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The Slide To Collapse Is Greased With Self-Interest
Self-interest is intrinsically self-liquidating on a systemic level.
One enduring if rarely stated principle of Neoliberal Democracy is that the single-minded pursuit of self-interest magically produces an equilibrium which serves everyone’s interests well enough to avoid the destabilization of rebellion or systemic collapse.
Let’s start by defining Neoliberal Democracy: neoliberalism sees markets as the only efficient, fair and durable method of organizing resource extraction and the social order: governance, employment, distribution of income, etc. Turning every social and economic function into a marketplace ensures that market forces provide the discipline and transparency participants need to make prudent choices and investments.
Democracy is a political marketplace in which votes replace investor and consumer decisions as the mechanisms that enforce discipline and transparency.
The melding of these two ideologies is clearly natural, as both see a transparent market as the best possible system for both governance and and the economy.
The key characteristic of a market is that all participants exclusively pursue their own self-interest. No one need sacrifice their own self-interest for the good of the whole system because by definition the system of competing interests naturally organizes itself to maximize the choices of each individual and the equilibrium of the system.
The transparency, fairness and stability offered by this ideological system is very compelling: the advantages of a system that transparently discovers the price of everything while offering roughly equal opportunity to all participants to seek self-fulfillment (i.e. the pursuit of happiness) via a dogged focus on self-interest are self-evident.
Looking out for Number One is thus the foundation not just of personal self-aggrandizement but of systemic stability and fairness.
But let’s move from ideological abstraction to the pragmatic–what happens in the real world? What we find in the real world is that participants seek to transfer their own risk to others while minimizing their productive work and maximizing their gain/skim.
Risk inevitably introduces the possibility of loss–both fair and unfair. Let’s say a participant in the market invests in a scheme to produce the Acme Brand widget.
Unfortunately, the widget fails to find a market and the enterprise closes its doors. The investors lose their investment: this is fair because any enterprise in a market is at risk of losing favor from changes in fashion or the emergence of more agile competitors.
Unfair risk is loss incurred through no fault of one’s own. Let’s say an employee of Acme Widget Corporation gave his all to the company, and was laid off anyway–not through some failing in his efforts or talents but as a result of dynamics beyond his control: the marketplace found little value in the Acme Widget.
The rational, self-interested participant will naturally seek to offload risk of loss to other participants. Employees of the state (i.e. the government) transfer most of the risk of being laid off to the larger group of taxpayers: in a recession, the state can raise taxes on everyone in the system to guarantee its employees get paid. In effect, the risk of loss is distributed to everyone paying taxes in order to guarantee the employment of state employees.
Financiers have learned that making bets big enough to render their enterprise too big to fail effectively transfers the risk of loss to the taxpayers. We see the same mechanism in action: those who manage to transfer the risk of loss to others guarantee their self-interest can be pursued risk-free.
The rational, self-interested participant will also naturally seek to minimize his productive contribution while maximizing his income/gain. The state employee will (for example) game the system to retire early on a fake disability claim, or manage to evade work, accountability or responsibility with little risk of loss because the system makes firing a slacker employee almost impossible.
A financier will use free money for financiers issued by the Federal Reserve to buy assets everyone needs to live: private water systems, rental homes, parking meters, etc.–what are known as rentier assets because the financier isn’t adding or creating any value in his ownership; he is skimming a fee from those who pass through the gate he owns.
The rational, self-interested participant will minimize his own expenses and maximize his income/gain by exploiting the commons–assets shared by all participants. The rational, self-interested participant will thus let his sheep out into the common pasture to graze for free, dump his waste into the river and the smoke from his works into the air, all free of charge.
This dynamic of everyone pursuing their own self-interest destroying the commons was articulated by Garrett Hardin in his paper The Tragedy of the Commons.
There is another dynamic at work called tyranny of the majority.
Imagine a ship with 100 passengers and crew drifting down a river that eventually cascades over a 1,000 foot waterfall. It’s easy to plot the ship’s course and the waterfall ahead. You might think 100% of those onboard would agree that something drastic must be done to either reverse course or abandon ship, but before we jump to any conclusion we must first identify what each of the 100 people perceive as serving their self-interest.
If life onboard is good for 60 of the 100, they may well rationalize away the waterfall dead ahead. Why risk the treacherous river currents by abandoning ship? As a result, the majority vote to tweak the ship’s course slightly, thus dooming the 40 others who can hear the thundering cascade ahead but who are powerless to change course in a democracy.
This is the tyranny of the majority feared by some of the American Founding Fathers.
