How do you fix an economic crisis? It’s an interesting question. On its face, it seems like the thing we need to leave to seasoned economists, shrewd businesspeople and well-studied policymakers. Surely the advice of the IMF and the World Bank have guided many a country out of crisis, business-led decisionmaking has provided efficient outcomes, and state policies prioritise the needs of their people in hard times.
But putting “fiscal responsibility” and “sound monetary policy” aside, there’s a deeper question to be asked here, one which goes beyond the immediate context within which the term “economic crisis” could occur. Whether one calls it a boom-and-bust cycle like a Keynesian or endemic crises like a Marxist, such events are far from odd hiccups in our lives- they have become commonplace features. This makes a person wonder: what is the issue here? That is: what is this kind of crisis, beyond the system we live in? If we simply accept the basics of our system and understand the crisis of the “economy” from within it, then solutions which point us out of the system we live in, even if only partially, will have a hard time even making it onto the agenda. Instead, understanding what an economic crisis is independent of the immediate economy at hand can help us understand not just how we can return to “normal”, but how the “normal” is linked to the occurrence of crises- and how it might need to change.
Let’s take some examples from history, then- no better way to understand what lies beyond our own experience, after all, than looking to the experiences of other times and places. But instead of looking for economic crises that look more like ours, seeking out the much sparser monetary economies and rarer financial instruments of the past, perhaps it would be better to compare our struggles on the level we experience them– that is, systemically.
One example is the history of the Ottoman Empire. Heir to the Turco-Mongol, Islamicate and Roman imperial traditions, the popular image of the empire is as having a meteoric “classical” period where it conquered lands around the Black Sea, Aegean and Mediterranean; a “stagnation” period, where conquests slowed to a halt and internal systems began a period of “corruption”; and a period of decline, where challenges from the West surpassed the empire’s abilities, and both internal and external forces pulled it apart. This is a paradigm that’s been steadily challenged in the past few decades, so much so that the word “decline” is more often used with scare-quotes than as is.
The most convincing and interesting treatment of this scepticism I’ve come across so far is Baki Tezcan’s “The Second Ottoman Empire”, that argues we need to see the Ottomans beyond the 17th century as not a declining or stagnating stage of a once-great empire, but as a whole new imperial project- one of limited, perhaps even constitutional monarchy, with a more solid sense of the independent rule of law (though still bound to religious authority). For Tezcan, the Ottoman institutions didn’t fall apart in the 17th century onwards- they changed to match the needs and capabilities of a different kind of empire- a “second” Ottoman Empire.
A similar shift can be seen in the latter centuries of the Roman Empire. What was in its earlier years an empire of conquest, taking lands with Roman armies to distribute them to these citizen soldiers, developed in later years to a system of devolved administration with provincial and auxiliary troops making up large parts of the army. Where once Caesar’s conquests and Trajan’s Dacian Wars conquered valuable lands to be brought into the empire, later centuries saw the empire split, reunited, reconstituted, looted, decentralised. Certainly, one way to understand it would be as a decline.
But in both of these cases, another thing to understand is what kept the empires in their “rise” running. Certainly this is a very deep question, and there are a near infinite number of factors involved- but looking from a systemic, “political economy” angle, it was conquest. The Ottomans in the years before the great consolidation under Sultan Mehmed the Conqueror depended on Turkic tribes placed on the frontiers pillaging, conquering, and settling bordering lands. In later years, the conquest of new lands and distribution of tax income as they were integrated into the Ottoman economy was a vital part of keeping those with power invested in the system as a whole. Similarly, the Roman Empire as well promised land and/or cash payments to their legionaries at the end of their service, meaning the growth and loyalty of the military was made possible by the conquest of new and distributable land.
The “natural limits” of empires put to one side, it’s important to consider the economy of such rewards as well. In a world of chaos and disruption, to own land and control soldiers is perhaps the most valuable privileges of all. Particularly in premodern societies, land would be the primary means of production, while the soldiery under one’s command would allow for the enforcement of one’s ownership or privileges over that production. But in a wide-ranging and secure empire, direct ownership of unworked land and patrimonial claim over a portion of the soldiery means less where trade, manufacturing and a monetised economy are possible. We see this in the Ottoman Empire, where many of the “elite” janissary troops even in the 17th century preferred to invest in craftsmanship and were often absent from battle. The “rewards” of being a brave soldier were nothing in comparison to the rewards that could be reaped by leveraging the janissary status to invest in business. Similarly in the Roman Empire, the prior pressure to expand to gain more land for cultivation waned as the Roman elite combined the smaller farms into grand latifundia, working less off of raw land area and more on economies of scale enabled by consolidated ownership. This concentration of wealth and the trade and investment it enabled transformed the Roman economy as well.
What I am trying to point to with all of this is that while the heroic stories and big personalities of eras of expansion attract those with an eye for history to yearn for such days, in some ways the success of such days creates the derivative systems that succeed them. For the Ottomans and the Romans, success in conquest of new lands for cultivation, integration and finally coordination meant that eventually each plot of land had more value as a part of a network than it had in its individual raw production- which, as a result, shifted political pressure from the conquest of “fresh” new lands towards the struggle over the “worked” land. The Ottomans, for example, abandoned an attempt to link the Don and Volga in the 16th century to take Astrakhan from the expanding Russians, in part due to viziers in the capital seeing it as an unnecessary and “inconclusive adventure”.
