Globalization was billed as the inevitable triumph of laissez faire economics - a system so perfect that it would survive until the "heat death" at the end of the universe. Well, looks like the universe of the "masters of the universe" came to an end a few billion years early. In fact, post-Cold War globalization (from the founding of the WTO in 1994 to the crash of 2008) barely lasted longer than the Third Reich (1933-1945).
Is there a way to explain this planet-scale trainwreck to Joe Sixpack in a way that makes him want to demand policies that will do it right next time instead of doing it all over again? It depends on whether Joe understand how an air-conditioner works. Follow me below the fold into the land of thermodynamics.
One of the favorite metaphors for the free market is "the engine of growth". And, up until the wreckers got their hands on the government in 1980, it sort of was a true metaphor. Everyone, from the first to the fourth world economies, was growing in a regulated economy with reasonable tariff barriers. Sound investments were actually improving the standard of living. Yes, the oil crises showed that we had an overdependence on oil; but we were well positioned to deal with that in 1975 (as we are not today).
The Air-Conditioner Economy
But, in 1980, there was a sea change in the way our economy was structured. We saw the "engine" reconfigured into an "air conditioner". (If you don't know how an air conditioner works, see the ENDNOTE.) That is, the motor power of the economy was devoted not to productive work, but to endlessly circulating paper assets in a closed financial economy, expanding and contracting monetary flows to various economic sectors to the net effect of decreasing the entropy of the financial elite by dumping that entropy onto everyone else.
In this metaphor, the unusable waste heat (entropy) dumped by the A/C corresponds to the unusable waste production and wasted human lives dumped into the non-elite economy to turn raw materials into profits at the highest possible rate.
The rich live inside the air conditioned house, enjoying all its comforts. The rest of the planet lives in a perfectly-insulated room attached to the A/C output vent where it gets increasingly hot. We, the non-rich workers, are the compressor that runs the rich's A/C. We do the work that lets them compress the profits into stocks and bonds. Then, they "blow bubbles". That is, they dump those profits into a "partial vacuum" and ride the momentary bounce that that asset injection creates. It used to be called "pump and dump". I call it the air-conditioner economy.
The third world is where the plumbing of our globalized A/C system is most obvious. Here are the real "motors" - the sweatshop and maquiladora factories that actually make the real goods that keep the engine of paper entreprenuerialism turning over. In these third world places, the workers get barely enough to stay alive. The profits are held by the financeers who put together the deal, financed the factories, and control the export trade. The hermetically-sealed flow of "coolant" from the motor room back to the A/C elite quarters is too blatant to miss.
The inevitable breakdown
The only problem is, contrary to laissez faire principles, the economic world (like the physical world) is finite. It can only absorb so much entropy. How long can you run your A/C if it is dumping its heat into a small room full of people before you started to kill the folks in the small room? Looks like the answer is about 12 years.
The warning signs have been there for a while in the increasing indebtedness of everyone. That debt represents the rich handing out bottles of cold water from their nice cool refrigerator to keep the engine running. What happened in 2008 was that the engine couldn't run the refrigerator hard enough to chill enough water to keep the engine running. Basically, the A/C motor just seized up due to overheating. (Duh - 40% of all US corporate profits were in the financial sector last year? Who was doing the real work?)
The solution, of course, is to reduce the load on the motor - by transferring some people from the A/C house to the motor room. This simultaneously reduces the volume you need to cool and increases the space outside for the entropy to disperse into. Big win if you remain inside; bigger loss if you get pushed out.
In this round of the A/C economy's perpetual game of musical chairs, those people would be the white collar middle class. Boy, are they surprised to find that their "fortunes" and "jobs" (like real estate broker, outsourcing manager, etc.) have evaporated as fast as water in the desert. The middle class joins the working class, which was pushed out in the 1980s and is today watching their pensions vaporize. The poor barely got to stand in the cool lobby in the early 70s, before being thrown right back into the heat. Today, the poor aren't even people. They have been turned into raw material - prisoners for the growing, and growingly privatized, prison-industrial complex.
Sometimes, the metaphorical "dropping dead in a hot room" becomes real, as in India where an epidemic of farmer suicide has followed in the face of the corporate double whammy of patenting ancient seed varieties and providing "terminator gene" crop seeds.
The "musical chairs" nature of the A/C economy is implicit in its acceptance of a "closed" financial economy. The second law of thermodynamics implies that the engine must slowly run down - hence the ever-shrinking footprint of a decent middle class life around the world.
Conclusion
The economy's out of control. Money just doesn't need human beings anymore. Most of us only get in the way...People lived before money was invented. Money's not a law of nature. Money's a medium. You can live without money, if you replace it with the right kind of computation.
- Bruce Sterling, "Distraction"
If the middle class doesn't want to join the other sweatshop slaves, it had better start pressing to dismantle the A/C economy and replacing it with something ecologically and socially sound. They can start by demanding nationalization of the super-banks and real, as opposed to toothless, regulation of the financial community. Then, they need to invest in the real economy - especially in alternative energy.
Everyone, except the masters of the universe, knows that and has a major incentive (looming capital-d Depression) to do that. But the MOTU are still calling the shots in Washington, and on the corporate media (e.g., this Santelli ass-clown). I don't know how to do it; but we have to get the middle class to dig in its heels; or we will all be in a sweatshop and on a planetary global warming death-trip soon - and that's if we're lucky.
ENDNOTE
The economy is like a hungry, growing organism. It consumes low-entropy natural resources such as trees, fish and coal, produces energy and useful goods from them, and spits out high-entropy waste such as carbon dioxide, mine slag and dirty water. Mainstream economists are mostly concerned with the organism's circulatory system, how the energy and resources can be efficiently allocated, while tending to ignore its digestive system...the sources of the resources that the organism consumes and the sinks into which it deposits waste are ignored. Effectively, economists are assuming they are infinite. Because of this, they recognise no limits on the capacity for economic growth.
- Herman Daly, "Economics blind spot is a disaster for the planet", New Scientist, 15 Oct 2008.
The original version of the above quote has been around, in one form or another, since Mr. Daly published "For the Common Good" in 1993. It has bounced around my mind until it emerged as the air conditioner analogy:
http://en.wikipedia.org/...
http://en.wikipedia.org/...
liquid refrigerant passes through the metering (or throttling) device where its pressure abruptly decreases. The decrease in pressure results in the flash evaporation and auto-refrigeration of a portion of the liquid (typically, less than half of the liquid flashes). The cold and partially vaporized refrigerant travels through the coil or tubes in the evaporator. There, a fan circulates room air across the coil or tubes, and the refrigerant is totally vaporized, extracting heat from the air which is then returned to the food compartment. The refrigerant vapor, now slightly superheated, returns to the compressor inlet to continue the thermodynamic cycle.
- http://en.wikipedia.org/...