Capitalism, One Euphemism for Chaos Theory

Underlying Capitalism, Democracy, or any refined theoretical concept designed to bring order to human life in a diverse society is the assumption that a reluctant chaotic universe will respond to our feeble human attempts to organize it.

Most civilized and educated people have adopted some form of Capitalism today which they feel gives them the best possible allocation of the Earth’s scarce resources and the most equitable distribution of their society’s limited income and wealth. However, most economists agree that modern, sophisticated Capitalism is not the perfect way of doing all that, just the way that seems to be the least controversial for the time being.

Unfortunately, the growing number of countries who accept the inevitable “Globalization” of Capitalism, will experience the uncertainty, the disruption, and the unexpected and unwanted financial and social costs necessary to bring that about. Continued human efforts to promote Globalization will definitely upset the economic status quo of the rich and the poor alike. But such an outcome is “normal” in Chaos Theory, where perceived self-organization comes with assured unpredictability.

Expected results don’t automatically nor necessarily follow what we think are causal actions. More often than not, there are unintended consequences because all the important causal factors affecting the results have not been considered and properly evaluated.

Regardless of the desires of sincere business, social, and political planners to forecast the future, no one can do that very well without completely understanding how each minuscule factor is likely to influence the future. (The innocent flutter of a butterfly’s wings on the other side of the globe might affect our local weather, chaos theorists opine.) Eventually, trying to anticipate long term consequences will be recognized for what it is, merely educated human speculation or “betting against the house” where Chaos reigns and knows the odds better than we do.

In its simplest terms, the basic idea behind Capitalism is to obtain something from someone else. We can give the process of acquiring things several unique names: trading, earning, conning, stealing, or winning a bet. The objective is to end up with something that you didn’t have before. Something you needed, or thought you wanted or had to possess because “you were worth it” as the glamorous woman in the TV ad says with a seductive smile. Regardless of how you secured the pursued object, it is yours. It becomes part of what defines you and your “net worth.”

Then, despite all your earnest efforts to secure your net worth physically (or with insurance) once you have obtained it, unforeseen things happen to wrest it away from you, or destroy it, or render it worthless. These unpredictable “things” are not only the Acts of God and the acts of men, but also the subtle consequences of the numerous unpredictable and barely traceable interactions derived from singular, individual stimulants or incitements which experts might assume to be the evidence of Chaos Theory in operation.

Such consequences viewed from a distance in time and space may be deemed harmless and even theoretically “beautiful”- as a geometric fractal appears when plotted on a colored computer monitor. But close up, the immediate impact on a person’s life can seem disastrous to the individual who loses what he thought he possessed.

Material objects change hands. Intangible possessions like power and prestige disappear and end up somewhere else. Recycling is an ongoing process in Nature. Generally, if there is a demand for something, there will be a supply. Often, something is obtained from somewhere to make something else. If what is made is desirable and has value to someone, it will be sought by whoever values it the most.

Power, land, wealth, arty objects, gem stones, drugs, and alcohol become “valuable” – whatever grabs our human attention and won’t let go until our puny egos are satisfied by possessing them. We succumb to tantalizing attractions and pursue them until either we obtain them or lose interest in them. (Perhaps, because they are unobtainable!)

There is no morality in Capitalism and no expected recognition of any social obligations from capitalists. We try to obtain things for as little as possible and give up things for as much as possible. We all know the economic rule: Caveat emptor, caveat vendor. We are always taking something from someone who has, and giving up something to someone who wants. As time passes, transactions take place and order appears when enough of the same transactions are repeated.

Markets are identified for necessities as well as fad items. Then, efforts are made by expert businessmen to maximize the profitability of these repetitive transactions in a specific market. But as certain identifiable desires are waxing in prospective customers, equivalent desires are waning in other customers. And slightly different desires for similar items are waxing in other customers. Millions of chaotic events are transpiring constantly.

The dynamics of any market are invisible, though they are statistically observable after the fact and analyzed in depth. The short term predictability of a market trend is temporary, however. The preferences of the customers can change abruptly for no obvious reason. When that happens, a new, seemingly self-organizing trend evolves from the unnerving chaos and a clever entrepreneur launches and promotes a revised product or package.

Sooner or later, different influential factors, unappreciated and disruptive, enter in the “tried and true” sales formula, and the sales results become disappointing. Back to the conference table goes the product planning team to try to understand why they have failed economically to produce something for their volatile market that could be sold for a decent return on their investment.

But Chaos is already ahead of them. A market is influenced as much by the availability of money, as the personal desires behind the apparent demand. And in turn the availability of money is dependent on the earning power of the employed customers in that particular market and the amount of credit extended to them. The lack of money, credit, or something to convert to money limits demand.

“So, let’s create a new market among those who have adequate financial resources,” says the ambitious CEO. “Or offer our cash-impaired customers extended payment terms and zero percent per annum interest for awhile. Or a free gift for coming into our showrooms!”

