Howard Bloom on Boom and Crash

This is an excerpt (without footnotes) from The Genius of the Beast: A Radical Re-Vision of Capitalism by Howard Bloom (Prometheus Books, 2011). Reprinted by permission from the author.

Googling the Future: The Fabulous Russian Gets It Wrong
The story of the explanation for everything, the Kondratiev Wave.

Boom and crash is like the fin of a shark skimming just above the water’s surface. It’s not an independent creature. It’s just the visible portion of a larger beast, a part of the body of something far bigger beneath the waves. The shark itself, gray, sleek, massive, and hungry, cuts through the dark waters beneath the crests and ebbs in the quest for food. But you and I can’t see it. If we’re standing on the beach, all we spot is a moving triangle—the fin.

What’s the invisible body of which crash and boom is a mere fin? Crash and boom is a manifestation of a cosmos Googling her potential. It’s a manifestation of a universe feeling out her future and wrestling the impossible into reality through tools like you and me. Crash and boom is a fin moved by a search strategy, the search strategy of fission-fusion, the search strategy of explore and digest, of gamble and test, of grow bold then lose your confidence, the search strategy of the cycle of insecurity built into your biology and mine. But this primal search pattern takes on a whole new meaning when it asserts itself among us human beings. In bees, the cycle of spread and clench, of reach out then digest, runs over and over again, week after week, year after year, and century after century. So does the bee hive’s boom of spring and the bee hive’s bust of winter. But the structure of bee hives remains the same. Honeycombs are still made of wax. Each cell in the honeycomb is still hexagonal—it still has its familiar six sides. And the social structure of the hive—with a queen, her retinue, her nursemaids, her interior workers, her unloaders, her outdoor foragers and her explorers—stays the same. That’s not true in societies of human beings. The cycle of crash and boom in humans brings social breakthroughs.

Let’s go back to the Kondratiev Wave theory of boom and crash. The rise of new technologies brings boom, the Kondratiev theory says. And the petering out of a technology brings a crash. In thirty-one B.C., the Roman Empire was split by a civil war between the armies of a thirty-two-year-old named Octavian and the army and navy of Mark Antony and his politically brilliant girlfriend, Cleopatra, queen of Egypt. The battle was over expansion strategies. Over speculative tactics for feeding the next boom. Octavian wanted to keep the focus of the Empire in Rome with Europe in its view. Meanwhile it looked like Cleopatra had convinced Mark Antony to move the center of the Roman Empire east and to look for expansion in the Middle East and Asia. No matter which direction Rome faced, East or West, its technologies remained the same. Rome raised its cash by using the warship, the shield, the sword, and its highly disciplined army to conquer new lands and to bring home the loot. It raised yet more money by sucking in the resources of its conquered lands. It collected whopping annual tributes from subject territories such as Greece, Spain, and France. It fattened its treasuries with twenty-five thousand drachmas a day of silver from Spain’s super-rich silver mines and with a flood of silver from the mines of Laurium and Macedonia. And Rome took in its food by raising it on huge industrial-sized farms planted on conquered land and worked by slaves, latifundia, or by importing it on cargo ships that crossed the shipping lanes that Rome had expropriated when it seized control of the Mediterranean Sea from the Phoenicians in 146 B.C.

There are often crashes when wars are over. Why? Wars are forms of exploration. They test your reach to see just how far you can go. What do you do after your hunting and gathering are over and your expedition outward has landed you more food? Or less? You repurpose. You sit down and digest what you’ve found. Or you stew over your loss. One way or the other, you consolidate. Recessions and depressions happen not when technologies peter out, but when the group shifts from fission to fusion, from stretch to clench, from exploration to digestion. Recessions and depressions are powered by the pendulum of repurposing.

