Difference between revisions of "Part 2 - Chapter 5"

Latest revision as of 06:38, 21 May 2020

The economy of the free

The authors take an idealist philosophical position - that we imagine realities, then seek to create them. They invite us to join in the process of imagining and growing a new reality based on 'solid data' from many companies that have constructed the building blocks.

[Editor's Note: some of the examples listed are not companies, and might object to being called one. The Mondragon network comprises hundreds of co-operatives, bound together in a sophisticated eco-system that includes welfare, education, insurance and research secondary co-operatives that support over 100 primary worker co-operatives and two multi-stakeholder co-operatives (in banking and retail). John Lewis is formally a company but regards itself as a partnership. The staff are referred to as 'partners' in the constitution and the governing bodies include 'Partner Voice' (in each store) and a 'Partnership Council' (elected from all stores).]

The authors set out the desire to build 'an economy of the free' (free from the fear of being bought and sold as property). The authors ask how much more Paul Polman (Unilever) might have done if a prototype eco-system economy of the free existed. [I would argue there are prototypes in Mondragon (Spain) and Emilia-Romagna (Italy)].

Overcoming obstacles

The authors set out how to change obstacles into supportive allies in the process of change.

1) Create a path to change that enables those in power to see something better than they currently experience

2) Create meaning-making stories from the experiences of many individuals over the course of a generation

3) Find people both willing, and powerful enough, to embed meaning-making stories in new institutions.

4) Re-create the money system to recognise currencies for all (six) capitals

5) Make governments a direct stakeholder in the Economy of the Free, to create a path for public sector reform

6) Help company owners jettison the 'illusion of control' to overcome 'loss aversion' (avoiding small loses, even if big gains are possible).

7) Build a new system that the old system can transfer resources into (do not try to tackle the inertia in the old system)

8) Value your imagination

9) Hone your capacity to deal with uncertainty

Using Ohm's law as a metaphor, the challenge is build changed relations faster than resistance can be organised. In this scenario, we can preserve wealth already created. If resistance is strong, capitals will be destroyed in the transition process.

Your economy, your job to change it

We can change ourselves to change the economy. The first step is changing the stories that drive our thoughts and behaviours. Start with accepting multiple perspectives as the new normal.

The authors nod to Darwin (incremental evolution) more than Marx (punctuated revolution) but recognise that context can bring about rapid changes in times of crisis.

Getting involved in the economy of the free (by participating in the book's development for example) is a step toward experiencing a new reality, and one way to control fear and challenge your own biases.

Disruptive Innovation

Creating a regenerative economy is framed as disruptive innovation (with a nod to Clayton Christensen's 'The Innovator's DNA'.

Own and rewrite stories that shape current reality. The authors highlight changes:

1) End 'ownership' of companies 2) Reframe capitalist to include all six capitals 3) Change markets to flow capital from places of accumulation to places of need 4) Adapt to the challenge of sustainable development 5) Adapt to AI (with hope, not fear)

Given AI requires the creation of 'common pool resources' (the common knowledge of a great many), it has potential for the economy of the free.

Nested living ecosystems

Ecosystem systems have boundaries that shift and move with context. People may be deeply embedded or near the boundary (bridging) and positions are ever changing. Thought form P5 (Chapter 9) helps with understanding the construction of ecosystems.

The Economy of the Free is (will be) one that every type of capital is understood to exercise power, and that all stakeholders are accepted as empowered, within each eco-system layer. (Power is no longer limited to money and political control).

The diversification of 'power to' leads to maximum adaptive capacity and regenerative capacity, particularly where the bonding processes in local, regional and international ecosystems is strong.

Using the analogy of the beehive, the authors argue that the beehive is a living entity, with individual bees as self-governing members (within defined roles).

[Editor's Note: on p. 122, the issue of companies dying is discussed, and the claim is made that 'all of the capitals and resources in it are immediately put to use elsewhere in the ecosystem'. This needs more nuanced thinking - some capitals (human, intellectual, manufactured, financial) could be used elsewhere, but this is more problematic in the case of natural and social capital. Ending a company always depletes social capital (even if the social capital has been deployed destructively previously). Functioning networks, and levels of trust, will largely cease to exist even if small pockets survive. The reuse of natural and manufactured capital requires the application of human, intellectual and (new) social capital. If these have been disbanded/dispersed, neither natural nor manufactured capital may be re-deployed quickly or easily. Abandoned buildings (manufactured), machinery (manufactured) and the land/resources they stand on (natural) may become derelict if no-one chooses to reuse them. It is not a given they will go elsewhere in the ecosystem].

