i s r f
b u l l e t i n
Todayâ€™s Future Challenges & Opportunities Across the Social Sciences
Edited by Dr Rachael Kiddey
i s r f
b u l l e t i n
Challenges & Opportunities Across the Social Sciences
First published June 2017 Copyright Â© 2017 Independent Social Research Foundation
TABLE OF CONTENTS
EDITORIAL 4 SOME THOUGHTS ON TODAY’S FUTURE
POST-TRUTH NUMBERS 12 A BETTER FUTURE FOR WATER: WHAT ROLE FOR THEORY? 16 BASIC INCOME — HAVE AUSTERITY’S CHICKENS COME HOME TO ROOST?
A THEORY OF THE FINANCIALIZED FIRM
EDITORIAL Dr. Rachael Kiddey ISRF Editorial Assistant
hat does the future look like from where we are now? For a brief, post-Second World War period, ‘the future’ looked to be ripe with opportunity, promising a fairer and less divided society, better public services, and a gradual softening of Europe’s cultural, economic and geographic boundaries. Nevertheless, following the U.K.’s EU Referendum and the election of Donald Trump as President of the USA, and while tensions continue to escalate in Syria, Turkey and the Korean peninsula, we find ourselves at what might well be looked back on as a significant crossroads. So what does the future hold now? This edition of the Bulletin has been produced to complement the theme of the workshop, ‘Today’s Future: challenges and opportunities across the social sciences’, although three articles published here perform the dual role of introducing the work of four recently awarded Political Economy Research Fellowships. In the articles that follow, Professor András Bozóki (Professor of Political Science at Central European University), a speaker at this year’s ISRF workshop whose university is currently under threat from the Hungarian government, sketches out how we might start to understand current global social change. In his ardent article, Bozóki argues that we must increase and intensify social dialogue if the future is to be peaceful and progressive. Elsewhere, Dr Liz Chatterjee, postdoctoral researcher on the Limits of the Numerical project part-funded by the ISRF (see also Bulletin, issue XII), eloquently describes the issue of ‘post-truth numbers’ in relation to climate change. Numbers affect us all and could have devastating effects for future generations, so where do they come from? What is social science doing to counter the situation in which we currently find ourselves whereby ‘numbers remain ubiquitous, yet
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whose claims to stand as accurate, value-neutral representations of reality are not so much contested as an after-thought.’ In their individual ways, the articles produced by those awarded ISRF Political Economy Research Fellowships lay bare other key concerns that will affect what kind of future we move towards. Drawing on 20 years’ experience as a consultant and academic researcher, Emanuele Lobina sets out how his project seeks to reorient the theory of economics of the supply of one of the most basic of all human needs – water. In a world in which even water is increasingly at risk from becoming privatised so that only those who can afford it can have access to it, it is apt that Jurgen De Wispelaere’s research focuses on basic income. By slashing spending on public services, austerity affects those in the lowest income brackets the hardest, and while calls for an unconditional basic income were once the preserve of utopians, they are now being taken seriously and trialled in a number of European countries and in Ontario, Canada. Rather than being overly concerned by the threat of separating income from labour, De Wispelaere argues, policy makers are starting to understand that a guaranteed basic income can reduce poverty and provide the reform necessary to sustain a working welfare state. Of course, it would greatly help if large corporations stopped using expert lawyers and accountants to ‘dam the flow of income and wealth into elite hands and away from other stakeholders or society at large’, and instead paid their taxes, like the rest of us! This topic is expertly explained, in lay-terms, by Keir Martin and Adam Leaver in their article introducing their joint ISRF project on the theory of the financialised firm. I only wish I could attend the fifth annual workshop of the ISRF in person but this year, my own immediate future is one fraught with nappies and sleepless nights, as I’m expecting another baby and will be on maternity leave until January 2018. I leave the Bulletin in the capable hands of two guest editors. First, Dr Constantinos Repapis (Lecturer in Economics at Goldsmiths, University of London) will edit the November 2017 issue in which he will reflect
on his ISRF-funded project, ‘Economics: Past, Present and Future. An Interview Project’ 1 . The spring 2018 edition of the Bulletin will be produced by Dr James Dixon (Built Heritage Consultant at the Museum of London Archaeology). As a contemporary archaeologist, Jim will commission five articles on the theme ‘Site’ - sites as social and political places with their own economies and ecologies. I hope that the papers collated in this edition of the Bulletin suitably whet your appetite in anticipation of the forthcoming workshop, at which it is hoped that ideas discussed here (and many more) will be further debated, expanded and reflected upon. I paraphrase Professor Bozóki when I say that, even as our governments attempt to separate us, build walls and reinforce imagined political borders, we – social scientists – must keep talking across disciplinary and geographic boundaries; keep undertaking work that critically evaluates the myriad ways in which we are at once differently human and very much like one another. We owe the future that much.