If 60% of the voting public is dependent on government spending, then they will vote to continue that spending regardless of its unsustainability, source or unfairness to those who will suffer most when the entire contraption collapses in a heap.
To the degree that government revenue is a form of public commons, then the siphoning of that resource to serve individual gain leads to the loss of the commons, as well as the loss of any notion of the common good.
With 60 of the 100 voting to continue the present course of State borrowing and spending to support their piece of the largesse, the ship is doomed to end up in pieces at the bottom of the waterfall, despite the utter obviousness of the catastrophe just ahead.
In other words, democracy functions when a sustainable equilibrium can be maintained with slight adjustments in course/policy. But when a dramatic change of course is required to save the system, a change that upends all the rentier skims and redistributes risk of loss to all those who reckoned they’d successfully offloaded all risk onto others, then there is no political support for the necessary radical change of course.
Those collecting a piece of State spending will vote to keep the ship firmly heading for the waterfall, because they fear the consequences of changing course or abandoning ship. Any radical change of course reintroduces the risk of loss that each self-interested participant offloaded onto the system itself.
Enterprises that haven’t offloaded risk or secured guarantees from the State are forced to make radical changes when their survival demands it. Recent history is full of examples of corporations that were riding high and then failed to change course radically enough; those companies lost their way and were acquired for a sliver of their former value.
The political marketplace of democracy fails when the State has transferred risk and guaranteed the skim of enough voters.
The political marketplace of democracy also fails because self-interest is best served by influencing the State to protect one’s private rentier skims and gains.The highest-leverage, highest-return investment is buying political favors and influence from politicos.
If average citizens could buy a semi-permanent escape from taxes for, say, a $20,000 “contribution” to the right politico, anyone with a tax burden of $10,000 or more annually would make this easy calculation: in a single decade, I’m going to pay $100,000 in taxes if I do nothing. If I buy the political favor for $20,000, I will save $80,000 over a decade.
That’s a four-fold yield (400% return) on the initial investment. Where else can you reap that kind of guaranteed return?
It turns out to be remarkably easy to evade the transparency required to make democracy and the market function fairly. The political favor is buried in hundreds of pages of legalese jargon in a legislative bill or regulatory statutes. No one will ever discover the favor unless they know where to look.
Self-interest is intrinsically self-liquidating on a systemic level, something I analyze in depth in Resistance, Revolution, Liberation, for without an understanding of the distorting mechanisms of self-interest, we cannot understand why people will continue supporting a visibly imploding Status Quo: they will do so as long as they are getting a piece of that Status Quo that is free to them.
This is how systems collapse: those who have offloaded risk (a.k.a. skin in the game) to the system itself and guaranteed their job, income, pension or rentier skim via the State will continue to support the Status Quo that has benefited them so handsomely even as the ship tumbles over the waterfall to its destruction.
Charles Hugh-Smith of OfTwoMinds blog
26 Comments on "The Slide To Collapse Is Greased With Self-Interest"
Plantagenet on Mon, 4th Aug 2014 11:14 am
The premise that “self-interest is intrinsically self-liquidating” is intrinsically false.
It assumes a Marxist or Dickinsian view of humanity where evil bosses care about nothing but themselves. But numerous psychology studies have now shown that humans don’t work that way—-humans naturally have a charitable, sharing impulse hard-wired in. You can see it everywhere in US society, where hundreds of billions of dollars are donated and spent annually on charities, welfare, food stamps, education loans and grants, and every other kind of beneficent activity one might imagine.
ghung on Mon, 4th Aug 2014 11:49 am
“Looking out for Number One is thus the foundation not just of personal self-aggrandizement but of systemic stability and fairness.”
Assumes that “all men were created equal”, which they weren’t, and assigns a Darwinian character to human societies that societies have clearly resisted throughout history, for better or worse. Survival of the fittest doesn’t exactly apply here. Goes to Planet’s comment regarding “charitable, sharing impulse”.
Of course, identifying those who actually need our compassion and charity vs. those who would exploit it is problematic. Perhaps survival of the fittest (or most ‘sociopathic’) applies more than we like to think. Nature or nurture? Here’s to the most conflicted species known to man, eh?
Davy on Mon, 4th Aug 2014 11:52 am
Plant, there is also the tax advantages of gifts, marketing efforts to gifts, and finally gifts are the first to go when profits drop. Plant, when you consider the wealth inequality or legalized theft (sanctioned corruption) going on today then consider what is given back the subject changes. The new subject becomes self-interest hiding behind hypocrisy I have to snicker when Monsanto or DOW does some environmental work or makes environmental donations. I loved Madoff’s donations or Goldman Sachs giving to a charity then looting donations back through financial backdoor maneuver. The biggest issue is the amount of social wealth transfer compared to what is donated. The numbers are on a different scale. Basically social wealth and main street wealth is being looted by 1%ers and corporations who then give a very very small amount back to their favorite charities. This is hardly sharing impulse. The hardwiring is sophisticated greed masquerading as benevolence. The only true gift economy is with the tribe. The rest is self-interest driven.
