the percent of homeowners with mortgages with no or negative equity; Zandi calculated the percent of the total single-family housing stock.

Emphasis Mine

That is 20,000,000 households, not people.

Scared shitless, yet?

The Great Depression will probably be known as the good old days as the US economy implodes.

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Blogrolling

I decided to indulge in following the Next Blog link and see what pops up.

• Lost in my madness is a Spanish Language Goth blog of photographs and poems. Pity my Spanish is so bad.
• ESPRIT is an English Language blog of interior design, architecture, and viruses. The designs seem tame. The graphics of the virus are interesting.
• hawgblawg is an English Language blog by Prof. Ted Swedenburg from the University of Arkansas. This is mainly about Arab culture in the Mississippi valley.
• NIGORCHA is an English Language blog from India which features photographs of varying quality from quite good to no charge at the film processing place.
• Jewel Style is a Spanish Language blog of women's fashion photography. Looks most photographs are lifted from trade magazines, although the non-trade ones look professional.
• Toko Online Grosir & Eceran. Menyediakan Baju/Busana Muslim, Baju Koko, Jilbab & Mukena pilihan. is an online store blog from Indonesia. There is some quite stylish clothing advertised there.
• The Muffin Man Kipp in an English Language blog of cute child photographs.
• COMITE ORGANIZADOR is a Spanish Language blog that appears to a online record of the meeting of an organising committee.

And there ended my blogrolling as there was no link out.

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Still Pretending

Jim Kunstler writes that Americans are Still Pretending that they live in the greatest nation in the world:

Once the US gets into serious difficulties with our oil supplies. every other sector of the economy wobbles, including especially the food-growing sector, which cannot function without copious amounts of diesel fuel and hydrocarbon-based soil 'inputs.' Americans will go hungry, and not just the 'underclasses.'

Along in this process somewhere, there is huge potential for armed conflict with other nations. If the unraveling gets traction while George W. Bush remains in charge, the US may answer bellicosity from oil-exporting nations, or energy-hungry rivals, with truculence of our own. Things can get out of control very fast in such a situation. Nations that were happily selling us salad shooters six months earlier may be targeting our naval vessels with a different sort of shooter, say a Sunburn missile. In any case, we will be acting with a bankrupt, exhausted, and over-extended military, and the best case outcome would leave us merely isolated and marooned geopolitically on our own continent, with dwindling energy and mineral resources and an angry, demoralized population.

This time around we have more to fear than fear itself. The banking executives, government officials, and candidates for president are not doing the nation a service by concealing and ignoring our losses. Finance, as the driver of an economy, is finished, but the deployment of capital is still an indispensable arm of a real economy. Sooner or later we'll get back to money that stands for something and banks that function as credible repositories of wealth. But we haven't even started down the path to that place, and the longer we pretend that we don't have to go there, the worse the journey will be.

Emphasis Mine

Jim Kunstler has consistently pointed out that the USA is in no position to absorb the effects of peak oil. The policies pursued by the US government have only exacerbated the problem of running an economy on less oil.

I think the appearance of hunger among the US middle class would lead to an emigration of talent (mainly liberals) to other countries, and a growth in the radical right.

Would Fascism grow out of a US depression? The signs are there in the proto-Fascist movements that already exist. With the emigration of liberals, the politics would drift further to the right.

The world could face the prospect of a nuclear armed Fascist power with a very big chip on its shoulder. Interesting times indeed!

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CAPITALISM'S MYSTERIOUS TRIUMPH

Paul Krugman tries to explain CAPITALISM'S MYSTERIOUS TRIUMPH as Communism failed because of an inability to provide a sustaining reason for existance; only under crisis could it work.

But neither technological change nor globalization can explain the fact that socialist economies did not merely lag the West: they actually went into decline, and then collapse. Why couldn't they at least hold on to what they had?

I don't think anyone really knows the answer, but let me make a conjecture: the basic problem was not technical, but moral. Communism failed as an economic system because people stopped believing in it, not the other way around.

...

We see this kind of thing all the time, in microcosm. The market does not require people to believe in it; but the centrally planned economies that live inside a market economy, known as corporations, do. Everybody knows that financial incentives alone are not enough to make a company succeed; it must also build morale, a sense of mission, which makes people work at least somewhat for the good of the company rather than think only of what is good for them. Luckily, under capitalism an individual company can fail without taking the whole society down with it - or it can be reformed without a bloody revolution.

