The problem goes like this: Everything we know or we think we know is known through our sense. However, what we sense is not exactly something real, it is rather a set of electrical signals that travel through our brain based more or less on some external stimuli. Therefore what we believe we see, hear or feel is not necessary what exists in reality, it is rather what our brain makes of it. Thus, what we believe is reality is in fact what we imagine it to be. As a result, we never truly know “reality” and we cannot perceive the world with a 100% objectivity.

This creates a back-door in the way we conceive the world and ourselves through which it can be argued that in fact we do not know anything and the world is the illusion of the mind, a lucid dream. The only thing that remains certain in all this line of argument is “I think, therefore I am!”. This is because, in order for me to question things, I have to exist in the first place. The very fact that I can question my-self proves that something exists, that I exist (have no idea about the rest). I may not exist in the way I see myself, I may be a computer program, I may be an illusion, I may be a ghost, but regardless of this “I am” because I think of these things.

So what’s the point of all this? The point is exactly asking this question! In truth it does not really matter how or what we think of the world, because in the end we still have to do the same things in order to exist. One can try to challenge them, but may  very well end up losing the only  certainty that is known to him or her.

Regardless, this is not what I wanted to discuss. Rather the issue that I wanted to discuss is the lack of perspective in modern day people (in developed countries). By perspective I mean a wider conceptualisation of the world in terms of time. Most of us strive towards short-term benefits like having a nice car, a successful career, social recognition or in less fortunate cases, towards having cloths and food for the next few days. While for some this perspective exists because social and material constraints force the adoption of such a view, there is also a large number of people for whom poverty is no longer an issue and thus they can focus on more complex achievements. Unfortunately, a present-focused view of the world limits the scope of achievements to only those that can happen short-term, forgoing more complex ones that require more time and show benefits later in the future – in some cases well after we are dead. To present my dilemma more clearly: How many would be willing to dedicate their time for future achievements, thus sacrificing some of their well-being today so that future generations would enjoy a better life?

My guess is that very few.

It is as if almost everyone adopted the Keynesian view of “in the long run we are all dead”. The future no longer matters and it remains only in the dreams of Sci-Fi writers and movies.

But has it not occur to anyone that if we no longer care about our future, we may no longer have one?

Nowadays information, people, goods, ideas and money travel around the world at speeds unsurpassed in any previous age which in turn makes everything happen much faster, sometimes too fast for anyone to control. And when things get out of hand it takes either a miracle or a strong and competent leader to get them back on track. Unfortunately the world does not have such leaders, not at this time at least. Without such leaders the tasks falls on pretty much everybody to get things working again. It is our responsibility at this time to recognise the problems we face, to accept them as problems (even if they contradict are deepest believes) and try to find solutions to them.

In the worst case scenario, one my think that we live in a world where socialism has failed, capitalism has betrayed us, were tyranny still looms and democracy has become a shop in which we have to buy every few years a bunch a bad, expired products which we are forced to wear until the next shopping spree. But however depressing these times may seem it is important to remember that all we do and all we have matters only in relation to one another. We need one another even if it is to show off or brag, to humiliate or to help, to build monuments or make wars. Nothing makes sense in a world where each one of us would be alone. So as long as we exist as a society there is still hope.

“The emigration of Jews from the Soviet Union is not an objective of American foreign policy,” Mr. Kissinger said. “And if they put Jews into gas chambers in the Soviet Union, it is not an American concern. Maybe a humanitarian concern.”

“I know,” Nixon responded. “We can’t blow up the world because of it.”

Got to love these guys. For those that don’t know this: Henry Kissinger was also Jewish and his family (including him) ran away from Nazi Germany to the US in 1938 because of the persecutions.

As previously explained, the way society is built is not independent of human actions. In fact humans are very capable in shaping the way they construct their political and economic systems. The myriad of economic systems and political systems that exist today and have existed throughout history lay testimony to the various ways in which humans can organize and reorganize themselves. In this maze of different ways of doing things there is supposedly some underlying explanation to why a certain social or political model was adopted at a certain point in history and geographical space. The logic is that once there is a good understanding of the mechanisms that created this economic and political model, then it should be much easier to understand its problems and if possible improve it/ change it accordingly.