1. Dr Ivano Cardinale, a colleague of Repapis’, will give a short presentation on ‘Economics: Past, Present and Future. An Interview Project’ at the Amsterdam workshop. Several films will also be available to watch in the Exhibition Space. 6
SOME THOUGHTS ON TODAYâ€™S FUTURE Professor AndrĂĄs BozĂłki Professor of Political Science, Central European University
irst of all I wish, in the 21st century, to live in a time when no university is banned or destroyed by a government anywhere in the world, and where this would particularly be unimaginable within the European Union. A time when no leader or government believed that they were above the rule of law and constitution. Unfortunately, as it seems, we are not progressing but regressing in this field. My workplace, the Central European University in Budapest, is considered by the increasingly authoritarian Hungarian government as an enemy of the state. It is considered as enemy because it is liberal, critical, global, independent, and multicultural. To understand global social change better, we need to sketch out what is happening and recognise that similar outcomes might be caused by (partly) differing reasons. Forms of solidarity also vary: from social classes to new identity groups which might create new social coalitions. Welfare democracies have been characterised by a strong middle class with strong party affiliations. Different forms of modernisation theory have shifted from welfare and class perspectives, based on market economy and liberal democracy, to a neoliberal perspective that includes fluidity, individualism, identity groups, state capture, and the idea of a market society. I As for international relations, we still live in a post-Cold War condition in which the collapse of the bipolar world is followed
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by capitalism unbounded. The breakup of non-democratic federations gave rise to new nation states, first democratic, but later increasingly authoritarian. The expansion of Western international political structures (European Union and NATO particularly) led to great hopes in the European periphery, yet today they still cannot be described as success stories. We need to create a federation that works better for ordinary people (such as Erasmus programmes and freedom of labour) which is balanced by a more equal development of countries that belong to the same supranational political unit. The partial crisis of liberal democracy in several countries is due to the fact that cultural liberalism has been increasingly (mis)understood as neoliberalism. Over the past three decades, liberalism was associated with privatisation, deregulation, austerity, reduction of public expenditure, tax reform, unified exchange rates, financial liberalisation and the like. It lost its cultural appeal among the less educated, but also among the national middle classes. Politics disappeared in the legal, moral, and technical discourses. Political decisions have been presented as ’technical’ ones, which means that they belong to the educated elite only. That provoked an angry reaction and the rise of populism, illiberalism and some forms of authoritarianism. Hybrid regimes present themselves as “democracies” but these are fake, defective, illiberal, delegative, electoral, shallow “democracies”, institutions without meaningful democratic spirit. In the Third World, or Global South, “frozen authoritarian” postcolonial regimes guaranteed the peace of the core countries, funded by them. When the Arab Spring uprisings expelled dictators and their violently secularised regimes, the alternative outcome proved to be just as non-democratic. U.S. democracy assistance, which turned out to be “democracy promotion” first, and “exporting democracy’ in practice, lost credibility after the War on Terror in Iraq. Millions of people are left trying to escape from the crisisridden areas of Africa and the Middle East.
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II As for the way of life, we witness a radical transformation of working conditions and technology. We are living through a change in the labour market from full time, permanent positions to part-time, freelance, flexible (working at home) conditions. The conventional workplace is disappearing, especially for younger generations. The boundary between working hours and free time is blurred. Social networks seem to be more important than social stratification, as long as further individualisation of life is going to continue. People have new types of relationships, a trend that is likely to continue. Shift from belonging to choice is another characteristic of the 21st century across society, in private and public life. III As for ideas and political forces, it seems clear that since the global financial crisis of 2008, the left-liberal progressive project, that aimed to domesticate neoliberalism in the framework of Third Way, proved to be an unsuccessful programme. It did not offer popular solutions to the decline of classic party-systems, and led to the rapid decline of the Old Left and gave rise of several new, left-leaning group identities. On the other hand, reactions to neoliberalism reinvigorated the radical right wing populism and, in some countries, brought a wave of anti-migration and antiEurozone sentiment. The recent rise of ethnicism, nationalism, racism, and new “elitist” populism is partly due to the lack of credible political alternatives. The unexpected survival of neoliberalism, despite the rhetoric to the contrary, reinforced the There Is No Alternative (TINA) discourse familiar from the 1980s and 1990s. The outcomes are passion, anger, emotion, anti-intellectualism: a revolt against “political correctness” and rational discourse.
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People are seeking “leader democracy” (Weber), and the re-politicisation of public life. People wanted politics from below, and popular sovereignty, but what they got instead was the personalisation of politics, radical anti-liberalism, and sovereignty of the leader. Rational discourse continues to lose its appeal as increased numbers of people do not read long texts, are disinterested in political programmes and rationalised political debates. This is fertile ground for ’fake news’, alternative facts, short messages and decontextualised visual images. As it seems, a “soft war” is going on between politicians, parties and countries, in which constitutional procedures matter least. The new hybrid regimes base their legitimacy on negative attitudes, deep-seated mentalities and prejudices of the subject population. This is reinforced by the extreme use of propaganda. IV What is to be done? How can we create a coalition of “common sense” as opposed to fragmented identity groups? Is it the end of identity liberalism, as Mark Lilla suggests? Or, alternatively, should concerned people rather focus on a coalition of progressive identities, as suggested by recent Dutch elections? Naturally, I cannot offer global solutions, I do not have an ambition for that. But solutions should be found through increasing and intensifying social dialogue. Perhaps the whole of Europe will be something like a cultural reservation by the mid-21st century. Perhaps it will reinvigorate itself after these reactionary times. As it seems now, there are different Europes with different visions and interests. This is not just an East-West issue but has a North-South component, problems differ across Europe. In Central Europe, the old German concept of “Mitteleuropa” remains prevalent. Economic development matters but there is no determinism. Path-dependence matters but it cannot be an excuse for lack of attention and effort. Perhaps, our present, our era will later be
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looked upon as a critical juncture for innovation. Mobility of millions of young people from Eastern EU member states to Western ones is a painful “exit” for the East and seems to cause unnecessary turbulence in the West – but it also can be a resource. Increased mobilisation of young people will perhaps be a generational experience. At least, if regimes are not Europeanised, their people will be.