Exploration and outstretch focus the energies of the group on its periphery, its outskirts, its new frontiers of possibility. Digestion centers the group on its core, on testing what it’s found, on throwing out what seems weak, and on pulling together the discoveries that pass the test—on solidifying the winners in new and stronger ways. In you and me, digestion takes the comfort foods and the new treats we’ve discovered in our multi-mile expeditions through the aisles of grocery stores and corner shops, chews it, sends it down our esophagus—the tube from our mouth to our stomach—focuses it in a single churning ball in our core, separates what fuels us from the stuff we can’t use, sends the useless and the harmful down our intestinal pipes on their way to the pit of porcelain in our flushing room, and sends the good stuff into our bloodstream to be fashioned into the megamolecules that keep us functioning for the next few days. These are used as fuel or fused into muscle, fat, and bone. That’s consolidation. That’s repurposing.

But digestion doesn’t just maintain the status quo. It feeds a process of radical change, of fresh creation. You and I change every day and every year. Once you were an embryo. Then a zygote. Then a baby. Then a toddler. Then a child. And you continue to change as you read this page. Ten billion cells of your body die every day and you replace them without knowing how you pull this act of creation off…or without knowing you are doing it at all. Your body has never experienced middle age and old age before. Yet the community of cells that make, rebuild, repair, and constantly change you will find their way to reshape you as an older person as surely as they found their path to making you an embryo a long, long time ago. How they manage to follow this master plan when there are no blueprints and no master planner, we still don’t know. The one thing that we can clearly see is the cycle of expand and consolidate, of explore and digest, of speculate then test and toss away, in our developmental biology.

Modern social organizations find their way forward using this evolutionary search strategy. Crash and boom usher in new institutions. Crash and boom work as an exploration-engine that generates breakthroughs, an exploration-engine that drives social change.

Let’s go back to Rome. The aging of basic technologies didn’t plunge Rome into depression in thirty B.C. when Octavian won the war and Marc Antony and Cleopatra killed themselves. Yet there was an unmistakable downturn. Why? In all probability, the depression was an example of the pendulum of repurposing at work doing something it does over and over again—bringing recession after a war. Why recession after war? Because huge numbers of men are no longer needed as soldiers. Augustus dismissed a hundred thousand soldiers to slim the army down from sixty legions to twenty-eight. And according to Tacitus, Augustus was up against a problem. To “apply soothing medicine to the spirits of the soldiers, that they might be willing to endure peace.” Augustus had a hard time coming up with the funds to pay the dismissed soldiers their discharge bonuses—bonuses equal to thirteen years of pay. The result was a near mutiny. Augustus settled as many soldiers as possible on lands seized from the conquered. But it’s not easy to repurpose soldiers as farmers. Incompetent farmers are lucky if they can feed themselves, much less others. While they wait for their crops to come in, they live as inexpensively as they can. They don’t buy. They hang on to their bits and pieces of leftover plunder. They don’t send consumer dollars—or Roman Denarii—whizzing through the economy.

What’s worse, if they grow frustrated, former soldiers can return to what they know best. Picking up their arms and fighting, this time not for the state but against it… as rebels. The former soldiers are like the dazed and confused bees whose old job is no longer paying off. They need repurposing. Even in ancient Rome.

In its post-war recession, Rome’s focus turned inward. Rome went through a perceptual shift. Its future projectors, its scenario generators, its Othello mechanisms, no longer focused excitedly on fresh opportunities. Rome’s fantasies focused on problems. On the ways things could go wrong. On the ways you could lose your toga, rather than the ways you could win a whole new wardrobe. The poetry of Horace, for example, was filled with apocalyptic visions. Horace’s biographer, Peter Levi sums it up like this: “Another age is crushed with civil wars, with its beautiful, despairing solution and its vision of the fall of Rome.” Rome went from binge to purge, from exploration to consolidation, from hunting and gathering to digestion. Rome shifted position in the cycle of insecurity. Instead of crawling out to explore the strange, Romans rushed to the comfort of their mothers’ shins again. The result? Rome gave new powers to its central institutions. In the Romans’ moment of emotional crisis, they strengthened the central structures they felt could save them.

