Integrated Chaos

The world is in a royal mess. We‘re in the middle of an economic collapse. We have financial markets in free-fall. Century-old manufacturing firms are begging for bail-outs. Radical religious fervor runs rampant. Military conflicts and threats menace the world. Terrorism keeps entire populations on edge. The environment poses great concerns for the planet. Social and cultural change creates turmoil everywhere. Access to energy sources are at crisis levels. Legal disputes cause bitter divisions. Criminal behavior has become uncontrollable. Rioting in the streets and in some nations, full-blown civil war. Governance has become nearly impossible. Political persuasions spin the solutions in the favor of competing parties. Our time will undoubtedly be recorded as the most chaotic era in history, yet one which boasts of dizzying levels of human achievement and progress. Chaordic.

A Chaordic Universe

Chaordic, a hybrid term fleshed out by VISA International CEO, Dee Hock, evolved to describe the mix of chaos and order, conveys the thought of an accordant coexistence displaying characteristics of both, each acquiescing to the other, yet each disrupting the other. Believers in a chaordic universe posit that all systems exist largely in this state. Living organisms, human organizations, integrated systems, businesses, nonprofit organizations, government entities and hybrid combinations of them all that are neither hierarchical nor anarchic, come close to explaining the nature of their being. Rather than analyzing how the chaordic organization develops, let us accept this as the twenty-first century reality. Unless we understand the complex interdependent nature of our world, we will inadvertently destroy nearly everything we touch. Unilateral decisions made without regard to integrated systems will result in “solutions” that will precipitate universal disorder.

Pick-Up Sticks

The childhood game of pickup sticks best approximates the integrated and interdependent association that describes the development of human organizations and their associations with other people and organizations. The sticks are gathered in a bundle, held vertically in the middle of the playing area and released. They fall into each other according to the forces of gravity and balance. In some versions of the game, sticks are of different color and one color is worth more than others. The objective of the game is to carefully separate one stick at a time from the pile without disturbing the other sticks. Each player gets his turn. If he succeeds, he keeps going to the next stick of his choice. Once he causes another stick to move, however, his turn ends and the next player takes over. The winner is determined by successfully removing the most sticks, or by retrieving the most valuable colors and scoring the assigned values.

The strategy of the game gets interesting. The top sticks may be removed with relative ease. As the players work their way into the pile, however, the weight and position of overlapping sticks make it almost impossible to pull one out without causing one or more of the others to move. Tug ever so slightly at one end of a stick and the player discovers that he has indirectly affected sticks layers away.

A player’s motive for moving a particular stick has no bearing on the consequences. He may fully intend to limit his manipulations to his side of the pile, but he interferes with the top, bottom and sides that he had neither intentions nor desire to touch. Even if he claims to have complete understanding of the entire pile of sticks, he still cannot move one of them without risking a major shift of positions. Moreover, once the shift begins, the pile undergoes a significant change with different sticks forming new associations and assuming new positions. The pile may become hopelessly entangled or it may totally fall apart. Every move affects every subsequent move.

Now, imagine if one player gets to keep playing even though every time he plays he disturbs the rest of the pile. He always says that he didn’t intend to move the other sticks, but it just happened. He continues to play, and each time the pile shifts more radically until the sticks can no longer be separated. The other players quietly sit by and watch. They have no authority to act. Eventually, the dominant player makes no excuses for his behavior. He just throws the sticks down at will and picks them up whenever and however he pleases. The other players threaten to leave because, understandably, they have little interest or incentive to play. The player then cuts them a deal. He tells them he will assign a victory to them if they just sit there and watch. If they are nice to him, if they tell him he is doing a good job, he will let them “win” more games than the other players. This becomes pure totalitarianism. But I am getting ahead of myself.

