Economic Insanity: Chapter 1

Part 1

Questioning the System

When he was young Phædrus used to think about cows and pigs and chickens and how they never knew that the nice farmer who provided food and shelter was doing so only so that he could sell them to be killed and eaten. They would “oink,” or “cluck,” and he would come with food, so they probably thought he was some sort of servant.

      He also used to wonder if there was a higher farmer that did the same things to people, a different kind of organism that they saw every day and thought of as beneficial, providing food and shelter and protection from enemies, but an organism that secretly was raising these people for its own sustenance, feeding upon them and using their accumulated energy for its own independent purposes. Later he saw there was: this Giant. . . .

      The Giant began to materialize out of Phædrus’ Dynamic dreams when he was in college. A professor of chemistry had mentioned at his fraternity that a large chemical firm was offering excellent jobs for graduates of the school and almost every member of the fraternity thought it was wonderful news. . . .

      So here was this Giant, this nameless, faceless system reaching for him, ready to devour him and digest him. It would use his energy to grow stronger and stronger throughout his life while he grew older and weaker until, when he was no longer of much use, it would excrete him and find another younger person full of energy to take his place and do the same thing all over again.

                                          —Robert M. Pirsig,

                                            Lila: An Inquiry into Morals

Chapter 1

Feeding the Bastard Child

Most of you [graduates] are here [at commencement]

today only because you believe this charade will help you

get ahead in the world. But in the last few years things

have got out of hand; “the economy,” once the most

important thing in our materialistic lives, has become

the only thing. We have been swept up in a total

dedication to “the economy,” which like . . .

[a] massive mudslide . . . is rapidly engulfing

and suffocating everything.

—Hugh W. Nibley,

“Leaders and Managers”

The original American Dream, the Dream that inspired the Founders, has diminished in our day. Indeed, it has shriveled from a grand and comprehensive social ideal to an economic wish list, a self-centered program of selective prosperity in which we make our mark as consumers, not as producers and creators. The economy has become our greatest concern—for the simple reason that we have allowed it to control both our collective and individual lives. Yet in the context of what America once meant, the economy is but one small part of a much larger ideal, an ideal that, sadly, we have shoved into the background.

This is not to say that economic matters are unimportant. Indeed, if the economy is ailing, all other aspects of the American Dream can’t help but be affected. But a healthy economy alone will not restore the American Dream any more than giving an AIDS patient a million dollars will make him well again. Several other factors must first be put back into the American equation, for the Dream is not just economic—it is also political and social in nature. Instead of spending time and energy trying to make the economy more efficient, we ought first to put economics back into the social and political context where it rightly belongs.

In the day of Jefferson, Adams, and Washington, the economy was not the primary adhesive that held the people together. Indeed, economic differences almost prevented the thirteen original states from uniting into one country. Today, by contrast, it seems the economy is all that holds us together. In every other area of life, we find only divisiveness. The common ideals, values, and dreams that once united us as a people are fracturing and fading before our eyes. The only thing we agree on anymore is that America is in deep trouble, and the only thing that binds the Union together is our voracious economy.

Everything Is Economic Nowadays

Perhaps the best way to cut through the layers of complex theory, conflicting opinion, and thoughtless tolerance that obscure our view of this insatiable beast is to ask an almost insultingly simple question: How do we best satisfy the physical needs and wants of human beings? This is the fundamental question of economics, but unfortunately it is not as simple to answer as it is to ask. Indeed, seventy-odd years of East-West tension resulted from this question, for communism offered one answer (a strictly controlled, centrally planned economy) and capitalism another (a largely unregulated, profit-motivated market), and the world wasn’t quite big enough for both perspectives. Even if we limit ourselves to market-based economic systems, the question is not easy to answer, for the market mechanism is both complex and controversial, fraught with disconcerting moral and social issues.

In spite of, or perhaps because of, its simplicity, this question, to my knowledge, is never expressed so directly in the economics courses offered at our colleges and universities. The reason it is not asked is because it is actually a moral and philosophical, not a mathematical, question, and economics has evolved into a mathematical science.

As a field of scholarly study, economics has distanced itself from real-world concerns and conditions to the point where it has become little more than an exercise in mental gymnastics, a discipline filled to overflowing with complex mathematical models constructed of Greek symbols and impossible, otherworldly assumptions. Economics, the science, is evident in the media-happy, everyday world where we live and work. Facts and figures constantly bombard us: unemployment, cost of living, consumer price index, business cycles, recessions, real wages, inflation, exchange rates, wealth distribution, poverty levels, GNP, GDP, leading indicators, lagging indicators, and so on, ad nauseam.