While the above logic stands in theory, in practice there is a major obstacle in applying it because there is a lack of consensus on the best way to explain human social organisation. Without such a consensus any attempt to build a social organisation is the result of intuition rather than of knowledge. It is like when a cathedral starts to show cracks, but instead of having a solution which can be determined through logic and knowledge, there are tens of different plausible explanations to why the cracks appeared in the first place. Each of these explanations also point towards different solutions. As those who need to fix the cracks have no choice but to pick one solution and as it is impossible to objectively be certain which solution is the correct one, then they have no choice but to rely on personal experience and intuition (one can call this ideology) rather than knowledge. Obviously this is a problem because the chosen solution is likely to be only a temporary fix, if any fix at all. This is why, before discussing how to build society there should be at least some general consensus on the basic forces and rules that govern society building, independent of human actions. This is not necessary a theory but rather a set of universal acceptable truths about human interaction and human nature.

Continuation in part iii….

Although this may not seem obvious for everyone, humans actually live in two worlds. One world is the physical world, the world were science originated from, the world of physics, chemistry, astronomy, computer science and the like. The world were the laws are natural laws, completely independent of humanity, and where in fact human existence is dependent on them. For example most of the goods consumed in society are the result of humanity’s understanding and usage of these laws.

The second world is the world of humans. It is a world made up of social constructions like economics, politics and law. A world which is not independent of human existence, in fact it is the creation of humanity. From governments to economic systems and laws, all are products of human endeavours and will always be created and recreated based on what humans see fit. Yet this is where the problem of science arises, because being a universally embraced method it is also used in order to find the fundamental laws that make the world of humanity work (social sciences). Yet, these laws are not natural laws, these are laws created by humans themselves and as history teaches us, they can always change. Applying science in the world of humanity to understand why things are the way they are, is as if a person keeps forgetting the reasons for his or hers decisions and keeps asking himself or herself “why did I do what I did”? By no means is the scientific method useless in humanities (social sciences) but the task it sets to achieve, that is finding an explanation to why things are the way they are, is simply never in reach. Even after decades of research there is little hope for one to find fundamental truths or a certain set of laws, like the laws of gravity in science, on which all social scientists agree. If this is the case, then it must be that something is missing…

It just might be the case that for understanding the human world, something slightly different than the scientific method is needed. Although it may use the same tools, like logical deduction and empirical testing, it may have to look at the world from a different perspective then to simply understand it,  possibility by adding a drop of creativity. The closest analogy to a proper human science can be found in architecture. Where if someone tries to use the scientific method to study for example all the cathedrals in the world, he or she will never find some fundamental law that explain their construction or the factors that determined  each one of them to be different from the other and even if it did, the answer will have little usability for the rest of the world besides being a simple curiosity. This is because the correct approach would be not to understand why cathedrals are made the way they are, but to see how cathedrals can be built, how can they be improved and how can the knowledge used in their construction help in other  architectural projects. The same applies in social sciences, where the goal is not to decipher why we do things the way we do, but how they should be done. How can we make a better constitution, a better economic system, a better international order?  The world of humanity is a construction and social sciences are the art of constructing this world.

http://www.indavideo.hu/video/HP-tilt/

This is for real

The issue

Since November last year (2008) exchange rates across Central and Eastern Europe have been plummeting at unexpected rates. Some have even reached lows that have last been experienced in 2003. Obviously the first suspect is the world financial crisis, but this is just a simple explanation that overlooks the deep roots of the problem and what its repercussions might be on the Western countries.

Why are the rates plummeting?

There are 3 main reasons:

1. Western banks and investment funds have been investing heavily in emerging markets. This is because, as these markets are on the rise and many of their assets are under valuated, there is a good chance they could make a nice profit while maintaining a relative low amount of risk. And one of the best emerging markets is or used to be the former communist states of Central and Eastern Europe.