What this should show us is that while the means by which economic “value” is created and distributed are vastly different in our modern times, there is still a significant difference between direct and derivative value, a difference that the complexity of our system places differential weight on. In other words, we need to understand that the difference between expansion and consolidation is not based simply on individual choice and character, but more on the pressures the system exerts.
Let’s put it more bluntly with an example. Some of the wealthiest people in the late 19th and early 20th century West, and in this way some of the wealthiest people in the world overall, were the notorious businessmen who were greatly influential in the establishment of the modern industrial sectors which form the backbone of developed economies today. The Henry Fords, Andrew Carnegies, John Rockefellers and others are figures that still hold an aura of unstoppable will- they are called captains, titans, or barons of industry by many still. By others they are known as “robber barons”, co-opting and conquering smaller businesses and communities to consolidate them in their business empires. Many of these figures were also, of course, involved in the actual business of empire, working closely with the states they emerged from to leverage military power where they needed it.
Looking at a list of the wealthiest people in the world now, one can’t help but feel underwhelmed in comparison, even if they disapprove of the robber barons. Amazon, Facebook, Tesla and Google seem, and indeed arguably are, far more derivative and intangible in their establishment and in their purported value than things like Ford Motors, Standard Oil or Carnegie Steel Company. To say that Tesla is the automobile company is so incongruent with the experience of any regular individual- and really the statement is true, as ingenious use of tax credits and rapid fluctuation of stock in a speculative market account for a lot of its profitability over the years, as the company has neither delivered on many of its promised innovations nor delivered anywhere near the number of actual cars as companies it supposedly dwarfs in valuation. Another of the highest-valued companies in the world, Apple, deals almost exclusively in consumer products- meaning that its direct contribution to the furthering of industry is minimal, and it instead drives production only insofar as it produces (in other words, it is largely the endpoint of manufacture and industry).
The parallel I am trying to draw here points to the transition out of an age of expansion, where the real foundations of economic activity are “conquered”, established, and worked. Just as the later Ottomans and Romans, we are and have been for some time in a derivative age, where the worked land and its control are more economically and politically valuable than expansion into “unworked” or “non-integrated” land, so to speak. Like the Dutch tulip mania, it is only in such an age that the absurdity of NFTs and crypto, which have in the past few months wiped out $2 trillion of wealth, could occur. It is in such an age where “sensible” roads to wealth and “real businessmen” become rarer, and arcane financial instruments and the hereditary maintenance of wealth through clever use of the system is more commonly found.
The starkness of economic decline in the developed world is in part due to the incomplete transition into this new mode. While the wealthy and elite have caught onto this new model of wealth creation, the ethos and livelihoods of many working people are still tied to the previous age, where an expansion of industry creates jobs, the income from which is then used to buy further ownership in homes, cars, etc. The “American Dream” as well as the rising fortunes of millions in China can be ascribed, at least in part, to this feature: as industry expands, the goods created can be shared among the population, however unevenly. Moving into a derivative economy, however, the expansion of production slows, such that the real economy that provides food and housing and other goods may not follow the trajectory of the monetary economy which addresses control over existing goods. What becomes important, then, is not the production of sufficient goods for popular consumption, but the accumulation of sufficient power for the acquisition of existing goods. Rising real estate and rent prices, educational fees and general inflation throughout the developed world is a sure-fire sign of this occurrence. We don’t necessarily lack the productive capacity to expand the real economic base that people can use; there is just more value in the derivative part of this, such that real estate becomes a nexus for investment rather than a primary good, and education becomes a rolling service tied to large endowment funds rather than a place to train competent workers to contribute to further production.
As early as the 17th century, Ottoman political commentators were decrying the “decline” of the empire, and advising a return to the days of Suleiman the Magnificent, known more commonly in post-Ottoman lands as “Kanuni” or Lawgiver. To them, the growing social mobility of peasantry, the involvement of the soldiery in trade, and the growing monetisation of the economy and of stations of prestige all spelt disaster for a system that must remain focussed on the proper fulfilment of function by each of the social classes. Many of those who yearn for the “good old days”, whether the older generations who lived and worked in the 1960s and 70s or the younger generation feeling duped by a system that delivers on fewer and fewer of its promises each day, at times sound somewhat similar to these commentators. Whether it’s Trump’s promises to revive American coal mining, economists wondering how to make their countries “the world’s factory”, or the shining promise of the Green New Deal, many see the way out of our predicament as a return to more primary, real economic production, increasing overall material wealth and providing jobs to the working class engaged in that production. In other words: those controlling wealth should use it to direct labour to grow the real economy, and labourers should earn their keep through working to do so. The solution to crises of distribution, is growth.
At first glance this seems like the natural next step. Goods are becoming more and more expensive and hard to acquire, while many people are having difficulty finding gainful employment. So, creating more goods both brings in cash and serves the people who need them, while providing the employment to enable people to make use of this new increased production. In other words- if our economies are oversaturated, just grow the real economy.
