Thursday, September 17, 2009

"Too Big to Fail", "Too Big to take a Pay Cut"...

An article from the NYT, "Where Politics Don’t Belong" caused me to put my thoughts into this NaviMap. It discussed, "Too Big to Fail", i.e., Wall Street, and "Too Big to take a Pay Cut", i.e., the income of doctors.

If governments and here I am using the American one as the example, would to leave the markets to decide what is produced, sold then the government would be much smaller and has less to do. Since politicians need to win voters support, they must always find something to do to continue in office. This result in "more government" (box 1) which inevitably leads to messing with the functioning of the markets (box 2) so that the constituencies they they want to get support have an advantage over others (box 3). Note that this lead to a reinforcing loop.

Special interest influence the process of government for their benefit (box 4). The easiest is to provide money to help politicians win elections. Now another reinforcing loop, and this time between Box 3 and Box 4 enters the picture, which is the current state of affairs. Special interests have taken over the government.

Since no reinforcing loop can go on forever, the limits of growth eventually appears. This lead to Box 5 becoming critical, where  markets becomes increasingly distorted, inefficient and uncompetitive (box 6). Voters get fed up - this is the demoting influence of Box 6 on Box 3. If it hasn't happen already, it would as a matter of course.

Box 6 will compete with Box 4 for Box 3, but with Box 5 becoming more a reality, the underperforming economy eventually give Box 6 the upper hand and Box 4 is vanquished. This is all well and good except that I wonder if this can be achieved peacefully or if the economy could have deteriorated so badly by then for some nations that they just simply spiral down.

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