The Fourth Flourishing

 

Few things are as offensive as the religious giddiness associated with prosperity, especially among the Trumpists. But when you consider the life-or-death circumstances of economics, the connection is psychologically and emotionally necessary. Or so I tell myself when I try to be objective.

Starting with the first civilizations, Egypt began as a command economy presided over by a sacral king. Mesopotamian Civilization was under the control of a priesthood. The "megamachine" that (unromantically) makes the civilization go may be called a surplus-accumulating wealth-creating instrumentality. This can be shortened to surplus-creating because it adds to the real wealth available. When it works tolerably well, the surplus increases. The condition of workability is the reinvestment of part of this surplus into improved productive apparatus, whether organizations or tools like hoes and watergates.

Such an instrumentality is an essential part of a civilization. There is always a main one, but there's no need for it to be the only one. In all civilizations there are other, less significant instrumentalities which accumulated surpluses and invested them for expansion. Besides the Sumerian priesthood, private persons were accumulating from the profits of their enterprises or from the profits of privately-owned slaves or even from voluntary restrictions on their own consumption. These kinds of surplus accumulations may be found in any civilization regardless of the preponderance of its "own" instrumentality. The variant and incidental instrumentalities are of little significance. We do not know of any civilization, in its prime of life, that has ha more than one significant surplus-creating organization.

An economic system does not have to be expansive - that is, constantly increasing its creation of real wealth - and it might be possible for people to be happy in a steady-state economy if they are used to it. Usually, however, people live under expansive conditions for generations. Their minds are psychologically adjusted to expansion, and they feel deeply frustrated unless they are better off each year than they were the previous year.

Investment is an essential part of the system, and if investment falls off, consumers have insufficient incomes to buy the consumers' goods that are being produced by another part of the system because part of the flow of purchasing power or revenue stream generated by the production of goods was diverted from purchasing the goods into savings, and all the goods produced could not be sold until those savings reappeared in the market by being invested. In the system as a whole (I'm a holist in this sense) everyone sought to improve their own position in the short run, but this jeopardized the functioning of the system in the long run. The contrast isn't merely between the individual and the system, but between the long run and the short run.

Economic progress requires three factors: innovation, savings, and investment. Economic progress has always involved shifts in productive resources from old methods to new one. Resistance to such shifts causes turmoil on the scale of hundred years' wars which have marked the major transitions from one system to another. Vested interests are in a position to defend their interests and preventing progress merely by refusing to use the surpluses in their control to finance innovations. This causes an Epochal Crisis.

Western Civilization is the richest and most powerful social organization created by the human race. One reason for this success has been its economic cycles, consisting of a series of Epochal Crises and Renewals (either by reform, but usually by making an end-run around the obstructive vested interest controlling the old sclerosing instrumentality).

Each stage created the conditions for the emergence of the next one. Feudalism sclerotized into "chevaliarism" under which rubric they fought over the scraps of the dying system. Sometimes these now-ignoble knights bullied or oppressed the very merchants whom their demand for luxury goods had brought into being. These merchants were the agents of the next stage: commercial capitalism. When the unforeseen consequences of the law of supply and demand worked against the merchants, they sclerotized their system into mercantilism. In the meantime, however, the mercantile profits and widening markets created a demand for humbler goods best produced by the application of inanimate power to fabrication. This led to the third stage: industrial capitalism. This new mode of wealth-creation soon gave rise to an insatiable demand for investment money. To meet this demand, financial capitalism provided organizations and services such as the LLC and the investment bank. These eventually gained control of the industrial system as a whole. This would have culminated in monopoly capitalism except for the process being interrupted by our variant of the third hundred years' war, the two engagements of the World War with an Epochal Crisis wedged in between them known as the Great Depression.

The New Deal made possible an economy not dominated by any specialization controlling the economy as a whole. This was a plural or mosaic economy. The structure of this new system was entirely different from that which existed in the period of financial capitalism before 1929.

In that earlier period the two major differences were that the whole economic system was dominated by bankers and financiers, especially investment bankers; and as a result, the system had a financial mechanism that was basically deflationary because the volume of money was determined by the limited supply of gold. As a consequence of the first feature (or bug??) power and prestige began with the financiers and passed to heavy industry and then to light industry and commerce, after which they were diffused among farmers, laborers, bureaucrats, service workers and petty bourgeois clerks.

As a result of the Great Depression, finance was reduced to a subordinate role and a struggle arose about the arrangement of the other blocs. In fascist countries industry, commerce, and p'tit-boos, by abolishing any forms of political democracy, sought to establish authoritarian regimes in which industry with its allies could exploit the farmers, laborers, and consumers in general in favor of producers. In Keynesian countries this didn't happen; instead labor, agriculture, commercial groups, and to some extent consumers were strengthened and all groups (including demoted finance) became satellites around the government. The control of the money supply, which had been one of the main attributes of the banking bloc before 1929, became an attribute of the government after 1945, and the government exercised its control under pressure from the shifting alliances among the great economic blocs around it. These blocs came to include finance, heavy industry, light industry, commercial and service associations like real estate, labor, agriculture, transportation, and so on. If any one or several of these blocs became too obviously exploitative of the others, the others would form a coalition to pressure the government in their direction. The algebraic resultant of these pressures was to increase government spending, and therefore inflation.

