29 ноември 2011

Why big businesses are bad for business

I recently gave a talk at a big corporate conference to hundreds of delegates, without exception middle-managers from large companies. I realised as I spoke to the audience that my words about entrepreneurship were irrelevant to them – even offensive. For I was preaching the gospel of independence, freedom and risk-taking, while they were entombed in the cosy, airless coffin of big business. All of them were life-long employees of huge institutions and, to them, the struggles of running your own business were totally .

The more I thought about this disconnect, the more I realised that all too many executives in large public companies actually have more in common with various arms of government than they do with entrepreneurs and start-ups. I used to believe that the great divide was between the public and the private sector: between state and commercial interests. But in truth the real difference is between giant and small organisations, whether they are for profit or not; between huge bureaucracies and owner-run outfits.

After all, most large corporations are international. They are likely to be publicly traded and owned by diffuse shareholders, themselves pools of institutional money managed by hired hands. Like public bodies, they suffer from the agency problem and institutional capture by managers. At least in founder-run firms, you know who the boss is. Moreover, private firms are largely local, serving customers in their immediate communities, unable to take advantage of tax manoeuvres, which the likes of Google exploit so ruthlessly. Private firms generally have loyalty to their home country, whereas multinationals are the commercial equivalent of non-doms – everything has a tendency to migrate to the lowest-cost location.

Government and big business typically have close, sometimes unhealthy relationships. Corporates pay for lobbyists and lawyers to influence legislators and regulators; politicians seek non-executive directorships and consultancies with large banks and suchlike when they retire from public office. Such organisations as defence companies, builders, IT contractors, security firms and others are vast suppliers to the public sector. Their skill set is not innovation, but contract negotiation: they make money if they persuade the civil servants and regulators to agree price increases.

As parts of the public sector were privatised, such as the utilities, they acquired the profit motive – but never adopted the flexible mentality of an entrepreneurial business. Most are near-monopolies, and behave much more like arms of government than the sort of companies I have owned or founded. Often their staff are unionised, with all the group-think that accompanies such burdens. Sometimes they jazz up their adverts, logos and branding, but such efforts are like putting lipstick on a pig.

In companies I own and help direct, the highest-paid executive earns between five and ten times what the lowest-paid staff member earns – and mostly, as founders, they are risking their capital, too. By contrast, in corporate empires, the CEO often earns 50 or even 100 times what the basic workers are paid – and the most they risk is losing their job. Such massive inequality leads to profound dysfunction. It arises because the rewards systems in large firms are broken. Boards become obsessed by governance, bosses become convinced of their genius, while staff feel minimal loyalty. Large businesses tend to be mature and to focus on cost-cutting, outsourcing and automation. Frequently they do not generate additional jobs, but destroy them.

I don’t believe in big government, and I’m not sure about big business. Sometimes their relationship reminds me of the finale of George Orwell’s Animal Farm, where the revolutionary pigs become as corrupt and brutal as the humans. “The creatures outside looked from pig to man, and from man to pig, and from pig to man again; but already it was impossible to say which was which.”

Of course certain sectors require huge amounts of capital, such as car manufacturing or mining. Others, like water supply, have to be monopolies. And global enterprises can achieve economies of size that they pass on to the consumer. So I readily accept that big business can be beneficial to society – and is a fact of life. But I still hope that one day the relentless tide of consolidation is reversed, and both government and industry revert to a more human scale.

lukej@riskcapitalpartners.co.uk

The writer runs Risk Capital Partners, a private equity firm, and is chairman of the Royal Society of Arts. He is the author of ‘Start It Up’

© Copyright The Financial Times Limited 2011.
Why big businesses are bad for business

Jobs pledged to ‘destroy’ Google smartphone


Steve Jobs was so angered by Google’s development of a smartphone operating system that would compete with Apple’s own that he pledged to “destroy” it even if it took all of the tech company’s then $40bn in assets, a new biography of the deceased Apple co-founder shows.

While the rift between Apple and Google – and their chief executives Jobs and Eric Schmidt – has been documented before, the depth of feeling on Jobs’ part raises the odds that the two companies will clash head-on in what could be an epic legal battle.

“I’m going to destroy Android because it’s a stolen product. I’m willing to go thermonuclear war on this,” Jobs says at one point in the book, according to the Associated Press, which was among a few organisations that obtained early copies. At a meeting between the two Silicon Valley leaders at a Palo Alto restaurant, Jobs told Mr Schmidt, a former Apple director, that he would not take even $5bn to drop litigation, the AP said.

Thus far, Apple has sued only makers of phone handsets that use Google’s Android operating system, including Samsung and HTC. Though dozens of cases are in play, it has scored some early victories, including temporary bans against Samsung sales of an Android-based tablet in Germany, Australia and Holland.

Apple might not have sued Google yet because the biggest internet company by users has raised the defences elsewhere that it makes no direct profit from Android, which is distributed free, and has not delved deeply enough into the underlying patents to have knowledge of whether they could have violated some others, said legal analyst Florian Mueller.

But Google has now bought Motorola’s mobile phone division, putting it in direct hardware competition with Apple, and the extent of Jobs’ anger suggests that a large battle is brewing. Jobs died earlier this month aged 56.

“I think we are all in for a head-to-head collision between Google and Apple,” Mr Mueller told the Financial Times on Friday. Apple declined to comment and Google did not respond immediately to an interview request.

Apple has already cited the fact that one of Android’s leaders, Andy Rubin, worked under two Apple executives who patented relevant work. The iPhone and iPad maker’s strongest technical argument may be around the multi-touch gestures on screen, where Apple clearly led, Mr Mueller said.

But Jobs’ core beliefs are at a more emotional level, involving ideas, where the legal outcomes are less predictable, according to the book.

The 630-page book by Walter Isaacson, simply titled Steve Jobs, gives new details on many other areas of the secretive man’s professional and personal life, including his health and his romances.

It is based on dozens of interviews with Jobs that continued until just weeks before his death from cancer this month, as well as talks with family members and friends.

Some of the biggest revelations involve Jobs’ decisions on his medical treatment, where it appears that a man widely hailed as a genius made the poorest decisions possible.

It had been reported by Fortune magazine in 2008 that Jobs had delayed surgery for what he knew was a highly treatable form of cancer in his pancreas while he pursued alternatives. It emerges that Jobs resisted entreaties by his wife, a cancer survivor, former Intel chief Andy Grove and others close to him to have the small tumour removed because he did not want his body to be “violated”, Mr Isaacson told the CBS television show 60 Minutes.

After Jobs finally gave in, it may have been too late. Doctors discovered that the disease had spread to neighbouring tissue, Mr Isaacson said, and Jobs “regretted” his initial reluctance. The news programme posted an excerpt of its interview with Mr Isaacson on Thursday ahead of its full broadcast on Sunday night.

After Jobs accepted a traditional medical approach to his illness, he mastered it in detail and made the final decisions on all treatment, according to an account of the book in the New York Times. That included approving the sequencing of his own genes, which allowed for hand-tailored treatments, a pioneering approach that Jobs believed was key to the future of medicine. But not all that Jobs wrought, at Apple or in his personal life, was a success.