The authors lean towards 'creative destruction' (i.e. Schumpeter's views on entrepreneurship and innovation).

[Editor's Note: I think this ignores the challenge by Morrison's study of the Mondragon Co-operatives (in 'We Build the Road as We Travel') in which he argues against creative destruction based on evidence of organised regeneration. Considerable resources are deployed to ensure rebirth/renaissance of struggling co-operatives, and eco-system structures support this process.]

The biological metaphor is continued, discussing the exchange of DNA within eco-systems through offspring, and exchanges up and down the nested eco-systems.

The argument moves to the eradication of traditional externalities and the creation of new externalities - trust is now established not through contracts but trust in systems, processes and social norms.

Regenerative capitalism and a regenerative global economy

The authors accept capitalism, but 'not as we know it'. Regenerative capitalism changes its understanding of capitals, has a currency for each capital, growth the circulation (flow) of each currency, grants voting power to each contributor of each type of capital, distributes rewards to each contributor of each type of capital, prioritises eco-system integrity over individual entities. (p. 124-125).

They present the above as an anti-fragile circular economy (blue economy, economy for the common good, triple bottom line economy, impact investment economy etc.)

The argument shifts to reformulating property (what to apply it to - e.g. equipment, and what not to apply it to - e.g. living beings). The authors argue that the concept of property remains even within discussions of the commons. The authors argue for a narrative of 'freedom' to apply to eco-systems (e.g. atmospheres, water), companies and people. Stewards would be required to veto changes that result is a lose of the freedoms of eco-systems, companies and people. As future generations are represented in governance, 'there is almost no need for regulation or legislation' (p. 126). Through multi-stakeholder design principles in governance, previous externalities have been internalised, reducing the need/role of government.

"The distinction between you as a citizen, you as a consumer, you as a voter, and you as a worker and manager still exists, but you now wear all of those hats within the business eco-systems you are part of." (p. 127).

Escaping gravity

Stories act life gravity - pulling you in a particular direction. In this section, examples are provided of 'juggling with the new gravity'.

The government's new role

The shift in government in the Economy of the Free is not one of control, but one of maintaining the freedoms of eco-systems, organisations and people. The functions of government pass to a new FairShares Commons ecosystem. The authors imagine local infrastructure can be funded bh sharing in the capital gains (and surpluses) of FairShares Commons Companies in their region.

As members of FairShares company become part of the general meetings of their companies (locally, regionally and internationally), so the need for governments to 'battle on their behalf' (p. 127). The 'seven generations' principles assures the public interest.

[Editor's note: there is evidence that such arrangement - e.g. enterprise unions in Japan - are not as effective as industry wide representation. There is a discussion to be had here about the nesting processes/protocols].

Lobbying would still exist, but the power of money (to buy influence) would fall dramatically.

The economy's new stories

The author's set out the central story of the economy of the free:

1) "it is illegal, and defensively [definitively?] morally wrong to apply any part of property law to any individual, any incorporated business, or any ecosystem of businesses at any scale from the smallest through to the global business ecosystem."

Capital may or may not be owned, but ownership cannot used to suppress/supplant the freedoms set out above.

2) The economy is emergent, so data gathering for analysis is stopped. Economists change their role to coaching for (rather that reporting on) performance and adaptive capacity, free from the need to predict or control the economy.

The economists' new role

Economists now longer track the rental incomes from properties, or financial capital gains only. Their new role is to understand the new framing of freedom, and work out how accumulations of capital can be moved to where it is needed. Their priority is stewardship, creating conditions for free ecosystems, organisations and people to thrive. In terms of measurement, it is the flows of different capitals, what affects them, how they might be balanced, that replaced the analysis and reporting of accumulations at regional and international level.

Economists might become action researchers, experimenting with changes in the ecosystem, providing feedback loops to other actors and focusing on maximising the adaptive capacity of the ecosystem.

Explore, experiment, improv

Use techniques in Chapter 8 to dismantle old stories and rewrite new ones. The call for 'action learning' and 'action research' is reconfirmed.

The stock market looks like

The stock market would function differently if charged with ensuring that the economy as a whole has the capacity to (re)generate wealth across all capitals.

