Economic Insanity: Introduction

Twenty-two years ago, Berrett-Koehler Publishers in San Francisco published my book Economic Insanity: How Growth-Driven Capitalism Is Devouring the American Dream. Books on economics by unknown authors don’t generally sell well, and mine was no exception. But it has occurred to me that much of what I wrote almost a quarter of a century ago is more relevant today than when it was published. As an experiment to see if that is really true, and also to make this book freely available to anyone who is interested, I have decided to publish the chapters on this blog. The book isn’t very long—only 180 pages—and the longest chapter is 20 pages, so this shouldn’t be too overwhelming. On the longer chapters, I may divide them in half, if a logical break appears. Just remember that all the sources and quotations, as well as any statistics, are over twenty years old. That doesn’t mean they aren’t relevant.

Powerless over Our Future

If you believe the polls, ordinary Americans are concerned about the decay and disorder they see around them. No one, it appears, is able to do much to stop the deterioration, much less reverse it. In many ways, we the people feel powerless. Powerless over the economy. Powerless over our elected officials. Powerless over the ballooning national debt. Powerless over the moral malaise that is spreading like an epidemic. Powerless over a thousand social ills that are rising like a tidal wave to engulf us. Powerless, in short, over the future—our future.

When an entire people feels powerless over its future, this is an indication that democracy no longer exists in more than name, for in a democracy power resides in the people. Consequently, this sense of impotence and loss has spawned a wave of frustration that is growing in both size and intensity. The people know that something in America is broken, but they don’t quite know what, they don’t know why, and, most important, they don’t know how to fix it. All they can point to are the symptoms.

The symptoms, of course, are evident everywhere. It is the illness itself we can’t seem to put our finger on. And so all our solutions—from government wealth redistribution to corporate restructuring—are symptom-oriented, which means that they are by definition inadequate. Indeed, many of our so-called solutions create more problems than they cure. They attempt to alter the results of the system without changing the system that produces those results.

“Recent reports and analyses,” writes Willis Harman, “have made it clear that the global dilemmas are real and imminent, and that these will require fundamental system change for their resolution—that further economic growth, technological application, modernization, shift to ‘information society,’ and so on are bringing additional problems more rapidly than solutions.”¹ The problem, in short, is not with how firmly the roof of our collective house is nailed on, or how well the walls are put together, or even how much we pay the carpenters. The problem is that we have been using the wrong blueprint.

Consequently, this book seeks to identify a new pattern, a new model, a new way of looking at our organizational and individual lives. And I believe that pattern can be found in an outright rejection of certain assumptions that drive our economic system, in reforming the parameters that govern our ability to own capital, and in embracing once-familiar ideals that we have abandoned in our hopeless quest to find happiness in a consumer society based on endless growth and accelerating scientific progress. The intent of this book, then, is to point out where we have gone astray, to remind us of the full and original meaning of the American Dream, and to engender the hope that that Dream is neither dead nor beyond our eventual reach.

Our economic system, we must acknowledge, is much more than just a free market, a collection of businesses and bureaucracies, exchanges and transactions. At a more fundamental level, it is a common pattern of thought, a way of looking at the world around us, and it manifests itself in our financial dealings, our ownership practices, and our producer-consumer relationships. This pattern of thought pervades all we do. It envelops our lives in such a profound and subtle way that most of the time we’re not even aware that it exists. It’s just there, an inseparable part of us, as software becomes part of a computer, because we don’t step back from it to consider it, or question it, or rewrite it.

Granted, stepping back from the economic system to get a clearer look at it isn’t exactly easy. In some ways, it’s like stepping back from the Milky Way galaxy to get a better view of its shape and dimensions. We can’t do it literally, because we’re stuck in the middle of it, but we must learn to step back figuratively, in our minds, and reassess its involvement—nay, its control—in our lives, because it is the economic system and not just the way we implement it that is flawed. If we are to solve the monumental problems that face us, we must change the way we think about things, because our problems are systemic in nature, and all our present attempts to solve them are as effective as straightening deck chairs on the Titanic.

