Friday, May 18, 2012

The cornucopian enchantment

The cornucopian enchantment: "the conceit that ingenuity will always trump scarcity".

I just heard an interview with Prof Robert Shiller on ABC Radio National. Schiller mentioned Montesquieu foreshadowed Adam Smith by suggesting commerce would help civilise society. However Smith warned against capitalist criminals - monopolists, market riggers and so on (the Goldman Sachs traders of his time).

Schiller refers in passing to everyone being "fed well" as a component of that civilising effect; to me this implies also a reasonably fair distribution, today shared abundance has to be more than food, especially in rich nations with abundant calories, in order to produce civil happiness. The manifest unfairness of Wall St legitimately fuels the backlash of the Occupy movement, just as the unfairness of the French court legitimately fuelled the French revolution. Montesquieu and Smith are right - capitalism is potentially a better driver for happiness and abundance than complete market control - but as Keynes (as Smith) understood it needs regulation to reduce the unfairness, and a lot of that regulation must be self-organised by social norms and moral framework. But those governors have been substantially, deliberately undermined since the late 70s – as Paul Krugman describes in various essays about the 'return of the gilded age".

Philanthropy is useful, but of course rarely is of sufficient scale to repair the damage to public goods that enables the philanthropists to acquire their wealth in the first place (and then to rig the market to further lock in the inequality.) Shiller talks (without calling it that) of the groupthink dominant in the US early in his career (but still after the return of market deregulation) and also in the rise of irrational exuberance (by the way attributed to Greenspan in 1996 not Shiller in 2002).

There is an even stronger form of irrational groupthink operant today – I coined the term “cornucopian enchantment” for this sometime around 1999 (the term appears in my PhD, Inequality and Sustainability). This is the conceit that ingenuity will always trump scarcity. Unless society can rapidly produce a suite of energy, technological and social rabbits then global scarcity will deepen, and indeed hunger will return, not just to Niger and Somalia, but more generally. Then followed by conflict, despite Montesquieu's hopes (and those of Steven Pinker, for that matter). In that context reducing unfairness is essential.

This period of enchantment can be traced roughly to the late 1970s when Limits to Growth started to be ridiculed. We should be awakening from it by now, but in privileged parts of the word we keep dozing on. Europe bleeds $1 billion a day importing energy. This is a greatly under-recognised causal factor in the global financial crisis, and looks as if it will get worse. Not only my opinion, also that of Sir David King (former UK chief scientist.)