© Copyright The Financial Times Limited 2011.
Jobs pledged to ‘destroy’ Google smartphone

China’s satellites cast shadow over US Pacific operations

China’s rapidly expanding satellite programme could alter power dynamics in Asia and reduce the US military’s scope for operations in the region, according to new research.
Chinese reconnaissance satellites can now monitor targets for up to six hours a day, the World Security Institute, a Washington think-tank, has concluded in a new report.
The People’s Liberation Army, which could only manage three hours of daily coverage just 18 months ago, is now nearly on a par with the US military in its ability to monitor fixed targets, according to the findings.

“Starting from almost no live surveillance capability 10 years ago, today the PLA has likely equalled the US’s ability to observe targets from space for some real-time operations,” two of the institute’s China researchers - Eric Hagt and Matthew Durnin - write in the Journal of Strategic Studies.

China’s rapidly growing military might has unnerved its neighbours, many of whom are US allies, while disputes this year with Vietnam and the Philippines have added to the concerns.

China’s military build-up has accelerated in recent years, as it has developed an anti-ship ballistic missile, tested a stealth fighter and is poised to launch its first aircraft carrier. The fast-growing network of reconnaissance satellites provides China with the vision to harness this hardware.

Admiral Mike Mullen, the top US military official, said at the weekend in Beijing that it was clear that the PLA was focused on “access denial” - a term that describes a strategy of pushing the US out of the western Pacific.

“The US is not going away,” said Admiral Mullen, chairman of the joint chiefs of staff. “Our enduring presence in this region has been important to our allies for decades and will continue to be so.”

China warned the US last month not to become involved in its dispute with Vietnam over the South China Sea. “[China’s] strategic priority is to keep the US out of its backyard,” Mr Durnin told the Financial Times, adding that the satellite technology needed for achieving that goal is now in place.

When China tested missiles near Taiwan in 1996, the US deployed two aircraft carriers to nearby waters. The PLA’s inability to locate the ships was a source of great embarrassment that helped spur China’s satellite programme.

“The United States has always felt that if there was a crisis in Taiwan, we could get our naval forces there before China could act and before they would know we were there. This basically takes that off the table,” said Joan Johnson-Freese, a professor at the US Naval War College in Rhode Island.

© The Financial Times Limited 2011

America flirts with a fate like Japan’s

By Clive Crook
Published: June 19 2011 19:37 | Last updated: June 19 2011 19:37
Bromley
The stalling of the US recovery raises big, scary questions. After a recession, this economy usually gets people back to work quickly. Not this time. Progress is so slow, the issue is not so much when America will return to full employment but what “full employment” will mean by the time it does.

The administration thinks the pace of recovery will pick up soon. Last week President Barack Obama called the pause a “bump in the road”. Others think the slowdown will persist and might get worse, fears that cannot be dismissed. One alarming possibility is that the traits the US has relied on to drive growth in the past – labour market flexibility, rapid productivity growth – might have become toxic. If the US is unlucky, traits seen as distinctive strengths are now weaknesses, and a “lost decade” of stagnation, like Japan’s in the 1990s, might lie ahead.

The mainstream view is more optimistic and goes as follows. The recovery in the first half of the year was weak but special or temporary factors were to blame: bad weather, the timing of defence expenditures, the phasing out of fiscal support, the Japanese earthquake, the oil-price surge, worries over Europe’s debt, and so on. Together these could have cut 1.5 percentage points from growth in the first half of this year, yielding a feeble 2 per cent – too slow to put a dent in unemployment.

Some of those factors should fade in the second half, letting the growth rate recover to between 3 and 4 per cent. That would be disappointing with so much ground to make up – though unemployment would be falling, albeit slowly. Even optimists acknowledge it will take a while for consumers to cut debt to comfortable levels, for the housing market to stabilise, and for other aftershocks of the Great Recession to be worked out. But, in the end, the economy will bounce back and close the gap between actual and potential output.
Strong productivity growth, reflecting the US economy’s famous ability to cut jobs promptly, is central in all this. Potential output is growing even as actual output and employment stutter. This hurts now, the optimists acknowledge, but when conditions improve workers will be rehired. A low-friction labour market is fast to hire as well as to fire, and American companies will take up the slack quickly once conditions allow. In the end, US labour-market exceptionalism will deliver new jobs and strong growth as in the past.

But will it? Two things might work differently this time. First, since the recession was unusually deep and the recovery unusually slow, the US is experiencing unheard-of long-term unemployment rates. The housing slump and its associated plague of negative equity aggravate this by making it harder for the unemployed to move to find work. Long-term joblessness erodes skills and employability. Structural unemployment is surely inching closer to European levels. America has not been here before.

As Financial Times columnist Martin Wolf recently pointed out, after a recession such as this you can make a case for welcoming low productivity growth if it keeps more people in work. Better to spread the pain around through short-time working, he argued, than cut jobs. In a new paper, Robert Gordon of Northwestern University makes essentially the same point. He shows that in the past quarter-century the US labour market has become markedly more exceptional – more organised around the “disposable worker”. Management thinking and declining unions have driven friction ever lower, while employment subsidies and regulation have made Europe’s labour markets stickier. The Great Recession and its surge of long-term unemployment are a severe test of what was once seen as a distinctive US economic strength.

The second danger also works through productivity, but arises from the role played by debt in this cycle. Under circumstances such as today’s, with households striving to cut debt and interest rates at zero, economies can behave in strange ways. In a paper last year, Paul Krugman of Princeton and The New York Times, and Gauti Eggertsson of the Federal Reserve Bank of New York drew attention to the possibility of a “paradox of toil”, akin to the paradox of thrift (whereby if everyone tries to save more, the economy shrinks and so does aggregate saving). The logic of the paradox of toil is simple. Suppose the supply of labour increases, or productivity rises. Initially, prices would tend to fall. If nominal interest rates are stuck at zero, the real interest rate and burden of debt both rise. This leads overleveraged consumers to cut spending still more. Demand is not just slow to respond: the economy shrinks.

It is a peculiar world where higher productivity reduces output; and willingness to accept wage cuts worsens unemployment (which Mr Krugman and Mr Eggertsson call the “paradox of flexibility”). The idea that easy hiring and firing might permanently raise long-term unemployment is less bizarre, but still not something the US has needed to worry about in the past.

A gradually improving recovery would put things right side up. US strengths would be strengths again. But a prolonged slowdown, with consumers still not on top of their debts, might be self-reinforcing. Some would say this has already begun, hence the pause. The optimists say no, not yet – and they had better be right.
clive.crook@gmail.com

© Copyright The Financial Times Limited 2011.
America flirts with a fate like Japan’s

Turkey: Inspiring or insidious


By Delphine Strauss

Published: April 28 2011 22:34 | Last updated: April 28 2011 22:34

In one corner of the courtyard, green-painted railings enclose the tomb of a saint. In another, a pair of 12-year-old boys in spotless white shirts and neatly pressed trousers politely answer visitors’ questions. In Diyarbakir, a city in Turkey’s Kurdish south-east where many children work on the streets or land in jail for throwing stones at security forces, these two have come to prepare for high school entrance exams. Asked what they want to do later, one says “doctor” and the other, grinning, declares “police”.

They are attending a study house run by supporters of Fethullah Gulen – a preacher who has inspired the creation of a vast network of schools and student dormitories that blend academic rigour, especially in the sciences, with a moral education based on Islamic principles.

“It’s not just explaining English or maths – it’s explaining what it means to be a good or bad person,” says the director of Diyarbakir’s 20 study houses. “In this system teachers come to school earlier, become friends with students and care about the relationship....In none of our schools do we teach religion. We tell them what’s right and wrong. We show them good and bad practice, and they decide.”

