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When Exchange Value Ruled the World: A Brief History of Capitalism

When Exchange Value Ruled the World: A Brief History of Capitalism

By Cameron Dean of Oakmount Partners Ltd, a globally recognized financial institution. 

In life things either have exchange value or experiential value. The chances are you are already aware of what exchange value is. Quite simply, it refers to the material worth of an item.

Glenn King

Glenn King

Exchange values change all the time. A bottle of water for example, might not be worth much –and why should it be? After all it could just be purified tap water. But water bottles on sale in night clubs or concerts can be quite expensive. The price skyrockets because sellers know their customers are likely to be exhausted from dehydration, dancing, and over-excitement.

Exchange values are mostly conducted in monetary transactions, but not always. If you’ve ever swapped an item for something else – then the exchange value is determined by the object (or objects) you were prepared to sacrifice for the gain.

The Old Age of Experiential Value

Today we live in what economists call ‘market societies’, but this hasn’t always been the case. Our societies have always had markets in them – but they were never dominated by the market itself.

European society began the process of transforming into a market society from about the sixteenth century onwards, gaining faster traction with the advent of the Industrial Revolution in the eighteenth and nineteenth centuries. The continuing commodification of labour allowed exchange value to triumph experiential value.

But before then, experiential value held sway. What then, is experiential value?

Experiential value is like a sun set. It’s the value you get from being alive. It’s the feeling you get from helping your mother to clean the dishes as a child. Think about it. Imagine you couldn’t be bothered helping out with chores, and instead offered up pocket money as a payment instead. What would happen? The chances are no amount of money could hide your mother’s disappointment.  Experiential value is thought to have worth beyond monetary value.

The same thing happens when a neighbour does a favour for you and you feel compelled to say “I owe you one”. This is how societies operated largely before the market took over: by obligation, honour, and reciprocation.

Enclosures and the Beginnings of Capitalism

Before capitalism, there was serfdom. Serfdom was a legal and economic system that had persisted perhaps since the dawn of agriculture. The serfs, the ancestors of regular people like you and I, were compelled to be born, live, and die working the same plot of land.

They would plant seeds and grow cereal crops on the land of wealthy feudal landowners. Once the land was harvested, the landowner would then take what he wanted by force. The serfs would be left to eat the scraps of their own labour.

Global events brought an end to serfdom. The discovery of new sea lanes allowed the Europeans to sail around Africa and on to India, China, and Japan. Ordinary merchants took wool with them and traded it for silk and swords overseas. The landowners back in the serfdom of England were shocked and appalled to find the common folk amassing huge piles of wealth akin to their own, so they decided to get in on the action. The landowners kicked the serfs off of the land – and replaced them with sheep pastures. And so began the age of the enclosures.

The serfs, who had toiled for generation after generation, had nowhere to go. So they did the only sensible thing: they moved from town to town, looking to offer their services for somewhere to sleep and something to eat. The enclosures ended serfdom and drafted a national workforce overnight.

The birth of the profit motive and debt

Initially, there were too many unemployed former serfs, and not nearly enough work to employ them. The landowners also had a problem: they needed employees to look after the sheep on their new enclosures. And so began the birth of the profit motive, and debt. Profit is a relatively new motive in human societies. Profit should not be mistaken for greed. Greed has always exited, but the profit motive has not.

It began when a few of the serfs went back to the enclosures and offered to look after the sheep – for a wage – for the landowner. In order to look after the sheep the former serf needed employees and food. So the landowners loaned money with interest to the serf for him to start looking after the sheep. This is precisely the moment the profit motive was born. Because the serf was now indebted to the landowner, he needed to make sure of two things:

  • That he made enough money to pay back the money the landowner loaned to him.
  • That he had some money left over (profit) to feed himself and his employee.

Debt tends to have bad connotations, but it is debt that fuels the economy. Debt jumpstarts economic transactions by breathing life into an enterprise where there was nothing before it. If the landowner had never loaned money to the serf, then neither would have made any money at all. Debt and profit make the world go around.

