Preface to the Ethical Economy

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* Book. The Ethical Economy. Adam Arvidsson and Nicolai Peitersen. Columbia University Press, 2012.

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From the preface:

"A couple of years ago we were invited to a seminar with the top management from one of the world’s largest consumer goods companies. The event was held in an informal setting, a converted brewery, consciously designed to promote ‘creativity’ and ‘thinking outside of the box’ (read cushions to sit on and plenty of toys and postit notes…). And the theme was ‘ethical challenges to business’ or some such. We ploughed through our power points, only to be interrupted, at about the third slide, by a stern businesswoman who declared: 'Listen we all know this. We know that we cannot go on being a capitalist company !'. At the time we took this as quite a startling thing to hear (this was in 2006), but as we have talked to more and more executives and business people on various levels similar statements have become legio- in particular after the crisis of 2007. In fact business, big and small, are investing heavily in alternative values. In the Anglo-Saxon world it is difficult to find a self-respecting company of above medium size that does not have a Corporate Responsibility policy (in fact spending on such issues has skyrocketed in the last five years), many companies co-operate actively with NGOs and support social entrepreneurs (and as a consequence of the new abundance of corporate money this sector is itself growing rapidly). And many companies publicly declare that their purpose is not primarily to make money, but to save the world, contribute to a more sustainable society, or more concretely, to address the social context in which their key product is deployed, like ‘helping people make informed food choices to improve their nutrition and health’, instead of ‘selling yoghurt’ for example.

At the same time, activists are ever more siding up with corporations. The social movements that we remember from Seattle and Genua are becoming Social Enterprises for which large corporations can figure as partners rather than enemies. The Naomi Klein era is over, to be replaced by the likes of Umair Hacque and John Grant who preach a reformed capitalism ready to address wider social concerns.

Although a lot of this is green-washing, a lot of it is sincere. Companies and managers have a wide range of reasons to trash Milton Friedman and his recommendation to focus on profits alone, and to try to become a 'Force for Good' (as one successful UK based initiative is called3). These reasons range from the obvious- we are all in the same boat on a sinking planet (if such an expression can be allowed); public opinion is demanding a social conscience; most people who work in large corporations are conscious moral agents who want to feel that they are doing something meaningful, or at least not downright destructive with their lives; 'green' and 'ethics' are great marketing opportunities and they can open up new areas of business- to a number of less obvious motivations that we will describe in this book and that we actually believe are more important. (The ability to create cohesion around a common cause is, for example very useful in order to motivate creative knowledge workers.) The question that we want to pose in this book is not about the sincerity of it all (we leave that to Naomi Klein). Rather, we want to understand whether it can work. Or rather, can the ethical turn that we are presently witnessing among corporations, consumers, investors, employees, activists and w wide range of other stakeholders: their desire to address a number of concerns that go beyond the profit motive, become a basis for a new 'social contract' whereby the interest of business and the interest of society can coincide? In other words, can there be such a thing as an ethical economy?

We believe that there can. But in ways that are different from what is communally argued. To anticipate the main argument of this book: We suggest that the movement towards an ethical economy is driven by deep structural tendencies that are firmly related to the ways in which value is produced in the information society. And we suggest that corporate investments in responsibility and sustainability, however sincere, are just a surface manifestation of this. That is, the possibility of an ethical economy is inherent in the development of the means and relations of production, as Marx would have said. But its realization is contingent on active engagement and political agency on the part of interested actors. In particular, we suggest that a necessary precondition for a realizing a (more) ethical economy is the construction of a new public sphere, where diverse value concerns can have a more direct impact on the processes in which economic values are set, and make these processes public in new ways.

But before we set out to tell that story. Let's spend some more time on the concept of a 'social contract', and why we think that a new one is needed.

Social Contract

Industrial society - that old model that we still remember as the textbook example of how economics and social systems are supposed to work- was built around such a way of connecting economic value creation to overall social values; an imaginary social contract. According to this social contract business was supposed to contribute to the well-being of society by furthering economic development and a growing prosperity that could trickle down the social pyramid, or be redistributed by the welfare state. Although this 'contract' was not always respected in practice, and although there were quite intense conflicts as to how it should apply, virtually everybody argued that it should apply, at least in theory, and most people agreed on the basic common values, economic growth and increasing prosperity. From this perspective, even the raw profit seeking of business could be understood to be functional to the overall social good; to make a profit could be said to be an important, or even, as Milton Friedman argued, the only social responsibility of business.

Today this social contract has been shattered. Globalization and the socialization of production have undermined the national arenas on which the redistribution of wealth used to play out, and have radically diminished the power of the industrial working class that used to be an important party to that process. Three decades of neoliberal policies have not only separated the market from larger social concerns, but also relegated the latter to the intimacy of the private sphere, creating a situation where there is no society, only individuals and their families as Margaret Thatcher famously put it, and no values, only prices. Most importantly perhaps, a growing awareness of the planetary consequences of industrial capitalism has led to a questioning of the very desirability of continuous economic growth, at least in its consumerist, materialist version.

