FEST Writing Group

This is a paper I presented at the societal conference last year which is sponsored by the New England Seminar on Bowen Theory. The conference has evolved into a think tank where people are invited to present on a variety of topics relative to the emotional process and societal regression. This paper was written for presentation and my goal is to rewrite it for publication. I would like to add to the data regarding the financial crisis and summarize the work of Peter and Rosemary Grant in a more orderly way. I appreciate the opportunity to work on it in this context. I look forward to your comments.

A View of the Emotional System – The Financial Crisis

Murray Bowen offered us a view of the emotional system in his theory of human behavior. He focused on the instinctive nature of man and the forces that influence human behavior and functioning. Key amongst the processes he identified was DOS that takes place in the context of the triangle. He saw that there was wide variation in how people functioned in their closest attachments and that some individuals had a greater capacity to tolerate higher levels of anxiety before activating the triangle process. He saw the shifting of anxiety as the underlying process that led to human organisms functioning at the expense of others, with two people seeking an inside position while pushing a third into the uncomfortable outside position. The outsider automatically will seek a favorable position with one of the insiders in an effort to put himself in the more favorable inside position. Bowen saw the anxious focus on a third as a way of stabilizing the relationship for the two insiders. He noted that in families and organizations this process can become more fixed which over time leads to the compromised functioning of one or more members of the family or group. He noted that this process relates to the degree of interdependency amongst family or group members and that all members of the family/group are not equally involved in the process.

Laurie Lassiter has introduced us to the triangle hypothesis that zooms in on one aspect of the triangle, viz. two or more against one, and proposes that living organisms in response to threat move in coordinated ways to pressure some members of their group to function, at great personal expense, in ways that enhance the survival and functioning of the group as a whole. Although the triangle is the mechanism used by the human species to adapt to rising levels of threat, it is not the mechanism for all species. DOS accounts for the variation in human functioning, evident in every family, in its responsiveness to threat or environmental changes.

At higher levels of DOS, one would see a greater capacity to read one’s environment accurately and greater flexibility in one’s response. At higher levels of differentiation one is increasingly able to guide oneself, even in the context of one’s closest attachments. The self is sufficiently integrated to allow for some degree of emotional separation from the group that allows for a greater capacity for individual guidance. More differentiated people are less responsive to emotional pressure and can separate themselves from the emotional environment sufficiently to guide and direct their own functioning within the group.

At lower levels of DOS one is increasingly guided by the emotional system of which one is a part and increasingly less free to guide oneself independent of the group.  Lower levels of differentiation reveal the innate sensitivity of people to emotional pressure that can erase all or most of their capacity to self-direct. Their lives are guided by the group and hence they are more vulnerable to functioning for the group, even when it means sacrificing self. The fact that the self is poorly defined increases their vulnerability to being used by the group. This process is out of awareness for the most part.

Bowen theory offers us an opportunity to view the human condition more accurately and to study the emotional system that guides us all albeit to varying degrees.  To become more aware of this process it is often helpful to learn from other species that are guided by the same life forces we find in the human.

All living organisms are sensitive, to varying degrees, to changes in their environment, and this in turn influences behavior. With this in mind, it may be useful to turn to the research of Peter and Rosemary Grant of Princeton University.

Peter and Rosemary Grant began their research of the ground finches on the Galapagos Islands in 1973. This study was continued for at least twenty years with the assistance of numerous graduate students and colleagues. They studied the genus geospiza or ground finches.  This genus includes:

G.diffiilis (sharp beak finches)

G.Scandens (the cactus finch)

G.Conirostris (large cactus finch)

G.magnirostris (large ground finch with large beak)

G.fortis (medium ground finch with medium beak

G.fuliginosa (small ground finch with small beak)

In each of these species, the beaks of various birds are variable (Grant p.42).

“Beaks are to birds what hands are to us” (Weiner, p.50) They are the tools needed for managing or manipulating the environment, which influences their survival. The shape of the beak sets limits on what the birds can eat and what nuts/seeds are available to them.

The Grants studied the twenty-four types of seeds available to the finches for their size and hardness to assess difficulties they would present for the different types of finches with varying size beaks.

In the Galapagos only the first half of the year is wet, the second half is dry. The Grants have studied variation in the beak and the behavior of the finches during changing conditions and during both seasons of the year.

There was no rain from April through July of 1974. It was determined that the volume of finch food was down 84% in some areas and the finches lost weight accordingly. Not only was their less food but less variety.  The available seed had a struggle index (hard to eat depending on size of beak) of six compared to 0.5 in the wet season.

