Modern Mysteries

Two contemporary puzzles: Trade and Democracy

Barack Obama, the President-elect of the United States has been labelled by some as a protectionist. The Doha round of the World Trade Organisation has been a knockout defeat. The Nobel prize for economics was awarded to Paul Krugman for his efforts in understanding modern trade. Am I just making random comments?

The benefits of trade is not very difficult to understand. People in the West love coffee and coffee grows well in the tropical East. People in the West have (or had) a lot of money, and people in the East like investment funds. Mutual benefit from products or services most efficiently produced and most appreciatively consumed lead to a better outcome for all.

Paul Krugman’s not insignificant award sought to explain a deficiency in this basic system. The anomaly was that at times patterns of trade did not follow this logic. The explanatory framework devised by Krugman sought to take into account the benefits of specialisation and market leadership, rather than simple comparative advantage. Simply by making a start, a person or organisation can develop skills and economies of scale that allow them to be and remain competitive. Hence a smart coffee farmer from the West may be able to keep out Vietnamese competitors if this person started out and grew in size before the Asian became dominant.

Another aspect that complicates the trade situation is based on size and diversity. The more diverse a region the less is the need to rely on products or services from another region. Also, the larger the region (for example the European Union) the greater the possibility for diversity - generally speaking. The more a country or group of countries can meet its wants and needs from within, the less the advantage of trade imports. Most countries or regions throughout the world can meet not only the basic needs of life, but also most of the subtle and nuanced desires of even the most fickle consumers without sourcing externally.

Due to diversity, whether from nature or human endeavour, the law of diminishing returns comes into play with trade. International trade can be immensely stimulating when diversity is restricted – say at the end of World War II. However if a country has reasonable basic resources, and is reasonably engaged in use of resources and human capital, the advantages can soon become disadvantages.

The failure of the Doha round of the WTO is precisely because the leaders of countries have seen that what was a blessing has now become a curse. In a way this is self-fulfilling. The benefits of trade lead to an abundance that created sufficient diversity within countries. With this newfound diversity the country is therefore more adept at meeting its peoples needs, and hence is less reliant on trade.

The United States and other Western nations promulgated trade. They are however now the victims of trade – from China for example. To be of worth trade needs to be mutually beneficial. For a long time this has not been the case in the US’s relationship with China. The fact that the US has been one of the blockers for the Doha round shows some intelligence. The fact the Barack Obama is a protectionist shows a little more intelligence.

The word protectionist has some sort of false derogatory theme attached to it by the benefits of free trade. If the disadvantages far outweigh the advantages in certain trades, then to take a protectionist stand is literally to protect – sounds pretty sensible to me.

Broken and shattered Western countries, as well as international organisations, increasingly look to countries like China (with its trillions of dollars in foreign exchange reserves). Some countries need to realize that the advantages of trade are not intrinsic - just like the advantages of an unregulated financial system are not inherent.

Finally on trade, from Paul Krugman we have that just because one country efficiently produces a product or service, there is not necessarily any reason to label that product or service as a necessary import by any other country. Car manufacturing in countries like Australia and the US is in a moribund state. However better performing Japanese manufacturers do not have intrinsic competitive advantage. From this it can be seen that increasing protection and decreasing trade keeps alive the inherent creative urge that drives a country. At the right time, protectionism actually encourages optimism and keeps alive the possibility of prosperity. Prosperity is what free trade is supposed to be all about. It is also what protectionism is about.

Another key concept of the contemporary world is that of democracy. Like trade, democracy is not intrinsically good.

When the majority of a population has ill-will in mind they then vote into power a leader that will fulfil their negative intentions. An example of this mechanism is found in your average failed marriage. Happiness finds the happy and misery attracts the miserable. If I am just managing to keep a lid on a sea of negative emotions I might like to avoid them by getting married. Like attracts like. My partner will be of the same ilk, and we will spray each other joyously with our wounds.

Hitler was democratically elected by a Germany full of little Hitler’s. Ah yes we elect a leader to fulfil our dreams. Just look at the last democratic election in the Palestinian Territories. Hamas was branded by the West as a veil for violence. Hamas shortly afterwards showed their true colours in a wave of violence and brutality. Hence they now run the Gaza Strip.

Admittedly the situation is not so simple. An obvious issue that is raised is based on innocence. For example some people repeatedly marry and divorce only for money. Is not the victim innocent? Hamas ran a very sophisticated mainstream political campaign. Was not the electorate deceived by the violent gang that Hamas afterwards revealed itself to be?

A partial answer to deception is truth by transparency. If a person or organisation has unethical, illegal, or violent intentions, then a system that reveals that this is the case is paramount; hence the importance of a free press and open access to information about the workings of any governing body.

