The Culture of More: 5 Socioeconomic Bubbles Ready to Pop

Socialism failed because it couldn’t tell the economic truth; capitalism may fail because it couldn’t tell the ecological truth.

~ Lester Brown

On Monday, we looked at 5 financial bubbles floating around our economy and asked whether the proliferation of bubbles could mean that we’re in a bubble of bubbles. We defined a bubble as a structurally tenuous entity with nothing of substance at its core. Today we’ll look at 5 socioeconomic bubbles that could easily be viewed as both causes and effects of those financial bubbles.

The current version of capitalism seems to be based on the idea that growth is always good. Is that realistic? Is it desirable? Is it even capitalism? The very fact that much of our culture is based on the idea that more is better would seem to indicate that we are indeed in the midst of a bubble of bubbles.

The Bubble Roster – Part II

There are many trends over the past few decades that could easily be called bubbles. Here, we’ll take a look at 5 socioeconomic bubbles that are still inflating:

5 Socioeconomic Bubbles

1. Growth: One could argue that growth itself has become a bubble. Over the past 30 years or so, governments seem to be willing to do whatever it takes to avoid a slowdown in growth. But growth, unchecked, can become cancerous. Sustainable growth requires balance. We cannot have more, more, more without consequences. Whether you’re talking about biology or economics, a balance between resource capacity andutilization¬† is paramount. Cells that grow out of control sap the resources of the organism, eventually killing it. The same is true of economic resources.

If we use up all of our resources in order to sustain growth, that growth, and the economy itself, will eventually stagnate and die.¬† The concept sounds so simple – and yet we have failed to grasp it. We, the electorate, continue to support the cancerous policies that promote growth at any cost. We are willing to take on unprecedented amounts of debt in order to support failed corporations. We’ll max out our credit lines to have the newest, biggest and best. We’ll worry about paying for it all later. It’s a perfect example of how one bubble feeds another.

2. Consumption: Our insatiable desire for more has fueled the growth and debt bubbles. The 1200 square foot home in which we grew up isn’t good enough for our kids. We need it bigger. Last year’s gadgets are so pass√©. We need the new ones. Our old T.V. still works great, but we’ve got to have that new giant screen model with HD and hundreds of channels. (Never mind that the quality of content on those channels is in a deflationary spiral, perfectly representing a culture with “nothing at its core”.)

While all of this inflated consumption has lead to economic growth, we must remember the foundation of these purchases: a growing pile of debt. That can go on . . . until it can’t go on any longer. Charles Hugh Smith sums up the consumption conundrum perfectly in a recent article entitled Oversupply of Old Failed Ideas, Undersupply of New Pragmatic Ideas:

“Beyond a modest level, consumption is the classic example of diminishing returns: you keep spending more but enjoying it less. At the end, ennui, alienation and exhaustion replace enjoyment.”

If we insist on growth at any cost, we’re going to have to be prepared to pay up. But it seems like most of us want the growth without the cost. Not only is that impossible, it’s undesirable. Too much of anything becomes toxic.

3. Complexity: Is it just me, or is everything a lot more complicated than it used to be? Ordering a plain cup of coffee is boring. Our cars are so computerized that the backyard mechanic can’t fix it himself anymore. Our financial system, tax system and legal system are comprised of a web of information so complex that the average person has neither the time nor the expertise to untangle it all.

Perhaps that’s how Fannie and Freddie are still in existence. Perhaps that’s why no substantial regulation or transparency exists in the $600 trillion derivatives market. Perhaps no one in a leadership position even understands the structure and implications of these ticking time bombs. Is it a coincidence that the only people who fully understand them are the ones making loads of money from them while taxpayers foot the bill when they blow up? If that’s the case, perhaps they shouldn’t exist – at least not until we can figure out how to keep them from destroying our economy or until those who play in those markets are ready to fully shoulder the risks associated with them.

The Paradox Of Choice is a book by Barry Schwartz which postulates that more is less. Too much complexity and excessive choice don’t lead to greater satisfaction. Rather, they can hinder our ability to make effective decisions.

4. Complacency: It seems we have a complacency bubble on our hands too, and it feeds the other bubbles as well. Back in 2006 many experts told us that it was OK that U.S. housing prices had gone parabolic because demographics supported the rise in prices, etc., etc.. We might see a correction, but no crash was in the cards. We believed them. We were complacent. After all, nothing bad had happened yet, right? Again, it continued until it couldn’t.

Right now, we are hearing similar shushing from experts who tell us not to worry about the massive (and growing) heaps of debt on the books of countries and consumers worldwide. Don’t worry. We’ll grow our way out of it, they say. All we have to do is borrow a few more trillion to help consumers buy another home, car, or iGadget they don’t need and we’ll be back in business. Really?

I would contend that we’ve already borrowed so much consumption and growth from future generations and that it will take those generations quite a while to pay the bill for our profligacy. I wonder when the complacency bubble will pop? I’m not sure, but I guess it will probably happen right about the same time the other 9 bubbles we’ve outlined here start to pop. Who knows? Maybe I’m off base on this. After all, it hasn’t happened yet, right?