The Elements of Society

As in the pile of sticks, elements in the universal society of man have a direct and an indirect bearing on all other elements. Each element, of course, has its own individual shape and position. It has purpose, structure, operating procedures, controlling boards and a defined human imprint. It consumes, produces, takes up space and lends itself to measurements of success or failure. Yet, with all these individual profiles, no element can be treated independently of all other components of society. Whether we talk politics, the economy, education, manufacturing and labor, the trades, financial markets, the law, the environment, the military establishment, the media, health care, farming, social services, transportation, religion, recreation, entertainment, tourism, entrepreneurial pursuits or the underlying philosophies and passions that fuel them all, everything affects everything else.

Let’s isolate the current housing market crisis for examination within the parameters of this discussion. The government created two entities to extend affordable housing to people who could not enter the market, Fannie Mae and Freddie Mac. Through a complex strategy too involved to explain here, we will just say that they pressured banks to loan money to people who would not ordinarily qualify. Fannie Mae and Freddie Mac then bought up billions of dollars of these bad mortgages and offered them to the financial markets with the backing of the federal government. The government has always been considered the safest of guarantees because it is not going out of business. This maneuvering, as anyone can see, affected the financial markets. Banks either closed or required bailouts to survive, investment firms lost billions of dollars and their clients incurred huge financial losses. With lending money drying up, manufacturing concerns now find it difficult or impossible to continue operations. Thus, labor costs have to be cut which translates into layoffs or elimination of jobs. The ripple effect is now in full swing. With no money, the trades, health care, transportation, recreation, entertainment and the entire economic playing field now deal with shortages and cutbacks.

If one looks at each industry unilaterally, this state of affairs seems grossly unfair. After all, what blame lies at the feet of the transportation segment of the economy? What role did tourism play in it? What about farming? Why should any individual industry suffer because of irresponsible decisions made about affordable housing in the United States congress? Precisely the point. No element of society is insulated from the decisions and movements of one or many other elements.

In fact, studying the whole series of developments in areas of society that seem disconnected to the current crisis may be extremely interesting. Why did congress make these decisions in the first place that caused the domino effect? Was it the politics of vote-getting? Did legislators make a blatant play for the votes of minorities that were excluded from affordable housing? Perhaps. If not, then were they motivated by altruistic concerns that people were being unfairly shut out of the housing market? That leads us to question of who raised this issue to the level that it garnered the attention of the lawmakers. Did unions or minority representatives raise the awareness of the issue by community organizing and championing causes? Did religious persuasions or beliefs have a hand in this? Or, did the educational component of society sow the seeds of unrest and chart a strategy to deal with the supposed problem? Now, we have to ask why the clergy or the professors were so zealous in their support of the cause. Again, did they have altruistic motives? Or, did a significant number of them have profound philosophical disagreements with the dominant status of the United States of America or with our capitalistic system?

We may conduct the same routine of questioning with regard to the American auto industry, now in the process of asking for a bailout. The conventional wisdom blames management. Stupid management decisions bear responsibility for the devastation of the car companies. Right? Well, if we impugn the car executives, we cast aspersions upon the academic institutions from which they received their degrees. Yet, we cannot overlook management’s resistance to change, inflexibility, irrelevance, anti-intellectualism, unsustainable car models and a litany of ill-advised acquisitions of businesses under the guise of diversifying their assets. Executives enamored with lifestyles of luxury diverted their attention from their primary business to irrelevant side issues. Still, we cannot ascribe all the blame to the people who run the business.

Maybe we ought to take our questioning a little deeper. What role did the imposition of Corporate Average Fuel Economy standards have on the troubled industry? Auto execs say plenty. If so, then the regulatory oversight of the government caused the problem to a certain degree. How did these laws come into being? The environmentalist lobby. Insofar as the green movement was responsible for the passage of the CAFÉ standards, they became players in the game. Now, the green movement must come under scrutiny. Are their philosophies and data credible? Are their motivations purely a defense of the environment or are they front issues for political causes that have America’s punishment or even destruction in their sights? Even more esoteric is the belief that the environmental movement is the outgrowth of a new religion that worships Mother Earth.