Hitting a Wall

American businesses have gradually arrived at the conclusion that they must either change or die. The ultracompetitive global marketplace has no room in it for low-quality, outdated, slow-to-market, or high-cost products. Business leaders have figured out that in order to achieve high quality, competitive costs, speed to market, and world-class design, they must abandon the outmoded bureaucratic model of management and replace it with leaner, meaner organizational structures staffed with creative, intelligent, motivated workers.

I have spent a fair amount of time surveying the current management literature on change, and I invariably find the experience frustrating. Hundreds, perhaps thousands, of consultants and business leaders are pushing for what they see as dramatic reform. They want to reengineer the corporation, create excellent executives, empower the workforce, unleash the powers of democracy in organizational America, give workers a sense of ownership, develop intelligent organizations, and make every employee a leader. These are all worthy objectives and are definitely steps in the right direction. What frustrates me is that they all reach a certain point in both their theory and their application and suddenly they hit a wall. They never reach the logical conclusion to their own arguments.

Why is this so? For the simple reason that they are looking for answers within a system that doesn’t work. The wall they hit is the outer limit of the current system. They reach that and can go no further. It’s as though our current system of thought were their entire universe. They have never asked themselves what lies beyond its borders. Why do we assume that the answer lies in fixing certain aspects of the present system? Why don’t we ever entertain the thought that perhaps it is the system itself that is lacking?

In the next few chapters I will question several major assumptions of the current system, and even if you don’t agree with my analysis, I hope that you will come to see that in reality there is no wall. Beyond the comfortable confines of our current economic system, there is a whole universe of potential answers to our problems. Before we start questioning assumptions, though, we first need to look at an idea that is central to the arguments of this book, for it offers a clue as to what an ideal system should look like. Without an ideal, a correct map, and a destination, we shall find ourselves on a path to nowhere.

The American Dream

Just what exactly is the American Dream? Is it merely the opportunity to acquire wealth, to be at least comfortable and secure, if not outright affluent? If so, then there is nothing uniquely American about it. You can achieve it just as well in Germany or Australia or Hong Kong. We talk about the American Dream a great deal—it’s a term we hear often—but usually all it means to us is some kind of nebulous level of financial well-offness, measured and merited on an individual basis. It has become an economic term, nothing more.

Not surprisingly, Ronald Reagan proclaimed this narrow vision of America: “What I want to see above all is that this country remains a country where someone can always get rich.” This, of itself, is not such a bad desire, but to want this “above all” makes one wonder about Reagan’s perception of America, wonder how many Americans share his tunnel vision of the nation’s purpose and meaning.

My contention in this book is that the American Dream is—or should be—much more than a wealth wish. I base this argument on the notion that the dreams and ideals that guided the Founders were much more comprehensive than the simple fantasy of getting rich. They were after “a more perfect union,” a nation to stand as an archetype for all the world. If ever there was a nation that stood for something, that had a manifest meaning and purpose—a mission—that nation was and is the United States of America.

The very notion of nationhood in our day might seem almost obsolete, irrelevant. Multinational corporations now stretch beyond geographical and political boundaries and wield wealth and power greater than many small countries. But countries and corporations exist for very different reasons and serve different purposes, even though some people have suggested that multinational corporations are the nations of the future. If this is true, then we can expect the demise of democracy and the rapid resurrection of political, and not just economic, tyranny.

Nations serve a distinct purpose in the world, and, ideally, that purpose goes far beyond wealth or race or religion or language or cultural heritage. We must not confuse nationhood with nationalism, which promotes an us versus them attitude and leads to all sorts of lunacy. If the bold experiment that began in Philadelphia in 1787 retains any credibility in our troubled world, nations should exist in order to “establish justice, insure domestic tranquility, provide for the common defence, promote the general welfare, and secure the blessings of liberty.” The Founders were not interested in their own lives only. Rather, they were striving to create a “new order of the ages,” a pattern for all nations and peoples and times, with America as the Great Experiment.

