I just finished reading What Went Wrong With Capitalism, by Ruchir Sharma, chairman of Rockefeller International, who spent twenty-five years with Morgan Stanley, where he was head of Emerging Markets and Chief Global Strategist.
The core theme of the book is that government overreach, through a combination of excessive and unceasing monetary stimulus, unsustainable government debt, regulatory bloat, and the federal government’s willingness to bail out any and all ailing companies and industries, are at the heart of what ails American economic life: income and wealth inequality, high inflation, job inequality, and the fact that our children cannot look forward to a better life than we have enjoyed.
The big winners have been the financial markets (now worth $120 trillion in the US, $390 trillion globally) in general and billionaires in particular (now more than 2600 in the US alone). The losers, of course, have been American workers (other than the finance industry, which “takes home nearly 10 percent of all U.S. wages, double its share in 1980.”) and consumers, due both to growing job inequality and high levels of inflation that will not come down soon, no matter who wins the November election.
An alternative title to this book might be: Why Can’t We Help Ourselves? If it is commonly believed that capitalism and democracy are broken, as they appear to be, why did we break them? If it is, after all, the politicians that can’t say no, it is we they can’t say it to.
We live in an age of angst and addiction: opioids, alcohol, gambling, eating, anger, consumption - and the list goes on. And now, according to Sharma, low interest rates, exorbitant government spending, and the belief that it is the government’s job to eliminate the risk inherent to life.
Dissonance is a term used to describe the concurrent existence of conflicting elements. In psychology, cognitive dissonance is the mental anguish that arises from contradictions in our beliefs or between our beliefs and our actions. In music it is the unpleasant product of conflicting sounds. And in society it gives us politics and political parties. Why else would we need them?
Dissonance plays a role in addiction and anxiety, both of which can be an attempt to reconcile, or at least obviate, the contradictions of cognitive dissonance. And it is at the heart of the political division, vitriol, and hatred that currently defines American politics. Dig down into the context far enough and I believe you would find that most Americans want the same thing – to satisfy Maslow’s Hierarchy of Needs (i.e., food & water, safety, belonging, esteem, self-actualization). What we disagree on, now with a great deal of angst and grievance, is how to achieve them.
Disagreement, by definition, results from an attempt to reconcile conflicting elements. But how do these contradictions come to be in the first place? Why is there a need for reconciliation?
The simple answer, as I’ve written many times, is that reality (i.e., the universe, nature, life) is defined by twos. Left and right. Up and down. Two sides to a coin. Etc. And each element of the two is part of a contradiction which can only be reconciled if it is in balance with the opposite element. Too much of either element and you have dissonance.
One source of dissonance that I believe has always been overlooked is the “division of” phenomenon which began with the division of labor (DOL), a trend often recognized but seldom fully appreciated. Having dug into the context, however, I believe DOL is the source of a lot of the economic calamities Sharma refers to and a lot of the discord contaminating our social and political lives today.
It all began in earnest with the industrial revolution, was enhanced by the birth of “scientific management,” and expanded from the factory to the office to the field to our personal lives by the digital revolution. The dissonance that originated with DOL in our factories now extends into the furthest nooks and crannies of our economy, our culture, and our politics. It defines us, and it’s making us very uncomfortable.
It’s easy to see how the industrial revolution resulted in the continuous division of labor. Craftsmen used to make complete things, from furniture to the early automobile. Now they are just cogs on the wheel of production, performing narrowly defined tasks in a pre-defined way with little flexibility or the satisfaction that comes from successfully resolving the inherent contradictions that ultimately require resolution in any process, mental or physical.
The mechanization of production tilted the contradiction between the freedom and pride of craftsmanship and the desire for greater productivity and product consistency toward the latter through rigid production lines and multi-purpose machine tools. That, in turn, gave birth to the need for middle management. Workers, once left to define their own workflow and resolve the inherent contradictions therein, are now bound to rigid routines, measured and calibrated, and “managed” by others.
The digital revolution brought the same rigidity to the office where staffers are now subordinated to pre-defined processes and systems designed to virtually eliminate decision-making in the interests of productivity and consistency. Office workers are now the assembly line workers of old.
But DOL didn’t stop there. It is the division of labor which is at the heart of the gig economy. Uber and Lyft didn’t create ride sharing so much as they created the first driverless taxis through technology that didn’t eliminate the drivers, but did enslave them. Delivery drivers, once given a van of goods and left to their own, are now told exactly which routes to drive and the mandated order of deliveries. And, of course, their actual performance, as in the factories and offices, are monitored and measured in real time.
