Musings Report #7 2-15-14 The Infrastructure of Opportunity

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For those who are new to the Musings reports: they are basically a glimpse into my notebook,the unfiltered swamp where I organize future themes, sort through the dozens of stories and links submitted by readers, refine my own research and start connecting dots which appear later in the blog or in my books. As always, I hope the Musings spark new appraisals and insights. Thank you for supporting the site and for inviting me into your circle of correspondents.

The Infrastructure of Opportunity

One of my "jobs," as it were, is to read a wide range of material, from articles to academic papers to books (much of it recommended by readers). Like many others, I've been trying to get some sort of handle on the emerging markets which are currently melting down in currency and/or political crises (unsurprisingly, the two go together as the legitimacy of the currency and the regime are causally linked).

Reading surveys on the political economies of Turkey, Indonesia, Vietnam, etc.--the nations which were grouped in all sorts of fanciful acronyms such as MIST (Mexico, Indonesia, South Korea and Turkey) when they were all growing rapidly--I am struck by one common factor in their malaise/deceleration: corruption.

And what is corruption but the inability to limit those plundering the commons or exploiting others for their own private benefit? Corruption appears to be a common ill across the ideological spectrum (offering yet more evidence that ideologies do not provide answers, they are simply screens behind which corruption is free to expand) but also the emerging-developed-economies spectrum as well: corruption is an active cause of systemic stagnation in Italy and Japan as much as it is in Indonesia or Cambodia.

There is an infrastructure that enables corruption--it is not just a vacuum. And that infrastructure of corruption inhibits the rise of an infrastructure of opportunity. The opportunity to join the predation and parasitism of corruption is not a productive opportunity, nor is it one open to all.

I have also been struck by the necessity for physical and digital infrastructure that enables the expansion of opportunity. Even in Europe, expansion of roadways that enable trade has been critical to the growth of opportunity in nations such as Poland, where the aggregate length of highways grew 5-fold from 2000 to 2013. Turkey added 10,000 miles of highways in the same time span, and roads expanded by 37% in the Greater Mekong Subregion of Laos, Vietnam, Cambodia and southern China.

But physical infrastructure is only one piece of the infrastructure of opportunity: literacy, food security, enforced ownership rights, stable state policies and access to broadband digital networks are equally important.

We tend to take all this infrastructure for granted, forgetting that it took several hundred years to construct not just roadways but property rights, means of settling disputes, libraries, and so on.

If we compare these "still struggling to establish the basics" economies with those of the U.S., Japan, Western Europe, South Korea et al., we cannot but be struck by the immense opportunities that are open to every resident of these developed nations, no matter how poor they might be in cash or assets.

The opportunity to learn is perhaps the most broadly distributed it has ever been in human history, yet we find a curious disinterest and lack of motivation in broad swaths of developed-world populaces. Access to knowledge is close to 100%, while the opportunities to put that knowledge to work are less evenly distributed. My goal for the community-based economy is to widen the opportunity to contribute to 100% as well.

Summary of the Blog This Past Week

We Can Be Certain of This 2/15/14

Certainty, Complex Systems, and Unintended Consequences 2/14/14

Greed + Cartels = U.S. Sickcare/ObamaCare 2/13/14

Doomed If We Do, Doomed If We Don't 2/12/14

Our Middleman-Skimming Economy 2/11/14

America's Make-Work Sectors (Healthcare and Higher Education) Have Run Out of Oxygen 2/10/14

I think the entries on certainty are some of my more insightful work, though traffic doesn't suggest they were particularly popular. Fortunately popularity doesn't influence what I write, which may be the source of whatever audience the site has garnered....

Best Thing That Happened To Me This Week

I managed to dredge up the willpower necessary to write 6,000 words about the community-based economy. Oh, and we made another home-made pizza....

Market Musings

As I noted on Friday, certainty is much more compelling that hedged hesitancy, but I find no source of near-term certainty in global or U.S. markets.