The connection between Capitalism and Chaos Theory may seem perverse or unrealistic, because we Americans tend to believe that Capitalism is a settled and established economic system which has brought prosperity to our country. But as you can see from the panic expressed in the words of the CEO quoted above, sales results that fail to meet expectations create consternation and an urgent call for renewed creativity in dealing with an apparently adverse market situation, so that profitability and market predictability can hopefully be regained.

Yes, we know that the Law of Supply and Demand works in mysterious ways and often with unanticipated delays that create scarcity which can affect prices drastically. That has repetitively happened to the price of gasoline over the years. Yet, the man in the street has been convinced that Capitalism works favorably in providing him with a wide range of inexpensive, quality products that he can afford and rely on for their usefulness and durability. Shouldn’t everyone in the world be so economically blessed as we are in the U.S. and allowed to share with us the chaotic Capitalistic system that will bring prosperity to him or her?

Prosperity is an economic word that suggests a better average lifestyle and overall standard of materialistic living have been attained. But it is a relative concept depending on who is gaining and who is losing market share in the dynamics of a global economy. The economic water level doesn’t automatically raise all boats, as the metaphor promises, especially the battered and unseaworthy craft used by the poor and the incompetent business managers.

The promise of a better life, an easier job, and a more affluent lifestyle catches the attention of the deprived workers who long for a bigger share of the economic pie. Some may obtain a temporarily stable job, a higher wage per hour, a shorter work week, and a happier existence compared to what they have now. But what about those who are losing a job, a steady paycheck, health benefits, and the daily routine, stressful or not, that engenders a feeling of contributing value to society?

This economic extremity of losing a job is worse for an employee than losing market share is for a poorly run company. The worker has totally lost the most viable market for his or her services. Even if his skills are current and his talents are above average, an individual may have to move his family to another city to find an employer interested in his particular skills. And another, similar employer may be a non-union shop paying a lower wage and offering less fringe benefits or only part time work. Our individual economic future is not predictable, and never was.

Stop and ask yourself, “Isn’t our beloved Capitalistic system that frantically drives businessmen and women to acquire labor and materials at the lowest possible costs continuously chaotic?” Doesn’t a profound uncertainty prevail, one that tends to re-organize each industry gradually in an unpredictable way? One that affects each competitor differently in a seemingly hostile way?

Such unpredictability is not contemplated by the average wage earner, because the dynamism accompanying Globalization is swifter than what he was accustomed to over the past 50 years. The mix of new jobs created in our new-millennium economy are not as remunerative, and the new skills required must be learned. But what do the Capitalists insist? That there has always been a period of readjustment in the labor market as economic progress is made, a period of phasing out certain skills while adding new ones.

For the unemployed, the unemployable, and even the struggling middle class, nothing stays the same. Ours is not a primitive agricultural economy where change was imperceptible. There is not much demand for buggy whips today.

Of course there is always turmoil and stress inside a business even if it is not struggling to remain competitive nor merging to avoid bankruptcy. Because the “key” jobs are not sent abroad and the control of the business remains in the hands of the local board of directors, the shareholders and customers have the illusion that it’s “business as usual.”

The bankers, the lawyers, and the accountants know otherwise, and so do the suppliers. But these groups are striving to survive themselves when there is a recession as strong as the one that we have just experienced. The normal business chaos inside a company becomes more apparent during a recession because CEOs scramble more aggressively to weather the reduced demand for products and services, and that usually involves reassigning and dismissing many employees.

So, why link Chaos Theory to Capitalism? What enlightenment does that provide us? How can a study of Chaos Theory actually improve our personal, company, and industrial welfare? Meg Wheatley has written about dealing with the power of chaos in organizing a company. (See her 1992 book: Leadership and the New Science: Learning about Organization from an Orderly Universe – “Orderly” in a different sense than we would normally think of it, I suppose.)

I won’t go there because my interest is opening the minds of individuals primarily, not business leaders. I see studying Chaos Theory as an opportunity to better prepare individuals for tomorrow’s reality, the Future Shock, as author Alvin Toffler calls it in his book by the same name.

On 9/11 Americans came face to face with the uncertainty that has always existed in our human lives, but that we had conveniently preferred to ignore. It didn’t occur to us just how much others hated us, our Capitalistic way of life, our predominantly Christian way of thinking, and our far-reaching government policies.

We couldn’t believe that this hatred could cause others to plan such a complicated, surprising, and devastating terrorist act. The horror of this act touched all of us and frightened many of us even though we had lost no one in that catastrophe. We became immediately convinced that our personal safety was an illusion, that our systems of security were penetrable, and that our fate could be in the hands of someone else besides ourselves.

This common realization was not brand new. The awareness of our vulnerability was just buried in our subconsciousness somewhere. The ongoing threat was disbelieved because, in spite of what we saw happening in other places in the world, it hadn’t happened here “at home,” except in Oklahoma City. The shock or surprise shook us up and begged the question, “What could we have done?” The same kind of shock hits a company’s work force whenever the management decides to close a plant for whatever reason. “It can’t be happening to us, can it?” is the reaction. Any devastating event or life-threatening illness causes the same response. “What did I do to deserve this? How could it have been prevented?”

