I almost dont have to write this anymore.
Of Two Minds is pretty much doing half of the job for me.
I have redacted (heavily) one of his recent essays here because it covers many of the why-for’s of where we are heading and why things are going to have to change.
We have boxed ourselves into a a lot of corners.
A number of lethal traps hobble structural reforms to the failing Status Quo.
1. Stagnation Trap. As the Plutocracy and State continually increase their share of the national income: The primary consequence of this widening gap between the ever-poorer middle class taxpayers and the ever wealthier State and Plutocracy is a structural divergence between the interests of the Plutocracy and the State and those of the middle class. This widening structural imbalance of power and share of the national wealth is reflected in the blocking of any structural solution by the State and Plutocracy. Since the structural problem is State and Plutocracy over-reach, any real solution will necessarily reduce their shares of the national income and limit their joint powers. Loathe to accept even the smallest reduction in their income and power, both the Plutocracy and the State (including all those dependent on its various fiefdoms) resist all structural change with every force at their command. The inevitable consequence is a profound structural stagnation in which real reform is betrayed in the name of compromise, “solutions” which leave the powers and income of the State and Plutocracy fully intact are trotted out under new Orwellian names and all discussions of truly structural solutions are ruthlessly eliminated from the mass media or belittled/undermined in classic propaganda manner. This is the stagnation trap: in resisting structural change, the State and Plutocracy guarantee a stagnation which inevitably leads to collapse of the very system of privileges and powers they seek to maintain.
2. Scalability Trap. This is a way of describing the inevitability of job losses in any industry as it scales up to technologically optimum (automated) production. If an economy refuses technological production then it can not trade expensive manually produced products profitably. Even the lowest-cost labor is more expensive than machines. Just as the agricultural workforce has fallen to 2% from 50% as mechanization scaled up, any work which can be largely automated (not just manufacturing, but software coding, tax preparation, etc.) will fall into a scalability trap once the technology is available to automate production.
3. Capital Trap. As bank assets fall in value (mortgages etc.) then banks’ capital requirements increase dramatically. Additional reserves are simply trapped capital as the capital constraint will lead to a downward spiral of higher interest rates for borrowers, a slowdown in borrowing, more loan defaults and thus more erosion of bank capital as bad-debt/impaired loan losses keep mounting. The nation has poured staggering sums of its national wealth into speculatively built, rapidly depreciating real estate: The capital in all this unnecessary real estate is trapped because it cannot be sold. Rather than be declared insolvent, the owners leave the capital trapped, hoping for some magical rescue. This misallocated capital hurts in another way: trapped in unneeded real estate, it cannot be invested elsewhere where it might earn a real return and are now “capital traps” of national savings. Though the cliche is that “housing always comes back, but the capital in housing will remain trapped for years as sellers refuse to accept less than bubble-era valuations and buyers refuse to pay bubble-era prices.
5. Stranded Debt Trap. As assets fall in value, the debt (mortgages, etc.) cannot be repaid. The debt is stranded/trapped and cannot be sold except at fire-sale prices which require the owner to book stupendous losses. In the case of lenders/bankers, accepting/recognizing such losses would generally lead to a formal recognition of insolvency.
6. Saturation Trap. A saturation trap occurs when a product or service deemed essential and backed by a large sunk-cost infrastructure, hits a saturated market: there is simply far too much supply and declining demand. Yet the pressure to keep providing the service or product is immense as so many jobs, enterprises and governmental agencies depend on the market’s existence. Examples include homebuilding, mortgages, commercial space, retail, hospitality/lesiure/travel, etc.
