economy

Uneven Growth Show @ MoMA

It's my absolute delight to finally be able to announce that the Network Architecture Lab will be collaborating with MAPOffice in the 2014 "Uneven Growth" exhibition at New York's Museum of Modern Art.

Pedro Gadanho, curator for contemporary architecture at MoMA is curating the exhibit which runs from November 22, 2014 to May 10, 2015. The show will be launched on October 26 of 2013 with presentations by the different teams at MoMA's PS 1. More details here.  

It's an incredible opportunity for myself and the Netlab, not only because of the importance of the venue and Pedro's brilliance as a curator, but also because of the subject matter. It's going to be a great journey!

Text from the press release follows:

In 2030, the world’s population will be a staggering eight billion people. Of these, two-thirds will live in cities. Most will be poor. With limited resources, this uneven growth will be one of the greatest challenges faced by societies across the globe. Over the next years, city authorities, urban planners and designers, economists, and many others will have to join forces to avoid major social and economical catastrophes, working together to ensure these expanding megacities will remain habitable.

To engage this international debate, Uneven Growth brings together six interdisciplinary teams of researchers and practitioners to examine new architectural possibilities for six global metropolises: Hong Kong, Istanbul, Lagos, Mumbai, New York, and Rio de Janeiro. Following on the same model of the MoMA exhibitions Rising Currents and Foreclosed, each team will develop proposals for a specific city in a series of workshops that occur over the course of a 14-month initiative.

Uneven Growth seeks to challenge current assumptions about the relationships between formal and informal, bottom-up and top-down urban development, and to address potential changes in the roles architects and urban designers might assume in the evolution of cities. The resulting proposals, which will be presented at MoMA in November 2014, will consider how emergent forms of tactical urbanism can respond to alterations in the nature of public space, housing, mobility, spatial justice, environmental conditions, and other major issues in near-future urban contexts.

Urban Case Study Teams:

New York: Situ Studio, New York, and Cohabitation Strategies (CohStra), Rotterdam

Rio de Janeiro: RUA Arquitetos, Rio de Janeiro, and MAS Urban Design ETH, Zurich

Mumbai: URBZ, Mumbai, and Pop Lab, Massachusetts Institute of Technology (MIT), Cambridge

Lagos: NLÉ Architects, Lagos, and Inteligencias Colectivas, Madrid

Hong Kong: MAP Office, Hong Kong, and Network Architecture Lab, Columbia University, New York

Istanbul: Superpool, Istanbul, and Atelier d’Architecture Autogérée, Paris

Uneven Growth: Tactical Urbanisms for Expanding Megacities is organized by The Museum of Modern Art, New York, in collaboration with the Museum of Applied Arts (MAK), Vienna.

This is the third exhibition in the series Issues in Contemporary Architecture, supported by Andre Singer.

The accompanying workshops at MoMA PS1 are made possible by MoMA’s Wallis Annenberg Fund for Innovation in Contemporary Art through the Annenberg Foundation.

See MoMA's press release.

Netlab Project Team

Kazys Varnelis, Director
Leigha Dennis
Jochen Hartmann
Robert Sumrell

Economic Crisis, Cycles, and Measures to Fix It

Asian and European markets fell overnight, priming Wall Street for a drop that will put it in bear market territory. Meanwhile, a double dip recession in the US is increasingly likely, China is finally showing signs of its own, potentially cataclysmic debt crisis, and both the Eurozone sovereign debt crisis and the American debt SNAFU are looming storm clouds. Morgan Stanley and Bank of America seem to be in deep trouble.

In other words, we're looking at the perfect storm. 

One of the factors exacerbating this crisis is the loss of traditional tools for dealing with the economy. Starting with the Great Depression, Keynesian economic policy gave governments a way of getting out of bad times and even of avoiding them entirely. The method was simple enough: use deficit spending in a down cycle to stimulate the economy by investing in the future, primarily by building infrastructure, then pay off that deficit by taxing more highly during boom times, thus slowing down the boom, prolonging the good times. The goal was to turn recessions into slowdowns. Only the lunatic fringe thinks that Keynesianism was socialist. Far from it: capitalists embraced it for producing a long postwar boom. In the US, the 1930s saw the construction of roads, dams, and bridges across the country. The dams of Tennessee Valley Authority and the Pacific Northwest made possible the refining of Uranium and production of aluminum, providing the raw materials that allowed the Allies to win the Second World War while the dams of the Southwest allowed Los Angeles and Las Vegas to grow. Detecting a recession in the mid-1950s, Eisenhower responded with the program to construct the Interstate highway network. It all seemed to work splendidly. In a December 1965 issue of Time Magazine, economist Milton Friedman stated that that "We are all Keynesians now," referring to the dominance of the model among economists (or at least such is the way the statement was read, see the Wikipedia link on the topic). The bottom fell out immediately thereafter—the consequence of a slowing economy and overcommitment to the costly Vietnam War and social welfare programs—and the US economy didn't recover for another twenty years.  

