Post-bubble is a way of life

[imomus]

As anyone who even glances at newspapers will have seen this past week or so, we're in the middle of a "correction" -- big money is being wiped off share values. It's said to have started with rumours that the Chinese government were planning to make a tougher business environment in order to slow down the country's overheated, bubble-style growth. Anyway, today shares continue to slide, amidst conflicting noises: Correction: this could become a crash after all, thinks The Guardian's chief economics journalist. But Treasury chief feeling good about economy, contradicts Reuters. Gung ho hum!



Now, a lot of the selling we've seen this week represents typically irrational capitalist behaviour -- hunches, worries, fears, projection and paranoia trigger more hunches, worries, fears, projection and paranoia . This storm in a rich man's bone china teacup needn't really concern the rest of us. The huge sums of money being lost are largely imaginary, purely notional, and concentrated, anyway, in very few hands.

But what might a big crash mean to the rest of us? Might it even be rather good news? I think the answer to that depends on the answer to the question "How big?" The kind of crash people call a "correction" would mean very little to me, personally. I own no property, no house, no car. I have no dependents. Neither do I have any debt. I could live on a quarter of the sum I'm currently earning, and it wouldn't honestly make much material difference to my life. A crash would only start to impact my life if it made air travel more expensive, or made the internet somehow stop working.

Berlin isn't just a city well-protected from rising sea levels, earthquakes, and so on. It's also well-protected from financial instability. This is a city with incredibly cheap prices, a city populated by people who manage to live well on little money, a city of renters rather than owners, a city pretty familiar with post-materialist lifestyles.

But a warning on just how wrong things can go here, in other circumstances, comes from Kafka's experience of the city in the early 1920s. High inflation and unemployment led to such poverty, misery and civic unrest that Kafka, already seriously ill with tuberculosis, didn't dare buy newspapers or venture into the centre of town. He stayed in a rather dull suburb with his girlfriend, Dora Diamant. Then again, the same conditions of instability attracted the younger, tougher Bertolt Brecht, who came to the city to agitate for communism. He later described Kafka as "a man too much trapped under the wheels" of the capitalist system rather than someone looking for alternatives. But even Brecht had to flee when the Nazis used instability to grab power. They eventually murdered Kafka's sisters in concentration camps.

The big fear, should a big crash come, isn't so much the immediate economic effects, but the political ones. What would a desperate America do if and when it realized that, as The Guardian thinks, what we're seeing now is its supremacy crumbling away? Might the empire lash out with more ill-advised military adventures, try to take the world down with it?

It's easy to get apocalyptic, though. I prefer to think that what's been happening this last week or so -- and seems set to continue this week -- might actually be a bit of a boost, a filip, an incentive to people to start looking at their basic priorities in life.

My own brand of post-materialism matches Berlin values with Japanese ones. Here, for instance, is Kyoichi Tsuzuki, in the afterword to "Tokyo Style", his documentation of the way ordinary Tokyoites live in small spaces:

"Today, amidst Japan's unprecedented devotion to money, even after property and fame and desires have all been attained, somewhere in the backs of our minds lingers an altogether Asian vision of the quiet life in a thatched hut deep in the mountains.... There's a Buddhist adage that says: Half a mat to sit, one mat to lie down. No matter how huge a mansion you may build, there's no need for more than one-meter by two-meters when you sleep; no matter how many dishes are set out before you, there's no eating what will feed ten. Sure, given the choice, who wouldn't like more space instead of less? Still, if it comes down to working extra hard just to pay high rents and mortgages, then there are people who would rather spend that time surrounded by their favorite things."

Atelier Bow Wow have followed their interest in "pet architecture" -- basically the design ingenuity of poor people responding to vastly over-valued real estate -- with a book about the Post-Bubble City, in which small, sustainable private houses become a metaphor for the body, and for local personal survival. Post-bubble is a way of life.

