Bayesian Cybernetics

The posthumous discovery of Thomas Bayes’s Essay towards Solving A Problem In The Doctrine Of Chances (1761), and its rigorous rule for the revision of probabilistic inferences in response to emerging evidence, brought risk analysis to a level of comprehensiveness that was fully epistemological, and thus no longer subordinate–even nominally– to higher-order determinations of knowledge. In Bayesian adaptive forecasting, a circuit was completed. Modernity had learnt how to think risk, and thinking risk had taught it how to learn. What it had learnt and what it had risked were no longer meaningfully distinguishable. It had realized integral cognitive hazard, or virtual intelligence catastrophe.

Land, Nick. “Odds and Ends: On Ultimate Risk.” Collapse VIII. Urbanomics (2014).

During the last 200 years the laws of probability, Arabic numbers, compound interest, and the limited liability company were successfully integrated into a distributed system of wagers that progressively took over the world. To truly bear witness the insanity of modernity is to get lost in an incomprehensible cyclone of complexity; most people are lulled into a sort of perpetual future-shock. It is hard to deny the brilliance of the minds that created those powerful engines that we use nearly every day to go to work, those flying marvels that take us from one side of the world to another with almost miraculous reliability, or the ability to be seen and heard nearly everywhere in the world by just clicking a few buttons. The system is based on an intrinsic reward to wagers, by definition risks must be compensated if they are to be taken. For centuries, what was once called the capitalist class used their wealth to undertake ventures, dramatically when it was close to running out, by investing in some offshore interest. And so, with the passing of time, nearly all of the world is in some way generating or prospecting for productivity, with all sorts of stakes attached to these. And as a greater and greater edifice is built upon these wagers, colossal against an increasingly unsympathetic planet, one can start to see it teetering like a tower that as a child one would build, swaying softly after the placement of the last block. It is not without reason that our ancestors feared change so much. And doubly so now, as we must not only navigate through change but also have our wagers succeed also.

What I want to highlight here is the following premise: “In Bayesian adaptive forecasting, a circuit was completed. Modernity had learnt how to think risk, and thinking risk had taught it how to learn.” In no time is this truer than today, where the machine learning revolution, as well as the increasing wealth of information that we are exposed to, has not only added a new dimension to the phenomena that can be studied–economically, sociologically and psychologically–but, crucially, an impulse to progressively integrate these horizontal extension of measurement-of-everything into our objectivity. As we transition to a post-structural world and ever greater parts of our identity are digitized (more precisely, those that can be measured), we too wager the that the very things we measure are forever changed through measurement and the feedback we direct through and by these measures. The Bayesian notion of updating priors to update expectations continuously with the arrival of new data insinuates a feedback cycle that perpetuates measurement and prediction that in itself resists objective delineation, never mind understanding. This incredible tool gets sharper each time you use it, and if you’re competing with others, you have every incentive to use it as much as possible. If modernity is truly defined as a risky wager then in assuming this risk we must really evaluate emergent risks that arise through the systemic undertaking of risk itself. The calculation of risk, as a cultural innovation whose real coherence is expressed as an emergent being, or developing global system, is unable to step outside itself, in order to submit to an objective self-estimation. More concretely, systems that we cannot understand cannot be measured. The unknown unknown is not the consequence of a single wager–which unless measured and deemed correspondingly rewarding is not taken–but the joint emergence of a system-of-wagers and the risk that pertains to itself, which is unmeasurable and unknowable.

Book Review: Spaces of Global Capitalism

As alluded to by Zizek in his debate with Jordan Peterson, David Harvey’s flavor of Marxism is one that is rigorously backed by sound economic analysis in urbanization dynamics, particularly the role of the city as nexus for economic forces and the outcomes of suburbanism, gentrification, etc. My interest in other theorizers of the city, like Lewis Mumford, brought me towards this book. However, this book is not about cities. This is a book about the notions of space under which modern neoliberalism supports and satisfies capitalism.

Key notions that are introduced are the means by which neoliberal projects, too radical for domestic politics, are exported to third world countries in the interest of “peace, democracy, development”, satisfied by the privatization, free trade and the free market. These maxims, although consistent with the monetarist political theories popularized by Milton Friedman and proselytized by the “Chicago boys”, failed to materialize their goals, and instead seem to be pursued solely for elite interests.

Looking particularly at the era of 1970s, which was haunted by inflation and unemployment, a series of policies were pursued in what is interpreted by Harvey as a consolidation of power towards elite hands being the defining narrative of our current era, the answer to “what happened during the 1970s?” that we debate at length. Although I am sympathetic to austrian perspectives regarding the monetary consequences of Nixon closing the gold window, I believe a more nuanced perspective of this era is necessary to properly isolate the forces at work behind the great stagnation.

