Intro to Economic Life 8: Economic Numbness
Intro to Economic Life 8: Economic Numbness
Why our system is an elephant we can't see, or feel
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In Part 6 we looked at how a market society creates systemic pressures - like the growth impulse - that will fragment things through commodification. Those same processes pull us further from each other and from our ecological systems. So, if you stopped a random person on the street and asked them to visualize an ‘economy’, they’re not likely to conjure images of interconnected communities enmeshed with the Earth. Rather, they’ll default towards imagining a mass of disconnected strangers trading commodities.
This fragmented view starts to creep into our inner worlds too. In Part 7 we saw how corporate capitalism appears to us as a series of fragmented interfaces. We touch different parts of our system at different times, and are encouraged to create disconnected personas for each touchpoint.
It reminds me of the Buddhist fable of the Blind Men and the Elephant, which tells the story of blindfolded sages who touch different parts of an elephant - tail, thigh, ear, leg, tusk, and trunk. They imagine them to be a rope, a wall, a fan, a tree, a spear and a snake. The moral is simple: if you can’t see - or feel - the bigger picture, you’re going to imagine it as several smaller pictures.
This happens in our economic life. Look at any newspaper and you’ll find stories with headlines like ‘US consumer sentiment drops’, ‘Germany faces shortage of skilled workers’, or ‘shareholders optimistic about tech stocks’. They’re presented as separate pictures of fundamentally different sorts of people with different logics, and yet all of us could be all of these at once. A German immigrant to the US is a worker as they walk to the office in the morning, but if they stop outside to buy a coffee first, they’ll be a ‘US consumer’. If they ignore the Starbucks and drink the office coffee instead, they’re a saver, someone who opted to not spend. Perhaps they’ll put that money towards buying extra shares in a tech company. This single person could be a source of all the newspaper headlines above.
We seldom think like this though. Rather, we build separate senses of ourselves as we interact with separate interfaces that are distanced from underlying reality. For example, your ‘consumer’ persona browses a supermarket shelf, which is an interface that hides hundreds of different underlying supply chains. Later, your ‘saver’ persona thinks about their pension, which might be invested into numerous mutual funds that collectively invest into hundreds of corporations that own tens of thousands of underlying subsidiaries all over the world. As your consumer persona picks up a carton of soya milk, they’re totally unaware that your saver persona might be indirectly invested in companies that supply the firm they’re about to buy a product from. Your saver persona doesn’t know that either, because all they see is an account statement from an investment manager.
Many steps removed, your consumer persona might actually be one of the sources of income for your saver persona. Nevertheless, these different parts of yourself not only appear as strangers to each other, but as strangers to the underlying reality of what they’re doing. This is what Marxists would call ‘alienation’. The underlying reality is that each of us is a whole person in a whole system, but we don’t perceive that. Rather, we perceive fragments of ourselves in fragments of the system. It’s little wonder that we struggle to understand the ‘elephant’ right in front of us.
Seeing the elephant
In Part 7 I encouraged us to zoom out and look at that elephant by using images from my Lego Model of Corporate Capitalism series, like this one:
This is a highly simplified representation of the interlocking parts of a single corporation. Each of those parts, however, can be abstracted up a level to represent entire sectors, markets and classes. As a class, creditors and shareholders are big players in the financial sector, and that zone between them and the corporation is called the financial markets. The zone between different working classes and the corporation is called the job market. Suppliers seek to sell into the B2B (business-to-business) markets, while consumers operate in the consumer markets, which also get called B2C (business-to-consumer) markets.
This is a useful start, but the Lego image is somewhat mechanistic in appearance, so let’s loosen it up a bit by identifying some broader ‘centres of gravity’ that the different components are coming from…
This image doesn’t cover every possible class and player, but it’s close enough. Let’s now remove that background image of the single corporation to reveal the broader structure of corporate capitalism more generally…
At a meta-level, corporate capitalism - like our elephant - is a whole system that needs to be seen as one, but it’s constructed in modular parts that are held together through different interlocking markets. In Part 5 we looked at how the ‘market vortex’ begins to form, but nowadays that vortex can also seen as a series of sub-vortices in complex symbiosis. For example, the corporate sector sells shares and bonds into the financial markets in exchange for money, which they’ll use to buy assets from a supply chain, and to hire workers in the job markets. Those workers will input their labour into the corporate sector to operate the assets, which will output goods into B2B or B2C markets (depending on what industry they’re in), and thereby extract money back into the financial sector. Small slivers of that money might then end up with retail investors (like our aforementioned mutual fund saver) who might use that to buy more things.
