Capitalism and Anomie
A new study demonstrates that foreign direct investment leads to social breakdown.
With big corporations taking overt liberal political stances on hot-button social issues, many who stand on the other side have started to question the neutrality of the market economy.
We were brought up to believe that the market is not interested in anything but making money. And, we were told, since profit is the driver of capitalism which in turn drives higher living standards, we should just leave the market to itself. But, today, as major corporations lean in to various controversial political and social issues, this view seems no longer tenable.
There remains little discussion of a much deeper issue. Is there something in capitalism itself, as practiced today, that tends toward greater and greater degrees of social and political liberalization? In fact, there is a long tradition of thought in political economy and sociology that suggests capitalism is inherently liberal. By that, I mean that capitalism, by its nature, tends to demolish stable cultural mores and give rise to an atomized and alienated society.
Until recently, there had been no effort to test this hypothesis. Constructing a methodology to test whether rapid capitalist economic development led to the demolition of stable social norms seemed difficult. In social science there generally are no laboratories in which to create controlled experiments.
But recently, researchers at the Neumann Forum have devised a methodology to answer these questions. They use what social scientists call a “natural experiment”—that is, an example of an entity that has been subject to rapid changes along the lines of the hypothesis of the experiment. The researchers find their natural experiment in the country of Ireland.
Ireland, until very recently, was relatively undeveloped economically and had an extremely cohesive Catholic culture. But in the past three to four decades, the country has undergone rapid capitalist development and its culture has been turned upside-down and inside-out. This rapid development was driven by flows of foreign direct investment, or FDI, which are external flows of capital that enter countries and establish rapidly growing corporate sectors of the economy.
Consider some of the headline facts to see just how extreme these changes have been. Between 1970 and 1990, Ireland was around 28 percent poorer than its closest neighbor, the United Kingdom. Between 2002 and 2007, after rapid economic development had taken place, Irish living standards were around 11 percent higher than those in the United Kingdom. So, there is no doubt that rapid capitalist development has made Ireland much richer. But this newfound wealth came with profound social costs.
As the authors show, by any non-economic measure, living standards in Ireland have markedly deteriorated. For example, between 1950 and 1965, Ireland had a suicide rate of around 2 per 100,000 people. That was minuscule in comparison to the suicide rate in the United Kingdom, which at the time was around 8.5 per 100,000. Yet by the early 2000s, Ireland’s suicide rate had risen sevenfold to around 13 per 100,000 people—outstripping the United Kingdom’s rate in that period of around 7 per 100,000 people. Ireland’s suicide rate would eventually converge toward the United Kingdom’s, but this was still around fourfold higher than it had been between 1950 to 1965.
If this is not an indication of an extreme rise is anomie, I know no better example. All the other statistics on social health that the researchers studied showed the same pattern. In the same period, the homicide rate rose 609 percent; alcohol consumption by 128 percent; and drug deaths by 6,115 percent. The fertility rate fell by 58 percent.
These are fascinating trends and should be carefully scrutinized. But they do not prove a causal relationship between foreign direct investment and the rise in anomie and resulting social pathologies. To do this, the researchers deployed regression analysis. They examined Ireland by region, called “counties” in Ireland, to see if the counties with higher FDI inflows had greater degrees of social atomization. They found that higher levels of FDI were associated with declining religiosity in the population, higher rates of liberal political views, and higher rates of drug offenses. They also show that counties with more liberal political views—itself driven in part by rates of foreign investment—tend to have higher rates of political fragmentation, lower fertility rates, and higher rates of drug offenses.
The Neumann Forum study makes a powerful evidentiary case that capitalist development, at least that driven by foreign direct investment, gives rise to both political liberalism and anomie. Now that this hypothesis has strong evidence in its favor, it must be reconsidered and once again discussed. Capitalism is liberal by its nature, and liberalism seems to be strongly associated with atomization and anomie.
If countries want to undertake economic development, they should be mindful of this causal link. Indeed, the authors of the study even have a few ideas about how to control economic development in such a way that it does not generate such profound levels of social pathology. Interested readers should read the study together with its recommendations.
While the results of the study are original, the idea that capitalist economic development might sever social bonds has a very long pedigree. The first proponents of this view were Karl Marx and Friedrich Engels in their Communist Manifesto. “All fixed, fast-frozen relations, with their train of ancient and venerable prejudices and opinions, are swept away, all new-formed ones become antiquated before they can ossify,” Marx and Engels wrote. “All that is solid melts into air, all that is holy is profaned.”
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Marx and Engels, being communists, believed that this was a necessary process. They believed that capitalism’s disturbance of fixed cultural life was a prerequisite to dispel people against the primitive illusions they held about the world. “Man,” they wrote, “is at last compelled to face with sober senses his real conditions of life, and his relations with his kind”. After Marx and Engels, however, sociologists and political economists tended to take a dimmer view of these processes. Perhaps the most important work in this respect in the 20th century was that of the French sociologist Émile Durkheim.
Durkheim observed the same process at work as had Marx and Engels, but Durkheim believed that rather than giving rise to new, atomized-but-liberated agents, this atomization created social pathologies. He coined the term “anomie” to describe this phenomenon. To Durkheim, anomie was a social condition that caused a breakdown of moral values and an uprooting of individuals from their communities. Durkheim believed that anomie was the condition that gave rise to epiphenomena such as the rise in the suicide and homicide rates.
Recently, political scientist Patrick Deneen has dusted off this old tradition. Much has been made of the fact that in his book Why Liberalism Failed, Deneen blamed liberal ideology for the social pathologies we see in Western societies today. What has been less discussed in Deneen’s book is his frequent implication that this liberal ideology is an outgrowth of international capitalism itself. “The global market,” Deneen writes, “displaces a variety of economic subcultures, enforcing a relentless logic of impersonal transactions.” It is hard not to read sentences like this as indicating that it is the capitalist machine and its globalizing tendencies that produce social liberalism, and not vice versa. The Neumann Forum study finally proves the truth of this intuition. Rapid capitalist economic development through foreign investment does indeed lead to the disintegration of social bonds and gives rise to anomie and various social pathologies.