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One Model for a New World Economy

If the Industrial-Era economic system is, in fact, on its last legs, it would be useful to think through some of the possible post-capitalism models that might emerge.

I don't think we have enough early indicators to create a solid vision, so anything we talk about will have to be something of a thought experiment. What kinds of constraints would we face? What kinds of demands? Consider the following, then, at best a scenario sketch.

Resilience Economics

[Update: To clarify, as requested: this is written as a scenario set in the unspecified (but probably ~late 2020s) future, from the point of view of someone living in that future.]

The trigger was a phrase we'd all become sick of: "Too Big to Fail." The phrase had moved quickly from sarcasm to cliché, but ended up as the pole star for what to avoid. Any economy that enabled the creation of institutions that were too big to fail -- that is, whose failure would threaten to collapse the system -- could never be thought of as resilient. And, as the early 21st century rolled along, resilience is what mattered, in our environment, in our societies, and increasingly in our economics.

Traditional capitalism was, arguably, driven by the desire to increase wealth, even at the expense of other values. Traditional socialism, conversely, theoretically wanted to increase equality, even if that meant less wealth. But both 19th/20th century economic models had insufficient focus on increasing resilience, and would often actively undermine it. The economic rules we started to assemble in the early 2010s seek to change that.

Resilience economics continues to uphold the elements of previous economic models that offer continued value: freedom and openness from capitalism at its best; equality and a safety net from socialism's intent. But it's not just another form of "mixed economy" or "social democracy." The focus is on something entirely new: decentralized diversity as a way of managing the unexpected.

Decentralized diversity (what we sometimes call the "polyculture" model) means setting the rules so that no one institution or approach to solving a problem/meeting a need ever becomes overwhelmingly dominant. This comes at a cost to efficiency, but efficiency only works when there are no bumps in the road. Redundancy works out better in times of chaos and uncertainty -- backups and alternatives and slack in the system able to counter momentary failures.

It generates less wealth than traditional capitalism would, at least when it was working well, but is far less prone to wild swings, and has an inherent safety net (what designers call "graceful failure") to cushion downturns.

Completely transactional transparency also helps, giving us a better chance to avoid surprises and to spot problems before they get too big. The open-source folks called this the "many eyes" effect, and they were definitely on to something. It's much harder to game the system when everyone can see what you're doing.

Flexibility and collaboration have long been recognized as fundamental to resilient systems, and that's certainly true here. One headline on a news site referred to it as the "LEGO economy," and that was pretty spot-on. Lots of little pieces able to combine and recombine; not everything fits together perfectly, but surprising combinations often have the most creative result.

Lastly, the resilience economy has adopted a much more active approach to looking ahead. Not predicting, not even planning -- no "five year plans" here. It's usually referred to as "scanning," and the focus is less on visions of the future than on early identification of emerging uncertainties. Resilience economists are today's foresight specialists.

What does this all look like for everyday people? For most of us, it's actually not far off from how we lived a generation ago. We still shop for goods, although the brands are more numerous and there are far fewer "big players" -- and those that emerge tend not to last long. People still go to work, although more and more of us engage in micro-production of goods and intellectual content. And people still lose their jobs and suffer personal economic problems... but, again, there's far less risk of economic catastrophe, and some societies are even starting to experiment with a "guaranteed basic income" system.

Is it perfect? By no means. We're still finding ways in which resilience economics isn't working out as well as past approaches, and situations where a polyculture model doesn't provide the kinds of results that the old oligarchic/monopoly capitalist model could. But those of us who remember the dark days of the econopalypse know where non-resilient models can lead, and would rather fix what we've made than go back to the past.

Okay, I'll be the first to admit that this isn't as complete a picture as we'd like, but the core idea -- that resilience becomes the driver of new economics -- strikes me as very plausible. It's a pretty technologically conservative scenario; no AI-managed "just-in-time socialism" here, nor any nano-cornucopian visions. But it's very much the kind of model we could create in the aftermath of a disastrous economic crisis, in a world where the importance of resilience is becoming increasingly evident.


Thumbs up for "LEGO economy". I think you could stand to remove much of the jargon from this description, but I think you have something here. I think the jargon is overshadowing what is a very basic but not necessarily obvious point: that a stronger economy requires more, smaller pieces that work well with each other.

Thanks Jamais... I've been eagerly awaiting your thoughts since your post on Saturday evening. I think your logic of how things should be is sound, and I hope that something close to what you describe emerges in wake of the total (intentional?) collapse of our financial system.

The question I have is according to almost every article I've read over the last several months, including the recent Rolling Stones article, and the one by the ex-finance head of IMF all say basically the same thing, which is this disaster will not get better as long as the financial oligarchs maintain control. Well, I don't see anything happening to wrestle it from them. If anything, Obama/Geitner are working FOR them.

Yes, their path is unsustainable, because there is only so long you can commit global finanical piracy, but in the meantime the world could be plundered into a hole worse than the depression, as you and many have put it. It seems then that they would have even more power over the world, not less as your more resilient system requires.

Do you think that they too will be ultimately undermined by their actions?

I think game-like equity markets are going to play a role in allocating resources in this post-industrial economy, and they´re going to encourage different kinds of gameplay than the current gaggle of financial markets.