The problem with Keynesianism, ultimately, is that it relies on political will to operate: deficit spending and taxing during boom times are matters for politicians to approve, not just for economists to formulate. Given that taxes are never popular, conservatives typically preferred to cut rather than tax more during boom times. As the event horizon for investors became shorter and shorter, the idea of paying off one's debts seemed nostalgic. In the US, only during the boom years of the Clinton administration was a concerted effort made to pay off the national debt. Facing a recession and desparate to keep taxes low while waging two senseless wars, George W. Bush's admistration played Keynesian economics badly, creating an unprecedented national debt for the US and hamstringing the Obama administration when it came to power amidst the worst economic crisis of the postwar era. Now mind you, this may be a deliberate strategy, called "starve the beast." But surely even the most maniacal conservative politician wouldn't do that, would they?

Notwithstanding Bush's political use of Keynesianism wound up in disrepute after failing to get the US out of the economic turmoil it faced after 1966. By the 1980s, monetarist economic theory, led by the same Milton Friedman, took hold in the US. Avoiding the political hassles of Keynesianism, it suggested that the economic could be tuned by the Federal Reserve Bank which would adjust interest rates. Keep them low when the economy needs stimulus. Raise them to slow it down. To curb the stagflation of the late 1970s, Paul Volcker, a Democratic economists appointed by Jimmy Carter, raised the federal funds rate to 21%, thus bringing down inflation dramatically. Soon after, the Republican administration used Keynesian economic policy—albeit giving the economy a boost in the form of tax cuts instead of infrastructural investment—to successfully get the US economy going again. The Republicans took the credit for all of this, but perversely, it was a Democratic Fed chairman and a form of Keynesianism that worked.

With the death of Milton Friedman and the relative success of monetary policy since then, Larry Summers (Obama's chief economic advisor, among other things) would state in his 2006 eulogy for Milton Friedman, "we are now all Friedmanites." Although the full text was "any honest Democrat will admit that we are now all Friedmanites," it seems likely that Summers expected that all Republicans were by Friedmanites as well.

But with interest rates impossibly low and the national debt impossibly high, we seem to be facing a 1966-like moment. Economists have run out of options for solving this crisis in capitalism. Political will for either more manipulation for the Fed (and really, what can they do at this stage with the federal funds rate flatlining just above zero? see here) or for more Keynesianism has evaporated.

Game over, you've run out of quarters. 

Regarding the Euro

The biggest story of the last two decades has not been the opening up of China, rather it's been the creation of the Eurozone.

wiki media map of eurozone

First off, take the size of the combined economy of the Eurozone. In terms of GDP, it is larger than China, second only to that of the US (the European Union, which also includes the United Kingdom and much of Eastern Europe would be the world's largest economy, except that it quite doesn't function as one economy). 

Since I write about architecture, networks, and economy, the reason I am interested in the Eurozone is that it was an unprecedented construction of a single smooth space—to use Deleuzean terms—on a planetary scale. With the fall of the Iron Curtain in 1991, it seemed to confirm Deleuze's suggestion that the old regime of enclosures was giving way to a new world of modulations. Seemingly overnight, national currencies and border controls, the most familiar artifacts of modern nationhood, disappeared to get out of the way of the rapid circulation of capital and increased worker mobility. For Eastern Europe the delight in national independence at last swiftly faded, giving way to the rush to be subsumed into a larger union again, albeit voluntarily this time, without the Soviet Union's tanks and guns. 