But in Turkey, opinion is sharply divided between those who see Mr Gulen as a force for social mobility and tolerance, and those who suspect he is insidiously undermining the country’s secular foundations. His followers have been described as “Islamic Jesuits” – and as Turkey’s equivalent of Opus Dei. Yet there is little doubt that the movement he inspires is now an important force shaping Turkish society, part of a broader evolution in which leaders emerging from a religious, business-minded middle class are gradually eclipsing older, fiercely secular, elites.

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Mr Gulen – known to his admirers as hocaefendi, or respected teacher – now lives in leafy seclusion in Saylorsburg, Pennsylvania, nursing ill health and communicating largely though his published writings and speeches. Yet he has a following of millions, easily the most influential of Turkey’s religious communities. This Hizmet (“service”), as its friends call it, has a global reach: businessmen sympathetic to the cause have established schools – from Kazakhstan to Cambodia, the US to Iraq – and are rapidly opening them across Africa.

What the Hizmet consists of, and what it does, matters beyond Turkey’s borders. Growing prosperity and diplomatic muscle have made Ankara an assertive actor in the Middle East. Islamic movements around the region are drawing on Turkey’s experience as they challenge the old regimes. Gulen admirers are in the vanguard of Turkish businessmen in new markets; their activities may determine Turkey’s image as Ankara seeks a place at the centre of world affairs.

The professed aim of the schools is to create a “golden generation”, a new elite equipped to succeed in the global economy, while exemplifying faith, virtue and an ethos of serving others. When students graduate, many remain committed to the movement as they take up positions in teaching, business, media and public life.

“The Hizmet filled the gaps,” says Kerim Balci, a columnist for the pro-Gulen newspaper Zaman, who became involved in the movement when he left his village to go to high school and struggled to adapt to city life. “I work in a Hizmet institution. Economically also, I was given a scholarship by the Hizmet. But the real thing that kept me in was action. I meant something there – I was given duties.”

This commitment and absorption in the life of the community is typical. Almost all supporters also make financial donations – 20 per cent of income is not unusual.

To outsiders, such zeal can inspire both admiration and unease. Secularists worry that Gulen missionaries, once persecuted by the state but now working freely under the rule of the mildly Islamist AK party, will transform Turkish society, increasing pressure to conform to conservative values. But the bigger fear , beyond ideology, is that Gulen followers may be infiltrating state institutions, using their influence to undeclared ends.

These long-standing fears reached a new pitch when police swooped last month on an Istanbul publishing house with orders to seize all copies of a draft book. Entitled The Imam’s Army, it detailed the Gulen movement’s supposed dominance within the police. Its author, the journalist Ahmet Sik, had been jailed a few weeks earlier, accused of links to Ergenekon – allegedly a terrorist network that plotted to overthrow the government. But for many observers, his arrest reinforced suspicions that the Ergenekon probe – in which scores of government critics are on trial alongside known thugs – was being used to settle political scores.

Others accused of helping Ergenekon include Ilhan Cihaner, a prosecutor who had been investigating local branches of the Gulen community, and Hanefi Avci, a former police chief who wrote a book on the movement. Nedim Sener, another journalist arrested in February, had co-authored research criticising the ways Hizmet members sought to influence young people and dominate commercial life.

“Anyone who touches him burns,” Mr Sik called as he was bundled into a police car. When The Imam’s Armywas finally leaked online, it was downloaded more than 100,000 times in 24 hours – despite the fact that it contained little new information and was clearly a rough draft.

With his mild, contemplative expression and neat white moustache, Mr Gulen is not an obvious figure to inspire fear. Born in 1941 in the eastern province of Erzurum, he was largely self-taught after primary school but read voraciously – drawing inspiration from Said Nursi, a thinker who advocated reason, tolerance and distance from politics.

Mr Gulen began his career as an imam in Turkey’s state service, at a time when there appeared to be little choice between extreme conservatism and an extreme secularism that rejected Turkey’s history and religious traditions. Instead, he advanced an interpretation of Islam that stresses tolerance, condemns violence and embraces modernity. He has advocated action to alleviate poverty, promote education and advance dialogue between different religions.

Bill Park at King’s College, London, has described it as a “heady and promising combination of faith, identity, material progress, democratisation and dialogue”.

These messages make Mr Gulen a welcome antidote in the west to more radical ideologues. He has lived in the US since 1999, when he left Turkey under threat of prosecution during a clampdown on Islamists. In contrast to Turkey’s Islamist Milli Gorus movement, whose parties contest elections, Mr Gulen insists he has no political ambitions and preaches respect for authority – advising supporters to waive obligations, such as wearing the Islamic headscarf, if necessary to gain an education in the secular system. When sympathisers enter politics they are told to cut ties, says Mr Balci, the pro-Gulen columnist.

“The Nursi-Gulen tradition doesn’t envision an ‘Islamic state’. It rather seeks a liberal-democratic state that will be tolerant to its missionary work,” Mustafa Akyol, a commentator on religious affairs, wrote last year.

Mr Gulen himself rarely gives interviews to rebut the accusations against him – some of which stem from the wilder fringes of a fertile conspiracy culture. He has no spokesman, simply publishing a list of more than 80 “claims and answers” on his English website. There he insists he has no links to the finances or running of the schools, no possessions except books and clothes, and no wish to influence any state institution. He has said the word “movement” misdescribes the Hizmet, as it implies political aims, and even rejects terms such as “follower” or “member”.

Yet pro-Gulen media clearly seek to shape the political agenda. Zaman campaigns to end military interference in democracy and has championed the Ergenekon investigation in that context. It is supporting the AK party of Recep Tayyip Erdogan, prime minister, ahead of June parliamentary elections. Mr Gulen himself also intervened directly in politics for the first time last year, calling for a Yes vote in a referendum on government-sponsored changes to the military-era constitution.

“I wish we had a chance to raise the dead from their graves and urge them to cast Yes votes,” he said, in comments that shocked even his own followers – and raised speculation he might also pick sides in June’s polls. The community’s support could be “a huge factor in these elections”, says Gareth Jenkins, an Istanbul-based analyst who has angered Gulenists by criticising the Ergenekon investigation. He believes Gulenist support could also be crucial if a battle develops between Mr Erdogan and President Abdullah Gul.

Most Gulen supporters see AK as Turkey’s best option at present. But no politician likes a rival power centre emerging – and Gulen media often side with Mr Gul, not Mr Erdogan, when views of the two diverge.

Party politics aside, critics say it is disingenuous to deny the Hizmet’s influence in a society where people advance by personal connections. Research led by Binnaz Toprak of Istanbul’s Bahcesehir University detailed interviews with businessmen in provincial cities who felt joining the community was the only way to prosper, while abstaining would mean losing custom and being shut out of municipal tenders. Many bought Zaman newspaper or attended the weekly meetings of local Hizmet circles in response to these implicit pressures and not through genuine conviction, the 2009 study found.

In Diyarbakir, many people consider the Hizmet, for all its claims of neutrality, as a rival power to Kurdish nationalist groups. “They are putting pressure on people, they want to shape people,” says one local politician, declining to be named because “talking about Gulen is not an auspicious business; when you talk about him, something happens”.

