Blog: Rebalancing Society

Brexit and the rest: it all adds up

6 July 2016

I have written frequently in these TWOGs on the need for rebalancing society, but I feel that recent events have made the message more compelling. I will keep conveying it until that message gets through, or I can no longer write. So if you agree with it, please circulate this so that I can move on!

Question: What might explain the following? Brexit. Trump. Sanders. Democracies in retreat. Thugs in presidential palaces. Backlash against globalization. Add to these: climate change and corruption in America (worse than Brazil). Answer: Imbalance in society.

In 1989, the Berlin Wall fell, and that set off our relentless march to imbalance. The wall fell on us, thanks to our misunderstanding of what brought it down

I have written frequently in these TWOGs on the need for rebalancing society, but I feel that recent events have made the message more compelling. I will keep conveying it until that message gets through, or I can no longer write. So if you agree with it, please circulate this so that I can move on!

Question: What might explain the following? Brexit. Trump. Sanders. Democracies in retreat. Thugs in presidential palaces. Backlash against globalization. Add to these: climate change and corruption in America (worse than Brazil). Answer: Imbalance in society.

In 1989, the Berlin Wall fell, and that set off our relentless march to imbalance. The wall fell on us, thanks to our misunderstanding of what brought it down

It was claimed in 1989 that capitalism had triumphed. This was dangerously wrong. Balance had triumphed. While the communist states of Eastern Europe were severely out of balance, with so much power concentrated in their public sectors, the successful nations of the West balanced their power more effectively across their public, private, and plural (civil society) sectors. But a failure to understand this has been throwing the world out of balance ever since, with power increasingly concentrated in the private sectors, in favor of the forces of economics and individualism. Since 1989, capitalism has indeed been triumphing, globally and domestically.

Now consider these happenings in light of this imbalance.

Brexit. Was there dissatisfaction with the European Union? Of course. Was there xenophobia? No doubt. But these evident explanations do not justify the knee-jerk reactions of an establishment press to the pro-Brexit vote: “stupidity”, “lies”, “cynical politicians”, “dumb down”, “hucksters”—to quote from two recent columns in the New York Times, by Roger Cohen and Thomas Freidman. It’s too easy to dismiss the lashing out of disadvantaged and disoriented people instead of probing into the source of their angst, especially when that questions the globalization dogma that these two writers have promoted blindly for years.

Beneath this vote lies the social imbalance When people have lost their way, while their established leadership offers no viable alternative, they find somewhere to go. And this can cause them to act no less stupidly than their leaders. The prevailing paradigm, the American dream, has become a nightmare for too many people around the world. (Especially in America, where social mobility—the odds of getting ahead when born into a poor family—has dropped startlingly.) One inconvenient truth behind the Brexit vote is the anger felt about globalization, in this country directed at the powerful elites of the London financial establishment.

Trump and Sanders. Take your pick—rednecks or liberals, manifesting their frustration as anger or angst. Again we find the same social imbalance, here directed more explicitly at the brazen power of Wall Street.

Democracies in retreat.  Not long ago, democracies were in ascension, all over the world. No longer. Thanks again to the imbalance, they are in retreat, left and right, with the unimpeded rise of elected thugs in presidential palaces (Russia, Venezuela, Turkey, etc.), or through the bribing of elected politicians by private interests. In Brazil this corruption is criminal, and at least is being prosecuted. In the United States this corruption is legal, and so it continues to fester.

Global Warming. Is there excess use of carbon energy? Of course there is. But behind this is the imbalance inherent in the domination of economic interests over social need: the obsessive drive for quantity over quality—for more and more GDP and Shareholder Value instead of better and better lives. We and our planet are being consumed by consumption.

Exaggerated individualism and rampant globalization. These are two sides of the same coin. Instead of balancing individual needs with collective and communal needs, we allow one to dominate the other two. And who are the prime beneficiaries of this? The wealthiest individuals, many of whom are the greediest—and the ones behind a globalization movement that allows an unelected economic autocracy to undermine national sovereignties and social communities. No wonder so many disrupted people vote Brexit, Trump, Sanders, Le Pen, et al. Who else acknowledges their concerns?

And how about terrorist attacks?  Angry at the established forces and unimpeded by a balanced alternative to the prevailing paradigm, some people lash out in horrific ways, with indiscriminate killing. They express no concern for the consequences of their actions. (Does the 1% express concern for the consequences of their particular actions—less horrendous but more widespread?) After the latest carnage in U.S., we have the spectacle of the National Rifle Association giving elected representatives permission to legislate against assault weapons.