What struck me during this period was the incredible openness of Europeans, both to each other and to those of us whose primary residence was abroad. As borders opened, so did minds. The development of the Internet went hand in hand with this opening up, allowing Europeans to go beyond the traditional boundaries of their national languages and literatures to share their ideas and learn from others at remarkable speeds. This is not to say that this wasn't going on everywhere, but it was particularly in evidence in Europe where the growth curve was very fast, a stark contrast to what was going on in the United States where thought often seemed stuck in the dark ages. For a time, Europe seemed to regain its status as the world's center of culture—as much as such a thing could exist—from the United States. Who would have thought, in 1991, that two of my books would be published by a press in Barcelona, that I would publish as much in European periodicals as in the United States, or that I would be teaching in Ireland part time? 

But as the August crisis—and the last three years teach us—that growth curve got ahead of itself and Europe now faces a grave economic crisis. The economies of European countries were at different places when they joined the Eurozone and there's no way that in a few years everyone could be at the same place as Germany. Where it seemed to happen, as in the last half of the Celtic Tiger, this was largely done on debt, a condition that has now been demonstrated as impossible to sustain. 

Now that the collapse of the Euro is being talked about as a real possibility, what sort of impact will this have on network culture? Is the Eurozone like the League of Nations, a great idea whose time has not yet come but will arrive, bigger and better soon? Or is it a historical anomaly? Even if globalization is a dominant economic force today, will a decade of economic stagnation couple with a collapsed eurozone lead to renewed calls for nationalism? Is the dialectic of smooth and striated space (remember, for Deleuze it was always a dialectic) about to shift again? 

These are some of the biggest questions for all of us this fall. 

Ivory Towers of Debt

Javier Arbona has a new piece up called "The Sorrows of Finance Capital," in which he asks how it is that a university system in crisis can afford to build snazzy new buildings with vertiginously high budgets.

This is something that has bugged me a great deal lately. The credit crash has led to budget-tightening in universities, but the college building boom just keeps going. Whether it's at SFSU—which as Javier points out, can't afford an urban studies major anymore but can afford neomodernist digs—or at the University of Limerick, which during my at last visit a couple of weeks ago was sprouting more cranes than ever—it's been a striking feature of the Great Recession. 

As Javier points out, although the university brags that the building is funded by a $10 million gift, some $258 million (!) will have to come from construction funding. Now all this is—no surprise, alas—something that the press has chosen not to report on, and even seems to find hard to comprehend, as a series of Twitter exchanges between a newspaper critic and Javier on the above site demonstrates. 

Universities have let a Wall Street mentality infect them. As a recent report by the Tellus Institute concludes, colleges and universities not only embraced risky investment strategies with their endowments, they continue to gamble with their money even after the 2008 crash. Tellus concludes that these universities "have been as much contributors to the financial crisis as they were victims of it." 

Part of the problem is that, as Karen Ho points out in Liquidated: An Ethnography of Wall Street, investment banks operate on ever-smaller time horizons. Lasting value is scoffed at in favor of immediate profits that can drive annual bonuses. With university boards populated not by faculty and researchers but by "leaders" in business, universities look at their endowments not so much in terms of sustainability and social responsiblity but rather as investments from which to wring maximum profits.

No wonder, then that university presidents are enamored with flashy construction projects which are much easier to justify to boards than equitably-paid faculty or low tuition for students (indeed, both of these are at odds with the sort of mentality that Ho observes on Wall Street: employees are always disposable and any university that keeps tuition down must be failing to charge apporpriately for its services).* After a few years at a university, the building-enamored president moves on to bigger and better digs, leaving faculty to struggle to get grants to fill buildings that shouldn't have been built in the first place.

As a byproduct, universities issue bonds and, so long as endownments keep flowing in, can service them. It's a giant ponzi scheme with little of value for students and, as Harper's described in a notorious graphic about the consequeneces of overbuilding in Brandeis (Brandeis has threatened a lawsuit and has accused Harper's of slander and libel over this piece), can collapse precipitously during times of economic crisis. But while bonds were hot, Wall Street couldn't have enough of them, so universities eagerly complied.     

With regard to Javier's exchange with the critic, there's been a lot of chatter lately about the effect of the Internet on the field and I suppose that for whatever reason, I'm going to have to add to that chatter on Tuesday at "Critical Futures" an event at Storefront. In anticipation of that event, I'll conclude by observing that when design critics are unable to confront kind of issues that Javier raised in his piece, then we should be asking just what merit the field has in the first place, unless its merely cheerleading for the next building boom.

* At one institution that I once worked at, the director told the staff one year that cost of living increases were not possible due to poor finances. After delivering the news to the board that he had held staff salaries down, the chairman—a local businessman—moved to raise the director's salary.   

