The debate, always, is between decentralization and greater centralized authority.
It is the nature of man to seek order in the chaos, and that requires the imposition of order. Monarchs made kingdoms by subduing the unruly provinces; Empires were built via the subjugation of colonial peoples. In some ways, this consolidation would seem to be the natural order of things. As if, perhaps, the universe began with a big bang – and ever since then, everything has been coalescing back together, back to The One. Which, once achieved – will trigger another big bang.
We understand the lure of centralized authority; it permits a power unobtainable by other means. But centralized authority doesn’t merely appeal to those who would wield it, the appeal is broader.
Centralized authority, we say, permits more moral outcomes. And surely, at times throughout our history, this has been true. Without the federal government stamping on “states rights” – without troops to guard black kids trying to integrate white schools, without subsequent federal legislation – could the Civil Rights movement possibly have succeeded? Recall that a core argument for “Obamacare” was ensuring that those who don’t currently have health insurance would be able to get it – surely a more moral outcome.
Centralized authority, or so we say, creates security. The Patriot Act, the NSA. The more power we give to government, the “safer” we can be from terrorists! That’s the argument, dubious though it may be.
And greater centralized authority certainly permits more economically efficient and profitable outcomes. The Federal Reserve was created, in part, in an attempt to prevent financial panics. Really, you should look at the sheer number of panics in our nation’s history – the Panic of 1907, for example. It’s really quite fascinating and frightening. And this was the inevitable result of disorderly and untamed markets. So you create the Fed, you create structure, and the next phase of economic progress begins. Culminating, initially, in the Great Depression – and there’s a school of thought that says, this was no accident.
But it speaks to the notion that greater centralized authority may stave off lower-level chaos, but may ultimately create chaos on a scale previously unimagined. We coalscee back to The One – and then you get a big bang.
Fast forward to now. For weeks, it’s been rumored the Fed is going to start winding down Quantitative Easing. This mere rumor is wreaking havoc in emerging markets; investors, worried there won’t be as much liquidity sloshing around the system, have begun pulling their money out of those markets.
To be clear: Less centralization is triggering chaos.
So Zero Hedge today quotes extensively from a Financial Times article lamenting the fact that central bankers around the world have unaccountably “given up on fixing global finance.” They ought to buck up and show a little intestinal fortitude, writes Robin Harding:
Despite the success of unconventional monetary policy and recent big upgrades to financial regulation, we still have no way to tackle imbalances in the global economy, and that means new crises in the future.
Indeed, the problem is becoming worse. Since the collapse in 1971 of the old fixed exchange rate system of Bretton Woods, the world has become used to the “trilemma” of international finance: the impossibility of having free capital flows, fixed exchange rates and an independent monetary policy all at the same time. Most countries have plumped for control over their own monetary policy and a floating exchange rate. …
Five years ago, after the collapse of Lehman Brothers, there was appetite and momentum for a new kind of international financial system. That appetite is gone – but we desperately need to get it back.
The flaws in the international financial system are old and profound, and they defeat any effort to work around them. Chief among them is the lack of a mechanism to force any country with a current account surplus to reduce it. Huge imbalances – such as the Chinese surplus that sent a flood of capital into the US and helped create the financial crisis – can therefore develop and persist.
Understand what this is saying: We need more centralized control.
Global centralized financial control.
For without it, there is chaos, there is suffering. With it – our problems are solved!
Until that, too, creates a big bang. And then, look out.
This would seem to be the way of the world. A dividing line, perhaps, between liberalism and conservatism – with conservatism coming down on the side of chaos, liberalism on the side of control.
And what’s going on in Syria can certainly be viewed through this lens – part of our ongoing campaign to exert greater control over so key a region in terms of energy. We have sought to impose order on the chaos. Except, it’s not so simple – as the relatives of those killed in Iraq since we “liberated” it could tell you.
Can this trend be stopped, should it be stopped? No, and probably. There’s a line to be drawn somewhere, but wherever we would attempt to draw it, it’ll be crossed. Limits on the NSA’s ability to monitor Americans’ internet usage, for example, would be erased – gladly! – the moment we get another big terrorist attack.
This reaching for The One, then, may be impossible to stop, the outcome inevitable. Chaos – order – even greater chaos – attempts to establish greater order.
Rinse and repeat. And then keep your head down, waiting for the explosion.