It is probably not the best time to bother you all with my two cents. There is some pretty crazy shit going on out there, and everyone is eager to have a go at explaining what the hell is going on. Besides the fact that most of what is published is not very interesting, I am stunned by the lack of perspective the media provide. Yes, we do see a couple of buffoons in the political arena, some of them even successful. And yes, there is a terrible war going on in the Middle East that no one is prepared to end, and yes, we have seen assaults, but the idea that 2016 is an annus horribilis, does not really fit the facts. At least, not if you believe the situation today is a lot worse than many other periods in the last century.
Yet, we all realize that a crisis is imminent. Both the Brexit referendum, as well as the race for the White House make perfectly clear that both countries are complete plutocracies. And this is true of pretty much every western country. We like to draw the attention to the 1% that owns 50% of all wealth, but think of it this way; 1% of all wealth is owned by 50% (or 70%, or 90%, depending on where you live) of the voters. What we are witnessing today, is the fact that a plutocracy is extremely unstable.
A very interesting intervention this week was published by the Guardian, that by the way this week published its biggest loss ever. Stephen Hawking wrote an article about our view on money and wealth. He links the view on money and wealth to the Brexit, and argues that we need another perspective.
His article is refreshing, in that it has a hopeful tone, and also does not try to explain the Brexit by pointing out that people have been ‘fooled’. That is the current narrative on both sides of the pond. Brexit voters don’t understand what’s at stake, and Trump supporters do not understand they are supporting something against their own interest. In other words, democracy is great, but is dangerous in the hands of stupid people. This, by the way, is a common story line, which is also used around trade agreements, common currencies, or indeed the EU at large. Many of the opinions published build on the idea that perhaps the interests of the common people haven’t been explained properly. It is even used for Turkey. The poor supporters of Erdogan probably do not know what is good for them.
Years ago, my brother worked for a Belgian conglomerate. The divisions of the company were each led by one of the four – kind of colorful – brothers, who were trying to outsmart each other all the time. One of the divisions consistently had problems. It was led by the only brother who had a university degree. “Been in school too long”, his father, the founder of the company, used to say.
Recent academic research indicates that perhaps our elites have been too long in school as well. In an experiment by scientists from Yale, respondents were asked to play a game, in which they could make choices about the division of a cake. They could choose between an equal or a less equal distribution. The trick here, was that an unequal distribution would lead to a bigger cake, and an equal distribution to a smaller one.
The outcomes were remarkable. Respondents with only lower education practically all chose the ‘fair distribution’ option. Respondents with higher education, explicitly took the size of the pie into equation, and how many people would ‘win’ given a new distribution. In other words, they took the efficiency of the solution into account.
What this example shows, is that the way economic progress is measured, and thus how big interventions – and elections – are sold to the public, are not in line with how most of the public think. Intuitively, they put an enormous premium on equality. But they are told, that Brexit, or TTIP, or a treaty with Ukraine are good for economic growth. A bigger pie, that is, not an equally distributed one. So what is the problem? Do many people just fail to understand what’s good for them? Probably not.
It is obvious that more efficient solutions are not good for everyone. The truck driver from Manchester who lost his job to a Polish immigrant who works for a third of the pay, is not wrong in believing that the open borders were not good for him personally.
But it may also be that the intuitive strategy of people who haven’t been in school for too long, in the end works better. There is a lot of scientific evidence that people in relatively egalitarian communities are happier. Also, focusing on egalitarian solutions could play out well in games that are often repeated. The cement of a community is the understanding that others want to treat me as their equal. The moment I stop believing that, I will not support the system anymore. And this is exactly what we see today. The terrorism and the crazy elections, are two sides of the same coin. The majority is checking out.
The Belgian economist Bernard Lietaer pointed out that efficiency and resilience can be enemies. Think about agriculture. A monocrop often has higher yields than a mix of varieties. So it is more efficient. But it is also a lot more vulnerable for diseases, and will not generate new species. So it is less resilient.
Western politics has created a combination of highly efficient systems and a growing inequality. This has brought high levels of wealth, but it cannot be pushed any further. So, our elites do not need a new narrative. They need a new strategy. Mindlessly following corporates that want further integration and globalization is a dead end street. We need a new approach. Hawking mentions a couple of ideas in his article, and refers to them as ‘cathedral thinking’:
We will need to adapt, rethink, refocus and change some of our fundamental assumptions about what we mean by wealth, by possessions, by mine and yours. Just like children, we will have to learn to share.
Good advice. But also good to realize how far this is removed from contemporary politics. Most opinion leaders of today will have to leave the stage before this will change for the better.