Economics has reached such a sterile plateau, in fact, that Robert Heilbroner asks in his classic The Worldly Philosophers: The Lives, Times, and Ideas of the Great Economic Thinkers whether there even are worldly philosophers anymore. And his answer is no. “There are certainly a vast number of economists,” he says, “over twenty thousand of them in the United States alone. . . . There is a Nobel Prize for Economics. There are economists in every bank and corporation; there are economists in the newspaper columns in the morning and on the television broadcasts at night.” But are there worldly philosophers? “Not if we mean by the term great prognosticators or great visionaries. . . . In the main, economics has become a technical, often arcane calling, and ambitious projections of imagination into the future are no longer listed among its aims.”¹ Although there are notable exceptions, most economists today, even some Nobel Prize winners, are technicians, not philosophers.

Why is this so? Because the realm of economics has become a world unto itself, a world of numbers and equations that are becoming less and less relevant because they are no longer attached to the basic questions and issues that spawned the whole field of economics in the first place. Economic thought is now merely an analytical tool, not a guiding philosophy.

Even on the most practical level, economics has distanced itself from the real questions of life and is setting up its own ground rules. We speak of the “business world” because it is a world of its own, and it is consuming the larger world of which it used to be only a part. Sports, entertainment, the arts, politics, the media, medicine, law, education, charity, the family, human relationships—all are being devoured, partially digested, and regurgitated with an acrid economic flavor. Everything is economic nowadays, at least on the surface, and yet few seem willing to look beneath this veneer and ask the questions that troubled the great thinkers of past centuries, questions that make us evaluate our most basic assumptions. Especially since the demise of the Cold War, we have apparently assumed that all the fundamental questions of economics have been put to rest. Capitalism won, communism lost, end of story.

This, specifically, is where we have failed, for those questions have never been answered satisfactorily. The great worldly philosophers debated them and never arrived at a suitable answer. But now there are no great worldly philosophers, no inquisitive minds to attack the larger picture and make us rethink the inadequacies of our system at its most fundamental level. We are in the hands of technicians, who have no interest in a panoramic view.

This particular brand of myopia persists because we have anesthetized economics and severed it from its philosophical underpinnings, because we have interpreted the fundamental question of economics in terms of processes and techniques. How do we best provide for the physical needs and wants of human beings? The key word here is “best,” which on those rare occasions when we bother with the larger view, we have interpreted to mean “most efficiently.” But best can have a much broader meaning. We can define it in moral or philosophical terms. How do we create the greatest good for all human beings while providing for their physical needs and wants? That is a completely different question, one we have yet to answer. Neither communism nor capitalism in any of its various guises has addressed this question in a meaningful way.

Consequently, our present system contains no satisfactory answer. And yet that is exactly where we have been searching. For decades we have been tinkering with the knobs on an old black-and-white TV, moving the rabbit ears around, trying somehow to get a tolerable picture. It has apparently never occurred to us that what we need is a new color TV, or a cable hook-up, or maybe, heaven forbid, to throw the tube away for good and spend our spare time living life in the flesh and not vicariously. We need somehow to become uncomfortable with our present habits of thought and behavior.

The Bastard Child

As suggested by this chapter’s epigraph, “the economy” has become our all-consuming interest. By elevating it above and divorcing it from our political and social aspirations, we have allowed the economy to get out of control—and by that I mean out of our control—to the point where it is now in control. The result is that, to a surprising degree, most Americans live under the yoke of a system from which they are more or less excluded. To be more specific, most Americans are noncapitalists living in a capitalistic system. You can be a noncapitalist in two ways: First, you can disagree philosophically with the basic premises of capitalism. This category is surprisingly small. Second, whether or not you believe the theory, in a practical sense you are not a capitalist unless you possess capital. This group is inordinately large.

Many Americans own stock in some corner of corporate America. But that does not necessarily make them capitalists. If we define capital as “accumulated goods devoted to the production of other goods,” most stockholders cannot consider themselves capitalists just because they own a little stock. Their primary intent is not to produce goods with their capital. To them, investing their savings in corporate America is no different from putting their money in a six-month CD at the local bank. It’s simply the prudent thing to do if you don’t want inflation to get the best of you; and if the stock market isn’t performing so well, then you sell your shares of stock and invest your hard-earned money in T-bills or municipal bonds or soybean futures—whatever pays the highest return. Frankly, these passive stockholders don’t even care whether or not a product is produced. What they care about is the capitalist holy trinity of stock price, earnings per share, and dividends.