It isn't just Japanese in Japan who feel this way. David Duval Smith of design group Namaiki really impressed me with a lovely interview he gave Theme magazine. Namaiki do just enough work for corporate clients to follow their own interests, which have veered recently into guerilla gardening -- the greening of spaces in the city and outside it.

"The model for my farms," says Smith, a New Zealander, "is Masanobu Fukuoka’s seed ball project and Bill Mollison’s Permaculture system of sustainable agriculture. (Fukuoka is the pioneer of natural farming and sustainable agriculture in Japan who now gives lectures abroad. Mollison is an Australian researcher.) Basically, the idea is to spread the seed and let nature go. It’s about living in an edible jungle. You don’t need to pay 100 yen to buy a few pieces of lettuce or herbs. You just plant some seeds, the rain falls and they grow, and you get hundreds of leaves and thousands of seeds the next year.

"People have been calling them “guerilla farms” or “green graffiti,” I guess because it is done without permission. But I believe it is a victimless crime, if a crime at all. No one profits [financially], there is no damage, no loss of anything. A gross and a net gain.

"I came to a realization that nothing was more miraculous than soil and seed. They are positive in every sense, right up to the massive real profit in seeds at the end of the plant’s life, clearly sustainable, and essential to human existence.

"The project also was started as a reaction to the car, which I believe is a true villain in communities. Cemented roads are unproductive, as is parking. Yes, personal mobility is important, but I think that can be addressed more intelligently. And also, yes, goods and delivery systems are important, but only in commerce and the consumer market, which is quite unsustainable. At present, it takes 100 calories to make 10 calories of food, not to mention petroleum-based fertilizers, machine harvesting, plastic, and the worldwide delivery involved. This is unsustainable, unhealthy, and unintelligent. Vegetables are best fresh, and so I thought that they should be grown locally.

"People sometimes use the expression “going to seed” to refer to something in the process of declining or decreasing, but I think going to seed is a necessary part of life."

Comments

[imomus.livejournal.com]

Human economic behaviour is capitalist behaviour

Now, this is just not the case. Capitalist behaviour is human economic behaviour, but just a small subset of it. Think of communist five year plans, or barter systems.

[zenicurean.livejournal.com]

Point taken - I clearly misapplied the term. What I should have actually said is that the rationale of economic activity tends to be fairly constant across systems. If we're going to see a mass of selling, then we're going to be seeing a relatively predictable and reasonable response to the increasingly evident threat of Chinese investments being overvalued. Reduced to its elements, it's the same motivation that keeps farmers from chucking their tools down wells for the hell of it.

Saying that the stock market wealth (that's quite possibly evaporating slowly) is imaginary and notional is perfectly correct in the philosophical realm, in the way that money is all notional and imaginary. It might even be good economics in the sense that Chinese investments probably are overvalued. But it's not imaginary wealth and it's not inconsequental wealth. Arguing that would be the moral equivalent of Homer Simpson disappointedly going "Twenty dollars? But I wanted a peanut!"

[zenicurean.livejournal.com]

(Rephrase second to last sentence as "but the claim to material wealth money represents is not" etc. etc.)

[imomus.livejournal.com]

I really meant that a lot of share profit is never expressed as anything more than numbers in a computer. It's neither used for the personal benefit of the person said to own it, nor invested in real world projects which provide employment. It sits as numbers in a bank account, or tied up in other shares, and rises and falls in (notional) value as those shares rise and fall.

Much of the value wiped off shares this week will have been of this type. Purely speculative "money" which never finds expression except as numbers in electronic space, and whose disappearance won't really be tragic.

[zenicurean.livejournal.com]

It sits as numbers in a bank account, or tied up in other shares, and rises and falls in (notional) value as those shares rise and fall.

But, obviously, money that goes into banks gets shuffled into loans, which go into businesses, while money that is spent on stocks and shares also goes someplace - namely, whoever sold those stocks in the first place. It's almost impossible to not circulate money around in a sufficiently developed, credit expansion-based capitalist economy.

