The New Nobility has bypassed the need for Divine Rights or formal granting of power; their privileges are now informally embedded in the system.
BY CHARLES HUGH SMITH ON SUBSTACK / READ AND SUBSCRIBE TO CHARLES HUGH SMITH ON SUBSTACK
Context matters, for context establishes cause and effect and what’s elevated to important / consequential.
Context is tricky for two reasons:
1) we only manage what we measure, so what we don’t (or can’t) measure is ignored as if it doesn’t exist. Yet what we don’t measure may still be causal and consequential.
2) Context is cultural and not self-aware of its contradictions. As Bertrand Russell pointed out, the most important phrase in the entire Bible was “Thou shalt not suffer a witch to live” at certain junctures, with the definition of witchcraft being set not by biblical scholarship or the principles laid out in the New Testament but by the zeitgeist of that era.
Other examples include blatant violations of the principles laid out in the US Constitution–banning ownership of property in certain neighborhoods based on ethnicity, and so on.
In the present era, the dominant context is financial, and so in a “market economy” everything–and everybody–has a price. In the context of my work, a social order in which everyone has a price is totally, blindly, fatally corrupt.
But it’s not polite to state that America’s economy and political-social order are totally, blindly, fatally corrupt, for this is outside the conventional norms / context that the purpose of life is to amass as much private wealth as possible by any means available.
This lack of self-awareness is also a core dynamic in Model Collapse, a context that I view as far more causal and consequential than what dominates headlines and commentary: AI, geopolitics, energy, etc.
As noted in previous posts, to those who accept a context without an awareness of its potentially fatal limitations, the model seems to be functioning perfectly because its self-referentiality excludes any other possible output other than the system is performing nominally.
From the systems-level perspective / context of Model Collapse, in focusing on the conventional realms of AI, geopolitics, finance, energy, etc., we’re picking up seashells on the beach, oblivious to the tsunami racing ashore.
There’s another systems-level context which I see as causal and consequential: Neofeudalism and Neocolonialism, topics I started addressing 13 years ago in 2012. The E.U., Neofeudalism and the Neocolonial-Financialization Model (May 24, 2012).
The basic dynamics here are hyper-financialization and hyper-globalization set in the contexts of Core and Periphery and the passing of the traditional Colonial Exploitation / Extraction model of national wealth-building.
With the passing of brute-force colonial exploitation / extraction in which the Core (the colonial power) extracted wealth from the Periphery (its colonies), national wealth-building was set aside in favor of neofeudalism, an economic structure that exploits both the global populace and the home-country populace via financialization-globalization to the benefit of a class I term the New Nobility, a class of wealth and power whose built-in privileges parallel those of a feudal Aristocracy.
In the conventional telling, nothing has changed, humans always seek to exploit others to maximize their own gain, etc., etc. But this context explains nothing and establishes nothing beyond an empty fatalism.
In the Neocolonial Model, the New Nobility maintain their power by promoting a dysfunctional divide-and-conquer society in which the exploited classes are set against their shared interests via ginned-up cultural conflicts, deranging distractions and hallucinations passed off as predictive narratives: with natural gas and nuclear power running AI data centers, super-abundance is right around the corner.
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That we can no longer afford (or access) the healthy foundations of a high quality of life are of no concern.
Please direct your attention to the latest mayhem, the cultural red flags we’re constantly waving, the 792 best series on TV, all of which deserve your devotional loyalty, the AI therapists / best pals that can be yours for a low, low monthly subscription, the latest projections of endless wealth in the stock market / crypto casino and the endless scroll of the top 792,000 influencers and AI-generated “celebrities.”
With brute force now problematic, the Neocolonial method of extraction / exploitation is financial–indenture Periphery populations by extending them credit that then siphons off their wealth in interest payments–and globalization: offer jobs to the lower classes (so the interest on the newly expanded debt can be paid) and opportunities for graft, fraud and payoffs to local elites by moving production overseas to exploit cheap labor and lax environmental / labor regulations.
The flood of foreign capital snaps up all the productive assets at low prices (having a strong currency and unlimited credit come in handy) and then offloads them to sovereign wealth funds when it comes time to exit.