The auto industry also points its finger at the bloated labor unions that have negotiated now unsustainable contracts. Some seven hundred thousand retired workers are on the industry’s pension rolls, plus a staggering number of union workers qualify for a so-called “Job Corp” which essentially pays workers for not working. Aside from these perks, the cash benefits of the union workers include wages for up to seven weeks of vacation and many paid holidays and days off. These contracts draw the support of political parties because they represent voters. They are also infiltrated by selfish and greedy leaders, plus the well known problem of union fraud and thuggish tactics. Are unions willing to expand their vision of the problem beyond their unilateral self-preservation, without regard to the impact on the pile of pick-up sticks? According to the International Association of Machinists, Tom Buffenbarger, it’s not likely. The IAM blog contains this statement. “A business plan that includes limits on executive compensation, prohibits companies from paying excessive dividends and gives the government an equity stake is warranted in this extraordinary circumstance,” said Buffenbarger. “What is unwarranted is any requirement designed to penalize employees or retirees whose unions have already negotiated substantial cost-cutting measures with automakers.”

This article can easily become unwieldy. Let us then point the reader into some further directions of inquiry. How does the banking industry look at the present crisis? What does the crisis look like from the perspective of international security? How do immigration authorities view the problem? Taking the narrow viewpoint of any one of these interests as it relates to their particular industry may have disastrous consequences for a number of other industries. Such is the nature of our integrated chaos.

The Dominant Player

In the end, the government has the catbird seat. Through legislation, executive fiat, and regulatory enforcement, lawmakers can pretty much do whatever they want to do. Questioning their motives makes no difference. Call them partisans, political hacks, bullies, tyrants or unfair practitioners of law enforcement. No matter. They can grab of any stick in the pile of their choosing and rip it out of position. They can create, destroy, modify, ruin or grant arbitrary success to any industry that suits their purpose du jour. Five hundred thirty five legislators, backed up by a like-minded judiciary has unlimited power. Three hundred million people are at the mercy of an oligarchy that the founding fathers never designed to operate in the way that it does today. The loudest and most effective lobbyists have the best chance to affect the outcome of any particular issue. It is doubtful that any group of lobbyists acts in the best interests of the whole. Their very purpose for existence is to clamor in the favor of special interest groups. They demand that the government pick their designated stick from the bottom of the pile and yank it out. The few take precedent over the many.

Who lobbies for the American people? Who has the interest of the whole in mind? What may be good for the housing industry may be toxic for the financial markets. What may delight the environmentalists to no end may signal the end of certain manufacturing segments of the economy. The sinister agendas of anti-capitalist professors whose tenure insulates them from reprisal may also incite their young learners to act in ways that will destroy the country.

Mission Statements

Reading the mission statements of several special interest groups, manufacturing concerns and labor unions is instructive.  Their reason for existence is clearly spelled out, and, as you can tell, it is not to help their competitors.

SIERRA CLUB MISSION STATEMENT: To explore, enjoy and protect the planet.To practice and promote the responsible use of the earth’s ecosystems and resources; to educate and enlist humanity to protect and restore the quality of the natural and human environment; and to use all lawful means to carry out those objectives.

Natural Resources Defense Council’s mission statement reads, in part: We work to foster the fundamental right of all people to have a voice in decisions that affect their environment. We seek to break down the pattern of disproportionate environmental burdens borne by people of color and others who face social or economic inequities. Ultimately, NRDC strives to help create a new way of life for humankind, one that can be sustained indefinitely without fouling or depleting the resources that support all life on Earth.

U.A.W. Local 723 Mission Statement: To educate our members in the history of the Labor Movement and to develop and maintain an intelligent and dignified membership; to vote and work for the election of candidates and the passage of improved legislation in the interest of all labor. To enforce existing laws; to work for the repeal of those which are unjust to Labor; to work for legislation on a national scale, having as its object the establishment of real social and unemployment insurance, the expense of which to be borne by the employer and the government.

GENERAL MOTORS MISSION STATEMENT: General Motors is a multinational corporation engaged in socially responsible operations, worldwide. It is dedicated to provide products and services of such quality that our customers will receive superior value while our employees and business partners will share in our success and our stock-holders will receive a sustained superior return on their investment.