There isn’t really a beginning or an end to this system, but there are systemic tendencies within it that pull in some directions over others. For example, companies have got bigger over time, rather than smaller, and inequality has got worse, with small numbers of people having vastly more than others. The system certainly tries to constantly expand and accelerate, but it also goes through periodic contractions (‘recessions’). Needless to say, over time people have attempted to modify these systemic tendencies through policies, regulations and special bodies that seek to manage the relations between the different parts. For example:
Boards stand between shareholders and managers, to make sure managers are acting on behalf of shareholders
Unions might stand between the workers and managers, to fight for better pay and working conditions, and to lobby for better workplace regulations
Government regulators will step into all the markets to try steer them: Labour regulations govern relations between companies and workers, consumer regulations govern relations between corporates and consumers, and financial regulations might govern relations between large financial institutions and smaller retail investors, or between the finance sector and firms. There’s also corporate governance regulations to govern relations between shareholders and managers
A huge aspect of the picture is the monetary system, with central banks that will try affect the different ‘sub-vortices’ through monetary policy and governments trying intervene via fiscal policy. Governments can also try use anti-trust laws to break up huge corporations into smaller parts, but those parts will often seek to reassemble themselves in a new form somewhere else in the system. Individual corporations frequently break sections off themselves and then recombine in some new cluster through mergers and acquisitions.
The politics of disconnection
Most of us struggle to see this picture of complex and morphing interdependency. Rather than perceiving ourselves as passing through different ‘centres of gravity’ in a large interconnected system, we’re trained to just see separate pictures. The consequences of this are highly political. For example, supermarket executives might brag about how the serve consumers with cheap goods, but those cheap goods might be cheap because the corporation uses its market power and economies of scale to drive down worker wages or dominate over SME suppliers.
Those very same consumers might feel frightened by ‘cost of living’ increases, because their wages are not going up as fast as prices, but we live in a closed system and the prices are being paid to the companies. So, if a higher price is being paid to the corporate sector while wages aren’t increasing, who is claiming the excess? Well, look to our diagrams: it’s the shareholders and managers.
If workers realize this, however, and go on strike, the shareholders of businesses can get consumers to turn against them by claiming that the workers are disrupting the consumers, or that the demands for higher wages are themselves the source of inflation. Unless you can see the interlocking parts of the sub-vortices, it’s going to be tricky to untangle these claims.
I place the corporate sector in the middle of the image above because the corporate sub-vortex is particularly strong. It pulls upon us, either directly through products and jobs, or indirectly through supply chains, pension funds and so on. Even if you work for a small company, it will often be dependent at some level on corporate products or corporate customers. This means many of us will consciously or unconsciously orientate ourselves towards mega-firms.
That said, there isn’t really a single centre to our system, because the parts fold into each other: in the image above, for example, I have currents moving around the outside from workers into retail investment and consumption. Furthermore, there are other strong sub-vortices such as the public sector, which sometimes aligns with corporates, and at other times pushes against them.
As an imaginative exercise, try substituting different parts of the picture as the centre. For example, what does it look like when you place the public sector in the middle? China is a major player in the global capitalist system, and yet Chinese corporates often orientate themselves around the Chinese state, at least at home. In the UK, by contrast, the financial sector is the core national industry, which means everything orientates around it, a phenomenon sometimes called ‘financialization’.
Four Views on a Compartmentalized World
As these different parts of corporate capitalism get played off against each other, our fragmented internal personas get played off against each other too. Perhaps you are paid too little at work, and are worried about the cost of living, so you seek to compensate by making money in the stockmarkets. You buy shares in companies that are run by managers that believe they must boost profits by paying workers less while charging consumers more. See what just happened there? One part of yourself seeks to benefit from the suppression of two other parts of yourself.
To understand this, we need to travel to different vantage points in the system to look at the world through the eyes of the persona or group who resides there. How does each perceive their own situation and problems, and how does this relate to the others? I go through four viewpoints below. I’m going to start with the world through the eyes of the financial sector.