If a couple are fighting before they get married and then they fight after they get married and then they get divorced, they may (like many) be surprised at the outcome. We so often hide from the obvious out of emotionally based blindness and compulsion. However at least the divorced couple can see that there was nothing sinister or criminal about the failed marriage. No deception took place. The truth was not hidden, rather people were hiding from the truth.

In order to avoid the harming of innocents, whether they be romantics looking for love or a country looking for a leader, it is important that fact be separated from fiction.

The healthy functioning of the concept of democracy is predicated by two factors. Firstly, the general population needs to be sane. Secondly, people with vast power are vulnerable to going insane. Hence the average sane person can see when a politician is a megalomaniac (for example Robert Mugabe of shattered Zimbabwe). Democracy would have been a great institution in the time of Stalin in the Soviet Union, or Mao in China, or the Khmere Rouge in Cambodia. It was not however helpful in the time of Hitler’s Germany. This theme points to the importance of multi-lateral relations between countries to keep in check any rogue country (or countries) – whether it (they) be democratic or not.

Overall Well-Being

Overall Well-Being (ODB versus GDP)

It seems that the world is falling in. Is it really? Grand and fear striking similes and metaphors abound: an economic national security emergency; a financial tsunami; the Great Depression 2.0.

Firstly lets take a look at personal psychology. The term recession seems to not have the same psychological association as depression does, however they are of the same nature. If you take a look at what is driving stock-markets and investors helter skelter, experts repeatedly say that the behaviour does not fit with fundamentals. Also, a little bit of good or bad news tends to go a long way. People are literally in a manic emotional state.

Take a look at the behaviour pattern of financial executives. Essentially they have for years been prepared to take on increased (even absurd) risk for the sake of additional profits. The downside possibility would know doubt have been in the back of their minds, but ignored. Some of these financial executives decided to hedge their bets by taking out insurance: credit default swaps. However the contagion consumed this cautiousness because the people giving out insurance ignored the possibility that they might have to pay out an insurance claim. It is like giving out fire insurance with the idea that money can be made because fires never happen. Insurance brokers however argue that they were covering financial products that will never get burnt, let alone destroyed, by fire. To this there is a very simple response. Why on earth would companies actually pay out millions and billions and trillions of dollars for insurance cover if there was no credible underlying risk? The very fact of the existence of a voluminous credit default swap market is proof that financial executives knew, but in general ignored, the underlying risk that mortgage-related debt products would go bad.

What is the psychological pattern operating in any gambler (or addict for that matter)? The gambler focuses their mind more and more on winning, and ignores the common-sense knowing that the odds are stacked against them. In the back of their minds they know they can’t win, but they have to ignore this. They ignore this because they need to focus on winning. They need to focus on winning because there is an underlying emotional issue that they cannot face. When the gambler inevitably loses, they get a little taste (or wave) of the overwhelming emotional sea that they dare not jump into. In time the addict or gambler can develop the skills, understanding, and most importantly awareness, to tackle what lies hidden in the basement of their mind.

When people in the developed countries the world over accumulate massive levels of debt they do so out of compulsion - this refers to consumer (credit card) debt and household debt, business debt, and government debt. If when I am sitting in my little granny-flat staring at a furniture-less wall, I go crazy. Hence what I do is pick up one of the credit-card brochures lying around, I go out, and I buy a plasma television. Now on those lonely nights I simply stare at the blaring screen in order to both occupy and numb my mind. A zen monk on retreat simply stares open-eyed at a wall. In time (and in fact in a very short time) the wall becomes the mirror to see what lies just beneath your usual waking mental state. A zen master may well watch television, but has seen all the shows on their inner-tv.

No doubt up to a certain level the basic stuff of modern life contributes to wellness of being. However the golf tripping, spa resort frolicking financial executives that are the pillars of financial deconstruction are addicted to indulgence. I recall one such executive saying that he recently had the worst week of his life. Now he was not talking about the state of his bank account. He was talking about his emotional state; he was talking about his very own personal depression.

Am I getting you lost here?

Economic growth is the very foundation of modern society, so it seems anyway. If the world goes into a global recession, or perhaps a global depression, why is this occurring? Here it might help by recalling that strategic tipsters backed the African continent (and not Asia) to become the great emerging economic giant of the 20th century. Rather than prospering, Africa however slipped into decades of violence, destruction, and genocide. Asian countries on the other hand became the developing potential superpowers.

Why were the tipsters wrong? Africa had the potential to prosper. It had the natural resources, the people, and the technology (especially if it harnessed the technology gains from other parts of the world) to create a prosperous society. At both an individual and collective level, the ability to create a vibrant and harmonious social web gave way to violence and destruction. At both the individual and collective level, a vast body of emotional discontent (rage) that was lurking in the unconscious, came to the surface. In a domino effect one persons rage can infect a village, a village can affect a region, a region a country, a country a continent.

