How many of you subscribe to Carmichael/Frautschi weekly updates? : LUSENET : TimeBomb 2000 (Y2000) : One Thread

Douglass Carmichael, who has been a favorite read of mine since his Westergaard post last summer, kicks out some great thought in the Y2K arena. For those of you here, have you visited his site and do you get his updates? He also brought Soros into a Y2K discussion as it relates to markets, which is something someone else here did. It was also through him that I first heard of Tainter's book, "Collapse of Complex Societies."

-- Brett (, February 23, 1999


As an example of an update, here's a clip from the most recent:

THE REFLECTIONS ON THE WEEK # 45 (doug) markets and security

"spin wars," good phrase. But not a good way to handle y2k.

Politics is like cigarettes: it works because it integrates so much. Cigarettes integrate taste, smell, the visuals of smoke and gesture, interpersonal doings ("can I have a light?") that are seductive and sexualized (cigarettes compete with sex), play with status and image, put in the hands a package and a product well made and with a real aesthetic. Then there is the nicotine and addiction. And movies help the integration.

A politics, to work, has to integrate elite's and economies and production, consumption, legitimacy, PR, mixing news and persuasion at a level that works. Indeed, that it works is primary, binding together careers, hopes, images and legitimacy in a workable milange across generations. It works to bind,rich, poor, ambition and greed, and have an ideology of benevolence. In short it must appear to the participants as a solution to life's practical problems.

I go into this because we are going to be confronted with stresses in political response to y2k. If we start with two major trends;

1. Costs of y2k will lead to the demise of weaker organizations that cannot pay the costs and this means a general narrowing of ownership, and concentration of wealth.

2. There is the contrary trend (y2k is sure dialectical for a "mere" technical problem), that large complex systems are more vulnerable to y2k, both because of internal complexities and more elaborate supplier, customer interconnections.

Those with real power, political and economic (they see each other as peers, from the government side, and as people needing control, from the business side), like effect #1 and fear effect #2.

The result is a general tendency to look for mechanisms of control, not as a very conscious plot, but as birds of a feather drawn to solutions which mutually reinforce each other, they tend to lean towards ways to justify the defense of the apparatus. The way this is likely to play out is that defense of the infrastructure will emerge as a focus of battles over legitimacy. The central argument will be that the national infrastructure is attacked by terrorists, rogue states, and such, and this justifies more spending on encryption, activity tracing and such. This will tend to weld the corporations and the government security agendas (it is plural so far) into a single coherent effort that just happens to support the trend of business mergers, corporate power, market control. This is not done so much out of malice as in trying to do a good job. You would like these people.

y2k is a trigger for this fear and security responses. As such it is dangerous to a free society. At the same time, dangerous of chaos with an over-bloated population, where y2k could turn a nation of consumers into a nation of pirates, is all too real.

World markets are in trouble. There is over production, have and have- not inequalities ( I write this from Martha's Vineyard where new homes are often gigantic ideas rendered all too quickly into material manifestations, without conscience or aesthetic or discernment of spirit), and as Business week quoting an extensive report from the Economic Policy Institute says, in the US "85% of the increase in the stockmarket since 1976 has accrued to 1% of the population." Debt is out of control, absorbing a large percentage of the wealth generated by people's work. The percentage of your rent or car that goes, not just to the obvious interest, but to the interest the producer and their suppliers pays on borrowed money to make the house, apartment or car for you, is approaching 100% of the cost. That is why, despite working much harder and with two incomes families, it is no longer middle class to own a house and send kids to college. Which means you are increasingly working to pay interest, not to pay labor or materials. The quality of life potential is absorbed by a very few individuals. (one percent of Americans are millionaires, more than one in a hundred, still 2.6 million people!)

The result is that market instability is in the air anyway, and y2k becomes a perceivable threat, both realistically (the technical situation is dangerous and too vague for the control addicts to feel comfortable with) and ideologically (the y2k transformationalists are the new commies, a position until recently held attributed to environmentalists), to the current "arrangement".

So in this context, not only do we see a need to make the current legitimacy of power and institutions seem to be working, but to attack those who would critique it. The real danger is the next step, when those desiring control start to get active in the face of perceived threats, justifying protection of financial wealth through the rhetoric of protecting the national infrastructure.

Mexico for example, with the collapse of the PRI, had a vacuum which has been filled by local groups of thugs. The same of course happened in the Soviet Union. The idea that "it can happen here", is just a cover story for the reality that it is happening here. Of course our situation is complicated enough that multiple scenarios can be unfolding at the same time.