On Ireland, Briefly

Today's news from Ireland is grim. As my readers know, I have been teaching in Ireland for some years.

I've expected this day since I first set foot there in 2005.

Faced by the impending bankruptcy of its banks and the consequent destruction of its tottering financial system, the republic is seeking a bailout from the IMF and the European Union (more here). The result is that another European country winds up on the same road that developing nations did in the 1980s and decades of austerity are to come. But where the banana republics of old were undone by the ruling elite's direct expropriation of funds for infrastructural schemes, the countries being forced into perpetual indebtedness now are suffering because of a more collective delusion. This time, instead of infrastructural schemes, it was the bourgeoisie's faith that they had found a pot of gold that animated the mania, making them the most earnest cheerleaders of the same big banks that they have to bail out now, the same banks that have led the country to the brink of ruin.   

The Celtic Tiger, if it ever existed, was created by the returns on productivity that external investment in a well-located, but underdeveloped, English-speaking nation brought. By the early 2000s, however, the Celtic Tiger was over and a new boom began around absurdly valued real estate. Even today, real estate in many parts of Dublin goes for more than comparable real estate in Manhattan. Since the latter is unquestionably overvalued by at least double (on a simple rent to price basis… seriously what other value can we give it besides rent multiplied by a degree of froth?), the former is thoroughly ludicrous. So even though I had seriously thought about moving to Ireland after George W. Bush's reelection in 2004, and I dearly love the country, the economist in me panicked when I began looking into the real estate situation and I stayed put.  

I repeatedly warned about the impending collapse of an economy based on froth upon froth. Now it's finally happened and the price will have to be paid. Although Ireland would probably have done better to go it alone and refuse to bail out the banks, imposing heavy taxes on corporations and the mega-rich, they've decided to seek aid from the IMF. The "cure" will be akin to massive chemotherapy. It certainly won't be pleasant.

Sadly, there's little question that architects and architectural institutions as well played a role in this debacle. Schemes for housing millions of  new residents expected to come to the country in the coming decades were eagerly drawn up even when there was no industrial or economic basis for such a massive increase in population. Such projects schemes validated the boom. Why weren't plans drawn up for controlled shrinkage during impending contraction or for how to utilize the massively overbuilt housing? Alas, the answer is simple: such thoughts didn't fit with the mantra that the boom would never end. Ireland was different, I was told time and time again, and unlike the tired old United States, it had discovered the secret for perpetual growth. 

But such growth could only come from the fairy people and, as is their wont, they turned out to be a devious bunch, eager to lead the deluded, greedy, and overeager astray. 

Now it's time for the hard planning and thinking that should have been done a half decade ago or earlier. It's time to reconsider what architecture means in a shrinking economy and with a shrinking population that seems likely to lose 10% of its population within a decade. As always, I'm ready to help by offering my input on the rebuilding process.

I hope this time somebody will want to listen. 

On Black Swans and Realism

A couple of weeks back the Planet Money podcast hosted Nassim Taleb, author of the Black Swan. Click here for the interview. I have not read Taleb's book, although I am likely to now, but I am baffled by how the real estate crisis and the crash of the market could be considered a hard-to-predict or rare event. In that, Taleb seems like an apologist for the neoliberal school of thought which is in love with totalizing arguments: "There is no alternative" or "Nobody could have predicted it." So sorry, but there are alternatives and plenty of us predicted it long in advance. Look, I only have a basic training in economics, but it was a good one, and it was obvious to me that the market was out of whack. Unless somehow more training in economics leads to diminishing returns, the idea that the crash was a black swan seems bizarre, even delusional.

But again, I have not read Taleb's book and much of what he said in the Planet Money interview made a great deal of sense. Although I enjoyed the show, it seems like the interviewers, who tend to be free-market apologists, did not want to hear what Taleb had to say, which is that the Obama administration is completely out of touch with the will of the people. Nobody wants to prop up the financial system anymore. If I were Obama, I'd begin by firing Larry Summers, Rahm Emmanuel, Timothy Geitner, and the whole rotten crew. But I would've never hired them in the first place. It's going to be tough to do a 180 but it's either that or—barring a real black swan (or perhaps a candidate so Right wing that he or she is unelectable by a majority)—the Republicans take the midterms and have the next presidency locked up. 

