Economics of Dungeon Crawling

Hoarding of wealth has a deflationary effect on any group's economy. Just as the dwarves after Smaug hoovered up their wealth. The ease of capturing an asset often depends upon its relative value. In fantasy roleplaying games, the amount of money stolen by a bandit gang might be a pittance compared to a warlord's battle chest, which in turn is nothing compared to a dragon's hoard. Each becomes progressively harder to loot for any would be adventurers.

Now, the vitality of an economy is often characterized by the constant flow and transfer of wealth across several strata and several markets. Diversity is a hallmark of a healthy economy, like a healthy ecosystem. How might one get money flowing again when most politicians come directly from the plutocrat clade itself (if not serving it)? Writer Charles Stross has an idea relating to soft paternalism.

For example, ideas could include financing space colonization or fusion commercialization. The problems would be extremely costly, but also offer the greatest investments over the long term.

Have-Nots vs. Would-Earns

As John Robb notes, a key issue in Ukraine and elsewhere (including Venezuela, Thailand, and perhaps Turkey again) is the easy which an open source insurgency may be started and continued. If the 20th century and earlier history had the classic dichotomy of haves vs. have-nots, than perhaps the 21st might be the haves vs. the would-earns.

In this case, the underclass is comprised of people simply yearning for an honest day's work, a chance to perform a trade or profession without much interference from the power elites. However, many of the "power elites" are individually not that powerful themselves. The system/organization that employs them restricts their ability to use their individual judgment in certain situations, perhaps compounded by group-think and institutional bias. For example, a corrupt cop shaking down bribes may be given a blind eye (if not encouraged for a cut) by his cash-strapped superiors. However, an individual still effectively set an example that sparked a series of revolts. A fruit vendor burning himself in protest started the Arab Spring.

Even with tools like sock puppet accounts, online censorship/manipulation (even if subtle rather than overt), and plain spinning are deployed (and I believe they were in many such cases), there comes a point where a situation can no longer be contained. In the developed countries, there is less desperation (for now), allowing much of the systems to continue to function. In more desperate circumstances, even a humble fruit salesman or bulldozer operator can help topple a regime. 

Bitcoin Futures

Despite some recent bans dropping the price of Bitcoin, I believe it is still a market to watch. I think that a Bitcoin (and similar cryptocurrencies) are more useful as a money/value transfer system than simply as a currency. The weak points tend to be the exchanges and perhaps size of the blockchain, but I believe future currencies can learn from this. Even Bitcoin can be modified based on code from other implementations. I am interested in observing this new class of commodities over the long term, for it will be a wild ride.

Autolysis and Blowback

Political and corporate elites must compete with rivals and threats to their power, as they have throughout history. In the Cold War, everything became a weapon towards these ends, even art. As the nation state expands into byzantine bureaucracies and ensuring accountability becomes more difficult, there can be two approaches.

The simplistic and easy one is the knee-jerk one, relying solely on brute force and entrenching corruption instead of trying to combat it. The problems are over time, you treat the symptoms (instead of the causes) of your problem. For example, if you shoot whoever says the trains are late, it does not make them run on time (as opposed to improving infrastructure). Media censorship tends to have that effect.

The alternative is try to fix things, even a superficial effort. It has the benefits of channeling that rage into your political foes, but also could make you a lightning rod for their efforts. A drawback with both approaches, however, is the top down structure. It can be very hard for a leader to make decisions when they are not directly positioned there. Perhaps a savvy elite would aim to relocalize a good deal of the decision making, while they just sit back and relax?

Para-Statehood

A similar prediction to this blog was made by the UN recently. It depicts a future where special economic zones replace conventional nation states. Given the technological movements towards relocalization, so called 'para-states' could eventually replace current states. The catastrophic mismanagement of the Soviet, and currently the US, UK, and EU, is stirring up countless protests. Separation and relocalization, I believe, will dissect the conventional nation states. On the other side, smaller nation states can adapt easily to such a world: Iceland, Switzerland, Singapore, and New Zealand being my personal favorites to watch. How long can the center hold? We shall see. 