Yet the new values that are acquiring an ever stronger presence in our society- a growing popular demand for a more sustainable economy and a more just and equal global society- have but very weak and unreliable ways of influencing the actual conduct of corporations and other important economic actors, and can only affect economic decisions in a tenuous way. True, a lot of companies now claim to be socially responsible and to behave in a sustainable way, but we have no way of evaluating the social worth of their efforts in any reliable or even seemingly 'objective' way. Quite paradoxically we are in the midst of an explosion of ethics, in the sense that more and more people routinely evaluate their everyday actions in terms of their planetary consequences, be this choosing what foods to buy or making more radical decisions as to where to work and how to live their life more generally. But there are few ways in which such ethical values can influence the processes in which crucial decisions are being made. We need a system that is able to create and strengthen such a link, allowing for new ways in which the overall social value of economic value creation can be decided, and for those decisions to affect the conditions of economic value creation in tangible ways.

We are of course not alone to suggest that radical economic reform is needed. After the relative complacency that marked the 'end of history' and the ensuing belle époque of the 1990s, the last decade has seen a wealth of suggestions as to how business practices and economic systems need to be reformed, many of them coming from writers close to the business community itself. Similarly, the financial crisis of 2008 spurred a range of suggestions as to how financial markets need to be reformed and better regulated.

This book is part of that literature but it also goes beyond it in an important way. We are not only suggesting what we think needs to be done, we are also pointing at what is actually happening. In other words, we claim that the solution that we are proposing is a realistic solution: that it is firmly anchored in the forces and contradictions that are at present operating within the global economy. And we will dedicate the main par of this book to describing what those forces are, how they operate and how they might develop. In doing so we argue that the foundations for such a new system are emerging around us, and that the solution to our quandaries is perhaps much closer to us than what we realize. We understand these foundations to consist in three circual developments.


Foundations

The first development consists in the transformation of processes of wealth creation and the emergence of what we call ‘productive publics’ as an increasingly important way of organizing immaterial, and increasingly also material production. With productive publics we understand collaborative networks of strangers who interact in highly mediatized ways and who coordinate their interaction through adherence to a common set of values. Examples range from the networks of peer production that are today responsible for the lion’s share of software production globally, and that are making inroads into new kinds of collaborative material production through Open Design and Open Biotech; via urban creative scenes and online participatory culture that create value for the media and creative industries, to the kinds of collaborative knowledge work that have been identified, in organizations, as crucial to maintaining a climate of innovation and flexibility. Indeed, in Chapter 2 we will argue that organizational models similar to what we describe as publics have become crucial also to the global value networks where mundane material goods like mobile phones and washing machines are produced today. In other words, publics are an organizational form that is well established in the contemporary economy. As ways of coordinating production, publics are different from markets and bureaucracies in that they allow a wider range of concerns to matter as motivations. Knowledge workers are motivated by the prospect of economic gain, but also, and increasingly so as we move up the value chain, by possibilities for self-realization, to have a meaningful impact and peer recognition. In other words, publics introduce a wide range of different orders of worth in economic life (and in Chapter 4 we will argue that these diverse orders of worth converge, at the individual level, into reputation and what we will call ‘ethical capital’). To accommodate this development, managerial thought has come to emphasize the crucial role of values. Indeed, the recent growth in the emphasis on ethics and social responsibility on the part of corporations can be understood as an attempt to accommodate the more diverse orders of worth that productive publics bring forth. But publics also tend to be highly autonomous in conferring value on the productive contribution of their members. As we will argue in more detail below, the value conferred on members of productive publics tend to depend on how other members of those publics evaluate the worth of their whole life conduct. This means that publics entail the possibility of a new kind of ethical economy where the value of individuals, organizations and brands is set in collaborative evaluations of their virtue and excellence.

The second and third foundations consist in the growing importance of financial markets and the spread of social media, respectively. These are much more controversial. The spectacular growth of the size and importance of financial markets that have marked the last three decades has been paralleled by their increasing selfreferentiality and detachment from over-all social concerns. This has not only encouraged unethical practices, but also radically increased both social inequality and economic irrationality, as an isolated group of disproportionally wealthy individuals and institutions (like investment banks) have acquired an excessive influence over key economic decisions. At the same time we need to recognize that financial markets have institutionalized a new way of making economic value decisions. Ever more the value of assets that are traded on these markets is set in processes of deliberation where a number of diverse value concerns are weighed against each other, as traders, market analysts, financial journalists and other assets valuators struggle to find a feasible way to interpret a complex abundance of information. In this book we will suggest that the social inequality and economic irrationality that financial markets generate today is to a large extent a result of the lack of a common standard for making such value judgments. If we has such a common standard financial markets could become an arena where the diversity of value concerns, the ethical diversity that marks the information economy could be integrated into tangible economic valuations. We suggest that such a common standard is already emerging and that this is linked to the spread of social media.

