Why Centralization Leads to Collapse   (June 28, 2013)

A system that suppresses dissent is fault-intolerant, ignorant and fragile.

Increasing centralization has been viewed as the solution for all social and economic problems for quite some time. The Eurozone project is one recent manifestation of this belief.

The basis of this belief is rationality and efficiency. If we centralize production and decision-making, we eliminate all sorts of inefficiencies. Decisions can be made by "top people," and supply chains can be rationalized from a hopelessly inefficient clutter down to a supremely rational and cost-effective pathway.

Ironically, in eliminating inefficiency and messy decision-making, centralization eliminates redundancy, decentralized pathways of response and dissent. Once you lose redundancy and all the feedback it represents, you lose resiliency and fault-tolerance. The centralized system is fault-intolerant and fragile.

By rationalizing decision-making and authority in a centralized hierarchy, the system slowly but surely eliminates dissent: those who "don't get on board" and "get with the program" imposed from the top are marginalized, pushed out or liquidated.

From the point of view of the "top people," this is merely rational; why tolerate a lot of chatter and resistance that doesn't serve any real purpose except to bog down the duly chosen program?

As Nassim Taleb has observed, dissent is information. Eliminate or marginalize dissent and you've deprived the system of critical information. Lacking a wealth of information, the system becomes a monoculture in which the leadership is free to pursue confirmation bias, focusing on whatever feedback confirms its policy mandates.

A system that suppresses dissent is fault-intolerant, ignorant and fragile. Any event that does not respond to centralized, rationalized policy creates unintended consequences that throws the centralized mechanism into disarray. Lacking dissent and redundancy, the system piles on one haphazard, politically expedient "fix" after another, further destabilizing the system.

The event that triggers crisis and collapse isn't important; the system, rendered unstable and fragile by centralization, is primed for crisis and collapse. The dry underbrush is piled high, and if the first lightning strike doesn't start the fire, the second one will. With dissent and the inefficiencies of redundancy and decentralized pathways of response gone, there is nothing left to stop a conflagration that consumes the entire forest.

Things are falling apart--that is obvious. But why are they falling apart? The reasons are complex and global. Our economy and society have structural problems that cannot be solved by adding debt to debt. We are becoming poorer, not just from financial over-reach, but from fundamental forces that are not easy to identify or understand. We will cover the five core reasons why things are falling apart:

go to print edition 1. Debt and financialization
2. Crony capitalism and the elimination of accountability
3. Diminishing returns
4. Centralization
5. Technological, financial and demographic changes in our economy

Complex systems weakened by diminishing returns collapse under their own weight and are replaced by systems that are simpler, faster and affordable. If we cling to the old ways, our system will disintegrate. If we want sustainable prosperity rather than collapse, we must embrace a new model that is Decentralized, Adaptive, Transparent and Accountable (DATA).

We are not powerless. Not accepting responsibility and being powerless are two sides of the same coin: once we accept responsibility, we become powerful.

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