The Post story starts with the expanded DSM description of NPD, then relates it to how it's experienced, first at the individual, then at the organizational level:
According to the DSM-IV, the disorder begins by early adulthood and is indicated by the subject exhibiting at least five of the following:
1. An exaggerated sense of self-importance
2. Preoccupation with fantasies of unlimited success, power, brilliance, beauty, or
ideal love
3. Believes he is "special" and can only be understood by, or should associate with, other special or high-status people (or institutions)
4. Requires excessive admiration
5. Has a sense of entitlement
6. Selfishly takes advantage of others to achieve his own ends
7. Lacks empathy
8. Is often envious of others or believes that others are envious of him
9. Shows arrogant, haughty, patronizing, or contemptuous behaviors or attitudes
It's also important to understand that everybody has some narcissistic traits, and that a certain amount of narcissism is a healthy thing. What's different about NPD is that the symptoms are stable and persistent over time and pervade every aspect of the person's existence. Though estimated to be present in only about one percent of the population, NPD is widespread enough that almost everybody is likely to encounter at least one narcissist in their lives. It is usually an extremely disagreeable and memorable event for the non-narcissistic. For a relatively healthy person, the first response to a narcissist's grandiosity, haughtiness and odd body language is often bemusement. But later, as the narcissist reveals him- or herself to be manipulative, predatory and lacking in empathy, this bemusement turns to disgust until, finally, the healthy individual is forced to cut all ties with the narcissist. This often ends with upsetting results, as narcissists are notoriously spiteful and vicious.).
According to Dr. Vaknin, narcissists are "dangerous to your health." But what if they're in charge of major corporations worth hundreds of billions of dollars? A look at the havoc caused by the management of WorldCom, Enron, Adelphia and Tyco make clear the sort of danger that narcissists pose to the economy and the world at large.
Dr. Vaknin lives in Skopje, Macedonia. Via email, we discussed what may well be the defining malady of our age.
I'm very interested in the concept of corporate narcissism. Many companies are successful without also engaging in criminal behavior. In your opinion, how much of the recent wave of business scandals in the U.S. is attributable to a corporate "culture of narcissism," and how much to a number of very misguided--and possibly narcissistic--individuals?
The "few rotten apples" theory ignores the fact that affairs like Enron and WorldCom were not isolated incidents--nor were they conducted conspiratorially and surreptitiously. What is now conveniently labeled "misconduct" was an open secret. Information--albeit often relegated to footnotes--was available. The charismatic malignant narcissists who headed these corporations were cheered on by investors--small and institutional alike. Their grandiose fantasies were construed as visionary. Their sense of entitlement--never commensurate with their actual achievements--was tolerated forgivingly. Their blatant exploitation of co-workers and stakeholders was part of the ethos of the virile Anglo-Saxon, natural selection, can-do, dare-do version of capitalism. Everyone colluded in this mass psychosis. There are no victims here--only scapegoats.
At the time the Enron scandal broke, I vividly recall Bush saying that it was "a business scandal, not a political scandal." That was a self-serving lie, of course. Enron was his biggest financial supporter at the time, and would not be surpassed for some time afterwards. He was deeply indebted to Enron, which in turn had contributed mightily to the phony energy crisis that devastated California as well as other states, and had influenced the Cheney energy task force, which had generated maps of Iraqi oil fields, among other curios, though this was not yet known.
Furthermore, the Enron style was not much distinguished from the Abramoff style or the Karl Rove style. In all three cases, we had very similar types of operation, in which the existing rules were turned inside-out, and instead of anyone crying "foul," there was a broad consensus that the central practitioners were "geniuses", even "revolutionary" thinkers! And thus, one way or another, massive criminal enterprises came to constitute a large portion of the GOP infrastructure. And Bush simply said, "Nothing to see here, move it along," and an obedient press said, "Yes, sir!"
But Enron was not just a business scandal and a political scandal, it was also a cultural scandal, both because Enron's influence went beyond the political to the cultural, and because it's emergence reflected a larger cultural dynamic, which it served to heighten and intensify, and spread. The extensive criminality I mention above was part of that. As was the magical belief in markets.
The belief that markets in and of themselves magically solved problems was at the very root of Enron's spectacular success in creating and dominating the energy-trading business. Neither creating new sources of energy nor building new infrastructure were central to Enron's mission. Making money from ginned-up trades was. Indeed, as the victimization of California clearly showed, the lack of energy sources and infrastructure--real or fabricated--was a tremendous source of income for Enron. Yet, the obvious lack of connection between Enron's business model and the nation's energy needs never seemed to occur to anyone, except, of course, ideological extremists. Such was the power of the narcissistic market fantasy.