Need I go on? Need we go on? There is another way. It’s called balance, across the sectors: respected governments and responsible businesses with robust communities. Constrained greed. Concern for the disadvantaged. The Western democracies were closer to all this in the four decades following World War II. (Recall the welfare programs of the Johnson administration in the U.S. and the higher levels of taxation in many of the developed countries.) The world needs to restore its balance, and reject the oxymoronic “democratic capitalism.” (Notice which is the noun and which the adjective.)

Once we understand what has been going on, we can appreciate that the conventional solutions will not work. The problem will not be fixed in or by the private sector. Capitalism certainly needs fixing, but this will require rebalancing across all the sectors—which means putting capitalism in its place, namely in the provision of goods and service. Period. Nor can we expect public sector governments to take the lead, because most have become too coopted by private interests domestically and overwhelmed by corporate forces globally.

This leaves the plural sector, comprising those associations that are neither private nor public, most of them community-based: our clubs and groups, NGOs, not-for profits, cooperatives, social initiatives and social movements. This sector is massive, yet it has been lost in the great debates over public versus private, namely the linear politics of left versus right.

Please understand that the plural sector is not them; it is you and I, in our everyday lives. Some of us may work in the private sector and most of us may vote in the public sector but all of us live in the plural sector. We need to recognize that it is here, on the ground, that the restoration of balance will have to begin.

© Henry Mintzberg 2016. Please see Rebalancing Society…radical renewal beyond left, right, and center for a full rendition of this message. For earlier comments on this theme, please see the TWOGs under Rebalancing Society (This TWOG was delayed pending the appearance of a related version on the Huffington PostFollow this TWOG on Twitter @mintzberg141, or receive the blogs directly in your inbox by subscribing hereTo help disseminate these blogs, we now also have a Facebook page and a LinkedIn.

Rescuing Capitalism from Itself

16 December 2015

I’m still recovering from bypass surgery. The third TWOG on managing health care is intended to appear next week. In the meantime, I post here a piece that was originally published on HBR.org last week and is adapted from my book Rebalancing Society…Radical Renewal Beyond Left, Right, and Center (Berret Koehler, 2015). Ive TWOGed several times on this, but I feel that this version says it best.

I’m still recovering from bypass surgery. The third TWOG on managing health care is intended to appear next week. In the meantime, I post here a piece that was originally published on HBR.org last week and is adapted from my book Rebalancing Society…Radical Renewal Beyond Left, Right, and Center (Berret Koehler, 2015). Ive TWOGed several times on this, but I feel that this version says it best.

In 1989, as the Berlin Wall fell alongside communism in Eastern Europe, pundits in the West proclaimed the triumph of capitalism. The American historian Francis Fukuyama even declared “the end of history,” writing in National Interest‘s summer 1989 issue that he saw “the universalization of Western liberal democracy as the final form of human government.”

It has not worked out that way. Since 1989, the United States has experienced some alarming changes, for example the massive infiltration of corporate money into public elections, disquieting levels of corruption in business, rising income disparities, and the decline, of all things in this country, of social mobility. America is having a tea party all right. It’s for large corporations, under the slogan “No taxation with representation.”

Meanwhile problems across the globe continue to fester, with turmoil in the Middle East and numerous democracies on the wane after years of being on the rise. And then there’s global warming.

Of course, many people recognize these problems. In the United States, the inclination has been to fix capitalism, mainly with proposals for what I call adjectival capitalism: Sustainable Capitalism, Caring Capitalism, Inclusive Capitalism, Conscious Capitalism, and others. The assumption seems to be that if only we get capitalism right, all will be well with the world. Fukuyama’s end of history will finally be realized.

No doubt capitalism needs fixing, and we can certainly do with greater corporate social responsibility. But let me ask this question: how did a word coined to describe the funding of private enterprises become the be-all and end-all of human existence?

The Problem With a Two-Legged Stool

What I believe needs fixing is our perception of society. In a sense, we have been seeing it as sitting on a two-legged stool. One leg represents public sector governments and the services they provide for the common good, such as education, defense, and a transport infrastructure. The other leg represents private sector businesses and the resources they mobilize for the provision of our commercial goods and services.