In spite of our heritage, however, we still seem collectively confused at times about the experiment we are supposedly performing. “What experiment?” we ask. “Isn’t that water under the bridge? Wasn’t that all settled long ago? Aren’t we through experimenting?” But if the experiment is over, why is our freedom incomplete? Why is our democracy impotent? Why are we becoming more unequal and disunited? Why is the American Dream, even the narrowly defined economic dream, so difficult to achieve for so many? Maybe we don’t understand the Dream as well as we should. Maybe we don’t understand America very well.

If we go back to the source of the American Dream, the ideals and values upon which this nation was founded, we find a number of key ideas—among them equality, liberty, democracy, unity, opportunity, morality, justice, prosperity, happiness, and individual dignity—abstract ideas for which our forebears were willing to sacrifice their very lives. Thomas Jefferson put it well: “We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty, and the pursuit of Happiness.” In broad strokes, Jefferson painted a picture of the American ideal, touched a nerve that moved his fellow Americans to action, that separated them, figuratively and literally, from every other people on earth and set them up as a pattern for other nations. His message rang loudly in their ears, just as it should ring in ours today: All citizens of this great land are theoretically guaranteed an equal opportunity to reach their individual potential within the framework of a free and supportive society.

It is this ideal that in theory gives U.S. citizens the liberty to become the most fully human people on earth. And it is this ideal that, in spite of our admitted imperfections, still draws people from all countries to the shores of America the Beautiful. For the most part, these immigrants don’t come to get rich. They come to be free, to worship as they choose, to escape oppression in all its hideous forms, to take a hand in their own government, to be equal before the law, to walk with dignity, to make as much of their individual lives as they can. They come, in short, to be Americans. Not African-Americans, not Asian-Americans, not Irish-Americans, not Hispanic-Americans, not gay or straight Americans, not blue- or white-collar Americans, not conservative or liberal Americans, not upper- or middle-class Americans, and certainly not lower-class Americans. Simply Americans. For America is not merely a geographical region of the earth’s crust; it is not only a unique political structure; it is not just a culture formed from the various ingredients that went into the melting pot. It is much, much more. America, above all, is an idea, an ideal that represents the very best in human nature and vision.

My belief is that our nation has gotten off track because we have divorced our economic concerns from the social and political ideals that guided the Founders. Consequently, our economy has grown up on the shaky foundation of several inherently false assumptions—unlimited ownership, boundless growth, ever-increasing productivity, accelerating technological advancement, and self-interested competition—and this foundation has created an unwieldy economic system that is drastically incongruous with every other aspect of our lives as Americans.

If you look at our American ideals—democracy, liberty, equality, unity, happiness, community, and so on—you find that both the structure and exercise of our economic system are in direct conflict with those ideals. Our businesses, by and large, are not democratic, nor do they create liberty; they do not foster either equality or unity; they supplant community; they limit true opportunity; and they treat individuals as commodities, mere human resources to be bought, used up, and replaced.

These are fundamental flaws in the structuring of our economic affairs, and no symptom-oriented, Band-Aid approach to treating them will make them go away. If we want an economic system that is congruent with our higher ideals, we must attack the root of the problem and stop hacking at the leaves. We must question the basic assumptions that drive the system and reveal them for what they are.

Modern America—with an economic system that directly conflicts with its social and political ideals—is like a car with its accelerator jammed wide open and its brakes locked at the same time. Not only is such a vehicle a nightmare to drive (just ask the president and Congress), but incredible internal damage can also result from the competing demands placed on the machine. This internal damage is evident, of course, in the vessels of government and commerce, but primarily in the lives of frustrated individual Americans who find it increasingly difficult to feel good about either their present situations or their future prospects.

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1. Willis Harman, “Doing Business in a Transforming Society: Background Notes for Dialogue,” Seminar Outline, 1991, 2.