In the wake of World War II, an interesting phenomenon began to build up in the Malenesians, the island chains ranging to the southwest from Guinea to Fiji. Visiting anthropologists observed the primitive local residents were building unusual structures. They would flatten the ground in long strips, build wooden towers and construct strange bird idols.
The reason they were doing this was, during the war, when Japanese and American soldiers were stationed on the islands, they would airlift resources onto the island. Sometimes, these provisions were airdropped by parachute which would sometime blow off-course and land in the jungles where the locals would retrieve them. When the war ended, the airlifted resources ceased arriving.
The primitive locals, without any context to what an airplane was, began to construct superficial mimics of the airfields that the competing militaries used for logistics. The hope was, if they built these idols and structures, the airplanes would return and drop food from the sky. The primitive people of the islands didn’t understand what was going on and attempted to recreate the past.
The term created for this phenomena was a Cargo Cult. We in the modern world know that their efforts are little more than a resource waste. Yet the modern world is not immune to the Cargo Cult mentality and we have built substantial portions of our society around one.
The Cult of Money
The first major aspect of the modern Cargo Cult is money.
Barter, which had the advantage of knowing the good or service you were receiving existed, was limited by substantial flaws. You had to have something the other person wanted, the other person needed to want your product and timing mattered. Barter economies, if they exceeded a local village, required complex multilateral trades to get products and services you wanted.
We got around this by creating money.
Over time, the commodity we used to trade changed to resolve competing use problems. Salt, beads, gems and gold coins were common.
Then we reached a point where we discovered that carrying commodities was cumbersome. We would store gold in third party vaults, called banks, and the banks would issue scrip for claims on the gold. People realized they could trade in the scrip instead of the gold. This is the origin of paper money.
While not bad in and of itself, banks realized that people generally didn’t ask to look in the vault or ask for their gold. So unscrupulous bankers, frequently backed by the State itself, would produce claim scrip for gold that didn’t exist. The bank could now receive value from the productive economy without producing anything in return.
The State took advantage of this by nationalizing currency creation. They discovered they could generate currency scrip and pay for things without overtly raising taxes on the population. This proved popular because the general public was shielded from the direct effects of taxation. It, instead, led to inflation.
Today, the relationship between generating productive value and having money is severed. The Monetary Cargo Cult observes that wealthy people have money. Therefore, to make more people wealthy, all we have to do is print more money. The cult leader is Keynesian Economics and its adherents worship Modern Monetary Theory.
These ideologies are religious in nature. The core philosophy is that if something produces money and spends it, we will become prosperous. Instead of focusing on maximizing the useful value of scarce resources, the Monetary Cargo Cult attempts to conjure infinite riches from the sky by worshiping at the altar of the fiat currency. All it does is to debase the currency and makes people poorer by aggregating real goods and services to creators of currency that require no equivalent value creation to produce.
The Cult of Inflation
Inflation, as it’s understood by major State institutions, is something that is healthy. The Federal Reserve, the central bank of the United States, has dictated that 2% annual inflation is a desirable outcome. The belief is that inflation is a sign of an expanding economy and must be strived for. This was built on the observation in the late 1800s that during times of economic expansion, there would be a notable increase in prices on the market. During contractions, prices would fall.
The Cult doesn’t understand that the economy didn’t expand because of inflation, inflation occurred because the economy was expanding. During an expansion phase, demand for existing resources increases, leading to a price increase. Over time, prices come back down again as new capacity comes online, returning prices to the previous level.
If we were to accept that inflation meant expansion and deflation meant contraction, then we should expect the US economy to have been shrinking at an annual rate of 0.2% from the nation’s founding to the formation of the Federal Reserve. Yet the inflation story falls apart when reviewed against overall GDP of the country. The US expanded during the deflationary period on a per capita basis. Deflation obviously didn’t slow the economy and the growth wasn’t explained by population growth. Despite falling prices, individuals were getting richer.
The premise of central banking is argued that if we can maintain a perpetual 2% inflation rate, we can maintain perpetual growth. The Cargo Cult is latching onto the superficial element – inflation during an expansion – and creating a false representation of this with the expectation it will work.
Instead, all it does is debase the currency. Even the framing is false. “Just” 2% can, as this Futurama clip aptly demonstrates, quickly explode out of control. The Cult doesn’t comprehend that 2% isn’t off a fixed baseline. Hence why a “healthy” 2% can turn a Dollar into $4 billion over a thousand years. Only a Cargo Cult can claim slipping in a $5 billion note into a soda machine to get a Coke is healthy inflation.
The Cult of Employment
The third major Cargo Cult centers on employment. The general observation is that an economy where unemployment is low, we observe higher rates of general prosperity and growth in the population. The reason for this is as more people produce desired goods and services, there are more goods available for trade.
However, the State’s Cargo Cult shows up once again. They see that if employment increases, the nation gets more prosperous. So, they think, why not just employ more people? The State begins to lever its Monetary Cult to subsidize industry to induce more hiring. It will subsidize projects or it will directly hire more people in expanding bureaucracies. These new workers drive down the unemployment number and, with it, the expectation of future riches.
The Cult, again, misses the mark by creating a superficial facsimile of a functioning economy. The State will subsidize failing industries to keep people at work and create absolutely bizarre jobs within the bureaucracy that have zero benefit to anyone.
The core of the problem is that “more jobs” is actually a bad thing that the Cult doesn’t comprehend. Economic advancement occurs when individual industries, over time, see lower levels of employment in relation to the output. Whenever a politician promises a new solar plant will “create jobs,” what he’s doing is communicating to the public that the cost of their energy will increase. Adding more people to do something that is already done isn’t a good thing.
The method by which the State Cargo Cult creates employment makes us poorer. The State starves new productive industry by incentivizing legacy industry to maintain, or increase, employment levels relative to the level of output and burdens the broader economy with useless bureaucratic and regulatory functions. It’s done to maintain a promise to keep unemployment down because, it’s assumed, employment means prosperity.
Modern Magical Thinking
For all of our modern advancements, humanity is still susceptible to primitive behaviors. Science has, in the modern world, replaced the Church as the new religion. Like many old religions that attempted to explain natural phenomena under the guise of the supernatural, modern science attempts to explain economics through a lens of magical thinking. The Cargo Cult extends far beyond economics, too. It can be found in law, societal structure and even the business world.
It’s important to understand that no one is immune to this way of thought. The only reason the people of Tanna worshipped John Frum was not because they were somehow stupid or unsophisticated. They were exposed to something they had no frame of understanding and attempted to integrate it into their comprehension of the world.
If anything, the people of Tanna are quite a bit more sophisticated and intelligent than the modern State. Unlike the State, when presented with evidence that they were misunderstanding the world, worship of John Frum declined. The State, on the other hand, when presented with evidence it misunderstands economics, will double down on its old beliefs.
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