Some economists declare that a ‘recession’ is two consecutive quarters of negative GDP growth. And as I write this book there is endless speculation in the economic press as to whether there is, or will be, a recession. But the answer to that question is not what businesspeople or policymakers want to know – or ought to want to know. They want the answer to a question less specific but more pertinent to their decisions. ‘What is going on here?’ That formulation sounds trite. But we live in a world of radical uncertainty, and every situation, every point of decision, is unique. And in that world, the question ‘What is going on here?’ needs to be posed again and again.

Central planning has two big problems: it’s planning, and it’s central. The first of these problems is perhaps the most obvious: a national economy is a big and absurdly complicated thing and the idea of writing down a huge spreadsheet or computer program to make all the decisions is an impossibly difficult task. But the second is perhaps the more wicked of the two: the problem of getting the information necessary to do any planning at all, and then centralising it in one place where the decisions are made. The problem of centralisation of information has a lot of logistical aspects, of course — the Soviet Union was always running into problems because it couldn’t change plans quickly enough in response to shortages and gluts. But it also has serious conceptual problems; Friedrich Hayek won a Nobel Prize and can fairly be regarded as on of the antecedents of cybernetics* for noticing that ‘information’ itself is a tricky concept, and that it can’t necessarily be treated like any other commodity.

*Stafford Beer records in one of his essays that he had read Hayek’s work in the 1950s and thought it was excellent stuff; he was profoundly shocked in the 1970s to find that Hayek was an economic advisor to General Pinochet.

In the years when it looked like things were going well, the central banks developed a view of the world in which the changing structures of global finance weren’t part of their job. They didn’t pay attention to the debt bubble, and they had got rid of the communication channels that might have carried the red-alert warnings up to the highest levels of policy-making. More precisely, they had got rid of the translation systems. There was no shortage of people warning that there was a problem in 2006 and 2007, but none of these warnings was given in a form that could be recognised by the world’s central bank governors as requiring action. A failure to build System 4 and balance its variety against System 3 is itself a failure of System 5 — that’s the function that has the job of balancing ‘here and now’ against ‘there and then’. So, using the viable system model to diagnose the causes of the global financial crisis, we end up with a rather interesting conclusion. Where things went wrong was a matter of philosophy. The central banks had an identity-creating function, but it had failed; it defined their purpose in such a way that they failed to understand that particular kinds of information were relevant to them.

One of its signals has been so amplified that it drowns out the others. The ‘profit motive’ isn’t something that can be ascribed to corporations — they don’t have motives. What they have is an imbalance between the two key higher-functions — here-and-now versus there-and-then. They aren’t capable of responding to signals from the long-term planning and intelligence function, because the short-term planning function has to operate under the constraints of the financial market disciplinary system. Either a corporation has a survival condition based on needing to make a monthly interest bill, or there’s an implicit threat from the financial environment that if it fails to behave in a particular way, it will be taken over by an outside entity.

If you take away that pressure, it’s quite likely that the natural equilibrium of corporate decision-making systems will be less hostile to human life. Viable systems fundamentally seek stability, not maximisation.

If every maximising system has to have a higher-level system governing it (to make sure it doesn’t go bonkers), then that logically implies that the top level of any decision-making system that’s meant to operate autonomously can’t be a maximiser. And so, the governing philosophy of the overall economic system can’t be based on the constrained optimisation methodology that’s currently dominant in the subject of economics. Otherwise there’s a risk that the system will go bonkers, and that it will start pushing maximising objectives, oblivious to the danger that it’s on course for making human life impossible. Like it actually has done.