It's not that narcissists in business was a unique phenomenon to that time or place. I'm simply stresses the openness and ubiquity. But a study in Britain in 2005 found quite a bit of narcissism in the business world there. In April 2005, a Guardian story, "Is your boss a psychopath?" reported:
Belinda Board and Katarina Fritzon of Surrey University decided to test whether there was any overlap between the personalities of business managers, psychiatric patients and hospitalised criminals (psychopathic and psychiatrically ill). Their results, published last month, make startling reading.
Board and Fritzon found that three of 11 personality disorders (PDs) were actually commoner in managers than in disturbed criminals. The first was histrionic PD, entailing superficial charm, insincerity, egocentricity and manipulativeness. There was also a higher incidence of narcissism: grandiosity, self-focused lack of empathy for others, exploitativeness and independence. Finally, there was more compulsive PD in the managers, including perfectionism, excessive devotion to work, rigidity, stubbornness and dictatorial tendencies.
Swithcing back to the NY Post story, just slightly later, Vaknin expounds more broadly on the potential collective dynamic:
Pathological narcissism, though, can be latent and induced to emerge by what I call "collective narcissism." The way pathological narcissism manifests and is experienced is dependent on the particulars of societies and cultures. In some cultures, it is encouraged. In others suppressed. In collectivist societies, it may be projected onto the collective; in individualistic societies, it is an individual's trait.
Families, businesses, industries, organizations, ethnic groups, churches and even whole nations can be safely described as "narcissistic" or "pathologically self-absorbed."
The longer the association or affiliation of the members, the more cohesive and conformist the inner dynamics of the group, the more shared are its grandiose fantasies ("the vision thing"), the more persecutory or numerous its enemies, the more misunderstood and exclusionary it feels, the more intensive the physical and emotional experiences of its members--the stronger the bonding myth. The more rigorous the common pathology.
Such an all-pervasive and extensive malaise manifests itself in the behavior of each and every member. It is a defining--though often implicit or underlying--mental structure. It has explanatory and predictive powers. It is recurrent and invariable--a pattern of conduct melded with distorted cognition and stunted emotions. And it is often vehemently denied. [emphasis added]
What struck me, when I read these words, was not just how aptly they applied to the cultures of Enron, Adelphia, Tyco and WorldCom--as well as the cultures of Lehman Brothers, Goldman Sachs, Bear Stearns and AIG. Rather, I was struck by how they resonated with another passage from a different context I had just read the day before. If one key feature of NPD is the sense of exceptionalism (present, one way or another in the first 5 of the above 9 characteristics), how could I not make the connection when reading a paper about our current economic crisis, which incidentally took note of how the notion of exceptionalism was part of the normal historical pattern it reflects. The paper was, "Is the 2007 U.S. Sub-Prime Financial Crisis So Different? An International Historical Comparison" by economists Carmen M. Reinhart of the University of Maryland and Kenneth S. Rogoff of Harvard. They are co-authors of a forthcoming book, This Time is Different: Six Centuries of Financial Folly. Here are the relevant passages:
The first major financial crisis of the 21st century involves esoteric instruments, unaware regulators, and skittish investors. It also follows a well-trodden path laid down by centuries of financial folly. Is the "special" problem of sub-prime mortgages this time really different?
....
Our comparisons employ a small piece of a much larger and longer historical data set we have constructed (see Reinhart and Kenneth S. Rogoff, 2008.) The extended data set catalogues banking and financial crises around the entire world dating back to 1800 (in some cases earlier). In order to focus here on data most relevant to present U.S. situation, we do not consider the plethora of emerging market crises, nor industrialized country financial crises from the Great Depression or the 1800s. Nevertheless, even in the smaller sample considered in this paper, the refrain that "this time is different" syndrome has been repeated many times.
First come rationalizations. This time, many analysts argued, the huge run-up in U.S. housing prices was not at all a bubble, but rather justified by financial innovation (including to sub-prime mortgages), as well as by the steady inflow of capital from Asia and petroleum exporters. The huge run-up in equity prices was similarly argued to be sustainable thanks to a surge in U.S. productivity growth a fall in risk that accompanied the "Great Moderation" in macroeconomic volatility. As for the extraordinary string of outsized U.S. current account deficits, which at their peak accounted for more than two thirds of all the world's current account surpluses, many analysts argued that these, too, could be justified by new elements of the global economy. Thanks to a combination of a flexible economy and the innovation of the tech boom, the United States could be expected to enjoy superior productivity growth for decades, while superior American know-how meant higher returns on physical and financial investment than foreigners could expect in the United States.