The devil in the detail of debt

The gift of debt allowed ordinary Europeans with nothing to set themselves up for profit-making adventures. Much of the world was explored (and colonized) by the Europeans soon after, mainly in pursuit of profit. In tow was the commodification of more and more goods.

This commodification-creep did not go unnoticed by Europe’s Christian thought-leaders, and not only because the concept of “interest” is sinful in itself. Anxieties over the triumph of exchange value over experiential value are perhaps best culminated in Christopher Marlowe’s play Doctor Faustus.

In Doctor Faustus the main character, Faustus, conjures up a demon. The demon offers Faustus unlimited power for 20 years in return for his soul. This offer (a loan) renders Faustus’ soul indebted to the demon. As the time grows near, Faustus is only filled with dread and regret at the deal he made, before he is sent to Hell.

Doctor Faustus was written around the time that exchange value was becoming the dominant system of transaction in Europe. It is important to note that it was re-imagined in the nineteenth century. In the re-told version, Faustus – realizing his dreadful mistake – decides to spend the rest of his unlimited power on making the world a better place. When the final Day of Judgment comes, God intervenes, seeing the wellbeing that Faustus has created, and ushers him off to Heaven and not Hell.

“We’re all middle class now”

The re-write of Doctor Faustus, like the original, was ahead of its time. It recognized the potential that the profit-debt marriage has to improve people’s lives. This is what the revised ending alludes to. Faustus is no longer sinful and destined to Hell – rather his indebtedness (selling his soul) has paid dividends and he is whisked off to Heaven.

Life slowly got better for both the rich and poor; first in the Western Europe and then in the Americas. Slowly because of a certain economic system: the Gold Standard. The Gold Standard stagnated and severely limited economic development. Because gold is a finite precious metal, and because under the Gold Standard the value of a currency was defined in terms of gold, no “new” money could be generated.

One of the reasons the world managed to recover from the Great Depression of the 1930s was by abandoning the Gold Standard. And so a new system began – what Yanis Varoufakis calls the “Black Magic” system of banking. This Black Magic is the ability for bankers to create money from thin air. They create it, and loan it out at interest, careful to make sure that the loanees return the money – with interest.

The only thing stopping the bankers from printing money ad infinitum is that it becomes worthless. If there is too much money about people stop believing in its worth, which can be disastrous to economies. But the more money the bankers can create from thin air, and loan out intelligently, the more entrepreneurs can start up their own businesses – like the landowners loaned money to former serfs to labour the land.

And if those entrepreneurs are successful, they can employ more people, pulling more people out of unemployment, and steadily making everyone better off.

It was Tony Blair (not John Prescott) who said “We’re all middle class now”, pointing out that many members of the working class now earn as much as their middle class compatriots (and in some cases more), and are able to afford multiple holidays a year, large houses, and to enjoy life’s little pleasures as they come.

And that is the history of Capitalism, in a very bare-boned sort of way. It is the story of exchange value; of the marriage of profit and debt; the story of manufacturing the unlimited power of belief to lift billions out of poverty, into a world their grandparents could only have dreamed of.

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Trust matters more than ever in an uncertain world

Trust matters more than ever in an uncertain world 1

By Zac Cohen, COO, Trulioo

Trust in the time of COVID-19

Perhaps more than ever before, retail and investment banks the world over face a pivotal moment in their evolution, as banking transitions from a digital-first towards a digital-only landscape. The COVID-19 pandemic has put severe restrictions on traditional face-to-face or high street banking and forced sections of society that had previously been resistant to or unable to access digital banking to make the shift. This understandably brings with it significant anxiety and fear.

For an industry that has been striving to rebuild consumer confidence since the global financial crisis of 2008, COVID-19 presents a huge challenge. It needs to foster trust at a time when the world is facing unprecedented levels of uncertainty and stands on the brink of an even more severe global recession.