I want to balance that with the potential in the situation for the good, which is simply that we have all learned more about our technology dependency, understood better where the basics of food water, energy and telecommunications come from, and recognized more about our mutual vulnerabilities. That is the kind of stuff that could lead to deeper resolve to make the situation better.

The responsiveness of communities is beginning to be a focal point of action. This needs careful watching. Is the old boy network organized around protecting existing assets, or moving towards more openness, participation, and reasonable reflection about how we meet our needs, material and social?


Here are excerpts from a great review of a great book, Bill Greider reporting on George Soros' The Crisis of Global Capitalism. In the Nation. (Some comments in [..]'s).

"The epic, slow-motion crisis unraveling the global economic system continues to gather momentum, taking down Southeast Asia, Japan, Russia, now Brazil. Who's next? The cross-hairs are targeting Germany and other European economies, China and the irrational exuberance under way in the US stock market. Since our political leaders refuse to face this crisis honestly and explain the confusing drift of events [exactly like y2k, it's beyond them, since they are trying to manage the situation rather than explain it], citizens must turn to unauthorized loners like George Soros to understand the portents for global catastrophe.

" As he has done before, the financier explains with urbane detachment and elegant abstraction the actual secret of his success: When others became enthralled by Milton Friedman, Soros remained the confident nonbeliever. He always saw the illogic of market theory and regularly bet against it.

"I would urge patience and respectful attention to what this man is saying, all of it. It is an important book for this confused moment in economic history, and Soros is a rare voice, willing to risk his own legendary status and speak directly, authentically, to the crisis before us. Put aside any residual biases; you will learn much from him.

"We have arrived at a watershed in economic thought. The reigning conservative orthodoxy is breaking down, crumbling under the weight of its own contradictions, smashed by the realities of disorder and suffering that laissez-faire principles are generating. Soros fully understands the intellectual origins of "economic disintegration," while US governing elites and the economics profession remain in denial.

"His brooding sense of alarm ought to invigorate anyone who has shared skepticism about the "market fundamentalists," as he calls them. His reasoning can equip those who have been on the political defensive for a generation, freeing them to think anew about refashioning the future in more equitable, humane, progressive terms.

"What Soros is ambitiously trying to construct is a post-Friedmanite way of understanding the world and our common moral responsibilities. He is explaining why the utopian idea of self-regulating markets was always bound to fail, why it must be forced to yield to society and its larger values, how perhaps we can accomplish this in both economics and politics. "A society without social values cannot survive and a global society needs universal values to hold it together," he writes.

"'It is time to recognize that financial markets are inherently unstable," Soros says. "Imposing market discipline means imposing instability, and how much instability can society take?' Thus, his gloomy outlook rests upon the assumption that if the global system is not torn apart by deflation or depression, it will be undone by political rebellion.

"Soros muses: 'I can already discern the makings of the final crisis.... Indigenous political movements are likely to arise that will seek to expropriate the multinational corporations and recapture the 'national' wealth. Some of them may succeed in the manner of the Boxer Rebellion or the [original] Zapatista Revolution. Their success may then shake the confidence of financial markets, engendering a self-reinforcing process on the downside.'

"Much of the philosophy underpinning these prophecies will seem familiar if one has read The Alchemy of Finance or other books in which Soros has explained the illusions and fallacies of the "efficient market" theory. What fortifies this discussion is his effort to sketch a broader historical framework for the social understandings that are now pushed aside by the unregulated marketplace. If you approach this book with overwhelming skepticism, you may be surprised to find that this financial titan expresses basically hopeful and progressives beliefs about humanity.

"I won't attempt to summarize, but Soros's perspective might be crudely described as social democratic with libertarian inclinations. He believes in the potential of individualism and maximizing freedom-- the core values of Friedman's marketplace--but he demonstrates why these will lead only to atomizing conflict and crisis without an overarching framework of common values and collective action. The market cannot possibly defend (or even recognize) those values unless forced to do so.

"Unlike the facile cheerleaders for globalization, Soros insists on the existence of universal human values. He sees no difficulty in identifying "a universally valid code of conduct" that could be applicable across nations and cultures, despite differences of race, religion, wealth and poverty. These views, he agrees, may sound like naive idealism. "Idealist I may be, but naive I am not."

"Among other things, what Soros is suggesting are the outlines for a global political strategy. Build an alliance of democratic nations, rich and poor, in which all roughly agree on the common values of free speech, freedom of assembly and religion, the right to human dignity. Then begin to recapture the failed international institutions, like the United Nations, in which tin-pot dictators and totalitarians are treated as equal partners. This alliance would accept the need for patience--we are not all on the same page of history and development--in order to nurture those countries struggling in the progressive direction (and to exclude those that trample on our shared values).