I know that some of my readers have expressed the wish that I would come out and say that everything will be ok soon and that the boom of the last decade will be back. But with the neoliberal bag of tricks exhausted, I just don't see how that can happen. If the Great Depression is too upsetting a model (and inaccurate, after all, we have YouTube to entertain us, they didn't), then take Japan since the asset bubble popped in 1991 or, heck, take the United States from 1966 to 1996, my formative years. It's not my fault that the economy is the way it is (if it were, I'd be a lot richer, like Obama, Summers, Emmanuel and Geitner) and I don't take great pleasure in predicting the Great Recession will not end soon. But I was very much alarmed by all of the people going around talking about the boom as if it were the greatest thing since slight bread. Now they wonder why their real estate investments went awry. I guess black swans are the answer…    

Still, I hope that these same individuals listen to Taleb and understand that extrapolating short-term trends is nonsense. I am not sure how we will dig or if we will dig ourselves out of this hole. It could be that this is a terminal crisis for capitalism, which will be replaced by some new economic system. I am not sanguine about that prospect either for instead of socialism we could well have a (happy faced) neo-fascism (after all, we have YouTube).    

In sum, do give the interview with Taleb's a listen, but be skeptical about the black swan. Instead of black swans, maybe it's better to hunt for the Owl of Minerva, who as Hegel reminds us comes out at twilight to paint her grey on grey when a form of life has grown old… Ask yourself where the owl is flying now. 

Why Did Actor-Network Theory Run out of Steam?

Lately, I've been consumed by analyzing the biggest story of the decade:  financialization and the ensuing economic crisis which now seems likely to be with us for a decade. In thinking about the #domusweb project, I've been struck by how the critical tools that have been en vogue during the last decade have proved bankrupt in the face of the economic crisis.

What strikes me most about this is how clear the crisis was to anyone who reads materialist historians. Take Giovanni Arrighi's brilliant The Long Twentieth Century. The description he gives of financialization and systemic cycles of capital accumulation in the Introduction should be enough for anyone to make reasonable sense of what happened in the last decade. What's more remarkable is that it was written not this year but in 1994.  

Or take Fernand Braudel, the other great inspiration for Arrighi beyond Marx. Arrighi points out that in observing the development of the capitalist cycle in eighteenth century Holland in the third volume of Civilization and Capitalism, Braudel writes "At all events, every capitalist development of this order seems, by reading the stage of financial expansion, to have in some sense announced its maturity: it was a sign of autumn." (Braudel, Civilization & Capitalism, volume 3, 246). 

In contrast to Alan Greenspan's boldfaced lie that nobody could have seen the crash coming, materialists understood full well what was on the way. What puzzled us was the dimension and duration of the boom.

But in certain ways, the academy did miss the obvious. Cogent analyses of capitalism were never part of the discourse in most fields. Instead, capital became too abstract a force, divorced from reality. Everything could be read as a manifestation of capital and rote critiques made for an easy conclusion to "critical" essays. Such deep reading wasn't deep at all, really, and thus its understandable that such "lite" criticism was rejected wholesale under network culture.

Instead, other explanatory models rose to the fore, models like actor-network-theory. Famously, Bruno Latour asked the rhetorical question "Why has Critique Run Out of Steam?" For Latour and most other advocates of Actor-Network-Theory, capitalism was as much a construct produced by Marxists as an actual entity. Instead, they argued, agency had to be traced across a network of actors, both human and non-human. 

The sad thing about all this is that Actor-Network Theory wound up about as useful as lite criticism, which is not very much. To be mean: how is it that Actor-Network Theory proves so irrelevant to the contemporary crisis? Why, in other words, did it run out of steam? 

Let's turn all the talk about Marxist analysis being irrelevant in the 2000s on its head, where it belongs: Marxist analysis was way ahead of the game. It proved far more relevant than monetarism in the end. Our contemporary crisis is a crisis of overaccumulation. If that's not clear to you, then go and read Marx or Arrighi or Mandel or Braudel or any one of a number of thinkers who explain it well. For here perhaps Latour might have something if we read him against the grain: see, it wasn't Marxism that was irrelevant—it was the construction of Marxism's irrelevance. A world beholden to the bubble—including in academia—simply never understood that nothing had really changed, except for the level of delusion.  

 

Fear of Flying

Iceland's Eyjafjallajoekull volcano hasn't given up disrupting north Atlantic air travel this summer, but what if it's the harbinger of something bigger?