Most of these token capitalists are employees of corporations or small businesses. And, as such, they are not independent, they are bound—to their current employers and, more important, to the system. They can escape with relative ease and at any time from their respective employers—and either find a new employer or fight the exhausting self-employment battle— but they can’t really escape the yoke the system puts on them, because they don’t own capital.

These people are, in practice, noncapitalists, because they are dependent. Dependent on what? First and foremost, on their paychecks. But in the larger sense they are dependent on the ebb and flow of “the economy.” Gone are the days when communities were more or less self-sufficient, when people didn’t lose their jobs because of events or changing business practices in some other corner of the nation, or of the globe.

By contrast, let’s assume for a moment that I am employed at a General Motors plant in middle America. If the economy takes a downturn, consumers across the nation will reduce or delay their car buying. Because of lower demand by people I shall never know but on whom I depend, I may lose my job when the plant closes, along with hundreds or thousands of my co-workers. But this is not the end of it. This is merely the stone that causes ripples to surge outward in the economic pond. The collective payroll of my closed plant will now be missing from the local economy. Retailers, small businesses, restaurants, and other services that depend on the disposable income of GM employees will be hurt. Many will fail. Tax revenues will shrink, causing hardship among teachers and other civil servants. Fewer people will have health insurance to cover their medical bills. Charity cases will increase at the hospitals, which will not only drain federal funds but also increase premiums for those who do still have medical insurance. And the ripples spread out further and further. We are all interconnected by “the economy.”

Although their incentives naturally run toward perpetuating the system, even big-time capitalists aren’t immune to the whims and fluctuations of “the economy,” which is infinitely more potent than even the wealthiest billionaires. No one is immune, because our lives are shaped and misshaped by large, unwieldy, impersonal organizations. We’ve become one giant community—a community too large to maintain the balance that interdependence requires, too large to be governed effectively, too large to prevent the individual from being swallowed up in the needs of the impersonal whole, too large, indeed, even to be called a community. We are an “economy.” That’s what binds us together now, not community. Economic ties have supplanted social ones.

And yet “the economy” is nothing more than the bastard child of modern-day capitalism and the illegitimate assumptions that drive it. And now the bastard child is both in control and out of control, simply because we won’t admit to ourselves that somewhere along the road to organizational dominion we sired it by our greed, our ignorance, our self-interest, and our desire for instant gratification. We won’t claim responsibility for it, and therefore it isn’t required to play by the same rules that govern individuals and made possible the birth of our nation.

Nevertheless, we are mortally afraid of disciplining “the economy.” We simply feed it, make certain it keeps growing, regardless of how fat and insolent and burdensome it becomes to us as individuals. “The economy” even dictates our morals, for what is good for the economy, we are told, is good for the American people. This inverted moral imperative then filters on down to the organizational level and infiltrates our lives through the economic activities we pursue during most of our waking hours.

Organizational Morality

Because of the way our particular system has grown up, all that we see as good and desirable in people’s lives—everything from canned beans and high-top basketball shoes to laptop computers and Beethoven on CD—comes from the large organizations of capitalism; therefore these organizations must survive, at all costs. And not only must they survive, they must prosper. They must guard themselves against any future possibility of failing. They must increase their assets, their profits, and their market share, at the expense of any competitors, or the environment, or even their own employees.

Organizations must grow, for if they do not grow, they become vulnerable and may fail. And if businesses fail, dire consequences follow: employees become unemployed, become a burden on society; “the economy” is harmed; consumers have less disposable income to buy the products they want and need; and our standard of living, that elusive economic measure of relative wellness, declines. Therefore, organizations must, absolutely must, prosper. This is the cardinal rule of “the economy,” the highest law of economic America. Large organizations must not perish.

And because of this cardinal law, any act that enhances organizational success can be rationalized, because it works for the greater good of humankind, regardless how repugnant it may be to moral individuals. Thus, because we have exalted economic exigencies above political, social, or moral considerations, organizational morality now supersedes individual morality. Often it even supersedes the law.

Citing U.S. News and World Report statistics, Paul Hawken claims that 115 of the Fortune 500 were convicted of serious crime during the 1980s. No one knows how much misconduct went undetected, but the more important question is this: What was their punishment? Sometimes nothing. Sometimes a handslap, a fine, which can be written off as a business expense. Are they ever closed down, even after a long history of flouting the law? No. Union Carbide lives on, although many victims in Bhopal have not received even a penny of compensation. Indeed, “following the accident, Union Carbide proceeded to liquidate a substantial portion of its assets and give them out to shareholders in special dividends, thus reducing the corporation’s potential payout to the victims.”²

According to Russell Mokhiber, author of Corporate Crime and Violence, corporations kill 28,000 people and seriously injure another 130,000 every year by selling dangerous or defective products. More than 100,000 employees die each year because of exposure to toxins and other dangers at work.³ Are these organizations ever given the death penalty? No. Because the organization is more important than either the people it employs or the society it should serve.

