A recurring underlying aspect of many problems that we see today in the economy, polity, and society is that of imbalance in the pursuit of ideas and ideologies.
In public discourses, we see it in the prioritisation of individual rights over the social and the collective. This manifests in the dominance of liberalism on social issues and free-market principles on economic issues.
In recent years, especially in the US, woke liberalism has been squeezing out conservative views. The resultant tensions manifest in the political realm on issues like family values, transgender rights, and most prominently in debates on immigration. It has resulted in the near-complete polarisation between the liberal and conservative political camps, with almost no meeting ground. The political centre stands egregiously vacant.
In economics, it’s about the pursuit of free market and efficiency-maximising ideologies gone too far. I have blogged hereabout 25 economic orthodoxies that conflict with reality. Generally, in Western economies (again, especially the US), it is about consumption marginalising production, and the elevation of virtual innovation (software or digital) over physical innovation. The near deification of AI and the complete neglect of the (perhaps more important) emerging electro-industrial-tech stack is an illustration.
In international trade, trends like tariff reduction, trade liberalisation, globalisation of value chains, and offshoring have clearly gone too far. The most striking manifestation of this trend is China’s stranglehold on the world economy in manufacturing, and the associated destruction of manufacturing bases and loss of manufacturing jobs across countries.
Nowhere is the loss of balance as salient as in finance. It manifests in the disproportionate and growing importance of private (venture capital and private equity) over public markets (banks and capital markets) in financial intermediation. I have written here about the problems and consequences of financialisation going too far. It is evident even in the preference among youth for liberal arts education over STEM courses in colleges.
In important areas of global concern like climate change, this imbalance has led to a headlong plunge into renewable energy sources and electric vehicles and wholesale abandoning of fossil fuels and traditional industries. It has swept aside daunting transition challenges like financing sources, sunk costs of legacy systems, unsustainable mitigation and adaptation costs for developing countries, technical problems of integrating energy systems, and so on.
This imbalance is also stark in our engagement with emerging technologies like Artificial Intelligence (AI). The agenda on automation and the application of AI is almost exclusively framed and driven by Big Tech companies. The public narrative is framed in terms of innovation and human progress, the most desirable of all objectives. But the driving force behind the race to adopt these technologies is efficiency maximisation and cost reduction, which enhance business competitiveness and increase profits. Its larger consequences are never a consideration, and adoption is done without any public debate.
On this issue, as I blogged here, Daron Acemoglu and Simon Johnson have shown how ideas and technologies have deep political significance and how agenda-setting shapes the nature of the “progress” arising from these ideas and technologies. The agenda framing makes certain aspects of the issue salient while obscuring certain others. This process is deeply political. The political power balance determines what’s made salient and what’s obscured.
Another imbalance surrounds the marginalisation of the role and importance of governments and the elevation of the private sector. For example, the ever-expanding use of consultants and outsourcing of services has enfeebled government capabilities and left the state open for capture by vested interests (see this and this). It has amplified the self-fulfilling dynamic of governments are inefficient and therefore should deregulate and exit. There’s a real risk that the new movement of deregulation will add to this enfeeblement without achieving anything substantial in its original objective.
In development, it is about neglecting plumbing issues, such as state capability, in favour of innovation, management theories, and the application of IT solutions. For example, in school education, the fundamental issue of improving classroom instruction quality (and therefore teacher capabilities, motivation, pedagogical techniques, and teacher-student engagement, among others) is often overshadowed by the pursuit of smart classrooms, digital content, and blended learning, among other initiatives. I have blogged here on ten things in development orthodoxy that deviate from reality.
The common thread in all these examples is that of an idea or ideology being taken to its extremities, sweeping aside counter-views. The resultant common deficiency is that of balance. Any idea or ideology unrestrained by countervailing views and unmoderated by reason and prudence becomes unbalanced and verges towards fanaticism.
The Greeks had a word for balance, meson, or the middle. At a philosophical level, the Bhagavad Gita refers to the highest state of balance, or equipoise. In physical and social systems, this balance is achieved in a state of equilibrium (it is a different matter that there might be multiple equilibria). The essence of stability in any system is this balance.
However, the innate dynamic of ideas and phenomena generates a gravitation or swing to the extreme. This is just as true of social systems as it is of physical systems. Any trend - capitalism, socialism, statism, globalisation, liberalisation, privatisation, deregulation, financialisation, automation, etc - if left to itself, follows a self-reinforcing feedback loop that ends up destroying countervailing forces and spawns its excesses.
I blogged here about a universal dynamic to how ideas evolve and play out. They trigger interest and get gradually adopted, with their degree of adoption increasing over time. This, in turn, creates distortions that cause a backlash against the idea. The backlash strengthens over time and results in a correction of the excesses that had seeped into the idea.
A simple framework to explain this is the Hegelian dialectic, wherein as a thesis (idea) evolves, it conflicts with its emerging antithesis to generate a synthesis, often a better state of affairs. As Hegel wrote, thesis begets anti-thesis, both of which undergo a struggle to generate a synthesis, and so on it goes.
In their highly influential book, The Fourth Turning, Neil Howe and William Strauss describe a cyclical trend in history. Their century-long cycle encompasses four phases, or turnings as they call it - High, Awakening, Unravelling, and Crisis. Each turning lasts a social generation of about 20-25 years.
The work of Howe and Strauss has resonance in other similar interpretations of history. In this essay from 1976, Sir John Bagot Glubb, the former Commander of the Arab Legion, describes history in terms of cycles of around 250 years, or 10 generations of 25 years each. Peter Turchin, an expert in cliodynamics, uses maths to model historical changes and find historical cycles.
Be that as it may, this imbalance has inevitably forced backlashes across fields - politics, economic policies, trade, financial markets, public systems, etc. Across them, orthodoxy is on the retreat. Populist politics, anti-immigrant sentiments, protectionism, revival of manufacturing, retreat of globalisation and offshoring, support for fossil fuels, etc., are a result of this backlash.
In the circumstances, the challenge for us is to identify and acknowledge the imbalance within systems, and then figure out ways to deal with the problem. There’s a need to consciously cultivate or encourage countervailing forces to achieve a dialectical balance. Only open systems can engage meaningfully through such a process to achieve balance.
In this context, it is also useful to draw from a concept formulated by Aristotle, phronesis, or practical wisdom. It is the ability to exercise good practical judgement, as the highest intellectual virtue. Unlike theoretical knowledge or technical skill, it is about knowing how to act rightly in specific situations by balancing general rules with context, ethics, and experience to achieve good outcomes. Its critical value is underlined by Albert Hirschman, describing the ability to exercise good judgment as the binding constraint in development.
This is important since a related theme associated with the imbalance is the supremacy of expertise and technocracy, and the marginalisation of prudence and politics. This trend must be acknowledged and reversed for any meaningful effort to restore balance in these realms.
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