Hizmet members say secularists are too ready to believe any conspiracy that fits their prejudices. “Some people believe whatever is said against the movement. It’s understandable because the movement is changing what’s happening in Turkey,” says Fatih Ceran of the Journalists and Writers Foundation, which acts as its unofficial public relations arm, politely explaining there is no way to seek comment from Mr Gulen himself. “Some people here want a more polarised Turkey andthe movement is going very much against it.”

Yet fears are magnified by the difficulty of identifying who supports the Hizmet and what it consists of. Gulen-inspired organisations are happy to welcome visitors and explain their activities – stressing their charitable and non-proselytising nature. But many individuals conceal their sympathies. US consular officials were unsettled by the reluctance of visa applicants visiting Mr Gulen to explain their motives, according to a 2006 cable published by Wikileaks.

The movement’s boundaries are vague: it attracts both committed and casual followers and has no membership lists or financial statements. Businessmen from one city might open schools in Kyrgyzstan – or an individual might support one student. “There’s no way to speculate on numbers because it’s non-hierarchical: there’s no central organisation,” says Helen Ebaugh of the University of Houston, who is researching the movement’s finances.

Supporters say this lack of definition is a strength. But as the Hizmet expands and becomes more influential, could its lack of structure leave it open to exploitation by people joining out of self-interest rather than conviction? Mr Gulen issued a rare statement denying any wish to suppress Mr Sik’s book. But one theory is that the raid on the publishers was orchestrated by Gulenists within the police, acting in their own interests and not on orders from any authority.

“It is possible theoretically that some people are using [the movement] for their own betterment,” says Mr Ceran. Others argue that anyone who approached the Hizmet purely to advance their career would either be deterred by the culture of donations, prayer and public service – or be inspired to join in.

Whatever the truth, a force that set out to bridge divisions in Turkish society is now inspiring fear among a broad section of the population. “You are trying to abolish one hidden power and you are creating another one,” says Sengul, a professional woman in Istanbul. “There are democratisation initiatives and so on, but at the end of it people are scared of reading a book.”


GULEN AND BUSINESS



A secular elite yields to middle-class entrepreneurs with moral purpose

    For much of the past century, Turkey’s economy was dominated by a handful of conglomerates owned by the families of Istanbul’s secular business elite. Now, governments hoping to boost trade with one of the world’s fastest-growing economies are increasingly dealing with Tuskon – an association that reflects the arrival of a new middle class of conservative provincial entrepreneurs.

    Its growing influence also reflects the rise of the Gulen community, from which most of its 25,000 members are drawn. “We are not a direct part of that movement,” Rizanur Meral, Tuskon president, told the Financial Times in a recent interview. “We have members with different thoughts, ideas and preferences. But we can say that the majority of our members support Mr Gulen’s ideas.”

    These are the entrepreneurs who answered the call by Fethullah Gulen, a Turkish preacher, to found schools and businesses in Balkan and central Asian states after the fall of communism. Tuskon – an umbrella for scores of regional business associations – is now spearheading Turkish efforts to enter markets across sub-Saharan Africa, and strengthen ties in the Middle East.

    Though officials from the traditionally secularist foreign ministry have tended to keep their distance from Gulen-inspired projects, ministers appear to view them as a useful extension of Turkey’s soft power. Tuskon often takes them to visit “Turkish schools”, as they are known overseas.

    Mr Meral squeezed a Saturday breakfast meeting with the FT into a fortnight when Tuskon accompanied Recep Tayyip Erdogan, prime minister, to Russia; helped organise a visit to Ghana and Gabon by president Abdullah Gul; and hosted Gary Locke, US commerce secretary, at an event to promote Turkish-US trade.

    Tuskon remains apolitical, Mr Meral insists, merely ensuring its activities do not conflict with government policy. But its members’ presence in Africa appears to have helped it influence policy – it lobbied successfully for the opening of embassies and Turkish Airlines routes across the continent, for example.

    Tuskon’s main role is to help small and mid-sized businesses understand the global economy and forge contacts in new markets, Mr Meral says. But it is also trying to address inequalities at home, encouraging members to support charitable projects and invest in poor Kurdish regions, even when it does not make economic sense. “You have to have some moral incentives,” he says. “There are many business people from the east of the country who . . . think they should pay their debts to the region where they grew up.”

    Yet Mr Meral admits Tuskon’s influence is attracting some with less admirable motives. “We have become very careful in selecting members,” he says. “The major criteria are to be reliable and trustworthy, to stick to business ethics . . .so they represent the Turkish business community in the best way in international markets.”


© Copyright The Financial Times Limited 2011.


Turkey: Inspiring or insidious

Japan’s job-for-life ethos is dying a death

By Mure Dickie in Tokyo

Comfortable life becomes a thing of the past

There used to be something of a script for a Japanese middle-class, white-collar life. Freshly minted graduates would enter a company where they would stay for the rest of their careers. For women, that job lasted until marriage or the birth of a first child. For men, it lasted until retirement.

In exchange for hard work and general submission to the corporate will, the archetypal salary man – or sarariman – could expect security and the gradual uptick of seniority-based pay. Living standards rose, delivering an increasingly comfortable life.

But this narrative is beginning to look like a period drama. The middle-class certainties of the postwar era have been eroded by the low growth and economic dislocation that followed the bursting of Japan’s 1980s asset bubble.

Tokyo residents Raisuke Furukawa, 31, and his wife, Etsuki, 36, started their careers in classic fashion. He joined a major department store chain in 2003, and she joined a trading house in 1998.

Far from the start of a job for life, however, this was merely an opening act. Mr Furukawa is now on his third employer. Mrs Furukawa is on her sixth.

Indeed, Mr Furukawa says that by the time he graduated, any illusions of future job stability were erased by a spate of large corporate bankruptcies at the time. He also saw a troubled future ahead for department stores, once the champions of Japan’s retail sector, but which are now struggling to compete with more focused shops and the internet. Revenues at his company were falling and older middle managers were vulnerable to cost-cutting lay-offs.

Such a fate, now common, would have been an aberration for their parents’ generation, Mr Furukawa notes.

“When they were our age, 30 or 40 years ago, Japan was still in its high-growth period and because of that salaries would rise every year,” he says. “When the economy was rising, psychologically they had it easier than us. Nowadays there’s a lot of uncertainty and gloomy talk about the future.”

The National Tax Agency says average annual salaries, including bonuses, fell in nominal terms every year but one in the decade to 2009, sliding 12 per cent from Y4.61m to Y4.06m ($52,000). Repeated bouts of deflation mean real incomes have fallen less, but analysts say lower bonuses and salaries have further undermined already weak consumer sentiment and therefore reduced overall economic growth.

Japan used to congratulate itself on being a middle-class society, a definition based in part on government surveys that showed more than 90 per cent of citizens defined their economic position as “lower-middle”, “middle” or “upper-middle” as opposed to “higher” or “lower”.

Such self-assessment has changed only slightly in the past two decades, but the self-congratulation has been replaced by anxiety about job security and growing inequality.

Japan’s biggest manufacturers now rely heavily on contract labour, leaving around a third of the workforce without even the much-reduced security of a staff position. Sociologists fret about the emergence of a new class of “working poor”.

Indeed, poverty rates rose sharply from the mid-1980s to the late-2000s, with nearly 16 per cent of the population living on less than 50 per cent of the median household income by the end of that period, according to the Organisation for Economic Co-operation and Development.

With two salaries – each close to the national average – the Furukawas are far from poor. They have a small but nice flat in one of Tokyo’s leafier neighbourhoods, take a foreign holiday once a year and are still able to save much of their income.