The theme of a spreading emotional darkness is juxtaposed historically by the moral fabric of society. The minds of people have the intellectual understand of what is essentially right and wrong ingrained in them. What can make a moral code deeper is the understanding, rather than just the repetition, of what is right and wrong. What can foster this understanding is the nurturing of human consciousness. A meditator instrinsically develops the capacity to distinguish between right and wrong, between good and bad.

An individual that cultivates their own consciousness does two things. Firstly, as mentioned, an understanding develops about morals, about ethics, about values. Secondly the more a person becomes conscious (aware) the more they create a separation from what they are observing. And when a person can detach themselves from the emotion that is going on inside them, they are less involved or caught up in this emotion. They can see that for example the anger, although remarkably unpleasant, is a passing emotional state. Society can provide the tools to help people express this emotion in a safe and perhaps even creative (rather than destructive) way. Traditional meditation already provides the tools to observe the emotions if they are not excessively strong for any particular person at that time.

America is considered a modern superpower. It is also projected to slide into recession, and is fighting to stave off a repeat of the Great Depression. However if I were to travel to America, I would still see all the basic stuff that creates a galloping economic growth rate. All the basic stuff is still there! There are all the raw materials are still there. All the people are still there. All the technology that explains how to put the raw material together to create a great society is still there.

While all the people are there, what is their individual and collective mental capacity? Some of the intellectual geniuses of Wall Street no doubt had high IQ’s. However some of their decisions showed profound lack of intelligence and foresight. Also, now that they can not preoccupy their mind with financial work, some of them will be hitting the drink to stave of their personal depression. If I were to test the IQ of an unemployment Wall Street financial wizard the morning after a binge, I think the results would be pitiful. In order to ignore his or her own personal issues, this person has gone down the road of financial destruction that reverberates around the country and the world - at financial, economic, and social levels.

If any group of people go down the path of collective greed, then when they finally see the possibility that this may end, fear strikes. Ultimately the fear is that they have to face what they have been avoiding: themselves. Deep down, every single person has a sense of what is in their unconscious. When a magnetic and collective wave of fear occurs, the end result is a collective depression: for example the Great Depression.

Whether or not the current global recession turns out to be global Great Depression 2.0 is primarily based what is in the collective unconscious: the sum total of all the stuff we carry around inside us that we are not able, or are not willing, to see.

On a brighter note, it does not have to turn out this way. As mentioned there are tools that can be employed. Also, society is currently geared in a way that puts the preeminent focus on gross domestic product (GDP) and economic growth. A counterpart needs to be developed that acknowledges the deeper aspects of what it is to be human. Sure life would be (and is) tough without the basics of life that many people take for granted: hygienic food, sanitized water, adequate shelter, sewerage removal systems, and education and health care facilities. However beyond this an increase in material well-being does not necessarily equate with an increase in overall well-being - and often leads to an inverse relationship: obesity for example.

The indicator of GDP should have a counterpart called OWB (Overall Well-Being). OWB essentially explores the subtleties of what it is to be human: what it is to be civilized, and what it is to be spiritual or religious. When for example an economic recession or depression is looming, GDP may well spike. However OWB will take a serious nosedive. After a little while people dust themselves off after the crash, forget about their share losses, and thank themselves that they are still alive. OWB starts to improve. People start developing the urge to reconnect with friends who are also hiding in their own personal depression. The urge to create a little bit out of the mess around them rekindles the spirit, and GDP starts its long steady move towards the next precipice. However this time, if society places more focus on factors other than just material or economic well-being, the fall won’t be so bad. Also, there are skills that people can develop that emphasise and contribute to overall well-being. People can learn how to express and even watch the emotional stuff that stunts their creativity, their intelligence, and their spirit.

The focus on economic growth and consumerism becomes a self-fulfilling tragedy. Emphasise the material, and people focus more on the material to avoid the immaterial emptiness. Filling peoples hearts and nourishing their souls cannot be without the values and freedoms that are the cornerstone of any modern and democratic society. However this is just the foundation. A great tower is not built simply by putting foundations on top of the foundation. Such a construction simply collapses under its own weight. The modern social structure will become a highrise as the emphasis moves towards empathy and compassion towards fellow humans and the world at large. Examples of this are the focus on workplace and occupational health and safety; acknowledging and addressing mental health needs; and confronting the degradation of the planet from pollution. The upper floors of the grand towers of post-modern society are not burdened with concrete and steel. They are filled with flowers and mirrors and singing and dancing.