What you're apparently criticising is, however, that an investor wishes to save real, actual money by cashing in their assets before they depreciate in real money terms, and I don't get how that is irrational. Aftert all, while there is an element of sheer speculation about the market, stock prices still represent the price of owning bits of companies with varying degrees of genuine capital and real income. In fact, if anything is wrong with the "casino" stock market these days, it's that it frequently ignores that basic fact.

[zenicurean.livejournal.com]

And to be less long-winded about it - yes, they're essentially trading expensive little bits of paper, but they're using real money that comes from someplace and goes someplace with a genuine effect on the pattern of the economy.

[fishwithissues.livejournal.com]

hmm, but shouldn't we (on the internet) be moving past the idea that numbers in electronic space have no materiality? that money could've been turned into physical dollars with enough clicking and signing of papers. now some of it no longer exists. maybe it'll grow back, but that won't happen without a measurable series of market changes. you can't just paint that money back in like photoshop, i guess is my point. and i think i see what you're saying, that at a certain point invested wealth seems like a signifier, a point system for the powerful, but that's a more general problem of a gold-less, digitized system of finance, i think. actually i don't know anything, i'm running on fumes of high school econ right now.

[zenicurean.livejournal.com]

imomus is actually perfectly correct that simply having an expensive slip of paper (since we're apparently ignoring the initial purchase here) doesn't actually make a person impact anyone's economy unless it's traded on the market - but then he strangely condemns the people in question as irrational for attempting to actually do so.

[(Anonymous)]

There is no money dam, just a glittering reservoir collecting the rain before it feeds through to the tributaries of love. Any recent evaporation is a good thing, to stop wasteful businesses and individuals receiving loans for their maverick schemes, and forcing them to reconsider the profitability of ideas that no-one actually wants! Back to art school, funkster! Lesson one: the world is more than you you you. Dream your dreams in the bath or MySpace. But come back when you are ready to exploit them! It’s a glorious day for art and business, brother and sisters!

[zenicurean.livejournal.com]

Any recent evaporation is a good thing, to stop wasteful businesses and individuals receiving loans for their maverick schemes

Recessions are Momma Nature's way of reorganising the labour pool, bursting industrial bubbles and relieving inflationary pressures, after all. If this heralds a severe downturn, it remains to be seen whether the Chinese party apparatus grasps what is happening and that growth in a sophisticated economy is not going to be eternally continuous no matter how much we wave the red flag. If they panic, it will cause more problems than it can ever create solutions.

[mandyrose.livejournal.com]

Strange that according to the Chinese five-element system, rampant capitalist economic growth is seen as "excess of wood"-- this would deplete water (the human unconscious, as well as physical, actual water), and increase fire (anger, passion, greed, obsession with sex). One of capitalism's problems is that it creates booms like these. And small farmers may throw their tools down the well, if they can't keep up with big agribusiness.

[zenicurean.livejournal.com]

Whatever is wrong with the market's fang shuei, and whatever alchemical or astrological failures it engenders up in Platoland, none of them will not be cured by tightening regulations e.g. on "grey money" like the Chinese government occasionally purports to want to do - if only to remind everyone who is in charge.

Right now economic growth is driven, not only by government investment, but also extensive western business involvement, and I'm not entirely sure if the Chinese government realises how much they need to keep the business atmosphere predictable and secure after the market settles down. Fact is, looking at what might quite possibly be a major southern construction bubble, it's rather evident mid-level Chinese government officials do not widely understand how markets work and why it's not very smart to put money in things that do not actually create returns. They're doling out money like candy; if the market reacts negatively, it's quite possible the Chinese middle managers will blame it for what is partially their own financial failure. And that's simply not conductive to anyone's economic well-being.

[mandyrose.livejournal.com]

The five-element cycle has less to do with
Plato, alchemy, or astrology, and more to do with physical, i.e., elemental reality. That is, resources being earthly and finite.

