Schismogenesis

What part of inequality in society is deemed fair and acceptable, and, conversely, what part is considered unfair and should be corrected through government intervention and wealth redistribution? For most of my life, this has been the driving question in Western politics.


Two camps have sought to address it. In highly simplified terms, left-wing politicians have claimed that inequalities are unfair because society is largely responsible for them; right-wing politicians have argued that inequalities are fair since they are primarily the outcome of a meritocratic system.


Notwithstanding these diametrically opposite positions, both sides have had a common objective: fairness. Through political cycles, debates have led to some compromise-driven convergence towards a balanced socio-economic framework as the world moved into the neoliberal order born in the 80s.


American historian Gary Gerstle notes that two distinct cultural movements emerged at the same time as neoliberalism, each with its own moral compass: Neo-Victorianism (self-reliance, traditional families) and Cosmopolitanism (freedom from prescribed social roles). Mr. Gerstle observes that these two currents both originated from and supported neoliberalism and its market-based globalization trend. These unifying dynamics contributed to a stable social, economic, and political environment.


But by driving a wedge between the low/middle working class and the professionally educated managers, entrepreneurs, and intellectuals, the Great Financial Crisis created a new source of unfairness and shook neoliberalism. Critically, it also caused class-related differences to overlap with the cultural divide described above. This development allowed culture to enter and hijack politics, busting the traditional left-right construct. As a result, all the cultural aspects of life are being politicized, including food, transportation modes, COVID mask-wearing, gender/sexuality, and science.


Unlike fairness, culture, which shares the same Latin root as cult, is uncompromising and prone to populism. In the extraordinary book The Dawn of Everything(2021), I discovered the phenomenon of schismogenesis.’ It explains how each social group defines itself culturally by opposition to others in a self-reinforcing loop leading to deep divisions. The political debate is not converging toward an equilibrium any longer. Instead, what is now dubbed ‘identity politics’ fuels divergence, i.e., belief polarization, with facts distorted to suit opposing narratives. Good luck to democracy!


Like everything else, firms, until now politically pragmatic, are being increasingly politicized based on their sustainability profile. If this trend continued, Neo-Victorian firms would end up exclusively dealing with Neo-Victorian suppliers and catering to Neo-Victorian customers, supported by Neo-Victorian employees and financed by Neo-Victorian investors. A similar politico-cultural alignment would naturally occur on the Cosmopolitan side. The corporate world and the financial markets would eventually split into two groups vying for social and economic hegemony.


Since achieving sustainability from an environmental and social perspective requires unity, this evolution would have dramatically negative implications. There is only one way forward. It requires that firms work to depoliticize ESG. They can do so by strictly presenting the integration of ESG as an effort to build competitive advantages and create long-term economic value, as argued in Capitalism Sapiens (2022).


That way, sustainability could become the new place of convergence.


Perhaps it is not too late.

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