I believe the key that Harvey lays out is this idea of accumulation by dispossession, which is contrasted to “accumulation through the expansion of wage labor and productivity in industry and agriculture, which dominated processes of capital accumulation in the 1950s and 1960s. Dispossession, on the other hand, is fragmented and particular–a privatization here, and environmental degradation there, a financial crisis of indebtedness somewhere else.” Herein I target my own version of the critique, which is that the nature of this distributed system of dispossession and perpetuation of class differences is nebulous by design, and that only by properly describing the behaviors and intensities of these forces can we understand our present condition: stagnant, overburdened by debt, monotonically rising inequality. Let’s then begin where Harvey begins, with the closure of the 70s:

“In October of 1979, Paul Volcker, Chairman of the US Federal Reserve Bank, engineered a draconian shift in US monetary policy. The long-stranding commitment in the US to the principles of the New Deal, which meant broadly Keynesian fiscal and monetary policies with full employment as the key objective, was abandoned in favor of a policy designed to quell inflation no matter what the consequences might be for employment or, for that matter, for the economies of countries (such as Mexico or Brazil) that were highly dependent upon economic conditions and sensitive to interest rate shifts in the US.

The real rate of interest, that had often been negative during the double-digit inflationary surge of the 1970s, was rendered positive by fiat of the Federal Reserve. The nominal rate of interest was raised overnight (the move came to be known as the ‘Saturday night special’) to close to 20 percent, deliberately plunging the US, and much of the rest of the world, into recession and unemployment. This shift, it was argued, was the only way out of the grumbling crisis of stagflation that had characterized the US and much of the global economy throughout the 1970s.”

What interests Harvey most about this movement is not the consequences of this policy at home, which favored debt-owners and thus the financial elite, and were broadly observed as “deregulation, tax cuts, budget cuts, and attacks upon trade union and professional power,” but mainly the consequences that were externalized to codependent countries like Mexico and Brazil. These policies, exemplified by the refusal to back down to PATCO air traffic controller union strike, proved to be actively hostile towards the middle classes as well as lower classes, surprisingly, since PATCO was a white-collar union and an icon of the middle class.

But where Harveys analysis is most interesting to me, and sadly where I feel more detail is necessary, is at the global level for the consequences of these actions. In the wake of the oil crisis, product of the 1973 oil embargo, vast amounts of capital flowed towards oil producers in OPEC, Saudi Arabia, Kuwait, Abu Dhabi. Through threats of invasion and other means of coercion, the US had the Saudi’s agree to channel all their petrodollars through New York investment bank infrastructures, which created a “search for yield” in the historical low interest rates of the mid-70s (conditions mirrored in today’s world), which forced these banks to find new territories on which to invest and speculate. The search for yield needed to satisfy two conditions for the profits to be secure to US interests. First, investment opportunities had to be made available by tearing down barriers to foreign investment. Second, the security of these investments was to be guaranteed, most critically the risk of nationalization, for these were critical material resources (oil, minerals, agricultural goods), as well as capital-intensive industries, such as telecom.

The logic of this coercive project is, of course, fraught with parallels to colonialism, and yet again this is regrettably not the focus of the book. However, a historical sketch depicts the most flagrant instances of this practice, taking Pinochet’s 1973 coup in Chile, Mexico’s 1982-4 default, and in Nicaragua during the 40s and 50s. Mexico’s case is of particular interest, as it most exemplifies the logic of “accumulation through dispossession” that Harvey points out. In an initial stage, these investment banks take dollars that are a result of low interest rate regime as well as coercive channeling of petrodollar money and start to offer dollar-denominated debt to foreign governments.

Upon becoming indebted to US banks with debt denominated in US dollars, these governments became sensitive to changes in US interest rates. It is for this reason that, following the Volcker shock of 1979, Mexico fell into distress and eventual default. Harvey cites Wade and Venenoso when they write about the 1997 Asian currency crisis, but is similarly applicable to the conditions orchestrated in Mexico, “Financial crises have always caused transfers of ownership and power to those who keep their own assets intact and who are in a position to create credit, and the Asian crisis is no exception … there is no doubt that Western and Japanese corporations are the big winners … The combination of massive devaluations, IMF-pushed financial liberalization, and IMF facilitated recovery may even precipitate the biggest peacetime transfer of assets from domestic to foreign owners in the past fifty years anywhere in the world, dwarfing the transfers from domestic to US owners in Latin America in the 1980s or in Mexico after 1994. One recalls the statement attributed to Andrew Mellon: ‘In a depression assets return to their rightful owners.'”

