- Is the inversion of the yield curve the keening of the banshee at midnight?
- Are recessions supposed to happen in order to cleanse the system of dysfunction?
- What kinds of places might be laid waste by an economic depression?
- Are places that voted for both Obama and Trump doomed?
- Is debt a time bomb that explodes in an economic downturn?
- Micromanaged systems tend toward long-term fragility
- An index of economic freedom "heatmap"
- A "democracy index" map
- Is there too much democracy in the world relative to growth?
- North Korea now has a market economy
- Do rich and poor countries have different kinds of resilience?
- Mild stressors
- Moderate stressors
- Catastrophic events
- The 1258 Mongol sack of Bagdad represented the failure of a complex, open system
- The USSR's survival of WW2 was demonstrated the resilience of a simple, closed system
- This theory needs serious supplementation
- Cultural and social openness and complexity need to be brought into the equation
- Tolerance without acceptance is better than harmony
- Societies that value and enforce social harmony tend to be very clean
- Radical utopian ideals find their origins in a conservative ethos
- Maps of tolerance
- Who exactly is doomed in the coming crash?
- What will be the consequences of populism?
- The complex, closed society would be most vulnerable of all
- What is to be done?
Is the inversion of the yield curve the keening of the banshee at midnight?
A "yield curve" is a graph that shows what interest rates are expected to be at different points in the future.https://en.wikipedia.org/wiki/Yield_curve
In finance, the yield curve is a curve showing several yields or interest rates across different contract lengths (2 month, 2 year, 20 year, etc. ...) for a similar debt contract. The curve shows the relation between the (level of the) interest rate (or cost of borrowing) and the time to maturity, known as the "term", of the debt for a given borrower in a given currency.Usually, long-term rates are higher than short-term rates.
The U.S. dollar interest rates paid on U.S. Treasury securities for various maturities are closely watched by many traders, and are commonly plotted on a graph such as the one on the right, which is informally called "the yield curve".[2] More formal mathematical descriptions of this relation are often called the term structure of interest rates.However, sometimes long-term rates will become cheaper than short-term rates.
This happens when investors become worried about the future.
An inverted yield curve occurs when long-term yields fall below short-term yields.This can be a sign that the economy is entering a recession.
Under unusual circumstances, investors will settle for lower yields associated with low-risk long term debt if they think the economy will enter a recession in the near future.
https://www.forbes.com/sites/bradmcmillan/2019/11/13/the-yield-curve-has-un-inverted-now-what/#252368783866
When investors decide that trouble is ahead, and the yield curve inverts, they tend to be right. The chart below subtracts 3-month rates from 10-year rates. When it goes below zero, the curve is inverted. As you can see, for the past 30 years, there has indeed been a recession within a couple of years after the inversion. This pattern is where the headlines come from, and they are often accurate. We need to pay attention.
Another scary thing is that historically, the yield curve recovers prior to the recession.
If you look again at the chart above, just as the initial inversion led the recession by a year or two, the un-inversion preceded the end of the recession by about the same amount. The un-inversion does indeed signal an economic recovery—but it doesn’t mean we won’t have to get through a recession first.
In fact, when the yield curve un-inverts, it is signaling that the recession is closer (within one year based on the past three recessions). While the inversion says trouble is coming in the medium term, the un-inversion says trouble is coming within a year. Again, this idea is consistent with the signaling from the bond markets, as recessions typically last a year or less. The recent un-inversion, therefore, is a signal that a recession may be closer than we think, not a signal we are in the clear.The sobering economic news does not end there.
There have been dire warnings that because of all the debt that has built up over the 2010s, the USA is headed toward the worse downturn since the Great Depression.
There may be "good" news on the horizon, however.
Recessions may be like forest fires, which are both natural and necessary.
If you successfully fight a forest fire, it makes the next forest fire much worse because of the buildup of flammable mass.
This raises a really tough question.
Are recessions supposed to happen in order to cleanse the system of dysfunction?
https://mises.org/library/why-we-need-recessionEconomic downturns only correct the aberrations and excesses of a boom. The benefits of recessions include:
- Sclerotic structures in the labor market are broken up and labor costs decline.
- Productivity and competitiveness increase.
- Misallocations are corrected and unprofitable investments abandoned, written off, or liquidated.
- Government mismanagement of the economy is exposed.
- Investors and entrepreneurs who were taking too great risks suffer losses and prices adjust to reflect consumer preferences.
- Recessions also allow a restructuring of production processes.
At the end of the corrective process, the foundation for a renewed upswing is more stable and healthy.If productivity rates have been relatively low as of late, it could be due to the lack of a recession and its cleansing effects.
There is talk in the media that with the correction of the yield curve, the world just dodged a recession worse than any recession in history.
But if the world really did dodge such a severe recession, does this only mean that the next economic downturn will be on par with the Great Depression?
What places might be laid waste by an economic depression?
Are places that voted for both Obama and Trump doomed?
Within the USA, the most economically desperate counties are supposedly those that voted for Obama and then later Trump.https://www.washingtonpost.com/graphics/politics/2016-election/obama-trump-counties/
Is debt a time bomb that explodes in an economic downturn?