In the wet season every ground finch had the same menu, seven kinds of soft seeds and fruits. They spent half of their foraging time on those seven. But that changed to a thirteenth of their time in the dry season. The Grants discovered that the bird’s beaks determined what they ate. The size and hardness of the seed would determine which size beak would be most adaptive to the present environment. One researcher discovered that the birds with the biggest beaks in the dry season ate the biggest seeds, birds with medium beaks ate medium seeds and birds with small beaks ate small seeds.

Under normal conditions, the rains come and food of all types will be plentiful again.

From March 1976 when the island was lush until the end of 1977, there was a severe drought. And this is what happened on the Island of Daphne Major:

January 1977                                                                                December 1977

1400  Total number of finches                                                300 surviving finches

1200 fortis finches                                                                     180 surviving fortis finches

280 cactus finches                                                                      110 surviving cactus finches

12 fuliginosa finches                                                                  1  surviving fuliginosa finch

The oldest and most experienced birds survived. During the drought, when big tough seeds were all a bird could find, big bodied, big beaked birds survived. The surviving fortis was about 5% – 6% larger than the dead ones.

Research also showed that the beak of the surviving fortis was ll.07 millimeters long and 9.96 millimeters deep compared to 10.68 millimeters long and 9.42 millimeters deep of the dead ones.  This small variation made a major difference in survivability at that time.

Males are larger than females by 5% with proportionately bigger beaks, giving them an advantage in this environment. 150 males survived the drought. Only a small number of females survived.

In January 1978, the rain came and life was good again. Within weeks the finches began to mate. There were six males for every female among the fortis. The females were selective in choosing a mate. They selected the largest males with the blackest plumage and the deepest beaks.

Every female mated, most males did not. The bigger males in the group were favored. The offspring in turn were bigger with deeper beaks. The average fortis beak of the new generation was 4%-5% deeper than the beak of their ancestors before the drought. Nature favored the deep and narrow beak because that was what was needed to crack the mericaps of the tribulus plant to expose the seeds.

In 1979 and 1981 it was again noted that females were choosing males with those features that allowed them to survive during the hard times. Therefore, the biggest males with the biggest beaks were mating.

The question was asked: Would beak size begin to reverse and under what conditions?

In December 1992 there was a major flood due to El Nino. Excess growth could be seen everywhere. Trees flowered seven times. The total mass of seeds on the island by June was twelve times the norm. There were five times as many caterpillars to eat and every one of them was four times larger than normal. The environment was too wet for the cactus and tribulus plants so big seed crops crashed while small seed crops were plentiful. And the finch responded.

On Daphne Major alone the females produced up to forty eggs and fledged twenty -five young. The most prolific pair on the Island of Genovesa laid twenty-nine eggs in seven clutches and had twenty fledglings.

Finches are more or less monogamous under normal conditions. In this lush environment they became bigamous and polygamous.

Within six months, there were 2000 finches on Daphne Major alone, an increase of 400%. Most finches breed around the age of two. Now they were mating in the cactus bush at three months of age. Cactus finches produced more than half the young they would ever produce in that one season.

The wet and chilly conditions triggered finches on the island of Genovesa to abandon their young in the nest. Mocking birds hung around the nests and terrorized finch parents and nestlings. This occurred after changes in the mocking bird social order that killed off the elder males and left a band of juvenile delinquents without supervision.

Then the rains stopped, leaving an abundance of small seeds, enough to support the population for one or two years.  The rainfall was low in the two years after the flood and the supply of seed diminished as well. By 1983-1984 finches were dying everywhere.

Now it was the big birds with big beaks that were dying and small birds with small beaks flourishing. Selection had flipped in this drought. More males died than females who now had the small size advantage. The flood favored small finches over big ones. There was ten times more small seed available and large finches had trouble finding large seeds. Small seeds were hard for large birds to eat. Their beak was too large. Their body size demanded more food, which again put them at a disadvantage. The flood had reversed natural selection.

From this we can see how living organisms are sensitive to their environment. Certain environments favor some individuals over others. In every environment however, some are favored to survive and reproduce over others.  This seems to be consistent in all species.

With this as a background, let us now look at the financial crisis and what it can teach us about the human condition.

Money, like seeds, is a resource. It is essential to some degree for survival and most certainly can enhance one’s state of well being. One’s responsiveness to the presence or absence of the resource to some degree reflects the level of maturity in the individual as well as the group.  There is an automatic threat when a resource dries up. There is also a perceived threat that one could lose the resources one has, and man devotes much life energy responding to this even when conditions are favorable.