POST-TRUTH NUMBERS Dr. Elizabeth Chatterjee Postdoctoral Scholar, Department of Political Science, University of Chicago; Research Associate, Limits of the Numerical Project
egimes of quantification dominate contemporary life. Metrics, indicators, ratings, targets, and audits appear to permeate every policy and institution—and their expansion comes at a heavy cost, as every academic at the mercy of their h-index score or university ranking knows. Indeed, the rule of numbers appears so ubiquitous that many have argued we live in an “audit culture”. This dominance of quantification was the opening premise of our project on ‘The Limits of the Numerical’. Funded in part by ISRF, it brings together three teams of researchers to examine the phenomenon across three key policy areas: healthcare (the University of Cambridge), higher education (the University of California, Santa Barbara), and climate change (my own colleagues at the University of Chicago). Existing scholarship on the rise of the numerical generally echoes Max Weber’s celebrated thesis that the hallmark of modernity is a process of rationalization. In this interpretation, numerical calculations play a key role in making the world more legible and tractable. They appear to undercut political contestation through their veneer of impartial objectivity and transparency. In this way the numerical is linked with the growth of a bureaucracy of Weberian professionals on the one hand, and the accountancydriven logic of the market on the other, both colonizing increasingly vast swathes of social, economic, and political life. The age of numbers is thus typically equated with the age of technocracy or the age of commodification. Yet recent events have challenged this simple narrative. Numbers have starred in some of the biggest political stories of the last
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year. In the face of repeated efforts at expert “fact-checking”, the notorious “Brexit bus” advertisements promised £350 million extra for the National Health Service for Britons voting to leave the European Union, while Donald J. Trump claimed that three to five million illegal ballots cost him the popular vote in the 2016 United States presidential election. Such headline-grabbing numbers clearly sit uneasily with the rationalization thesis. Nor do they support the notion that contemporary societies are governed by technocrats. After all, as the key Brexit campaigner Michael Gove declared, the political developments of 2016 implied that “people… have had enough of experts”. Such political numbers are not merely populist phenomena; even highly specialized domains of policymaking are far from immune to their allure. Climate change, the focus of our research here in Chicago (and sometimes described as the arena of “a priesthood of experts”), throws up a wealth of examples. Dig into the history of the 2ºC target that has become a theological tenet of international climate negotiations, and you find a story of contingency and political convenience. The target originated in a pair of footnotes not by a climate scientist but an economist; it happened to be a useful heuristic in the relatively crude early days of climate modelling, more or less coinciding with a doubling of CO2 concentrations; and its rise owed much to sponsorship by German and Dutch scientists and, from 1996, the European Union. Even the notion of human interventions being able to stabilize the climate, now treated as inviolable, was not inevitable or scientifically unproblematic. Two decades of negotiations have brought little in the way of emissions reductions, and yet the 2º target has not moved. In fact, in the Paris Agreement of 2015 (commitments under which would still fall far short of the global target) and again as the result of political exigencies, 2ºC was joined by a still more implausibly ambitious target, 1.5ºC, which would require decarbonisation far beyond the reach of feasible contemporary technologies. Such targets might be useful as coordination devices, to be sure, but at the cost of diverting political attention to distant futures.
Nor are political numbers confined to the international climate arena, with its strange admixture of national intransigence and technological utopianism. Our ‘Limits of the Numerical’ colleagues in Cambridge, working on healthcare (see ISRF Bulletin XII), flagged up some similarly “sticky” numbers in Britain’s National Health Service. The value of the quality-adjusted life year (QALY) unit used to inform resource allocation priorities has appeared remarkably stable over time (£30,000), and emerged not out of a detailed empirical investigation into feasible alternatives but as an attempt to codify an already existing but implicit rule of thumb. Its rationale has thus been informed at least as much by the exigencies of bureaucratic management as by attempts to measure and make commensurable different medical conditions. Such observations prompt a revised central question: what if numbers, rather than being the exemplary tools for Weber’s disenchantment of modernity, have their own potential for enchantment? Charged with the mythic power of apparent objectivity, their deployment in political discourse often has an aspect of ritual - or even magic. Their use in politics might be less rationalizing than rhetorical, a question of style as well as substance. From this perspective it may not be accidental that many policy targets are missed or that policies focus on suspiciously round numbers (think too of the European Union’s ‘20-20-20’ energy targets), but part of a systematic strategic logic. Beneath their veneer of precision lurks a surprising vagueness: as in the case of the 2ºC target, their very concision risks obscuring agency, shifting responsibility to the future, and allowing the dissipation or renegotiation of blame when they are all too frequently missed. Reframing the politics of the numerical in this way opens up new areas of research. How new are rhetorical numbers? While they might be especially prominent in the “post-truth era”, as the age of Brexit and Trump has been labelled, other policymakers have also frequently taken advantage of them. The “targetworld” of Tony Blair’s New Labour Britain saw individual hospitals attempting to meet as many as 100 separate targets, for example, a strategy
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often criticized as motivated less by efficiency than an attempt at “spin” by an appearance-driven regime—and likened to the rather different setting of the Soviet Union with its own proliferating targets. What kinds of administrations are most likely to favour their deployment, then, and in what sectors? The politics of such “magic”, “imaginary”, or “irrational” numbers also appear to come with significant costs. A significant body of empirical work has documented the prevalence of “gaming” as individual educators, medics, and others attempt to inflate their scores or evade responsibility for missed targets. In the longer term, the costs might be even higher—perhaps even helping to explain the advent of the post-truth era itself. Such numbers’ tenuous relationship with reality or political feasibility may implicate them in a broader backlash against technocratic elites, and a new normal of rising distrust in government on both sides of the Atlantic. The ISRF Workshop with which this Bulletin’s publication coincides explores the contribution of the humanities and social sciences as we grapple with the challenges of the twenty-first century. Facing the future necessitates complex processes of policy planning, often relying on attempts to quantify the challenges of everything from climate change to the health implications of ageing populations. If the numbers produced by such planning processes are not the products of rational calculation but other strategic motives, this has serious implications for how we evaluate different imagined futures for our societies. As late as a year ago, the epistemic, social, and ethical violence entailed by regimes of rational quantification appeared one of the gravest threats on our academic horizons. Now we must reconfigure our theoretical tools to respond to a paradoxical new challenge that most of us failed to predict, and the consequences of which are still unclear: a political arena in which numbers remain ubiquitous, yet whose claims to stand as accurate, value-neutral representations of reality are not so much contested as an afterthought.
