Where the route to wealth is via exchange, members of society, especially the most talented and energetic, are motivated to produce more wealth in order to trade it for the wealth produced by others. Relationships tend to become mutually beneficial, overall wealth increases, and inventive ways are found to produce ever more of it. On the other hand, where the preferred route to wealth is command, outcomes are quite different, exchanges being less wealth for wealth than wealth for (as some waggish economists have put it) “illth” – or at least potential illth in the form of “offers that can’t be refused.” Wealth, if it grows at all, grows slowly, with innovation becoming more concentrated on how to extract and how to evade, than on how to produce. Society takes on a hierarchical and less mobile cast; more centered on birth and alliances among elites, less on creative ability; more status consciousness and less socially egalitarian.
This last circumstance is particularly worth stressing because of the social atmosphere it fosters. While power is always distributed unequally, the average individual has much more clout in exchange-centered (let us simply say “free”) than in extraction-centered (“unfree”) societies. Extraction is based on narrowly distributed skill sets, those of the warrior, courtier, and bureaucrat, who generally seek to, and usually succeed in, monopolizing their functions. Productivity, by contrast, may assume many forms, and individuals — both as producers and consumers — typically deal with vastly larger numbers of transactional partners through the marketplace than in the polity. Even compared to representative government, with regular, competitive balloting, the marketplace offers the average person far more choice, not just among a few promise-making candidates at widely spaced electoral intervals, but among numerous products and providers on a daily basis. The upshot is that in free societies the typical individual has more leverage and can demand more consideration than in those organized around command. Competition in productivity — however sharp its elbows may sometimes feel — tends to elevate the standing and dignity of the ordinary man and woman, enriching them as much in psychological as in material possession. In highly developed exchange societies the demos — consumerdom — may not be royalty, but it is catered to with deference by those eager for its custom (and votes). Customers may not be always right, but they’re nearly always flattered.
So, by what means might this special set of circumstances, those of our free civilization taken as a whole, provoke a bubble?
First, by encouraging those habituated to it thoughtlessly to universalize the peculiar aspects of their condition, imagining that they exist as humanity-wide constants rather than as socially exceptional contingencies — a natural tendency for those encased within a closed perceptual sphere. Specifically, it has the potential of leading to fundamental misapprehensions, an innocence one might say, about human nature and human action, dangerously overestimating their benignity and leading to excessive or misplaced trust. To translate this into bubble-talk: the difference between the “social pressure” inside and outside the bubble becomes too great.
Second, as with anything of long-standing, it can produce forgetfulness about the struggles that first called it into being, about the perils that attended its birth, and about the lessons these should leave. As with the preservation of all things hard-won vigilance is necessary. But with extended enjoyment an easy smugness may instead take hold, fostering frivolousness about what should be held dear and veiling threats toward which less favored ancestors would have been continually alert. To translate this into bubble-talk: the distance between the bubble’s point of origin and its circumference becomes too great.
Third, it spoils. Desires too regularly satisfied are desires likely to grow, a process that may carry them beyond what even the most cosseted optimism ought to think possible. Politicians with short time horizons and the ability to pass along, and thus hide, costs, are tempted to play upon such false hopes, bidding them ever upward. To translate into bubble-talk: the bubble’s surface becomes too insubstantial.
In each of these three cases, that which starts as solid fabric — real cultural and economic achievement — becomes progressively stretched and progressively frayed until its tensile strength is exceeded.
Now recall the circumstance of anomaly. The bigger the anomaly, the bigger an ensuing bubble is likely to be. The anomaly constituted by modern civilization is truly enormous. If modern civilization turns out to be a bubble the distance from its surface to its point of origin, that is to say the distance of its collapse, will be enormous as well. Once support is removed it’s going to be a long, long way down. Stock market and real estate bubbles are survivable because the collapses generally erase only a few years of accumulated value. Not so a plunge from where we now stand to the normal human condition. As with an airline cashing in mid-flight, not much may be left afterward.