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This is a research blog for my MA in Visual Effects @ Ravensbourne, UK.

Reinventing the firm

The report “Reinventing the Firm” by William Davies is a critic about the way the economic thinking in the last 20 years has evolved to a exclusive “shareholder value” and a “for profit” approach, in which a business should persistently pursuit short-term maximum gain and nothing else. The starting point for it is obviously the crash of 2008 and the subsequently recession. According to the report, more inclusive alternative ways and long term strategies are needed in order to reduce the risk of future crises. Also, different models of ownership and corporate governance and more diverse companies can generate wealth as well as positive benefits for society and shareholders as well.

It analyses business and the market from the perspective of collaborative management, offering solutions in the public sphere by applying new models of governance in the private sector. All very interesting and nobel. Though, there’re some interesting points inherited on this debate about the possible social role played by the private sector. Right on the beginning (Reinventing the Firm, Why now?, page 15), it recognises that the state can’t be entirely responsible for the creation and distribution of wealth and well-being. It also cites lack of support from politicians in expanding social entreprise in mainstream businesses.

And continues by stating that the current economic and political context and its turbulent nature is the right opportunity to rethink and expand a new sort of framework on business, ownership, management and accountability; finally reaching the inevitable question of what form of autonomy is desired in the economy.

Autonomy is a helpfully ambiguous value, straddling economics and politics. There is ample economic evidence concerning the benefits that worker autonomy can deliver to business performance, meaning that there are tangible economic reasons for managers to empower and liberate their employees. A particular idea of consumer autonomy, meanwhile, is at the heart of how markets are designed and regulated. But there is also an emerging political framework that seeks to deliver greater autonomy in our economic lives (including in our workplaces) as a component part of a society less liable to domination.

For instance, a firm that sought to empower employees purely as a means to extract greater effort and productivity from them could be accused of excessive work intensification, and would scarcely be satisfying the democratic requirement for non- domination in the workplace. On the other hand, a firm that privileged workplace democracy at the expense of productivity would be failing in an equal and opposite sense. The task, this report argues, is to build firms with a suitable balance between economic and political forms of participation, liberty and empowerment. In the best cases discussed in this report, this balance is struck in such a way as to uphold both sets of priorities.

Clearly, there is a conflict between the political perspective of the problem which is intrisic to the business management of the framework and the economic part, which is crucial for the existence and maintance of any sort of business. Autonomy perhaps is the balance that is allowed and given to the employees now invited and more integrated to the model by their employers. This balance needs to fulfil individual needs and individuality is an important part on the equation, as well as self awareness and self importance as essential factors.

This reminds me of the George Soros book “The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What it Means”. Regardless of what the author was aiming for or his activities, the title offers an insightful conceptual framework about the relationship between thinking and reality within the economic and political perspective. Soros refers to it as General Theory of Reflexivity. In this article “Soros: General Theory of Reflexivity”, he explains that he was heavily influenced by Karl Popper:

In his books Popper argued that the empirical truth cannot be known with absolute certainty. Even scientific laws can’t be verified beyond a shadow of a doubt: they can only be falsified by testing. One failed test is enough to falsify, but no amount of conforming instances is sufficient to verify. Scientific laws are hypothetical in character and their truth remains subject to testing. Ideologies which claim to be in possession of the ultimate truth are making a false claim; therefore, they can be imposed on society only by force. This applies to Communism, Fascism and National Socialism alike. All these ideologies lead to repression. Popper proposed a more attractive form of social organization: an open society in which people are free to hold divergent opinions and the rule of law allows people with different views and interests to live together in peace. Having lived through both Nazi and Communist occupation here in Hungary I found the idea of an open society immensely attractive.

While I was reading Popper I was also studying economic theory and I was struck by the contradiction between Popper’s emphasis on imperfect understanding and the theory of perfect competition in economics which postulated perfect knowledge. This led me to start questioning the assumptions of economic theory. These were the two major theoretical inspirations of my philosophy.

What Soros says with his reflexivity idea is that situations that have thinking participants, participants’ view of the world is always partial and distorted (fallibility). And this fact can influence the situation they relate by taking inappropriate actions/decisions (reflexivity). Even though it seems obvious, these ideas have been in a way ignored by economic theory, according to the author. What is also very interesting is this bit by Zygmunt Bauman (Liquid Modernity, page 20):

The individual submits to society and this submission is the condi­ tion of his liberation. For man freedom consists in deliverance from blind, unthinking physical forces; he achieves this by opposing against them the great and intelligent force of society, under whose protec­ tion he shelters. By putting himself under the wing of society, he makes himself also, to a certain extent, dependent upon it. But this is a liberating dependence; there is no contradiction in this.

Not only is there no contradiction between dependence and liberation; there is no other way to pursue the liberation but to ‘submit to society’ and to follow its norms. Freedom cannot be gained against society.

Important to notice that any comparison may sound unfair, since we are having two complete different spheres here. One thing is a collaborative and inclusive business model and the other is a economic political framework and political sociologic analysis. But what I am concerned here is how theoretical models are product or pure response to something wider. In Bauman’s book, for example, he says that fordism was in its heyday simultaneously a model of industrialization, of accumulation, and of regulation. And yes, I know. I know. We are far beyond our glorious industrial past. And even though we are in much more dynamic and complex context, I think this observation is still valid.

Modern self-confidence gave an entirely new gloss to the eternal human curiosity about the future. Modern utopias were never mere prophecies, let alone idle dreams: openly or covertly, they were both declarations of intent and expressions of faith that what was desired could be done and will be done. The future was seen like the rest of the products in that society of producers: something to be thought through, designed, and then seen through the process of its production. The future was the creation of work, and work was the source of all creation.

Every society today is consciously committed to economic growth, to raising the standard of living of its people, and therefore to the planning, direction, and control of social change. What makes the present studies, therefore, so completely different from those in the past is that they are oriented to specific social-policy purposes; and along with this new dimension, they are fashioned, self-consciously, by a new methodology which gives the promise of providing a more reliable foundation for realistic altern­atives and choices.

The future is a product created by the one who has the hold on the present. William Davies report apparently offers some interesting ideas on employee ownership as an optimal model of autonomy, merging economic performance with politically progressive forms of accountability and governance. It’s interesting to see these oposing aspects trying to carefully work together. It’s as if we were trying to get a grip on our liquid destiny.


Reinventing The Firm, William Davies
General Theory of Reflexivity, George Soros
Liquid Modernity, Zygmunt Bauman

- Posted by rrraul on 25/03/2013 | PG03 |