Without doubt, a thriving digital economy will be critical for the global economy to bounce back quickly and strongly from COVID-19. Therefore building online trust has become critical to our very future.

A billion reasons to protect customers

The global banking system processes more than a billion transactions every day, from transfers and domestic and international payments, to loan approvals and the creation of new accounts. And each one of these transactions represents an opportunity for some sort of financial crime, whether that’s money laundering, identity theft, bribery or the financing of terrorism.

The global pandemic has only served to accentuate this level of risk, with new threats emerging on the back of COVID-19, and bad actors looking to exploit new opportunities. In particular, online fraudsters are looking to target people who are using digital services for the first time as a result of the pandemic, often the most vulnerable groups in our society such as the elderly.

Research that we recently conducted in the UK and the U.S. found that concerns about online security are higher within financial services than in any other sector, with more than half of people (51%) reporting that they are ‘very concerned’ about identity theft when using financial services sites.

Crucially, 90% of people believe that banks have a responsibility to reduce cybercrime through whatever identity verification is necessary.

Building trust from day one

Of course, customers want online banking services to be responsive, intuitive and fast, but it’s important to recognise that, first and foremost, people want to know that their money and their personal data are safe.

Know Your Customer (KYC) and Anti-Money Laundering (AML) practices are now essential in enabling banks to not only identify each individual customer, but to build trust across the digital ecosystem more broadly.

Identity verification technology during the onboarding process enables a bank to demonstrate to its customers that it is taking their security seriously from the very outset of the relationship. First impressions count — more than three quarters (77%) of consumers claim that the account opening process can ‘make or break’ their relationship with a financial services brand.

Banks simply cannot afford anything other than optimal onboarding and identity verification – fail to deliver this and trust is immediately eroded and in many cases, the customer walks away.

On the other hand, where banks do succeed in demonstrating their commitment to security during these first engagements, delivering a fast, secure and seamless account creation process, they are able to develop a more meaningful relationship with their customers. As many as  84% of consumers report having greater trust in financial services brands that use real-time identity verification during the onboarding process and 71% are more likely to share more personal data.

A layered approach to identity verification

In order to provide first-class onboarding processes and establish trust at the outset of the customer journey, banks need to ensure they can deliver relevant and compliant identity checks for customers, dependent on their geography and the type of service or product that they are looking to access. They need to move beyond a ‘one size fits all approach’ to identity verification, which can lead to cumbersome or unnecessary checks on the one hand, and increased risk on the other.

This is why a digital identity network is so powerful. This is essentially a marketplace of hundreds of data sources, verification processes and tools that leverage network data intelligence to verify and authenticate identities online.

This marketplace approach lets businesses get a more holistic view of risk and then apply whichever verification layers are needed to provide assurance and build trust.

Zac Cohen

Zac Cohen

For example, a bank may only need to perform a basic KYC check when onboarding a customer with an established government ID number or driving license. If that same customer then wants to take out a loan, the bank would need to run other verification checks to create a higher level of assurance. And if the bank wants to onboard a customer whose only form of digital identity is a name tied to their mobile phone number, it would likewise build up assurance through multiple verification and authentication layers — for instance, ID document verification, which captures images from a person’s ID document and assesses its validity, combined with biometric authentication, which compares a selfie photo (taken and sent through the mobile phone) with the photo on an ID document.

With such a layered approach to identity verification, banks have complete flexibility and choice to apply the most appropriate identity checks at every stage of the customer journey, meaning that they can manage and optimise customer experience while minimising risk and ensuring compliance against a rapidly changing regulatory backdrop.

Building a global ecosystem of trust for the digital economy

To build and maintain online trust in such a complex and diverse environment is extremely challenging for banks.