These are the austerity measures that today are most apparent in troubled countries like Greece, Argentina, Turkey, etc, and consist of “cuts in welfare expenditure, relaxed labor laws, union busting, and privatization.” These of course make the country more attractive as pools of exploitable labor for US investment, and make the country compete in a logic of zero-sum extractive, cost-differentiation strategy, which is basically a race to the bottom, as it disincentivizes value-added industries from flourishing, as well as draining or destroying natural resources of these countries without benefiting local interests.

Harvey writes about the ejidos, a system of communal land ownership that was fundamental to Mexican agriculture, and how “the privatization of the ejidos in Mexico became a central component of the neo-liberal program set up during the 1990s … [forced] many rural dwellers off the land and into the cities in search of employment.” Furthermore, the creation of bankruptcy and distressed condition of company interests make these investments even more compelling to US interests, which have priority access to make these investments.

It is again disappointing that Harvey does not further expand on this thesis, as I find it very interesting, but perhaps other sources cited by Harvey, such as Dumenil and Levy, do a better job. He acknowledges their perspective, although distances himself from their more radical conclusion: “Dumenil and Levy go so far as to argue that neoliberalism was from the very beginning a project to achieve the restoration of class power to the richest strata in the population. Commenting on how the top one percent of income earners in the US fared, they write: ‘Before World War II, these households received about 16 percent of total income. This percentage fell rapidly during the war and, in the 1960s, it had been reduced to 8 percent, a plateau which was maintained during three decades. In the mid 1980s, it soared suddenly and by the end of the century it reached 15 percent.’ Other data show that the top 0.1 percent of income earners increased their share of the national income from 2 percent in 1978 to over 6 percent in 1999.” Today we know these trends have only exacerbated in the years since this analysis was performed, so the question of whether these movements should be identified as malicious class conflict remains critical.

The operative logic of neoliberal accumulation is described: the confluence of private and government interests, the public bearing of risk and reaping of profit by private sector. The preeminence of economic interests, particularly in places where laws are little or loose and nothing stands in the way of capital. Although familiar, Harvey poignantly : “externally, neo-liberal states seek the reduction of barriers to movement of capital across borders and the opening of markets (for both commodities and money capital) to global forces of capital accumulation, sometimes competitive and more often monopolistic. The powers of international competition and the ideology of globalization are used to discipline internal opposition at the same time as new terrains for highly profitable and in some instances neo-colonial capitalistic activity are opened up abroad.”

Other relevant characteristics such as: “governance by elites is favored and a strong preference for government by executive order”, and use of institutions such as IMF and World Bank outside of democratic influence. Although these conditions are today taken for granted, Harvey details the ways in which skepticism of this economic orthodoxy still prevailed in the 1980s: “in spite of all the rhetoric about curing sick economies, neither Britain nor the US achieved high levels of economic performance in the 1980s […] The 1980s in fact belonged to Japan, the East Asian ‘tiger’ economies and West Germany as powerhouses of the global economy […] To be sure, in both Japan and West Germany, the central banks generally followed a monetarist line (the West Germany Bundesbank was particularly assiduous in combating inflation). But in West Germany the unions remained very strong and wage levels relatively high […] In Japan, independent unions were weak or non-existent, but state investment in technology and organizational change and the tight relationship between corporations and financial institutions (an arrangement that also proved felicitous in West Germany) generated an astonishing export-led growth performance […] By the end of the decade those countries which had taken the stronger neo-liberal path still seemed to be in economic difficulty. It was hard not to conclude that the West German and Japanese ‘regimes’ of accumulation were deserving of emulation. Many European states therefore resisted neo-liberal reforms and increasingly found ways to preserve much of their social democratic heritage while moving, in some cases fairly successfully, towards the West German model.” Here this line of thought is very interest, and is in line with Robert Gilpin’s Global Political Economy, in which he broadly categorizes the main political-economic forces into American, German, and Japanese flavors. However, the notion of these ideologies competing is not thoroughly developed in this book, nor do I think it is the main point. Nonetheless, an interesting line of thought, and one that is consistent with other work that I’ve read. Especially interesting because Harvey believes that the reason that the American model was ultimately successful, the neo-liberal model, was because from the standpoint of the elite class this was the most effective way to help them restore and accumulate their power.