What countries are most indebted?Government debt as a percentage of GDP:
https://en.wikipedia.org/wiki/List_of_countries_by_public_debt#Public_debt_per_capita
- Japan
- Singapore
- Qatar
- Greece
- Italy
- Ireland
- Belgium
- USA
- Canada
- Bahrain
Micromanaged systems tend toward long-term fragility
The investor Nassim Taleb theorizes that open complex systems exhibit constant moderate volatility that ironically results in greater long-term stability.These complex, open systems are definitely regulated, but the governing rules and laws are minimal.
One example for Taleb is the restaurant industry.
The restaurant industry is afflicted with constant churn.
Restaurants and restaurant chains are constantly going out of business.
But new restaurants with new business plans always take their place.
At the micro-level, every restaurant is doomed.
At the macro-level, this tragedy feeds the health of the industry.
In contrast, Taleb claims that micromanaged systems with almost zero volatility are prone to long-term chaos.
In fact, those simple, closed system tend to oscillate between the extremes of zero volatility and total chaos.
Along these lines, one of the most fragile states in the world is Saudi Arabia.
In Saudi Arabia, even mild dissent is either harshly persecuted or lavishly bribed into silence, and the economy is cushioned by subsidies from oil profits.
https://www.arabianbusiness.com/taleb-says-saudi-arabia-is-unstable-like-egypt--378412.html
"A perfectly fragile country is a country, say like Egypt" before "the recent events, where there is no variation and then - puff - you got a crisis and it’s mayhem," Taleb told an conference in Moscow hosted by Troika Dialog. "So Egypt is perfectly unstable, Saudi Arabia, countries like that.’’In economic terms, centrally controlled and highly subsidized societies would manifest long-term instability, whereas "free" economies would prove more resilient.
An index of economic freedom "heatmap":
https://en.wikipedia.org/wiki/Index_of_Economic_Freedom
- Hong Kong
- Singapore
- New Zealand
- Switzerland
- Australia
- Ireland
- Estonia
- UK
- Canada
- UAE
- North Korea
- Venezuela
- Cuba
- Congo
- Eritrea
- Equatorial Guinea
- Zimbabwe
- Bolivia
- Algeria
- Djibouti
"Democracies" afflicted by constant moderate volatility would manifest long-term stability.
In contrast, seemingly more stable and less "democratic" societies would be more vulnerable to long-term collapse.
A "democracy index" map:
https://en.wikipedia.org/wiki/Democracy_Index
On the other hand, there is much more democracy in the world than there is economic freedom.
Places with democracy but without economic freedom include Latin America, southern Africa, eastern and southern Europe, India and southeast Asia.
That might have dire significance for those places.
They might be susceptible to nationalism, populism and authoritarianism.
Is there too much democracy in the world relative to growth?
The typical American perspective throughout the Cold War is that if countries adopt capitalism, then they will become prosperous and become democratic.This was the explicit rationale given by the Clinton administration in the 1990s for normalizing trade relations with China.
It is also the assumption by Americans that Chinese economic imperialism is a positive development.
Specifically, they are assuming that China's global investments will pave the way for progress and democracy.
https://www.nytimes.com/2018/05/04/opinion/sunday/china-colonial-power-jinping.html
But another American belief is precisely the converse.
Americans believe that when countries become democratic, then they also adopt the American economic model and become prosperous.
This was the Bush administration's deep rationale for the invasion of Iraq.
The Bush administration outwardly claimed that the reason for invading Iraq was to rid Iraq of nuclear weapons.
The public argument was that the Iraqis would hand over nuclear weapons to terrorists to use against the USA.
This did not make sense because Islamic terror groups have a greater mutual antipathy to secular Arab governments like Iraq than either of them has toward the West.
The deeper reason for the invasion of Iraq was found in a series of beliefs that are common in the USA.
These assumptions were taken to their extreme conclusion in Iraq.
- Iraqis would gratefully greet Americans as their liberators
- There would then be peace within Iraq
- Iraq would instantly become a thriving democracy
- Iraq would then prosper economically
- "Nation building" would thus cost the USA nothing
- This would be a model for the Middle East
- Democratic revolution and prosperity would sweep the region
- Peace with Israel, because democracies do not fight one another
The two maps above illustrate a rebuke to simple, facile American assumptions.
Democracy has taken hold in more places than has economic growth.
This might help to explain the contemporary emergence and profusion of populism, nationalism and authoritarianism.
Democracy unleashes high expectations.
When high expectations burgeon within a stagnating economic order, the result might be discontent.
The reverse model might be found in Singapore.
In Singapore, democracy is tightly constrained even while economic progress is strenuously pursued.
Consequently, Singapore is not characterized by nationalism or populism.
There one country which is portrayed inaccurately in the economic freedom heatmap.
North Korea now has a market economy
North Korea is not the economically restrictive country that it once was.In the 1990s, famine struck North Korea.
Millions of people might have died.
https://en.wikipedia.org/wiki/North_Korean_famine
As a consequence, North Korea is no longer a state-directed, centralized economy.