What was the financial crisis of 2008 and how did it happen? According to Joseph Stiglitz, winner of the Nobel Prize in economics,  “There was a bubble and it broke, bringing devastation in its wake.” “The bubble was supported by bad bank lending, using as collateral, assets whose value had been inflated by the bubble.” “New innovations allowed the banks to hide much of their bad lending, to move it off their balance sheets, which then increased their effective leverage, making the bubble all the greater.”  Credit default swaps, a new instrument, were designed to manage risk but actually served to deceive regulators due to their growing complexity. (p.xviii)

Low interest rates and lax regulations fed the housing bubble. (p.2) Homeowners borrowed from their home equity to enjoy the bounty of goods offered to them. Mortgage equity withdrawals hit $975 billion in one year. People assumed that housing prices would continue to go up and did not perceive the risk in their behavior. Two-thirds to three-quarters of the economy (GDP) was housing related.

(P. 2) Wall Street in turn developed mortgages with high transaction costs and variable interest rates that did not provide any protection against the loss of income or loss of home value. What they did do was make a lot of money for the banks and other mortgage lenders and originators in the form of transaction fees. “ The lure of easy profits from transaction costs distracted many big banks from other functions such as lending to small and medium sized businesses, on which our economy depends.”

The banks involvement in mortgage securitization entailed the transformation of risky subprime mortgages into AAA-rated products safe enough to be held by pension funds. The banks not only acted as middlemen for the risky assets they were creating but they also held many of those assets. US banks and financial institutions boasted about their clever new investment instrument. P.7 “At their peak in 2007, the bloated financial markets absorbed 41% of profits in the corporate sector. P.7

The rating agencies, whose job it is to check the growth of these investment instruments, overlooked the risk and approved them which encouraged others, including pension and retirement funds, in the US and overseas, to buy them.

The Federal Reserve, led by Alan Greenspan and later Ben Bernanke, stood by and presented an image that communicated there was nothing they could do. More likely, they did not read the environment realistically or accurately. In part, a belief in deregulation may have prevented them from seeing the down side. Given that, they were less likely to respond in a way that would begin to regulate the overheated market.  Even though there were simple things that could be done to check the bubble, such as raise interest rates, they were unable to act, as it was contrary to their way of thinking about the problem.

During the period the world economy was expanding, many concluded that unfettered markets worked. The belief was that deregulation fettered the high growth and it would be sustained. The growth however was sustained on a mountain of debt. (p. xx) In the past, Western banks had been saved from the follies of their lending practices by bailouts. (Thailand, Korea, Indonesia, Mexico, Brazil, Argentina, Russia). In spite of that evidence, available to all, people continued to act as though these were anomalies and did not intellectually see them as a real threat. However their behavior, in continuing to engage in the same risky behaviors that brought other countries to the brink, may well indicate their responsiveness on an emotional or instinctual level.

The deregulation ideology seemed to take hold around the time of the Reagan administration. He appointed Alan Greenspan to the Federal Reserve in 1987 as Greenspan‘s ideas were in line with the president regarding deregulation. Paul Volcker had been the Fed Chairman previously and had earned high marks for reducing the inflation rate from 11.3% to 3.6%. Normally this achievement would have led to reappointment but Volker’s thinking was not in line with the current trend regarding regulation. As in all administrations to one degree or another there is tremendous pressure to think, as the group would have you think.  The threat is always there – that if you think different you will be pushed out and in fact many are.  People become overly invested in their beliefs and that prevents them from hearing other viewpoints. It quickly becomes us against them or more specifically two or more against one.

So what makes deregulation so attractive? Laws are made by societies in an effort to regulate behavior that can or will impinge on others. The stated goal of most laws is to develop a society that is reasonably safe and manageable for its citizens to live and work and grow. The law, however well it is written, can be interpreted in many ways as one can readily see in decisions that are presented to the US Supreme Court. I would propose that the law itself and the interpretation and enactment of the law is reflective of the functioning of the social group it is attempting to regulate.  A well-regulated social group will be guided by their own principles and hence will function in ways that contributes to the orderly functioning of the group as a whole. A poorly regulated group is more divisive and more apt to function in ways that undermine some to enhance the functioning of others. That is what we see in the financial crisis, a lack of regulation at all levels.