7. Quantification Trap. Observation and the accurate logging of quantifiable data is the heart of science. But economics, finance and human behavior are not always illuminated by choosing a quantifiable metric. In some cases, quantification serves to obscure the actual forces and causal mechanisms at work. If all the economic field’s massive data collection and quantification were actually useful, then economists would be empowered. As it stands, a quantification trap opens when data of questionable value is deployed as an “empirical metric” to support a policy or forecast which then serves to mislead, the State or other powerful enterprise presents ginned-up deceptively packaged quantifications which support its policies or propaganda:
8. Skillset Trap. Sunk costs of training and the awarding of degrees creates a force akin to a mighty river behind skillsets for which there is no market. MBAs now classify as skillset traps as countless business schools seek to milk candidates for tuition even as the market for middle managers dries up. We might even find that the entire college/university degree industry is largely a skillset trap as the skills being taught have no analog in the job market. At the lower end of the employment scale, “computer repair” training continues to attract funding even as it becomes ever cheaper to simply replace defective computers with new ones. Such functionally obsolete skills qualify as skillset traps.
9. Trend Trap. Social Security system (and indeed, all “pay as you go” entitlements) was founded on a worker-retiree ratio of about 20-to-1 and an average lifespan of about 64 years. The trap was the extension of these demographic trends into the distant future. Despite official assurances (which ring increasingly hollow), the reality is these programs will go broke far sooner than is politically convenient.
Another trend is as several billion people aspire to the high-energy consumption lifestyle enjoyed by the advanced economies, we can anticipate an end to the trendline of ever higher energy consumption and ever higher growth based on resource exploitation. While it is possible that the world’s population will enjoy a high-energy consumption lifestyle in 20 years it certainly won’t be enjoying cheap, abundant petroleum-based growth. The world faces not just Peak Oil but Peak Coal, Peak Uranium, and peak rare metals. It seems that lithium-ion batteries cannot be scaled due to materials limitations. The reality is sobering–we cannot evade one Peak by substitution because the Peaks are not just in oil but in minerals and metals as well.
10. Preservation of Institutions Trap. As bureaucratic institutions find their own resources shrinking. In defense, each institution and the public unions and technocrats which thrive within its stout walls raise a clarion call that society and the economy will certainly collapse should their institution (or their salaries and benefits) suffer any degradation or diminishment. Since such institutions, their dependent suppliers/contractors and their symbiotic unions wield tremendous lobbying powers, their cries of anger and despair will be heeded until the public coffers has been completely drained.
There are many pernicious reasons why “preservation of institutions” is such a trap. Consider the “buyouts” which are offered to reduce head count; the most competent and experienced will quickly accept the offers, while those with few other employment options will cling to the safety of the institution, leaving the organization weaker. As morale sinks and leadership weakens, the public grows ever more disgusted and dismayed that their taxes are producing such marginal returns. Those left behind will be even more strident and desperate in their demands to “save our vital institution” and will thus redouble their lobbying efforts to funnel more of the dwindling tax revenues to their fiefdom. Thus an unresolvable conflict arises: Institutional fiefdoms fight for their entitlements with the zealousness of the resentful and desperate, while the taxpayers will rise up in rebellion against paying such high taxes for such pathetic returns.
In many cases those bound up in the institution’s bureaucracy suffer a failure of imagination: they literally cannot imagine the institution without endless staff meetings, various layers of management, and all the other trappings of an enterprise which has lost its way but which remains viable because its source of income is no longer accountable to the market or to its output/results. Rather than undertake the radical reform all sclerotic, overly complex institutions need, those employed by the fiefdom will fight to preserve not the institution’s purpose but their own entitlements and perquisites.
11. Growth Via Credit Trap. In a previous incarnation of capitalism, wage earners were encouraged to save money, thus creating pent-up demand for products and a pool of capital which could be lent to private enterprises. In the current incarnation of neoliberal capitalism, consumption requires ever greater borrowing and debt to sustain ever more marginal growth, this cycle of ever more extreme stimulus-funded-by-debt has only one end-state: self-destruction.
12. Exemption from Free/Transparent Market Trap. a key defense against erosion of the Plutocracy/State/high-castes’ shares of the national income is the mechanism of “innoculating” themselves against disruptive market forces via the political construction of protected fiefdoms.
The trap is that each Elite’s success in dodging the forces of change by its shrill lobbying leads to the end-state of officially sanctioned propaganda to persuade the middle class that the destruction of their wealth and security was the result of “eternal laws” rather than from the completely manipulated transfer of risk from the Elites to middle class taxpayers.