Indeed, despite rapid digitisation across all sectors and regions, the internet continues to suffer from a lack of a critical identity layer that would solve many of these complex problems. While there are layers of protocols and methodologies for transporting data over networks, there is no protocol for transporting assurance. In online transactions, then, there is no standardized way to establish that an individual is who they say they are — the essence of identity.

Clearly this needs to change in order to drive trust, digital access and financial inclusion.

A digital identity network provides banks with the assurance they need in these turbulent times, protecting both themselves and their customers from fraud and delivering seamless customer experiences. In particular, it allows banks to enter new markets and reach new customers who have previously been marginalised or excluded from the digital economy, with confidence. In this way, digital identity can become a great equalizer, enabling more people to access and enjoy the benefits of a digital economy, built on trust.

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Workforce Diversity Matters To Our ESG Evaluation

Workforce Diversity Matters To Our ESG Evaluation 2

We believe the limited representation of Black voices in key decision-making processes prevents companies from reaping the benefits of a diverse workforce. It also exposes companies’ reputations to allegations of discrimination, as shown by recent calls on social media to boycott certain businesses after apparently racist behavior of employees were captured on video and shared. As such, we believe companies need to be deliberate in how they recruit, hire, and develop Black talent if they want to achieve a sustainable and diverse workforce, thereby improving ESG performance.

As part of our social assessment in the ESG Evaluation, we assess how effective a company is at developing a productive and inclusive workforce. Key indicators include employee retention and turnover rates, labor standards, pay, benefits, and rewards. We also assess whether fair labor standards are entrenched across the value chain. Moreover, we evaluate an entity’s preparedness to respond to long-term risks and opportunities, including from changing demographics and social patterns. We assess the extent to which decision-making demonstrates the company’s commitment to its long-term strategy and sustainability, as well as its success at building an inclusive workplace culture. These practices are particularly important given the presence of systemic racism, which continues to disadvantage Black people in corporate environments, particularly in the U.S.

U.S. workplaces have yet to achieve equal opportunity for people of different races, and policies have so far not fully addressed the widespread issue of racism. According to the Center of Public Integrity and the Washington Post, from 2010 to 2017, one million discrimination complaints were filed with the U.S. Equal Employment Office Commission. More than 30% of these cases related to racial discrimination.

Labour Market Outcomes Are Rooted In Systemic Racism

The Black community has long been subject to civil and human injustices that have contributed to a vicious cycle of low educational attainment, high unemployment, and concentrated poverty. This has made it difficult for Black people to enter the workforce, advance in higher wage work, and accumulate generational wealth. Poverty serves as a systemic hurdle to Black employees because it creates barriers to higher educational attainment, thereby limiting their ability to procure employment and financial opportunities that would enable wealth accumulation. In 2018, the Kaiser Family Foundation revealed that Black Americans have the second-highest poverty rate in the U.S. (after Native Americans, another highly marginalized group). The study also highlighted a striking wealth disparity; while the median net worth of a white household in 2016 was $103,000, for Black households it was only $9,200 (see chart 1).

Chart 1

Workforce Diversity Matters To Our ESG Evaluation 3

Yet, structural hurdles and enduring biases have also historically disadvantaged Black jobseekers, regardless of educational attainment. In the U.S., only 31% of Black employees are in management or professional positions, and a low proportion is in upper management positions (see chart 2).

Chart 2

Black Employees are largely underrepresented in management and professional occupations
Educational attainment of the labor force, age and above in the U.S.

Workforce Diversity Matters To Our ESG Evaluation 4

What’s more, Black employees are often held to higher standards than their white counterparts. A 2015 study by the National Bureau of Economic Research found that Black workers receive extra scrutiny in the workplace, leading to lower wages, slower promotions, and sometimes even job loss. This legacy may also create an additional barrier to career advancement, which is apparent in the low proportion of Black employees in upper management positions. Of the Fortune 500 companies, Black employees only account for 3.2% of executive and senior management and only 0.8% of CEOs (four in total) are Black (see chart 3).

