09/06/2013 03:52 pm ET Updated Nov 06, 2013

The Psychosocial DNA of Capitalism

In 1974, a developmental psychologist by the name Clare W. Graves published a summary of his lifelong work in the field of bio-psycho-social systems of the human experience. Today, his research is still considered one of the most pioneering endeavors into the field of integral and social psychology that answers the question of how cultures emerge and why. Graves, a contemporary of Maslow of the hierarchy of needs fame, pioneered the use of the term value-systems. I often cringe when I hear the term being misused by someone like comedian Bill Maher when he tries to describe the collective values that define who a person is. In his quest to answer the question of how humans and cultures evolve, Graves studied over a thousand subjects over long periods of time in order to understand their decision-making processes, their preferences and their worldviews, how they chose to spend time, what were the things they placed higher value on over others, etc. He also wanted to understand the dynamics of why his subjects' value preferences changed over time.

Graves identified eight possible levels of psychological development that a human being can belong to based on these value choices. He called these levels value-systems, and here is the widest explanation of what the term values systems is according to Graves: It is a hierarchically ordered, always open to change set of ethics, values, preference, priorities and purposes by which individuals, groups and cultures can come to live. At the core of Graves' work is his claim that humans evolve in response to existential challenges from their environment and as they evolve into higher levels of existence their preferences, or values evolve with them. These value-systems have a spectrum of meaning for words and expressions at every level of personal and cultural stage of development. For example morals have a different meaning for someone belonging to the third level of value systems than they do for someone in the 4th, 5th and 6th levels. Capitalism has a different meaning and different implications for people and cultures belonging to the different value-systems levels. As humans and cultures emerge to higher levels of existence they develop more complexity that includes the lower levels.

Capitalism in the United States today is representative of the fifth level of values, which is a far more complex form of development than where capitalism is in China, or the Middle East as examples. Graves, and his successor, Don Beck, who I've worked with for the last decade, contend that there are two sides for every value system. There is a healthy and unhealthy expression at every level and the higher the unhealthy expression is, the more damaging it can be to a culture's continued development. Examples of unhealthy expression of the fifth level system in the United States are the practices of the financial sector that brought the global economy close to collapse in 2008.

The eight levels of human existence identified by Graves and Beck's Spiral Dynamics model and the ones I have developed further in my theoretical framework about capitalism are as follows:

1. The survival values system

2. The tribalistic/kinship values system

3. The heroic/egocentric/feudalistic values system

4. The order/temperance/one true way values system

5. The enterprising/strategic/scientific values system

6. The Egalitarian/Humanitarian values system

7. The Integral/Process driven/ Big Picture values system.

8. The Global/organismic/holistic interdependence values system.

Cultural emergence alternates between communal systems and individualistic systems. The complacency and the burden of conformity of the communal system cause the culture to emerge into the individualistic system. In turn, individualistic values if gone unchecked cause the collapse of social order forcing emergence back into the communal system, but at higher values.

To gain a better understanding of how these systems emerge, one only needs to look at why President Obama won a second term and why the Republican Party is increasingly being seen as out of touch with the majority of Americans. The last few decades have witnessed some very telling transitions in our culture and in the virtues of capitalism as a guiding principle. In the 1980s, out of the ashes of the previous fourth level communal system, the Reagan administration ushered in the individualistic fifth level system. Reagan announced the United States' entry into this level of cultural values in his first inaugural speech by declaring the government to be the enemy of business, and then proceeded to fire 11,000 striking federal employees.

The new era of unfettered capitalism had begun. The monetarist philosophy of "Only Money Matters" led by Milton Freidman and the Chicago School became the new meme that defined capitalism. Increasing the price of the economic pie became more important than creating a bigger pie. Jobs were outsourced, streamlined and offshored. Businesses, large and small were securitized, monetized, and downsized. Jobs, unions and workers disappeared. Money was being created out of thin air and the politicians and business leaders loved it. For three decades everyone drank the Kool-Aid with the belief there was no need for government in a capitalist culture.

These were individualistic values at their best that made our government impotent by design. Then the system moved into the toxic phase of its unhealthy expression and by 2008, the inevitable happened. As the system collapsed, the only thing that could save it was a government infusion of capital. This was the ironic, subconscious cry for the culture to return to communal values. While this individualistic system goes through the decay phase over the next decade, there is no denying that the next communal system is at hand. It is the sixth level system of values that the Reagan-era capitalist of the fifth level system cannot even begin to understand. Our values in culture and in economics for the next few decades will be defined by the egalitarian and humanitarian values of this new system that seeks to deepen the understanding of the human race, and it doing it through values empowered by the democratization of information. We are already seeing this in business through the rise of practices like peering, sharing, presencing, collaboration and giving things away for free. These are the values of the knowledge economy. On the cultural level, the values of this system will continue to heel the wounds suffered at the hands of the unhealthy expression of the previous system.

Yes, this means Obamacare, and yes this means taking care of our poor and less fortunate. But the government that we have today that is designed from the fourth level system -- whose values have been rendered obsolete and has been hijacked by lobbyists and special interest -- can't do it. The government of the future is a "smart government" designed from the "Big Picture" seventh level of values. It is algorithmic not bureaucratic. It is one that is beholden to the people and must anticipate what capitalism's next move is and work with it to keep its practices healthy.

While many might think the emerging system of egalitarianism and the deepening of human understanding is the final Utopian state, the research shows otherwise. The human experience is an endless quest towards infinite possibility that will continue to alternate between individualistic and communal values. It is that tension between the two systems that causes us to seek higher meaning and purpose in life.

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