The North Korean economy is now based on unofficial markets that are taxed by the government.
The average official salary in 2011 was equivalent to $US2 per month while the actual monthly income seems to be around $US15 because most North Koreans earn money from illegal small businesses: trade, subsistence farming, and handicrafts. The illegal economy is dominated by women because men have to attend their places of official work even though most of the factories are non-functioning.There is now gross wealth inequality in North Korea.
Wealthy families enjoy a life of luxury in the city while bands of starving orphan boys wander the countryside.
https://www.nytimes.com/2019/04/18/world/asia/north-korea-economy-sanctions.html
The markets have also created a new class of private entrepreneurs known as donju. With the help of the elite, who provide access to labor and other resources, the donju have taken over state-run mines, farms, factories and fishing fleets and helped finance a building boom in Pyongyang, the capital. The two groups are believed to split the profits.
“The state power and the up-and-coming capitalists have formed a symbiotic relationship, creating a web of corruption throughout the North Korean society,” said Hwang Jin-hoon, a North Korea expert at Korea Development Bank in Seoul, in a recent paper.
Along with corruption, these changes have given rise to a culture of consumerism and scenes of prosperity: sports cars, cellphones, fancy coffee shops and high-rise apartment buildings in Pyongyang. They have also raised North Koreans’ economic expectations, even as sanctions draw tighter.North Korea's economy is arguably now much more stable than in the past because of the shift to a market economy.
North Korea has been economically "pre-disastered".
This is fantastic news for South Koreans.
Despite their patriotic rhetoric, South Koreans fear the cost of unification with a desperately poor country of 25 million people.
There is a second factor that might make North Korea resilient.
It could be that its poverty makes North Korea economically indestructible.
Do rich and poor countries have different kinds of resilience?
This is a very qualified sort of resilience.First, automobiles might prove a useful metaphor on how systems are afflicted by catastrophe.
Automobiles can be described as "reliable" or "tough".
A Toyota Corolla is a very reliable car.
An old Corolla will probably last a long time and rarely break down.
An AMC Jeep is much less reliable than a Toyota.
But when the AMC Jeep does break down, it can be rapidly repaired because it was designed with the expectation that it will often get damaged.
A complex, open system is similar to a reliable car like the Toyota.
A simple, closed system is more similar to a tough jeep that may be prone to breaking down, but which can always get fixed no matter how bad the damage.
Second, one must distinguish between three degrees of stress on a system: mild, moderate and catastrophic.
Mild stressors
Complex, open systems deal with mild stressors much better than do simple, closed systems.An educated, developed society is less likely to be laid low by mild stressors such as a normal flu epidemic.
That is, in the language of the auto industry, a developed or affluent society is more "reliable" when confronted by a mild challenge.
In contrast, poor society can be significantly traumatized by what might otherwise be a mild trauma, such as flu season.
Moderate stressors
A complex, open system would suffer somewhat from a moderate crisis, yet learn and grow from such a serious but survivable ordeal.For example, epidemics like Ebola have not swept through the USA.
Moreover, when Ebola patients have been treated in American hospitals, the hospitals discover how unprepared they are for an epidemic.
American hospitals accordingly alter their protocol and purchase new equipment, and fund scientific research, which leads to technological breakthroughs.
In contrast, a simple, closed system might be traumatized by a moderate level of crisis.
What would otherwise be moderate a trauma for most countries -- for example, the loss of Soviet assistance -- would profoundly harm a poor country like North Korea.
Also, the simple, closed system learns nothing from its crises.
For example, the spread of Ebola in Africa does nothing but kill people and spread panic.
Catastrophic events
But if the challenge proves catastrophic, this changes the equation.A cataclysmic impact reverses the levels of trauma afflicted on affluent and poor societies.
A mega-disaster will overwhelm and destroy a complex, open system.
However, a simple, closed system is more likely to survive a super-calamity and repair itself -- although it will not learn or grow or change from its experience.
For example, if every society in the world were to lose one-third of its population in a plague, it might then be the poor countries that would prove more robust.
Poor countries would return to normal in a couple of generations.
A poor country would then be more "tough" in automobile terms in that it could withstand disaster and repair itself quickly.
A poor, simple country is more likely to recover from a severe disaster, but only to return to its old, static state.
This is the history of a country like Afghanistan, where war periodically decimates the population, but after a couple of generations everything returns to what it was.
In contrast, a wealthy society might never recover after a plague because it would be crippled by a shortage of experts and specialists.
An example of a complex, open system destroyed by catastrophe is found in the Middle East during the Middle Ages.
The 1258 Mongol sack of Bagdad represented the failure of a complex, open system
Bagdad was one of the great centers of learning and civilization in the world during the Middle Ages.The Mongols spent a week laying waste to the city.