Executives understand this. Middle managers understand this. The lowest-level employees understand this. Above all, the government understands this. Why? Because if the large organization fails, masses of people—both managers and employees—suddenly become “occupationally abandoned” and are at the mercy of the economy. This is why employees put up with the moral imperative of organizational survival; this is why they submit themselves to arbitrary authority; this is why they become “good corporate citizens.” This is why no one demands that organizations play by the same rules and adhere to the same moral principles deemed appropriate for individuals.

The Founding Values

Tackling this separate and self-serving organizational morality head-on, David K. Hart argues that all organizations in our nation should be governed by what he calls the Founding values, for these values are congruent with human nature and ensure that people are productive and happy. “The Founders believed that the Founding values should guide all human institutions: Government, economic, and social institutions were bound to observe the same moral rules. They understood Adam Smith’s argument that people become what they spend most of their lives doing. And if their lives never transcend the manufacture of pin heads, then there they stay.”⁴

Hart bases this argument of organizational responsibility on three notions: that organizations exist to better the human condition (not vice versa), that human happiness is the ultimate goal of society, and that this happiness can only be achieved where organizations honor a certain transcendent moral truth.

“It is quite risky to suggest a single moral a priori that guided the Founders,” he admits, “but I believe it can be argued that everything was based upon an extended meaning of the first word in the Jeffersonian triad of ‘life, liberty, and the pursuit of happiness.’” That extended meaning is, quite simply, the absolute sanctity of each individual’s life. “As free agents, individuals can magnify or squander the possibilities of their lives, but those lives are sacred. Therefore, no organization, public or private, has any right to deny, or even trivialize, the possibilities of individual lives with organizational requirements.”⁵ With this statement, Hart brings to light a pivotal question: Which is more important, the organization or the individuals in it? The form of government the Founders established suggests their answer to this question. Unfortunately, we have turned their wisdom on its head and have permitted a different answer to shape our lives in modern America.

The Individual

Implicit in the notions of liberty, democracy, equality, morality, justice, happiness, human dignity, and even material prosperity is the fundamental concept—the bedrock, if you will—upon which the American Dream was built: that the individual is more important than any particular organization, including the nation itself, to which he or she belongs. Belongs. The word implies ownership. Does the individual really belong to an organization, or does the organization belong to the individuals who devote pieces of their lives to it? That is a question we must address as Americans, for the answer tells us where power really resides in this country.

If the individual is, in practice as well as in theory, more important than the organizations in his or her life, then organizations exist to serve society, never to be served by it. Jefferson suggested this arrangement in the statement that follows his assertion of unalienable rights: “That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed. That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government.” If the government (or any other organization) becomes burdensome rather than of service to the people, it is their right to change or even do away with it.

If individuals are truly more important than organizations, then the people have the power to abolish any institution that proves abusive or even ineffective and replace it with a better one. The fact that every corporation in this land is granted a charter by the government and cannot exist without that express permission also suggests that the people have every right to revoke that charter should the corporation either break the law or endanger the lives or health of individuals. Indeed, in the latter part of the eighteenth and most of the nineteenth centuries, states regularly revoked the charters of corporations for abusing the powers granted them by the people. “Even when corporations met charter requirements, legislatures sometimes decided not to renew those charters.”⁶

The people were cautious about granting corporate charters, determined to maintain control over these impersonal business entities and to ensure that they served society, not the other way around. “The colonists did not make a revolution over a few bags of tea,” Richard Grossman and Frank Adams observe. “They fought for many reasons but chiefly to create a nation where citizens were the government and ruled corporations.”⁷

Times have indeed changed. Why, to put it bluntly, do corporations that flout the law with impunity still exist? Why do we put up with organizations that spend millions of dollars lobbying Congress to ease restrictions on pollution; that cheat the military on defense contracts; that defraud the public with lavish spending and fast-and-loose investment schemes; that deceive government about product safety; that render sterile hundreds of foreign employees who must work with chemicals banned in America; that worry more about profits than about human life; that are repeatedly convicted of violating health, environmental, and safety standards? Is it perhaps because they have become not only more powerful but also more important than the individuals they harm?

