The Worst Things Imaginable

Jeff Rudzinski Independent Study Summer 2013 Final Paper

The U.S. Economy is supported by massive consumption spending with the gross savings as a percentage of GDP at 11.5% according to a 2011 World Bank calculation. The United States is also the worlds largest proponent on capitalism. If we divide the western world into capitalist and socialist countries, the latter of which include the Scandinavian countries, consumption spending in the United States is nearly $10,000 USD more per year per capita than any of the European nations. The United States ranks only second in the world to the United Arab Emirates in terms of consumption spending per capita (World Bank). And yet, in spite of the economic success enjoyed by the western capitalist nations (and the English speaking nations in particular), an interesting paradox presents itself: we seem to be less happy on the individual, national, and cultural level. It is an old adage that money cannot buy happiness, but the idea of happiness and wealth being non-exclusive seems to have lost its hold on the minds of citizens of the democratic capitalist nations. Of course, this naturally raises a simple question, the answer to which can seem endlessly complex. Does capitalism as an economic system and as a way of life cause people to be unhappy? To answer this question, I will propose an idea which in many respects can seem radical and perhaps to some readers even apocalyptic at times, although this is not my intention. Answering this question will require us to consider many areas of scientific and philosophical study. My intent is not to solve the problems of the world. I rather wish I possessed the required intelligence to do so, but such a task is reserved for the collective wisdom of the human race. Rather, my purpose is to bring to light what I consider to be a fundamental flaw of the capital economic system. In order for our society to increase the happiness of its citizens, we must come to terms with the idea that capitalism is a set of ideas created by man, and inevitably has flaws. In this particular case, the drive for greater productivity and social standing have led to the use of multiple technologies that have detracted from our overall levels of happiness, despite their well-intended uses. We must first start by defining happiness. This is not easily done because not only is the term subjective, but it is also the aggregate of an endless number of factors. Furthermore, measuring happiness is extremely difficult as data must define what factors to include in any sort of happiness index. For example, should infant mortality rates be included in an index of happiness? Or perhaps we should include GDP per capita instead. In this sense, not only are individual responses to questions pertaining happiness subjective, but so too is the researchers selection of factors and questions used to conduct any study of happiness. For the sake of time though, I will select a number of factors that I consider universal in nature, and which can be applied to individuals and entire populations. These factors are family relationships, nonfamily relationships, job satisfaction, job security, trust (both individual and societal), physical safety, health, and the ability on a person to affect change in their own lives (in other words, the degree to which one has control over their life). We cannot take these items as being applicable to all people. Therefore, when we say that a nation is happier, more trustworthy, or

has better relationships, I am simply referring to these items on the whole as an aggregate. Without getting into the sometimes boring detail, a number of simple statement can be made relating to happiness. The 2012 World Happiness Report commissioned by the United Nations and written by economist Jeffrey Sachs of Columbia University defines a number of areas that affect happiness. In terms of family relationships those who are married and those who have children are happier than those who are/do not. Those who develop strong relationships with non-family members are happier than those who do not. These things most of us simply know from experience. In terms of job satisfaction, the more autonomy a person has in their work and the more a job requires problem solving and thinking, the job provides greater satisfaction than those that do not. Also, the less repetitive the job is the less mental fatigue it places on an individual. Of course people also prefer a steady job to a non-steady job. When a person is unemployed their level of happiness decreases significantly. Not only that, but when the unemployment rate is raised, even those employed become less happy as the security of their job comes into question. Perhaps most importantly though, social status is by far the greatest indicator of happiness. By extension, the more equal a society is the more happy individuals are within that society. This desire to be viewed as superior relative to others fulfills a most basic human need which is ingrained in each of us through evolution and the history of our species. Those viewed as superior in some respect would have priority choice for mates and would wield influence over others. This list is in no way complete, but represents the most basic and fundamental of human experiences which relate to happiness. I will not discuss the reasons why these factors affect happiness, as that discussion would entirely fall into the realm of psychology for which there are ample reading materials available for further study. Now that we have created a set of factors that relate to happiness, let us take a look at how economic systems play a role in affecting those areas of our lives. Civilization itself is rather new in relative terms. The transition from a hunting and gathering existences to settled cultures took place a mere 10,000 years ago with the advent of agriculture. Before this time period, human beings directly competed with each other for resources ranging from food, water, shelter, and sexual mates. This characteristic has been ingrained in us as a species and in many ways still dictates our actions today. True, we in the western world no longer compete for food or water or other resources in the classic sense, but we compete for goods, social status, power, wealth, etc. This is true not only for the individual, but for the nation as well. We compete because quite simply, we live in a world with limited resources. But with limited resources comes the most basic of economic questions. What should we focus our efforts on (produce) and who will receive the fruits of our labor? This question is of course familiar to every economist that has ever lived. The answer to the question, or at least the best answer we have thus far, is capitalism. The system is designed to efficiently allocate resources within

