The root causes of the rise of technocratic frameworks
Money governs by demanding that certain operations of institutions to fit within the essentials of stability, value and trust of money. Banks are the most obvious example of institutions which have their operations (theoretically) controlled by money, but virtually every institution is governed by acting within the parameters set forward by money–and the institutions, in turn, seek to control the nature and qualities of the supply of money available to them and to others.
Then what about systems where values are volatile and difficult to forecast for whatever reason? Such circumstances make the provision of long-term relationships more risky, and these long-term arrangements are essential to a system of Governance by Means of Money. In particular, money must be invested so as to maintain value and to create value. These investments require increasingly large and typically long-term commitments measured over years and the associated forecasts of stability and consistency unless risks should become too great.
When risks increase, complexity tends to increase as well as more and more provisions are set in place to protect those who are trying to minimize the variability of forecasts against their hopes and plans. Complex systems are inherently difficult to keep stable because unusual stresses can arise from unpredictable sources “hidden” by the complexity. Engineers, ecologists and physiologists have long known about such issues and studied them at length. More recently, Nicholas Nassim Taleb has introduced the term “black swan” to represent this notion of the unpredictability of complex systems. It seems to me, as an aside, that Taleb’s long-shot, the finding of actual black swans in Australia, doesn’t illustrate very well what he was getting at in his wonderful book. The point is made, however, that things can come at us that are a total surprise. They almost certainly will do so when systems are very complex.
We have moved to a substantially more global economy than in the past because technology has allowed it from jet airliners to standardized business education to global telecommunications networks. Goods, services and ideas flow rapidly and several types of institutions attempt to span borders with their operations. This has led to some degree of standardization, but it has also undoubtedly resulted in increased complexity, as well.
In turn, money moves rapidly in sort of a super-layer of actions tied to some larger governance institutions, but most governance cannot play in these games because the political walls of a different age prevent easy capacity to assure stability and growth when capital moves rapidly. No one redrew the borders when the financial world shrank.
The market response to this is to call for either minimal governance or to argue for local governance that is world-leading. Just as half of all doctors graduate in the bottom 50% of their class, surely not all governance will be world leading. Some governance structures are likely to achieve lasting advantages and that leads the others to be increasingly unstable and of low growth. To assure stability, governments (as part of larger governance structures) invest in ways that attempt to mitigate risk to their own populations. Again, complexity is added to the soup. Where governance is minimized, it is difficult to maintain stability against the tides of complexity. At some level, some set of rules and institutions must be trusted to assure stability and value. But how?
In theory, opportunity should allow for the movement of money to those places that offer opportunities. This works rarely without very strong governance structures in support. Thus, institutions are grown and theoretically enable the stability to achieve growth in local places. Unfortunately, more institutions means more complexity and more resolution of conflicts between institutions at various levels of function. Action becomes difficult; coordinated action is all but impossible across numerous governance institutions. In part this is due to the fact that the incentives to maintain local control are just too great. In short, people like to cheat to their own advantages, so they fragment their institutions.
The result is usually reform processes that take years to hammer out. If anyone balks, the process can collapse. So the needed stability is fundamentally undermined. Without clear understanding of threats that demands coordinated action, the inherent complexity is more likely to grow than it is to be smoothed. It is difficult to scale capitalism across dozens if not hundreds of governance frameworks. No one can control, understand or logically invest in such structures for long with any great success. As such, crises occur that become cascading sets of threats in their own right.
Clearly the global framework of Governance by Means of Money has a range of nested feedback loops tending toward threats and problems.
So what now? Now we also introduce the idea of system-wide catastrophic threats outside the scope of any one framework of governance. These are threats that cannot necessarily be managed inside any one system of governance by means of money. The result is fear…combined with an inability to act. And this leads to yet further feedback loops of uncertainty and instability.