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Stakeholder Capitalism Ch.4: Divided we fall




In a series of blogpost, I'm reflecting on the book Stakeholder Capitalism, written by Klaus Schwab with Peter Vanham.

The book is mainly about economics, but a whole chapter is devoted to the increasing polarization and division in modern Western societies, and rightly so. Important political and societal decisions, including economic ones, depend on democratic agreement. Such agreement is easier to reach with a strong political center, but the trend is against the center. More radical viewpoints and developments can be found both on the left and the right of the spectrum.

Klaus Schwab tells in a few pages about the Berlin Wall in his home country, Germany. Before the Wall, many Germans celebrated a new common European identity, he writes. I believe they did, as the German nation was deeply damaged during the war, resulting in deep trauma and an identity crisis. But in 1989, people climbed the wall, and German reunification was set in motion. That process was facilitated in Davos by the WEF, Schwab tell us, and I surely think that is something to be proud of. However, in the next thirty years, the political center waned. In 2019, the big winners were the extreme left en the extreme right. About these both, he writes:

  • Die Grünen (the Greens): “They embodied the growing concern in society over climate change.”

  • AfD (kinda alt-right): “More worryingly however, the radical right and anti-immigration party …”


That shows that Schwab has personal preferences. We cannot consider the book politically neutral, so any explanation or solution being given is a bit suspect. He strengthens this impression by talking about “populism”, a term without much meaning (see Torbjörn Tännsjö, Populist Democracy - A Defense, 1993), mostly used to virtue-signal one's own political position. But on the other hand, Schwab mentions the refugee crisis of 2015/2016 (Wir Schaffen Das) and the resulting practical problems which would impact public opinion.

Good leadership shown by Merkel during COVID-19 strengthened the political center again, but only temporary. The trend is away from the center, towards polarization, not just in Germany but in many Western countries. Trust in elites, democracy and elites has waned. What caused this?

The authors mainly point to economic causes. Already before the financial crisis of 2008, many people did not profit or even were hurt by globalization. Those people, although increasing in number, wore mostly in the margin, but after 2008, it accelerated.

I strongly agree with the authors that we see polarizing societies in the West, and that we cannot explain that with “only an ideological lens”. Indeed, (economic) inequality has increased, as was shown in chapter 2. The book states that, underlying both the extreme left and extreme right, belief in the establishment and institutions is eroding. The leading political and economical class should react with introspection and humility, and address societal and economic ills. It is hard to disagree with the authors on this point, if we want to preserve our societies! This introspection, although preached, is not practiced in the book. They complain about the WEF being targeted by complot theories during the COVID-19 pandemic, but fail to offer explanations and introspection for such harassment.

Another main reason given by the authors for polarization is the environmental crisis. Although the authors admit that “not everybody stood on the same side of the debate”, they still present environmental problems as a general cause for polarization. I'm afraid I have to remind the reader about the different way in which Die Grünen and the AfD were depicted by the authors.

Also interesting is what they have left out to explain the rising societal division. To my mind do come a few pieces of the polarization puzzle:

Multiculturalism and immigration. Immigration not only causes short-term integration problems, as is shown in the book, but can fundamentally lower the social capital and trust in a society. See e.g. Putnam on diversity and community (2007) and Schaeffer & Sønderskov on ethnic diversity and social trust (2020). Furthermore, it will lead to more segregration (see my take on the Schelling model, in Dutch). Ethnic diversity can literally rip a state apart; when as a political science student I asked Robert Putnam in 2006, when he was visiting Leiden University, why Yugoslavia fall apart while there was previously social binding, he didn't know for sure but pointed to political leadership.

Secularization. The loss of religion (religare = binding together) has continued. Religion is not just a personal belief, but also offers social structure and institutions of its own.

Network society. The network replaces the city, so we get more individual freedom and loosely organized cliques. This makes sense as we shift from the anonymous industrial mass society to the individualistic information age, but doesn't help to keep us together.

Urbanization. Tensions between cosmopolitan city-dwellers and more traditional people living in villages are increasing, as lifestyles, fundamental views, social ties and economic interests are growing apart. See e.g. How the megacities of Europe stole a continent's wealth by Julian Coman in The Guardian (2019).

Europe. It doesn't have one language, it doesn't feel like one nation, and – except for traumatized Germans with identity issues – it is hard to imagine Europe as a united nation in the next century. Note that I use nation as the more instinctual, linguistic and ethnic part of the nation-state; we already got an European state, which is easier as it lives in the realm of the artifice, but will also be fragile without a supporting strong nation as base. (This is similar to the mind-body problem.)

Psychological. This is related to other factors such as multiculturalism and secularization. I won't dive deep into this but I believe Carl Jung and Erich Neumann, among others, wrote about this quite early. Their insights are fascinating but complex and somewhat out of scope for this chapter review.

Maybe some of these factors will be mentioned later on in the book; I don't know yet – I have to keep on reading. However important these other factors which I propose might be, we have to agree that economic divisions and insecurities play an very important role, maybe the most important role. The polarization is real, so when Stakeholder Capitalism proposes to take account all stakeholders, then yes that would be something nice to have, if we can realistically achieve it. I expect this “howto” part to be explained later on in the book.

The next part of the book, part II, will deal the drivers of progress and problems that might hinder progress. The first of these drivers is described in chapter 5: globalization.




If you want to follow my adventure with this book, just follow this weblog or check my twitterfeed or Facebook timeline with the hashtag #wefbookclub or the mention @WEFBookClub for the next few weeks. You might also order the book, and maybe even join the WEF Book Club on Facebook, so you can make this a participatory experience for yourself.

Also check the index page of my review series that I will update as I add blogposts on this subject.
Excerpt: Polarization and societal division are on the rise. The green left vs. alt-right is not just ideological; economic issues and growing inequality drive this.
Post date: 2021-03-10 01:18:56
Post date GMT: 2021-03-10 00:18:56
Post modified date: 2021-03-13 01:05:04
Post modified date GMT: 2021-03-13 00:05:04
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