But no stool can balance itself on two legs, let alone one, whether public or private. Even the democratic countries are experiencing increasing political dysfunction: either pendulum politics, namely the fruitless swinging between left and right, or else paralysis in the political center. Both abet the current imbalance.

Society needs a third leg for balance. I call it the Plural Sector. You may know it as “civil society,” or the third sector, or the home of NGOs and not-for-profit organizations. But if it is to take its place alongside the other two sectors, it requires a label that fits with theirs: public, private, plural.

The plural sector comprises all those associations, many community-based, that are owned neither by private investors nor by the state itself. Some are owned by members, others by no-one.

Consider all the member-owned cooperatives. The U.S. alone, with 320 million people, has 350 million cooperative memberships. As for non-owned, consider the Red Cross, or Greenpeace, or any of America’s most respected hospitals and universities.

Also prominent in this sector are social movements, for example the Salt March that eventually led to Indian independence, and the social initiatives that are driving so many constructive changes these days, from the Grameen Bank for the micro-financing of the poor to the Khan Academy for the extension of free education. It is quite remarkable how inclined people are to organize voluntarily, in order to share their common interests and pursue their common dreams.

The Plural Sector

The concept of the Plural Sector has an interesting pedigree. In the early 19thCentury, Alexis de Tocqueville, the perceptive European observer of the emerging United States, described the propensity of Americans to band together in what he then called associations, both formal and informal. He believed that these associations were a key element in the emerging democratic nation: “if men are to remain civilized or to become so, the art of associating together must improve.”

Has it? It has certainly grown: today the plural sector is huge, and probably prominent in your own life. How many of its associations have you interacted with in the past week alone: shopping at a local co-op, driving the kids to a “private” school, playing on a local sports team or joining a group to bring in a refugee family?

Yet this sector gets lost amidst the great debates over left versus right: private sector markets versus public sector governments. This has to change for the sake of balance in society.

In a healthy society, each of the three sectors cooperates with the other two while helping to keep them in check. When one sector dominates, society suffers. Too much power in the public sector results in state despotism, where public officials constrain private freedoms. Communism tried to sit on this one leg, and collapsed. An unfettered private sector results in the kind of income disparities and corporate social irresponsibilities that we are now seeing in the United States and other countries. And an overly powerful plural sector can create a populist tyranny where one community group overpowers all others.

The United States long balanced itself on all three legs: this has been central to its remarkable success. Indeed, the major progress in the four decades following World War Two — social and political as well as economic — was accompanied by significant welfare programs, high personal taxes, and a rather egalitarian distribution of income.

Then the Berlin Wall fell, and America has been going steadily out of balance ever since. You see, capitalism didn’t triumph in 1989: balance did. The Eastern European countries were utterly out of balance, on the side of their public sectors, while the U.S. was relatively balanced. But a failure to understand this has been throwing the county out of balance ever since, on the side of its private sector. Capitalism may not have triumphed in 1989, but it has been triumphing ever since.

Finding Our Balance

How then to restore balance, in the U.S. and so many other countries that have followed suit? Certainly necessary is restored respect for the role of government in society, not least from its own elected officials, as well as greater corporate social responsibility. But these alone will not do it.

I believe that in a world with private sector forces so influential, especially in the global arena, and with so many governments overwhelmed by this, the plural sector has to play the central role in the restoration of balance. It has to push governments and corporations to act dutifully while waking all of us up to the dangerous realities that we face: the degradation of our environments, the demise of our democracies, and the denigration of ourselves.

We have hardly lost our propensity to associate: consider all the community-based social initiatives that we see around us right now. And then there are all those formal associations that have the autonomy, the energy, and the inclination to drive necessary changes: GreenpeaceAmnesty International, Doctors Without Borders.

Yet Robert Putnam has characterized contemporary American society as tending to “bowl alone.” And that, arguably, includes the associations of the plural sector. Greenpeace concerns itself with the environment, Amnesty International with human rights, and Doctors Without Borders with health care. In this respect, like businesses, they differentiate themselves into many missions.

When it comes to common cause, however, businesses get their collective act together. For example, they use their chambers of commerce to lobby for tax cuts. Associations of the plural sector are less inclined to do so. Compare the influence of the World Economic Forum with that of the World Social Forum. (Have you ever even heard of it?) Or compare the international cooperation in 1987 that generated the Montreal Protocol to address the ozone layer with the lack of progress on global warming in recent years.