When the labor force, resources and other assets have been strip-mined, close down production and move it to wherever is offering the most bribes–oops, I mean tax credits: it might be Kentucky, or it might be Bulgaria, where doesn’t matter.
This flow of maximizing-profit-by-any-means capital is touted as beneficial to all until the debt and imbalanced economies both implode. Then the narrative moves on: gee, too bad you fell into the credit-debt trap and all your assets were seized by creditors.
The other half of neocolonialism is exploiting the Home-Country citizenry with the same tools of wealth extraction: financialization and globalization. The basic mechanism is to slowly siphon off labor’s share of the economy’s output and redirect it to capital, forcing wage earners to borrow money and take on extraordinary risks to maintain their quality of life.
As production was moved overseas and costs / risks were transferred from employers to employees, capital established self-reinforcing advantages over labor, driven by the purchase of political influence that dismantled much of the infrastructure of social mobility.
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Since competition and transparency obstruct profits, these have been eliminated in favor of monopolies and cartels, with quasi-monopolies being the favored model to retain fig-leaf of “competition.” The dominance of “market forces”–everyone has a price–normalized corruption and elevated finance as the dominant context of every decision.
The problem with these structures is not visible until it’s too late: they’re self-liquidating, as their very success has generated sclerosis (i.e. loss of adaptability) and self-referential data harvesting and “training”: everything’s going great because our statistics “prove” it.
The New Nobility has bypassed the need for Divine Rights or formal granting of power; their privileges are now informally embedded in the system.
Recall my Neofeudalism Corollary #1:
If the citizenry cannot replace a dysfunctional government and/or limit the power of the financial Aristocracy at the ballot box, the nation is a democracy in name only.
In the context of Model Collapse and Neofeudalism-Neocolonialism, all that’s been normalized is inherently self-liquidating as the resulting extreme imbalances will catalyze a swing of the pendulum to the opposite extreme.
Two charts reflect what’s 1) normalized in the conventional context and 2) unsustainably imbalanced:
The top 0.25% collects the majority of income from capital:
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The bottom 50% own a sliver of these assets that qualifies as signal noise
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Cause and effect generate consequences. Get the context wrong, then all the predictions are hallucinations. Get the context right and we’re one step ahead. That’s far better than always being one step behind.
Nobody believes that “doing more of what’s failed” will actually fail, because to date it’s only made insiders rich.
Why Is Everything Such a Hot Mess? Let’s summarize the consensus views.
1. Sociopaths are in charge. There are two options: A) the sociopaths gained power through official, legitimate means such as elections or royal bloodlines, or B) the real web of power is hidden from public view and operates behind the screen of official authority.
2. Alternatively, the system itself is sociopathic and so it doesn’t matter who’s in power, as the system elevates sociopaths to power by its very nature.
Yes, there are sociopaths and yes, there are conspiracies. Every corporate price-fixing scheme is a conspiracy that is consciously organized to benefit the few at the expense of the many and protect the conspirators from any negative consequences.
These are the defining traits of every conspiracy: pull hidden strings of power for private gain (more power, more wealth, etc.) and moat the conspirators from any consequences.
In this view, if we replaced the sociopaths who gained power and exposed the conspirators / hidden web of power to consequences, then we could restore legitimacy, stability and functionality to the system.
The alternate view is: since the system itself is sociopathic, the only way to restore legitimacy, stability and functionality is to change the system from the ground up: change the structure of power, oversight, incentives, the whole ball of wax.
In a conspiracy, those organizing the hidden web of power know it’s wrong which is why they must hide it: exposure means ruin because the system still has the capacity to punish fraud, exploitation, abuse of power, etc. When the system itself is illegitimate and dysfunctional, then those rising up the ladder to positions of power don’t see it as wrong; it’s simply BAU–Business As Usual, the way things work and have always worked.
In this view, perverse incentives have been normalized and are accepted as status quo. So for example, addicting your customers to destructive products and services is an excellent business plan as it maximizes profits while directing the consequences onto the customers, not the corporate leaders who planned and executed the profit-maximizing strategy.