Why did people stop believing in socialism? Part of the answer is simply the passage of time: you can't expect revolutionary fervor to last for 70 years. But perhaps also the unexpected resurgence of capitalism played a role. By the 1980s Russia's elite was all too aware that the country, instead of overtaking the capitalist nations, was slipping behind - that Russia was failing to take advantage of new technology, that if anyone was challenging the West it was the rising nations of Asia. Communism lost any claim to the mandate of history well before it actually fell apart, and perhaps that is why it fell apart.

In the end, then, capitalism triumphed because it is a system that is robust to cynicism, that assumes that each man is out for himself. For much of the past century and a half men have dreamed of something better, of an economy that drew on man's better nature. But dreams, it turns out, can't keep a system going over the long term; selfishness can.

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This is now a common justification for Capitalism. We cannot rise above our selfish nature. We must learn to embrace it.

Jesus believed otherwise and was prepared to die for it. Love one another as I have loved you. That is not a surrender to selfishness but an appeal to our better nature (dreams if you will).

Capitalists would surrender in the struggle against our vices, but Communists should never despair that we are capable of improving ourselves and consciously choose virtue over vice.

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The Support Economy

In The Support Economy: Why Corporations are Failing Individuals and the Next Episode of Capitalism, the authors appear to confused about the nature of Capitalism. However, the book has a good discussion about misogny in advertising.

The authors confuse Capitalism with the existence of enterprises. They appear to confuse the effect of organisation in Capitalism with organisational narcissism. They do not recognise that organisations exist to reproduce Capital.

They condemn organisations for being based around the transaction. They do not recognise that the transaction is the basis for all economic activity. You cannot wish away the transaction without wishing away the economy.

They are correct about the increasing automation of the workplace.

They want to replace the transaction with advocacy.

They advocate a customer orientated organisation similar to the ideas of Tom Peters and Seth Godin.

They explained the long recognisation of women as the consumers (over a century), and how this led to misogny in advertsing.

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Bank of America Asks Congress for a $739 Billion Bank Bailout

Mish roundly condemns those "summer capitalists" as they want a socialist solution to a capitalist fuck-up as Bank of America Asks Congress for a $739 Billion Bank Bailout:

Supporters contend that a government rescue could be the fastest and cleanest way to force banks and investors to book their losses from bad mortgages — a painful but essential first step toward stabilizing the housing market.

My comment: Those supporters are socialist fools.

Mish's prescription is to let the market set the true value of the houses and let the financial institutions take the losses. This is to avoid the moral hazard of propping bad lending practices.

What is overlooked here is the question of whether housing is a social good available to everybody, or a commodity to be traded. Until we decide what housing is, we cannot decide on a solution.

This ambiguity about housing gives rise to crises like the current one.

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Not eating to pay the rent

Australia is facing a crisis as people are Not eating to pay the rent:

THOUSANDS of people across the country are skipping meals to pay rising rents, a housing affordability conference in Sydney heard yesterday.

And housing experts warn the home affordability crisis threatens to destabilise the economy and drive the country into recession.

Experts told the housing conference yesterday that Australia faced great social unrest and human suffering as well as chronic labour shortages without affordable housing.

And people thought that things were going great under Howard. Now, the flimsiness of that economic miracle is being exposed.

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Financial Setbacks

The Daily Reckoning discusses Financial Setbacks:

The period 1980-2007 has seen more economic growth than any other period ever. More cars, more televisions, more highways, more hotels, more concrete, more Internet connections…just about more of everything was produced than in any similar 27-year period in history. In other terms, more money was invested and earned than ever before. And more people added more to their wealth than ever too.

The condition precedent for this explosion of wealth was that the world turned away from political change…towards market change. To the largest nation in the world, Deng Tsou Ping announced, 'to get rich was glorious.' All of a sudden, a billion people were bussing, humping, and schlepping - not to build a proletariat paradise, but to make money. To the north, the Soviet Union was never defeated…it simply fell apart, crushed by the weight of its own central planning. By the end of the '80s, it too pronounced itself in favor of making money. And by the early 2000s, Moscow was the most expensive city in the world…with so many millionaires its politicians couldn't shake them down fast enough.

Meanwhile, in Britain and America there were soft revolutions too. Maggie Thatcher and Ronald Reagan ushered in a new era where money and market solutions were said to be the cure for almost every problem. Regulations were eased or scrapped altogether. Marginal tax rates were cut. The 'spirit of enterprise,' as Reagan quoted writer George Gilder, would make us all rich. Those who could innovate would create new wealth. Those whom the spirit of enterprise did not touch directly could buy mutual funds. The market was the source of wealth. All you had to do was to be 'in the market' and you would get rich.

