The Crisis of Complexity

The Utopia Thieves: Progress, Ecology and Neoliberalism — Chapter 4

RECISION engineering, which only made sense once metals were abundant, eliminated the need to have everything made by hand. thus creating further abundance through mass production.

Precision engineering also allowed devices of greater complexity to be made, whence the progression from comparative roughness and simplicity to greater complexity in each successive generation of technical devices, to which I have referred to above.

Take, for instance, the following World War II era documentary about a two-mile-wide factory complex intended to produce powerful 18-cylinder aircraft engines of the latest type, each engine comprising 13,000 parts, with the aid of 5,000 external contractors.

The significance of greater complexity is that it further undermines individualistic, or atomistic, notions of how the economy works. Every important breakthrough against the barriers of scarcity and prior impossibility is now achieved through great cooperative endeavours, like the one described in the first two minutes of this documentary about the launch of the first Apollo moon rocket, the test vehicle Apollo 4.

Perversely, those who fail to cooperate cheerfully and who stingily hold out for number one instead, in the manner prescribed by the average economics textbook, are often able to profit thereby. But they do so by means that are now counterproductive in an economy of complex and joint production.

A simple example will suffice to illustrate the point. Suppose a jigsaw is being completed by ten people, each with a piece of the jigsaw. When it is finished, the ten will be rewarded with $1,000.

You might think that it would be obvious to go home with $100 each. But you are not thinking like an entrepreneur! What if one person, more entrepreneurial than the others, decides to gamble on demanding $200 or not handing over their piece at all? The short answer is that the others will probably be content to accept $88.88 each.

This kind of behaviour, colloquially known as ‘hose kinking’, creates an artificial form of scarcity by which people are exploited. But it gets worse. Suppose everybody starts to hold out for $200 apiece. There is, now, no way that the jigsaw is going to be completed at all.

We now have what the modern-day economist Michael Heller has dubbed the ‘Gridlock Economy’. Potential abundance has been frustrated by the combination of complex techniques of production and economic attitudes that are overly privatised.

Actually, this was a problem that Marx had foreshadowed as well:

The economists express this as follows: Each pursues his private interest and only his private interest; and thereby serves the private interests of all, the general interest, without willing or knowing it. The real point is not that each individual’s pursuit of his private interest promotes the totality of private interests, the general interest. One could just as well deduce from this abstract phrase that each individual reciprocally blocks the assertion of the others’ interests, so that, instead of a general affirmation, this war of all against all produces a general negation.

For those who take complexity seriously, without adopting a radical perspective, a common position is that capital is an organising principle within an otherwise atomistic economy.

In the words of a famous 1937 article by the later Nobel economics laureate Ronald Coase, large-scale operations organised by capital float in the market like lumps of butter in a sea of buttermilk.

Within these ‘lumps of butter’, which in Coase’s analogy do not touch each other to form some sort of ‘iron cage’ or industrial complex though others say they do, capital is not only committed long-term but also entitled to a merely residual reward after employees, suppliers, and all other stakeholders have been paid their market reward. As it has later been somewhat romantically put, ‘leaders eat last’.

On the other hand, where capital takes the form of an uncommitted mass of funds, the possibility of exploitation arises, whereby those workers, suppliers and other stakeholders entrapped in Coase’s figurative lumps of butter and engaged in acts of joint production, may be exploited, after the fashion of the jigsaw puzzle example of a few paragraphs above.

As it’s said, in every abusive relationship, the partner least committed to the relationship, or who can successfully convey that impression, is the one that wields the power. So it is, likewise, with ‘footloose capital’ vis-a-vis the world of complex and joint production.

This is an aspect of the problem that the economist John Maynard Keynes had in mind when, in 1936, in on the most famous passages from his General Theory of Employment, interest and Money (1936), as follows:

Thus the professional investor is forced to concern himself with the anticipation of impending changes, in the news or in the atmosphere, of the kind by which experience shows that the mass psychology of the market is most influenced. This is the inevitable result of investment markets organised with a view to so-called “liquidity”. Of the maxims of orthodox finance none, surely, is more anti-social than the fetish of liquidity, the doctrine that it is a positive virtue on the part of investment institutions to concentrate their resources upon the holding of “liquid” securities. It forgets that there is no such thing as liquidity of investment for the community as a whole. The social object of skilled investment should be to defeat the dark forces of time and ignorance which envelop our future. The actual, private object of the most skilled investment to-day is “to beat the gun”, as the Americans so well express it, to outwit the crowd, and to pass the bad, or depreciating, half-crown to the other fellow.

By liquidity, Keynes refers to the usual economic assumption that everything should be potentially up for sale at every point in time, and that there should be no commitment or loyalty to sunk costs or employees’ career structures. That capital should in other words be ‘disembedded’, as sociologists put it, part of the sea of exchange and not actually part of the lumps of butter.

Keynes’s point is that the fetish of liquidity leads to a divorce between Wall Street and Main Street, as it has so often been put. This is really rather obvious. But on a deeper level, way can say that this oft-observed and obvious problem persists, and tends to recur even after intervals of a more pro-social policy such as the kind of capitalism that existed in America between the New Deal, which largely put an end to the sort of insecure and precarious ‘casino capitalism’ Keynes described, and Ronald Reagan’s presidency under which it revived. Citing Louis Uchitelle’s The Disposable American, Medium writer Steve LeVine notes, for instance, that:

Until the 1980s, layoffs were barely a thing. . . . Companies tended to avoid large-scale dismissals, because they violated a red line of publicly accepted practice and also could finger the company for blame. The United States was still in the age of company as community and societal patron, and even when workers went on strike, they were generally not replaced, because the optics would be bad.

The same story is told in a recent New Yorker article by Evan Osnos, as well as in books like Rick Wartzman’s The End of Loyalty.

And the reason that casino-like investment and precarious employment revive, is because it actually pays for Wall Street and other investor communities to be organised on the basis of liquidity and lack of commitment.

This enables the investor community to drive a harder bargain with those who are more deeply embedded in society and the world of work: in Coase’s butter-lumps in other words. In this way, capital is able to prevent the almost limitless bounty of modern production techniques from trickling down to all those at the bottom.

A bounty that, if produced to the maximum possible level of abundance, would also be cheapened to the point that profits fell, in much the same way that a monopolist has an incentive not to produce or sell too much.

A further point that may be made, here, is that many of the most dire pronouncements about capitalism by Marx and other radicals are based on the idea that reforms to embed capital in society, and to force it to accept a lower rate of profit amid greater abundance, are necessarily doomed to fail.

And that, so too, are all efforts to make capital see itself as a part of society rather than an adversarial force which does, indeed, come to behave, collectively, in a similar fashion to the grasping monopolist.

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I am an urban historian from New Zealand with a special interest in New World cities. Somewhere along the line I picked up a PhD on planning and economics.

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Chris Harris

I am an urban historian from New Zealand with a special interest in New World cities. Somewhere along the line I picked up a PhD on planning and economics.