How this is not the immediate response of those in charge of the massive cash flows that would direct such a shift is made clearer when we take the perspective developed above into account. If we view the economy as one of expansion, then our current age is a decayed, slowed down version of this only, and the answer is to reinvigorate it, somehow. Production does not occur because of corruption, inefficiency, and lack of coordination.
Yet if we understand that we have transitioned into a different model of economy, we can make sense of why corruption, inefficiency and lack of coordination seem to occur in an economy that has more regulation, transfer of information, and monopolisation than before. It is not that the economy of yesteryear is performing inefficiently; rather, it is that the economy of today, the economy of derivatives, is performing too efficiently to be stopped and reversed. Companies like Toys R Us don’t go bankrupt because of bad management- they are cannibalised by leveraged buyouts prioritising capital extraction over productive returns. Hospitals around the world during COVID weren’t stretched thin because we cannot produce or predict pandemic needs; precautions were knowingly dismantled for the driving of profit and value. Petrol prices are not rising due to unpreparedness against the pressure from the conflict in Ukraine; oil companies are posting increasing profits despite the disruption.
Just like the Roman and Ottoman Empires in their “stagnation” periods, the economic system of the developed “West” provides greater life expectancy and greater safety, while certain social inequalities of the expansion era have had their effects lessened through expanding enfranchisement. Trade and travel increased under this global economy (though staggered by COVID), similar to the increase of trade in the growing monetary economies of our two example empires. Indeed, even the empire of the warlike Mongolians generated a “Pax Mongolica” that allowed ease of travel and boosted commerce. The pressures maintaining this derivative system are not merely the blind greed of key individuals- it is the network of benefits it has provided and still provides to many in positions of decisionmaking. While the period of expansion may seem like a positive model when focussing on the flaws of the current age, there are benefits provided by a more established economy that cannot be found in an economy based on wresting primary goods from nature.
See, for example, so-called “developing” countries, many of whom still operate on the model of an expanding economy. Rather than endless certification and sectors built on sectors built on sectors, many of these economies work on the extraction of primary products or the manufacture of basic industrial materials. China has expanded its economy in the latter half of the 20th century through this model, and many other countries still aspire to replicate that success. Others like Brazil have seen steady increases in their agricultural production even over the past decade. The consequences of this production, however, have been catastrophic environmental degradation.
From these discussions emerge two points that show why we cannot simply return to a prior form of production to fix the crisis of our economies.
The first is that the derivative system that creates the crises we live in now, is itself created as a result of the pressures of the prior system of expansion. Neither the Ottoman Empire nor the Roman empire was successful in “going back” and becoming conquering empires, filling their coffers with new land and looted treasures, despite the many calls to do so. Expansion and integration, if successful, lead to consolidation and coordination, which raise the value of the land under control beyond its individual productive capacity. Similarly, establishing industries and production leads to interconnected sectors which produce more monetary and thus political value at higher levels of derivation. This, among other things, produces our current system and is what works to maintain it.
The second is that even where primary production, the “expanding” economy is possible, the underlying conditions that drove it in earlier periods have indelibly transformed in our current era- and not, as a Marxist or classical economist would focus on, only socially and financially. The very natural resources that are extracted in the growth of primary production are under threat, as their management has not been a sufficient point of focus for economies worldwide. The degradation has occurred and is continuing to such a degree that remaining in the system is not a possibility either- those economies that seem to be improving on this front often merely outsource the damage caused, and in other cases more damage is caused for little to no reason.
What all of this must amount to is the understanding that while we cannot simply maintain the system the way it is, the solution is not to rewind the clock, and to “fix” the system that has decayed. The system has not decayed– this is an entirely natural (though not necessary per se) development of our economies which is consciously maintained due to the real benefits it has provided. The previous system gave birth to the current, and will very likely do so again even if, and that if is very questionable, a reverse is possible.
Now, something that can be misunderstood here, especially when bringing in a historical perspective, is the expectation that this argument will end with a prediction/statement as to how these issues historically, normally, or even naturally get resolved. But we live in very different times. The very basis of human economic and social activity, the capacity which allows us to go through these shifts and cycles, is itself under stress- a stress which, though it may not destroy the planet, may make it drastically less habitable to us. This is not a “normal” part of the cycle, an Ibn Khaldun cycle of desert vs city folk. This is a possible breaking of that cycle, an exhaustion of the process.
What this means is that the next steps, the “way out” so to speak, is not something that can simply be left to the aggregate outcome of loosely related individual intentions. The collapse of any system is a time of great suffering and chaos, but viewed in a cycle it seems a natural part of social development. Frankly, however, it seems we have neither the time nor the resources to afford such a “luxury” of discord. Instead, the next step must be more intentional, it must be a transformation that attempts to resolve the crises we face and inflict upon the natural world that supports us. Now is not the time to yearn for the conquerors of man and nature, nor the time to maintain “sensible” business as usual. We are already in an era that requires something new- something that includes not only the people who conquer nature in its calculations, but the “nature” that is so vital to our survival as well.