Muslim civilization never recovered from the catastrophe.
https://en.wikipedia.org/wiki/Siege_of_Baghdad_(1258)
Hulagu subsequently besieged the city, which surrendered after 12 days. During the next week, the Mongols sacked Baghdad, committing numerous atrocities and destroying the Abbasids' vast libraries, including the House of Wisdom. The Mongols executed Al-Musta'sim and massacred many residents of the city, which was left greatly depopulated. The siege is considered to mark the end of the Islamic Golden Age, during which the caliphs had extended their rule from the Iberian Peninsula to Sindh, and which was also marked by many cultural achievements in diverse fields.What would be an example of a simple, closed system proving more resilient to catastrophe than a complex, open one?
It might be the Soviet Union in the face of German invasion.
The USSR's survival of WW2 demonstrated the resilience of a simple, closed system
The origins of the Soviet system under Stalin can be found in the Allied intervention in the Russian Civil War between the Communists and the Tsarists.https://en.wikipedia.org/wiki/Allied_intervention_in_the_Russian_Civil_War
Allied intervention in the Russian Civil War consisted of a series of multi-national military expeditions in 1918. The stated goals were to help the Czechoslovak Legion, to secure supplies of munitions and armaments in Russian ports, and to re-establish the Eastern Front. Overthrow of the new Bolshevik regime was an additional, covert motivation.[7][8]
After the Bolshevik government withdrew from World War I, the Allied Powers openly backed the anti-communist White forces in Russia. Allied efforts were hampered by divided objectives, war-weariness from the overall global conflict, and a lack of domestic support. These factors, together with the evacuation of the Czechoslovak Legion, compelled the Allied Powers to withdraw from North Russia and Siberia in 1920, though Japanese forces occupied parts of Siberia until 1922 and the northern half of Sakhalin until 1925.A list of the Allied countries involved in the expeditions in Russia:
- Czechoslovakia
- UK
- Canada
- Australia
- India
- South Africa
- USA
- France
- Japan
- Greece
- Estonia
- Serbia
- Italy
- China
- Poland
- Romania
Stalin assumed that sooner or later, the Allies would again invade Russia.
Stalin's response was to transform the USSR into a wartime society and economy.
The USSR became a simple, closed society with a state-directed economy and a totalitarian political system.
(This is, in fact, what people mean when they say "communist" -- although this is far from what Marx meant by the term.)
The bad news is that Stalin transformed Russia into an economic zombie and a machine of mass murder.
The good new is that this is was what saved the USSR from total collapse in the later German onslaught.
What if Russian history had been quite different?
What if Russia had long ago rapidly developed into an economically advanced democracy?
In other words, what if Russia as a complex, open system had faced the German army in WW2?
There might have been two outcomes:
- If Russia was not advanced (or lucky) enough, it would have been totally destroyed.
- If Russia as an economically and politically advanced nation had withstood the invasion, it would have emerged even more sophisticated and powerful.
Complex, open systems bounce back from moderate crises stronger and more dynamic than before.
That is what happened to the USA in the past when the USA survived ordeals such as the Civil War, the Great Depression and WW2.
These crises, while rigorous and tragic, were not truly catastrophic for the USA the way the German invasion was for the USSR.
(In WW2, 26 million Soviet citizens died, in contrast to the deaths of 420,000 Americans.)
True catastrophe would consists not of world war or depression, but losing the war or not emerging from the depression (for example, Japan's three decades of stagnation).
Again, in the face of a normal crisis, the USA is more resilient than North Korea.
However, in a genuine cataclysm such as the collapse of civilization, North Korea might prove more tough than the USA.
There is a problem with all this theory, however.
This theory needs some serious supplementation
One of the obvious flaws with this theory is that North Korea was afflicted with catastrophic economic failure in the 1990s, and managed to re-invent its economy.That is, North Korea did not merely survive only to rebuild itself into its old form, as Afghanistan has for centuries.
Moreover, there is the case of Japan, which began to stagnate in 1990.
Japan is an affluent, educated society like the USA that would be expected to manage a potentially catastrophic crisis and learn from it and grow and transform.
Yet Japan remains stuck in an economic funk after 30 years and refuses to change itself (e.g., essentially banning immigration).
Here is the hypothesis so far:
Complex, open systems are better at both enduring mild and moderate traumas and managing potentially catastrophic crises, from which they creatively learn and grow, but they cannot recover from catastrophe; simple, closed systems are more vulnerable to mild and moderate challenges, but can survive catastrophes only to return to their their static old forms.Rather than throw out the theory, perhaps it can be modified...
... by adding an epicycle.
One needs to look at complexity and openness in more than merely political and economic terms.
One example might be found in a comparison of the leadership of North Korea and the USA.
From a distance, North Korea resembles a scary, fanatical religious cult.