When Octavian took power, he renamed himself Augustus. He declared himself Emperor. And he moved a process forward that had begun under his great uncle, the man who had adopted him as a son and had willed him his property, Julius Caesar seventeen years earlier. He shrank Rome’s democratic institutions down to fig leaves. And he built the powers of a central regulator, a central controller—himself and the institution of emperor, an institution he dramatically advanced. He turned from an explorer to a consolidator. One of the most important consolidators in Western history.

While he was at it, Augustus made reforms in the government. Under the existing system, taxes were collected by “tax farmers”—entrepreneurs who were allowed to set tax schedules as high as possible, turn over the bulk of what they collected to the state, and who were allowed to pocket any extra money their extortionate rates pulled in. Tax farming allowed you, if you were empowered to collect taxes for the state, to drive the tax rates up to whatever you felt the citizens in your district would bear without beating you to death some very late night. The practice of tax farming said you could keep the change. You could keep whatever taxes you collected above the rate the Roman state demanded of you. Tax-farming was vicious, and Augustus needed as much good will as possible. He was about to raise taxes. So Augustus abolished tax farming. Augustus also established policies that favored free trade, private enterprise, and private property. And he built or rebuilt roads and harbors, opening the way for an upgrade of multi-continental trade.

Is Augustus’ institution building and centralization in a time of slump or crash an exception to the rule? No. Not at all. The Panic of 1819 in America was blamed on wildly speculative new technology and pathologically enthusiastic exploration of new opportunities. It was blamed on “overinvestment” in manufacturing and “wild speculation” in western land. But that placement of blame was false. It turned out that the “wild speculators” were right. Their manic dreams of giant payoffs from factories and from western acreage accurately predicted the future. Manufacturing had by no means peaked in 1819. In fact, the growth of industrial production would go on for another 200 years with no end in sight. And the Western lands that the investment enthusiasts were scarfing up for less than a dollar per acre would sell for $2,350 per acre one hundred and eighty-nine years down the line.

But American society’s manic-depressive cycling from frenzied belief to doubt, panic, blame, and the Othello Effect in 1819 did shift the American herd into a different kind of creativity. It drove Americans to craft new centralizing institutions. It led to the spread of the savings bank to help the poor pile up their pennies so they could make it through the next panic. And it led to the creation of manufacturing associations to support the new factory founders. The panic of 1819 shifted America from exploration and expansion to consolidation and structure-creation. From hunting, gathering, and shopping to digestion.

Eighteen years later, America was hit with the Panic of 1837. Again, exploration of new opportunities—wild speculation, and overenthusiasm about new lands and new technologies—were blamed. But were technologies really going from exuberant youth to elderly decay in 1837? Were they following the pattern of the Kondratiev Cycle? Far from it. In 1825, the Erie Canal was opened. That revolutionary man-made 363-mile-long waterway brought the iron mines and wheat fields of the Middle West into the economy of the Atlantic seaboard. The Erie Canal replaced the perilous journey to the wilderness of states like Michigan, Wisconsin, and Minnesota with a mere cargo-boat ride from New York City, from Boston, from Philadelphia, and from the other bustling cities of the East. The Erie Canal also pulled the American Mid-West into the net of global trade. It put the grain and ore of the Midwest an ocean boat ride away from Europe. And when Continental harvests failed and when England, Scotland, and France were threatened with famine, Europe soon learned to send its gold to the US in exchange for Erie-Canal-transported grain.

The opening of the Erie Canal also added a new layer to the infrastructure of fantasy. It fired the imagination of a tall, gangly sixteen-year-old kid in Kentucky who read schoolbooks by firelight at night and who put himself through a course in the law, then eventually became president and dreamed of an upgrade on the canal’s miracles—a transcontinental railroad. Another wild scheme criticized as a techno-boondoggle. That kid who fixated on the Erie Canal was Abraham Lincoln. Lincoln’s passion over the new techno-transport technologies led him to become a railroad lawyer. And his hero-worship of the Erie Canal’s main creator, New York Governor DeWitt Clinton, impelled Lincoln to try his hand at politics.

