Whether the canopy of a rain forest or the trading floor of Wall Street, complex systems share certain characteristics. A small input to such a system can produce huge, often unanticipated changes -- what scientists call "the amplifier effect." A vaccine, for example, stimulates the immune system to become resistant to, say, measles or mumps. But administer too large a dose, and the patient dies. Meanwhile, causal relationships are often nonlinear, which means that traditional methods of generalizing through observation (such as trend analysis and sampling) are of little use. Some theorists of complexity would go so far as to say that complex systems are wholly nondeterministic, meaning that it is impossible to make predictions about their future behavior based on existing data.
When things go wrong in a complex system, the scale of disruption is nearly impossible to anticipate. There is no such thing as a typical or average forest fire, for example. To use the jargon of modern physics, a forest before a fire is in a state of "self-organized criticality": it is teetering on the verge of a breakdown, but the size of the breakdown is unknown. Will there be a small fire or a huge one? It is very hard to say: a forest fire twice as large as last year's is roughly four or six or eight times less likely to happen this year. This kind of pattern -- known as a "power-law distribution" -- is remarkably common in the natural world. It can be seen not just in forest fires but also in earthquakes and epidemics. Some researchers claim that conflicts follow a similar pattern, ranging from local skirmishes to full-scale world wars.
What matters most is that in such systems a relatively minor shock can cause a disproportionate -- and sometimes fatal -- disruption. As Taleb has argued, by 2007, the global economy had grown to resemble an over-optimized electrical grid. Defaults on subprime mortgages produced a relatively small surge in the United States that tipped the entire world economy into a financial blackout, which, for a moment, threatened to bring about a complete collapse of international trade. But blaming such a crash on a policy of deregulation under U.S. President Ronald Reagan is about as plausible as blaming World War I on the buildup of the German navy under Admiral Alfred von Tirpitz.
Well, certainly the financial regulatory regime did begin its long, inexorable rollback in the '80s, but Ferguson is correct in a backhanded way -- what really set the stage for the current problem has more to do with the repeal of the Glass-Steagall Act and the evisceration of any meaningful regulatory and oversight mechanisms. Remember during the 2000 campaign when folks made fun of Dubya's use of the little-known jargon word "securitization"? That's what he meant, friends 'n' neighbors, it's just that after all his other malaprops that magickal season, people just assumed it was another by-product of his hopeless syntax.
At any rate, yes, thanks to animals like Bob Rubin and Phil Gramm, the current economic failures owe much more to Clinton- and Fredo-era policies than to Reagan. Ferguson misses the forest for the trees here though, and I think it's because he's a true believer in the system, not only cannot believe in its capacity to fail, except in the most mystical and theoretical terms, but believes in its goodness, that it is right more than it is wrong.
This is a seductive belief, and it manages to roll in most of us at some point or other. I could probably read Chomsky and Zinn for the next fifty years, and not entirely overcome the socioeconomic conditioning provided by the public school system. I like the idea of anarcho-syndicalism, and a more even societal sharing of risk and reward, even as I accept the idea of hegemon, so long as it's an American hegemon. Why? Because societies are still at the stage where hegemony predominates, and a Chinese hegemon, for example, is even less likely to provide any ancillary benefit to my rational self-interest than a thoroughly corrupted American corporatocracy.
That's just one (rather extended) example, but here's the thing that gets me about Ferguson's baroque naïveté -- he's looking for birth-death civilizational cycles and perturbations for rational explanations. Here's the deal, bro-ham -- what we've gone through, what we're still going through, most of us, this is not a recession, it is not a depression. It is a correction, it is the natural outcome of deliberate actions buttressed by looting and constrained only by imagination.
Consider: a small but economically and politically powerful subset of people grants "loans" which are bullshit, backed by nothing, to a great mass of people, which the small subset knows with absolute certainty will never be able to pay back. They then place bets accordingly, again backed by imaginary assets. When inevitably the scam "fails", they use their financial and political power to force the government to repay their imaginary losses, keep their bonuses intact, and allow them to continue doing "business" as before.
In what way is any of that a "perturbation"? It was not anomalous; it was not unpredictable. It was not a behavioral outlier. It is perfectly in keeping with what is a clear pattern of sociopathic behavior, precisely because of the lack of disincentives to such behavior.
Look, I enjoy the armchair study of collapsonomics as much as the next guy, finding parallels between current events and ancient ruins, looking for causes of systemic failure. Natural disasters, internal corruption, barbarian onslaught, lack of moral fiber -- it's the ultimate in Monday morning quarterbacking. But there's nothing accidental about any of this. The Wall Street rentiers knew and know precisely the consequences of their actions -- there are none. Why wouldn't they continue to do so?
Immediately after the recent earthquake in Chile, we heard plenty of mortified plaints about looters and such, vile opportunists taking advantage of everyone else's misery. At least in Chile, the looters didn't actually cause the earthquake. There they get shot; here they get to keep their fucking retention bonuses through sheer chutzpah. It's a mistake to continue believing in the historical tendencies of goodness and rationality and utilitarian integrity of "the system" anymore -- these people have been given unbelievable control and leverage, and they're rotten to the goddamned core, utterly indifferent to anything but getting theirs.
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