Yet like middle-class peers around the developed world, they wonder how to shoulder the cost of expanding their family. Both went to private schools, but that looks unaffordable for their own offspring. They once imagined having two or more children; now budget considerations are nudging them toward settling for one.

But along with uncertainty has come flexibility, even freedom.

Mr Furukawa left the department store for a better-paying internet-related job at a small company, then took a substantial pay cut to take his current job at a digital start-up.

Such ventures are risky, but he takes heart from the knowledge that the internet and social change is making it much easier to start new companies in Japan than it was for past generations. “I have confidence that I can do something,” Mr Furukawa says.

© Copyright The Financial Times Limited 2011.

Agnes the ageing suit


As the world’s population gets older, how are we going to manage? Innovative approaches are being developed at the MIT Age Lab
James Crabtree tries on the Agnes ageing suit
James Crabtree climbs into the Agnes ageing suit, designed to mimic the physical restrictions of old age. A plastic inner harness and elastic bands attached to the feet and hands imitate the movement limitations created by spinal problems, while foam wrist, knee and neck pads simulate the symptoms of arthritis. First constructed in 2005 by a team of MIT researchers with backgrounds in psychology, ergonomics and exercise physiology, the suit has been used by companies as diverse as Siemens, Daimler and General Mills. The latter experimented with it to understand, for instance, the difficulties elderly consumers face when opening cereal boxes
James Crabtree tries on the Agnes ageing suit
It was only after a couple of hours in the suit that it hit me. I was exhausted. Putting it on hadn’t been that hard, although, standing in a windowless classroom in Massachusetts Institute of Technology’s AgeLab, I did need help from a researcher to hand over the components. First came the industrial blue overalls. Then the stiff foam knee and elbow restraints, bulked-up versions of those white tubes you wear to recover from a sprained ankle or wrist. Then a series of elastic straps and wires, designed to make it difficult to stretch up, or bend down.
Agnes hat
Hard hat with elastic straps to reduce head movement and stretching ability
The hat looked like nothing special – the generic sort worn on building sites – until more straps were attached, dragging my head down and lending a distinctly elderly arch to my back. Then there were the shoes, softened with special spongy soles that made stepping down stairs alarming. I began to walk carefully, fearing a fall. Basic tasks became difficult. Reaching high objects was a struggle, as was a simple chore such as sweeping the floor. The suit’s goggles turned my vision yellow, while the double-layered plastic gloves meant the touchscreen on my phone no longer worked.
Yet it was the cumulative effect that took its toll. As I was shown round by Joseph Coughlin, the AgeLab’s amiable 50-year-old founder, I felt more and more worn out. The researchers call the outfit Agnes, or Age Gain Now Empathy System, and see it as a carefully designed tool to help businesses adapt their products for elderly consumers. But, after an afternoon inside one, I didn’t feel especially empathetic. I felt beat.
I had come to Boston to meet Coughlin on a rainy June morning, to learn about innovative approaches to the problems of an ageing society, and, in particular, to discuss how people could avoid moving into retirement homes in old age. Probably America’s most prominent ageing expert, Coughlin is a fixture on the conference circuit, and a doyen of White House advisory committees. His enthusiasm for the subject is infectious: he seems almost to bounce as he talks, his silver and salmon bow-tie bobbing up and down. The garment is something of a trademark: on his office wall, five further examples are mounted and framed in a glass box, a gift from one of the lab’s many corporate partners.
Joseph Coughlin, founder of MIT’s AgeLab
Joseph Coughlin, founder of MIT’s AgeLab
As we walk, Coughlin points out other age-related gadgets: a set of two-way monitors allowing distant children to check in remotely on elderly parents; a sensor-enabled “smart trash can” to measure how much food is being eaten; and, most charmingly, a furry white robot seal, designed to provide stimulation for a dementia sufferer.
Yet Coughlin balks at the idea that technology alone can solve the many problems thrown up by an ageing population. Instead, he argues that every social and economic institution – from transport and housing to education and commerce – must be reinvented, especially if many millions more are to avoid the indignity and expense of a final trip to a nursing home. “We need a vision that says ageing is not just about the frail. Ageing is about all of us, and how we keep people productive for as long as possible,” Coughlin tells me. “What we’re left with is a crisis, where we’re using yesterday’s social and policy models to address today’s new ageing population. It is a fundamental disconnect.”
The disconnect Coughlin describes isn’t difficult to understand. We are living longer. Much longer. And picking up the tab is going to be expensive.
James Crabtree holds 'Paro', the robot seal
Paro the seal. Paro is an animatronic ‘therapeutic’ robot baby seal, designed to comfort elderly patients suffering from dementia. Paro responds to touch and sound, waking up and getting sleepy depending on the frequency with which a user interacts with him. Although born in a lab, Paro is now commercially available, with many thousands of units sold in Japan since it was first put on the market in 2003
The first American baby boomer reached retirement this year. For the next 19 years roughly 10,000 more will retire daily, doubling the population over 65m to 72m, or one in five Americans, by 2030. The same is happening in Britain, where the elderly population has now outgrown the young. And it is the very oldest demographic that is growing most rapidly: the Office for National Statistics says the number of over-85s will more than double by 2035, to 3.6m. But that’s nothing: by then there will have been a seven-fold increase in centenarians too.
This so-called “silver tsunami” stems from a seemingly unstoppable increase in longevity, driven in part by improvements in medical technology. American demographer James Vaupel has shown that human life expectancy in most advanced nations has increased in a linear pattern, rising by about three months a year for the past 170 years. Some experts think this trend will flatten out, but as yet it shows no signs of doing so. A 2010 study in The Lancet predicted that, assuming it keeps going, half of the babies born since 2000 will live to see their 100th birthday.
As a result, pension systems designed for a decade-and-a-half of retirement now face being stretched over three decades instead. Social care systems are also in crisis, as the scandal over Britain’s bankrupt private care home provider Southern Cross all too readily demonstrated. And the problem is going to get worse: one in 10 of those in their late sixties requires some form of daily personal help, but the number rises to around half of those over 85.
Spongy-soled shoes
Spongy-soled shoes affect mobility and balance
Yet nursing homes are expensive, with annual costs in the US ranging from $78,000 for the average nursing home to $194,000 for full-time home-based care – a bill only a tiny fraction of Americans can hope to afford. The British government’s recent Dilnot review of social care proposed a £35,000 cap on the fees that any individual, or their family, would have to pay. Yet this still leaves a funding gap – likely to grow to around £6bn a year by 2026. And all of this at a time when government budgets across the western world are being cut.
The debate about how to fund long-term care hides another issue. No matter how wisely the current system is reformed, this remains a system no one actually wants to use. Indeed, as a 2005 study from the American Association of Retired Persons (AARP) points out, around nine in 10 of those shortly to retire express a strong preference to stay in their existing homes during their retirement.
Back in his office, Coughlin is clear that current care models no longer work. “The senior living industry, from independent living on a campus to nursing homes, at the very best is under question, if not under siege,” he says. “Retirement in the future is not going to be about moving to the beach or to the golf course, even if you can afford it. Ageing well is about living in an environment that has the intensity and the density of activities that keep you engaged and healthy.”
Agnes suit harness
A harness sits around the waist and legs
In part to help realise this vision, Coughlin persuaded MIT to allow him to set up his lab back in 1999. He was frustrated by traditional academic approaches, which treated ageing largely as a medical problem. There were experiments to coax mice or worms into living longer, and money to help cure diseases. But the result was what he calls the longevity paradox: “We spend billions of dollars trying to live longer, but no one puts any thought or any investment into how to live longer, better.”
Tools like Agnes proved especially useful in exploring one sector that Coughlin sees as critical to the future: transport. Here, as in other areas, technology is part of the answer – cars augmented with clever information systems can make drivers more aware of hazards and obstacles, and so on. MIT’s AgeLab even includes a driving simulator housed in a full-size cherry-red Volkswagen Beetle, with sensors to monitor driver eye movements and pulse rates.
Yet the wider issue of driving is one technology can’t solve. Seven in 10 Americans live in rural or suburban locations. For many, public transport isn’t an option. Most will eventually get too old to drive. Coughlin puts it like this: “Even if I keep you healthy and bring meals to your house, if you don’t have transportation you have the same accommodation as a prison.” Without new ways to travel, the options many elderly people face are grim. But that isn’t the only problem.
Agnes suit elastic straps
Elastic straps to reduce mobility
The tragic consequences of a generation of elderly drivers unwilling or unable to give up their car keys were brought home to Katherine Freund more than 20 years ago. Her three-year-old son Ryan was knocked down by a car driven by an 84-year-old man, in front of their suburban home in Maine. The driver suffered from dementia. Ryan ultimately recovered, but at the time he suffered severe injuries and fell into a coma. “My little boy was run over by an apparently nice old man, who thought he had hit a dog,” Freund tells me. “So I began to think about how in the world that happened, and how I [could] make sure that it never happens again to another little boy, and another nice old man.”
Having heard about her two-decade-long campaign, I drove up from Boston to visit Freund’s office, housed in a converted mill a few miles outside Portland. The city is the largest in Maine, which also happens to be America’s most aged state – making it a test-bed for ageing and innovation. Freund is small, carefully dressed, and has a quiet, intense voice. As we talk, sitting around her boardroom table, she pulls out a chunky ball of blue wool and begins to knit.
For a number of years after her son’s accident, she tells me, she turned the problem over in her head. Most elderly people have no alternative to cars. Public transport is limited. Taxis are expensive, or unsuitable. There are few rules to stop you driving. Faced with a choice between giving up either their cars or their freedom, most elderly people drive for longer than they should. And, as a consequence, older drivers have the highest accident rates of any group apart from teenagers.
A folded Agnes ageing suit
A folded Agnes ageing suit
Freund’s solution was ITNAmerica, an innovative not-for-profit organisation that brings together volunteers, vehicles and clever computer software to provide around 50,000 subsidised car rides a year to elderly people across the US. The organisation is, in effect, a cheap, community-run taxi service staffed by a mix of paid and volunteer drivers. Launched in Portland in 1995, it charges an annual $40 individual membership fee and an average of $9 a trip, much less than a regular taxi. Partially supported by charitable grants, the service has now expanded to more than 20 cities across America.
