Difference between revisions of "Part 2 - Chapter 5"

Revision as of 05:28, 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

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