Wait and see whether the religion of the Servile State is not in every case what I say: the encouragement of small virtues supporting capitalism, the discouragement of the huge virtues that defy it.” - G. K. Chesterton

This week, we post several articles showing how the tide keeps on turning against Big Tech and its incredible power over our lives. Their tax evading, creeping surveillance system of our lives is slowly creating a backlash against companies that were once thought to be changing our lives for the better. Instead, they turn out to be destroying our future by killing our society’s youth.

The other important article is regarding our energy system, that (at current rates) will requires 400 years to be moved away from fossil fuel to green energies. Needless to say, we don’t have that much time, at least if we want to keep our Earth in its current condition. The human race is likely to survive the environmental disasters that we are creating for ourselves and the rest of the planet flora and fauna. The problem is that other species won’t make it and that the catastrophes will result in a completely different organization of our social systems.

For example, the pollution and depletion of natural resources (from water to raw materials to energy) requires to increase cooperation of all players to manage dwindling stocks. Since this is unlikely to happen, nationalization and state management could become an obvious way to allocate resources according to national priorities.

We are currently reading Sapiens and the author makes an interesting point: even though we don’t like capitalism, we currently cannot find an alternative to this political economy. As regular readers know, we are far from being the biggest supporters of capitalism, but it does make an interesting point: what alternative can we come up with that would be as efficient as the price system in the allocation of capital, goods and services?

The answer to build our future may thus not necessarily be in the replacement of capitalism but in its regulation. Of course, this doesn’t come close enough to ensure the stability of humanity’s development over the next centuries, but capitalism may be like democracy: the least worst of systems in its category. What needs to be worked out then, is reforms and regulations that would allow capitalism to benefit our societies without endangering them. It can take many forms, from adequate protectionism against unfair competition to the breaking up of monopolies and TBTF corporations (especially in the financial sector).

In other words, capitalism should be cooperating with democracy instead of undermining it, meaning that capitalism must thus be ranked lower than democracy, or the wealth accumulation will eventually let powerful economic interest to take control of the political apparatus. This is already happening now, but democracies have built in mechanisms that allow its citizens to counter this threat. Meanwhile, the Chinese model is an interesting model where capitalism is used to accumulate power, enriching some in the process but under control from the government.

We do not support a one-party rule of a country, but the Chinese experience shows that capitalism and democracy are not necessarily linked, meaning that democracy can definitely control capitalism instead of surrendering its attributes to corporations and vested interests. The political will for this solution seems to be growing in Western countries, which were amongst the ‘losers’ of globalization and are experiencing capitalism’s logical, self destructive consequences. Hopefully, these countries will be able to define a new social contract that will make them able to strike a fair outcome for all of their citizens.

At this rate, it’s going to take nearly 400 years to transform the energy system – (Hat tip Thomas) – In other words: we’re facing imminent catastrophe, millions (billions?) of deaths from side effects, and a change in our lifestyle (needs to happen anyway). The 2C threshold is a ‘pipe dream’ and we’ll be lucky if we can keep warming within 4C for this century.

Bottled Water, Brought to You by Fracking? – In the USA, the raw materials used for the manufacturing of plastic bottles is extracted… partly from fracking, which depletes water tables while (in some cases) polluting the water reserves, leading to increased consumption of bottled water which is in most cases repackaged municipal water… This business is a environmental disaster and a scam.

Silicon Valley’s Gilded Cage – Some perspective from the inside: the slow morphing of an enthusiast software engineer into a mindless aimless Silicon Valley worker.

Silicon Valley’s Tax-Avoiding, Job-Killing, Soul-Sucking Machine – (Hat tip Lao Ho) – The GAFA are obviously massive monopolies that need to be broken up, but they somehow managed to avoid it thanks to their incredible size and good PR. It might be time to break them up as they are spinning out of control.

Even McKinsey Gets It: High Wages Improve Economic Performance – Important. High wages translate into higher capital spending (increase productivity with more efficient machinery) and household consumption. This obvious economic fact can be linked to the work of a great many actual economists (Hobson, Keynes…), though it seems to have been shunned in past decades as economists became mouthpiece for the rich.

Hillary Clinton’s Trickle-Down America – Mrs Clinton describes the flyover country as ‘backward’ but she may not understand how much the regions which she touts as progressive are reliant on the exploitation of low skill, cheap immigrants. The coasts are congratulating themselves for being ‘multi-cultural’ even when they are mostly white, educated white collars working for large corporations undermining government funding (helping with tax evasion for corporates). Lower government expenditures, weaker labour rights and higher poverty contributed to the ‘backward’ America that Mrs Clinton is decrying, but her party was a key enabler of this race to the bottom.

European Court of Justice Nixes “Investor-State Dispute Settlement” Intra EU, Raising Doubts About Its Future – The European Court of Justice found that an ISDS ruling wasn’t legal since it wasn’t a court from a member state, which could endanger the future of this extra-legal, un-democratic and unfair practice.

How the West got China wrong – China was integrated in the world economy thanks to the belief that it would become more democratic but instead the country took advantage of it to achieve sizeable power and influence. Meanwhile, since its nomination at the head of the country, President Xi has taken a sharp U-turn on many liberal policies and turning the country into a powerful dictatorship. The West must now revise its plans to dealing with the country.

Economists Shocked That China Invalidates Their Pet View That Economic Liberalization Producers Political Liberalization – Some ‘I told you so‘ that actually should have been obvious to any person interested in history (including economic history) and Chinese history / economics. But we always prefer to believe that ‘this time is different‘, don’t we?

Picture of the week: Krafla geothermal power plant in Iceland

About Carlito Riego

"Great perfection may appear imperfect, but its usefulness is inexhaustible. Great abundance may appear empty, but its usefulness cannot be exhausted. Great correctness may appear twisted, great skills appear crude, great eloquence appear awkward. Activity conquers cold; inactivity conquers heat. Clear serenity governs the world." - Lao Zi