LEHMAN BROTHERS MISSION STATEMENT: Our mission is to build unrivaled partnerships with and value for our clients, through the knowledge, creativity, and dedication of our people, leading to superior results for our shareholders.

Freddie Mac’s mission is to provide liquidity, stability and affordability to the housing market. Congress defined this mission in our 1970 charter [PDF 54K], which lays the foundation of our business and the ideals that power our goals. Our mission forms the framework for our business lines, shapes the products we bring to market and drives the services we provide to the nation’s housing and mortgage industry. Everything we do comes back to making America’s mortgage markets liquid and stable and increasing opportunities for homeownership and affordable rental housing across the nation.

All of these mission statements sound good on their face. Their strategies for achieving their mission, however, may pose serious problems for anyone other than their specific industry. It is when their mission runs counter to other interests on the planet that they begin to flex their muscles. Eventually, someone has to decide who has the upper hand. That decision usually falls to the government. Can we trust our representatives in Washington D. C. to be one hundred percent objective and become fearless patriots interested only in fulfilling their constitutional mandate? Their track record discourages us from believing that. In fact, our government is filled with partisans whose visions are skewed by their political views or by their individual constituencies. The government, then, becomes its own special interest group…with one major difference. It always gets its way. Unless a massive lobby comes along that wants the nation as a whole to prosper, the future belongs to the partisans in government.

What is the answer?  The best answer is no answer. The only totally objective force that mitigates in favor of no one in particular and everyone in general is called the free market. Either we opt for centralized control over everything in accordance with the philosophies and values of political hacks in government or we let the free market determine our destiny. Brutal? Maybe. But it plays no favorites. A level playing field presents itself to everyone who looks to the free market for governance.  To those who think centralized control is better than the free market, I have one main question:  Who will exercise this control?  Once we assign the privilege of control to one individual or entity, we will have effectively shut off all debate, and with it, freedom to speak, freedom to act, freedom to be.

The Free Market

So, what is the free market? From Wikipedia, it is a market in which property rights are voluntarily exchanged at a price arranged completely by the mutual consent of sellers and buyers. By definition, buyers and sellers do not coerce each other, in the sense that they obtain each other’s property without the use of physical force, threat of physical force, or fraud, nor is the transfer coerced by a third party.

Free market decisions are made strictly by the law of supply and demand. Free markets conspicuously lack control or regulation, in which governments directly or indirectly regulate prices or supplies. Artificial control distorts market signals. In the free marketplace, consumers dictate whatever prices that the market will bear for goods and services. The allocation of resources toward consumers and investors become totally a function of the whims, needs and desires of free people. In a free market, price is whatever the consumer is willing to pay rather than a governmental edict. Free markets stimulate competition between players in the economy, generally forcing prices downward and quality upward.

The free market is risky, but it is equally risky for everyone involved. It is especially frustrating to those who hold their ideas passionately, but cannot sell them to the general public. Such players tend to bypass the raw rules of the free market and work to obtain an unfair advantage over the rest of the players. This translates into political power. In its purest sense, political power is the power to make the marketplace conform to a centralized decision-maker. In a perfect world, that makes sense. In an imperfect world such as ours, it means tyranny.

Yes, ours is a system of chaos. But it is an orderly chaos. Our integrated systems can not be manipulated by anyone espousing a singular or unilateral viewpoint. If this happens, at some point in the future we will all get squashed.

Comments

[Tim Garcia]

The free market is not "equally risky for everyone involved." The risk depends greatly on what resources each player has. Someone who has a load of accumulated wealth can play a low risk game, or a high risk game; someone who has little or no resources is at the mercy of the ones who do have the resources.

You also say that "the allocation of resources toward consumers and investors become totally a function of the whims, needs and desires of free people." This is true only if everyone is equally "free." I don't think the beggar at the rich man's gate was as "free" as the rich man. =]