In fact, the North Korean regime carefully cultivates this public image.
https://www.newyorker.com/magazine/2017/09/18/the-risk-of-nuclear-war-with-north-korea
Van Jackson, a scholar of international relations who served in the Pentagon from 2009 to 2014, spent years analyzing the Kim family’s handling of crises, including the seizure of the Pueblo. The grandfather’s theory of victory still drives North Korea toward provocation, he said, but the regime also knows its limits; to survive, it chooses violence but avoids escalation. “When South Korea blares giant propaganda speakers at the North from the D.M.Z., North Korea fires warning shots nearby but doesn’t dare attack the speakers themselves,” he said. “When South Korean N.G.O.s send propaganda leaflets into North Korea using hot-air balloons—which really pisses them off—North Korea threatens to attack the N.G.O.s but instead just fires at the unmanned balloons.” In Jackson’s view, North Korea is not irrational, but it very much wants America to think that it is.North Korean regime is acting according to the "madman theory" of international relations, in which rational actors feign irrationality in order to intimidate rivals.
https://en.wikipedia.org/wiki/Madman_theory
The madman theory is a political theory commonly associated with U.S. President Richard Nixon's foreign policy. He and his administration tried to make the leaders of hostile Communist Bloc nations think Nixon was irrational and volatile. According to the theory, those leaders would then avoid provoking the United States, fearing an unpredictable American response.Nixon had been Vice President under Eisenhower.
Eisenhower had brought the Korean War to a close by suggesting that he might use nuclear weapons.
https://www.nytimes.com/1984/06/08/world/us-papers-tell-of-53-policy-to-use-a-bomb-in-korea.html
President Eisenhower said he ''thought it might be cheaper, dollarwise, to use atomic weapons in Korea than to continue to use conventional weapons against the dugouts which honeycombed the hills along which the enemy forces were presently deployed.''Nixon thought that he could use the same tactic to bring the Vietnam War to a conclusion.
On May 21, 1953, Mr. Dulles met in New Delhi with Prime Minister Jawaharlal Nehru and told him that, if the armistice negotiations failed, ''the United States would probably make a stronger, rather than a lesser military exertion, and that this might well extend the area of conflict.''
In a memorandum, Mr. Dulles said he assumed this would be relayed to the Chinese, with whom the Indians then had good relations.
https://www.newyorker.com/magazine/2017/10/02/the-madman-theory-of-north-korea
In 1969, Richard Nixon, about eight months into his Presidency, grew frustrated with the North Vietnamese leadership. The President wanted to negotiate an exit from the Vietnam War, but his adversary’s terms were unyielding. Nixon thought that he needed the Soviet Union to pressure North Vietnam; he also believed that Leonid Brezhnev would act only if he was convinced that the U.S. was about to do something crazy. In late October, Nixon ordered an operation code-named Giant Lance. B-52 bombers loaded with atomic weapons took off from bases in California and Washington State and headed toward the Soviet Union, then flew in loops above the polar ice cap. Nixon’s hope was that Soviet intelligence would interpret the action as an immediate, and utterly insane, threat of nuclear attack. The “madman nuclear alert,” as the political scientist Scott D. Sagan and the historian Jeremi Suri called it in a 2003 article, remained secret for years. H. R. Haldeman, Nixon’s chief of staff, recounted in his memoir how his boss described the tactic. “I call it the Madman Theory,” Nixon once told him. “We’ll just slip the word to them that ‘for God’s sake, you know Nixon is obsessed about Communism. We can’t restrain him when he is angry—and he has his hand on the nuclear button.’ ”It turns out that the North Korean regime was highly rational all along -- "crazy like a fox", so to speak.
The problem today it is the American leadership that is a little more "iffy".
One analyst stated that the North Korean leadership is worldly and sophisticated.
For example, the North Korean dictator Kim Jong-Un attended a Swiss boarding school.
Today, he said, it is the American government that is bizarre, insular, simplistic and provincial.
But maybe it was always like this.
A former American diplomat to South Korea stated that Americans think in terms of democracy versus communism, and South Korea versus North Korea.
Actually, he said, a Korean is a Korean.
And, he added, Koreans are a helluva lot smarter than Americans.
Americans are generally very nice people.
But it could be that culturally and intellectually, Americans lack a certain...
... Je ne sais quois ....
We need to look at culture and society as much as political and economic systems.
It could be that in their mentalities, if not their political and economic systems, it is the North Koreans who are complex and open, and it is the Americans who are simple and closed.
Cultural and social openness and complexity need to be brought into the equation
It is important to note here that social and cultural openness is not the same thing as social harmony.In fact, they are opposites.
For example, Japan is a paragon of social harmony.
Social harmony, however, is a closed, micromanaged system rooted in the cooperative rural values of village life.
For example, the following NYT article describes how one apartment complex in Japan, which once thrived as a community of young families, is now exclusively occupied by elderly people dying alone and forgotten.
https://www.nytimes.com/2017/11/30/world/asia/japan-lonely-deaths-the-end.html
The author points out how this isolated mode of individual existence is historically alien to a Japan whose roots stretch back to communal village life.
In contrast, tolerance is an urban value that implies a certain social distance or isolation.
Moreover, tolerance is not the same as social acceptance of non-conformity.
Indeed, the utopian ideal of social acceptance is a disguised form of conservative social harmony.
Tolerance without acceptance is better than harmony
Democracy and capitalism -- at least in moderately restricted form -- would provide long-term stability because political and economic openness generates constant, manageable turbulence.But what about social harmony?
Social harmony in its purest form would smooth out moderate volatility, making the system vulnerable to long-term instability.
Again, an extremely harmonious society would alternate between tranquility and chaos.