Plantagenet on Mon, 4th Aug 2014 12:00 pm
Davy, I can’t imagine why you snicker when corporations donate hundreds of millions of dollars to charity and other good works.
Isn’t that something we should applaud and encourage?
Personally, I snicker when I read about just how cheap supposedly caring politicians like Obama and Clinton are when it comes to their personal donations to charity—Bill Clinton even made a big deal about giving his used underwear to charity—wow, what a generous guy!
Davy on Mon, 4th Aug 2014 12:49 pm
Plant you come across to me as intelligent. Surely you can see through the facade. One can only laugh at hypocrisy now but one day the response may be lynchings. The poor and dispossessed will extract revenge from the greedy if living standards deteriorate too far for too many.
Northwest Resident on Mon, 4th Aug 2014 1:35 pm
It should be obvious to just about everybody (with a brain who knows how to use it) that this idea — that every man for himself pursuing his own self-interest without regard to the welfare of others — is what has lead us all to the brink of disaster. Too many people know how to cheat and game the system, and they do. Too many people place their own hunger for wealth and power above all else, much to the detriment of everybody else. This idea put into practice is what has lead to economic bubbles, resource depletion, enslavement and manipulation of whole populations, war and more war, and evils untold. Democracy in its purest form is a great human invention and could work very well — HAS worked very well in the past, in certain situations. But when the greedy, power-mongering sociopaths get involved, that’s when everything starts to break down. Until humanity finds a way to get their collective group of sociopaths (and psychopaths) under control, there probably isn’t any form of government or economic structure that will not be perverted or “taken over” by those individuals.
Plantagenet on Mon, 4th Aug 2014 1:54 pm
The idea of every man pursuing his own self interest is a heck of lot better then the idea that people should be subservient to a Stalin, Hitler, Mao or some other ” Great Leader” and be forced to follow his self-interest.
Plantagenet on Mon, 4th Aug 2014 1:58 pm
Some people are intrinsically power-mad and others are corrupted by power. Thats why the founding fathers of the US invented a government that would be ruled by a constitution instead of by the whims of whoever happens to be President—-its very naive not to recognize that even decent people can be corrupted by power.
The whole idea that the 1% are evil or psychopathic is simplistic—the rich are just like like you or me, except they have more money
PS—Ernest Hemingway said that first.
henriksson on Mon, 4th Aug 2014 2:06 pm
It is in everyone’s self-interest to serve the interests of everyone, though this is not readily apparent/just flat-out discouraged.
Plantagenet on Mon, 4th Aug 2014 2:14 pm
Serving others is not discouraged. People who devote their lives to helping others receive a lot of praise. However, most people are not able to be mother Teresa. Most people mainly look out for #1. But most people also have a compassionate site that comes out when they donate to charity or volunteer or otherwise help the less fortunate.
Davy on Mon, 4th Aug 2014 2:20 pm
Plant, the issue is corruption and manipulation by a few at the expense of many. I don’t think that is what the founding fathers organized and believed in. In fact they made checks and balances to prevent what we have today the best they could. What we see today is a passive subservience of the many to a few in a rigged system. You are exaggerating the comparison by injecting Hitler, Stalin, and Moa which is a cheap response. Sure I agree dictatorships are the least desirable arrangement. They generally happen when democracy and capitalism fail miserably. Plant, I am just not buying into the BAU meme of capitalism and democracy we see today. Democracy and Capitalism was probably over with the Roosevelt era and the modern society. Maybe it could only function properly in a rural and small town environment of our first hundred years pre-industrial revolution. Maybe it was never meant to function without eventually being corrupted and manipulated for the benefit of a few. IMO small tribes in a confederation are one of the most satisfactory arrangement where we see a fair economy and mutually beneficial social organization. I am not making an ethical judgment on what we have I am saying don’t tell me it is democracy and capitalism because it “aint”. It is a corrupted, manipulated, and globalized variant of capitalism and democracy that is in a state of decline. I am not commenting on the ethics of the system because this is how systems evolve. The ethics I am commenting on is saying we have democracy and capitalism and we don’t. That is basically a lie.
