May 6, 2013

Decadence and Economics

FINANCIAL SENSE
BY JR NYQUIST05/06/2013
Positive statistical indicators may not signify economic health. The larger context being lost, positive indicators may signify momentary spurts of productivity while the overall situation remains hopeless. Such statistics may reflect temporary conditions which have no actual sustainability. Yet, there are those who want to believe in recovery. There are those who can show – despite all skepticism – that a recovery is taking place. For example, see “Fed’s Evans: U.S. Economy Is ‘Definitely Improving,’” or the March 14 LA Times piece, “U.S. economy improving faster than expected, data show.” Or how about the Fox business article by Jennifer Booton which claims that “Rallying Auto Sales Signal Improving U.S. Economy”? Taking issue with this mathematical approach, which merely judges an economy on what it appears to be doing in the moment, we ought to judge the economy on the basis of what it is becoming.
One might ask how there could be real economic health when employees don’t show up for work on time, or call off every Monday – or when employee theft has become pandemic. How do we measure the moral character that signifies real productivity, or a false prosperity brought on by dishonest financial practices? A true measure of economic success may require a more philosophical approach. Do the “usual economic indicators” even signify what we assume they signify? Can we even trust economic statistics given the new propensity for lying?
It is important, above all, to judge a situation by what it is becoming; and the best way to judge where things are headed, overall, is to consult history. We must look at other ages, other civilizations. Imagine a meditation which takes as its object a series of connected events stretching back 2,500 years. These events reveal patterns that are destined to recur at intervals and include such things as war and peace, rise and decline, boom and bust. And if we enter into this meditation I believe we will find strong evidence that our civilization – along with our economy – has entered into a period of long-term decline.
In the second century B.C., the Greek writer and historian Polybius offered his own meditation, based on a profound study of what we now call “ancient history,” though to him it was “modern history.” After discussing the necessity of equilibrium within a state in hisHistory of Rome, and the importance of checks and balances, Polybius launched into a discussion of decadence. He said there were two “sources of decay existing from natural causes” in the state. One of these causes was external, while the other was internal. The external cause of decay admitted of “no certain fixed definition,” he admitted, “but the internal follows a definite order.”
What Polybius said next has great importance for those who wish to understand the situation of the United States in our time. According to Polybius, “When a commonwealth, after warding off many great dangers, has arrived at a high pitch of prosperity, it is evident that, by the lengthened continuance of great wealth, the manner of life of its citizens will become more extravagant….” He further suggested that this “extravagance of living will prove the beginning of a deterioration.” Flattered by office-holders who say the people are being “cheated” by the avaricious few, the public will direct their “passionate resentment” and anger at those natural leaders who previously brought prosperity to the state. Urged on by demagogues, the people will refuse to follow the laws; neither will they be content with equality under the law.
When all this comes to pass, wrote Polybius, “the constitution will receive a new name, which sounds better than any other in the world – liberty or democracy – but, in fact, it will become that worst of all governments, mob-rule.” And thus did Polybius foresee the future ruin of Rome. In more recent times, the historian Guglielmo Ferrero described Rome’s ruination in detail. In his famous lecture on “Corruption in Ancient Rome” Ferrero told American audiences in 1909 about one Roman generation living better than the previous generations until one came along that could only live better by going into debt. “In this way,” wrote Ferrero, “partly by natural, gradual, almost imperceptible diffusion … we see the mania for luxury and the appetite for pleasure beginning, growing, becoming aggravated from generation to generation in all Roman society, for two centuries, changing the mentality and morality of the people; we see the institutions and public policy being altered…. It breaks down all obstacles confronting it….”
Nothing can stop “the increase of wants and of luxury,” Ferrero warned his American listeners. Massive indebtedness must inevitably overtake society. “To satisfy their wants, to pay their debts,” he said, “the classes now set upon each other, in the cruelest civil war that history records….” Corruption through luxury is a “universal law of history,” he explained, “The United States is subject to that law today, as is old Europe, as will be future generations, and as past ages were.” The main problem he observed was that Americans did not recognize this law of history. They were unable to see the “malevolent force of dissolution … that was sinister and dreadful, a sure sign of incurable decay,” which the ancient Romans lamented as “the corruption of customs.” Today, he said, the Americans mistake the corruption of customs as “a universal beneficent process of transformation….” So much so, he added, “that we call ‘progress’ many facts which the ancients attributed to ‘corruption.’”
According to Ferrero, “it is certain that in the modern world every increase of consumption, every waste, every vice, seems permissible, indeed almost meritorious, because men of industry and trade, the employees in industries – that is, all the people that gain by the diffusion of luxuries, by the spread of vices or new wants – have acquired, thanks above all to democratic institutions, and to the progress of cities, an immense political power that in times past they lacked.”
We may call it “pessimism” that the ancients saw corruption in progress. In this, said Ferrero, “there was a basis of truth.” There are times, he warned, when personal egoism “usurps the place … that represents in society the interest of the species; national duty, the self-abnegation of each for the sake of the common good.” In such times we see an increase of certain vices and defects, “the weakening of the spirit of tradition, the general relaxation of discipline, the loss of authority, ethical confusion and disorder. At the same time that certain moral sentiments refine themselves, certain individualisms grow fiercer.” Ferrero added that in these times “family discipline is relaxed; the new generations shake off early the influence of the past; the sentiment of honor and rigor of moral, religious, and political principles are weakened by a spirit of utility….”
And so we find a reflection of our own time in that of ancient Rome. This reflection is not flattering, but alarming. We do not see in this distant mirror a picture of health, but a picture of declining vigor. The Romans declined from Scipio to Nero. The Roman economy became an economy based on plunder – an import economy with the force of the Roman legions behind it. Our own decline must be similarly marked out. The real productivity of the 1940s and 50s has given way to an import economy which exports paper (or digitalized) dollars which hold their value because of carrier battle-groups and nuclear missiles. The thing of substance has been supplanted by a hollow shell. And so we might ask ourselves which statistic best paints our economic portrait? Is it the statistic for out-of-wedlock births? Is it the statistic for abortions? Or could it be, even more, the number of Americans on the dole?
The economy is in decay. It continues to decay regardless of momentary upward “bumps.” This must be taken into account.
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