This idea of resilience is just smacking me straight in the face lately - it's a key concept in Joshua Cooper Ramo's new book - The Age of the Unthinkable - and it seems to be the only logical path out of this mess we've found ourselves in.

If Wall Street wasn't a 'gambling game'...I'm not sure what is..How do we get investors to take the long view instead of JUST seeing markets as 'games.' They aren't games. People don't die in games...Well OK, sometimes they do, but it's usually high school football.

A resilience economy will be a disaster economy, a refugee camp economy. The scale will be what you can do from a refugee camp on up. The standard of living will be within the reach of 100% of humanity.

A resilience economy will be a local economy, a swadeshi economy, a cottage industry economy. More people will be involved in agriculture and manufacture on a variety of levels.

A resilience economy will be a renewable economy, a low power economy, an energy efficient economy. It is an economy where Solar IS Civil Defense and an everyday reality.

Although I like this resilience economy idea, I wonder how it could endure through upward phases: why do "big players" that emerge tend not to last long? What prevents oligarchies from reforming and enduring? Law/government? So far I don't see how openness and/or a participatory approach would be sufficient to enact and maintain this resilience economy - even though I wish we could achieve it.

A minor rephrase seems to be in order.

'Too big? To fail!'

Hopefully we can get that smart by the late 2020s and avoid conflict that would sidetrack us. Resilience will also be built through more localized thinking and collaboration and evolution in the relationship between citizens and government. For most communities, the role of govt at every level must change from what it is today.

"How do we get investors to take the long view instead of JUST seeing markets as 'games.' They aren't games. People don't die in games...Well OK, sometimes they do, but it's usually high school football."

Actually, they often do. For example, war is a game, and people die in war, like, all the time. I´m defining "game" in this case as a set of rules defining behavior of a set of players pursueing a goal. (When I critique indie games at Play This Thing I tend to take a broader definition, I´m using a classical one to make a point). War is a game in that there are rules of mitilitary operation, logistical constraints, manuevers ect. and the goal of defeating the opponent, markets are a game in that they´re defined by rules of buying and selling adjusting price, with the goal being making money off of other participants. Now that we´ve established that, let´s look at how different markets work.

Bonds encourage people to hold the assets for a "gauranteed" gain but the problem is that all gains are part of a great ponzi scheme of fiat money (new moeny is created in a process that depends on bond purchases) and therefore you need to make more yield than inflation. Currencies exchanges are a pure jockey game made possible by the ponzi like nature of fiat money. Commodities have to do with basic human needs but come with an expiration date built in, if you could hold futures forever it would only keep commodities expensive for everyone, which is undesirable. When most people talk about markets they´re really talking about equities, which are fundamentally broken because the promise of speculative gains has allowed companies to get away with paying low or no dividends.

If we changed the rules so price movements were less wild and profits were gained from holding for a yield, then we´d have long-view markets. It should be possible to securitize renewable energy, sustainable agriculture and possibly carbon-sequestering capacity in this manner. Same could go for light rail and other useful infrastructure. Not as crazy profitable for pros, but highly profitable for society.

Increased complexity is unmanageable. The solution is clear - create structures or infrastructures that work well, because they are small, test them, and then create something conservatively simple that works above that....

...AFTER we have sound democracy in place. The current paradigm U.S.-centrist or "excludist" non-democratic. The US maintains a system where a small coalition can monopolize the system - all systems - and exclude everyone else. It isn't a big leap of the imagination to conclude the U.S. have been exporting this mindset to the rest of the world.

I understand we cannot get rid of this political monstrosity. What would the U.S. founding fathers have done differently if you'd shown them a 2 hour video of the U.S. and its political system in 2009? I would like to believe - a lot.

You can have all the simplified management systems in the world, only AFTER the current political order acknowledges that everyone's voice is heard and heard well. You want small decentralized distrubution? yes, but they need to be susceptible to democratic checks and balances. You want a big road and train network? yes, but after democratic elected governments have a say.

A big part of this mess is caused by a class of people who are either exempt from democratic oversight, or excluded from democratic decissionmaking. That must change first, or we'll all drown in an ocean of apathy, contempt, pride, arrogance or indifference.

I've also been waiting to hear your view on this, and I think your economic driving force is sensible. Realistic? I hope it will come to pass, but a core philosophical change is much harder than just restructuring! It will take serious intentional effort.

scenario sketching
is not the same as thought experiment
it is just imaginative extrapolition;
still on the wrong side of talking about
rather than being proactive...
hence your corresponding cries of "doom"

if you want thought experiment

be well

The resilience economy seems the sort of thing thoughtful, forward-thinking, mildly pessimistic people would build.

In other words, in the US at least, it's a complete nonstarter. Our culture prefers the aggressive, the immediate, and the unreasonably optimistic every time.

Resilience is the future! Way to go!
I'm so glad that more people are starting to wake up to this reality. For a bit more reality, go check out "the Crash Course" by Chris Martenson at http://www.chrismartenson.com/crashcourse
After that, go to http://transitiontowns.org/ for info on what you can do to build a more resilient lifestyle right in your own community!
After that, go talk to your friends and family and get them to help you build RESILIENCE!
(if you are still not sure what resilience is, then go back to the transitiontowns.org website and search for the word!)

Thanks for the useful info. It's so interesting

I liked it. So much useful material. I read with great interest.

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