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capitalism economy Notes From Disgraceland

Complexity Curse: From Low Productivity To Social Fragmentation

"Politics has become a problem instead of a solution."

Read more from NOTES FROM DISGRACELAND

 

3. IX 2018

Sooner or later, everything turns into sh*t (2nd law of thermodynamics)

Economic productivity is one of the most important indicators of the wellbeing of a society and a fundamental determinant of its standard of living. It determines how prosperity is metabolized and how quality of life improves with time. Productivity is defined as the quantity of output produced by one unit of an input within one unit of time. An increase in physical productivity causes a corresponding increase in the value of labor, which raises wages. This is why having an education or on-the-job training is sought after by employers; it increases the productivity of workers and makes them more valuable assets to the firm.

Here is an example of how it works in practice. An employer offers you $15 to dig a 25 square-foot hole in his backyard. Suppose that you have insufficient capital goods (your bare hands or a spoon), and it takes you three hours to dig a hole to his specifications. Your labor output is worth $5 per hour. If you had a shovel instead, it may have only taken you 30 minutes to dig the hole; your labor output just rose to $30 per hour. With a big enough crane, you may have been able to dig it in five minutes with a labor productivity of $180 per hour. It is clear how the quality of life of a crane owner, which is a direct consequence of his high productivity, differs from the rest of the crowd.

Economic productivity is the source of libidinal forces, the alpha and omega of economic potency, and the ability to better the human conditions. It regulates social entropy, defines the arrow of time, shapes our expectations of the future, and provides mechanisms that sustain our capacity to desire. Abundant productivity enables future generations to live better than the previous ones. Low productivity, in contrast, means both short- and long-term hardship and erosion of the quality of life.

For almost half a century, productivity growth in developed world has been showing a troubling secular trend. In the last decade, developed economies all have entered a stagnation trap from which they seem to be unable to find a way out. This is illustrated in the chart, which shows the history of productivity growth in the US. The bold red lines indicate long-term averages across different regimes. Except for a relatively short period of two successive transient bubbles (internet and housing), there is a clear decline of the average from 3%, in the post-war decades, to 1% in the last ten years.

The decline in productivity growth has profound social implications. A 3% productivity growth, as seen in the two post-war decades, means that the standard of living doubles for every new generation[1]. In contrast, a productivity growth of 1% requires three generations to double the standard of living. However, if we take into account the rise of living costs, in an economy with 1% productivity growth each subsequent generation will have less of everything than its predecessor. It is particularly interesting that productivity growth has been descending to a near all-time low in the last five years, to below 1%, just as it was declared that the economy was recovering from the post-2008 recession. This point in itself deserves special attention.

The death spiral of productivity growth is an example of Tainter’s law, a general pattern whereby investing in complexity inevitably generates decreasing marginal returns for the systems that uses it. Insisting on the same methods, even when they have ceased to work, sets a civilization on track for collapse[2].

This is the essence of Tainter’s argument[3]. A civilization forms when some benefit accrues from greater complexity[4]. Benefits of complexity are realized through cooperation – the proverbial “whole is greater than the sum of its parts”. However, in the initial stage, although benefits of increasing complexity rise, during their evolution, complex systems spontaneously generate endogenous mechanisms of self-sabotage.

The primary source of self-obstruction is the new protagonist that emerges on the scene: the coordinator[5]He is the guardian of the new paradigm, which champions complexity as the main and, ultimately, only strategy. The marginal benefits of complexity eventually begin to decline. Beyond a certain point, their intensification produces less additional benefit, putting its beneficiaries to more and more stress. But, as the community/organization now only knows how to use a single strategy, a superstructure is in place that cannot be gracefully abandoned.In the last phase, as benefits of additional complexity taper off, vast resources need to be invested in entirely unproductive ways, such as desperate attempts at regime legitimization: The competitive monument building, or the lavish parades held for each new, short-lived emperor. Eventually, the burden of civilization becomes greater than any benefit it provides and the society collapses[6].

Destruction of cooperation and self-sabotage in corporate organizations

Yves Morieux, offers an illustration of how the last phase of complexity is realized in the current context of developed corporate structures[7]. Behind persistent declining trend in productivity are the three basic tenets of corporate management that act as the main pillars of self-sabotage: PerformanceTransparency, and Accountability.

Transparency implies audits and compliance — where does my role start and end. Accountability creates conditions for failure (in a compliant way): Who is accountable? Instead of creating conditions to succeed, we obsess on knowing who is to blame in case of failure. Performance: People put energy and effort in what can be measured, i.e. their individual performance, but not in cooperation.

However, cooperation is how you allocate your effort. Cooperation means taking a risk by giving up the ultimate protection, your own performance, to enhance the performance of those to whom you are being compared, for the sake of cooperation, in order to achieve the optimal result[8]. People are continuously being discouraged and disincentivized to cooperate. If when they cooperate, people were worse off, why would they cooperate? The three basic tenets of corporate management are doing injustice to effectiveness. The more complex the system becomes, the more structures we add that emphasize the three tenets. They trigger a counterproductive multiplication of interfaces that not only add people (non-productive ones), but also create obstacles. The more complicated the system, the more difficult to see what is happening. So we need meetings, reports, conference calls, etc.: people spend 40-80% of time wasting their time[9]. This is the politics of deliberate sub-optimality.

MBA nation or cannibalization of the social landscape

The false premise, which has become the defining characteristics of American politics and, to some extent, the culture as well, has been that a society is essentially the same object as a corporation, just a bigger one, that skills you learn in an MBA program are the same skills you need to manage a society, and that successful corporate managers are, by default, also good national leaders. However, this is not the only social damage of this fallacy. When applying the lessons from corporate culture to society, one inevitably also imports the underlying mistakes of that culture. And so, in the same way a rising complexity creates its own mechanisms of self-sabotage, the essence of the neoliberal approach to social organization is inhibiting the mechanisms of social cooperation. Social atomization, the cult of individuality, the creation of homo economicus as a model citizen, competition as the only and ultimate criterion for everything, the obliteration of welfare, the destruction of empathy, and the entire conservative system of values, all of these structures are instruments of social fragmentation and annihilation of the tissue that makes society different from a collection of individuals. All this leads to barbarization of the social landscape with the degree of polarization that has reached the point where political consensus is no longer possible and democracy no longer works. Politics has become a problem instead of a solution. The net result? The quality of life is already deteriorating and this trend will be reinforced with each subsequent generation as the whole continues to shrink smaller than the sum of its parts.

Under the crush of social entropy, with its ever-increasing complexity as the only strategy, we are facing the same destiny as many civilizations have in the past. The future has already become impossible and without the clear picture of the future, the present cannot take off. Like the boy in Kafka’s story, A Country Doctor, our social and economic system already inhibits the world of undead. Rising complexity is the fatal wound depriving it from the capacity to die. Only when that wound heals, will the system be able to collapse.

 

[1] If one generation is about 20 years, then (1.03)20 ≈ 2

[2] Yves Morieux and Peter Tollman: Smart Simplicity: Six règles pour gérer la complexité sans devenir compliqué, Manitoba (2016)

[3] Joseph A. Tainter, The Collapse of Complex Societies, Cambridge University Press (1990)

[4] The term complexity is generally used to characterize something with many parts where those parts interact with each other in multiple ways, culminating in a higher order of emergence greater than the sum of its parts.

[5] Akshay Ahuja in Dark Mountain Project (19, March 2012)

[6] Akshay Ahuja, ibid.

[7] Yves Moreieux, ibid.

[8] Yves Moreieux, ibid.

[9] Yves Moreieux, ibid.

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