Friday, December 05, 2008

Change from the inside?

It is unsurprising that the people who have benefited from "the system" do everything in their power to preserve "the system". The structural mistake of the last century was to consolidate economic power in a few corporate institutions and then staff the upper levels of those institutions with products of a tiny number of educational institutions. This created a level of centralization where an intellectual error among a small cadre of individuals at the top of the pyramid would have ramifications to the entire base. Add the fact that once power was centralized into organizations with enormous social clout, those organizations would inevitably use their social position to enhance their power. However -- as a question of history -- those institutions are trying to collapse in order to prepare the way for something new, but the government intervention is simply preserving inefficient mechanisms for operating in the economy.

The problem is a consequence of centralization, and the collapse of the current system leads to an obvious solution: nationalize the banks and re-privatize them as collections of much smaller financial institutions, to create the natural benefits of a market that represents the broad diversity of human nature rather than one dominated by a few hundred Ivy League alums with outsized senses of entitlement. However, our entire civilization rewards those at the pinnacle of the pyramid, and there is a strong disincentive for the people at the top to rethink the structure of an economy that has been so "berry berry good" to them. Consequently, the bailout money is used to further consolidate economic power inside a few institutions rather than rethink the structure that created this.

But don't get me started on the idea that the systemic collapse brought about by regulatory advantages that Ivy Leaguers were able to weasel from their former classmates in their quest to increase their power is somehow proof that we need more regulation. The only law we need is the Sherman act -- allowing multiple institutions creates more diversification in the economy, and "spreads the wealth around" rather than concentrating it in the hands of the super-rich.

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