Chart 3

Diversity And Inclusion Policies Are Only The First Step

Workforce Diversity Matters To Our ESG Evaluation 5

In our opinion, D&I programs are an important mechanism for improving racial equity in the workplace. They aim to link a company’s strategies, mission, and business practices in a way that supports demographic differences among talent and enables an environment in which all employees are empowered to contribute their unique views and perspectives. As D&I programs have evolved, they’ve begun to encompass initiatives such as targeted recruitment, diversity education and training, career development, mentoring, and grievance procedures. Done well, D&I programs offer several business benefits, from improved productivity to innovation, which help boost a company’s ESG performance by helping it anticipate changing consumer preferences and consumption patterns.

Several studies have investigated the link between diverse workforces and a firm’s financial performance. According to a 2020 McKinsey & Co study, companies in the top quartile for racial and ethnic diversity are 36% more likely to show financial returns that exceed the national industry median. Another study by sociologist Cedric Herring, during his time at the University of Illinois, Chicago, found that companies with the highest racial diversity were able to generate nearly 15x more sales revenue than firms with the lowest levels of racial diversity. Herring suggests that racial diversity is the most important predictor of a company’s competitive positioning, and a better indicator of sales revenue and customer attainment than a company’s size, years in business, and overall employee headcount. Diversity has also been linked to increased innovation potential. Studies show that diversity supports, enhanced creativity, more informed decision-making, increased capacity for innovation, improved customer acquisition, stronger revenue-generating potential, and better talent management.

Analyzing Diversity Remains A Challenge

Where available, we analyze a company’s ethnic diversity metrics as one indicator for a diverse workforce. Businesses tend to focus mainly on the workforce composition and on recruiting employees from different identity groups, including race, gender, age, culture, cognition, and education. Social equality activists are increasingly demanding that companies release diversity statistics, thereby holding them accountable for persisting race gaps.

Although transparency practices are improving, the availability of data is a persistent issue. According to the U.K.’s Business in the Community (BITC) Race at Work 2018 Scorecard report, only 11% of employers report ethnicity and pay data. In France, a race-neutral policy approach to education and employment stands in contrast to that in other European countries. It is illegal for employers or institutions in France to ask about someone’s race or ethnicity. The intent of this was to avoid discrimination. However, in 2006, more than 25 years after the 1978 law prohibiting the collection of ethnic data, a poll by research company TNS-Sofres showed that more than half of France’s black adults said they had experienced racial discrimination. Furthermore, companies more frequently report strictly on percentages of minority employees without commenting, directly or otherwise, on the positions they occupy. This can mask some disparities in terms of job level, promotions, or lack of diversity in certain roles.

We also take into consideration companies’ strategies to increase diversity including quotas, targets, or affirmative action policies. Over the past few years, several European countries have proposed or implemented diversity quotas for boards of companies, principally to increase female participation. The U.S. state of California followed suit in 2018, while legislation is pending in other states. Although still controversial, quotas have helped increase the number of women on boards. Similar policies on ethnic diversity are largely missing. In the U.K., the 2017 Parker Review set a voluntary target for FTSE100 boards to have at least one director from an ethnic minority group by 2021. The Review’s 2020 update shows some progress but not full compliance with the recommendations.

Regardless of the approach a company takes to increase workforce diversity, it is clear that quality data is a necessary ingredient of an effective diversity strategy. As such, we believe transparency at all levels of the organization is imperative for companies to solidify the trust and loyalty of their employees, suppliers, and shareholders. In turn, this will help boost productivity and strengthen the potential for innovation, thereby supporting ESG performance.