Since fraud and exploitation generate higher profits, any CEO that reverses this strategy will be fired for gross incompetence, as the means to increase profits don’t matter, only increasing profits matters.
Maximizing fraud and exploitation maximizes personal enrichment. But in a sociopathic system, this isn’t viewed as wrong, it’s BAU–Business As Usual, as the system’s explicit goal is the maximization of private gains by any means available.
In my book Investing In Revolution, I trace how success and abundance generate sociopathic systems. The process isn’t guided by sociopaths, it’s human nature amplified by centralized, institutionalized power.
The psychology of what appears to participants as permanent abundance goes like this:
In the initial boost phase of the organization, success is not guaranteed. Success is contingent on the organization fulfilling its real-world purpose: transparent, competent governance, making products of enduring value and functionality, etc.
This requires feedback from the real world that hasn’t been filtered, as filtered feedback generates false signals, and responding to false signals leads to failure.
The leadership of the organization understands this and accepts accountability, for the organization won’t survive contact with the real world if leaders are not accountable for failures.
Feedback and accountability are transparent out of necessity.
This changes once the organization has institutionalized its success. The perception of those inside the organization changes: the organization is now viewed as so stable and successful that its existence is no longer contingent; it’s guaranteed.
Insiders no longer have to concern themselves with feedback and accountability; the focus shifts to maximizing private gains. Since the organization is permanent and rich in resources, revenues and political protection/power, there’s no need to invest in maintaining feedback or accountability, as the system basically runs itself via rules that govern the centralized hierarchy.
The organization selects those amenable to hierarchy and obeying rules. Those applying for positions self-select: those who chafe at hierarchy and rules quit.
Over time, this leads to leadership optimized for following rules and protecting the organization from consequences. Those with the capacity to adapt to sudden changes by reworking the entire organization on the fly have been weeded out by either self-selection or the optimization of business as usual, i.e. the artifices of filtering feedback, limiting accountability and defending the organization from negative consequences.
So when the time inevitably comes where radical re-organization is the sole path to survival, there’s no organizational memory to tap and nobody in the organization with the ability to manage it. The leadership will simply increase the resources devoted to artifice–bogus statistics, happy-story narratives, fake reforms, and so on.
To serve these now-embedded goals of filtering feedback, limiting accountability and defending the organization from negative consequences, insiders modify the organization’s rules of the game incrementally, eroding the authenticity of feedback and loosening accountability, as these modifications increase private gain and reduce exposure to consequences.
Once exposure to consequences has been eliminated, accountability is lost and the system loses the capacity to self-correct: feedback is edited/curated to maintain the appearance that the organization is fulfilling of its purpose admirably and the leadership is fully accountable, i.e. the leaders will experience negative consequences for the organization failing to fulfill its purpose.
This dismantling of feedback, accountability and consequence isn’t a conspiracy or a takeover by sociopaths; it’s all being done by perfectly average people who take their kids to soccer practice, etc., just like everyone else.
They don’t see the erosion because it started long before they grasped the first rung in the ladder to authority. They’re blind to the erosion of real feedback and accountability, and so they’re blind to this erosion leading to the organization’s failure to fulfill its purpose.
Since the organization rewards optimizing the tools of artifice–filtering feedback and moating the leadership from consequence–that’s how to they use their power: increase the artifice because restoring authentic feedback and accountability threatens not just their personal self-enrichment but the legitimacy and stability of the entire organization.
So they vigorously pursue doing more of what’s failed until the consequences of the corrupted feedback and loss of accountability lead to Model Collapse: the entire model that generates the rules that guide the organization collapses in a heap.
That’s how everything became such a hot mess. Nobody believes that doing more of what’s failed will actually fail, because to date it’s only made insiders rich.
Ultimately, this leads to a stark choice nobody accepts as inevitable: invest in Business As Usual or Invest In Revolution. Doing more of what’s failed doesn’t generate success, it simply accelerates the collision with consequences. But nobody inside the organization believes this, as doing more of what’s failed has been wildly successful for their entire career.
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It didn’t have to be this way. Of course it did. The causal chain leaves no other option.
