Here is a brisk Samizdata posting about our current financial woes:

A lot of people in the financial industry are trying to figure out the individual costs to them of the $50 billion Bernard Madoff hedge fund fraud. The allegation is that Mr Madoff operated a "Ponzi scheme" scam wherby hedge fund investors were paid money, not from the performance of the funds, but by money paid in by new clients. As soon as the inflows of new clients dried up – partly due to the credit crunch – the scam came to light.

As a result of this case, no doubt those who have been calling for much tighter regulation of financial markets will have yet another stick with which to hit the system, never mind that fraud is and should be prosecuted under the normal law of the land anyway.

But what interests me, however, is that systems such as Social Security in the US or public sector pensions in the UK have been funded under what is, essentially, a Ponzi system, whereby retirees depend on future generations continuing to fund a system that is rapidly becoming broke.

Just how stupid is this crass piling up and compounding up of social democratic state entitlements turning out to be?

Pretty bigly stupid:

Federal obligations now exceed the collective net worth of all Americans, according to the New York-based Peter G. Peterson Foundation. Washington politicians and bureaucrats have essentially mortgaged everything We the People own so they can keep spending our tax dollars like there’s no tomorrow.

The foundation’s grim calculations are based on Sept. 30 consolidated federal statements, which showed that Americans’ total household net worth, diminished by falling stock prices and home equity, is $56.5 trillion.

But rising costs for unfunded social programs like Medicare, Medicaid and Social Security increased to $56.4 trillion – and that was before the more recent stock market crash, $700 billion bank bailout, and monster federal deficits chalked up in October and November.

“Given more recent developments, it’s clear that America now owes more than its citizens are worth,” said Foundation president David M. Walker, the former Comptroller-General of the United States who has been trying to warn Americans of the coming financial tsunami for years, to no avail.

Yet, we are ponderously informed, the basic problem is ‘the dangerous politics of market radicalism’:

In looking at possible outlines of a post-2008-crisis state, the heart of the problem that it will have to address is the entity already mentioned, the overmighty subject, in this case, the financial institutions deemed to be "too big to fail".

Whatever regulatory regime is established, preventing the emergence or re-emergence of such bodies must be central and, given climate change, targeting these bodies with an added green agenda in mind would help with its legitimacy, in order to offset the dominance of capital.

Crikey.

Dead wrong.

The problem rather is that the state has been thought to be ‘too big to fail’.

Yet ‘the state’ in its modern form is failing as well, as its untrammelled Ponziness is increasingly starkly revealed.

Here’s a thought.

What if Democracies are inherently prone to be irrational? What if they tend to give the mass of people with Less the power to impose unsustainable ways of grabbing More? And that the contradictions in insisting that water can flow uphill eventually overwhelm society?

What if, thanks to new technology, smart Authoritarianism-Lite administrations can now evolve, presiding over dynamic economic activity based on plenty of personal liberty in that sphere but without giving the masses the chance to vote for strategically stupid welfarist choices?

The argument has been for a long time that in fact Democracies are inherently smarter than Authoritarian systems, Heavy or Lite, because the pluralism which comes from voting also brings with it a far superior ability to be honest about Facts, to analyse problems better and therefore to absorb shocks and change course.

The collapse of the Soviet Union and Russian Communism was thought to represent the culmination of that contest, with a knock-down victory for Democracy.

But maybe that was the beginning of the end of another, deeper phase – the end of the illusion that Democracy as hitherto practised was and must be the sole guarantor of strategic rationality..?