[zenicurean.livejournal.com]

I was trying to indicate the limited utility of invoking metaphysical anything with regards to the Chinese stock market.

[mandyrose.livejournal.com]

But you see, what I speak of is not metaphysical. It's physical. Capitalism, on the other hand, is metaphysical-- and based on an extensive array of human abstractions. Plants growing out of water, forests catching fire, fires producing ash that makes soil, minerals being extracted from the soil, minerals holding water-- you can't get less abstract than that. These are simply patterns that can be seen on a microcosmic as well as macrocosmic level. They are dependable and timeless.

[zenicurean.livejournal.com]

In that case, may I say your message simply contained too much of the occult element Aether for me to decipher it correctly.

[mandyrose.livejournal.com]

You consider physical science occultism?

Oh, and aether is not one of the Chinese elements :)

[zenicurean.livejournal.com]

No, it's not. Aether is one of the elements tagged on to the Classical Greek ones and is generally met in the medieval and renaissance corpus of Europe. Many magi operating according within the Hermetic and alchemical traditions embraced it. It's also clearly physics and very concrete and universally applicable, since I can apply it metaphorically to various phenomena.

[lord-whimsy.livejournal.com]

I'd imagine that many people in finance have seen this one coming--the Chinese government has a talent for getting in its own way as far as the economy goes. They're mechanistically-minded party goons dealing with a phenomenon that in large part behaves more like a lifeform. These are probably the same bastards whose inflexibility and political arrogance resulted in a third of all the river species becoming extinct after building that brutalist Three Gorges Dam nightmare--including a dolphin species. A bureaucratic triumph, no doubt.

As far as the economic situation: I'd sooner take the advice of drearily capable, dun-colored middle class sorts who have taken a concrete stake in their societies by starting businesses, assuming mortgages, starting families and making investments (in the West, they are "the rest of us"). A detached, "food for thought" perspective is useful on occasion, but eventually one is going to have to work out the details rather than working backwards by shoehorning everything into some pet theory. Economics is not art school--there are consequences. Millions can starve when someone 'thinks outside of the box'.

In any case, trading one dysfunctional system for another is certainly not an adequate answer to our problems. Saying "no" is all too easy. We need a solution--a real one.

[zenicurean.livejournal.com]

For a very simple economy it actually probably wouldn't matter very much whether they practiced their current disjointed command economics or not, because their economy would be much easier to fit into a plan. It appears that regions with very low per capita GDP grow at much the same pace regardless of how much economic freedom individuals are allowed by their more-or-less elected governments.

However, the Chinese experiment has demonstrated time and time again that their country is simply too huge and - paradoxically - too technologically advanced to control with the efficiency Mao once expected from his overly romanticised agrarian project. Reforms from the seventies onward have consistently attempted to settle this by making life easier for everyone concerned, so I'd assume that China will have to keep on dismantling its massive regulative engine to a level reminiscent of the modern mixed economies. Fifty-five percent of the GDP, maybe, would involve government spending, when right now it is more than seventy. So in some ways the best road for the Party - at least on the coastal regions where economic werewithal right now actually allows something like this - might be towards a kind of a politically unfree demisocialist welfare state project.

[lord-whimsy.livejournal.com]

Care to make any predictions as to where China will be in a decade? Two? At the moment, it seems that India's prospects seem sunnier.

[zenicurean.livejournal.com]

I wouldn't dare. I'm afraid it'd turn out to be touchy feely pseudopostmodern pop-economics simply because the Chinese political and economic systems are so very opaque and I have no idea what's happening right now inside their political ranks. It'd take an expert and I'm not one.

The big definitive command economy, the Soviet Union, collapsed in large part because their economic system was essentially cannibalistic - it devoured capital much more than it could produce it, and the whole experiment sort of ended up being a batch of unprofitable projects being funded by other unprofitable projects, all held up with oil and natural gas. But China is such a completely different story, with an increasingly mutant economy, and has its very own brand of impenetrable politics which might or might not try to make the best out of the globalisation-driven thaw with the West.