And yet we are on the descent into an economic depression. We have forgotten that wealth is created through human labour, nothing else. This will be a hard lesson to learn. There is no other way to wealth.

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Fear, hope and love: the three marketing levers

Seth Godin discusses Fear, hope and love: the three marketing levers.

He concludes:

I don't think love is often a one way street, either. Brands that are loved usually start the process by loving their customers in advance.

The easiest way to build a brand is to sell fear. The best way, though, may be to deliver on hope while aiming for love...

One of the problems for Communists is that Anti-Communism has been built on fear: fear of the gulags; fear of property confiscation; fear of being subject to the collective. And this campaign of fear is still remarkably effective.

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Origin of the Specious

In an attempt to show up the motivations behind the current wave of religious funamentalism, Reason Magazine discovers Origin of the Specious:

Political scientist Shadia Drury, a passionate critic of Strauss, puts it this way: 'For Strauss, the ills of modernity have their source in the foolish belief that there are no harmless truths, and that belief in God and in rewards and punishments is not necessary for political order....[H]e is convinced that religion is necessary for the well-being of society. But to state publicly that religion is a necessary fiction would destroy any salutary effect it might have. The latter depends on its being believed to be true....If the vulgar discovered, as the philosophers have always known, that God is dead, they might behave as if all is permitted.'

Thus, to preserve society, wise people must publicly support the traditions and myths that sustain the political order and that encourage ordinary people to obey the laws and live justly. People will do so only if they believe that moral rules are divinely decreed or were set up by men who were inspired by the Divine.

Kristol restated this insight nearly five decades ago in an essay in Commentary dealing with Freud: 'If God does not exist, and if religion is an illusion that the majority of men cannot live without...let men believe in the lies of religion since they cannot do without them, and let then a handful of sages, who know the truth and can live with it, keep it among themselves. Men are then divided into the wise and the foolish, the philosophers and the common men, and atheism becomes a guarded, esoteric doctrine--for if the illusions of religion were to be discredited, there is no telling with what madness men would be seized, with what uncontrollable anguish.'

Emphasis Mine

Here, the emphasis is on religion as a tool of social control, not as personal choice. This utility alone makes it desirable to the Capitalists as they enjoin us to defer our satisfaction to the after-life.

Marx expressed a contrary idea that:

Religious suffering is, at one and the same time, the expression of real suffering and a protest against real suffering. Religion is the sigh of the oppressed creature, the heart of a heartless world, and the soul of soulless conditions. It is the opium of the people

Karl Marx: Introduction to A Contribution to the Critique of Hegel’s Philosophy of Right, in: Deutsch-Französische Jahrbücher, February, 1844

Here, we have a clash of two contrary ideas in how to approach religion: social control; or acknowledgement of suffering. The rulers want the social control without acknowledging the suffering.

Marxists today should approach religion as a personal choice not as a tool of social control. We should not seek to obliterate religion but as to acknowledge a person's fundamental right to religious expression.

Atheism should not be seen as a sign of intellectual superiority either to be hidden from the sea of believers, or to be flaunted in front of them to condemn their ignorance.

For me, I choose to remain a Catholic in spite of the Church's official persecution of Communists. Although, I have been treated with benign indifference by the local Catholic community. This counts as tolerance.

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Is the Tipping Point Toast?

The Tipping Point purported to show that a few key individuals could literally change the world by starting trends that rapidly spread throughout the population. However, Duncan Watts thinks this case is overstated. He asks if Is the Tipping Point Toast?:

In their hunt for a practical way to create maximum exposure for any given ad, Watts and Peretti developed a way to marry the benefits of old-school mass marketing with clever six-degrees effects. Their first test case came when the Brady Campaign, the gun-control group, asked for help with an online petition.

Watts and Peretti set up a regular mass-market ad buy, running banner ads on several prominent blogs and news sites. Like many ads these days, they added a button on the ad that allows people to forward the ad to a friend--a way of collecting eyeballs for free. Typically, people ignore this 'share with your friends' pitch. But Watts and Peretti included technology called ForwardTrack, which displays the route the ad travels once you've forwarded it. This turned ad forwarding into a piece of social cartography. People would pass the ad specifically to those friends most likely to keep it moving. It became a Facebook-like contest to sign up the most friends.

The technique marries Watts's two main epiphanies: Cascades require word-of-mouth effects, so you need to build a six-degrees effect into an ad campaign; but since you can never know which person is going to spark the fire, you should aim the ad at as broad a market as possible--and not waste money chasing 'important' people. And it worked. The pass-around effect doubled the number of people who saw the Brady Campaign's ad. They paid for 22,582 hits and received an additional 31,590 for free. Another campaign they ran for the Oxygen network quadrupled the audience size, adding 23,544 hits to the initial 7,064.