What could anyone have done is the real question to be considered. “Unfortunate” things are happening to people all the time. Some people are just better prepared to face adversity than others, or to respond in imaginative and successful ways, and some are obviously “lucky!” To be better prepared or ready to respond with coolness and not panic requires some broader awareness of the looming, potential, and unusual eventualities: the unexpected, but possible “turns of events” that Chaos Theory enlightens us about.

For example, in our Capitalistic society, labor is always in a state of flux. Unemployment is inevitable as unhappy workers seek new jobs, technology advances rendering certain skills obsolete, and demand for workers waxes and wanes following end product demand. But how many people who are driving to work today suspect that they will be out of a job at the end of the month? Or at the end of the year?

How many employees seriously wonder about the financial condition of their company, their company’s plans for expansion or contraction, or their CEOs’ decision to send jobs overseas?

All employees have doubts and concerns about negative rumors inside their companies, but normally they don’t realize how they themselves are specifically involved. Even suspecting the worst, many will hope for the best without taking any action until the very last moment. If they were better educated about how dynamic and chaotic the Capitalistic business world is, and how rapidly new technology is undermining job security, they would hopefully do two things: prepare themselves mentally and skillfully for the unpredictable advent of change in their work place.

Few of us are aware of the profound impact on our families and ourselves of losing a steady job. The overall savings rate in America is virtually zero. Such individual fiscal unpreparedness reflects the expectation of stability and continuity in the face of an ever more dynamic economy. Since no one can predict with reliability what’s likely to happen in a game of chance (or in a business), you wouldn’t think that an intelligent person would so easily believe that the lottery odds will somehow favor them.

Yet, millions of adults act like they are capable and deserving of “beating the odds” in all the risky adventures in life. Today, society through its advertising people is providing our incautious risk-takers with more and more gambling opportunities where only a very few participants win anything substantial.

A house of cards is flimsy, backed by hopes and not by honest analysis. Chaos Theory never tells you when the stacked cards will fall, only that stability will be terminated at the most unpropitious and surprising moment. (Murphy’s Law in operation!) To avoid this undesired result, we need to understand the odds better and to recognize the cost of trying to avoid a long term negative result.

If that can be done. Most criminal acts lack the anticipation in the mind of the perpetrator that he will be caught. Such were the attitudes of the CEOs and CFOs of Enron, World Com, Tyco, and the other companies involved in the recent rash of corporate fraud and mismanagement uncovered in our complex economy.

Does it take another Depression to awaken the public to the tenuous economic stability that we have in the U.S.? Instead of exporting products and services today, we are exporting dollars; dollars weakened by the debt on our governments’ books and the projected deficit spending of our Federal Government. Yet, there seems to be no respect for the pending financial chaos and the likely collapse of our status of international superpower.

Spend and borrow from the future. Just what the State of California decided in their last election. The more borrowing, the more frantic are the cries not to increase taxes. Hang on; an economic boom will bail us out. Tax rates are high enough, so hold the line. No more taxes! Reduce spending! (But not on my pet project!) Patience, things will change in our economy for the better. (Or for the worse!) Employment will pick up, wages will begin to increase, and a tranquil economic “normality” will be restored!

Somewhere a butterfly arose from a fragrant flower and rippled the air. Somewhere a discharged employee couldn’t pay his mortgage, and the bank went under. Somewhere a small business failed, and its employees couldn’t find jobs and ran out of state unemployment benefits. Somewhere a shop owner of a popular mall couldn’t pay the rent and his CAM charges, and had to close his store.

Somewhere a bomb went off, and innocent people were killed in a market square because they believed that they were safe from the consequences of economic, political, and religious Chaos. Somewhere relationships are being altered imperceptibly, unintentionally, and unrelentingly. The trends aren’t definitive, the evidence is sparse, and the observers are asleep or powerless to cry out. Only luck has brought civilization this far, and there is no guarantee that our good fortune will last.

Chaos is trying subtly to organize herself, but she isn’t going to show us her hand. We must not let those who disparage her modus operandi control the decision making process in our economy. Double-talkers like Alan Greenspan need to be shown the door. Someone with an appreciation for the impact of Chaos must take charge.

Irrational exuberance and nonchalant valuation of risks must be avoided. We may have very little chance of escaping the unconventional influence of Chaos, but we do have the growing human intelligence to study Chaos Theory. Hopefully, we can learn some valuable lessons from its latent secrets and make a sincere effort to minimize the substantial risks that lay ahead of us.

Chic Hollis is a longtime drummer and motorcyclist, who served in the US Air Force in North Africa. Married 4 times with 5 children born in 5 different countries on four continents, Chic is a politically independent citizen of the world interested in helping Americans understand the reality that is life overseas where many intelligent, educated, and industrious people aren’t as privileged as we are in the US. He studied Latin, Greek, Russian, French, Spanish, Portuguese, and German and ran several large companies. Sadly, Chic Has left this planet and we miss him very much, but we are very pleased to display his amazing writing works.