an economy. To this extent nobody, myself included, can argue that it remains the best economic system accomplishing this goal. The system relies on two basic ideas: private ownership of resources and capital and competitive markets. Capitalism can be seen as a type of Darwinian system; those who have the best skills or attributes in relation to external conditions are best suited to advance within that system. In a sense, these features are reflective of our instinctive need to compete for resources. In turn, those who are able to accumulate vast resources will be viewed more positively by others. In a capitalist economy, the accumulation of wealth is the predominant indicator of social status. This can be seen at all income levels (Wilkinson). Businesses for example focus on profit maximization and cost minimization and individuals focus on obtaining higher wages for their labors. The business therefore has every incentive to increase efficiencies in order to maximize revenues/profits and the individual has every incentive to increase their own productivity (and therefore value), which they can later use to obtain a higher wage. From a business perspective this has led to the employment of greater amounts of capital to replace labor. Consider for example the number of farm hands employed today is less than a quarter of those employed at the start of the 20th century, despite large production increases (Carson, Thomas, Hecht). In addition to the employment of capital to replace labor, advances in electronic technologies have allowed business to outsource labor and other core functions to other nations (in most cases to take advantage of lower wage rates). Again, the motive of the firm is to increase its profits, and therefore its wealth, and therefore its status relational to other firms. The same is true for the individual. Being more productive means learning new skills and using new tools. The reason for doing so is to increase pay, increase wealth, and to increase social status. In most cases neither the business nor the individual understands the end objective of social status, but the instinctive drive to increase their place in the stack drives the employment and use of capital (technology).

As noted above, despite the larger share of wealth, citizens in western capitalist nations are on average not as happy as those in more socialist leaning nations. It is my contention that technological advances beginning with the industrial revolution are the cause of this rift in happiness that exists between the more capitalist nations such as the U.S. and the U.K. and the more socialist leaning nations such as Norway, Sweden, and Finland. Technology itself has a significant number of benefits. For example, automation allows for greater reliability and consistency in producing goods. Networking, email, smart phones, web conferencing make long distance communications easier. The internet allows for access to an endless stream of information. When we as business owners and individuals invest in purchasing technology, we do so with all of the benefits in mind. We also tend to factor in some of the negative aspects,

such as cost, when making purchase or input decisions. However, the issue arises when we fail to consider the psychological impacts of our purchasing, be it individually or for input purchases. These purchases, while offering a number of benefits, also deeply affect our relationships with other people. Lets take a moment to examine the impact that technology has on the labor market. Since the depression, advances in electronic technologies have created efficiencies that nobody could have ever expected. The internet for example, has created a situation where local markets are being replaced by international markets. Virtually any manufacturer or retailer in the world can now be considered a direct competitor to any other. This has had the benefit of putting downward pressures on prices. The creation of mass manufacturing has allowed for economies of scale and scope that allow businesses to manufacturer with minimal wage expenses. On the surface, everything listed above has led to great increases in revenues and profits for many businesses. So what is the problem? What has been advantageous for the business has been unsettling for the employee. For example, automation has reduced (relative to what would be otherwise) the employer demand for labor. As the demand curve for labor shifts to the left a labor surplus is created with lower prices to accompany it. In addition, globalization of markets, which itself is an extension of capitalism, has caused employment to become mobile. Outsourcing is easier than ever, further pushing labor prices downward. But by far the most important has the creation of cloud computing. Sites such as Salesforce.com have created economies of scale so significant, that literally a hand full of software engineers now have the ability to eliminate entire industries in a matter of months (Carr). Consider for example, the Stenography industry. The industry currently employs 22,000 people in the United States, with an annual combined pay of $1.049 billion dollars. Most of the employees in this field are very talented and must train extensively. Yet companies the likes of Google may be able to wipe out each and every one of them with a single software program that is scalable to courts across the country. The process for this could easily be completed in a matter of months. The overreaching point is that as a result of technological advances, labor markets have become highly unstable relative to economies of the past, at least from an employee view. In most cases, when technology displaces workers there is simply frictional unemployment that occurs while workers transition to new jobs. It is not the long term employment figures or percentages that are important here however, it is the instability that these technologies create for any particular individual. It is not the long term averages in the labor markets that individuals pay attention to, rather it is potential for rapid and unforeseen change in labor markets that affects the psyche of an individual for the worse. Adverse effects of technology can also be seen in the income distribution within a society. Note that the stenography example above is possible with only a handful of engineers, who between