This means that a lot of western cash (dollars, euros and pounds) have been poured into this region. And now, as things have gotten worse back home, Western investors need that money to plug the holes in their own back yard. As a result, investors are just selling off what they have in Eastern Europe and taking the money home. However, their money is not in their home currency (USD, EURO, GBP) it is mostly hold in the local currency. So as they sell the local currency (the currency of Central and East European countries) for dollars and euros, these local currencies start to devaluate.

2. Losing confidence (risk aversion) - as now investors have a hard time knowing where to put their money, the economies of Central and Eastern Europe seem less certain than those they have back home. After all, they should know more about what happens in their home countries rather than what happens in some country all the way across the sea. Also investors tend to trust more the governments of the rich developed world, believing they are better prepared in taking good decisions than those of less developed countries. This means that less dollars and euros are sent towards less developed regions like Eastern Europe. As a result, there is less demand for the local currencies. Thus, the local Central and East European currencies slowly start to devaluate.

3. Growing western deficits – As the trouble in US and Western Europe becomes increasingly more acute, their governments try desperately to salvage the economies. One of the most used methods is to basically inject money into the system, hoping it will somehow stimulate the economy and bring it out of recession. But the money must come from somewhere…

One solution is to print more money but this can very well just lead to inflation and in combination with the economic crisis it might just spell the apocalypse of the capitalist world. The only other solution is to barrow the money from … somewhere, usually from some banks and organisation specialised in lending to governments. Nonetheless, these organisations also need to get the money from somewhere and that somewhere is the rest of the world. Also the money needed must be in western currencies. That means dollars, euros and pounds because you cannot stimulate your economy by injection some other random currency, you need your own. One of the places where a lot of dollars and euros have been poured into is Central and Eastern Europe and now the West needs those dollars and euros to finance their deficits. As more and more government lending organisations try to buy the dollars and euros from Eastern Europe, the local currencies again start to devaluate as they are being sold for the western currencies.

The implications for US and Western Europe:

Now that things have been explained it remains to understand what this tells to the rich developed countries. Going back to the previous points there are two which need more careful attention. Firstly that dollars and euros are leaving Central and Eastern Europe in order to plug the holes of struggling Western financial institutions and secondly to finance Western government deficits. This is not a major issue as long as there still is an easy way to get the dollars and euros from “somewhere” without creating inflation. But what happens if the money runs out? Money is not infinite…

The basic problem is simple, as long as the West can gather money from Eastern Europe, in other words, as long as the currencies of this part of the world continue to devaluate there is still hope for a sound economic recovery of the rich Western world (they will have from where to get the money to support their economies). HOWEVER, if the West does not show any signs of recovery by the time the devaluation stops and the Central and East Europe currencies start to evaluate again, we can safely say that we are probably experiencing the end of a chapter in human history. Hopefully this will not happen.

Other information:

Central and Eastern Europe is not the only region experience currency devaluation; countries across the global are experiencing this. From Kazakhstan, Tajikistan to Philippines and South Korea currencies have been losing ground against the dollar and the euro. But Central and Eastern Europe has a much closer tie to Western Europe and the US, receiving more foreign investment and thus being a better representative case.

The amount of money being drawn out of Eastern Europe is impressive. In the case of Russia, in less than 6 months, $ 800 billion left the country as western investors were bailing out from the Moscow stock exchange and other short term investments, this was in November last year. It was the period when most stock exchanges in the less developed countries collapsed as Western investors virtually fled these countries. These were short terms investments but now we are looking at medium and long terms investments and deposits, once these are out, there is virtually nothing left.

The amount of public deficit ran in Western countries is breaking historic records. In US, in 2008 government deficit was about $ 450 billion (3.4% of the GDP) and for 2009 it is projected at almost $ 1,700 billion (more than 10% of the GDP). In UK it was 4.6 % GDP in 2008 and projected at 9 % of GDP in 2009.