What if they 'devalued' the foot?
Martin Gurri gets the times, but not the logic of the times. His Revolt of the Public is a must read. But he misses the essential foundations of the revolt.
(Click here to read my introduction to this three-part review of Martin Gurri’s Revolt of the Public.)
What if that picture above all of sudden became one ‘foot’? For as long as anyone can remember, rent has been priced in dollars per square foot. If a foot all of a sudden becomes six inches, one square foot all of a sudden becomes four square feet.
And your rent quadruples!
Who the Hell made you king?
To understand the loss of trust among Gurri’s Public we first have to realize that there is an interior logic to all actions. Sometimes this interior logic bears little resemblance to reality and we conclude that individual suffers some sort of mental disability. It is possible, though, for interior logic to be reasonable, but misinformed. Perhaps we dismiss such people as fools. Gurri believes the Public in revolt are tearing at the very arrangements that have allowed them the luxury to protest instead of having to fight for survival. Ultimately, he seems to dismiss them as fools.
But are they?
Consider our example of rent. Gurri uses the 2011 social justice protests in Israel as an example. He traces this to tent protests in Tel Aviv organized on Facebook by Daphne Leef. She was provoked to protest by steep increases in local rents. Gurri tends toward being dismissive in his treatment of Leef's grievances as if they reflect an economically normal process of real estate values - and therefore rents - increasing.
But is this process really normal?
Rent is like all prices; it combines two units of measure. When we price rent in dollars per square feet, it is easy to understand the foot as a unit of measure. It is less intuitive, but a unit of money (like the dollar) is also a unit of measure. And when we think about devaluing a unit like the foot, the unnatural truth about seeing rent inexorably rising becomes clear.
The analogy only seems extreme because it’s so much all at once. Over a century ago economist John Meynard Keynes described this process and its social consequences:
Lenin is said to have declared that the best way to destroy the capitalist system was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some...
Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.1
Gurri does not understand the Public in revolt because he does not grasp how money forms the scaffolding of the social order. Where once the dollar in one’s wallet measured a claim on gold or silver, now it measures a share of the national debt. Only two things can be done with debt: either repay it or roll it over. And since no one refinances a debt at a higher interest rate, ever-lower rates require creating new money.
This ‘devalues’ the dollar. But in a hidden “…manner which not one man in a million is able to diagnose.”
Let’s contrast this with devaluing the foot. Instead of all at once, we’ll do it one inch per year. To appreciate the outrage we have to understand that rent is a dollar-sign measurement of one month’s shelter. So we’ll start with a 1,000 sq. ft. apartment at $1/sq. ft. per month. $1,000, then, is equivalent to 30.42 days’ shelter (365 days a year / 12 months). Watch what happens to how many days shelter $1,000 buys:
INCHES SQ FT RENT $1,000=X DAYSYear 0 12 1,000.00 $1,000.00 X=30.42Year 1 11 1,190.08 $1,190.08 X=25.56Year 2 10 1,440.00 $1,440.00 X=21.13Year 3 09 1,777.78 $1,777.78 X=17.11Year 4 08 2,250.00 $2,250.00 X=13.52Year 5 07 2,938.78 $2,938.78 X=10.35Year 6 06 4,000.00 $4,000.00 X= 7.61For you (former) jocks out there, we have a fixed 144,000 square inches. But if we devalue the foot to 11 inches we have to divide that 144,000 by 11 x 11, then by 10 x 10, etc. The denominator decreases, so the result (square feet) steadily increases.
What really matters is what happens to the purchasing power of $1,000. In six short years it has gone from 30.42 days of shelter to a paltry 7.61 days. Before long we end up in a tent. We might as well set it up on a ritzy street.
Do the Occupy protestors seem that unhinged now?
When this is done to the dollar, it escapes our notice. If done to the foot? The outrage would be obvious. Indeed, the question of measurements would be “Imperial.”
Who the Hell made you king?
An opaque problem gets an opaque answer
Even prior to the Great Financial Crisis, Gurri’s Homo Informaticus knew - if only in a vague sense - that something was very wrong. Remember what we said about interior logic; sometimes it does not correspond to reality. That is certainly not the case here. The interior logic of the Occupy Movement starts with assuming that price measures value, which in turn is derived from usefulness. They look at their apartment over time and do not see increased floor space or enhanced utility. But they certainly do see ever-increasing rent dissipating the standard of living otherwise available with what is left of their salary. But, not being able to diagnose quite where the problem lies, they take to the streets to demand something equally vague and opaque: “social justice.”
A premise goes unexamined by both Gurri and his Public, one which I'll elaborate on in my next essay. The Public’s social expectations are that of a people ruled by representative democracy in its various forms - not by a monarch. The inner logic of the Public starts to make sense when we realize we are ruled by something quite different than we have been led to believe.
That’s 8.33% inflation.