Was enthusiasm over canal building a crazy fever of irrational exuberance? Not exactly. The Erie Canal was a goose that laid golden eggs at a machine gun pace. From 1825 to 1883, the Erie Canal produced a profit of forty two million dollars—the equivalent of over a billion 2007 dollars. Dollars that fattened the treasury of New York State. And the Erie was just one of seventy nine canals in the USA. Yes, some canal firms like the Morris Canal and Banking Company in New Jersey failed. But in 1837, the profits from the technology of canal-building were just getting started.

Which brings us to the other supposed techno-“bubble” behind the Panic of 1837—railroads. The borrowing and investing in railroads was frenzied in the years before 1836. The dreams of railroad investors were huge. In England, super-engineer Isambard Brunel, newly hired as chief engineer of Britain’s brand new Great Western Railway, looked out over England’s mere nine hundred and fifty five miles of track and planned a railway system that would cover tens of thousands of miles. Brunel was convinced that railroad lines would reach all the way to North America. Was Brunel’s enthusiasm and that of the speculators behind him wrong? Yes and no. Railroad tracks would never stretch across the Atlantic from England to North America. But rail lines had by no means reached their peak in 1837. When the Panic of 1837 arrived and the “railroad bubble” was decried as an insane fantasy, there were less than two hundred miles of track in the United States. Over the next sixty years, the web of tracks would increase to two hundred thousand. And those tracks would make big money for those who stuck with them. Vast fortunes, in fact.

Nor had the canal technology come anywhere near a peak in 1837. Canal building would go on producing profit and bringing America together in unbelievable new ways until 1907, when the building of canals finally petered out. What’s more, canals and railways would be social transformers, making America an interknit nation of a kind the world had never seen before. The canal and the railroad would be engines of both exploration and consolidation. Engines of creation. And carvers of new social forms.

For example, the system of personal timing you and I use evolved because of railroads and telegraphs. When the transcontinental railroad and the transcontinental telegraph line connected me in New York to you in Seattle in the 1870s, I could contact you almost instantly. To coordinate our work and our schedules, we needed to formalize and synchronize our sense of time. And the railroads needed the same thing, a formal, coordinated time structure to schedule trains so they wouldn’t collide head on. Railroads also wanted to let you me know when to show up for an arrival or a departure. What’s more, if you were running one of the two great railroad-enabled wars—America’s Civil War or Europe’s Franco Prussian War of 1872—you needed measured and synchronized time to make sure your troops were coordinated. This wasn’t easy when a state like Illinois had twenty-seven time zones and Wisconsin thirty-eight.

How did we pull off this rearrangement of the very foundations of our day? We used a piece of European technology whose modern mass production was invented in Connecticut and Massachusetts—the inexpensive watch. We kept track of our time in hours and minutes measured by our pocket watch and learned to show up promptly at nine am for work and at eight pm for a late dinner engagement. In 1883, when railroads could no longer stand the confusion of hundreds of disjoined local times, they divided America into four time zones and presented the dithering government with a fait accompli. Those zones allowed us to have our own local noon when the sun reached its peak in the sky and our own local midnight when the darkness was at its height. Those zones also allowed us to synchronize our watches by a linked system of minutes and hours. Railroads and the telegraph pulled off a fundamental change in the hidden structure that patterns our thinking and lays out our day. Railroads and the telegraph pulled off a fundamental change in our scaffold of habit. But more on the scaffold of habit in a few minutes.

All of that was in the future in the panic of 1837. But only the visionaries saw it. Only the speculators nurtured these mad dreams. Which brings us back to Mr. Kondratiev. Peaking technology did not bring the Panic of 1837. But the Panic of 1837 was followed twenty years later by yet another crash blamed on overenthusiasm for railways and canals, the Panic of 1857. American Henry Carey Baird complained that, “our railroad system has cost more than $1,000,000 and has brought ruin upon nearly everyone connected with it, the nation included.” His gloom was misplaced. The world was yet to see just how gigantic the fortunes amassed in the railroad business could become. A mere thirteen years later, railroads would build the fortunes of fabled magnates like rail-maker and former railroad executive Andrew Carnegie, railway consolidator J.P. Morgan, and railway owner Commodore Vanderbilt. These men garnered some of the biggest treasure heaps ever piled up by human beings. And they pulled their profits from the creation of a transportation system that would knit together a continent. A transportation system that would give humans new comforts and new powers. A transportation system that was blamed for one bubble after another. A transportation system that exceeded even the wildest speculators’ dreams.