If this is true—if organizations are in fact more important and more powerful than the individuals either in or around them—then people are at the mercy of things; individuals become mere functions in the inexorable arithmetic of organizational survival, and pretty much anything can be justified. This, I suggest, is exactly the state of affairs in America today, and this explains why an increasing number of Americans are so frustrated, why we often feel we are something less than fully human, why the American Dream is diminished.

When I assert that individuals are more important than the organizations in their lives, I am not arguing for reckless and irresponsible individualism. The individual is not intended to live in isolation, heedlessly pursuing selfish interests at the expense of everyone and everything else. Indeed, the American Dream, which is, among other things, a social ideal, can only be achieved in collective settings. In essence, you can’t be equal alone; you can’t have a democracy of one; you can’t be unified with just yourself. You have to have others to whom you are equal, with whom you can unite, who serve and are served by you in a collective effort to maximize each individual’s potential.

This is what America is all about. But somewhere along the path that lies between our nation’s founding and our present-day mess, we went astray. Somewhere we adopted the idea that people exist to serve the systems and groups and organizations in which they find themselves. People have become tools, human resources, to use the awful modern metaphor. The collective, then, is of a higher order than, and even defines, the individual. Consequently, we do not possess the power to determine the shape and contour and terrain of our lives. We are pawns on someone else’s chessboard. And increasingly, that chessboard is an economic board, for economic matters have come to dominate our lives as individual Americans, to both define and constrict our dreams.

This should never be. As John Steinbeck so aptly expressed it: “Man . . . grows beyond his work, walks up the stairs of his concepts, emerges ahead of his accomplishments.”⁸ Work has a practical purpose—to provide food, clothing, and shelter for the individual in society—but work is something more than mere utilitarian labor. Work has purposes beyond the economic fruits it produces. Work helps individuals define themselves, define their place in the world, fix their unique stamp upon the physical, social, intellectual, or cultural environment. And this is the danger of placing other American ideals lower in our estimation than our economic needs and wants: When the acquisition of wealth or even basic necessities becomes our primary objective, the individual, by definition, is less important than the work he or she performs and thus becomes a mere resource to be used by the organizers of economic endeavor. Somehow we have reversed our fundamental moral position about which is more important, the organization or the individual.

If the Founders lived in our economy-worshipping society, where moral relativism and situational ethics define our organizational morality, they would likely be seen as arrogant, egotistical, or (heaven forbid!) politically incorrect. “Yet,” Hart insists, “with their passionate hatred of unaccountable power and their commitment to liberty, such moral relativism would have been anathema, because it leaves people unprotected from arbitrary power exerted in their lives by organizations. That was unacceptable to them.”⁹

Arbitrary power, unaccountable power. These are unflattering expressions, yet they precisely describe the type of power exercised by many individuals and virtually all organizations in our present system. And until we understand why this is so and what it means for us as individuals, we shall achieve neither our full potential as human beings nor a full measure of freedom and democracy as a people. Why is it that we do not demand freedom and democracy in our economic as well as our political affairs? Do we need another revolution?

As suggested earlier, the economy is both out of control and in control. And the longer we simply feed it, permit it to grow as fat as it can, we as individuals will be at its mercy. Inequality will continue to increase, and liberty and democracy will continue to shrink. The only way we can regain control of our economic lives is by questioning some of the most basic assumptions that drive our present system.

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1. Robert L. Heilbroner, The Worldly Philosophers: The Lives, Times, and Ideas of the Great Economic Thinkers, 6th ed. (New York: Simon & Schuster, 1986), 322–23.

2. Paul Hawken, The Ecology of Commerce: A Declaration of Sustainability (New York: HarperCollins 1993), 116.

3. Russell Mokhiber, Corporate Crime and Violence: Big Business Power and the Abuse of the Public Trust (San Francisco: Sierra Club Books, 1988), 15.

4. David K. Hart, “Life, Liberty, and the Pursuit of Happiness: Organizational Ethics and the Founding  Values.” Exchange (Spring 1988): 6.

5. Hart, “Life, Liberty, and the Pursuit of Happiness,” 5.

6. Richard L. Grossman and Frank T. Adams, “Citizenship and the Charter of Incorporation.” World Business Academy Perspectives 7, no. 4 (1993): 21.

7. Grossman and Adams, “Citizenship and the Charter of Incorporation,” 18.

8. John Steinbeck, The Grapes of Wrath (New York: Penguin Books, [1939] 1982), 164.

9. Hart, “Life, Liberty, and the Pursuit of Happiness,” 6.