The Emphasis Must Be On Inclusion

Recruiting ethnic minorities does not necessarily translate into an environment that’s free of discrimination, allowing each employee an equal opportunity to advance. In our opinion, employers with a culture that tolerates discriminatory practices and microaggression are vulnerable to productivity lapses, decreased innovation, and lower creativity. Therefore, we believe the success of D&I initiatives appears to hinge on the inclusion side of the equation, which should ensure employees feel their contributions are appreciated and full participation is encouraged. According to author and inclusion strategist Verna Myers, Vice President of Inclusion Strategy at

Netflix, “Diversity is about being invited to the party. Inclusion is about being asked to dance.” Analyzing inclusion practices could provide better insight into how companies manage more covert forms of discrimination associated with microaggression. In a U.S. national survey of over 3,700 office workers conducted by the National Opinion Research Center (NORC), 58% of black respondents said they have encountered racism at the workplace. According to the NORC, workplace prejudice often shows up in subtle ways, through microaggression, typically during employee interactions through comments that proliferate Black stereotypes. Examples include referring to Black employees as intimidating, or unprofessional because of their hairstyles, thus creating a situation in which these employees are perceived as “not right” for the job. Such a toxic environment can go undetected by senior management, particularly when people of color are underrepresented at the workplace and in management positions. Many instances of discrimination also likely go unreported, making it even more difficult to expose covert forms of racism in corporate culture. In some cases, microaggression could ultimately result in higher staff turnover rates, one of the factors that informs a company’s Social Profile in our ESG Evaluation.

Many corporate leaders have committed additional resources to D&I programs in the wake of the Black Lives Matter protests. However, the success of these programs lies in how they resonate with employees. Literature on this topic suggests that achieving true inclusion requires a shift in the organizational culture to acknowledge the value of different backgrounds, expose conscious and unconscious biases, and create an atmosphere of respect and empathy. Managers, in particular, play a crucial role in employee development and are therefore important stakeholders in supporting racial inclusion. However, many are not necessarily inclined to reflect on or talk about racial discrimination, and without a business culture that fosters inclusion, meaningful change is unlikely to result.

Companies have started promoting conversations with Black employees to better understand their experiences, which we believe is a starting point. Ultimately, achieving a sustainable diverse workforce and addressing system racism will require continued leadership and accountability. A 2018 Boston Consulting Group study of more than 1,700 companies in eight countries, across different industries and sizes, found that five key factors help diversity to flourish:

  • Participative leadership: managers support employee contributions;
  • Strategic priority: top management and the CEO clearly demonstrate support for diversity; – Frequent communication: free and open communication is encouraged within teams;
  • Culture of openness to new ideas: employees feel that they can express their perspectives without fear of retaliation; and
  • Fair employment practices: employees with equal roles achieve equal pay, and companies enact robust anti-discrimination policies.

Looking To The Future

The Black Lives Matter movement has ignited a broader awareness of racism in society that has put the corporate sector in the spotlight. We believe companies’ diversity track records will be increasingly scrutinized, making a diverse and inclusive workforce a reputational imperative. In our view, more corporate entities will treat the challenge of workplace diversity as they would any other existential risk, and therefore gather the right information, including opting into voluntary diversity initiatives, to make the most informed choices.

A Call To Action: The Race At Work Charter

In collaboration with the U.K. government, the BITC established the 2018 Race at Work Charter detailing five actions all employers, regardless of sector, could undertake to further support diversity and inclusion. Since the Charter’s inception, more than 100 companies have added their signatures, including the National Grid, Goldman Sachs, and Deutsche Bank. By joining this initiative, companies are committing to taking meaningful action against discrimination in the workplace. The five actions are to:

  • Appoint an executive sponsor for race.
  • Report ethnicity data metrics and monitor progress.
  • Commit, at the Board level, to zero tolerance of harassment and bullying.
  • Clearly state that promoting equality in the workplace is the responsibility of all managers.
  • Take meaningful action to support the career progression of ethnic minorities.

The success of a company’s D&I efforts will be reflected in several indicators, including: the proportion of Black employees in the workforce overall, also in management and leadership positions; and the pay gap between employees in similar roles. Large, technologically advanced companies will likely be among the first to back their D&I commitments with meaningful targets and report regularly on progress. In the end, an effective, inclusive framework that supports long-lasting diversity and ESG goals depends on sound communication and ongoing commitment of employees at all levels of the organization.