In recent years social media have been depicted in a similarly negative light. After the enthusiasm of the Web 2.0 boom of the early 2000s, a number of voices have now come out to argue that the proliferation of social media create new conditions of collective loneliness (of being ‘alone together’ as Sherly Turkle puts it5), that they foster attention disorder and excessive preoccupation with surface and image (with personal brands), while threatening traditional conceptions of privacy. Furthermore, the social media industry is increasingly dominated by a few powerful actors, and their control over personal data is, as yet, unregulated. Social media might, or might not, do all of these things. Our argument is that, whatever else they do, they also provide a new and interesting foundation on which collective value decisions can be grounded. Social media tend to give a new objectivity to word of mouth and reputation. What people like and do not like, and increasingly how much they like it, is now becoming visible in a number of objective indicators, number of blogposts, activity on profiles, ‘like’, ‘re-tweet’ and other ‘social buttons’, ratings of various kinds and, increasingly the kinds of sentiment that can be automatically mined from text. We call this new factor ‘General Sentiment’, and we suggest that it might play an important role as a measuring rod for determining the overall social desirability of the particular value concerns that are emerging as part of the contemporary ethical explosion. Indeed we suggest that this is already happening as General Sentiment is now being incorporated into a wide variety of diverse valuation processes ranging from evaluating the return on investment in online marketing campaigns, to influencing the market value of stocks and other financial assets.

Our main suggestion is that a new system for making value decisions can be built by fostering tighter connections between these three developments. We suggest that it is desirable to make value decisions on financial markets more sensitive to online reputation, or General Sentiment, and to create ways by means of which the articulation of such General Sentiment better reflects the diversity of ethical horizons that have been consequence of the proliferation of productive publics. Indeed, once again we argue that such stronger connections are already being built. This can potentially create a situation where economic valuations would be more sensitive to ethical values, and where the ability to maximize one’s overall ethical impact, or virtue, would be a direct factor behind economic profits. It has the potential to develop into an ethical economy, in the sense that the creation of economic value and the contribution to ethical values would coincide. Such an ethical economy would supply a new way of anchoring economic wealth creation to greater social concerns, but not through a static social contract where the values are defined once and for all. Rather it would allow for continuous and widespread processes of deliberation that would be more adequate to the demands of a complex and highly flexible economic system like ours. It would also allow us to move beyond the present condition of moral relativism without attempting to impose any new universal values. This is so because ethical value in terms of General Sentiment depends only the strength of the positive or negative sentiment that a particular actor or venture is able to accumulate, and not on the content of the particular ideas or values that it expresses.

Throughout this book we will argue that these connections are already becoming stronger. As corporations adapt to the demands of productive publics widening their value horizons and investing in concerns over social responsibility; as members of productive publics as well as large corporations depend ever more on collaborative peer judgments mediated via social media to construct a valuable reputational score or brand, and as financial operators become ever more sensitive to online sentiment in their operations, such a thing as an ‘ethical economy’ becomes ever more clearly visible at the horizon. This said however, our recommendation is not to sit back and relax as social media and the reputation economy somehow miraculously save the world.


Instead, our key argument is that even though there seems to be a movement in the right direction, the infrastructure of the ethical economy needs to be built. This is so because actual developments in this direction already depend, to no small extent on peoples' active engagements, forcing companies to, for example, be more sensitive to social media based reputation. In addition, the concrete workings of the ethical economy depend significantly on the technological infrastructure on which it is shaped, it depends on what many now call the ‘protocol’ that is put in place. The design of such protocols is bound to have an important effect on how individual value judgments online are translated into General Sentiment, on who is allowed to mediate and shape that process and how this can translate into data that affect concrete value decisions. The difference between participation in a society wide process of deliberation, and subjection to a totalitarian, Big Brother-like information regime similarly depends, to no small extent, on the levels of power and influence that a particular protocol give individuals over the kinds of information that they want to ‘emit’ as they move through an ever more ‘wired’ lifeworld. And there are myriads of such decisions. In historical terms we think that our situation is very similar to that of the construction of the modern public sphere that accompanied the development of modern capitalism in the 17th and 18th centuries. Then too a multitude of actors who launched journals and debating societies, founded social movements, banks and insurance companies, invented new ways of trading wealth on the stock exchange and wrote and circulated political pamphlets, determined, through a multitude of minute actions, and without there being any central coordination, what sorts of protocols would structure the economic and political processes of industrial society. We must set ourselves a similar task: to construct the technical infrastructure that is able to support a new and more rational and democratic way of reconnecting the economy to social concerns. And we are singlehandedly well equipped to do so as the ability to program and the ease within which software and online appliances can be deployed and combined has already now created an explosion of innovation from below that already drives the technological evolution of the internet.

We believe that the construction of such a new public sphere can lead to a better connection between economy and society, a stronger coherence between what is socially desirable and economically valuable, as well as higher levels of economic rationality and stability. We also think that this would lead to higher levels of economic democracy. In view of present projections as to the spread of internet connectivity and social media use- particularly through the expansions of cell phones with internet connection in the poorer parts of the world- such an infrastructure, if built in the right way might allow a much wider share of the productive multitude to have an influence on how economic value decisions are set. It might create the basis for a new kind of global publics sphere to that can accompany the global value chains in which wealth is already being created in the contemporary economy."

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