Interesting article and I really enjoy the article. But could you argue that democracy, populism and democratic socialism act as balancing mechanisms on the capitalism accumulation? Europe and American capitalism have been going on for quite a long time? Capitalist democracies are in constant competition with each other. When too much capital accumulation happens, is usually causes bad policy that causes the underlying capital accumulation to falter and this continues until another self correction occurs
Thanks for reading! Yes, democratic politics can act as a balancing mechanism, and historically it often has. But the point I’ve been circling across the “crackhead economy” series is that what’s doing the balancing matters.
Democracy and populism mostly operate on the *distribution mechanism*: elections punish outcomes (inequality, housing pain, wages, corruption), and that produces corrective cycles (regulation, welfare expansion, antitrust moments, etc.). That’s the “self-correction” you’re describing.
But what I think has become much more clear post-08 is when the coordination mechanism itself disappears and the mechanisms that allocates capital and maintains competition becomes structurally broken and captured.
At that point, the system can look like it’s self-correcting politically while actually failing mechanically. That's where I think we are now. Policies are being created and refined, but they are increasinly ineffective.
So I’m not claiming capitalist democracies can’t self-correct because they often have done. I’m asking whether, at our modern *scale* (financial abstraction + global capital mobility + media capture + low-trust politics), the correction cycles are still strong enough to prevent us moving towards dominance, or whether they’ve become more like oscillations around a worsening baseline. (I suspect the latter).
That’s why I think the idea of a constraint-based architecture is interesting, as a different way of preventing the compounding channels from running away in the first place!
Insightful read. The idea that incentives compound but constraints just hold the line is fascinating. A lot of reform feels like we’re turning knobs instead of rethinking the walls.
Thank you! Indeed, a lot of reform debates are about calibration (change the tax rate, capital requirements, add an oversight board...)
But if the underlying system compounds and structurally accelerates accumulation or control, then small adjustments just slightly alter the speed, but don't change direction...
Constraints are different because they change the actual geometry of the system. The open question is whether constraint-first systems can maintain legitimacy at scale without disintegrating into hypocrisy like our current system seems to be doing....!
This is an incredibly insightful and powerful framing!
Identifying the key axis as orthogonal to the more/less government question is crucial, and echos another perspective you’ve discussed before: ordoliberalism. However, the focus in ordo emphasizes “rules, not discretion” while you’ve here highlighted that similar, perhaps even more powerful, effects can arise with “cultural mores, not discretion”. I’m curious about whether you would think of these as manifestations of the same (with German culture simply preferring more detailed rules) or if there are actually very distinct implementations at work, which on further analysis might reveal a path to solving the outstanding problems you identify in Islamic finance. Are there other systems that one should look at beyond these two, which might have yet other emphases?
this is valuable
Thank you for reading!
Interesting article and I really enjoy the article. But could you argue that democracy, populism and democratic socialism act as balancing mechanisms on the capitalism accumulation? Europe and American capitalism have been going on for quite a long time? Capitalist democracies are in constant competition with each other. When too much capital accumulation happens, is usually causes bad policy that causes the underlying capital accumulation to falter and this continues until another self correction occurs
Thanks for reading! Yes, democratic politics can act as a balancing mechanism, and historically it often has. But the point I’ve been circling across the “crackhead economy” series is that what’s doing the balancing matters.
Democracy and populism mostly operate on the *distribution mechanism*: elections punish outcomes (inequality, housing pain, wages, corruption), and that produces corrective cycles (regulation, welfare expansion, antitrust moments, etc.). That’s the “self-correction” you’re describing.
But what I think has become much more clear post-08 is when the coordination mechanism itself disappears and the mechanisms that allocates capital and maintains competition becomes structurally broken and captured.
At that point, the system can look like it’s self-correcting politically while actually failing mechanically. That's where I think we are now. Policies are being created and refined, but they are increasinly ineffective.
So I’m not claiming capitalist democracies can’t self-correct because they often have done. I’m asking whether, at our modern *scale* (financial abstraction + global capital mobility + media capture + low-trust politics), the correction cycles are still strong enough to prevent us moving towards dominance, or whether they’ve become more like oscillations around a worsening baseline. (I suspect the latter).
That’s why I think the idea of a constraint-based architecture is interesting, as a different way of preventing the compounding channels from running away in the first place!
https://www.butthistime.com/p/how-to-fix-a-crackhead-economy-addicted-323
Insightful read. The idea that incentives compound but constraints just hold the line is fascinating. A lot of reform feels like we’re turning knobs instead of rethinking the walls.
Thank you! Indeed, a lot of reform debates are about calibration (change the tax rate, capital requirements, add an oversight board...)
But if the underlying system compounds and structurally accelerates accumulation or control, then small adjustments just slightly alter the speed, but don't change direction...
Constraints are different because they change the actual geometry of the system. The open question is whether constraint-first systems can maintain legitimacy at scale without disintegrating into hypocrisy like our current system seems to be doing....!
This is an incredibly insightful and powerful framing!
Identifying the key axis as orthogonal to the more/less government question is crucial, and echos another perspective you’ve discussed before: ordoliberalism. However, the focus in ordo emphasizes “rules, not discretion” while you’ve here highlighted that similar, perhaps even more powerful, effects can arise with “cultural mores, not discretion”. I’m curious about whether you would think of these as manifestations of the same (with German culture simply preferring more detailed rules) or if there are actually very distinct implementations at work, which on further analysis might reveal a path to solving the outstanding problems you identify in Islamic finance. Are there other systems that one should look at beyond these two, which might have yet other emphases?