Some time ago, I have written a post where I tried to answer the question of how a good economy could work. That post was actually the continuation of another post called some form of capitalism, where I tried to understand the economic direction of the world. First I tried to understand what was going on, then I tried to find a way to fix it. Then I noticed something more interesting. A lot of people normalized the ridiculous state of the world reached in 2026 and started thinking that everything is moving through some process (like Hegel !) and eventually it will reach somewhere. When I noticed this, it gave me the idea for another post. Looking at the title, you may think I will only write about the economic concept called supply-demand balance. But in this post, I will also try to explain how people normalize the abnormal direction of the world and why this is such a big mistake.
In my previous posts, I mostly tried to write and understand what happened throughout the historical process. Then I listed some ideas by asking what I would do if it was up to me. Those posts actually don't show how terrible the point humankind has reached is, and some people can genuinely look at it and say "what's the big deal?". We can explain this by ignorance or carelessness of course, but instead of being judgemental, let's look at what has been happening in a little more detail. Especially in the last 2-3 years.
Around 10 years ago, in 2016 or so, the crises and monetary expansions around the world that had been continuing as a result of earlier processes slowly started coming to an end. (If you look at recent history, there is usually monetary expansion and then some kind of crisis anyway, but the frequency got higher.) Then, as far as I remember, towards the 2020s we started hearing concepts like "great reset" or "sharing wars". These were actually facade concepts and they were brought forward to hide much uglier realities. Because countries realized their natural resources were not infinite and at the same time, moving further away from democracy, towards some sort of gangster order. The increasing world population was also already pointing towards a ridiculous future where people would turn against each other for various reasons or resources.
Then came a pandemic period, how exactly it happened is still debated, and the economic balance of the world took another hit. So the war of sharing accelerated even more. Actually the word sharing is wrong here. War of taking down would be more accurate. By now, more or less everyone knows you can't just take some other country down. Because the world economy is standing on such thin ice that, because we failed to globalize properly and deny that we need each other, nobody can just get up and do whatever they want either. But that is an unimportant detail for now. Then a new technology appeared as a candidate for another industrial transformation: Artificial intelligence. But I am having a deja vu here. You know, years ago we were building the new digital world in metaverse, humankind was going to the moon and discovering Mars, quantum computers were going to solve unsolvable problems... Anyway, for the last 3 years artificial intelligence has finally been seriously inside our lives.
Up to this point I tried to write with as little interpretation as possible. We can disagree on the interpretations. But since everything has been happening in front of everyone's eyes, I can now explain things more clearly to the "what's the big deal" people. When artificial intelligence became visible with the new transformer model, of course it was a huge step for the world. It really became a useful tool with potentially massive contributions to industrial progress. But from the very beginning, it was marketed like a product that would save humanity, work and create value by replacing humans and for humans, become much smarter than humans and solve our problems. These were of course the kind of "shot in the dark" claims a company would make in a capitalist system, and I don't judge that part too much. Then, to summarize, with some interesting agreements between chip manufacturers and technology providers, companies started looking abnormally huge and an AI bubble was actually created. This bubble did not form because artificial intelligence is insufficient or stupid and will collapse one day, but because the value given to it is based on manipulation and because companies use various twisted financial paths to look valuable. And like every period, there will also be people and companies entering this area from the wrong angle and going bankrupt, but that is only one part of the bubble.
But the subject here is not actually artificial intelligence. It just gives us a good example of how things usually work around the world these days. In the past, a company would develop a product. Governments would support it and naturally protect their own interests. At the same time, they would increase their national income. I think I wrote something similar in my previous posts. We can assume this world is like a community of 150-160 people trading with each other. In a normal world, everybody produces something and sells it to the others. This is where that magical concept enters our lives. Supply-demand balance.
Normally, when a product is abundant, its price can go down because it is easy to find. If it is highly demanded, its price can go up because it is scarce or because you need to compensate the risk of replacing it. These, and probably more, are perfectly natural parts of the basic nature of supply and demand. BUT, these can only be valid in a normal world. Going back to our concrete example, factors like the costs of artificial intelligence, infrastructure requirements, environmental effects, possible transformations for workforce or risks are barely discussed, while companies and governments are supplying it like crazy. Then some financial tricks are added on top of that supply and demand goes up too. So we are not really talking about a supply-demand balance, we are talking about an order of "manipulation". But this needs a bit more detail.
Since the layout of the post might get confusing, let me summarize quickly: After the 2000s, monetary expansions and the chaos coming after them became more frequent and faster. With artificial intelligence, we are in the biggest revolution since the industrial revolution. But as a reflection of abnormal economic understandings, and right in front of everyone's eyes, an AI bubble formed. This is not a supply-demand balance, because there are things we misunderstand.
Normally, the first concern of someone producing a product or service is "can I sell this ?". The next concern is "how much can I sell this for ?". If there is no demand, taking on production cost for nothing is non-sense, or maybe it is called taking a risk and becoming an entrepreneur. Or you can put capital into it, produce it and then work to create demand, that is also a choice. The more your product is demanded, the more valuable it may become, but this is actually "valuation". It does not really tell you how much value or added value your product actually produces, it only tells you that it is demanded. But at the end of the day, your product gets a value, it might have competitors or not, and its demand is shaped by number of parameters. Then you more or less balance how much you will produce, how much you will sell and at what price according to the market, meaning the buyers and the environment. And supply-demand balance forms. If demand is very high, you may think "I can sell this at whatever price I want because people want it". Or you may think if I sell everything I have today, inflation will make my production unprofitable 2 months later, so you may want to sell a little more expensive. If buyers think the price is too high, you may lower it and continue production. Maybe time is your only production cost, so you keep your price high and only produce when there is demand ...etc. For many different reasons, this supply-demand balance somehow settles somewhere.