them are able to compete with an entire industry consisting of tens of thousands of people. Technology, when used to reduce production costs has the effect of funneling profits to owners. This logically follows, that the employment of capital over labor would only be done in an effort to reduce cost and/or generate more revenue. Normally if a business generated more revenue it would expand, hire more workers, and so forth. However, the unique nature of this new revenue generated by increases in technology induced productivity presents a different outcome. Instead of hiring more workers and thereby increasing demand in the labor market (and therefore wages), capitalists are more likely to increase levels of capital, which decreases demand for labor and decreases wages. To complete the circle, workers must now compete with each other more heavily and the stress placed on them through this process will ultimately decrease their happiness. Additionally, the move to capital over labor creates a different type of demand in the labor markets. Whereas a simple skill set could once earn a decent wage in years past, employers are increasingly looking for highly skilled, often college educated workers. The reason or this is because the need for basic labor is diminishing. However, this creates a big problem for the vast majority of society. A college education is very expensive, and it follows that if demand for labor is based upon the need for knowledge labor, then those form lower income families will be highly disadvantaged in their effort to obtain the skills necessary to obtain available jobs. In other words, because college is expensive only some families will be able to afford it, and only those will those who attend will be able to get wellpaying jobs, and in essence, the rich get richer and the poor get poorer. Work done by Richard Wilkinson and Kate Pickett, researchers at the University College London have detailed a long list of adverse side effects in inequality in wealth distribution. These range from high teen pregnancy rates, lower levels of trust, higher crime rates, increased mental illness, etc. One need not think hard to see that all of the above would generally create a less happy society. Let us now turn to the use of technology in our personal lives. Capitalism places a constant pressure for individuals to compete with one another. We have discussed the need to compete in the labor market, but we also compete in the acquisition of goods. In fact, if we did not compete for goods, what would be the point of capitalism? When we compete for these goods we do so in order to signal our status to other individuals (Wiltkinson). Relating back to the sort of social Darwinism of capitalism, those most able to compete will be most able to obtain goods. If we are to reverse this, we could also say that those who have the most or best goods, are most able to compete, and hence goods can be used to show superiority. It therefore follows that in societies where competition is stressed, consumption will also be high. So what do we choose to buy? The latest and greatest gadgets. Ipads, smart phones, ultrabooks, and the like have taken the role of status signifier in the modern world. But many of these items that we choose to purchase have drastic consequences, especially on our relationships. Text

messages instead of face to face conversations, or phone calls for that matter, the use of social networking, online shopping, and so on all work together to separate us from more meaningful in person interactions. This idea is not new, as Charles Murray describes a similar concept in his 1992 article The Pursuit of Happiness Under Capitalism and Socialism. Murray describes how socialism prevents humans from engaging in daily activities that strengthen our relationships. Capitalism on the other hand, according to him, allows these interactions to exist. However, Murrays article came before the widespread use of cell phones, computers, the internet, etc. True, in many instances some of these things allow us to connect to others that in ways that would not otherwise have, but I argue that these connections are less meaningful than in person interactions. Family for example is weakened, as more time is spent playing with devices than on actual family interactions. Family is not the only thing affected by our consumption of technology. Our consumption of natural resources in pursuit of wealth also has very real consequences for the natural environment though carbon emissions. There is also the matter of diverging populations and ideas. In his book The Big Switch, author Nicholas Carr describes how, despite the prediction that the internet would bring a greater understanding of ideas and information, the reality has been that people tend to use it to entrench and reinforce their existing ideas. Similar ideas can be seen in many areas of technological adoption. I do not mean to imply that these things do not add value to our lives, but they also come with a cost of which we are generally unaware. The question asked at the beginning was: Does capitalism make people unhappy compared to socialism? I find the answer to be that it does. In sum, the need to compete is a part of who we are as humans. It has been ingrained in us through thousands of years. Capitalism (as opposed to socialism) allows us to continue to compete for resources and goods. For many years this competition improved life. However, the competitive aspect of capitalism drives business and individuals alike to increase productivity, and in that spirit new technologies are adopted. Both the business and the individual may use the technology in a slightly different way, but the goal is the same for both, to amass wealth and to signal that wealth to others. But in a roundabout way, technologies are placing tremendous pressures on human beings in some of the most psychologically important and sensitive areas that affect our happiness. The key here is that capitalist nations are more likely than non-capitalist nations to fall victim to these side effects. Capitalist national will naturally have more wealth than socialist countries through the use of markets. Because of this, they will have a greater ability to purchase technology for production and recreation purposes. Indeed, the nations with the highest use of technology are the western English speaking capitalist nations or nations heavily influenced by them (US, UK, Australia, New Zealand, Canada, Japan, Hong Kong, Singapore) (Wiltkinson) (Sachs). By this theory, we would therefore also expect these same nations to have lower levels of happiness than the more socialist nations. This also turns out to be true when we consider the 2012