Related Research

  • Environmental, Social, And Governance: Why Corporations’ Responses To George Floyd Protests Matter, July 23, 2020
  • The ESG Pulse: Social Factors Could Drive More Rating Actions As Health And Inequality Remain In Focus, July 16, 2020
  • Environmental, Social, And Governance Evaluation Analytical Approach, June 17, 2020
  • Environmental, Social, And Governance: How We Apply Our ESG Evaluation Analytical Approach: Part 2, June 17, 2020
  • How We Apply Our ESG Evaluation Analytical Approach: Part 2, June 17, 2020
  • People Power: COVID-19 Will Redefine Workforce Dynamics In The Post-Pandemic Era, June 4, 2020
  • The ESG Lens on COVID-19, Part 2: How Companies Deal with Disruption, April 28, 2020
  • COVID 19: A Test Of The Stakeholder Approach, April 21, 2020
  • The ESG Lens On COVID-19, Part 1, April 20, 2020
  • How To Navigate The ESG Risk Atlas, April 11, 2019
  • How We Apply Our ESG Evaluation Analytical Approach, April 10, 2019
  • The ESG Advantage: Exploring Links To Corporate Financial Performance, April 8, 2019

External Research

  • https://www.washingtonpost.com/graphics/2019/business/discrimination-complaint-outcomes/
  • https://www.mckinsey.com/featured-insights/diversity-and-inclusion/diversity-wins-how-inclusion-matters#
  • https://journals.sagepub.com/doi/abs/10.1177/000312240907400203
  • https://assets.ey.com/content/dam/ey-sites/ey-com/en_uk/news/2020/02/ey-parker-review-2017-report-final.pdf – https://assets.ey.com/content/dam/ey-sites/ey-com/en_uk/news/2020/02/ey-parker-review-2020-report-final.pdf
  • https://www.talentinnovation.org/_private/assets/BeingBlack-KeyFindings-CTI.pdf
  • https://www.bcg.com/publications/2018/how-diverse-leadership-teams-boost-innovation
  • https://www.bitc.org.uk/race-at-work-charter-signatories/
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What is loneliness and how can you manage it?

What is loneliness and how can you manage it? 6

By Iris Schaden Your Business and Personal Coach

A mere century ago, almost no one lived alone. Today, many do and it is not unusual. The recent lockdowns and isolation periods have amplified feelings of loneliness. But why do we feel lonely? Why do our bodies experience social pain? Learn about what we can do to improve our situation, prevent chronic loneliness and minimise the tremendous impact it has on our health.

Solitude and choosing to be alone can be bliss. Over the last sixty years the number of people living alone has increased in developed countries by more than 50 percent. In countries such as Denmark, Sweden and Switzerland, it is very common for people to live alone. But this does not translate into higher levels of selfreported loneliness. Many people have friends or family they can interact with on a regular basis.

However, it is important to recognise that this choice is different to loneliness, which can be a state of profound distress. Loneliness is a purely subjective and individual experience that can be felt by anyone, no matter their social, educational, gender or age demographic. Humankind are social creatures by nature – we struggle without it – and social connections are important to our health and emotional wellbeing.

Loneliness is a problem when we feel that no place is home; when we are in a group and we still feel social separation; when we spend time with our family but we feel like we don’t belong; or when we lose a relationship and struggle to adjust. It is a growing phenomenon in modern times, a by-product of our individualism, long-distance study and career opportunities or time-consuming work commitments.

The pandemic, with its required isolation and social distancing, has added additional stress to many households, but feelings of loneliness or adverse effects of social isolation are particularly prevalent in one-person households and young people aged 12–25. According to a study by VicHealth, even before COVID-19 young adults and adolescents reported high levels of loneliness, social isolation, social anxiety and depressive symptoms. Additionally, it is men who tend to report higher levels of loneliness than women.