Neither was, technically, a viral hit. Neither passed the disease threshold, where the meme spreads exponentially and engulfs the mainstream. "But you can double your impact, which is still pretty good," Watts says.

The ultimate irony of Watts's research is that, if you really buy it, the most effective way to pitch your idea is ... mass marketing. And that is precisely what the wizards of Madison Avenue, presiding over our zillion-channel microniche market, have rejected as obsolete. "But that's the thing about magic," says Watts. "If it sounds too good to be true, it probably is."

Emphasis Mine

For us Communists, the message is that the mass-marketing of selling the party newspaper and mass rallies is still important.

There are no short-cuts: no magic viral marketing campaign waiting to be unleashed once get to the right people. The tipping point is just an anarchist pipe-dream of an influential event that triggers a magical transformation of society. People can be panicked for a time but then revert to old habits.

As the evangelists keep pointing out, change starts from the heart and moves outward into the world.

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Bad Judgement

Seth Godin discusses what appears to be Bad Judgement but is a fair judgement based on a different set of beliefs.

Once we realize that it's not a matter of judgment, but a matter of belief, everything changes.

That's because marketers are charged with changing what people believe.

If I can help change what you believe, I bet I can change your actions as well. And respecting your judgment is a great place to start.

As Communists, we should strive to understand and respect the beliefs of those who are not. In reality, I am marketing Communism to Capitalists and their supporters.

We tend to do this in the abstract in our model of the objective and subjective influencing each other.

We do want to change how people relate to each other: no longer as either Owner or Employee, but as a Worker-Owner.

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Gates calls for "creative capitalism"

Gates calls for "creative capitalism" in an effort to improve the distribution of wealth among people. Is the world's richest man going soft?

'We have to find a way to make the aspects of capitalism that serve wealthier people serve poorer people as well,' he told the annual meeting of the World Economic Forum. 'I like to call this idea creative capitalism.'

The speech to top businessmen and politicians in Davos reflects Mr Gates's growing focus on philanthropy. Mr Gates built Microsoft into a formidable and sometimes controversial money machine, which has been accused in the past of abusing its market position.

...

Mr Gates said the self-interest behind capitalism had driven multiple innovations but to harness it to the benefit of all required the system be refined.

Greater focus on recognition for improving the lives of others could provide a spur for companies to focus more on making money out of providing valuable products at affordable prices to the world's poor."

Emphasis Mine

Mr. Gates sees the main problem of Capitalism as being the distribution of wealth. He does not see that the main engine of the growth of inequality has been the Capitalist system itself. This is his blind spot.

His pious hope that Capitalism can be tweaked to fix the problems that it creates is just a salve to a troubled conscience.

Unless we are prepared to understand the true workings of Capitalism, any suggestions like this are just passing day-dreams.

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Bad loans have come home to roost

Peter Hartcher writes that Bad loans have come home to roost for the Americans while conveniently ignoring the same thing happened in Australia, Ireland, England, Spain, etc.

Yet even this does not explain the real force of this financial fright. Its greatest multiplier effect stems from the fact that it comes at the end of a five-year speculative bubble in US house prices.

The Federal Reserve dug the economy out of the 2001 recession by cutting interest rates to record lows. The key official rate went from 6 per cent to a record low of 1 per cent, and stayed there for a year.

This unleashed a great gusher of liquidity, and it gushed straight into real estate prices. Prices boomed and speculation flourished. Individuals, builders, building supply firms, property developers, banks and financiers all behaved as if house prices could only go up. Debt soared.

The bust in the junk mortgage market acquires its great power from the fact that it is the pin that pricks the housing bubble. 'This is very much an American problem,' Hale says. 'It reflects the very reckless behaviour in the American economy built on the assumption of ever-rising house prices.' One result is that the US is suffering its first national fall in house prices since the Great Depression.

Emphasis Mine

This is another don't panic article about how well the economy is performing. Just ahead of the market drop on Monday, Tuesday, Wednesday, ...

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No need to panic, says RBA

Reserve Bank governor Glenn Stevens says No need to panic.

My ignorant opinion is that we are heading for a depression.

The article says:

While Australia was weathering the turmoil in financial markets since August 2007, local investors and borrowers had not escaped completely unscathed.

'Firms whose business models relied on short term debt funding have been tested - a couple have, for practical purposes, left the scene,' he noted.

