Fiat Jobs

Could it be true that, contrary to what we are told, capitalism is not about eliminating inefficient capital allocation? This was my conclusion after reading Graeber’s book, although it was a hard pill to swallow since I could not argue against this with just the “No True Scotsman” of how we are currently living some kind of crony capitalism. To be intellectually honest, I should be able to pinpoint who and what the cronies are, otherwise the counter argument means nothing.

Luckily, the culprit can indeed be found and it is hiding in what we use for money: fiat. Fiat is just a way for government, government officials, bureaucrats and cronies to interject themselves in what would otherwise be a simple exchange of goods and services between two parties. It does not matter if the private sector is, superficially, the beneficiary of fiat money; what matters is that fiat in and of itself produces private profits through government intervention.

According to Milton Friedman: “If a private enterprise is a failure, it closes down—unless it can get a government subsidy to keep it going; if a government enterprise fails, it is expanded” (emphasis added)

Bullshit is expanding, and the rate of expansion is also accelerating. Private enterprises are increasingly being subsidized by government through fiat.

In his book, Graeber points out an increased political influence (as well as a bloated headcount) in the finance and service industries (service industry in this context means consulting and institutional corporate services - not to be confused with retail and restaurant workers who produce real value). The vast majority of bullshit jobs and active value destruction happens in these two industries. For any consultant, the holy grail of client deals is that which is struck with a financial institution. This symbiotic relationship becomes a nexus of absolute bullshit, and as the money printer keeps printing, more and more inefficiencies and bureacracy begins to accrete around a black hole of value destruction.

Different deparments in a bank have different excuses to have consultants hovering about. IT needs to cut costs by offshoring sensitive data to the other side of the globe, marketing departments need marketing consultants, management needs management consultants and HR needs to try to look busy by hiring outside HR consultants. By far, however, it is compliance which sucks consultants, advisors, regulators and union representatives toward itself the most.

Compliance, in the context of finance, is such a strange and vague term that people struggle to translate it from English to other languages in any coherent way. Still, as an odd Faustian bargain, it is the price any financial institution has to pay for money printing privileges, and in a fiat world, it is no wonder that an entire industry has spawned out of nothing to exploit this.

Besides parasitic compliance consultancies, the certifications industry has naturally dipped its beak into the well. Banks pay third-party paper mills to train employees into compliance professionals. Training can take months to complete, and it is nothing but a box-ticking exercise for the bank as well as the employee. That is not to say that some of these courses do not require real effort to pass, they do - it is just that they are pointless. Still, in order to appease regulators, a certain amount of employees must be certified.

This blog will cover the particulars of bullshit jobs in more detail in other posts, but the purpose of this post is to investigate Graeber’s claim about capitalism. I believe he is wrong in his assessment, although at face value it makes all the sense in the world. However, once I realized that it is fiat money that is broken, it becomes clear why and how bullshit accumulates close to where money is created. There are real industries out there that have to compete with one another, and although no one can currently escape the broken economy perpetuated by fiat, they still sometimes shed redundancies and inefficiencies. The problem seems to be that when a real business sheds pointless positions, those people have to work somewhere. Thus, they gravitate toward the money spigot. Sometimes they even manage to leverage their old connections to briefly siphon money from their previous employer, but these endeavours rarely last for very long.

As with most other things, Bitcoin fixes this. In a Bitcoin world, all of these industries are forced to explain what the value is that they produce, as their positions cannot be sustained or explained by a vague regulatory need.