A BETTER FUTURE FOR WATER: WHAT ROLE FOR THEORY? Dr. Emanuele Lobina ISRF Political Economy Research Fellow; Principal Lecturer, PSIRU, University of Greenwich
t is difficult to overstate the importance of urban water services for sustainable development across developed and developing countries. Water supply and sanitation satisfy basic human needs and prevent public health hazards, are central to reducing poverty and promoting economic development, and contribute to social cohesion and a cleaner environment. As more than half the worldâ€™s population currently lives in cities and this percentage is projected to grow, the importance of urban water services is unlikely to diminish in the foreseeable future. Against this background, water sector reform appears to be crucial for making progress towards social and environmental justice. Because urban water services are delivered under a natural monopoly, choosing the type of service provider â€“ for example, choosing between diverse organisational forms such as public and private enterprise and their respective ethos, modus operandi, and institutional setting â€“ will not only have implications on organisational efficiency but also on the prospects for mitigating the adverse consequences of monopolistic behaviour. The policy relevance of organisational reform in the urban water sector has fuelled my interest in this area for the best part of the last 20 years. Having engaged with empirical evidence as a consultant and academic researcher, I have grown increasingly dissatisfied with the conventional theory of organisational economics and its failure to provide accurate predictions and socially acceptable
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prescriptions. This dissatisfaction constitutes the motivation behind my ISRF-funded project on “Reorienting Industrial Organisation Theory: From Necessary to Possible Outcomes”. The project aims to reorient the theory of organizational reform on a critical realist paradigm so as to enhance our understanding of the complexity of organisational reform and inform more progressive policies in the sector. In the following sections, I first identify the rationale for my work by discussing the limitations of conventional theory and mainstream policy. I then sketch how I intend to innovate conceptually to address these limitations, before reflecting on the role of theoretical advances in shaping the policy reforms of the future. The problem with conventional theory and mainstream policy The explanatory limitations of current research reference points – market failure, government failure, and Oliver Williamson’s comparative institutional analysis – all originate from deductive theorising. Urban water services offer a case in point. While government failure and market failure theories respectively predict the necessity of private and public efficiency, both fail to predict the public and private inefficiencies, which are empirically pervasive. For example, market failure theory has little to say on the occurrence of public inefficiency, whereas government failure theory cannot explain the increasing termination of private contracts due to unsatisfactory performance. 1 Rational choice theories of government failure like public choice and property rights theory became dominant by accusing market failure proponents of deductivism. However, the same accusation can be levelled at government failure. In fact, due to deductive reasoning and the assumptions of instrumental rationality and 1. Lobina, E. 2015. Introduction: Calling for progressive water policies, pp. 6-29 in Kishimoto, S., Lobina, E. and Petitjean, O. (eds), Our public water future: The global experience with remunicipalisation, Transnational Institute, Public Services International Research Unit, Multinationals Observatory, Municipal Services Project and European Federation of Public Service Unions, Amsterdam, London, Paris, Cape Town and Brussels, http://www. psiru.org/sites/default/files/2015-04-W-OurPublicWaterFutureFINAL.pdf, last accessed 14 September 2016 17
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linear causation, rational choice accounts of relative efficiency assume that actors’ motivations and capabilities persist as if the duality of agency and institutions was ineffectual. This aprioristic stance, I argue, is better suited to portraying ideal states of affairs than comprehending organisational performance in the real world. Importantly, Williamson’s comparative institutional analysis lays the foundations for recognising organisational failures of all kinds, by acknowledging the duality of agency and institutions and the importance of path-dependency. However, his analysis remains hamstrung by the limits of deductive reasoning and the retention of a rational choice agency model. For example, it has been observed that Williamson’s a priori assessment of the public sector as the organisational mode of last resort, to choose “when all else fails”, effectively reiterates the predictions of government failure and does not reflect the empirical reality of the water sector.2 Although Williamson offers a healthy dose of realism by focusing on contract instead of choice, conventional theory remains unable to account for the full variety and dynamics of possible organisational efficiency outcomes. Also, this failure of prediction can be attributed to deductive reasoning and the fictitious insulation of explanatory claims from the real-world duality of agency and institutions. The knowledge gap on the comparative advantage of public and private organisational forms in urban water services is problematic. While conventional theory offers little helpful guidance to decision-makers on what organisational reform to adopt under different circumstances, the pervasiveness of public and private inefficiencies is cause for social concern. Also, policies of privatisation inspired by government failure theory have prompted widespread social resistance, 3 stressing the urgency of arriving 2. Dagdeviren, H. and Robertson, S. A., 2016. A critical assessment of transaction cost theory and governance of public services with special reference to water and sanitation, Cambridge Journal of Economics, vol. 40, 1707-24 3. Hall, D., Lobina, E. and de la Motte, R. 2005. Public resistance to privatisation in water and energy, Development in Practice, vol. 15, nos 3-4, 28618