There would be a shift from competition only to competition and collaboration. The obligations to steward into the future change expectations regarding governance. There would be new types of trading (based on the six capitals). Stock markets would contribute to public interest goals and agenda, reducing the need for regulation. The conjugate pair (of 'property' and 'freedom') is formed in the nexus that is the stock market, leading to a libertarian capitalism that would meet the objectives of Marx.

Reforming voice rights attached to shares representing six capitals changes the representation in corporate boards. Together with the right of self-determination (freedom from ownership) for companies, this shifts the paradigm.

Boom and bust looks like

Using a physics analogy (magnets), the boom/bust cycles of capitalism are described. As the economy of the free is a much more diversified economy (with the representation of multiple stakeholders on board, each considering six capitals and seven generations), the 'pull' of one capital is mitigated, and the boom/bust cycles can be mitigated. Events will generate new boom/bust cycles, but they would be flatter, further apart and more localised. Mondragon's resilience in 2014 is used to illustrate the likely resilience on the economy of the free.

Trade

In multi-national trade is partially free (through the supply chains they create). Such trade freedoms can be extended through the economy of the free. The more automous each person (with the company) and the more autonomous the company (within their ecosystem) the freer will be their capacity to act and adapt. The authors claim "trade will happen freely at all scales" (p. 135). They encourage local currencies and non-monetary currencies to mediate exchanges of non-financial capitals. Trade can be across, up and down, ecosystems. Trading practices would be emergent, not managed, focusing on self-organising, self-governing and self-managing institutions that are autopoietic.

Rules would not be defined by a few powerful individuals, but would emerge from the self-governing process within the between eco-systems. Tensions would be harnessed to adjust rules, structures and processes in a dynamic equilibrium. Inter-dependence and inter-reliance will play out as they do in natural ecosystems.

Finance looks like

The finance sector, claims the author, 'all of the capitals and their associated currencies' (p. 136).

[Editor's note: this is conceptually problematic for me, but I will read on...]

The orientation of finance is 'regeneration' (of all six capitals), not accumulating financial capital, and new transparency norms (following Ostrom?) means that information is passed back to representatives of all stakeholder groups, not just financiers.

The power of money in the economy is eroded as other currencies/capital are integrated, and voting power/surplus distribution becomes linked to those capital contributions. People would be wealthy in a wider variety of ways (based on the capitals in their possession).

Sustainability looks like

Sustainability would emerge from the changed arrangements of the economy of the free (because of multi-stakeholder designs bringing in multiple perspectives, governing for the next seven generations etc.). The goal is to increase each form of capital (wealth) over the life of the enterprise/ecosystem (on average) to improve the stewardship of nature, people, organisations and societies.

The radical libertarian argument increases: "...there are no regulations telling you to use the train instead of flying. Nor are there any social, moral pressures squeezing you against your nature. Instead, you have the freedom to use your wealth across all capitals in whatever way seems best from your perspective"'

[Editor's note: there is something of a revision to Adam Smith here - a highly diversified economy of autonomous individuals acting on their own moral conscience. I'm not sure social psychology would provide much support for the vision here, but I like the vision. I guess that it comes down to propagating different stories that undo the behaviours that social psychologist have observed.'

Interesting to see a fuller version of the Bruntland quote as it includes qualifying statements on continued growth, wealth redistribution, citizen participation and democracy. The essence of their argument (p. 138) remains quite 'western'. It would be more radical is effective worker participation replaced 'citizen' (or was added to it).

Work and reward

The authors argue that the culture of reskilling will thrive in the economy of the free. Unconditional basic income (UBI) and lifelong access to development support would facilitate this.

There is a discussion of UBI and research on work incentives and disincentives (Dan Pink?). In the economy of the free, work is not just rewarded with financial capital. Workplaces would aim to provide other opportunities to build (human, social, intellectual) capital. Work becomes part of your freedom. Research shows that money is not a good motivator for knowledge workers. Mastery, self-respect, peer-respect, having impact, autonomy - these all matter too.

UBI is positioned as 'one central pillar of an economy of the free' to remove the handicap of worrying about having food/shelter.

Your life looks like

The economy of the free will change your life but it is impossible to describe with precision. Whilst there will be joys, there will still be tensions and exposure to multiple perspective will not remove the tensions of meeting people who see the world differently from yourself.

The authors offer a view of a future in which we 'read headlines that talk about the regeneration of our climate' (p. 141). (noteworthy that all the first visions offered are environment related). The precariat will cease to exist once the economy is designed to provision all. Even if relying on the gig economy, unconditional basis income will take away many fears. (p. 142)

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