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The overleveraged and underleveraged society

The overleveraged and underleveraged society
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Anderson edited "Leveraging: A Political, Economic and Societal Framework" (Springer, 2014), has taught at five universities and ran for the Democratic nomination for a Maryland congressional seat in 2016.

Many critiques of capitalist society show that there is either too much of something or too little of something, and each kind of critique can be written in a way to show that the value that we have too much of is equivalent to too little of the opposite of that value. A book that shows that there is too much economic inequality (like Thomas Piketty's Capital in the Twenty-First Century) can also be read as saying that there is too little economic equality. A book that shows that women suffer too much injustice (like Betty Friedan's The Feminine Mystique) can be read to say that women experience too little justice in our society. A book that shows African-Americans suffer too much injustice (like Cornel West's Race Matters) can be read as saying that there is too little justice in our society toward African-Americans.


Leverage is very different. For American society -- in fact all societies -- suffer from both the problem of excessive leverage and deficient leverage though not about the same subject matter. Rather, on some matters we have too much leverage, and on other matters we have too little leverage. Moreover, leverage, unlike equality and justice, is not a moral concept. Leverage is an empirical concept like weight. A person can weigh too much or too little, but the weight itself does not establish the judgment that there is too much or too little weight. That judgment must come from the medical profession, who must defend their own standards and values.

With leverage -- and there are different kinds, bargaining leverage, resource leverage, and financial leverage -- there can be too much or too little. And the judgment that there is too much or too little must come from a normative standpoint-- for example, a moral philosopher, a political philosopher, or a Congressional oversight committee.

Leveraging involves using a minimum force to create a maximum force with the help of some tool and a fulcrum. In traditional physical leverage, you can move a large concrete block with a pen if the pen is placed under the block and lifted in the appropriate way. Archimedes, the ancient Greek scientist who is credited with discovering physical leverage, said he could move the entire earth if he had a pole that was long enough and a fulcrum.

The financial crisis of 2008-09 was, according to many economists, a "leverage crisis," because both banks and homeowners were involved in excessive leveraging practices. In financial leverage, there is borrowing that takes place which is used for an investment that is intended to generate an outsized return. In the home mortgage leveraging crisis, homeowners bought homes which were interest free for a few years and then the interest rates ballooned, leading many homeowners to become incapable of paying their mortgages. They were "overleveraged." The banks, which could not collect the monthly mortgages, were also overleveraged and many of them crashed. Thus, excessive financial leveraging led to a financial disaster. Another example of overleveraging in our society is working mothers who are overwhelmed with their work and family responsibilities.

On the other hand we have under-leveraging. For example, the poor minorities in many American big cities who do not have laptops or broadband (although they may have smartphones), are part of an economy and political system which under-leverages information technology. An economically strong society is going to leverage information technology -- this is resource leverage and not financial or bargaining leverage -- effectively so that citizens can benefit in their work, health care, and family relations. A society can also under-leverage the diversity of its very population if the talents, background and cultural knowledge of different groups of people are not effectively harnessed in business, education, and government. Resource leverage typically goes beyond efficient use of resources. Gary Hamel and C.K. Prahalad in their book Competing for the Future explained how resource leveraging is inherently creative, especially by uniting resources from diverse sources.

A just and prosperous society will minimize the cases of overleveraging and under-leveraging striving to reach what I have called a "Leverage Mean." Aristotle said that virtue was the Golden Mean between excess and deficiency. Leverage analysis sends up red flags when it reveals either excessive or deficient leveraging. Indeed, if there is excessive or deficient leveraging, there is probably some moral value that is being violated.

There we have it then. Leveraging should be used more responsibly, avoiding extremes and hitting the Mean. If we analyze different parts of society via a leverage framework, then we will be better positioned to promote moral values like justice, equality, freedom and stability.

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