Next comes reality. Starting in the summer of 2007, the United States experienced a striking contraction in wealth, increase in risk spreads, and deterioration in credit market functioning. The 2007 United States sub-prime crisis, of course, has it roots in falling U.S. housing prices, which have in turn led to higher default levels particularly among less credit-worthy borrowers. The impact of these defaults on the financial sector has been greatly magnified due to the complex bundling of obligations that was thought to spread risk efficiently. Unfortunately, that innovation also made the resulting instruments extremely nontransparent and illiquid in the face of falling house prices.
What the above passage shows is how the entire business culture--and, indeed the broader culture as a whole--comes to be dominated by a narcissistic fantasy of its own exceptionalism, its specialness, even uniqueness. This is where one gets books such as Dow 36,000, and The Bush Boom (which I diaried about here). But it's also the very essence of Reaganomics, an escapism from a harsh reality into a fantasy of painless renewal.
At a time when America was rocked by stagflation, energy shocks, deindustrialization, and an overnight shift from being the world's leading creditor nation to its leading debtor nation, Reagan used massive tax cuts to make people feel happy, and unprecedented deficits to fuel an artificial boom, that still lagged well behind the growth rates of early business cycles, and while leaving millions behind. Similarly, his false intelligence built up the teetering Soviet Union into an apocalyptic threat, which he then "defeated" by throwing far more money at the Pentagon than anyone there knew what to do with. (In reality, his bellicosity probably strengthened Soviet hardliners, delaying reforms by several years.)
Nothing better epitomized the narcissistic military fantasy of Reaganism than the invasion of the tiny island of Grenada in the immediate aftermath of the suicide bombing of the embassy in Lebanon, a great victory over an enemy with virtually no military at all, in order to distract attention from our ignominious retreat in the face of Mideast terrorists, whom we then proceeded to effectively ignore, until 9/11, nearly 20 years later.
That's just the way that narcissists roll.
Tolstoy famously begins his classic novel Anna Karenina with "Every happy family is alike, but every unhappy family is unhappy in their own way." While each financial crisis no doubt is distinct, they also share striking similarities, in the run-up of asset prices, in debt accumulation, in growth patterns, and in current account deficits. The majority of historical crises are preceded by financial liberalization, as documented in Kaminsky and Reinhart (1999). While in the case of the United States, there has been no striking de jure liberalization, there certainly has been a de facto liberalization. New unregulated, or lightly regulated, financial entities have come to play a much larger role in the financial system, undoubtedly enhancing stability against some kinds of shocks, but possibly increasing vulnerabilities against others. Technological progress has plowed ahead, shaving the cost of transacting in financial markets and broadening the menu of instruments.
And given that that's how financial crises roll, it seems inescapable that narcissism plays a role in them. If the Enrons and Madoffs and AIGs of the world function on one level, while such crisis involving entire economies function on another, we can also discern a third level, which author Kevin Phillips described in his 2002 book, Wealth and Democracy, in discussing the rise and fall of successive world powers--first Spain, then Holland, then Britain, each following a trajectory that we ourselves are now on. The fact that CEO pay has grown out of all proportion to average workers pay is not a function of any rational economic justification, it is a symptom of changed cultural norms that reflect a growing acceptance of the logic of narcissism.
This same logic could be seen in the three previous examples that Phillips describes, although he does not speak of narcissism per se. What does speak of, however, is how each world power in turn moved from manufacture to trade to finance, then experienced a profound shock at the peak of their powers, after which there was a profound split, with the elites doing better than ever, while the rest of society saw its fortunes stagnate for more than a generation. At the peak of their powers, in a collective narcissistic mindset, none of these powers was capable of objectively responding to the fact that they were merely human, subject to the same laws as the rest of humanity. Phillips speaks of their mindsets:
What all three "golden ages" involved, first and foremost, was a wave of success that brought broad enough status and prosperity to set the generality of Spaniards, then Dutch and Britons, ahead of their peers elsewhere. At first God was Spanish, which the banners of the sixteenth-century galleons more or less proclaimed. To Holland's favored brede middenstand, the Almighty must have been a Dutch burgomaster. And on Delderfield's bustling mid-nineteenth-century Kentish plain southeast of London, God was an Englishman.
We, of course know better: God is an American. What's more, he's a Republican and a CEO, to boot.
What we're seeing now is not just the bursting of one particular bubble, we are also entering the period that Philips says all previous world powers have gone through, after more than a generation of denial, when there is a resurgence of egalitarianism, pushing back against more than a generation of reactionary politics. It is, in effect, a war of sanity against madness, and if history is any guide, it has only just begun. |
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