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at better understandings of relative efficiency. Hence, my ISRFfunded project aims to develop a theory of organisational failure that departs from extant theory both methodologically and substantively. Reorienting the public vs. private debate in the urban water sector The project develops a theory of organisational failure that illuminates the multiplicity of the possible organisational efficiency outcomes, explaining how public and private water utilities become more or less efficient under varying circumstances, and reveals the social and economic factors leading to these outcomes. It does so by revisiting Williamsonâ€™s comparative institutional analysis from a critical realist vantage point, using inductive reasoning as a method of theorising, adopting multiple rationality as agency model and the duality of agency and institutions as the key to explanation. This critical realist explanatory strategy promises to offer more accurate and reliable guidance on reforming urban water services than incumbent theories do. As a philosophy of science, critical realism supports nonreductionist accounts of relative efficiency, intended as the organisational capability to further the equal redistribution of social wealth. The assumption of multiple rationality incorporates instrumental and bounded rationality, on the one hand and social, political, moral, and professional rationality, on the other hand. Concerns with the duality of agency and institutions facilitate the understanding of path-dependent, circular and cumulative causation, because institutions enable and constrain agency and are shaped by agency in return. This interaction produces a perpetual cycle that, due to contingency and irreversibility, results in nonlinear trajectories of events. Finally, inductive reasoning is a method of theorising that informs historical modelling, thus representing an antidote to reductionism. 301; Lobina. E. and Corporate Accountability International. 2014. Troubled Waters: Misleading industry PR and the case for public water, Corporate Accountability International, Boston, http://psiru/sites/default/files/201411-W-TroubledWaters.pdf, last accessed 14 September 2016 19
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Going beyond Williamson’s mere acknowledgment of the duality of agency and institutions and the importance of pathdependency, 4 the project operationalises path-dependent causation to identify the possible trajectories of organisational performance and the multiple organisational efficiency outcomes that these trajectories entail. This operationalisation is achieved by refining a new “remediable institutional alignment” framework, 5 which supports the investigation of the duality of agency and institutions by exploring the interplay of actors’ motivation, power, organisational arrangements and institutional environments made of rules, norms and customs. Because path-dependency is a historical and dynamic process, the perpetual interaction of agency and institutions determines a variety of organisational efficiency outcomes subject to lock-in, understood as a temporary rather than permanent condition. The “remediable institutional alignment” framework is used to systematically analyse the evidence contained in 30 qualitative case studies produced over 15 years of research. These investigate the relative efficiency of public and private water utilities in developed and developing countries, looking at variations in efficiency with and without changes in ownership. Examples include the efficiency outcomes associated with changes from public to private to public ownership in Grenoble, France, and improved performance under public ownership in Phnom Penh, Cambodia. Each case illustrates how networks of events lead to the more or less temporary lock-in of organisational efficiency, categorised as strong and weak lock-in of public efficiency/inefficiency and private efficiency/inefficiency. The causal feedback between actors’ motivation, power, and ability to respond to institutional and historical constraints and 4. Williamson, O. E. 1993. Transaction Cost Economics and Organization Theory, Industrial and Corporate Change, vol. 2, no. 2, 107-56 5. Lobina, E. 2013. Remediable institutional alignment and water service reform: Beyond rational choice, International Journal of Water Governance, vol. 1, nos 1-2, 109-32; Lobina, E. 2015. A comparative institutional analysis of public and private operations in the urban water sector, thesis submitted in partial fulfilment of the requirements of the University of Greenwich for the degree of Doctor of Philosophy by Published Work, University of Greenwich, August 2015 20
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opportunities, is catalogued. Generalised observations are then compared across cases to formulate hypotheses on the causality of variations in efficiency. Throughout this process, inputs from industrial organisation emphasise the importance of asset specificity in shaping principal-agent relations. Inputs from economic sociology reveal organisational efficiency as a multilevel social mechanism whereby coalitions of actors strategically engage in relationships of conflict, collaboration or transaction, and agency is embedded in institutions. Inputs from political and policy sciences illuminate the explanatory power of path-dependency by showing how history interacts with a stratified social reality. These complementary perspectives facilitate engaging with the data in a way that supports the emergence of socialised and historical accounts of multiple organisational efficiency outcomes. Can better theory herald a better future for water? The theoretical strategy sketched above promises to address the explanatory limitations of conventional theory by focusing on the possibility instead of the necessity of organisational efficiency. It remains to be seen whether better understandings of real-world organisational efficiency will translate into more progressive policies that further enhance sustainable water development. This uncertainty is due to the inherent unpredictability of the policy process and the interdependence of power, interests and the diffusion of ideas in a relational context. Unsettling as this uncertainty may be, it should not weaken the resolve of those who consider theoretical advancement to be necessary if we are to foster social and environmental justice. As historic peers of future generations we have a moral duty to point towards the possibilities of a better future for water service reform.
BASIC INCOME — HAVE AUSTERITY’S CHICKENS COME HOME TO ROOST? Dr. Jurgen De Wispelaere ISRF Political Economy Research Fellow Policy Fellow, Institute for Policy Research, University of Bath
n the space of a mere five years, the idea of granting each citizen — or long-term resident in some proposals — an individual, universal and above all unconditional basic income has taken off like a rocket in established policy circles. The phrase “basic income’s time has come” is no longer the hallmark of the quasidelusional battle cry of the seasoned utopian but can be heard — albeit perhaps with some trepidation — in the corridors of power across Europe and beyond.1 Of course, talk is often cheap, and political talk is no exception. Expressions of support from stakeholders and decision-makers in previous years mostly took the form of cheap support: political statements not backed by commitments to expending political resources (time, money, political capital) and therefore of little value to furthering basic income policy.2 However, it would appear that “the times are a changin’”, as the famous Dylan song would have it. Surely, the recent policy interest in piloting basic income experiments across the world represents a serious political commitment to exploring the potential of basic income as a key component of the next stage of welfare reform? 1. Jurgen De Wispelaere (2016) “Basic Income in Our Time: Improving Political Prospects Through Policy Learning?” Journal of Social Policy 45(4): 617-634. 2. Jurgen De Wispelaere (2016) “The Struggle for Strategy: On the Politics of the Basic Income Proposal.” Politics, 36(2): 131-141.
