Capitalism is changing

Richard SennettSennett is known for his work on societal change. In this book he states that, while over the last decades institutions skills and consumption have indeed changed, these changes have not set people free.

A big part of 20th century  has been dominated by large organizations (organized as a pyramid; unified, centralized, concentrated); leading to a strong reduction of what Sennett calls ‘social capitalism’. Three big changes are, in his view, at the root of this development:

1. The shift from managerial to share holder power in large companies. He even pins a date to it: the collapse of Bretton Woods unleashed enormous surplus of capital for investment, making business truly international (think merchant banking), and have put investors in charge, making management mere bystanders.
2. Those investors typically wanted short term gains instead of long term results. Companies started to behave accordingly, changing business ethics in a fundamental way.
3. The strong growth of communication technology.

These structural changes have resulted in a diminished trust (among workers) and low institutional loyalty that threaten the economy; which is especially manifest in the life of ordinary workers. Sennett believes furthermore that inequality is the Achilles heel of the new economy, but also says that the welfare state has become unsustainable. Without giving practical solutions he warns that people fear becoming ‘useless’, as the labor supply is more and more global (foreigners might be better armed for the tasks of survival), automation has an effect on some labor, although its impact has always been over-dramatized. And we are still pretty bad at the management of ageing; people are written-off to early; much talent is wasted.

While some of Sennett’s examples already come across as outdated (the book was published 10 years ago), it’s value lies in putting forward the seemingly paradoxical question how to make most of individual talent in a society that is still structured top down, while pursuing a cohesive society.