charles hugh smith-The Way Forward

Even those at the top of the neofeudal debtocracy know our economy and political order need real reform. Behind closed doors, they will discuss this with others in the Power Elite and gloomily shake their heads.

The usual reasons why real reform is impossible are duly trotted out: political stalemate/gridlock, the power of vested interests, etc.

The real reasons are deeper than economics or politics. Humans have been selected to assess risk with two biases:

Given the precariousness of daily life for hunter-gatherers, this makes perfect sense. The hunter-gatherer lifestyle places a premium on acquiring food for today and accepting the background volatility and insecurity of constant movement as the price of the longer-term security gained by accessing multiple food sources.

Why risk one's life for a payoff in the distant future, when one might not live to collect the payoff? The lower-risk strategy is to keep moving and exploit the occasional windfall along the usual routes between waterholes, fruit trees, hunting grounds, etc.

2. One in the hand is worth two in the bush, i.e. protecting what wealth and power is in hand is more important than risking them on a potential improvement.

We can visualize this valuation of risk and security as a see-saw (teeter-totter): those with much to lose are naturally risk-averse, while those with little to lose and much to gain have a substantial appetite for risk that could pay off big.

Our problem is that the security provided by institutions (in my nomenclature, fiefdoms) and state-enabled cartels is so great that no risk is worth threatening the perquisites, power and security of these organizations. What possible benefit is large enough to offset the risks that reform could diminish the budget and power of the organization and its leadership?

The answer is: none. There is no conceivable payoff large enough to offset the guarantees offered by the Federal government, which can always borrow (or print, if the rules were changed) the money needed to meet its obligations.

In other words, the state-cartel debtocracy has essentially zero incentive to risk real reform and every incentive to stonewall, suppress or block any real reform as a potentially dangerous threat to the organization's security.

This explains why all the supposed reformations of our broken system are mere simulacrum reforms, facsimiles of reform that satisfy the PR need for some sort of going through the motions effort that leaves the existing cartel-state power structure intact.

The only thing that can modify this risk calculation is the certainty that doing nothing will lead to the complete collapse of the institution. It is only when it becomes painfully obvious that there is no way left to suck enough dollars from the Federal/state/county trough to keep the Status Quo intact will the managers of public institutions and state-enabled cartels risk reform.

Given the systemic lack of accountability and market discipline, it will be too late for most of these sclerotic, self-serving organizations. Real reform will trigger a collapse, as the institutional culture has lost adaptability and the ability to downsize input (headcount and costs) while increasing output.

Institutions have an innate tendency to expand even as they lose sight of their real function. If the function is complex and the political protection strong, the momentum behind these tendencies increases.

Individual contributions and institutional success are both difficult to measure in large bureaucracies, and it is tempting to define success by easily achieved metrics that reflect positively on the management. As the organization loses focus on its original purpose, personal aggrandizement, security and advancement become the focus of departments and individuals.

The core purpose of the institution is given lip service but has been replaced with facsimiles of managerial expertise and bureaucratic infighting over resources. Easily gamed metrics are substituted for actual success.

As noted many times here, people who have no skin in the game behave quite differently from those who face consequences--this is called moral hazard.

Bureaucracies tend to institutionalize moral hazard: those managing the institution’s departments rarely suffer any personal consequence when the institution fails to perform its function. Funds are spent, but the individuals spending the institution’s money suffer no losses should their policies result in failure.

By breaking the institutional purpose into small pieces whose success is measured by easily reached targets, the institution can be failing its primary function even as every department reports continued success in meeting its goals. Repeated failure and loss of focus erode the institution even as those in charge advance up the administrative ladder.

The disconnection between the failure to fulfill the institution’s original function and the leadership’s rise feeds cynicism in the institution’s employees and erodes their purpose and initiative. Soon the institutional culture is one of self-aggrandizement, gaming of departmental targets, protection of budgets and a collapse of the work ethic to the minimum level needed to avoid dismissal.

Since the collapse of the neofeudal cartel-state debtocracy is inevitable, I am an optimist. I wrote Survival+ and Resistance, Revolution, Liberation to not only illuminate the roots of institutional failure but to lay out guidelines for bypassing those institutions as they devolve and collapse.

In sum: absolutely nothing within the Status Quo can possibly be truly reformed until the default option of doing nothing will guarantee collapse.

Recommended: Abnormality Bias (The Burning Platform/Jim Quinn)

Things are falling apart--that is obvious. But why are they falling apart? The reasons are complex and global. Our economy and society have structural problems that cannot be solved by adding debt to debt. We are becoming poorer, not just from financial over-reach, but from fundamental forces that are not easy to identify or understand. We will cover the five core reasons why things are falling apart:

1. Debt and financialization
2. Crony capitalism and the elimination of accountability
3. Diminishing returns
4. Centralization
5. Technological, financial and demographic changes in our economy
Complex systems weakened by diminishing returns collapse under their own weight and are replaced by systems that are simpler, faster and affordable. If we cling to the old ways, our system will disintegrate. If we want sustainable prosperity rather than collapse, we must embrace a new model that is Decentralized, Adaptive, Transparent and Accountable (DATA).
We are not powerless. Not accepting responsibility and being powerless are two sides of the same coin: once we accept responsibility, we become powerful.

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