In general all these pressures (er, lobbying) sought to redistribute economic resources among the three main claimants on these resources, these three being consumption, capital accumulation, and government services (including defense). Under finance capitalism before 1929, the risk had been the great diversion of resources toward capital accumulation and away from the other two. In the mosaic system the risk was toward rising consumption at the expense of capital accumulation and public services. This risk often appeared as a tendency toward inflation that would threaten capital accumulation by eroding savings.

In 1975 there came a knight to the rescue. a tetraploid giant called neoliberalism. It reared a fine mansion on rotten foundations; the obsolete people, angered, worked to undermine it. Suddenly the edifice sagged sharply to the right. A mass of rubble went thundering down the hillside into the valley. The failure of the foundations cut the power-line.

I call it, after Asimov, Reaction and Empire. The hillside is about to give way completely, and logs, bricks, fire, future, past, plaster, dirt, concrete, pipes, wires, life, liberty, pursuit and happiness are about to slide in one big untidy chaos toward the pine-needle floor of the valley, just ahead of the sun's fingertips reaching through the innocent pink clouds.

The devil came to college. That's how I learned about banks creating money. Instead of foaming at the mouth and demanding that we go back to gold (p'tit-boo p'tit-boo harelip harelip!) I learned how England defeated Bonny.

𝘞𝘩𝘺 𝘔𝘪𝘯𝘴𝘬𝘺 𝘔𝘢𝘵𝘵𝘦𝘳𝘴 by L. Randall Wray is being recommended — especially its "Money and Banking" chapter — as a key resource for understanding how banks actually lend money. The endorsement comes from economist Stephanie Kelton, who emphasizes that many conventional ideas about liquidity and banking are misleading or irrelevant.

The book challenges traditional views by explaining that banks don’t lend out pre-existing deposits. Instead, they create new money when issuing loans — a concept that’s counterintuitive but central to modern monetary theory (MMT).

Readers are encouraged to reread the chapter until it “makes sense,” suggesting that Minsky’s framework requires a shift in mental models about finance.

The book aligns with ideas promoted by Kelton and others in the MMT community — such as the notion that government doesn’t need to “borrow” money because it creates it.

Hyman Minsky’s work, as interpreted by Wray, offers a lens to decode the real-world operations of banking and finance — especially in times of instability. It’s not just about theory; it’s about seeing through the fog of outdated economic assumptions.

That’s precisely one of the core provocations of Modern Monetary Theory (MMT): to consciously harness what was once an emergent, incidental feature of the credit economy—namely, the endogenous creation of money by banks and governments—as a tool for deliberate macroeconomic stewardship.

Historically, the credit economy evolved with banks creating money through lending, and governments issuing currency to fund war (like the last engagement of the Second Hundred Years' War started by the Last Mercantilist) or infrastructure (like railroads). These actions were often reactive, pragmatic, and cloaked in myths of gold standards or balanced budgets. MMT reframes this:

Bank lending isn't a recycling of deposits, but a generative act—banks create new money when they lend. Government spending isn't constrained by revenue, but enabled by its sovereign capacity to issue currency.

MMT says: "Let’s stop pretending these are accidents or exceptions. Let’s design policy around what actually happens."

Conscious Availment Means:

Fiscal Policy as Primary Tool: Instead of relying on central banks to tweak interest rates, MMT advocates using government spending directly to achieve full employment and price stability. Deficits aren’t inherently bad — they’re the mirror of private sector surpluses. The question becomes: "What are we deficit-spending for?"

Demystifying Grotian Sovereignty: A currency-issuing government doesn’t “run out” of money. The constraint is real resources, not accounting balances. The ideal is to use the claims on resources (money) to mobilize these resources in innovative ways, to make the most of them by doing more with the same or less. The brainless option is to reach beyond the borders of the nation-state to grab more from its neighbors (zero-sum) instead of what Arnold Toynbee said that Solon had done, which he called "intensive development." Pericles made the tragic error of extending the sclerosing institutions over a larger region to increase the resource base of Athens. This means the use of military force (which is both a feature of Grotian sovereignty and my modified Maslow hierarchy, only this time it is wrongly vested in seizure and theft to keep the status quo propped up. This is the "ultima ratio imperii" phase of a civilization which is trying to avert decline but is paradoxically only accelerating it.

If classical economics treated money creation as a hidden ritual behind the temple curtain, MMT throws open the veil and invites society to participate in the rite. It’s a shift from accidental alchemy to intentional conjuring — a civic invocation of value, directed toward collective flourishing.

Once again, dirty rotten scoundrels have set the stage for their own exit.