One example today might be Hong Kong, where the protests seemed to slide very rapidly toward uncompromising revolutionary violence.
Another example might be Japan, where farmers have been violently protesting the construction of Narita airport since 1966.
https://en.wikipedia.org/wiki/Sanrizuka_Struggle
In contrast, traditional Korean society might actually exhibit the constant, moderate emotional volatility that provides long-term stability.
https://www.newyorker.com/magazine/2017/09/18/the-risk-of-nuclear-war-with-north-korea
Some of the American officials in Washington who are immersed in the problem of North Korea frequently mention the old Korean saying “Nuh jukgo, nah jukja!” It means “You die, I die!” It’s the expression you hear in a barroom fight, or from an exasperated spouse—the notion that one party will go over the cliff if it will take the other down, too. Krys Lee, a Korean-American author and translator, said, “My mother also used it on me!” Lee finds that it’s hard for Americans and Koreans to gauge each other’s precise emotions, because Koreans tend to use “more abstract, dramatic, and sentimental language.” She has heard that many Korean literature students find Raymond Carver—the most laconic of American authors—“very dry, and that he didn’t translate well.”The Japanese are not inclined toward open rebellion.
But when the Japanese do rebel, they are extremely violent and persistent.
In contrast, Koreans are bad tempered and dramatize everything.
In the long-term, however, Koreans are more rude than dangerous.
Is it possible to identify countries like Japan that have a strong sense of social harmony?
Societies that value and enforce social harmony tend to be very clean
Japan is a very clean society.This group spirit and ethic of considerateness is manifest in a commitment to cleanliness.
http://www.bbc.com/travel/story/20191006-what-japan-can-teach-us-about-cleanliness
Invisible dirt – germs and bacteria – are another source of concern. When people catch colds or flu, they wear surgical masks to avoid infecting other people. This simple act of consideration for others reduces the spread of viruses, thereby saving a fortune in lost work days and medical expenses.At first, Koreans might seem clean. If Koreans are somewhat clean at times, they learned it during the Japanese colonial period.
https://www.quora.com/Why-are-Japanese-and-Korean-people-so-clean-and-orderly
Japan has always been obsessed with cleanliness. The rest of Asia not. Chinese and Koreans are rather similar in this regard: they are practical and emotional people.
Korea also had a reputation of being the backwater of East Asia, by local and western sources.
But Koreans were directly ruled by Japan between 1910 and 1945. This must have left some traces of Japanese culture in the Koreas. Cleanliness and orderly society likely is one of these parting gifts, just like in Taiwan, another former Japanese colony.Here is a list of countries that are the most clean, in order of cleanliness:
https://www.zerohedge.com/news/2015-08-03/cleanest-places-world
- Switzerland
- Luxembourg
- Australia
- Singapore
- Czech Republic
- Germany
- Spain
- Austria
- Sweden
- Norway
Taleb says that at the national level, Switzerland does not really exist.
At the local level, Taleb claims, Switzerland is a totalitarian dictatorship of uptight neighbors.
Switzerland's secret of success is a combination of anarchism and anal retentiveness.
Switzerland is therefore actually both messy and clean -- a perfect combination for Taleb.
More ominous for Taleb might be Singapore, which has been described as "Disneyland with the death penalty".
Singapore might be a police state, but its aggressive entrepreneurial spirit lend it some kind of dynamism.
For example, the Singapore national postal service -- what in most countries is a paragon of bureaucratic sclerosis -- privatized itself and became a global shipping company.
https://en.wikipedia.org/wiki/Singapore_Post
Japan Post is likewise highly efficient.
https://japantoday.com/category/business/the-secret-of-japan-post-unbeatable-service
TOKYO -- The postal service in Japan, run by Japan Post, is a beacon of national pride and contrasts with services in some countries with a reputation of being slow to deliver and of losing parcels or checks.
Its vast network of offices, found in even the smallest rural towns, connect the length and breadth of the country, providing a vital lifeline for communities in out-of-the-way places.
Effectively the world's largest bank, its branches offer insurance, savings, and a place for Japan's army of elderly people to draw their pensions.
With many Japanese people having migrated to big cities, an online mall offering regional specialities like fruit or fresh produce always has takers. And refrigerated delivery allows those treats from home to grace urban dinner tables just hours after an order was placed.
But the Japanese are loath to privatize their beloved national postal service.
Like most Japanese institutions, Japan Post is built on attention to detail and making sure that what a customer paid for is what they get -- even if that means weeks of painstaking research to try to find out what that partially-obscured and badly-written address was supposed to be.
The government of former Prime Minister Junichiro Koizumi split the behemoth into four units in 2007, to handle deliveries, savings, insurance and counter services, but the government retained full ownership, with plans for the bank and insurance units to go private in a huge stock offering over the following decade.
But, the sheer size and scope of Japan Post, along with the place it has in the Japanese heart has put the brakes on the plan and successive governments have run out of steam as they tried and failed to move forward with the plan.
The prize would be huge -- billions of dollars of shares would likely be snapped up, boosting Japan's state coffers at a time of mountainous public debt and a shrinking tax base.