What happens there within about a year or two, however, is slightly easier. It depends entirely on China's ability to reassure foreign companies that it's actually smart to invest in it, and that Chinese investments in the Asian and American markets are business first and power politics only second. As long there's no need to get rowdy over Taiwan or India or whatnot, there's good incentive for everyone to get along, despite archaic Red/Yellow Peril whining from certain circles in America.

So as long as China is economically smart, and there are no humongous internal problems that come up, I think it's pretty much set to weather any corrective depression. America and Europe simply can't allow China to fall down any time soon. Everyone owes everyone else too much money. China basically owns America's bond market, and if that goes bust, Europe goes bust.

Coupled with increased foreign influence in China, internal dissent is the main thing that might prompt an "oh, heck!" reaction from the old guard, and lead to an isolation policy that nobody really wants. But given the weakness of democratic movements and the heretofore toothless nature of Falun Gong, that doesn't look very likely, so the question is pretty academic.

[lord-whimsy.livejournal.com]

The picture gets really complex when you add a supposedly recovering Russia to the mix...

[zenicurean.livejournal.com]

Russia is much easier. All one has to keep in mind that it's, well, Russia. Basically there are three ways it can go, with the reality probably being something of a broad-brush compromise between two or all.

It can close in on itself and let the Russian nationalists decide that autarky is cool, extorting Poland with gas is hip, building Great Russia is necessary, and who needs European investments anyway? Not that the gentleman in question will ever be anything but political comic relief, but this would be crystallised in the agenda of Mr. Vladimir Zhirinovski's Liberal Democratic Party (which is liberal and democratic in the same way that the latter-day Holy Roman Empire was Holy and Roman). I can basically see this happening if the voters get really nostalgic for the good old days, if the government starts feeling seriously threatened by an aggressive and petulant USA, or if Putin's successor is incompetent. If it happens, it will economically speaking mess things up simply because they tried that already and it didn't work out.

It can also stay as the Putinists' personal little corporate bordello, where journalists disappear in odd circumstances, governors are appointed by fiat, and the currency of choice for many investments is "American dollar in brown envelope, and please don't nationalise me." Since this is pretty much status quo, it will essentially keep up moderate growth and fairly good relations as long as oil and gas prices are good, and everyone in the West realises that the integrity of the impossibly fractious Russian Federation hinges partially on their ability to keep the Chechnyans down just so as to keep everyone else from accidentally wanting autonomy. One of the big problems here is that Russia really, desperately needs competent regulation - and now - and a reduced cost of doing business.

The third option is that Russia cleans up its act to get into the European Old Boy's Club, which might or might not happen through the sparkling fairy magic of popular pressure and economic opportunity. Diplomatic pressure sometimes works, too, but Russian authorities tend to hate it when it gets treated as the red-headed stepchild of international community (read: the USA).

Whatever happens, the West has got to remember that that there is an erstwhile superpower that's had The Enemy Come in from the West(tm) for about 500 years or so. They need to be taken seriously. Like with most large upcoming economies, the correct way to keep everyone (except the Chechnyans and the like) moderately happy isn't to try and aggressively "reform" their system in the name of everyone being one happy international family, but making sure there's an economic incentive for Russia to deal fairly.

[zenicurean.livejournal.com]

And small farmers may throw their tools down the well, if they can't keep up with big agribusiness.

Technology is their actual bane - the same one that so mercilessly destroyed a fine traditional livelihood based on having manufactures where poor people make needles by hand.

But no matter. Civilised countries have subsidy systems in place to make sure at least someone is getting paid for doing costly and unprofitable things for living. Although this would usually be, like Mr Bush's stupidity-based policies have proven, the wealthy, presumably on the logic that it's not worth putting money in producers who're never actually going to reap any benefits of scale.