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Finland has already embarked on the basic income train by paying out an unconditional basic income of €560 to 2000 unemployed test subjects currently receiving basic unemployment benefits for the next two years.3 Several municipalities in the Netherlands (Utrecht, Tilburg, Wageningen and Groningen, amongst others) and the Canadian province of Ontario are to follow suit in a few months, while local, regional and national governments across Europe are exploring similar options (e.g., Fife and Glasgow in Scotland; Barcelona in Spain). What to make of this recent interest in basic income? What explains the surge in interest in universal and unconditional cash transfers across the ideological spectrum, including a willingness of some government actors to proceed with pilot schemes? Explanatory variables are no doubt manifold. One fashionable answer is to refer to the “rise of the robots”, where automation is said to irrevocably change labour markets including rendering vast numbers of jobs obsolete.4 The threat of automation-driven technological unemployment at a scale we haven’t witnessed before is driving much of the tech-industry interest in basic income. However, the automation debate is in its infancy and the predictions of the labour market equivalent to a mass extinction event remain controversial.5 In addition, as an explanation for the policy interest in basic income, time works against the automation argument. The rise of 3. Olli Kangas, Miska Simanainen, and Pertti Honkanen (2017) “Basic Income in the Finnish Context.” Intereconomics 52(2): 87–91; Laura Kalliomaa-Puha, Anna-Kaisa Tuovinen, and Olli E Kangas (2016) “The Basic Income Experiment in Finland.” Journal of Social Security Law 23(2): 75–88. 4. Martin Ford (2016) Rise of the Robots: Technology and the Threat of a Jobless Future. New York: Basic Books; Erik Brynjolfsson and Andrew McAfee (2016) The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies. W.W Norton; Jerry Kaplan (2015) Humans Need Not Apply: A Guide to Wealth and Work in the Age of Artificial. Yale University Press. 5. Labour economist David Autor, for instance, insists firms and employees will adapt to the anticipated automation by shifting tasks within jobs; this argument offers an important antidote to the most pessimistic forecasts about layoffs. David H. Autor (2015) “Why Are There Still So Many Jobs? the History and Future of Workplace Automation.” The Journal of Economic Perspectives 29(3): 3–30. 23
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the robots is predicted to take another couple of decades to fully manifest, and politicians are not exactly famous for considering public policy in the long-term! It is hard to avoid the observation that the recent “elevation” of basic income coincides with the occurrence of the financial crisis in 2007-2008, especially the European sovereign debt crisis of 2009, and the austerity response that followed suit. In a nutshell, austerity is a mechanism of kick-starting growth and recovery by means of drastically cutting public spending. Mark Blyth calls it “the austerity delusion”, a dangerous idea because it clearly doesn’t work — as evidenced by significantly increased debt-to-GDP ratios across European economies — while the idea itself remains stubbornly immune to rational refutation.6 The idea is not just dangerous because it stubbornly fails, but in large part because the burden of failure is unequally distributed across the population and its social effects disproportionally felt by those at the bottom of the income distribution. Austerity increases risk of unemployment, poverty, social exclusion — even morbidity and mortality rates7 — for a growing number of citizens. The resulting division between insiders and outsiders is affecting both people’s wellbeing and the capability of government to institute policies aimed at protecting the most vulnerable in society.8 At this point it is worth noting that austerity is nothing new when viewed from the perspective of welfare state development. Paul Pierson, almost two decades ago, referred to the new politics of the welfare state under conditions of “permanent austerity”, arguing that welfare state retrenchment employed a different logic from the expanding welfare state of the post-war decades.9 In 6. Mark Blyth (2013) “The Austerity Delusion: Why a Bad Idea Won Over the West.” Foreign Affairs, May/June 2013. 7. Aaron Reeves, Martin McKee, and David Stuckler (2014) “Economic Suicides in the Great Recession in Europe and North America.” The British Journal of Psychiatry 205(3): 246–47. 8. Johannes Lindvall and David Rueda (2013) “The Insider–Outsider Dilemma.” British Journal of Political Science 44(02): 460–75. 9. Paul Pierson (2001) “Coping with Permanent Austerity: Welfare State Restructuring in Affluent Democracies.” In: P. Pierson (Ed.), The New Politics 24
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the Pierson perspective, austerity and welfare state retrenchment is mostly about changing political dynamics and finding ways to avoid (or shift) blame for unpopular reforms. Post-crisis austerity politics is partly a continuation of this welfare reform agenda but at the same time constitutes a break with governments having been granted a “license to cut” much deeper across a wider range of social programmes. Recent comparative research shows that while austerity had relatively little effect on social assistance budgets the impact on minimum income schemes is nevertheless serious and the tightening of minimum income schemes is at odds with the goal of “active inclusion” as mandated, for instance, by the 2008 European Commission Recommendation on active inclusion of people excluded from the labour market.10 The picture that is emerging after several years of austerity politics is one of European societies becoming increasingly socially, economically and politically divided — enter populism! — and governments apparently unable to turn the tide. The overall result of these recent policy developments has been increased pressure on the most vulnerable in society — the long-term unemployed, young labour market entrants, those operating at the margins of the labour market (the “precariat”), but increasingly as well, many who are poor while in work. Policy-makers are becoming aware of the limits of increased conditionality and restrictions imposed on minimum income schemes. In this context, the interest in basic income could be seen as an attempt to square the austerity circle: the need for a policy that combines robust minimum income protection with the modernisation of welfare programme complexity, while retaining a strong focus on labour market activation and human capital-building as per the “social investment” agenda.11 Instead of focusing on the decommodifiying effect of basic income — separating income from work — policy-makers of the Welfare State. Oxford: Oxford University Press. 10. Sarah Marchal, Ive Marx, and Natascha van Mechelen (2016) “Minimum Income Protection in the Austerity Tide.” IZA Journal of European Labor Studies: 1–20. 11. Anton Hemerijck (2015) “The Quiet Paradigm Revolution of Social Investment.” Social Politics 22(2): 242–56. 25
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are emphasising its ability to combat poverty, unemployment and bureaucracy traps. In this perspective, basic income is not viewed as a utopian alternative to the welfare state, but to the contrary, a key instrument in its long-term survival by allowing the minimum income floor to be mainstreamed and modernized. Of course, squaring circles is hard work and in the first instance we need to know that basic income can deliver; hence, the focus on piloting and experimenting with basic income schemes in Finland, Netherlands, Canada, and so on as part of a broader approach to evidence-based policy-making. It is early days so perhaps making an assessment as to whether the many experiments will generate results that support the basic income policy would be premature. It is moreover impossible to predict whether positive piloting experiences will lead to robust policy implementation. At this point we need serious political science research examining the conditions under which basic income can build up a robust constituency, as well as longlasting coalitions amongst decision-makers across the ideological spectrum. 12 However, even if — paradoxically — austerity has caused policy-makers to conceive of basic income as a valid instrument in their “activation toolbox”, the resulting program may still fall short of the more progressive aims, for which most basic income advocates push. This is serious cause for concern among those who insist that basic income is primarily an instrument of freedom and equality. 13 The answer to this worry is twofold, in my view. First, we should appreciate what even a modest basic income may accomplish given the dire prospects of continuing along the road we currently travel. Second, once anchored in our policy environment, political forces can focus on upgrading the modest (almost residual) basic income model to something more progressive, emancipatory and liberating. If successful — and, 12. Joe Chrisp (2017) “Basic Income: Beyond Left and Right?” Juncture, 23: 266–270; Jurgen De Wispelaere (2016) “The Struggle for Strategy: On the Politics of the Basic Income Proposal.” Politics, 36(2): 131-141. 13. Philippe Van Parijs and Yannick Vanderborght (2017) Basic Income: A Radical Proposal for a Free Society and a Sane Economy. Harvard University Press. 26
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granted, for now it remains a big “if” — such a political strategy would certainly make sure that austerity’s chickens finally come home to roost!