It's clear that the Fed's tapering, i.e. reducing the flood of free money that was unleashed to seek a higher return in emerging markets, has triggered a trend reversal in these markets. The risk-on trade (basically the theory that when credit is essentially free and unlimited, a greater fool is always on hand to buy a dodgy asset you're dumping for a profit) has switched to risk-off, and now the hot money is fleeing inflated emerging markets as it always does at the end of a credit-bubble.

U.S. markets are benefiting as the safe haven for hot money. But there also seems to be a rising confidence that the Yellen Fed will soon reverse course and increase the flow of free money (quantitative easing) as the global economy slows.

But this is not as unproblematic as it once was, for reasons I mentioned this week: as Federal deficits are shrinking rapidly, if the Fed didn't reduce its $1 trillion a year bond-MBS-buying program, it would soon end up owning the entire Treasury market. It's not too difficult to foresee unintended consequences of that unprecedented ownership, so the Fed's path to limitless liquidity and QE is now clouded.

This short article, Five-year Market Review: Thinning Participation, More Questions Than Answers, makes a strong case that many markets are rolling over or have already rolled over. Can a handful of markets buck this sea change and keep rising for another few years, even as the Fed tapers the flood of free money?

It's an open question, but it seems likely that the risk-off dominoes falling around the world will eventually topple the big dominoes still standing (see video links of this dynamic in From left Field).

From Left Field

Information-Commodification
Play and game are fully incorporated into the engines of control and value. We are all supposed to be ‘playful’ and ‘creative’ all the time. Which basically means this: nobody knows how to get maximum value out of information-based work, so you have to figure it all out yourself, ‘creatively’, but the results will all be measured and you will compete with all your collaborators for the prizes — whether real or imaginary.

We’re all servants of the most boring and clueless ruling class in a century.

Avant-gardes, on the other hand, are always interesting, but they are not really about art, whatever some silly art school textbooks might say. Avant-gardes are about media, about social relations, about property-forms, but they are only ever incidentally or tactically concerned with art. The most interesting ones around at the moment might be about pharmacology or horticulture or even ‘business models’.

The Physics of Dominoes (via Manoj) (short video) Amazing demonstration how a small force can topple enormous systems...

The largest toppling dominoes (short video)-- think "Chinese shadow banking and housing"....

China's Households "Massively" Exposed To Housing Bubble "That Has To Burst" -- but we've been reassured 10,000 times that it cannot burst....

Housing bubble forming in London, warns Ernst and Young -- file under "DUH!" -- empty "investment" million-pound flats abound....

Take a street and build a community: Shani Graham at TEDx Perth

Dark lands: the grim truth behind the 'Scandinavian miracle' -- this kicked up a lot of dust in European media....it seems to mix reporting with obvious exaggeration that borders on parody....

On Being an Illegible Person
"My temporary nomadic state is just one aspect of a broader fog of illegibility that is starting to descend on my social identity. And I am not alone. I seem to run into more illegible people every year. And we are not just illegible to the IRS and to regular people whose social identities can be accurately summarized on business cards. We are also illegible to each other. Unlike nomads from previous ages, who wandered in groups within which individuals at least enjoyed mutual legibility, we seem to wander through life as largely solitary creatures. Our scripts and situations are mostly incomprehensible to others."

Study: Nearly half of Americans living in “liquid asset poverty” -- cash will be king, and sooner than most imagine....

View From the Bottom of the Energy Barrel

Photo essay: The colorful motorbike girl gangs of Morocco (via Katharine K.)

The hawk and the squirrel (via U. Doran) beautifully filmed portrayal of the great narrative of the animal kingdom-- the hunter and the hunted (and we are of course both, but rarely at the same moment)

"All over the place, from the popular culture to the propaganda system, there is constant pressure to make people feel that they are helpless, that the only role they can have is to ratify decisions and to consume." Noam Chomsky

Thanks for reading--

charles