Excerpted from The Genius of the Beast by Howard Bloom. Copyright © Howard Bloom, 2011. All rights reserved.

Howard Bloom has been called “next in a lineage of seminal thinkers that includes Newton, Darwin, Einstein, [and] Freud” by Britain’s Channel4 TV, “the next Stephen Hawking” by Gear Magazine, and “The Buckminster Fuller and Arthur C. Clarke of the new millennium” by Buckminster Fuller’s archivist. Bloom is the author of The Lucifer Principle: A Scientific Expedition Into the Forces of History (“mesmerizing” – The Washington Post), Global Brain: The Evolution of Mass Mind from the Big Bang to the 21st Century (“reassuring and sobering” – The New Yorker), The Genius of the Beast: A Radical Re-Vision of Capitalism (“Impressive, stimulating, and tremendously enjoyable.” James Fallows, National Correspondent, The Atlantic), The God Problem: How A Godless Cosmos Creates (“Bloom’s argument will rock your world.” Barbara Ehrenreich), How I Accidentally Started the Sixties (“a monumental, epic, glorious literary achievement.” Timothy Leary), and The Muhammad Code: How a Desert Prophet Gave You ISIS, al Qaeda, and Boko Haram – or How Muhammad Invented Jihad (“a terrifying book… the best book I’ve read on Islam,” David Swindle, PJ Media).

Bloom explains that his field is “mass behaviour, from the mass behaviour of quarks to the mass behaviour of human beings.” That specialisation gives him a wide scope. His scientific work has been published in: arxiv.org, the leading pre-print site in advanced theoretical physics and mathematics; PhysicaPlus, another physics journal; Across Species Comparisons and Psychopathology; New Ideas in Psychology; The Journal of Space Philosophy; and in the book series: Research in Biopolitics. In 2005, Bloom lectured an international conference of quantum physicists in Moscow – Quantum Informatics 2006 – on why everything they know about Schrodinger’s Equation is wrong, and the concepts Bloom introduced were later used in a book proposing a new approach to quantum physics, Constructive Physics, by Moscow University’s Yuri Ozhigov.

Bloom’s second book Global Brain was the subject of an Office of the Secretary of Defense symposium in 2010, with participants from the State Department, the Energy Department, DARPA, IBM, and MIT. Bloom is founder and head of the Space Development Steering Committee, a group that includes astronauts Buzz Aldrin, Edgar Mitchell (the sixth man on the moon), and members from the National Science Foundation and NASA. He has debated one-on-one with senior officials from Egypt’s Muslim Brotherhood and Gaza’s Hamas on Iran’s global Arab-language Alalam TV News Network. He has also dissected headline issues on Saudi Arabia’s KSA2-TV and on Iran’s global English language Press-TV. And he has probed the untold story of the Syrian Civil War with Nancy Kissinger.

In addition, Bloom’s work has appeared in The Washington Post, The Wall Street Journal, Wired, Knight-Ridder Financial News Service, the Village Voice, and Cosmopolitan Magazine. He has appeared 199 times for up to five hours on 500 radio stations on the highest-rated overnight talk radio station in North America, Clear Channel’s Coast to Coast AM, discussing everything from the biome in the gut and the evolution of the stars to the mechanism of the Great Recession of 2008 and North Korea’s rocket programme.

Bloom has his own YouTube series, Howard the Humongous, which gets up to 790,000 views per installment. His website, howardbloom.net, has had between four and five million hits. Follow him on Twitter at @HowardxBloom.

The Genius of the Beast: A Radical Re-Vision of Capitalism
By Howard Bloom
Prometheus Books; Reprint edition (October 25, 2011)
ISBN-10: 1616144785
ISBN-13: 978-1616144784
$17.67

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