5. Narcissism: I’ve often wondered if my perception that people are a little more self-interested than they used to be was just a factor of growing older and becoming a little curmudgeonly. Unfortunately, recent studies have shown that people are indeed becoming more narcissistic. A new book called The Narcissism Epidemic: Living in the Age of Entitlementdetails research that shows that we have a narcissism bubble too.

So it seems that we are a society addicted to consumption and growth. But we’re too complacent to do anything about it because it’s all just too complex for us and we don’t care anyway because it hasn’t affected us personally – yet.

Enough Is Enough

Having described 10 bubbles over the past two articles, it seems like we can conclude that we have a bubble of bubbles on our hands. If that’s really the case, then society itself has become a structurally tenuous entity with nothing of substance at its core. But these bubbles have been building for many years and could conceivably continue for many more.

Still, it feels like we are approaching the “enough” point. That’s when we collectively decide that we’ve had enough – enough growth, consumption, complexity, complacency, and narcissism. Like the child who eats one too many chocolates or the imbiber who indulges in one too many cocktails, we are reaching the point at which we realize we passed Enough 2 drinks (or chocolates) ago and we’ve now crossed into the land of Too Much.

What will the catalyst for this realization be? Who knows? Maybe it will be more stories about Goldman Sachs and Wall Street getting rich while starving the poor. Maybe it will be the simultaneous popping of several bubbles that finally ends the tyranny of the capital markets.

What comes next may not be pretty. But like the hangover from any other overindulgence, it will pass. Then we’ll swear to never do it again. And we probably won’t. But our great grandchildren might. ;)

Do you see any evidence of bubbles where you live? How do you think this will all turn out?


Written by Kim Petch

6 Responses to The Culture of More: 5 Socioeconomic Bubbles Ready to Pop

  1. Re: Growth & Consumption

    I completely agree about deficit spending and stimulus, all in the name of propping up malinvestment and keeping the rats spinning in the cages. The path to true growth lies in sound money and sound investment, and in technologies for cleaner energy and production in the future.

    Re: Complexity

    The tax codes et. al are farrrr too complicated. I wonder what the true deadloss cost to society has been over the years as a result of this.

    Complacency & Narcissism:

    I believe this is in part a result of telling people that everything is OK, that they have the right to free education, healthcare, a pension, a stable job, etc…. without having to lift a finger in support of it. They feel that they “deserve” it merely for existing. It’s not just people that are guilty of this; plenty of corporations are also in bed with the politicians :)

    The problem comes when everyone feels that they deserve something and nobody wants to lift a finger in support of it.

    Nice post!

    • 2 Cents says:

      You’ve added a lot of great ideas. I happen to agree with you on all counts. Your point about the extra costs in complexity is right on the money and I think you could extend that to all of the other bubbles as well. All of them end up costing us more in the long run.

      Thanks for taking the time to comment! :)

  2. In terms of our behavior, I think I am less optimistic than you. I think we repeat the same mistakes over and over. We get caught in bubble after bubble. I think some of us are just prone to be more speculative or trusting than others.

    • 2 Cents says:

      There has definitely been a trend of one bubble after another. I guess it’s my hope that this bubble of bubbles will end at some point, ideally through a skillfully managed end and not an uncontrolled cascade of popping.

      Unfortunately, I think we may have already let it go on too long to hope for a nice, gradual deflation. Further, I’m not sure which of our current leaders I would possibly describe as skillful. ;)

      Thanks for your comment!

  3. I’d long suspected you were a Charles Hugh Smith fan! (So am I–Charles is one of the most brilliant minds on the web, maybe anywhere).

    It’s interesting that you list complexity as a bubble. I’ve thought a lot about the impact of complexity on our society and economy, but never considered that it might be bubble. Complexity seems to have become something of a refuge; if you can make an industry or institution sufficiently complex that the average person has little grasp of it, it becomes a black box that functions independent of reality.

    I think we’re seeing that with government, the legal system, healthcare and even with energy. The complexity not only provides refuge from scrutiny, but since the masses don’t/can’t understand, it also provides a protected revenue stream. The masses cede funds along with comprehension, assume that “the situation is too complex to be grasped by the average person” and turn control over to those who profess to know. The worse the core economy gets, the more complexity we seem to get, and as we do, we become more accepting of it too.

    I’d also add that recurring bubbles seem to have become the juice that drives the economy, absent more tangible forces. Booms parallel bubbles, and no bubbles equals bad economy. Speculation rules the faux economy, and creates bubble after bubble.

    Outstanding post and observations. Your last two posts are in the must read category for sure.

    • 2 Cents says:

      I am definitely a Charles Hugh Smith fan. Everything that you wrote about complexity is exactly what I had in mind. My posts are already pretty long, though, and I have to draw the line somewhere. Thanks for fleshing out the concept for me!

      “no bubbles equals bad economy” That sums up our current economic policies. I’m afraid if we don’t accept a little economic contraction now, we may just end up with one really big depression down the road. It’s time to pop the “faux economy” bubble and get back to real business.

      Thanks for your insights and for your kind words! :)

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