SPEAKING
FREELY Error messages from the
economy By Paul Tustain
Speaking Freely is an Asia
Times Online feature that allows guest writers to
have their say. Please click hereif you are interested in
contributing.
Forgive me lapsing
into anecdote if I promise it will be instructive
- besides it's more entertaining than economics.
When my last laptop stopped behaving
itself I called the support hot line, and spoke to
someone much more qualified than me to fix it. He
told me how to run some tests and we reset my
"system configuration", whatever that is. But
despite his assurances that the system should now
work, it did not.
After a week or two of
increasing desperation, in the end there was only
one way I could get my computer back to
predictable behavior. I threw it out of a
second-floor window, confident it would follow the
parabola of any object falling freely under the
influence of gravity. And that's exactly what
happened. Natural laws had
prevailed, and they continued
prevailing as the machine redistributed its
carefully organized components into disorganized
chaos shortly afterwards - as predicted by
science's second law of thermodynamics.
(I
warmly recommend smashing old computers. Not only
is it a delightful and low-cost form of revenge
but it offers a practical way of denying people
cleverer than you the later opportunity of reading
your private emails)
Simple science and
complex technology Science is about simple
laws. A single scientist explained the motion of
the planets and free-falling laptops. Another
discovered and explained the process of evolution
- again working alone.
In contrast to the
simplicity of scientific explanation, technology
is the work of countless thousands. No one can
point to a single individual and say "that person
produced the modern computer". Machines are the
result of new designs and solutions stacked one on
top of the other - usually until no one wholly
understands how all the pieces work together. They
are masterpieces of organized complexity.
Science's second law of thermodynamics -
which predicted my chaotic heap of broken computer
pieces - also predicts that when a system of any
kind gets complicated you have to pour in energy
and effort to maintain the complexity. It
correctly predicts that all organized systems
eventually break down and become disorganized
again. Everything - from a house to a human body,
from a bag of sugar to a spaceship - obeys this
law. Time eventually makes organized things turn
back into formless mush, and the best we can do is
pump in increasing amounts of energy to hold the
inevitable decay in check for a while.
And
now - sadly - we return to economics.
The
21st century economy is a technical device. The
modern Western economy is a designed system too,
although it used not to be. In the old days nobody
seriously tried to organize the forces of
economics. Instead everyone just sat out the bad
times scratching a living in fields and factories,
while natural forces swung the economy to and fro.
Then Western economic engineers realized
economic forces could be organized and harnessed.
They discovered that under the right circumstances
if money flows were directed in a clever enough
way they could produce an economic system that
benefited people. This has had the amazing result
that those of us who have lived inside their
increasingly complicated economy have become the
wealthiest people ever.
(So although this
article is probably published between diatribes
against central bankers, it is worth remembering
that without them almost none of us would be rich
enough to be interested in the debate.)
Nevertheless the natural laws of science
and of economics will win out. There is absolutely
no doubt that this cleverly organized and
beneficial economic system will fail; no doubt
whatsoever. The only question is When?"
The error message My old
computer reacted to its increasing complexity by
delivering me a series of error messages. It
started with "Disk read checksum error", went
through "please consult your system administrator"
(by which I think it was optimistically referring
to me), and finally offered what computer people
call the "blue screen of death", just before its
short and violent final journey.
In much
the same way there are ominous error messages
coming out of the Western economies - in the form
of the twin deficits. Every one of 100 million US
families spends $5,000 too much every year. They
are allowed to by the US government, which leaves
that money in the family's pocket while
enthusiastically spending it too.
This
money leaves the US, and is then lent back by
foreigners to cover the government shortfall. The
US will have to pay interest on this borrowed
money as well as somehow claw back over the coming
years the significant sum of $75,000 from each of
100 million US families. This is the unprecedented
extent of the US public debt.
Our central
bankers call these "imbalances" in the world
economy. They are the error messages - like my
computer's checksum - which nobody knows how to
fix any more. Perhaps governments could raise an
extra $5,000 dollars a year in tax from each
family. But that would cause a spiraling implosion
of demand. Suddenly millions and millions would be
jobless and the diminished tax take from their
employers and their salaries would leave the
public purse even worse off than it is now. So
logic dictates (to the current administration at
least) that we must look the other way - to tax
cuts that boost the economy and produce higher
gross revenues.
But although it worked for
Ronald Reagan, no one really believes this
solution either, and it certainly isn't working so
far. The truth is that the previous level of
taxation was somewhere near optimal. If we got an
overspending habit at that rate - which we did -
it would be unfixable, and debt would go up and up
until something broke.
The second law of
thermodynamics has patience. It allows us to
expend our energies and break the economic
monotony of fields and factories by organizing a
perfectly good system with a perfectly useful
output; yet, there is never a doubt the system
will eventually decay. As I was reminded by my
failing computer this is no bad time to check your
backup strategy.
Paul
Tustain is editor of www.Galmarley.comand CEO of
BullionVault.
For further information contact
enquiries@BullionVault.com
(Copyright
2005 Paul Tustain)
Speaking Freely
is an Asia Times Online feature that allows guest
writers to have their say. Please click hereif you are interested in
contributing.