Reported loneliness is on the rise. In 2017 and 2018 former US Surgeon General Vivek H. Murthy declared ‘an epidemic of loneliness,’ and the UK appointed a Minister of Loneliness. In these two countries, one in five adults reported that they often or always feel alone; in Australia, it was one in four adults. And this was before COVID-19, which makes us realise the mental and emotional impact lockdown has on individuals.

What happens to our bodies when we experience loneliness?

Neuroscientists, such as John Cacioppo, identify loneliness as ‘a state of hypervigilance whose origins lie among our primate ancestors and in our own hunter-gatherer past’. Our ancestors needed to belong to an intimate social group to survive. Cacioppo explains that our bodies respond to being alone, or being with strangers, as though we were in a dangerous situation.

Separation from other people (the group) triggers a fight-flight-or-freeze response and we feel social pain. While physical pain is primarily a sensory experience, social pain is the emotional state that comes from the distress of being lonely. Like the bodily sensation of hunger, it alerts us to a need, but instead of food the need is social interaction.

Loneliness generates anxiety: our breathing quickens, our heart races, our blood pressure rises and we struggle to sleep or sleep well. If we don’t pay attention, over time we start to act more fearful, defensive and self-involved. All of these actions drive others away and tend to stop those experiencing loneliness from doing what would benefit them the most: reaching out to others. It is a vicious cycle and one that is especially challenging for older and younger individuals.  

Tactics to help cope with feelings of loneliness. 

To belong is to feel at home in a place or situation where you feel included, comfortable and connected with others. In his assessment, Vivek H. Murthy wrote, ‘To be at home is to be known … You can feel at home with friends, or at work, or in a college dining hall, or at church, or in Yankee Stadium, or at your neighbourhood bar. Loneliness is the feeling that no place is home.’ Having relocated to different cities and countries and re-establishing my life over and over again, I can certainly say that loneliness can be a challenge.

Iris Schaden

Iris Schaden

How can we combat the feelings of loneliness and the anxiety that comes with it, before it becomes chronic and we find ourselves even more isolated over time? 

The first step in moving forward is acknowledging how you feel. Give those feelings a name with a specific timeframe; for example, today I feel alone or since I’ve been in lockdown, I have felt alone or since I lost my partner, I feel disconnected and lost. By doing this, we focus on the present and do not label our entire existence as lonely.

My personal strategy is to go outside if the loneliness gets too ‘heavy’; connect with other people through looks and smiles (even under a face mask our eyes can smile); call friends and family regularly; or schedule a brunch or glass of wine with friends (in person or video chat).

Practising random acts of kindness and gratitude, for others and ourselves, is another very effective and very positive way of bringing us back into the present moment and improving our overall wellbeing. Energy flows where our focus goes. It takes effort and sometimes it is indeed easier to just give in and watch a light-hearted movie on the couch. And that’s fine too!

If you are ever experiencing loneliness, I recommend exercising your social muscles and also seeking support. Remember that your feelings are normal as we are biologically fine-tuned to being with and interacting with others. However, you will need to make changes to avoid jeopardising your health. Once loneliness becomes chronic it becomes self-sustained and you will begin exhibiting defensive behaviour. As a defence mechanism, loneliness makes you assume the worst of others and you (your brain) become hypersensitive to social signals that might be interpreted as hostile towards you, when in reality people might just be trying to help you.

Large studies have shown that feeling lonely has a tremendous impact on your health: it can make you age quicker, cause dementia to advance faster, weaken your immune system and lead to anxiety and depression. Many people turn to substance abuse which only serves to numb the symptoms, rather than treat the source. And while you can find so much information online, knowing is not enough. Remember that reaching out for help is not a sign of weakness but one of strength. So please reach out to your network, talk to your health professional or get in contact with me.

There are different ways to improve your overall wellbeing. Let’s discuss.

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