Lasting change

In 2008 Obama campaigned with the slogan "Change We Can Believe In!" Four years later this slogan evokes the question what kind of change has actually taken place in the US since 2008. President Obama’s opponents claim in the current campaign that they are going to bring about “real change,” since Obama has failed to make the "hope for” change happen. Clearly perceptions differ regarding kinds of change, and especially the expectations about how quickly and fundamentally such change should take place.

In an evolutionary perspective, continuous gradual change is often compared to discontinuous and fundamental change. One can assume that those who voted for Obama expected quick and fundamental change during his first term of office, especially in the economy, which was extremely weak at the time of his election because of the financial crisis. In the present campaign job creation is the dominant issue. But precisely in this area it hasn’t been possible for Obama to achieve fundamental change, at the most some gradual changes.

Observation of strategic changes in firms provide findings that explain why fundamental change is often impeded: One important explanation is that over time successful firms tend to reinforce their values and norms with strong myths and legends so that adapting to changing conditions becomes difficult. Sometimes organizational routines are created; management resorts to this especially in uncertain situations. Thus, uncertainty can be reduced and anxiety can be controlled by routine actions; however, this prevents fundamental change.

The successful development of firms, and growing economic prosperity over decades in a Western context, is an example of a successful development that has lead to inertia. The successful development in the past has become the main barrier for fundamental adaption in the future: despite increasing criticism of neoliberal economic systems, necessary changes have not taken place. When in recent years, new challenges arose in the form of social expectations, especially as a result of corporate scandals and the financial crisis, leaders of firms and of political organizations mostly tended to rely on the deep structures that had been successful in the past. Fundamental adaptation has so far not been able to take place.

Evolutionary research has also shown that sometimes systems destroy themselves by applying their behavioral principles in an exaggerated manner. Excessive short-term shareholder-value thinking, for example, can prevent necessary adaptations and lead capitalism to destroy itself. This primarily, quantitative understanding of welfare is now criticized even by such leading economists as Joseph Stiglitz and Amaryta Sen. Analogous developments can also manifest themselves in other areas of society.

Gradual change consists of continual change in small steps. In this sense Obama and his team have effected, for example, that now in the US access to health care for everybody is being discussed and first measures are being taken. We have been able to observe similar continuous changes in our longitudinal case studies in firms (see Sachs S., Rühli E., Stakeholders Matter, 2011). As an example, since the early seventies there has been a continuous increase in the consideration of an ever-broader cast of stakeholders by firms. New kinds of tools (e.g. stakeholder mapping), departments (e.g. public affairs) and processes (e.g. stakeholder engagement) have been developed. Corporations have started to publish sustainability reports and signed standards (e.g. Global Compact) and founded roundtables (e.g. corporation 20/20).

As in firms, societal developments have taken place in the US, even if not to the hoped for extent and with the anticipated speed. More importantly it seems to me, we should concentrate on the events and stories that show the continual transformation processes to improve the quality of human life, rather than to bemoan the lack of fundamental change that has taken place. By no means should the partial lack of change be used as an excuse to go back to business as usual. In German we have the saying: “Good things come to those who wait.” Therefore I suggest “lasting change” for Obama’s 2012 campaign slogan.

Society of Jealousy or Society of Justice?

It is a well documented fact that human beings, and many animals, have since early childhood an ingrained sense of justice. Chimpanzees as well as year old babies are readily capable of discerning whether they’ve been cheated or not. Give a chimp or a baby less food than their companion, and they are likely to react in unambiguous ways that this is not “ok”. Moreover, studies have found that both chimps and human babies also are inclined to want thieves to be punished – even if they themselves were not the one stolen from. And therein lies a problem.

In Switzerland, as in much of Europe, one often encounters talk of a “society of jealousy”. This term is applied to the public outrage at the large bonuses, golden parachutes, and financial and taxation acrobatics available only for the privileged few (interestingly, however, only few seem bothered at the horrendous incomes of athletes or other celebrities…). The basic premise is that this outrage is fueled primarily by jealousy and that could the rest take advantage of the same benefits, they would do so without any qualms. Consequently, this resentment is unwarranted. This logic is commonly held by much of the wealthy elite and many economists who view human affairs solely through the lens of “rational economics”.

A concrete example of this is Switzerland’s lump sum taxation practice. This is where a very high net-worth individual goes to a Swiss Gemeinde (County) and negotiates a special income tax significantly below the usually applicable rate. Thus you have billionaires who pay a pittance of their annual income in tax when compared to the average working citizen in the same Gemeinde.

In an indignant article in the Neue Zürcher Zeitung (17. Feb. 2010), Charles Blankart, then professor of economics at the Humbolt-Universität zu Berlin, made a strong case for the economic logic of such lump-sum taxation for the wealthy and lamented this “society of jealousy”. He grounded his argument in the fact that such taxation policies make perfect rational sense for the Gemeinde (as otherwise they would forego the watershed of money the billionaire would bring in) as well as the notions of competition and liberty, i.e. that each Gemeinde should be free to choose how to manage its own finances and compete with other Gemeinden. He called this with some haughtiness “Economics 101”.

Now, the problem with such a conception of economics is that it completely misses the point that human beings don’t function according to what used to be (change is on the way!) taught in “Economics 101” and that structuring our society only on such a hypothetical economic model has a plethora of nefarious side-effects.

First, what we observe in Switzerland and much of Europe is not the outcry of a “society of jealousy” as much as the outcry of a “society of justice”. Our deeply engrained sense of fairness gets systematically trampled on by taxation policies as are commonplace in Switzerland (and elsewhere!) today. Second, while such taxation policies are by all means “rational” from a purely financial standpoint of a single Gemeinde, they are highly corrosive for the trust citizens have in a democratic, law-prescribing republic.

This lack of trust in the legitimacy of the laws of the state then sooner or later manifests itself in the (mis-)behavior of its citizens, so that for example income from clandestine work remains undeclared or cheating on your tax returns is readily justified: “If the rich get to cheat, why not also the rest of us?”. At the end of the day, such policies and the cynicism they create undermine the very foundations of a functional collective as any modern democratic state is. And at a later stage, it brings out the worst in us: an “everybody for him or herself society” and a society where not just justice is demanded, but increasingly also punishment.

Because at the end of the day, we are all still driven by the same evolutionary levers as we were as babies and as our relatives the Chimpanzees are.

In my next blog post I will attempt to delve into the great mystery of why this “society of justice” seems to be remarkably absent in a large portion of the American population when it comes to politics: I doubt that Mitt Romney and his 13.9% income tax rate makes much of a dent in his popularity among his base of Republican voters – even if they are amongst the economically struggling.

Manuel Heer Dawson