Precarity, Competition, and Innovation: How Economic Systems and Societal Structures Shape Our Future

Personal Perspective, Future of Work, Innovation

The rapid globalization and integration of the economy, including the power of technology to make work performed and done anywhere more accessible have resulted in our 21st Century societies finding themselves at a potentially critical moment in humanity's millennia-long story. 

Our world has shrunk considerably over the past 50 to 75 years. The end of World War II saw with it the birth of a more integrated global economy with capitalism gaining influence as communism waned into the early 1990s. The emergence of China from the 1990s to 2020s also reflects the triumph of global capitalism, albeit state-sponsored capitalism.

​As with any change in how society is structured, there were groups that benefited massively from this shift to a globalized, capitalist (neoliberal) world and those who didn't. One of the main results of this shift was many goods became cheaper to produce and consumer prices, at least in the United States, remained low for decades. 

For nearly 40 years, the average percentage change in consumer prices in the United States barely crossed 5%. In fact, median "inflation" (ie, yearly change in consumer prices) was 2.8% from 1983 to 2021 (we are a far cry from those levels in 2022, though). Compare this to the growth of capital and investment returns over the same time period. The median rate of yearly return for the S&P 500 (a basket of the 500 largest US-based corporations) from the same period, 1983 to 2021 was 12.8%. While this is not perhaps the most elegant economic analysis, I think it demonstrates how much relative value in capital was produced relative to costs passed on to consumers...nearly 10% more per year. 

Note the axes for the percent change in the S&P 500 Index are nearly 7 times as large as that of the CPI graph above, demonstrating large percentage gains in US stock prices relative to consumer prices, historically, over this time period.

Clearly, the returns to capital relative to the costs born by consumers was the result of companies trading more expensive labor for cheaper means of production. For a time, this bargain seemed "good" for many...prices were kept (arguably) artificially low through low-cost labor. Many workers in more economically developed countries didn't see this shift in economic structure as a problem as it benefited many of their pocketbooks either via high rates of return on capital and/or lower cost goods. Some individuals, especially those working in manufacturing sectors in the United States, Europe, Japan, and other developed countries saw opportunities shrink in favor of increased outsourcing of their work to China or, at least in the past few decades, automation. 

For a time, a global, capitalist, and neoliberal economy seemed to produce more overall prosperity than what came before it. Millions were lifted out of poverty and provided jobs that allowed them to live a life of greater convenience and security. The emergence of China's middle class was the growth engine of the global economy for the past 20-plus years. In a cruel twist of fate, however, the continual pursuit of maximum profit, minimal cost, and "optimization" of a global, capitalist economy may end up resulting in an overall more impoverished world. Globalization produced ever more competition amongst labor markets and the shock of the COVID-19 pandemic illustrated that a complex, global supply chain only works when all its requisite components and inputs are allowed to flow across borders and oceans.  

Competition drives innovation. The market forces that have dominated western economies in the neoliberal area allowed corporations and organizations with more innovative products to increase their profits. In sum, the lives of those using these products also became better. However, those groups that could not innovate and adapt died, resulting in layoffs and loss of entire sectors of our economy. The destructive nature of capitalism is fundamental to its success. There must be winners and losers. 

A bigger philosophical question facing the United States in particular as we approach the end of the first quarter of the 21st Century is whether we will allow the innovative and destructive forces of capitalism to continue to affect our citizens' personal health and wellbeing. Deaths of despair (from suicide and drug overdoses) have risen in the United States over the past 15-20 years despite our overall gross domestic product (GDP) per capita continuing to rise relative to other developed economies. 

The juxtaposition of income inequality and high poverty rates in the US along with overall greater economic growth and productivity of our economy as a whole illustrates that our current form of "US-led, global capitalism" results in big winners and losers. 
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Some illustrative data from McKinsey's Rethinking the Future of American Capitalism report drive home the point: 

• American firms rank among the most widely known and the most profitable globally: in economic profit, they make up 38 percent of the top 10. 
• In the United States, just 6 percent of counties account for two-thirds of GDP output.

​In addition, a variety of data available from inequality.org, sourced from OECD statistics and the Credit Suisse Global Wealth Report highlight the enormous share of wealth concentration in the United States relative to other developed countries.

The United States has more wealth than any other nation. But America’s top-heavy distribution of wealth leaves typical American adults with far less wealth than their counterparts in other industrial nations.

