Capitalism is dead. Long live capitalism. Confused? I’m talking about capitalism that recognizes its negative side effects.
Capitalism is inherently a good thing. It comes from the Latin caput, meaning wit, invention, discovery, and enterprise. Capitalism is using our wits in pursuing economic initiatives.
And pursue we have. In his new book, More from Less, Andrew McAfee says capitalism has created a country where Americans are now consuming less natural resources than in previous years, even as our GDP has continued to soar. That’s good. Even so, McAfee acknowledges, capitalism struggles with “externalities.”
The Oxford Dictionary defines “externality” as “a side effect.” In capitalism’s case, it’s the consequences that affect other parties without being reflected in the cost of the goods or services involved. Yes, capitalism has some negative side effects.
Like worker dissatisfaction. According to a 2017 Gallup study, two-thirds of American workers are disengaged at work. Of the country’s approximately 100 million full-time employees, 51 percent feel no real connection to their jobs, and thus they tend to do the bare minimum. Another 16 percent are “actively disengaged.” They resent their boss, jobs, and tend to gripe to co-workers and drag down office morale. This negative side effect makes it more difficult to attract top talent and retain it.
Widen the lens to see why. Many workers feel the effects of financialization. The term describes the shift in the economy from production to finance. The revenue and profits of the financial sector have become an increasingly large segment of the worldwide economy (33 percent of employed seniors in the 2015 Harvard University class went into finance or consulting). The benefit is millions of people have easier access to credit while risk has been spread through derivative instruments, better leveraging capital.
The negative side effect is financialization tends to commoditize the goals of work and to emphasize wealth maximization, reducing the meaning of work to nothing but price. Economic prosperity for a few (at the top) comes at the expense of social wellbeing for the rest. This is crony capitalism, where those on top take care of each other at shareholder expense (google: “golden parachutes”). Or it’s collusive capitalism, where corporations create a competitive advantage through the cooperation of regulators or politicians (google: “earmarks”).
Widen the lens further. Financialization is intertwined with globalization. The term refers to the efficiencies and extraordinary technological innovations wrought by social technologies. These have brought about extraordinary economic growth. But there are negative side effects, including greater income inequality and economic dislocation.
Widen the lens even further. Financialization underwrites our communication technologies that have enabled greater connectivity and increasing velocity. But there are negative side effects. They include communication overload, shrinking attention span, diminished social skills, anxiety, strained marriages, broken families, and social isolation.
A 2018 survey from the health care provider Cigna bears this out. As Americans increasing live on their mobile devices, they suffer from strong feelings of loneliness and a lack of significance in relationships. Nearly half say they sometimes or always feel alone or “left out.” Thirteen percent of Americans say that zero people know them well.
Widen the lens and we see how social isolation contributes to our suicide rates overall having risen by over 30 percent this century. Teenage suicides are rising at roughly twice that rate. Every year, 45,000 Americans kill themselves.
Social isolation makes it difficult to resolve conflicts. This requires trust, and trust is built by investing in relationships. Most Americans lack sufficient investments in friendships to risk trying to resolve conflicts. We instead stuff them. Depression results.
Widen the lens further. Social isolation and depression contribute to drug addiction. The number of overdose deaths is spiking, from 16,849 (1999) to 70,237 (2017). Of that number, around 47,000 overdosed on opioids. That means that in less than two years more Americans die of opiate addiction than died in the entire Vietnam War.
Capitalism is not solely responsible for these negative side effects. Nor is financialization. Nor is tech. Leaders in these fields do, however, tend to ignore their negative side effects.
The remedy is stepping back, widening the lens. As Chip Heath and Dan Heath write in Decisive, organizational leaders tend to narrow-frame decisions. Better decision-making requires asking, “How can I widen my options?” It can be done.
It must be done. Widen the lens and we see how corrupt forms of capitalism (as well as financialization) have caused most to forget what “unsustainable” means. It means there are ticking time bombs. Next week, I’ll describe how we ignore them at our own peril.