Our lives beyond the workplace have followed the same DOL path. Division is really just another word for reducing scope, and virtually everything about our lives has become more narrowly defined, resulting in our not doing a lot of things we were doing before. For most of my life, for example, I went to one doctor, who pretty much took care of everything. Now I go to a network of specialists, each using very specialized (and expensive) equipment, to assess my health. (And we wonder why health care costs are so high.)
Even our non-work activities have followed the trend. I have made a respectable living wage throughout my career, but it never occurred to me, until entering old age, not to mow my own lawn, or to reach for the Yellow Pages, the old Angi’s list, when I needed to free up a sticking door, repair a leaky faucet, or replace the agitator cuff in the washing machine. While I could easily afford to hire out such responsibilities, these were the tasks of living, and while they weren’t always convenient to perform, they always provided some sense of satisfaction when completed. (Replacing that rotator cuff remains one of my proudest achievements ever.)
Technology itself has greatly contributed to the DOL phenomenon. The technology behind our digital machines is not created by any one company. The tech unicorn boom was built on specialization. Behind the huge tech monopolies is an ecosystem of specialists who address only one small component of the total process. Millions of computers and servers using Microsoft Windows, for example, were recently disabled by a faulty update issued by a third-party cybersecurity firm, CrowdStrike, causing flight delays and operational failures the world over. That’s DOL.
Our political process has followed the same DOL narrative with Congress functioning more like an automated assembly line today than the deliberative body the Founding Fathers designed it to be. While the practice was relatively uncommon 30 years ago, strict party-line voting among representatives and senators is now the norm. Seldom do our elected officials make the effort to formulate an opinion on proposed legislation. They simply do what they’re told by party leaders, essentially negating the primary purpose of representative democracy. Only two opinions, that of Mike Johnson, who in his last contested election was elected by fewer than 200,000 Americans, and Chuck Schumer, really matter. The rest is just dissonance.
The problem with all this dissonance is the imbalance it creates. Our reality is designed to seek balance, not dominance. Nature is defined by the circle of life, the natural cycle of birth, death, growth, and rejuvenation. The economy is made healthy by cycles. Our bodies grow strong through effort and rest, exercise and recovery. Our lives are made rewarding and satisfying by resolving the conflicts and contradictions we face each day. That is what defines the accomplishments that matter.
I used to have an extensive woodworking shop where I spent hours crafting and repairing furniture. Like most tasks, it involved constantly resolving open questions, all of which represent possible contradictions. What do I do next? Do I use this material or that material? Resolving contradictions is what any process, whether you are building a toy chest for your children, as I did, or a giant social network, like Mark Zuckerberg does, is really all about.
If we take away the ability to resolve conflict on our own, which is ultimately what DOL does, we have deprived ourselves of the ability to resolve the dissonance inherent to life. We have merely masked the dissonance, not resolved it, and by doing so we have eliminated the ability to find fulfillment and joy.
Today I could buy a nice toy chest for my daughters at Ikea or Wayfair for far less than I spent by any measure. And it would probably not have all the little flaws you will find in every crafted piece of anything. Resolution is not a perfect process without DOL. But buying it off the assembly line would not have brought me the satisfaction I felt when I showed that finished toy chest to my daughters for the first time.
In closing, Sharma writes: “Old mental models of the economy need to change. Capitalist leaders have come to think and speak of the market economy as a machine, controlled by human engineers who have the power to ‘fine tune’ this ‘engine’ of growth. But the economy is less a machine than a natural ecosystem, less an engine than a complex organism, like a forest or ocean.” And nature, of course, doesn’t always move in one direction. It is constantly juggling the dissonance of life and death.
The same is true of the way we live our lives. The DOL path has led us down a narrow path of living wherein we have ceded control and opportunity in the pursuit of convenience and acquisition. By so narrowing the way we live we have eliminated choice and effort, but sacrificed the pride and joy of accomplishment. Dissonance is winning.
The key to managing and optimizing dissonance is balance. That’s true in nature. It’s true in music. It’s true in life. Balance is the sweet spot to bringing dissonance into harmony, to successfully juggling the contradictions and inconsistencies inherent in nature, an economy, a political system, or a life. Specialization, like DOL, must have its limits.
photo credit: shutterstock.com/JulieStar
Consider buying my latest book, Unintended Consequences: The Science of Context. It’s available at Amazon in both paperback and Kindle formats and addresses a plethora of problems for which the solution is buried in the context.