After the Financial Meltdown, Where's America's Outrage?

Last Updated Sep 9, 2010 3:11 PM EDT

Andrew Ross Sorkin of The New York Times noted that 49% of people surveyed had a negative view of Goldman Sachs. Financial companies are busily trying to rebuild their reputations by, among other things, running lots of advertisements touting their lending activities, but numerous reports show that banks are cutting credit lines to both individuals and businesses.

What puzzles me is why more than half of the people have a positive view of Goldman and its compatriots in financial services, given that Goldman apparently bet against the bonds it was happily selling, and the SEC is now investigating the possibility that financial companies gave misleading information to the agencies rating the bonds they were issuing.

That's not to say that people are happy. But compared to other countries, reactions in the U.S. seem fairly muted. In Iceland, some bankers are in jail with their assets frozen. In Ireland authorities are seeking to extradite a former bank CEO, now ensconced in the U.S.

This is not the only situation in which people hold beliefs that appear to be against their self interest. In fact, research has shown this to be the case in numerous instances. Similar behavior among voters prompted Thomas Frank to write his best-selling What's the Matter with Kansas? a few years ago.

New York University social psychologist John Jost has a theory that helps explain why the level of anger and activism in America is not as high as one might expect. Jost notes that people possess numerous, sometimes conflicting, motives. For example, people often like to believe that they, and the groups to which they belong, are superior--the so-called "above average" effect. Yet they also like to feel positively about the existing social order. In numerous experimental and field studies, Jost and his colleagues have demonstrated that disadvantaged groups tend to agree with their inferior position-coming to see themselves as inferior as a way of justifying their inferior position. So, for instance, students at less-prestigious colleges don't bolster their perceptions of the many positive attributes of the places they go to school. Instead, these students tend to justify the lower rankings by adopting descriptions of both their institutions and the higher-ranking colleges that confirm their school's inferior rank.

Jost's research has several important implications. First, it helps us understand why there is less anger and pressure to change regulatory oversight than might be expected by the economic disaster visited on millions of Americans by events not of their own doing. To feel good about America and its system, people make sense of what happened in ways that do not undermine the legitimacy of the existing status order, including the huge salaries earned by people working in finance.

Jost's theory of system justification also shows us that people, by their own beliefs and actions, come to accept whatever currently exists. This makes any sort of social change more difficult. That's why there is so much interest in learning how to change, as reflected in the popularity of Chip and Dan Heath's book, Switch. One reason why organizational change is difficult is that people find reasons to like the status quo, even if it isn't working.

I've discovered a third important consequence, from my experience in teaching people about power in organizations. I find that people often are reluctant to push for their own advancement and power, instead banking on the beneficence of others under the assumption that the world is a just place. They believe that hard work and good job performance will be sufficient, and that they don't have to develop influence skills and awareness of organizational politics.

These individuals keep their heads down and do their work, hoping for the best. But this behavior creates problems for people. That's because you need to understand and act on your own behalf. If you don't, no one else will.
  • Jeffrey Pfeffer

    Jeffrey Pfeffer is the Thomas D. Dee II Professor of Organizational Behavior at the Stanford Graduate School of Business, where he has taught since 1979. Pfeffer has authored or co-authored 13 books on topics including power, managing people, and evidence-based management. He has lectured in 34 countries and has been a visiting professor at London Business School, Harvard Business School, Singapore Management University, and IESE in Barcelona. Pfeffer has served on the board of directors of several human-capital software companies, as well as other public and nonprofit boards.