But for the last 10 years, almost nothing in the world works this simply. We had 2 basic questions: "who am I going to sell this to" and "how much am I going to sell it for". Different manipulations or tricks are being used to guarantee these 2. We can see this very clearly with artificial intelligence. Companies or investors, you know the ones called whales, keep giving messages like "everything is fine, we are improving, we are making miracles!!" and hide the problems, even if they have to lose money to make you dependent on AI. They even market it like "we improved so much that AI became dangerous, so because of our conscience we slowed down the work", instead of saying the money is running out :) But somehow these ridiculous processes became normalized and people stopped finding them strange. Economic processes moving "artificially" instead of naturally is simply deception. But there are people who even consider these deceptions as simple factors inside supply-demand balance. Now you may say: "They are huge companies and there are rich people behind them, I don't care, let them do whatever they want". Well, it doesn't really simply work like that :)
My most basic definition of a "good economy" is people being able to produce quality things and sell what they produce enough to sustain themselves. But that is a natural process. If I want to make this process work artificially, I need a lot of money. For example, I need to do bad things like misleading advertising, buying or eliminating competitors, selling at a loss to dominate the market, or in some cases bribing government officials... The problem is not "thinking" about doing these things, it is "being able to" do them. Instead "letting river find its way", it becomes "build the river for the water". And only rich people can operate this way. Then if the rest of the people normalize this and don't stand in front of it, naturally every economic activity starts going through different side routes or manipulations... These are the things you can't just say "I don't care". This way, the world turns into a ridiculous state where people with money can run around however they want and determine the fate of ordinary people. (Notice that the subject here is even independent from democracy or justice.) And since even that will not be enough, occupations, wars, deaths... etc. eventually make humankind reap what it sows. If you don't care, you become the one that is not cared about.
Of course, since the subject of this post is economy, it would be out of place to write about justice here even though it needs to be discussed too. We need to ask why laws exists and who it exists for and think about that separately. Here I am only trying to say that the economy has moved away from its natural path and turned into a dishonest game of "cash grab". A world can't live peacefully like this. Because in this system, the people who don't do evil become the ones who get hurt. Trust me, you would not want this to become the new normal...
I explained things mostly through artificial intelligence, but when you look around, the China-Taiwan tension, America's move in Venezuela and its attack on Iran and preparations around Cuba, Russia's invasion of Ukraine... These are all consequences of economic systems detached from their organic nature and of people normalizing this. These days, during the America-Iran tension, people are trying to make money in the oil market because traffic through the Strait of Hormuz is closed. It is like trying to generate electricity with wind power and get rich from a car going downhill towards a crash with broken brakes. You are not actually becoming profitable, you are just taking advantage of someone else's loss to gain an advantage. This logic starts becoming valid in other areas too. I wrote about it before: if people focus on creating opportunity out of crises, they normalize the crises and eventually become unable to produce anything without a crisis. You decide what kind of stupidity this is.
Stock markets of many countries keep fluctuating. Even gold and silver prices fluctuate, or they can be made to fluctuate by "whales". Because some people have the power to manipulate markets with huge amounts of money and there is no proper regulation. Every new development is presented like a spark of the next big opportunity for someone, and in the end most people who we can call normal people, lose money. Worse, these manipulations also trigger fear of missing out (FOMO). Up to a point this is natural of course, because every day it looks like someone is making some hit. If gold prices rise rapidly, people feel like they missed an opportunity. There are some interesting investor behaviour profiles that I am no qualified to explain. You can search and find them. But even those mostly apply in an "organic" economic order. Today, even a sane person can't properly plan a long-term investment. Because the world doesn't give enough confidence and short-term hit-and-run opportunities look much more attractive.
Another keyword here is "trust", of course. People have normalized distrust now. Because at the point of madness the world has reached, not many people actually believe "this will all turn around from here". And this is what kills the future. Like I said above, the ones trying to fix things or behave normally get hurt. You can't profit without causing someone else to lose. So my question to the people saying "what's the big deal?" is this: While making Hegel-like statements, what sign or possibility of recovery did you actually see in the world? In Ice Age 5, the birds thought they would survive if a meteor hit the world because they could fly. How big is a bird's brain? :)
After writing this much, it would be nice to offer a solution too, but the solution is not here. From what I have witnessed in my lifetime in my own country, I can say this: In a community, first morality collapses, then justice and then the economy. This is why, even though economy is the easiest one to fix, you still can't fix it. If we think of the world as one large community, first we need to figure out how we can ideally live in this world and then live that way ourselves. Then we need to make laws for the people who want to break this state. After that, the economy more or less fixes itself anyway. But when we look at the world lately, people are dominated by anxiety about their future. Doesn't that prove my point? Because other things collapsed first.
A voice inside me already says this will be the favorite post of this year. Problems that look extremely huge sometimes have very simple starting points. Then you need people who have the will to solve those problems. But at this point, supply-demand balance appears again. Is there demand for the solutions being supplied? I supplied this post, but will you demand it? That is all I am worried about. See you at the next post....
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