Northwest Resident on Mon, 4th Aug 2014 2:21 pm
For 99.9% of humanity’s existence, we lived and thrived in small tribes or communities. Every person had a role to fill, a job to do. With everyone working together and doing his/her job, the tribe or community prospered. Within that tribe, there were different levels of “wealth” and “power”, but the difference between the top individual and the bottom individual was not very much. All members of the tribe worked together, they held a common cause, they took care of each other, and THIS is how humanity gained success worldwide.
Then came civilization — large cities, bountiful resources, taxation, government, law enforcement — closely followed by individuals completely detached from community and tribe and common interest — the original “me-firsters”. They went on to become kings, queens, generals, merchants, bankers, business leaders, financial traders — individuals with no sense of commitment to the common good that outweighed their quest for domination, wealth and power.
Ant and bee colonies may grow very large, but every ant and every bee is committed 100% to the success of the colony. In large human colonies, we have too many individuals who are disruptive, predatory, scheming constantly to get ahead of the others and manipulate their way into positions of power and wealth which are not always based on their performance or capabilities, but all too often based simply on their sociopathic abilities to intimidate and to control.
Self interest is not what got humanity through the first million or so years of its existence and spread humans around the earth. Self interest is the JUSTIFICATION used in our (soon to be) short-lived modern fossil-fuel burning civilization by those who seek to exploit and manipulate others to make themselves more wealthy and more powerful.
Aspera on Mon, 4th Aug 2014 2:22 pm
Self-interest and selfishness get confused for one another so often you’d think that they were the exact same thing. Sometimes people try to pull them apart by using a term like enlightened self-interest.
This is the type of self-interest that Wallach and Wallach (1983) argued for in their thoughtful book “Psychology’s Sanction for Selfishness.” They note that individual contentment can depend on what happens to those things about which people care, “we are satisfied or pleased if we attain what we (really) want; we are made happy if something that we (really) wish for comes to pass” (p. 201).
Thus, while the satisfaction is experienced personally, it is derived from attaining any outcome that is valued, even from behaviors focused on issues far outside the immediate domain of the self. By this logic, an intrinsic sense of satisfaction might be derived from working with others to craft a response to a radically changing biophysical circumstance. My version of this is being active in a couple of community gardening/farming projects.
There is undoubtedly a pro-social inclination in people, a tendency that seems quite broad and genuine, not at all calculated. It certainly includes caring about the welfare of other people and helping them through hard times but this inclination should _not_ be mistaken for altruism for it also includes a broader array of concerns.
Included is an eagerness to share news, finding deep contentment from working with others toward a common goal and in sharing skills and knowledge, and, given the right conditions, a willingness to expend considerable effort in developing positive relations with others. The inclination is as much about interacting with other people as it is about helping them. A central theme here is being needed, of having the chance to make a contribution that is not deemed optional but is essential to community well-being.
JuanP on Mon, 4th Aug 2014 2:26 pm
There are evil and good tendencies in all of us. We come in all shades of grey, but no person is all black or white. These tendencies fight each other inside us throughout our lives. This fight is different for all of us. We each have our own personal demons. I know I ain’t no saint and no demon, either. Even psychopaths are charming when they want to.
Northwest Resident on Mon, 4th Aug 2014 2:31 pm
Self-interest is NOT what contributed to the success of humanity as we developed into the most prolific animal on planet earth. Self-interest IS what has brought humanity to the brink of destruction and what has perpetrated unfathomable evil upon not just humanity but upon the entire plant including all life and all nature. Self-interest is what will destroy us all if we don’t get it under control.
JuanP on Mon, 4th Aug 2014 2:47 pm
Aspera makes a good point that there is a self interest that is good and essential to prepper mentality.
It’s what I refer to as the Oxygen Mask Principle. In a decompressing aircraft at high altitude the masks drop in front of you and the correct procedure is to put on yours first and after that help others with theirs.
The same principle applies to prepping and other emergencies. You do your own prepping first and then you have the skills, knowledge, and experience to help your family, friends, and neighbors prep when their time comes. You can’t save anyone if you are dead.
Northwest Resident on Mon, 4th Aug 2014 3:01 pm
JuanP — True. Self interest and interest in the common good often times merge — what is good for one is good for all. But that probably isn’t the type of self-interest that “the slide to collapse is greased with”. It is that kind of “self-interest” that made humanity into the highly successful social animal that we evolved into, and that will be our saving grace when lack of fossil fuel sends us back to our pre-industrial small local community roots. When that happens, the psychopaths and sociopaths will just have to harness up and pull a plow along with everyone else — there won’t be a lot of excess wealth or power for them to game their way into — unlike today and recent history.
