Monday


In The Industrial-Technological Thesis I characterized industrial-technological civilization as involving an escalating cycle of science, technology, and engineering, each generation of which feeds into the next so that science makes new technologies possible, new technologies are engineered into new industries, and new industries create the instruments for further scientific research. I further argued in Civilization, War, and Industrial Technology that the only property more pervasively inherent in industrial-technological civilization than escalating feedback is war — since escalating feedback is characteristic only of The Industrial-Technological Thesis, whereas war typifies all civilization. Thus technological growth and war are both structurally inherent in The Industrial-Technological Thesis, so much so that to entertain the idea of civilization without either is probably folly.

Now I realize that in recounting the escalating spiral of science, technology and engineering, that I was recounting only the “creative” side of the “creative destruction” of industrialized capitalism, and that the creative destruction of capitalism as it is played out in industrial-technological civilization also has a destructive side that is expressed in a way entirely consonant with the distinctive character of industrial-technological civilization. Each phase in the cycle of science, technology, and engineering fails in a distinctive (and in a distinctively interesting) way.

The counter-cyclical trend to that of the exponentially escalating spiral of science, technology, and engineering is the exponentially deescalating downward trend of science in model crisis, stalled technology, and catastrophic failures of engineering. Science falters when model drift gives way to model crisis and normal science begins to give way to revolutionary science. Human beings, being what they are, have invested science with the “truth” once reserved for matter theological; but science has no “truths” — there is only the scientific method, which remains the same even while the knowledge that this method yields is always subject to change. Technology falters when its exponential growth tapers off and its attains a mature plateau, after which time it changes little and becomes a stalled technology. Engineering falters when industries experience the inevitable industrial accidents, intrinsic to the very fabric of industrialized society, or even experience the catastrophic failures to which complex systems are vulnerable.

Industrial accidents are intrinsic to industrialized society, and cannot be wished away.

I hadn’t previously thought of these disruptions to industrial-technological civilization together, but now that I see them whole I see that I have already written separately about all the phases of failure that so closely parallel the successes of industrialization. Mostly, I think, these disruptions have taken place separately, and have therefore only proved to be temporary disruptions in the rapidly-resuming cycle of technological growth. However, once we see the possible failures as a systemic, counter-cyclical trend that destroys old knowledge, old technology, and old industries in order to make room for the new, we can easily see the possibility of an escalating disruption in which scientific model crisis would limit knowledge, limited knowledge would lead to long term stalled technologies, and stalled technologies would lead to escalating industrial accidents and complex catastrophic failures.

None of this, of course, is in the least bit surprising. Ever since the industrialized warfare of the twentieth century we have been discussing the possibility that industrial-technological civilization will more or less inevitably destroy itself. Civilization, when it was suddenly and unexpectedly preempted by industrialization, has opened Pandora’s box, and the evils that fly free cannot be shut back inside.

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Creative Destruction

15 August 2012

Wednesday


Joseph Schumpeter coined the phrase ‘creative destruction’ to describe the growth of a capitalist economy.

The phrase “creative destruction” is indissolubly linked to Joseph Schumpeter, who coined it. Schumpeter devotes a chapter of his masterpiece, Capitalism, Socialism, and Democracy, to “The Process of Creative Destruction.” It has been observed that Schumpeter’s work was neglected for decades until in the late twentieth century the role of the entrepreneur in economic growth began to be appreciated.

I would argue that half of Schumpeter’s famous phrase continues to be neglected today, since the focus on entrepreneurial activity has primarily taken the form of singing the praises of innovation and the virtues of start ups, without an equal appreciation of the importance of business failure, bankruptcy, and economic collapse, despite the very prominent role that all of these phenomena have in the world today. It has been said that capitalism without bankruptcy is like Christianity with Hell, and this comparison is telling, more telling than I think most people realize, because the doctrine of Hell is about as unpopular as the idea of bankruptcy.

What events in recent world history have been more important than, for example, the economic collapse of the Soviet Union, the dot com crash, the bankruptcy of Enron, or the bankruptcies of Lehman Brothers and Bear Stearns? There have been many events of roughly equal importance to these massive examples of the “destructive” phase of “creative destruction,” creative examples among these, but it would be difficult to name obviously more important events that these for shaping the world in which we live.

