The notion of a fundamental "paradigm shift" came to wide public attention through an extremely influential book, The Structure of Scientific Revolutions (1962), by Thomas Kuhn. In his book, Kuhn argued that scientific revolutions are not produced simply by original ideas, tested through careful methodology, but by fundamental shifts in the way people think. So ingrained are the "paradigms," i.e. models, or mental fields, that control our thinking, that for the great majority, even scientists, it is all but impossible to see the world any other way. As Kuhn demonstrated, new scientific ideas, based on radically different paradigms, usually become accepted only when the older generation dies out, to be replaced by a younger generation whose thinking is less controlled by traditional mental constructs.
There has been much criticism of the President's economic policies, guided largely by an old guard whose ideas have also been fatally constricted, in a very similar way. While Timothy Geithner and the President himself represent a younger generation, they too have, at least so far, acted as though hopelessly in thrall to an outdated, indeed demonstrably flawed, paradigm.
As I've argued in some earlier posts, the difficulties of overcoming ingrained mental constructs should never be underestimated. In today's New York Times, we find an article implying that Geithner's ties to the Wall St. "old guard" have compromised his ability to adequately represent the interests of the US taxpayer. While there may certainly be some truth in this, the Times article distracts us from the principal problem facing both Geithner and his many critics alike. The frustrating but also fascinating fact is that none of the old paradigms, including the "lessons" apparently learned from Great Depression no. 1, can begin to prepare us for the radical nature of the new situation facing us today. It is therefore unfair to single out either Geithner or Obama for criticism when the vast majority of their critics remain in thrall to exactly the same paradigm.
What is this old paradigm? And what is the new paradigm that could deliver us from the ruins of the old one? In my view, the answer is relatively simple. It's also quite logical, if not perfectly obvious. But the problem with paradigm shifts has nothing to do with logic. And if it were a matter of what is obvious, then the old story of the Emperor's New Clothes would have little meaning for us.
Obviously, we have an intractable problem centered on the status of money, specifically money that has been loaned and cannot possibly be repaid. Obviously the solution is simply to cancel all the outstanding debts and start over. However, there is no way to do this without placing the entire monetary system of the entire world in jeopardy. What the old paradigm tells us is that the world's monetary system must at all costs be preserved, because, according to the old paradigm, the world's "economy" is based on that system. What any child can clearly see, however, ala the Emperor's New Clothes, is that money is not really a commodity, we can't eat it and it can't be used to make anything useful. If all the money in the world suddenly vanished, both on paper and electronically, every single thing we need to survive and even prosper would still be there. So the real problem before us is not the preservation of an outmoded and indeed harmful, if not perverse, system based on the virtual exchange of virtual units, a system so complex that only a few people with inside information can consistently profit from it, but the management of resources, commodities such as fuel, food, housing, communications systems, etc., in such a way that their production is not seriously interrupted and their distribution is fair and equable. While in the past the problems involved in managing a system of such enormous complexity might have seemed hopelessly impractical, the extraordinary development of computer-based technologies has completely changed that picture. It will be child's play for our high-tech wizards to reprogram their computers from the thankless, boring and pointless task of juggling virtual credit and debit accounts to the challenging, enormously meaningful, task of allocating the actual production and distribution of actual resources.
Will such a radical shift in the way things are done be likely to happen anytime soon? Sadly, this is highly unlikely. Because the paradigm shift entailed would be far too radical to gain anything like the broad acceptance that would be needed. The very real technical and planning problems would be overwhelmed by the far greater political problem entailed by a paradigm shift of such enormous magnitude. On the other hand, the events now dominating the financial world are in themselves so radical, that the system so many are now trying so hard to preserve may of its own self destructive momentum precipitate the new paradigm even before we are mentally and emotionally ready to either understand or accept it. Ultimately, we may have no choice.