World Happiness Report written by Jeffrey Sachs. Some have postured that the difference in happiness between these two groups related to the implementation of social programs in some areas. This may of course be part of the difference. In fact, I would agree in saying that social programs do provide a counter to the stresses of capitalism. However, the stresses of constant and relentless competition in capitalist economies cannot be ignored. Some may argue that it is not capitalism that is the issue, but rather the technology itself. To which I respond that there is no need for much of the technology we use for any other purpose that competition. In other words, capitalism and competition drive us to adopt new technology. New technology does not inherently drive us to compete. The titles of this paper is The Worst Things Imaginable. I did this purposefully in direct response to a central idea that has long been accepted in locked step with capitalism. The commonly accepted theory states that people will naturally seek to maximize their own utility (happiness), and the choices they make in an open market represent the choices that will make that individual the happiest. So those who follow this line of thinking will ask just why people choose to purchase technologies that make our experiences in life less meaningful. I answer this by saying that each purchase and each substation of capital for labor is so small in its own that we simply do not recognize the connection between it and our overall experiences. In my opinion, the worst things imaginable are those that divide us as humans, as people. As technology has progressed over the years it has also been with the intention of making our lives better. In many respects it has, but it also comes with a cost. Automation was intended to make production more efficient, not instill fear into employees for their jobs, networking was designed to help people communicate and not to aid in the outsourcing of jobs, software was developed to allow us to do more with our computing power and not to widen the gap in wealth, the internet was intended to provide us access to information and expand our minds and yet we are more divided than ever. Social networking, smart phones, and the like were intended to connect us, but instead they lead us to substitute quantity of interactions over quality. We pursue these devices because of the pressures capitalism force us to compete with one another. If I had to define the worst things imaginable, I would describe anything that divides us as people. Capitalism and technology were not created or intended with these purposes in mind. Then again as the saying goes, the worst things imaginable were done with the best of intentions. Capitalism was designed to generate wealth and allocate resources, and in that respect is unmatched. However, happiness and wealth are not the same thing. The sooner we realize this as a society, the sooner we can take action through policy to affect our lives in areas that will in fact maximize our happiness, not just our wealth.

Wealth and greatness are mere trinkets of frivolous utility, no more adapted for procuring ease of body or tranquility of mind than the tweezer-cases of the lover of toys- Adam Smith The life of money-making is one undertaken under compulsion, and wealth is evidently not the good we are seeking; for it is merely useful and for the sake of something else. And so one might rather take the aforenamed objects to be ends; for they are loved for themselves. But it is evident that not even these are ends; yet many arguments have been thrown away in support of them. Happiness, then, is something final and self-sufficient, and is the end of action.- Plato

References

Helliwell, J., Jeffrey Sach, and Richard Layard. Print. <http://www.earth.columbia.edu/sitefiles/file/Sachs Writing/2012/World Happiness Report.pdf>. Carson, Robert, Thomas Wade, and Jason Hecht. Economic Issues Today: Alternative Approaches. 8th. 2005. Print. Pickett, K., and R. Wilkinson. The spirit level, why greater equality makes societies stronger. 1st. Bloomsbury Press, 2010. Print. Carr, Nicholas. The Big Switch: Rewiring the World, from Edison to Google. 1st. 2013. Print. Murray, Charles. "The Pursuit of Happiness Under Capitalism and Socialism." CATO Journal. 11.2 (1991): n. page. Web. 6 Aug. 2013. <http://www.cato.org/sites/cato.org/files/serials/files/catojournal/1991/11/cj11n2-5.pdf>.