The slow pace of privatization has irked US and EU trade officials who are worried by the group's competitive advantage. Potential rivals abroad say the size of the organization means it has economies of scale that they would have trouble matching.
While vested interests in the form of labor organizations are partly to blame for the glacial pace of reform, the Japanese public's affection for a service that is woven into the fabric of national life is also an obstacle to change.
Who else, they wonder, would neatly sort and deliver hundreds of millions of New Year cards all over Japan on January 1?Switzerland and Singapore are both strict, highly regulated societies.
But they do have as their ideals a certain anarchy and aggressive sense of enterprise, respectively.
In Japan, the only ideal is really that of harmony, with a respect for dedicated, self-sacrificing civil servants.
Japan has democracy, capitalism, social tolerance -- the traits associated above with complexity and openness.
Japan is a complex, open society fascinated by outside societies and eager to adopt the ways of others.
But emotionally, it is as if deep down the Japanese wished that Japan were a simple, closed village which was politically, economically and culturally micromanaged.
The case of Japan is unique.
All societies value social cohesion, but there are countervailing values as well.
For example, Switzerland and Singapore exhibit a severely enforced social harmony.
Nevertheless, in Switzerland and Singapore there is also a certain anarchic strain of freedom and an aggressive sense of enterprise, respectively, that runs counter to social cohesion.
In Japan, it is as if political, economic and social freedoms are embraced superficially and for pragmatic reasons, but the ultimate valuation is social harmony.
The relationship of social harmony to the complex, open society needs to be clarified.
Rather than seek perfect social harmony, it might be better to value a tolerance that involves constant moderate conflict that nevertheless remains civil.
Here, a certain paradox emerges.
Radical utopian ideals find their origin in a conservative ethos
For example, Marx's vision of a communist society was based on the values of an aristocratic leisure class engaged in self-cultivation and self-governance.(This might have reflected Marx's own upper-class background.)
For example, Japan is a remarkably accepting toward things that would be considered deviant and dangerous in most cultures -- for example, organized crime (yakuza).
But in Japan, the acceptance of deviance serves to buttress the status quo and advance social cohesion.
The ideal of acceptance ultimately serves the conservative aim of snuffing out social conflict and volatility.
https://en.wikipedia.org/wiki/Corporatism
The ideal of tolerance, in contrast, is quite different from the conservative ideal of acceptance.
Moreover, this tolerance should never be a happy, utopian, peaceful or accepting kind of tolerance.
More desirable would be a gritty, realistic New York City kind of tolerance.
An ambivalent tolerance would produce a consistent moderate volatility.
Maps of tolerance
A map of the world in terms of racial tolerance:
A map of Europe in terms of tolerance toward Muslims:
A map of LGBT acceptance globally:
Who is doomed in the coming crash?
The maps and lists above describe who is most vulnerable to a profound economic collapse.- provincial areas in developed countries that are economically obsolete
- developed societies with a high debt load
- affluent societies that lack a certain "toughness"
- micromanaged economies
- micromanaged political systems
- micromanaged cultures (intolerant and too clean)
On the other hand, their complexity and openness enable them to learn and grow.
In contrast, underdeveloped and micromanaged societies cannot and do not creatively respond to challenge, although they are tough.
What will be the consequences of populism?
It was mentioned that countries that have democracy yet are faring poorly economically have turned toward nationalism, populism and authoritarianism.This also seems true of provincial areas of the developed world that are economically obsolete.
More than reacting to economic hardship, people in these places are getting an allergic reaction toward complexity and openness.
What will be the consequences of this?
It could be that the tumult of populism will revivify some countries and damage others.
That is, complex, open societies like those of North America and western and northern Europe might just learn and grow from a wave of popular discontent in their rural hinterland.
In France, President Emmanuel Macron toured France and engaged with small audiences at the local level, driving up his ratings, easing populist anxiety and learning about the lives of ordinary people.
https://www.newyorker.com/magazine/2019/07/01/can-emmanuel-macron-stem-the-populist-tide
If the West engages openly with populism rather than demonizes it, the West may emerge from the storm rejuvenated.
The influence of populist resentment on simple, closed societies -- for example, India -- might be more damaging and lasting.
By the standards above, there may be a third category of society that perhaps the most vulnerable to global economic depression.
The complex, closed society would be most vulnerable of all
This would combine the worst of both worlds.This would be soft, indebted, affluent societies with obsolete economies that are also micromanaged economically, politically and culturally.
That describes Saudi Arabia.
It might also describe segments of China on its prosperous, urban coasts.
It may also describe Japan.
But the response to economic collapse in Japan might not be rebellion and protest, but intensified alienation and the accelerated undermining of social norms.
https://en.wikipedia.org/wiki/Anomie
Anomie (/ˈænəˌmi/) is "the condition in which society provides little moral guidance to individuals".[1] Anomie may evolve from conflict of belief systems[2] and causes breakdown of social bonds between an individual and the community (both economic and primary socialization). In a person this can progress into a dysfunction in ability to integrate within normative situations of their social world - e.g., an unruly personal scenario that results in fragmentation of social identity and rejection of values.https://en.wikipedia.org/wiki/Aum_Shinrikyo
"Complex but closed" describes populists in the West.