'Yet these events have been absorbed thus far with little disruption in the broader economy.

'The availability of credit to sound borrowers has not been impaired.'

Mr Stevens said the direct financial effects of the global turmoil on Australia were likely to be confined mainly to the impact on borrowing costs, which have risen in recent months.

'Taking into account the strength of demand, this increase in borrowing costs does not seem likely to pose a particular problem for the economy as a whole,' he said.

'There is no evidence, moreover, of a 'credit crunch' in the domestic financial sector.'"

Emphasis Mine

There are several structural problems in the Australian economy:

• Inflated housing prices;
• High consumer debt;
• High corporate profits;
• Low infrastructure investment

This indicates to me that the individual would have a high exposure to a collapse in the perception of their own wealth. In other words, falling house prices and rising interest rates will lead people to consider themselves much poorer. Without an increase in real wages, debt servicing will become problematic.

People will see others lose their jobs, then their houses, and, possibly, even their lives through suicide. This would lead to an overcorrection in people's spending patterns (they would save far more than is healthy for the economy). In other words, consumers would withdraw cash from the economy thereby impairing its operation.

This panic would then lead to a depression.

This global depression may lead to a decoupling of the US economy from the world economy. The USA would no longer be the economic powership of the world economy. This loss of status would make the USA very dangerous indeed.

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Use of airstrikes boosted in Iraq

The Use of airstrikes boosted in Iraq as a means of counter-insurgency. Of course, the US military is perfext and there are no mistakes. These magic bombs only kill insurgents. If they are dead, then they were insurgents.

Gen. Petraeus has violated his own counter-insurgency strategy by increasing the use of air-strikes. When will the US military ever learn that they have lost in Iraq?

'The core reason why we see the increase in strikes is the offensive strategy taken by General [David H.] Petraeus,' said Air Force Col. Gary Crowder, commander of the 609th Combined Air Operations Center in Southwest Asia. Because the United States has sent more troops into areas rife with insurgent activity, he said, 'we integrated more airstrikes into those operations.'

The greater reliance on air power has raised concerns from human rights groups, which say that 500-pound and 2,000-pound munitions threaten civilians, especially when dropped in residential neighborhoods where insurgents mix with the population. The military assures that the precision attacks are designed to minimize civilian casualties -- particularly as Petraeus's counterinsurgency strategy emphasizes moving more troops into local communities and winning over the Iraqi population -- but rights groups say bombings carry an especially high risk.

'The Iraqi population remains at risk of harm during these operations,' said Eliane Nabaa, a spokeswoman for the U.N. Assistance Mission for Iraq. 'The presence of individual combatants among a great number of civilians does not alter the civilian character of an area.'

Emphasis Mine

POTUS should just declare victory and get the troops home. They are going to be needed to keep order when the US economy collapses in a depression.

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The Black Swan: The Impact of the Highly Improbable

The Black Swan: The Impact of the Highly Improbable is a very interesting book. Although I disagreed with some of the author's contentions, I found the book quite worthwhile to read.

The author makes a very convincing case for considering the silence of the graveyard in which the reasons for failure cannot be known because the participents had died in the attempt. This is particularly revelant for revolutions as the key players on the losing side are usually killed. And, as such, no comparison to successful revolutions can be made.

The author also stressed the importance of recognizing the limits of models. In Communist theory, the Bolshevik revolution of 1917 is held up as a model of success. But, we should also recognize the historical context because that revolution eventually failed whereas the revolutions continue in Vietnam, Laos, and Cuba. China has reverted to Capitalism, and North Korea is just waiting to unify with the South.

I think the author failed to distinguish sufficiently between human and natural systems. I got the impression that he treated them the same.

The author made no reference to Kuhn's work The Structure of Scientific Revolutions which covered similar ground. This I found intriguing.

The author quite correctly points out that the skewed distribution of wealth leads to extreme events. But I do not think he goes far enough to attribute the increasing instability of the Capitalist system to the increasing concentration of wealth and decision-making in the hands of fewer and fewer people. Witness the similarity of outlook of the WEF at Davos. Among such a small group of people, a really bad decision can go unchallenged, whereas a larger group may have enough dissendents to challenge it.

I am at odds with his ludic fallacy because I am convinced that we can understand the rules of human interactions in politics and economics. And I bristle at the idea that anyone would appear to surrender to unreason. Capitalism is built upon reason not unreason. It is arrogant enough to think that the universe is understandable and therefore can be controlled. This is one of the driving forces of Capitalism. Take that away and you are left with a cargo cult.

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