When Ben Bernanke gave his speech to the London School of Economics, our reporter was on the scene. Terry Easton put a tough question to America’s central banker: aren’t your interventions just making the situation worse, he wanted to know.
Amid the blah…blah…blah…of Bernanke’s response was this:
“The tendency of financial systems to boom and bust …is a very long-standing problem… but I think it’s very important for us to try to put out the fire…then you think about the fire code.”
In his 1988 book, The Collapse of Complex Societies, Joseph Tainter argued that all societies – like all organisms – are doomed. Tainter studied ancient Rome as well as the Mayan civilization. He noticed that problems always blaze up. Each one – whether climatic, political or economic – rings the firehall bell. And each solution – and readers may substitute the word “bailout” for solution – brings more challenges and takes more resources. Finally, the available resources are worn out.
Tainter observes that when the costs become high enough, people seem to give up. By the end of Roman era, for example, the burdens of empire were so heavy that people sold themselves into slavery to get free of them. So many people did so at one point that the authorities had to come up with another solution; they outlawed the practice. Henceforth, Roman citizens were required by law to remain free!
Another philosopher, Giambattista Vico, writing in the 18th century, put the beginning of the decline of Rome roughly at the time of the Great Fire during Nero’s reign. Nero, partly to pay for his post-fire reforms and reconstruction, began taking the gold and silver out of the coins. All civilizations go through three stages, Vico said – divine, heroic, and human. The divine period is ruled by the gods. The heroic period is adorned with victories and statues. Then, comes the human era. (Here, we permit ourselves to add a footnote to Vico’s oeuvre: the coin of the realm in early periods is the gods’ money – gold. Later, people switch to money of their own invention – the kind of money you make from trees.) This last stage, says Vico, is when popular democracy arises, along with rational thinking and what Vico delightfully calls the “barbarie della reflessione” [the barbarism of reflection]. In earlier eras, people do what their gods and leaders ask of them. In the final era, they ask, “what’s in it for me?”