Opening the Window Labeled "Financial Crisis"
A mailing by Tom Atlee to the CII list Sept 27, 2008
I've been reading a lot of critiques and suggestions about the
current financial crisis. I have neither the expertise nor time
to analyze them all and send out a proper briefing. But I find myself
highly dubious -- even suspicious -- of a $700 billion dollar bailout.
respected economists are, too. Not only are conservative free
market Republicans and liberal unions balking, but economist James
K. Galbraith, a University of Texas economist and son of the late
economic historian John Kenneth Galbraith, for whom I have tremendous
respect, calls the crisis "hype". And Thom Hartmann's
Wall Street Can Bail Itself Out Without Destroying The Dollar
makes it clear that there is at least one tried-and-true alternative
that would be far healthier for us and future generations than the
But there's something else going on with this, for me. That is
the object lesson this provides about social systems.
I'd like to look at one systems dynamic in particular. It is one
of the most widely recognized phenomena in systems science.
Positive (or "magnifying") feedback
causes things to increase or decrease. The screeching electronic
feedback between microphones and speaker systems is a common example.
For a social example, consider all the ways that the rich tend to
get richer -- especially when they aren't regulated or taxed --
and the dynamics through which poor people deprived of opportunity-supports
tend to get poorer.
Now let's look at negative (or "balancing") feedback.
This dynamic causes things to fluctuate within a desired range.
The most common example given for this is a thermostat which turns
the heat on when the room gets cold and turns it off when the room
warms up. In social system terms, financial regulation and progressive
taxes are forms of negative feedback, keeping greed and concentrated
wealth in check so they don't go wild in ways that undermine broader
This brings us to one of the main causes of this crisis. Former
Senator Phil Gramm, working in 2000 (as Senate Banking Committee
chair) with finance industry lobbyists, slipped a 262-page deregulation
bill into a gargantuan, must-pass budget bill, which cut short any
intelligent reflection about what the financial deregulation would
mean for the rest of us. Most legislators were barely aware of what
the bill -- called the Commodity Futures Modernization Act -- contained.
Earlier, he had sponsored a 1999 bill that allowed banks, insurance
companies and stock brokers to merge. His Commodities bill included
deregulating "credit default swaps" which [explains Mother
Jones magazine] "are basically insurance policies that cover
the losses on investments, and they have been at the heart of the
subprime meltdown because they have enabled large financial institutions
to turn risky loans into risky securities that could be packaged
and sold to other institutions." (For the fascinating story
of Senator Gramm and all this legislation, see
This whole situation is a lesson in distorted feedback dynamics
which are rapidly degrading the civilization we live in.
When you remove feedback that balances a system's extremes towards
healthy middle-ground, the extremes up-shift into "runaway"
mode, hopped-up on self-reinforcing positive feedback loops. Pulled
far enough away from equilibrium, the system spins out into a major
collapse, literally tearing itself apart. "Solving" the
current financial collapse by saving large institutions from the
debts they incurred with extreme risk-taking is simply not smart
systemic policy -- and won't likely last very long. This is not
I understand that the proposed bailout bill luckily had some sensible
systemic revisions, including making sure the bailout doesn't fund
corporate executive mega-paychecks, and some return to regulation.
But there are real questions about whether it really shifted the
system that brought about the "crisis".
Signficantly, Gramm's (and others') economic DE-regulation removed
balancing and moderating dynamics that were -- for good reason --
in place since the Great Depression and earlier. The fact that these
sane negative feedback policies have been peeled away over recent
decades should alert us to dysfunctions in another set of critical
systems -- our supposedly democratic system of governance and the
political system that shapes how that governance plays out.
The fact that major legislation like Gramm's bill, the Patriot
Act, the Iraq War authorization, and GATT and NAFTA could be pushed
through using manipulation and legislative gaming -- often with
few legislators even reading the bills involved -- raises serious
questions about the way Congress operates. (I know this perspective
is not new! But perhaps a systems view of it may be...)
One of the best commentaries on what we need to keep an adversarial
majoritarian democracy functional can be found in an article by
my father, John Atlee -- "Democracy:
A Social Power Analysis" .
Interestingly, even though I seldom publicize it, it is the most
popular article on the co-intelligence.org website -- and consistently
shows up as the first or second listing in a Goggle search for "social
power". Its key insight is that social power is ideally distributed
in a relatively equal manner and, where it is concentrated, it must
be answerable and balanced by other concentrated power. Since social
power occurs in different forms, we find negative feedback loops
like the bully pulpit power of a president being balanced by the
web power of bloggers, or the financial power of corporations being
balanced by the organizing power of unions and consumers.
Which brings us back to what's happening now. The concentration
of financial and mainstream media power that has occured over the
last several decades is seriously distorting most systems in our
This is not about Left versus Right, or Liberal versus Conservative.
It is about the ability of a system to sustain itself, following
the natural laws of systems. "Power corrupts and absolute power
corrupts absolutely." The more concentrated social power is,
the more it can re-enforce positive feedback dynamics that increase
its power, and interfere with negative feedback dynamics that help
balance the system and keep it healthy.
In his monumental COLLAPSE:
HOW SOCIETIES CHOOSE TO FAIL OR SUCCEED, Jared
Diamond notes that civilizations often collapse because the
elites whose power derives from social and environmental degradations
protect themselves from the consequences of their actions -- until
it is too late.
So there is another dimension to all this: Broken negative (balancing)
feedback dynamics lead to runaway positive feedback dynamics which
tear a system apart. We all have front seats to those dynamics playing
out in our own world -- from collapsing financial institutions to
accelerating climate change to email overload. When the intensity
gets "too much", the system collapses -- and one or more
other systems take its place. At such times -- when the system is
"far from equilibrium" -- chaos dynamics take over and
the opportunities for change become greatly magnified, such that
small efforts can have profound effects. What was impossible before,
when the system was stable, becomes suddenly possible.
In crisis, opportunity knocks very loudly. Opportunistic politicians
know this: Recall what happened after 9-11. Many major corporations
and big investors, as well, know how to profit from catastrophe
-- be it hurricane, tsunami, AIDS, or the collapse of major banks.
The original bailout bill was a handout to such folks, pushed by
a narrative of crisis -- and it may still be. Naomi Klein's THE
SHOCK DOCTRINE: THE RISE OF DISASTER CAPITALISM documents this
So let's face some important questions squarely: What would make
it likely that most social change activists and evolutionary agents
would see (and prepare for) crises, catastrophes, and collapse as
opportunities to move more rapidly and effectively towards a more
just, sustainable, wise, and enjoyable society? And: How could systems
thinking begin to influence an activist culture traditionally preoocupied
with issues, wars, candidates, and local disasters?
What, in short, will help those of us wishing to co-create a better
world to rise to the great Occasion of our era -- the unfolding
of intimately interconnected systemic crises in every part of our
Things are getting very ripe, indeed, for those prepared for the
PS: Another subscriber, Diana Morley, sent the following, from
Independent Senator Bernie Sanders of VT, which offers other (or
should I say "additional") systems-conscious approaches
to the financial crisis -- Sanders
Proposes Surtax on Wealthy to Pay for Bailouts - Calls for Breakup
of Businesses ‘Too Big to Fail,’ Stronger Financial
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