I think it is probably a little exhilarating for business types and economists to talk about the virtues of innovation, but the exclusive focus on innovation creates a kind of conceptual vacuum around its opposite number, but we are in as much need to innovative forms of business dissolution as for business innovation. The recent financial crisis and the consequent “great recession” (as it is now being called) focused a lot of attention on enterprises that were perceived to be “too big to fail.” That is to say, if very large institutions were allowed to fail catastrophically, the damage throughout the economy could be greater than that of keeping a failing business afloat. “Too big to fail” talk was also a constant accompaniment of many national crises, like that in Greece now, or the Argentine debt default more than ten years ago. I can easily imagine, in this spirit, someone arguing that the Soviet Union was “too big to fail.” In fact, I am certain that there are those who are argued that an engineered “soft landing” for the Soviet Union might have come at a lower human cost than that more or less catastrophic failure that the Soviet Union did indeed experience.

It is just as important for us to rid ourselves of what we no longer need as to innovate new products that are suddenly the thing that everyone needs. In my discussion of technological succession I emphasized that apparently exponential technological growth is often the result of several overlapping technologies succeeding each other in quick succession. This has certainly been the case with personal computers, as one generation of technology has rapidly succeeded another, and people have thrown out one computer after another as technology advances so quickly that the old computers are not merely inconvenient, but essentially useless.

There have been many news stories about computer waste, so if an individual wants to be informed about the process, the information is there for the taking. I recommend, rather than reading some news stories, watching the film Manufactured Landscapes, about the work of photographer Edward Burtynsky, in which you can see the painstaking work in a Chinese village of breaking up old computer parts, as well as the much larger scale but essentially parallel task of the ship breaking yards of Bangladesh.

It isn’t just individual objects like computers and ships that must be destroyed, or simply abandoned and allowed to sink into the landscape. In my post on Failed Cities I suggested that the process applies to entire cities as well:

“…industrial succession is part of the Industrial Revolution, and that the civilization that has emerged from industrialized societies is a civilization that must reckon with the industrial succession that comes with the Industrial Revolution. The rational approach to this would be to plan for cities to emerge around particular technologies, and for these same cities to be abandoned gradually as that same technology inevitably becomes obsolete.”

Ideally, the rational approach to obviously temporary supply chains would to build the facilities with the intention that they will be taken down and taken apart when this particular industrial process is succeeded by another industrial process. Unfortunately, civilization has not yet reached the point at which this level of planning and foresight can be integrated into large scale business operations.

In another sense, however, cities do in fact embody this idea — cities actually embody creative destruction — in the way that the build environment on the whole is always in flux. The same film I mentioned above in connection with computer waste disposal, Manufactured Landscapes, also features the ever-changing urban landscape of Shanghai.

Cities that have been continuously inhabited for long periods of time are inevitably built up and built over, sometimes intentionally destroyed no longer useful structures, and sometimes having existing structures destroyed by war or natural disasters. This is what makes cities so fascinating to archaeologists, since anywhere you dig is likely to reveal the history of the site in the layers below ground.

The city, then, considered from the perspective of the big picture and la longue durée, are or ought to be the model for the economy overall, which suggests that cities are the macroscopic model of rebuilding that needs to be realized on a microscopic level throughout the economy. We need an urbanism of objects to take control of our economic innovation and dissolution. Perhaps most macro-economic planning has been a failure in part due to the fact that it has not been conceived in this way.

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A New Bogey Man: Market Fundamentalism

The purveyors of economic ressentiment have introduced a novel term of abuse — market fundamentalism. We are to understand that the ills that have been with us since the dawn of civilization — poverty, war, exploitation, injustice, inter alia — so recently credited to globalization and other bogey men, are now to be laid at the door of market fundamentalism. Part of the abuse heaped upon market fundamentalism can be put to hardships following upon the business cycle in contraction (such criticism is muted during periods of expansion), part to perennial discontent on the political left, and part to the widespread belief in Europe that they have transcended the crude capitalism that brought them to their current enviable economic success.

If by market fundamentalism we mean an economic system in which market forces are allowed to function with a minimum of interference from government regulation and centralized economic planning, then the closer we approximate market fundamentalism, the more rapidly the market will be able to accommodate changed conditions, and the smoother the transition will be in times of dramatic economic change. This does not mean that a dramatic economic disruption can be smooth in an absolute sense, only that it will be less disruptive and less prolonged than if well-intentioned intervention prevents market forces from operating. The more vigorously we try to delay the market’s day of reckoning, the more brutal the reckoning will be when it arrives.

Marx Knew Better

If we attempt to fix industrial, commercial, and financial arrangements in a manner that reflects the economic reality of one particular moment in history, as soon as that moment passes the fixed arrangements cease to function and there is not only an economic reckoning, but a potentially disastrous reckoning on the part of a society that deluded itself into believing that it could define the terms of its own participation in History. Marx knew better. In The Eighteenth Brumaire of Louis Napoleon he wrote, “Men make their own history, but they do not make it as they please; they do not make it under self-selected circumstances, but under circumstances existing already, given and transmitted from the past. The tradition of all dead generations weighs like a nightmare on the brains of the living.” (1852)

"History does nothing; it does not possess immense riches, it does not fight battles. It is men, real, living, who do all this." Hence the role of individual intiative and self-interest, thought Marx didn't see it this way.