In his critique of this system as a means of accumulation through dispossession, he relies on Dumenil and Levy, as previously alluded to, but also Brenner, Gowan, and Pollin. These thus stand out as places to learn more about the things that interest me most about this book, the gory details. Although these deserve separate lines of inquiry, three main arguments are of critical importance in Harvey’s analysis. The first is the financialization of the economy in the course of the last 50 years, with distinct waves of innovation in financial instruments, as well as deregulation and a preponderance of financial companies as the drivers of economic growth. This is tied in his view to the rise of foreign direct investment (FDI) and the integration of previously disjointed markets, such as Germany and Japan, into the global financial fabric that US interests located about New York City. Secondly, the alliance between Wall Street, the IMF and the US Treasury, which is previously alluded to, become an important political driver during the Clinton presidency, which consolidated these institutions and their political economics as the new orthodoxy around the globe. It was in particular effective at persuading emerging markets to open up to foreign capital, with preferential treatment to for US capital and consumer market. This is not, however, the type of victory that is clearly worthy of emulation, as Harvey qualifies the high growth of the 1990s as unsatisfactory, given wages grew so little during this period. Finally, he postulates that this decisively “eradicated” Keynesian economics from corridors such as the IMF and the World Bank and, by the end of the millenium, most economic departments too.

This is all an interesting narrative, but it is one that is spoken in a way that I find very interesting, particularly with how it resonates with other modes of capitalist exploitation that I have been developing separately, and which were greatly informed by this book. Have you ever searched for months for a way of describing some crazy idea, only to find a book that approximates it a few months later? It is a great feeling. Just a few months before I had been working on an essay detailing a distributed system of coercive extraction, not one where one particular country clearly benefits, as in colonialism of old, but where the structure that delineates economic competition is itself the constraining element that creates political expediency towards the allineation of countries into a cohesive trade structure. Harvey says “the development of neo-liberalism must be regarded as a decentered and unstable evolutionary process characterized by uneven geographical developments and strong competitive pressures between a variety of dynamic centers of political-economic power.”

What I want to highlight is that it is part of the nature of this system, its main feature perhaps, that not one country can be singled out as responsible, as an oppressor, as guilty of a crime that by logic of economic orthodoxy does not exist. There is no grand plan, isn’t that a post-modern beauty? Instead of the hegemonic powers that we dealt with in yesteryear’s colonial history, today we deal with institutions like the World Bank, the IMF and the WTO, which are ostensibly independent but in practice pliable under US pressure, allows these interests to manage the rest of the world under the cover of plausible deniability. Instead, in this regime we see a new, distributed layer that fills the void of the omnipotent state: NGOs, think tanks, consultancy firms, investment banks.

In Harvey’s view, the deification of human rights as intransigent laws of nature is a political project meant to satisfy primarily the economic rights of man, and exclude those that cannot be formulated consistently under the guise of an individualist worldview. “The rise of advocacy groups and NGOs has, like rights discourses more generally, accompanied the neo-liberal turn and increased spectacularly since 1980s or so … NGOs function as ‘trojan horses for global neoliberalism.’ Furthermore, they are not democratic institutions. They tend to be elitist, unaccountable, and by definition distant from those they seek to protect or help, no matter how well-meaning they may be … Chandler reports, a prominent journal such as Foreign Affairs, carried not a single article on human rights [before the 1980s]. Human rights issues came to prominence after 1980 and positively boomed after the events in Tiananmen Square and the end of the Cold War in 1989 … Law replaces politics ‘as the vehicle for articulating needs in the public setting.’ It is, Chandler concludes, ‘the liberal elite’s disillusionment with ordinary people and the political process (that) leads them to focus more on the empowered individual, taking their case to the judge who will listen and decide.'” And yet who does the judge serve but precisely those interest and advocacy groups with the money and contacts to succeed in litigious activities. It may seem noble to support human rights, but the conditions under which these rights are exercised–that is, the conditions under which state actors are roused to respond to claims of human rights violations–are those most likely to be in their interest, while in the courts of justice the group with the greatest and richest supporter is likeliest to be satisfied. As Marx said, “between two rights force decides.” This is in an environment where the progressives were successfully “persuaded that class was a meaningless category”, and where instead categories that do not challenge business interest, or in cases which directly support them, become new obsessions.

To conclude this review, I would like to say that in spite of the 3/5 stars that I am awarding this book, I think that it is very important and worth reading, at least for those interested in the themes that I allude to in this article. Although I am left with more question than answers when I started this reading, I am sent in a direction that has been thoroughly transited by the work and literature that Harvey builds upon. Particularly, in respect of my other projects on the question of modern systems of control, I am still undecided and need more time to make my mind, but again this is a good direction, and a satisfying work from an interesting thinker. I look forward to read more of his work on city development, as well as the authors cited, particularly Venenoso (fantastic name), Dumenil and Levy.