In exchange for our dynamic and growing "economy" (ie, corporate profits) in the US do so many have to be left behind?
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What is the ideal balance between creative destruction, economic progress/reinvention, and the stability of our society? When should workers be protected at the potential expense of consumers? Will work as we know it be a thing in the future? And if not, is more time for leisure and creative pursuits for all a good thing? Will humanity fill the free time of a technology-laden future making the world better or worse?  

These are thorny questions and ultimately how things transpire is unpredictable but that does not mean we don't have some agency in shaping the future we want to see. ​

We have constructed a society in the United States where so much of the social safety net has been removed that we may ultimately become less innovative as a society. Who can afford to take the risk of starting a small business or company when they lack affordable access to health insurance or reasonable childcare costs? There is data supporting the notion that innovation is lower in more unequal societies. ​

Innovation also threatens many people's sense of value and contribution to society. As artificial intelligence (AI) becomes more capable at replacing work traditionally performed by humans, even white-collar work, many are left asking how they can contribute to society. The decline in American's confidence in institutions leads one to wonder whether individuals will feel the need to engage with larger societal structures in the future or choose to escape to some version of the metaverse (a la Ready Player One). 

Clearly, this is a time of immense change and uncertainty.
Will we become a less globalized and interconnected world, retreating inwards as societies and people?
Will the speed of automation and change result in many being left behind economically in the new world order?
​Will inequality continue to increase with potentially explosive societal consequences? 

A fundamental set of questions arises: Is our system broken? Can it be reformed? Must it be re-envisioned? Do we have the collective and political will to make real change?

Is the sun rising or setting on economic progress and opportunity for all as we approach the quarter-point of the 21st Century?

The current structures of our society add further complexity to addressing the problems we face. What is "right" is not always what is popular making it difficult for a democratic country to push forward with changes that may be difficult in the short-term but lead to long-term positive impact. While pursuing my Ph.D. in neurobiology from UNC Chapel Hill, I looked at delay discounting behavior...the tendency for people and animals to discount the future. The future is "worth" less than the present partially because at an individual level the future is uncertain. You may not make it to the future and so why delay consumption now? The YOLO ("you only live once") choices of many young adults reflects the underlying basic instinct of all living things to prioritize the NOW over the LATER. It is in our nature to do this.  

In large part, I think our politicians and leaders have failed to articulate a truly promising view of the future and America's place in it. Rather, "othering" and blaming certain groups is used for political gain while real solutions go undiscussed and our two-party system fosters division and extremism. We have the potential to move closer to being a true melting pot of culture and ideas, welcoming immigrants from across the world who seek to better their futures and our country as a whole by leveraging American Capitalism and the innovative ecosystems it can foster.

​If we don't find a way to strike the right balance between growth at any cost and compassion for all people within our society, though, we could lay the seeds for the destruction of the future we all want to see. 

More from the blog:

• The End of Work as We Know It: How an Increasingly Automated World Will Change Everything
• The Challenges of Being an International Researcher: Implications for Advanced Degree Labor Markets
  • Part 1
  • Part 2​

For Further Reading:

• What exactly is neoliberalism?
• Book: Capital in the Twenty-First Century
  • See also the documentary on the topic
• Rethinking the future of American capitalism (from McKinsey)
• Inequality: A persisting challenge and its implications (from McKinsey)
• The social contract in the 21st century: Outcomes so far for workers, consumers, and savers in advanced economies (from McKinsey)
• Book: The Power of Creative Destruction: Economic Upheaval and the Wealth of Nations
• Book: US vs. Them: The Failure of Globalism
• Book: Six Faces of Globalization: Who Wins, Who Loses, and Why It Matters
  • More on this concept from one of the book's authors, Anthea Roberts on her personal website
  • Who wins and who loses from globalization? There are (at least) six answers (excerpt from the Book)
  • The Corporate Power Narrative: How Corporations Benefit from Economic Globalization (excerpt from the Book)
• Book: Deaths of Despair and the Future of Capitalism 
• America's crisis of despair: A federal task force for economic recovery and societal well-being
• Book: Forward: Notes on the Future of Our Democracy 
• Relevant political reads from The Atlantic:
  • ​How the U.K. Became One of the Poorest Countries in Western Europe
    • ​A cautionary tale?
  • The Wreckage of Neoliberalism
    • The postwar neoliberal economic project is nearing its end. The question is who will write the last chapter, the Democrats or the totalitarians?

Sites Worth Exploring:

• INEQUALITY.ORG (United States and global data)
• realtimeinequality.org (United States data)