Marx: "History does nothing; it does not possess immense riches, it does not fight battles. It is men, real, living, who do all this." Hence the role of individual initiative and self-interest, thought Marx didn't see it this way.

The attempt to regulate our way out of market adjustments to prevailing conditions will foster precisely the catastrophic economic crises that Marx predicted, and if the response to such crises is more regulation, the severity of these crises will increase and perhaps even lead to a generalized economic crisis. Moreover, the institutions that manage financial crises on behalf of nation-states (or, at least, which attempt to manage financial crises) must be counted along with the industries they regulate as part of the economic system (not least due to regulatory capture). They, too, must be allowed to fail. If they are ineffective, they will be swept away as certainly as a failing industry.

Time and Tide

Time and tide, we are told, wait for no man. The business cycle is a tide, and it is no respecter to persons or nations but ebbs and floods according to market forces. Marx thought he could prove that the crises of industrialization that follow from the business cycle would increase in severity until the system of capitalism destroyed itself and was superseded by communism. Marx’s vision was somewhat myopic in this respect. Compared to the Great Depression of the first half of the twentieth century and the Great Inflation of the second half of the twentieth century, our financial crises are, in general, less severe than those of the past. We have, quite simply, gotten better at managing the business cycle.

The business cycle is the concrete embodiment of what Schumpeter famously called creative destruction. The upswing of the business cycle is the creative phase; the downside of the business cycle is the destructive phase. Let us not mince our words: the destructive phase of creative destruction can be excruciatingly painful. Industries are destroyed, careers are ruined, families suffer and individuals are reduced to despair.

Machiavelli Knew Better

The ugly truth of capitalism is that obsolete and decrepit industries must be ruined, and the uglier truth is that all who invested in or are employed by doomed industries will be ruined along with them. From the ashes of the ruins will rise the Phoenix of a transmogrified economy, but those who have been ruined will not be able to derive much hope or enjoyment from the perspective of their drastically reduced circumstances. This rude awakening to what the market can do if it turns against you is perhaps more than many can bear. Machiavelli claimed that a man would sooner forgive the execution of his father than the loss of his patrimony.

"...when it is necessary for a prince to proceed against the life of someone, he must do it on proper justification and for manifest cause, but above all things he must keep his hands off the property of others, because men more quickly forget the death of their father than the loss of their patrimony." The Prince, Chap. XVII

"...when it is necessary for a prince to proceed against the life of someone, he must do it on proper justification and for manifest cause, but above all things he must keep his hands off the property of others, because men more quickly forget the death of their father than the loss of their patrimony." The Prince, Chap. XVII

Most advanced industrialized economies have a social welfare net, the intention of which is to catch those who have been ruined and to save them from the most abject poverty. This, however, is cold comfort to those who have once experienced affluence. To be saved from starvation and homelessness is a profoundly humiliating experience to those who have been more accustomed to handing out charity rather than receiving it.

We might call these sad souls financial exiles, as their condition is analogous to the ancient punishment of exile, the poignancy of which Ovid so eloquently attested. Financial exiles retain their lives, their families, their citizenship, and a few tokens of their former affluent lives, but they have come down in the world abruptly, and are unlikely to again enjoy the considerable rewards of financial success.

Dreams of a Post-Industrial Twilight

If it were the case that all the political entities in the world could unanimously agree to desist from the ruthless ways of capitalism, and the great globe of the earth could be handed over whole to collectivist cooperation, the entire internationalism system could quietly allow itself to slip into a long, post-industrial twilight, in which each sector of society gets to keep the privileges and standards of living of the immediately previous generation by preserving the economic arrangements of that generation in the economic equivalent of a glass case, like a museum piece. However, we already know this not to be the case.

Whatever the absurdities of collectivist rhetoric that may come from the leaders of Russia and China, it is evident to the most cursory examination that these are nation-states bent upon economic dominance at any cost. Capitalism, by any other name, is just as ruthless. Whether the currency of competition is technology, natural resources, armaments, population, or any other measure by which one state can gain an advantage over another, we can be certain that other nations will pursue these advantages to the best of their abilities. As a result of historical accident, the West currently retains economic and technological advantages that can keep it from being swept aside by other powers, but this dominance could be forfeited in a single generation so that the historical accidents of our time could efface those of earlier times.

As Husserl noted in another context, though not a necessarily unrelated context, “The Dream is over.”

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“Après moi le déluge.”

Edmund Husserl: "The dream is over." In other words: “Après moi le déluge.”

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