Unlearned Lessons

Here we go again, with another ill conceived intervention in a remote land. In the meantime, some communities wise up to create their own solutions.

Potemkin Economies: System D and Stealth Inflation

The black and gray market is one poised for rapid growth. Recently, horsemeat was found in hamburgers in the UK instead of beef. This has far larger implications than ruined fast food. This was due to the authentic product being too expensive for the supplier to handle. This is a type of “stealth inflation,” a substitute of lower quality goods instead of the advertised content. A recent Supreme Court case in the US threatens to gut what remains of consumer protections and the ability to sue for violations of them. Given the massive money printing in the US, UK, EU, and other economies, stealth inflation is sure to rise as the currency wars expand. 

System D, the globalized black market, rushes to fill the gap. From anonymous currencies like Bitcoin to shady distributors, the alternative networked economy may soon replace the economy that political and financial talking heads dwell within. Like the Potemkin villages of the Soviet Union, the economic “growth” benefits a few connected individuals at the expense of the many. As Charles Stross writes, worldwide democracy is malfunctioning, as politicians race to defend the illusion of the prior status quo at all costs. 

Those costs increasingly include everything that made those nations free and pleasant places to live in the first place. Civil liberties, developed infrastructure, and other quality of life metrics increasingly circle the drain. The political elites and business elites escape trial with impunity. Faith in governments and economies decreases as do the natural resources that fuel the status quo too many people take for granted. The entire socio-political structure resembles a decaying bridge with heavy trucks driven across it. The wrong one will set into motion a costly cascade of economic and political failures. 

As Alvin Toffler wrote in "The Third Wave," the dominant political and economic machinery of the Second Wave (industrial, bureaucratic nation-states) increasingly fails and falters. The reason many corporate and political elites grasp for power is not out of confidence in the future but desperation. Ironically, the desperate measures they use may easily accelerate the negative trends instead of fixing them, such as silencing and prosecuting whistleblowers instead of dealing with corruption. This allows the tumor of corruption to grow unchecked, and capture or compromise the rest of the "checks and balances" against it. This is why bureaucracies may be vulnerable to "regulatory capture," especially at the highest levels. This is by no means limited to "socialism," as private companies may have books cooked by a corrupt executive seeking to cover up numbers seem better than they actually are. 

The answer lies not in returning to feudalism (whether corporate socialism or "First Wave" agrarian feudalism), but in a "Third Wave" society. The Third Wave (Information Revolution) could create all manner of new systems. Cyberdemocracy, semi-direct democracy (perhaps some fusion of the Swiss and Icelandic models), or perhaps even a distributed polity in the style of "The Diamond Age" may prove viable. 

One possible vector for infiltrating an existing political entity is a form of "auto-immune disease," turning its political and economic machinery against it. Imagine a non-profit corporation, or a corporation serving as a "host" for related subsidiaries, sharing a new organizational structure (workplace democracy with company catered dorms/lodging/etc.).  New industries (including ones to make it self sufficient) could easily bud off and spread. It could offer social capital, technical capital (in the form of education and training), and perhaps legal or political capital (assuming lawyers could be hired). Of course, keeping such a structure from becoming a cult of some sort is another challenge. Of course, some religious and cultural enclaves (especially close-knit ones from various diasporas) could be a good example or place to start from. 

Such alternative polities are a topic for later, however. The bottom line is that despite its best efforts, the Second Wave institutions and status quo are their own worst enemies. New institutions are arising, and often employ swarming tactics against their slower foes. A Second Wave enemy may act like a great white shark, while a Third Wave enemy may act like a school of piranhas. Time will tell how long the Second Wave system takes to fail past, or if it drags the world ecology down with it. As the illusion falls away, the world's Potemkin economies will be revealed for the frauds that they are.