A THEORY OF THE FINANCIALIZED FIRM Firm Boundaries and Contracting Relations Professor Adam Leaver & Dr Keir Martin ISRF Political Economy Research Fellows Adam Leaver is Professor in Financialization and Business Analysis at Alliance Manchester Business School | Keir Martin is Associate Professor of Social Anthropology at the University of Oslo
number of recent corporate scandals highlight the widespread use of tiered holding companies and complex financial arrangements at many national and international firms. Amazon, Starbucks, Google, Apple and others show that many large companies use such structures to minimise reported net income in certain jurisdictions to evict the taxation claims of the local state. Similarly the recent example of British Home Stores (BHS) shows that a firm need not be particularly profitable for owners to take significant amounts of money out of it. Intercompany loans, transfer payments, intellectual property charges, and special dividends are now common features of mainstream corporate practice, with firms increasingly treated instrumentally as conduits between debt markets and owner returns; as instruments of extraction rather than sites of profit generation. These examples have each become isolated public interest issues, but to date there has been no attempt to locate such practices historically, nor connect them theoretically. There is now an
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impressive body of work on the tax avoidance purposes of such structures, and there is emerging work on financial extraction. But there is little theoretical development as to what these practices at the aggregate tell us about the contemporary social and economic purpose of the firm. Traditionally theories of the firm begin with the following problematic: ‘given markets are so efficient, why do firms exist?’. The answer they give is normally built upon the a priori of efficient markets, which acknowledges certain weaknesses that may be solved via hierarchical co-ordination. Firms may resolve transaction-based1 , co-ordination-based2 or resource-based3 problems. From this perspective firms may enhance efficiency in situations where market co-ordination alone is sub-optimal. Firms therefore improve profit maximisation and through that improvement generate better returns to investors. But there are a number of troubling theoretical and empirical problems with this view. Existing theories of the firm tend to be derived axiomatically from economic theory rather than grounded historically and empirically. They rely on abstractions and thought experiments and rarely engage with the legal argumentation and documentation made for the formation of the limited liability firm in the nineteenth century, and its subsequent iterations in law. It is also perhaps reductive to think that the firm has only ever been the product of a single determining logic; or that it resolves a singular market based problem. The size and shape of the firm has changed considerably over the past century, reflecting shifting legal, institutional, economic and political configurations. The purpose of the firm is socially contingent or ‘embedded’ and so does different things and serves different purposes at different 1. Coase, R. H. (1937) ‘The Nature of the Firm.’ Economica 4, no. 16 (November 1937): 386–405. 2. Jensen, M.C., and Meckling, W.H.. (1976) ‘Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure.’ Journal of Financial Economics 3, no. 4 (October 1, 1976) 3. Wernerfelt B (1984). ‘The Resource-Based View of the Firm’. Strategic Management Journal. 5 (2): 171–180 29
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points in time. If the purpose of the firm is contextually contingent, then we need to consider how financialization has changed the purpose of the firm in many capitalist societies, and how those firm-level innovations in turn affect outcomes at the aggregate. In other words, the corporation is conditioned by, but also conditions, broader economic shifts. It is clear that at BHS, for example, the act of paying out £580m to related parties via dividends, interest and rent4, was perceived by auditors and other corporate governance guardians to be within the normal bounds of what owners might legitimately choose to do with their firm. But those actions affected other stakeholders who saw their pension fund fall further into deficit. The BHS example also shows that firms need not necessarily be efficiency-creating if they create opportunities for extraction for elite advantage to the detriment of other stakeholders. Furthermore, the use of securitisation, debt and special dividends elsewhere shows that firms have become sites of inter-temporal distributional tensions as income is drawn from the future and extracted in the present, creating new fragilities and uncertainties going forward. Under such circumstances we might legitimately ask whether the interests of elites and firms (and the relations they embody) are always aligned. Another way of approaching this question is to think of the corporation as a changing network of relations and obligations which create dams and flows to augment certain claims. The firm, in this anthropological sense, is a grouping like any other social grouping, like a caste or a clan – a social entity formed as an amalgamation of relational attachments in which particular relations and obligations are highlighted or obscured in order to bring the entity into being. And the kinds of relations and interests that go into making the corporation are always multiple, varied and subject to different interpretations, and contests over those interpretations. They are also contextually contingent, so that the firm may serve different interests and do different things at different 4. Sikka, P. (2017) ‘Philip Green has shown the rich can game the system. We need to stop another BHS’, The Guardian 1st March 2017 30
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points in time. Viewed in this way, the ownership, purpose and perceived boundaries of the corporation have never truly been settled. The firm is not unitary and unshifting but contested, where the outcome of that contest influences its particular character at a given moment. The ideal that the corporation is the property and vehicle of its shareholders might have some self-fulfilling effect; but it never totally â€˜performsâ€™ that vision due to the multiplicity of forces that battle over the purpose of the corporation, the outcome of which shapes the limits to the flow of obligations that the corporation embodies. A number of important points follow from this conceptualisation. First that the nature of the entity (in this case the corporation) is shaped by the transactions it enters into as much as the opposite. Secondly, this creation and dissolution of corporate bodies and the extension and limitation of chains of obligation has real redistributive effects. The limited liability corporation was originally intended to facilitate investment that would otherwise be too risky, thus creating benefits for the wider society. Arguably we now see something different after financialization: law and accounting expertise is being put to the task of creating complex relations to dam the flow of income and wealth into elite hands and away from other stakeholders or society at large. The limited liability firm as originally conceived was thought to encourage entrepreneurial risk taking by owners; it now works to insulate risk-averse elites from losses. Thirdly, this process is now, to a large extent, embedded in legal ritual via precedent. But this is not natural or given. Even that legal discourse, as a linguistic phenomenon, evokes different moral evaluations of the purpose of a company which helps to shape the moral climate within which different conceptions of the corporation become socially acceptable (or not). Overall, this view of the firm emphasises not simple, mechanical changes but messiness, contingency and tensions, particularly