The organisation’s HQ seems low-tech, right down to the room for a taxi-style dispatcher. But behind the operation lies a clever software package that the organisation had to build from scratch, using complex algorithms to match riders and volunteers. ITN’s other bit of ingenuity comes from its use of credits. Volunteer drivers build them up – most are over 60 themselves – and can then cash them in when they choose to stop driving. A volunteer in Los Angeles, meanwhile, could build up credits to donate to an elderly parent on the other side of the country. Freund has also struck deals with local supermarkets, so both ITN and its users get rewarded if they take a trip to the shops.
At ITN’s headquarters I meet Sandra [not her real name], a regular user in her late eighties. She has neat white hair and is dressed in a green cagoule. Speaking clearly but slowly, she tells me she suffers from a degenerative joint disease, which made it difficult to turn her head while driving. She had all but given up on her car, relying on ITN instead. Recently, she sold her car to the organisation, too, earning extra ride credits in return: “My insurance was due in April, my automobile registration in June, and a new driver’s licence in August. I thought: this is ridiculous!”
The Miss Daisy driving simulator housed in a Volkswagen Beetle
Miss Daisy. Housed in a cherry-red Volkswagen Beetle, Miss Daisy is a driving simulator designed to test the effects of cognitive distraction and medication use on older drivers. The car now sits permanently within the AgeLab, having been winched into the building via a modified elevator shaft
Sandra’s decision to sell is just one more small victory for Freund. Attitudes are also changing, she says. When she first suggested unsafe elderly drivers ought to be banned she received hate mail, mostly from elderly drivers themselves. Now she thinks more people recognise the problem. ITN still has to find a way to be self-funding, but, having added an affiliate in a new city roughly every year since she began, her ambitions have grown: “We aim to do for transport for older people what Ebay did for flea markets,” she tells me.
It is a tall order. ITN will have to grow well beyond its current 50,000 annual rides to meet the demand from the roughly 14m Americans Freund says will need alternative means of transportation by 2030. Still, back at MIT, Joe Coughlin is optimistic: “ITN is easily the most innovative transport project I have seen in 20 years. I think that Katherine is on a footing to do for alternative transportation for the elderly what Ralph Nader did for auto-safety.”
. . .
Just getting around, however, isn’t enough to ensure a contented old age. In Boston I meet another woman who began to worry about the wider difficulties around a decade ago. Susan McWhinney-Morse had lived in downtown Boston’s elegant Beacon Hill neighbourhood since the mid-1960s. She had counted Senators John Kerry and Ted Kennedy as neighbours, and raised four children. But as retirement loomed, she, along with a group of about a dozen local friends, began to fret about their options.
Residents of Beacon Hill Village
Residents of Beacon Hill Village
Lively though it was, Beacon Hill was not especially well designed for the elderly. Help from the government was limited to the poor or disabled. Visits to nearby assisted-living facilities and nursing homes convinced her such places were dull, isolating and expensive. “This was a group who weren’t going to go out to the ‘burbs, to a warehouse, to be warehoused for the rest of their lives. No way,” she tells me. “I thought, this is where I come from ... I’m simply not going to go.”
Two years later, in February 2002, she launched Beacon Hill Village, a charity designed to support the elderly population in the area. Like ITNAmerica, help with transport was a big part of the plan. But the group added discounts at local stores and medical facilities, and a programme of social activities, ranging from political discussion groups to trips out of town. A range of volunteers and paid professionals were available too, to help with everything from odd jobs to more formal care services.
More unusually, the organisation provided a concierge-style phone line, which members could call for advice on pretty much anything they wanted, whether it was a medical issue or finding a local handyman. Some used the service for more unusual purposes: one inherited an antique lamp shade and rang up asking how to get it repaired; another wanted a trip to a local horse race track to pick up her winnings.
A smart trash can
Smart trash can. Part of the AgeLab’s 'E-Home project' to redesign living arrangements for older people, the smart trash can uses radio frequency identification (RFID) antennas to tag objects in a kitchen. This allows the bin to sense when items have been used or thrown out – letting distant family members or caregivers look out for unusual eating behaviours
The idea caught on: around 400 local residents have now signed up, each paying $640 for individual annual membership. The concept attracted wider attention too, especially after an article about the organisation appeared in a magazine sent out to 30 million members of the AARP. A range of imitators began to spring up, and now similar villages exist in 64 communities across the US.
Sitting around a table at the organisation’s Beacon Hill office, McWhinney-Morse explains her vision for this “village movement” in grand, historical terms. “We were the generation that, after the second world war, got into our cars and drove to college and never came back,” she says. “I can remember going to a department store with my grandmother, and before we got back home the goods were delivered. That world died with the war. And what that world did was help to support older people in their own homes.” It is these networks of support that must now be rebuilt.
Implicit in the movement is a further rejection of the idea of moving away from home to retire. McWhinney-Morse mentions Del Webb, the American developer who built Sun City, the famous retirement community in Arizona. “His model was: come to retire, come to Arizona, come play golf. But don’t die here, because we have no facilities.” However, she also admits to doubts about how replicable the Beacon Hill model can become. It was never designed, she tells me, entirely to replace a nursing home or long-term professional care.
But back up in Maine, I met one couple who claim to have found just that answer – a new, inexpensive means of caring for elderly people who otherwise would need to go into a home.
. . .
Jim Maxmin and Shoshana Zuboff make unlikely saviours for the social care industry. An American, Maxmin spent much of his life as a businessman in Britain. He became chief executive of Volvo UK at the age of 34, and went on to lead both Thorn Home Electronics and later Laura Ashley – often shuttling back and forth across the Atlantic on weekends. Zuboff, a noted thinker on the impact of new technologies in the workplace, was one of the first women to join the faculty at Harvard Business School and was awarded tenure and an endowed Chair at an early age.
Jim Maxmin and Shoshana Zuboff are the founders of Elder Power
Jim Maxmin and Shoshana Zuboff are the founders of Elder Power
Maxmin and Zubboff’s genuinely is a marriage of ideas, given they are best known for co-authoring The Support Economy , a popular management book published in 2004. In it they argue that the frustrations consumers feel, especially when they are put on hold on the telephone, or otherwise badly treated, can only be overcome through an entirely new model of “distributed capitalism” with new systems of “deep support” for customers at its heart.
These ideas provide the background for the duo’s thinking on ageing, but the spark came from unusual coincidences beginning with their decision to move to the country. Keen to raise a family, they bought a disused dairy farm in the picturesque seaside town of Damariscotta, about three hours’ drive north of Boston in rural Maine. Their first son was born, and they began to get involved in the local community, giving presentations about their work.
They also met a local doctor, Alan Teel, who had started a business using webcams to monitor elderly patients who wanted to remain in their homes. After years of struggle he was unable to cover his costs. Around the same time a budget crisis saw the state of Maine cut the support it provided to Damariscotta’s private residential care home, threatening it with bankruptcy.
Both got Maxmin thinking. His experience at Thorn Home Electronics, which included Radio Rentals, taught him that if you can accelerate the depreciation of a piece of technology, such as a webcam, you can then give it away to a person who would otherwise not be able to afford it. Overheads could be lowered further if local people could be persuaded to volunteer as receptionists or bookkeepers, or simply to check in on elderly people at home. The care home’s building could also be an asset: its rooms could host other medical services, while its kitchen could be used to cook food for non-residents.
Maxmin spent long evenings poring over spreadsheets, puzzling over how to make the numbers add up. Eventually he hit upon a combination that seemed to work, and Elder Power, as the new organisation came to be called, was launched in 2008. It offers different packages of care, ranging from $100 to $600 a month, for which customers receive a mixture of visits and daily phone calls, along with cameras and motion sensors to monitor their wellbeing. More personal support – including transportation, help with meals and bathing – is provided too, although some of it costs extra.
Publicity came gradually, first by word of mouth then through presentations at local churches and community groups. A handful of elderly people joined, then a few dozen more, with the group eventually growing to more than 100. Much like Beacon Hill Village, the project aimed to use local facilities. But unlike Beacon Hill, Maxmin and Zuboff’s business takes all comers, often providing intensive support to those with severe conditions, including Alzheimer’s.
The dashboard of the AwareCar
The prototype AwareCar, a souped-up dark red Lincoln MKS, uses on-board eye-tracking cameras to measure the effects of fatigue and distraction on driving ability, while sensors measure heart and breathing rates. The car has helped researchers understand what type of information helps to focus, or distract, elderly drivers on the road
More importantly, Maxmin says, his model worked, providing almost all of the services associated with a nursing home, at a tiny fraction of the cost. Zuboff wrote up the experience as a case study in a recent issue of the management journal McKinsey Quarterly. Her figures showed that while the average monthly cost for nursing-home care in Maine remains at around $7,000 – rising to $24,000 for 24-hour home care – Elder Power allowed its members to stay in their homes for an average cost of $702 a month.
Maxmin admits there are no miraculous solutions to the problems of a fast-ageing society. We will all have to work longer, save more and pay more in tax to cover the costs of a world with a greyer population. Even so, he thinks models like Elder Power can have a much wider application. Perhaps moments like the collapse of Southern Cross, he tells me, could (in the right hands) become moments of opportunity. More generally, models like Beacon Hill Village, ITNAmerica and Elder Power show glimpses of a future in which more elderly people can stay in their homes for longer. All three use innovative technology, make use of assets in their local community and bring together the resources of local businesses, volunteers and the state to solve problems none could have solved individually, at reasonable cost.
Back at MIT, Joe Coughlin also refuses to be downbeat. “I would argue that longevity is probably the greatest achievement of human kind that has gone ignored. If you talked to anyone and said, ‘congratulations, you’re going live 30 to 40 years longer than your grandparents did in the 1900s’, that would be seen as a bonus prize.” With a bit of ingenuity, it’s a prize worth taking.