Everyone participated in the problem and of course there was much blaming in its wake. The homeowner, the mortgage originator, the mortgage lender, the bank, the regulators, and the investors all responded to a lush environment with the appearance of high growth and profit for all. It was the emotional system that drove this behavior. With lower levels of differentiation, man is less and less able to read his environment accurately, to assess risk thoughtfully.  He/she is more sensitive to disturbances in the environment and far more vulnerable to responding to emotional forces that would enhance self at the expense of others, or yield self so others could thrive.  The problems in the economy reflect the problems in man’s present functioning level. It is just a symptom.

There is a problem of sorts in large corporations where there is no personal interface with the original owner of the funds. Interactions between a homeowner and his local banker had many advantages. It motivated the banker to know the borrower and his level of risk or ability to repay the loan. The bank at one time would hold onto that loan for the life of the mortgage, so they had more of an incentive to watch their lending practices. Now the loan is sold and resold and eventually falls into the hands of investors who are interested only in making a profit. This became a major issue when banks were pressured to help the homeowner with rewriting their mortgage vs. foreclosure. There were many sides to the triangle with the government, bankers, investors and homeowners seeking a more favorable position for themselves, clumping with one group or another, while pushing a third group into a more compromised position. Often, it was the homeowner and his interests who were compromised as well as many small individual investors.

So lets take a look at the bailouts.

The repeal of the Glass-Steagall Act in 1999 that separated investment from commercial banks fed the expansion of the too big to fail banks.  Some think the too big to fail process led banks to take bigger risks. When the bubble burst, most of the banks were left with all these risky securities on their books and it threatened their survival. Even though they had lobbied long and hard for less regulation, they were now seeing the fruits of their labor and it was not what they expected. They could and would go under without government help. Although the US Treasury and IMF had argued against bailouts in Indonesia and Thailand, and the government had let Lehman Brothers go down, the environment shifted and the response to the current threat became the biggest bailouts in world history.  There were not only bailouts but the Federal Reserve provided increased liquidity which allowed banks to borrow from the Feds at reduced rates, some as low as zero which increased their profits as they charged a much greater fee for others to borrow from them.  It was a gift from the American taxpayer.

Key government players behaved differently than one would have seen under normal conditions.  Long established practices were already in place to deal with banks and their troubled assets. If what the commercial bank owes to depositors is greater than the bank’s assets, then government has to honor its commitment to depositors. Occasionally government (FDIC) will run the bank until an appropriate suitor is found. This is called conservatorship. In essence the government owns the bank temporarily. But Obama suggested this was not the American way in dealing with the present crisis (P. 116). People have a tendency to perceive things as totally different than what has happened before. In fact there are many similarities in all financial crisis and since this was on such a grand scale, one only needed to look at the Great Depression for perspective.

The Feds responsibility is mainly to commercial banks in the form of regulation as well as providing insurance on deposits.  But in responding to the Financial Crisis the government extended its safety net to investment banks and then extended it further to AIG, an insurance firm. (p.12) So here we see a changing environment evoking a change in behavior. Key government officials took on greater responsibility for troubled banks then ever before. One can debate the effectiveness of the bail out and many still do. Some think it was the way it was handled, providing little to no restrictions on the troubled banks. Some think it was not big enough to stimulate the economy. And some think it was a lost opportunity to restructure the entire financial system. Few would see it as an opportunity to observe the human organism in the presence of threat. It was as though the weather pattern had changed in Washington, from drought to El Nino, the banks on the brink in one environment and then, with the bailout, a return to better conditions, a reduction in threat and more evidence of unregulated behavior, such as bigger profits for those at the top.  When environments change, the behavior of living organisms will also change. In the human, depending on the level of DOS, there may be a choice as to how to respond.

CONCLUDING THOUGHTS/ IDEAS:

The emotional system is a guidance system, be it triggered by a chemical interaction or triangles or some other mechanism

The function of the emotional system is to regulate its members

Interactions have a significant impact on what organisms do

Every living organism is sensitive to alterations in its environment

Functioning at the expense of others is part of natural systems. It is embedded in man’s evolutionary history.

The cost of group survival is the impairment or loss of certain members of the group.

All organisms will react to extremes in conditions from floods to droughts, from poverty to abundance but not to the same degree. The vulnerability of man is most evident as conditions move toward the extremes.

The impact of a financial crisis in the US or other nations, on the global economy, reveals the level of interdependency between and among the members of all nation states.

A more regulated society would have seen the events leading up to the crisis more accurately and responded to the reality of the situation long before it reached the critical level.

Perhaps the only problem society has is a lower level of differentiation and a focus on that may increase man’s options for the future.

Knowledge of the emotional system seems to be the missing link in man’s quest to understand his behavior/functioning in relation to other members of society.

Knowledge of the emotional system can provide new options for mankind.