Crisis of jealousy and despair: a theory of rising political polarization and why managers and business schools should care about it

This study offers a novel theory of political and affective polarization in America and their impacts on business. The authors’ theory pivots on the growing portion of Americans for whom the national social contract is broken. Many of these individuals experience strong emotional reactions to the broken social contract, including jealousy among some and despair among others. Political parties have strategically consolidated fundraising by stoking these emotions and essentially nationalizing elections. The authors maintain that the net result is rising political adjustment costs – a previously unexamined source of government failure – that prevents government from effectively restructuring the social contract. The result is a dynamic systems model that explains how businesses contribute to polarization and political adjustment costs, identifies five emerging challenges that they create for businesses, and explains why managers should work to address them. The authors develop an agenda for research and teaching about these issues in strategic management, both within the US and in countries with different institutions.