© The Financial Times Limited 2011. Agnes the ageing suit

The Political Sociology of Stress


by Michael Liebig

At a graffiti-painted wall in a run-down building in Frankfurt, I recently read the following sentence: “The Essence of the 21st Century in One Word: Stress”. Well, we 're only into the 11th year of the 21st century. And the 20th century with its “hot” and “cold” world wars was certainly extremely stressful. Nevertheless, this sentence contains a bitter truth: There is a wide-spread and deepening sense of social-economic insecurity in Western societies. Existential insecurity is the breeding ground for stress which in turn aggravates the sense of insecurity.
Important here is the fact that the sense of insecurity is not limited to the underclass of badly educated unemployed and other marginalized social groups. A feeling of insecurity has intruded deep into the middle class. In Britain, we have just witnessed how the underclass went into a violent rampage of plundering and arson, but the precarious social-economic situation of the British middle class – stuck in the highest level of household debt worldwide – seems to me equally or even more worrisome. What has happened in Israel during the past weeks may be a sign of the times: Several 100.000 middle-class Israelis demonstrated peacefully against unaffordable costs for housing, medical services and education – adding up to social insecurity and endemic stress.
In continental Europe, there were neither mass rallies nor riots recently. But one of Germany's biggest health insurers, GEK Barmer, has published a shocking study: In 2010, 8,5% of its insured persons suffered from stress-related psychosomatic illnesses, in 1990 the number had stood at 3.7%. During the past 10 years (2000-2010), total stress-related psychosomatic illnesses increased by 117% in Germany.
The term “stress” was first used in the 1930s by the Hungarian-born medical scientist, Hans Selye, to describe the physiological reactions of human beings (and living creatures generally) when confronted with acute danger – be it a an attacking wolf or a fast approaching car with no sign of braking. That's natural or “normal” stress, helping to overcome short-term “crisis situations”. Since, the meaning of the term stress has been broadened to designate a protracted overload of physical, mental and/or emotional demands on human beings. This “abnormal” stress generates a broad variety of pathological – physical and/or psychological – symptoms ranging from severe headache or back pain to “burnout” and depression.