In the USA, affluent but uneducated voters make up the bedrock of the conservative populist movement.
That is, Donald Trump's strongest support comes not from the rural, white working class, but from prosperous small businessmen who did not go to college.
https://www.nytimes.com/2019/08/28/opinion/trump-white-voters.html
[T]he surge of whites into the Republican Party has been led by whites with relatively high incomes — in the top two quintiles of the income distribution — but without college degrees, a constituency that is now decisively committed to the Republican Party.
Individuals in the low-education/high-income group tend to endorse authoritarian noneconomic policies and tend to oppose progressive economic policies. Small business owners and shopkeepers — particularly in construction, crafts, retail, and personal services — as well as some of their salaried associates populate this group.
Unlike much of the current debate, the ‘white working class’ — concentrated in the low-education/low-income sector of the white population — is not the category that has most ardently realigned toward Republicans. It’s higher income/low education whites who are currently still doing well, but fear that in the Knowledge Society their life chances are shrinking as high education becomes increasingly the ticket to economic and social success.
Interestingly, "complex but closed" may as well also describe left-wing populists in the USA.
High-income whites without college degrees were swing voters sixty years ago, pursued by both parties; now, they are rock-ribbed Republicans. Their share of the white electorate has fallen, however, from 42.1 to 22.0 percent.
Young, over-educated, under-employed urban "socialists" like Alexandria Ocasio-Cortez might be "complex" in that they are modern and sophisticated and have high expectations.
But they might be described as "closed" in their desire to micromanage the economy and impose their political correctness on society.
Two generations ago, there were almost no low-income whites with college degrees, a group that made up 1.5 percent of white voters in 1952. These voters were a swing bloc without firm commitment to either party. By 2016, this constituency had grown to form 14.3 percent of all voters. They have, in turn, become the most loyal white Democratic constituency.
What is to be done?
At the public policy level, there is not much that can be done to avoid systemic collapse.This is because public policy tends to be a popularity contest.
The spread of democracy around the world has only made this worse.
Human beings tend to desire to live in a complex, closed system.
This is despite the long-term dysfunction of a system that seeks to perfectly smooth out volatility.
That is, people desire to live in an affluent society that is micromanaged.
Policy makers play to their audience.
Policy makers are a lot like real estate agents.
Real estate agents are always saying that "Now is the perfect time to buy a house!"
When the economy is booming, they say "It's a great time to buy a house!"
When the economy is tanking, they say, "It's a great time to buy a house!"
Politicians are like that, too.
For politicians, it's always a great time for a fiscal stimulus.
Politicians love being popular, so they are always pushing for:
- lower interest rates
- lower taxes
- increased spending
When politicians fight over a stimulus package, it's not about whether or not they disagree on whether stimulus is appropriate at a certain point in time.
The fights are about benefiting their own constituency above everybody else.
Back in the old days, conservative and liberal politicians both pushed for tax hikes in the face of economic crisis (for better or worse).
http://www.taxhistory.org/thp/readings.nsf/ArtWeb/1AEBAA68B74ABB918525750C0046BCAF?OpenDocument
Some of the most important elements of the New Deal tax regime were engineered by Herbert Hoover. Congress passed the Revenue Act of 1932 five months before Franklin Roosevelt won his bid for the White House. But key elements of the law -- including an array of regressive consumption taxes -- remained a cornerstone of federal finance throughout the 1930s.
The 1932 act imposed the largest peacetime tax increase in American history. Congress expected it to raise roughly $1.1 billion in new revenue, much of it from the rich.
Lawmakers raised income tax rates across the board, with the top marginal rate jumping from 25 percent to 63 percent; overall effective rates on the richest 1 percent doubled, according to economic historian Elliot Brownlee. Meanwhile, estate tax rates also climbed sharply, while the exemption was cut by half.
Because public policy is hopelessly corrupt, one must instead focus on personal self-interest.
For all its progressive features, Hoover's revenue swan song -- which passed with strong support from the Democratic majority in Congress -- also included an array of regressive excise taxes. The law created new levies (including taxes on gasoline and electricity), while raising rates for old ones. As a group, most of these consumption taxes fell squarely on the shoulders of Roosevelt's famous Forgotten Man. Yet once in office, the new president did nothing to reduce them. Indeed, excise taxes provided anywhere from a third to half of federal revenue throughout the 1930s.
You need to look out for Number One.
First, one needs to move to a society that is the exact opposite of Saudi Arabia.
The society would have a certain toughness.
This would be a rather frugal and austere society that might be tasteful, but would not have a passion for luxury.
Instead of buying gigantic houses and going on expensive vacations to show off on social media, people would read books and have gardens.
At the same time, it would be a complex, sophisticated, educated, open, tolerant society.
Does this describe any place in the USA?
Would it describe Scandinavia or Singapore or even Japan?
Second, one must live that kind of lifestyle oneself.
Does that describe Millennials?