"The crucial point, however, is that Soros proposes a "new architecture" far beyond anything being discussed now in the timid debates among governments. He envisions the reintroduction of national controls that would dampen speculation and the "hot money" of short-term lending, impose new regulatory obligations on both banks and hedge funds, and extract penalty costs for the errant behavior of creditors, instead of the usual bailouts when they get into trouble.

"Soros says nothing about the crucial question of governance. Why should any citizen, here or elsewhere in the world, be expected to trust a remote and powerful governing institution that narrowly defends the values of finance and takes its cues from major financial players? In an interview for Rolling Stone, I asked Soros this question and he seemed mildly puzzled by it. His answer suggested a patrician's shallow grasp of democracy.

"I don't think the broad swath of Americans are sitting in a very good position to control the credit stores in the world," he replied. "I mean, it's a pretty specialized and technical thing."

"In short, he wants a stable financial system and an equable social order and believes they can emerge, but he is not a small-d democrat and doesn't think like one. Given his personal history and enormous power, it's perhaps unrealistic to expect otherwise.

"His civic values are confirmed by the hundreds of millions he has devoted to fostering democratic reform movements in Eastern Europe and the Open Society Institute here in the United States. Soros finances such unpopular causes as dismantling the insane "war on drugs." He provides seed money for campaign-finance reform advocates and many other progressive issues.

"When I asked if he feels personal tension between his social values and his enormous wealth, Soros replied: "I have spent practically my whole life trying to reconcile these considerations.... As a competitor or as a participant [in financial markets], you look out for your individual interests. But as a citizen, or as a member of society, you really should put the interests of society ahead of your own personal interests. And you should do that--and this is crucial-- even if other people don't do it."

-- Brett (, February 23, 1999.

One significant factor which has led to the current wealth concentration levels is the US tax code under which individuals (all individuals, from the garbageman to the brain surgeon) pay a much much larger percentage of all taxes while big business (roughly described as the S&P 500) pays a much much smaller percentage of all taxes as compared to 40 years ago. The management and insiders in the S&P 500 are today's nobility. They rule the world and they have taken control without shedding a drop of blood. The shifting of tax burden has been a fairly incremental process, so most people are numb to the situation. The voters could change this situation in one election cycle if they so desired, but that won't happen in the near future. As a group we taxpayers are as content as an old man taking a couch nap on Sunday afternoon. Something will rouse us one of these days. Maybe y2k. If not, it will be something else.

-- Puddintame (, February 23, 1999.

Soros is an interesting person. On one hand, he looks toward a day in which specific, broad, basic principles can be shared across national boundaries. I won't even attempt to show where this will founder beyond pointing to "freedom of religion" and asking when anyone has heard a Shiite Muslim suggest that there could be a case for allowing the Jewish faith to be followed in his country; or a Palestinian, for that matter.

On the other hand he has the patrician's blithe expectation that the great unwashed will accept and acceed to the manipulation of markets, restrictions on products, goods, and services which will make the "Blue Laws" of the 30's, 40's and 50's look like gossamer spider webs. All of which he expects to be administered by his kind of people. That is, the "Right" people, the wealthy and "properly" schooled, who understand these things. This is a call for a return to the society so ably described by F. Scott Fitsgerald and his cronies in all of the "Gatsby" clones in literature.

Mind you, as I approach 50 years old, I can understand exactly what the desire is, and were I to be among the wealthy and "well schooled" (which I am most definitely not) I would understand and applaud the effort. This is another thinly veiled attempt to keep those who are among the technical section of society out here working with our oilcans, in our striped hats and striped overalls, continually oiling the gears and wheels of society, so the rightful business of galas, debuts, and "Society" can continue unabated, under the starlit skies and parasols of an eternal summer of 1941, at the beach club of the Cavalier in Virginia Beach, on the beach and in the houses of Martha's Vinyard and Newport RI, and on the beaches of Hollywood.


< / unintended rant mode>

Chuck, who apparently hasn't seen a soap box he couldn't climb on and love

-- Chuck, night driver (, February 23, 1999.

I wouldn't want to miss Carmichael's commentaries on Y2K. He circulates among some of the power centers in D.C. and doubtless hears a lot of things that don't make the papers. He can be a litttle opaque at times, and makes a few typos -- but he's worth reading.

-- Tom Carey (, February 23, 1999.

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