Aspera on Mon, 4th Aug 2014 3:06 pm
The “oxygen mask principle” reminds me of another principle, the “subsistence principle” that a locality should subsist, as much as possible, from the production of that locality and its immediate region, and should take measures to secure such production for the long term.
There are some who will charge that a subsistence principle is protectionist.
Wendell Berry says, “… that is exactly what it is. It is a protectionism that is just and sound, because it protects local producers and is the best assurance of adequate supplies to local consumers.”
He then makes a crucial distinction. A just protectionism is “… the best guarantee of giveable or marketable surpluses. This kind of protection is not ‘isolationism’.”
So, provision myself and family first so we may then be able to work with others. And protect local provisioning so they may be a givable surplus.
JuanP on Mon, 4th Aug 2014 3:15 pm
NWR, I think Aspera’s point was about word usage and the differences between self interest, which is healthy, need not be harmful, and is an inevitable consequence and part of our survival instincts, and selfishness, which tends to be counterproductive and hurt others.
JuanP on Mon, 4th Aug 2014 3:22 pm
I think the author creates unnecessary confusion in this article by applying meanings to the expression self interest that go beyond what I accept as its definition. At some points he appears to confuse selfishness with self interest.
I read CHS’s blog regularly for a few month a couple of years back. I respect the guy. He is an original thinker, but got stuck in some of his ideas and got repetitive.
Northwest Resident on Mon, 4th Aug 2014 3:32 pm
JuanP — You’re right. It was either too deep for me to understand, or I am too busy working on my programming task right now to fully absorb it — or both. But yes, very good point(s).
HARM on Mon, 4th Aug 2014 4:12 pm
Plant is obviously still drinking the Randian Kool-Aid, believing the Reagan-era mantra that “greed is good”, and anything other than unfettered capitalism = Marxist dystopia.
He, like most Teapublicans, rejects the repeatedly proven maxim that “power corrupts, and absolute power corrupts absolutely”.
He rejects the notion that markets are artificial and arbitrary constructs, created by humans for a particular purpose, and based on rules that are infinitely malleable. He rejects the notion that markets are not absolute ends in and of themselves, but rather are supposed to serve the interests of real human beings.
He rejects the idea that such a thing as a “market failure” or “externality” (Tragedy of the Commnons) can even exist, or that individual investors can act irrationally. Or that they can act collectively in a herd-like manner, even when their behavior clearly goes against logic and their own best interests.
HARM on Mon, 4th Aug 2014 4:16 pm
“Plantagenet on Mon, 4th Aug 2014 1:54 pm
The idea of every man pursuing his own self interest is a heck of lot better then the idea that people should be subservient to a Stalin, Hitler, Mao or some other ” Great Leader” and be forced to follow his self-interest.”
Classic black/white dichotomous thinking, the hallmark of a Randian free market fundamentalist. There is no compromise or middle path possible. Our only choices are between a Stalinist dystopia or a Gilded Age dystopia. Apparently social democracies that heavily tax rich people and corporations like Sweden, Denmark, New Zealand, etc. do not exist.
sunweb on Mon, 4th Aug 2014 6:44 pm
To add to the “confusion” there is the self interest of the individual and there is the self interest of the group. Yes, individual self interest would function within the group but what was good for the group may not be totally good for each individual within the group. So there is compromise or sometimes cognitive dissonance or outright denial to belong. I think this is a major factor now.
sunweb on Mon, 4th Aug 2014 6:51 pm
Social control and banishment were major parts of the smaller groups of our first years on earth. There was also a wisdom and inculcation of belonging, of cooperation, of who was human, etc through story and “myth”.
We have asked a lot of ourselves without knowing it.
Consider it this way. If humanity is seen as a person who is 100 years old, the first 99 years of her life would have been spent as gatherer and hunter. She would have only one year to adapt to the changes in family structure, living arrangements, child rearing and all the other pressures and stresses that the shift to agriculture brought. This same 100 year old person would have five or six days to adapt to the enormous changes brought about by the industrial revolution. And less than a day to adapt to the mass of information made available by electronics.
Each adaptation moves us further away from the original social and physical environment of our emergence. Is it bad or wrong? This is not the criteria. There is no fault. Each accommodation comes from necessity and is the best we know at the time. At the leading edge of human history is an accumulation that expands and deepens the knowledge of our travels.
JuanP on Mon, 4th Aug 2014 7:01 pm
Sunweb, excellent observation. Traditionally, when an individual refuses to engage in the necessary denial, cognitive dissonance, and compromise he is expelled from the band and sent into exile. Disagreement and individuality where allowed and encouraged within the accepted narrative, but no defying the commonly accepted narrative was allowed.