The global city is predicated on face to face communication being essential to major business deals. But the global city model, originally outlined by my colleague Saskia Sassen, is almost twenty years old. Trying booting up your Powerbook 100 to read this blog post. In this post I'd like to speculate on the impact of the volcano, technology, and global warming on the global city.  

First, let's talk global warming and green hype. During the last decade, friendly but misguided green advocates have advocated pedestrian-oriented cities as environmentally-sound alternatives to the suburbs. But looking at America (and many countries in Europe aren't all that different from this), most cities have seen sustained and uninterrupted declines in the last half century. The starring exceptions are the global city of various scales: New York, Chicago, Boston, LA, San Francisco and so on. For the most part, these cities have seen a remarkable renaissance as centers of business and creative activity. The urbanites who live here live in the global city, thinking nothing of jetting from London to Shanghai and alighting in San Francisco. Often, these individuals literally inhabit the global city and owning pied-à-tierres on multiple continents is increasingly as common among the super-wealthy as owning an estate is. At home, the "creative class" practices localism religiously, probably out enjoying home-smoked bacon cupcakes and carbon-neutral triple-pulled ristrettos right now.  

But the idea that this kind of life—which is as predicated on consumption as existence in deepest suburbia—is environmentally sound is laughable. Apart from the manic rate of conspicuous consumption in the global city, flying one mile on an airplane produces almost  as much CO2 as driving that same mile by oneself in an automobile (other side effects, including polluting in the very thin atmosphere high-up may be much worse). Moreover, if an average driver in the United States drives some 12,000 miles a year, that's half of what you need to get into a frequent flyer club.

I think by now you get the picture: the high-flyer of the global city is much worse for the environment than the suburbanite. So much for sustainable living. 

Now back to the volcano. The impact it's had on transatlantic travel has been massive as planes continue to be grounded in one European country or another multiple times a week. Pollution-wise, the amount of CO2 it released is significantly less than the amount of CO2 that would have been produced by the Airbuses and Boeings that happened not to fly on those days (obviously, the volcano also released other pollutants, many of which are quite toxic to life). Business travel had already dropped as a result of the recession. The volcano is a wake-up call. If my business relied on frequent international travel for face-to-face meetings, I'd begin asking myself how sustainable this is from an economic standpoint and how vulnerable my business was to such disruptions.   

There's more to the story. As I stated earlier, we're far from the day of the Powerbook 100, which couldn't even browse the Web. 70% of stock market trades now take place between computers at millisecond-level speeds. I have a hunch that the face-to-face financial deals that used to drive the global financial markets are becoming less important economically. 

Let's put this all together then. A perfect storm is emerging. Far from the idea that the suburbs will collapse in Richard Florida's great reset, it is likely the global city that collapses, replaced by ubiquitous high-speed telecommunications and undone by changing climatological conditions, not to mention peak oil.

Make no mistake, I'm not offering up a new utopia of any sort here. What I'm predicting is an end to network culture as we know it and it won't be pretty. The coming collapse of the global city will be slow and brutal, accompanied by the stationary state that Gopal Balakrishnan described last year.

I don't see many easy solutions out there. Ironically, the best bet is probably the very scare-word the American right loves to deploy: socialism. Now it's unlikely to take hold in the US, at least not for a generation or two but some countries will probably get the drift and head in that direction. What gets us out of this morass and what form of global spatial organization replaces the global city is unclear. Still, the late, great global city was far from equitable or sustainable. We can hardly lament its passing.  

For the Record

Nothing irks me more than the idiots* who say that nobody saw the crash coming. I blogged about it years before it happened. It was plain as day. The real estate market was a bubble. Nothing fundamental had changed.

So for the record, the bump in the stock market today suggests just how fragile the markets are. I've brought this up many times in the networked publics panels, but it's worth mentioning again: high velocity trading is a major threat to the markets and the markets are far from stable.

In literally the blink of an eye the NYSE had dropped over 995 points. It bounced back, but was still down over 350 at the end of the day. 

This isn't the kind of glitch we should ignore. It's a warning underscoring how unsound our financial markets are. Anyone interested in the survival of the current economy system should hope that the Obama administration doesn't ignore it.  

*Of course some of the people saying that nobody saw the crash coming aren't idiots; they're liars.

