Decision-making and forms of capitalism

It is interesting to see how ideological debates change with time. It wasn’t so long ago that socialism was still widely talked about as the fundamental alternative to capitalism in debates around how we should organise our economies and societies. Today the mainstream debate has moved towards a focus on different forms of capitalism. In particular, there is considerable talk at the moment about cooperativism, and about how cooperative organisations and structures might soften some of capitalism’s more negative features such as short-termism, lack of sustainability and excessive wage inequality.

I have read a couple of interesting contributions recently on the website of the Institute for Public Policy Research (IPPR) in the UK. In one of the posts Noreena Hertz talks about “co-op capitalism”. She argues that this will emerge as an alternative model, taking the best parts of capitalism (Schumpeterian qualities of evolution, innovation and creative construction) and combining them with collaboration, co-creation and working towards collective goals. In the other post Tim Finch reports on a panel discussion with Charlie Mayfield (Chair of the UK cooperative retailer John Lewis) and Will Davies (Director of the Centre for Mutual and Employee-owned Business at Oxford University) that questioned why the cooperative and mutual sector is still such a small part of the economy. Barriers in raising finance were cited, alongside negative attitudes from government towards cooperatives.

What links these contributions, and indeed all debates associated with different forms of capitalism, is that they are fundamentally concerned with how decisions are made. Worker-owned cooperatives such as John Lewis or the Mondragon Corporation (in the Basque Country) offer alternative ownership structures to the typical, privately-owned firm. What makes them really interesting, however, is that they challenge traditional conceptions of firm decision-making as a corporate hierarchy responding to the profit motives of financial shareholders. They represent specific alternatives where strategy within the firm is decided taking into account a wider set of interests. The co-op capitalism set out by Hertz makes the argument on a broader scale: it is essentially a call to widen the basis of decision-making throughout the economy in ways that recognise the value of the collective.

Another way of thinking about this is in terms of economic democracy, or the governance of strategic decisions relating to economic activity that inevitably have impacts on society that go far beyond the economic. The work of Keith Cowling and Roger Sugden on these issues goes back over 20 years, and the ideas in their 1994 book ‘Beyond Capitalism: Towards a New World Economic Order‘, for example, are an early expostion of many of the ideas that are emerging today around different forms of capitalism.

A weakness in capitalism for Cowling and Sugden is that it concentrates strategic decision-making in the hands of a small elite, in a handful of powerful places (such as New York)

So how can we move from debate to practice with respect to new, softer and more inclusive forms of capitalism? Firstly, as the John Lewis debate illustrates, there are plenty of examples of innovative firms and institutions from which we can learn a lot about how to make decisions in ways that integrate a wide range of interests. For instance, the many examples of ‘social enterprises’ that combine profit objectives with other forms of social purpose, and the universities around the world that are getting used to the pressures of balancing a wide range of interests in their governance (students, employers/business, academics/workers, the general development of the societies in which they sit …). Institutions such as the BBC in the UK (neither privately nor government owned, and designed to be governed in the public interest) also offer potential lessons.

In short, we need to be more open-minded in our understanding of the firm and its goals, and to embrace the plurality of institutions that already exist in our societies to learn where different balances of decision-making might work better or worse. It is clear, for example, that decision-making in the financial sector is currently not working for society as a whole, so what can be learned from elsewhere? Above all we need urgently to break what Will Davies describes as the ‘rigid orthodoxy of what companies are’. This poses a clear challenge to business schools, who are too often stuck in this orthodoxy, from which they pay lip service to issues such as corporate social responsibility. In business education we need to be bolder and more open-minded to different possibilities of governing economic activity within the firm.

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4 Responses to Decision-making and forms of capitalism

  1. Estimado James, felicidades por el post!!

    Deja que haga un breve apunte en castellano, a sabiendas que lo dominas al menos bastante mejor que yo el inglés. 🙂

    Dándole una vuelta al tema, tu post me trae a la cabeza la progresiva centralización de la toma de decisiones políticas, económicas y sociales en los mismos grandes centros de decisión: Londres, Paris, Berlin, etc…; y obviamente sus consecuencias más obvias como la desertización de las regiones y ciudades menos avanzadas que, en muchos casos, ni siquiera podrán competir en costes con los países del sur global. De seguir esta tendencia, parece inevitable una distribución si cabe aún más asimétrica de los recursos y del bienestar, que seguirá alimentando el monstruito…

    Por otra parte, y como contrapunto a la reflexión anterior, opino que el capital ha de dejar de estar “de moda”, necesariamente. Me explico. En un mundo en el que el acceso a los recursos cada vez va a ser más limitado para una población que, por otra parte, sigue creciendo constantemente…si no cambia el centro de atención de las personas… y si todos seguimos queriendo lo mismo: algunos podemos considerar que parece más necesario que nunca invocar un cambio radical de valores que permita a las personas -y por ende, las organizaciones en todas sus formas- superar el capitalismo apalancandose en la génesis de una nueva arquitectura socio-económica más participativa e inclusiva. No formar parte del modo de vida que nos pretenden vender constantemente puede ser la única salida…no comprar aquello que no aporte verdadero valor a personas cada vez más completas y satisfechas por aspectos menos tangibles…en una palabra: desbancarles; para volver a empezar.

    Hablo también sobre este tema en mi último post…creo que el cambio de paradigma va a ocupar muchas lineas…

    Un abrazo,
    Xabi Alberdi

    • James Wilson says:

      Gracias por tu comentario Xabi. Sobre la tema de la centralización de la toma de decisiones, Stephen Hymer hizo una predicción muy acertado en su brillante paper de 1972 sobre ‘The Multinational Corporation and the Law of Uneven Development’ (creo que tengo una copia si te interesa). Es cierto que la centralización de decisiones, particularmente los relacionados a finanzas y I+D, en tan pocos lugares del mundo tiene consecuencias para la capacidad de otros lugares establecer sus proprios trayectorias de desarrollo, aunque me gusta tu contra-argumento … quizás paradigmas están cambiando poco a poco.

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