Economic and Social Revolution

Revolutions are started by the arrival of new technologies. These gales of creative destruction force a society to react and, in effect, revolutionize the way things get done. When it is time, as now, there is no way to put it off and we don’t want to.
The present mess is probably going to be worse than it needed to be because our government and corporate elite delayed and de-regulated rather than re-regulated our markets. They postponed the changes in order to continue to game the system.
The present storm, however profound, is only the first in a series. More importantly, the subsequent financial and economic recovery, whether done well or badly, will determine our response to the other storms that necessarily follow this one.
There is a pattern and it will be repeated. Efficiency-creating but disruptive innovation blows like a hurricane in some sector of the economy. In the process, the old rules become obsolete because they are not applicable to a new set of facts. The elite are able to capture ever more of the rewards while all the costs are pushed off onto society as a whole. Finally, the costs become unbearable, the system freezes up and we have crisis.
In the case of finance, efficiency-creating but disruptive innovations led to new profit opportunities in derivatives, securitization and a shadow banking system. These innovations did not fit the legal safety net that enforced standards of prudence and accountability.
Wall Street bankers were able to slide out from under regulation and set up a new system where no rules applied to them. They collected the rewards of imprudent risk-taking while pushing the actual costs of that risk off onto unsuspecting stockholders and now bewildered taxpayer.
Finally, the economic system, despite soaring asset values, could no, longer generate the income necessary to pay the interest. Inevitably, this bubble burst and the house of debt came tumbling down -- on us as taxpayers and stock holders.
New technology is now similarly threatening a list of economic and social sectors where continuing lack of response promises wrenching revolution.
We have a carbon-energy driven economy that faces peak supply just as wind, solar, tidal and who knows what want to compete. Yet we follow the same self-destructive pattern. We bolster the old system as we allow the petroleum and coal industries to squeeze the public for profit and the government for subsidy.
It isn’t just finance and energy. Our social geography is structured around the automobile. Yet the auto industry executives seem to think a few more billions in bailout money is just the thing to make up for their decades of inefficiency and oligopoly profits. .
Infrastructure of every kind fits the model. That is why our crumbling interstate system is being privatized and the West is running out of water. The environment is just as bad, maybe worse. Our public utility infrastructure is at a tipping point to disaster.

Other public institutions with ripe new technologies, and with social costs coming due, include: medical care, education, food safety and adequacy, the military-industrial complex, and even the structure of the family. We are in the process of resetting the values in all of these areas.
Every revolution is a counterrevolution to the one that came before. Ronald Reagan gave us his free-market-deregulation-privatization revolution. This was essentially a counterrevolution against Lyndon Johnson’s war on poverty.
Now Barak Obama will have to harness the technology of the millennium with its transparency, accountability and community to his revolution. His administration seems to know this since his stimulus package promises money to all kinds of new science and technology.
Danger comes with revolution. First, the leaders of the previous revolution fight to keep their privileges and they still have the levers of power. Second, revolutions have an infinite number of possible outcomes and at this stage no one knows what package of values we will end up with.
The economic and social revolution we are now embarked upon is unavoidable but we will see the benefits only after we have paid the cost of resetting the values of our whole social structure.
We have to be proactive or the revolution could fail with all the horrible costs and no change. Embrace the revolution and 2020 could be an economic and political paradise.