Monthly Archives: January 2008

An Introduction to the Microcosm.

It seems an entirely apposite time to post my first blog – a day when reality appears to have caught up with the hallucinated economy, as predicted by so many Cassandras – to the long-standing derision of the Economist brigade.

As I write, the world’s “economy” is tanking – and doing so under the implacable gaze of the mathematics. So many pixelated pounds sterling and dollars which exist only in electron form are vanishing from screens and ledgers like a wind-scoured heap of Ponzi scheme promissory notes once the issuer has cut & run.

I’m no mathematician, but I don’t think you need to be to understand a few, inescapable, facts. I often wonder at the sheer irrationality, the religion-like ‘faith’, the adherence to fantasy which grips supposedly intelligent people when “economics” is the subject. People who like to imagine themselves as hard-faced realists are suddenly transformed into people who may as well believe that Harry Potter represents some kind of accurate simulacra of the way the world is.

For these are people who believe “economic growth” can go on forever. Or, at least, pretend to believe this whilst they salt away their own fortunes to buffer them from human reality. When faced with such people – and you try to explain to them the pretty simple concepts of entropy, the Second Law of Thermodynamics, the inescapable limits upon exponential growth within a closed system – their agitation becomes so palpable that they may as well be ‘speaking in tongues’ for all the relationship to facts born by their babble. Mercifully, such exchanges are always short. FT Man invariably changes the subject as soon as he possibly can.

But this time physical reality may impose its presence as surely as running into a brick wall would. Even if the “economy” can be patched up and kept afloat – just long enough to permit a few more lifeboats full of ‘suits’ to escape – it’s going under – sooner or later. Many people on the Left view these events with a certain schadenfreude – even glee. But, as is always the way in such things, it will be the world’s poor who really suffer – essentially 99% of the human race.

For all the talk of market “reality”, the world’s finance system is a profoundly irrational construct. It is no more based upon demonstrable and repeatable examination under the laws of physics than the nostrums of a UFO cult in Wichita. Today’s ‘market economy’ is founded – and is utterly dependant – upon an article of faith. Forget all the gobbledegook, the ‘specialist’ language, the Orwellian Newspeak of the ‘experts’. The article of faith is easily understood. It is this: a “belief” that all the money owed in the world can, and will be, paid back. If not by the original debtor – then someone else who picks up the debt. That all those pieces of paper and all those clusters of electrons floating around the digital ether will ‘come good’ – that they represent something ‘real’. But of course – in the real world – all they represent are loans upon loans upon loans – debts upon debts upon debts. From people with a ‘slate’ at the local grocery store, to the millions of people with maxed-out plastic, right up to the big boys in the banking world and the craven governments that do their bidding – all are just at different levels in The Great Ponzi Scheme that is the globalised economy.

I live in the British Channel Island of Jersey (that’s ‘old’ Jersey) and we are – allegedly – one of the very richest places on Earth. (GNI per capita in 2006 $63,000) A small, self-governing tax haven, the ruling elite of which has been permitted, over the centuries, a bacchanalian licence to generate wealth with little regard to the exigencies of the external world – privaterring, feudal abuse of the local peasants, knitting ‘jerseys’, making boats and slave trading – though this last “economic” activity gets remarkably very little mention in most of the self-aggrandising fantasies engaged in by the local elites who write the island’s ‘history’; cod-fishing is the preferred focus on Ye Old Economy. So much more ‘respectable’.

I call this blog “thoughts on the microcosm” because Jersey can be seen as such; a world in miniature, where most of the challenges which face developed economies are found and can be studied before extrapolation to the ‘real’ world. And what is particularly useful about the Jersey experience is that we are so much further down the road of ‘advancement’, of ‘economic growth’, of ‘development’ than pretty much anywhere else on the planet.

GNI of $63,000 per capita? Which government wouldn’t kill for figures like that? (Ok, so a lot of them do kill in efforts to achieve such ‘wealth’.)

So – France, Ireland, Switzerland – even the USA – look at us in Jersey. We have arrived. We have broken the trail – and here we stand – in the sunny upland of wealth and ease. According to economic orthodoxy we “have made it”. The financial envy of other economies throughout the world.

This is the high destination all the rest of you are yearning after.

So how do things look from up here? Was it worth the effort?

It would be obtuse to claim that there are not a number of great advantages available in Jersey – even for the abused, struggling migrant labour and the rest of the wage-slaves. Unlike in the USA, if you have a myocardial infarction the paramedics won’t deliver the coup-de-grace by demanding to see the colour of your plastic before treating you. Secondary health care is free-at-point-of-delivery; the education system is better than most places; by-and-large the island is a safe place.

But look beneath the gleaming surface – and what do we find?

I’ll leave that question for the next post.

Suffice it to say that Jersey’s economy is wholly dependant upon the global financial system – and we all know right now just how secure and wise a bet that was.

And this is not to mention that the fact that “rich and successful” Jersey would be deemed insolvent under the application of certain modern accounting standards.

Of course, politicians aren’t supposed to say things like this. The temporal framework in which we usually operate requires that we carry on selling fantasies to the voting public – at least until after election time.

But as we are to undergo the misery of bursting bubbles and the vanishing of economic mythology, I am going to take my consolation in saying “I told you so.” When the 100,000 population of this 45 square-mile rock discover that the “just in time” food ships aren’t coming several times a week any more; when the shelves are bare; when they realise that their average family home, which cost them £421,000 – plus the pixelated mortgage – is actually worth a fraction of that once the economically realistic ‘carrying-capacity’ of the island hits home – I think people are going to be angry – very angry.

Being Green politically, I’ve always had unusual political views – oh, you know, stuff like believing in the laws of physics, understanding the mathematical inevitability of the collapse of Ponzi schemes, recognising that billions of pixelated promissory notes do not equal a sound economy and that meaningful happiness is not to be ‘purchased’ in a Porsche or a pair of Jimmy Choos.

However, my mainstream, orthodox political colleagues in the Jersey parliament – my fellow ‘States members’ – are, I suspect, going to find the forthcoming paradigm shift a good deal harder to take than me. And so, I suspect, will their voters.

We sometimes speak metaphorically about ‘heads on spikes’ when we imagine a reckoning; people getting fired – or politicians loosing their seat. Now it does not take a vast leap of imagination to see a time when referring to ‘heads on spikes’ maybe no mere metaphor.

Fasten your seatbelts and assume the crash position. This epoch is about to land.

Senator Stuart Syvret.

Book of the Week:

A Mathematician Reads the Newspapers, by John Allen Paulos.

Joke of the week:

Q: Why did the economist drown when attempting to ford the river?

A: He had calculated that it was an average of three feet deep.