Why Stress has Become a “Social Disease”

Medical doctors and psychologists deal with individual cases of stress-induced illnesses. For social scientists, stress becomes an issue when it turns into a “mass phenomenon” affecting basic social relations in the family, at the work place or in the education system. “Bad” stress is not spread by bacteria or a virus and it's no genetic disease either. Social and economic conditions – and norms – in society make a growing number of people sick. Thus, stress cannot be seen merely as the sum of individual cases, but has become a social phenomenon affecting the lives of people across all layers of society: office workers, mothers, nurses, teachers, policemen, managers and technicians.
Why should social-economic norms make so many people sick? In trying to find answer, we have to go back to the 1990s, when social-economic norms in Europe began to change rapidly and dramatically. The continental European model of “Rheinish capitalism” became increasing undermined by the Anglo-American paradigm of “neo-liberalism”. The basic concept of man in these two socio-economic models differs greatly: In the normative concept of the “social market economy”, strongly influenced by both the social teachings of the Catholic church and socialist thinking, man is seen as structurally embedded in society. In the Anglo-American normative model, strongly influenced by both British liberalism (Adam Smith) and Calvinist Puritanism, man is seen as the “free”, individualistic and competitive homo oeconomicus. In the “social market economy” model, society's (and the state's) duty to care for the individual is a basic norm, while the homo oeconomicus is “on his own” – if he fails, he is a “loser” (and it's his own fault). This sketch of the two socio-economic models is simplified, but it should provide some insight into the power of norms for the development of society.
While Rheinish capitalism featured 1) long-term investment in the real economy, 2) steady, but rather moderate profits, and 3) cooperative relations between employers and employees, its Anglo-American counter-model featured 1) maximization of short-term profits, 2) focus on the financial and service sectors, and 3) the “flexibilization” of labor relations. Instead of a consistent re-investment of profits for research & development and the upgrading of production technology, the Anglo-American “shareholder value” paradigm diverted capital out of enterprises into financial investments promising maximum yields (anywhere in the world). The state – the anchor of Rheinish capitalism – was declared a bureaucratic monster which supposedly vastly overtaxed the economy's “top performers”. Business leaders, politicians and the media demanded (and got) tax cuts for businesses, notably the financial “industry”, which, however, uniquely profited from Europe's tax-financed (and world's best) public infrastructure, notably education, transportation, energy, and social services.
“Old Europe”, it was said then, lacked dynamism and competitiveness compared to the USA and Britain. The labor costs in Europe, it was asserted then, were far too high and the labor market much too rigid. Supposedly, German workers had to compete with the wage level in Vietnam. One wonders, what had happened to common sense? Particularly Germany's competitiveness has always been based on three factors: the quality of its (high-cost) labor force in high-tech production, stable, cooperative labor relations and its excellent infrastructure. This combination has guaranteed Germany's unique economic competitiveness internationally.
But these pillars of Germany's economic strength were badly undermined (Thank God, not destroyed) during more than a decade – up to the 2008 “financial crisis” when the Anglo-American economic model collapsed. But in the meantime, a lot of damage had been done. The normative paradigm shift towards roughshod social competition and penalizing “losers” has led to wide-spread and growing social insecurity. Pope Benedict recently spoke about the “wounds” in society due to a normative paradigm of “success at any cost”. And here we are back to the dramatic rise of stress-induced illnesses.

Stress, the Family & Demography

The July 27 science supplement of the Frankfurter Allgemeine Zeitung carried an interview with the sociologist Hartmut Rossa, in which he explains the consequences of the normative paradigm of
“total competition” when extended from the economic sphere into society as a whole. He first points to the rise of job insecurity, job rotation and “patchwork jobs”. In Germany, there are currently 2.4 million people “self-employed”: not high-income doctors or lawyers, but low-income teachers, nurses, drivers or waiters.
Then Rossa comes to his central point: The first victim of this trend is the family – the core element and foundation of society. Parents lack the time and energy to adequately “perform” in their job(s) and vis-a-vis their children – resulting in guilt feelings. The “overload” often becomes a contributing factor for divorce and “patchwork families” – often resulting in psychological damage for the children. And often, the sense of overload leads to the decision not to have children – resulting in the dramatic demographic decline across Europe during the past 20 years.
Rossa emphasized that empirical surveys clearly show that the vast majority of young people want the “traditional” family with children and with secure jobs for the both parents leaving them enough time and energy for family life. The latter also involves the availability of sufficient time and energy for the great contingencies if life: birth, decease, old age and death. Rossa points to the fact that the emotional security of the family is the most important (potential) source of stress neutralization. He sums up his observations by referring to a famous sentence by the philosopher Theodor W. Adorno: “You cannot live the right life within the wrong one”.

Stress: The Enemy of Economic Innovation

To address these societal “wounds” and to heal them, is not a matter retrospective nostalgia over the “good old days” of Rheinish capitalism. The stress-induced dissonance in society is an existential threat to cohesiveness of society, which necessitates corrective action.
While stress is the result of socio-economic norms which proclaim to promote economic “efficiency”, in reality, stress has become a serious economic problem. Sick employees can't work, and if they work, they are not productive. Far from being the dynamic motor of innovation, stress is the enemy of innovation – the essence of the modern economy. Innovations depend on creativity which, in turn, depends on a sense of personal security. Creativity is not easy-going bohème, but hard work – and the creation of innovations it takes time. The foundation of lasting economic success is long-term planning and investment: 5, 10 or 20 years – not the next “quarter”.
It seems that in Europe (some) business leaders and even some economists begin to realize that the “stress regime” in the economy and society as a whole is simply counterproductive: It doesn't pay off in terms of tough business calculation – when look beyond the next “quarter”. That the idea of “work-life balance” has become fashionable, seems to be an indication of a new thinking. I guess that there is a growing realization that, if Europe wants to remain economically competitive vis-a-vis Asia, a renaissance of the principles of Rheinish capitalism is the way of the future.
But, isn't that just wishful thinking in view of the revolution in “communication technologies” which have fostered an irreversible speed-up of life. Is that not the other principal cause of stress? How should the stress regime in society be reduced when people submit to the tyranny of mobile communication gadgets – not only at the work place, but at home, when traveling or making a walk in the woods with their children?
I would argue that technology as such is never the problem – be it nuclear energy or smartphones. Technology, including digital communication technology, does not intrinsically dictate social behavior. Social norms determine social behavior. Therefore, one should not use technology as a pretext (or excuse) for stress-generating norms. When the dominant social norm is competition and “efficiency” around the clock, people will not turn off their smartphones when dining, attending a cultural or religious event, or even when sleeping. When the normative order emphasizes “work-life balance” and the integrity of family life as vital for society and the economy, people will turn off their smartphones when they need to left alone.
Modern communication technology has unquestionably raised the (technological) productivity in the economy. Why should communication technology not be seen a chance to organize life in ways that generate free time and energy – to be spent in family life, cultural and religious recreation or social and political activities? The latter being absolutely essential ingredients for high and sustainable productivity levels of the labor force in a modern economy.
The “stress regime” in society has been the consequence of a wrong directionality of basic social-economic norms. When prevailing norms threaten in the cohesiveness and viability of society and the long-term productivity of the economy, they have to be changed. It wouldn't be the first that societies do learn their lessons from past mistakes.


© The Political Sociology of Stress , Michael Liebig