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after financialization. Our previous work5 for example discusses a relatively straightforward private equity takeover where the increasing granularity/refinement of obligations involved in the construction of different tiers of subsidiaries in complex webs of ownership led to an increasing difficulty in identifying liability at the aggregate: it became increasingly difficult to identify which corporate entity held the obligation and which jurisdiction was sovereign. Developing this observation, we would see such tensions between the levels as a consequence of a central dialectical process: that the boundaries of the firm require fixity to demarcate debt obligations; and it is through that process of fixing, that fluidity – the riskless and costless movement of income and wealth around a corporate structure – can be achieved. But this will always bring with it tension and conflict. And after financialization, in this post-crisis phase, these tensions have become more acute. It has never been easier to define obligations in law, but it has never been so hard to assign responsibilities for meeting those obligations via recourse to it. When Philip Green finally paid £363m back into the BHS pension fund, this was not enforced through any legal judgement, but rather came through a public injunction as to his moral conduct, the threat of withdrawal of his peerage and the uncertainties that might accompany any enforcement action brought by the pensions’ regulator.6 Here a different conception of the firm, and an (ex)owner’s obligation to it, was mobilised as the pension fund was on the verge of being taken over by the UK pension protection fund. The firm and its boundaries became a site of contest – a morality play – whereupon someone who had previously extracted a great deal of money from BHS but then severed ties with the firm (Green sold BHS to Dominic Chappell in 2015) was called upon to repay significant amounts of money back into the pension 5. Leaver, A, and Martin, K. (2016) ‘Creating and Dissolving Social Groups from New Guinea to New York: On the Overheating of Bounded Corporate Entities in Contemporary Global Capitalism.’ History and Anthropology 27, no. 5 (October 19, 2016): 585–601. 6. Sikka, P. (2017) ‘Philip Green has shown the rich can game the system. We need to stop another BHS’, The Guardian 1st March 2017 32
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fund. In this instance the understanding of the purpose of the firm changed, the boundaries of obligation were recast and new dams were created to channel flows back into the firm. It is difficult to gauge the significance of a single event of this kind. It is certainly the case, as the theme of ‘Today’s Future’ highlights, that there is a loosening of the certainties that characterised the past twenty to thirty year period: the inexorability of globalisation, the efficiency of free market capitalism and the reification of shareholder value creation as the primary objective of the firm. But is not yet clear whether that loosening, particularly its anti-globalist expression, will alter perceptions around the purpose of the firm, the obligations of owners, the dignity of work, and the national responsibilities of global capital; or whether the firm will become a less progressive space where questions of who might legitimately stake a claim on the firms’ activities becomes embedded in the identities of race, religion and nationality.
The Conversation Interdisciplinary Editor From April 2017, the ISRF began a pilot partnership with The Conversation. Josephine Lethbridge is The Conversation’s Interdisciplinary Editor, funded by the ISRF. Josephine’s role includes working with scholars at The Conversation’s member universities, as well as past and present Fellows of the ISRF, to bring interdisciplinary social research to millions of readers worldwide. Josephine will encourage researchers to write short newsworthy articles, working with them to produce pieces with journalistic flair but no loss of academic rigour. The ISRF hopes that, by promoting inter-disciplinarity through this partnership with The Conversation, the usefulness of interdisciplinary approaches will reach broader audiences, and that knowledge of such work will spread beyond the confines of academia. Any ISRF Fellows or partners with an affiliation to a European university who would like to know more about writing for The Conversation should contact Josephine directly at josephine. email@example.com
The 2018 ISRF Essay Competition Economic Thought The Independent Social Research Foundation (ISRF) and the Cambridge Journal of Economics (CJE) intend to award a prize of €7,000 for the best essay on the topic ‘What is the place of Digital Information Technology in the Economy?’ This is a topic, not a title. Accordingly, authors are free to choose an essay title within this field. The impact of digital information technologies throughout society, and in particular the economy, is one of the most critical issues of our time. They are rapidly transforming practices of capitalist production and provision of services everywhere. But the impact is uneven and uncertain. Jobs are being lost while profits for many are increasing. And while technology advances rapidly, with anticipated exponential changes in areas like artificial intelligence and robotics especially, existing organisations are often able to adjust only slowly, whilst the acquisition of relevant skills can take time. What are the dominant trends? What really is going on? Some say that ongoing developments herald a workless society. Others maintain that they undermine markets and herald the end of capitalism. Are these mere speculations? What can we discern from informed investigation and analysis? Essays are welcome that address these or a related theme. The winning essay, and any close runners-up, will be accepted for publication in the Journal; authors may be asked to make some corrections before publication. Other applicants may receive encouragement to revise and then re-submit their essays to the CJE.
Submission Deadline: 28th February 2018 More Information: http://www.isrf.org/2018EssayPrize
This issue features: Andrรกs Bozรณki Elizabeth Chatterjee Jurgen De Wispelaere Adam Leaver Emanuele Lobina Keir Martin
Published on May 16, 2017
What does the future look like from where we are now? For a brief, post-Second World War period, ‘the future’ looked to be ripe with opportu...