Games Without Frontiers

War has changed in network society. Of course, we are familiar with the asymmetrical networked warfare taking place in Iraq and Afghanistan. Then there's the emerging cyberwar, which recently ratcheted up as Google complained it was the victim of cyber attacks originating in China. The new issue of the Atlantic has more

But there's also economic warfare. What we see now is hardly a typical recession from which we will recover in the next year. On the contrary, part of a prolonged condition that will define this decade. Obviously, much of it is the product of astonishing foolishness on the part of governments, corporations, and individuals, all of whom seem to have been so hopped up on prozac that they thought that the good times would never end and that they could continue with their profligate policies for all eternity. As symbols of the old new economy are dying (goodbye and good riddance Hummer, sorry Athens—home of the 2004 Summer Olympics—and Dubai), and the crisis is crippling US cities and states (look at what's happening in Los Angeles, for example), we should ask if there isn't a touch of new war in all this.

Now I don't mean to turn to conspiracy theory, but I want to use this as an opportunity to suggest that our current economic crisis has its roots not just in rank stupidity and blind greed but also in other, murkier, conditions. Two seemingly opposed but complimentary plots come to mind. The first is China's. Back in 1999, two high-ranking officials of the Chinese military wrote a book called "Unrestricted Warfare." You can find excerpts at Cryptome. In this book, which is commonly understood to have been written to be read by the military, the first Gulf War was given as an example of how war had changed to become less directly violent, but also more pervasive (remember Peter Gabriel's song?). China's response against an adversary with technological superiority would be to pursue unrestricted warfare. In particular, economic war becomes part of the scenario. Here's a quote:

…in this era of economic integration, if some economically powerful company wants to attack another country's economy while simultaneously attacking its defenses, it cannot rely completely on the use of ready-made means such as economic blockades and trade sanctions, or military threats and arms embargoes. Instead, it must adjust its own financial strategy, use currency revaluation or devaluation as primary, and combine means such as getting the upper hand in public opinion and changing the rules sufficiently to make financial turbulence and economic crisis appear in the targeted country or area, weakening its overall power, including its military strength. In the Southeast Asian financial crisis we see a case in which the crisis led to a lowering of the temperature of the arms race in that region. Thus we can see the possibility that this will happen, although in this case it was not caused by some big country intentionally changing the value of its own currency. Even a quasi-world power like China already has the power to jolt the world economy just by changing its own economic policies. If China were a selfish country, and had gone back on its word in 1998 and let the Renminbi lose value, no doubt this would have added to the misfortunes of the economies of Asia. It would also have induced a cataclysm in the world's capital markets, with the result that even the world's number one debtor nation, a country which relies on the inflow of foreign capital to support its economic prosperity, the United States, would definitely have suffered heavy economic losses. Such an outcome would certainly be better than a military strike.
   

Is it conspiracy theory to suggest this is something the Chinese are thinking about? The Pentagon doesn't think so: they recently held a war game to investigate the consequences of economic warfare against the United States. More recently, US arms sales to Taiwan prompted Chinese military leaders to call for economic countermeasures.

Now, the effects of such a war in a globally-linked economy aren't clear and China could well wind up hurt in the blowback. It might be interesting for the Chinese military leaders to talk to the ghost of France's President Charles de Gaulle, who tried a similar move back in the 1960s by converting dollar reserves to gold only to find himself ousted during the events of May 1968. (N.B. I never knew that the origins of the Peter Gabriel song are in a European television game show that was also inspired by de Gaulle).   

In the US we also have an economic civil war of sorts that has been waged by members of the Republican party. "Starving the beast" is a policy that conservatives developed in the 1980s in which they hoped to realize their desires for a smaller federal government by forcing cuts. This could only be accomplished, they argued, by cutting taxes significantly so as to "starve the beast" and provoke governmental downsizing. See this article in the Independent Review, for more. Unfortunately for the conservatives, the beast didn't starve, it was stoked, it simply borrowed more money and our current economic crisis is very much the result. Massive cuts loom, but so do continued expenses that likely will only be fundable by increased taxes.

Playing with economies for ulterior motives is a dangerous measure, but one that I think we've hardly seen the last of in network society. All we can hope for is that we start talking about such madness in public and that, just as Herman Kahn's provocation that we think the unthinkable and contemplate life after nuclear war ultimately brought us to the process of détente, this too will lead us to stop playing silly games.  

 

 

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