And so, despite all the good that some of these associations do, society continues its dangerous march toward imbalance. These plural sector associations do have common cause: to challenge the imbalance that is at the root of many of the problems that they address. What they need now is common organization. But that too will not suffice.

What, then, can we do about this? This is the right question, because the plural sector is not “them.” It is you, and me — each of us and all of us. More to the point, it is we — as engaged actors, not passive subjects. We “human resources” have the capacity to act as resourceful human beings.

We may work in the private sector and vote in the public sector but much of our lives are lived in the communities and associations of the plural sector. Grand global conferences may play a role, but real change will have to begin at home, and from there, thanks to the new social media, spread across the globe, to mobilize our efforts for the sake of our planet and our progeny.

In his 1776 pamphlet “Common Sense,” Thomas Paine declared to the people of the American colonies that “We have it in our power to begin the world over again.” Paine was right then. Can we be right again now? Can we afford not to be?

© 2015 Henry Mintzberg

VW: The syndrome behind the scandal

23 September 2015

"What were they thinking?" This is the question an editor of the Globe and Mail newspaper in Canada asked me to address, in a commentary about the Volkswagen scandal. They published it on Wednesday, in a slightly different form.

"What was Volkswagen thinking?" This question makes a big assumption: that the Volkswagen people were thinking, about anything beyond their greed. About decency, about our environment, about their progeny.

OK, so you will not be buying a Volkswagen. A Chevrolet instead? Watch out for the ignition. Or how about a Toyota? Just duck as the airbag comes your way. Do you, by any chance, see a pattern? Have we been thinking?

"What were they thinking?" This is the question an editor of the Globe and Mail newspaper in Canada asked me to address, in a commentary about the Volkswagen scandal. They published it on Wednesday, in a slightly different form.

"What was Volkswagen thinking?" This question makes a big assumption: that the Volkswagen people were thinking, about anything beyond their greed. About decency, about our environment, about their progeny.

OK, so you will not be buying a Volkswagen. A Chevrolet instead? Watch out for the ignition. Or how about a Toyota? Just duck as the airbag comes your way. Do you, by any chance, see a pattern? Have we been thinking?

In Europe, the U.S., Japan, and most everywhere else, something is going on. There is a level of sheer corruption that transcends the automobile industry. How about banking in the U.S. and Europe? How about politics, most everywhere? Now Brazil is receiving a lot of attention, while the utter corruption of U.S. politics—private money in public elections, a level of lobbying out of control—carries merrily along.

A good deal of the corruption is criminal, and so can be prosecuted. So why don’t we prosecute corporate criminals and not just corporate crimes? And why don’t we set the fines to indicate that corporate crime doesn’t pay? If you wish to steal, don’t grab somebody’s iPhone. The government will throw the book at you. Devise some financial manoeuver—a little more clever than a Ponzi scheme—to defraud many people of much money. If you wish to get away with manslaughter, don’t do it as the driver of a car; do it as the designer of the car. Executives and engineers in General Motors knew that people were dying as a result of their inaction on those ignition switches, yet they have walked off scot-free.

Far more insidious, however, is the legal corruption, because it is so prevalent. Goldman Sachs allegedly manipulated the market for recycled aluminum so that it could siphon off $5 billion by moving ingot from one warehouse to another. What were they thinking? That’s easy: five billion dollars.

The company claimed to have broken no law. That is precisely the problem. Our societies are being destroyed by this legal corruption. University professors are in cahoots with pharmaceutical companies that think nothing of charging hundreds of thousands of dollars for life and death products that cost them hundreds. And economists who cannot see past markets support such nonsense. Are they thinking at all? Some markets! This is actually the exploitation of monopolies called patents whose prices are not being regulated. And these are not just any old monopolies: people have to die for want of these products, for the sake of obscene profiteering. What kind of a society tolerates this?

Are you seeing the pattern? It’s not a scandal; it’s a syndrome. Shocking as it may be, the Volkswagen affair is just a blatant case of an accelerating trend. Expect it to get worse, because right now we are living in a world where predatory capitalism is triumphing.

In 1989, pundits declared that capitalism had triumphed. Wrong. Balance triumphed. The developed countries of the West were balanced back then. Think of the United States post-war—higher levels of taxation, fairer distribution of wealth, generous welfare programs—and with all that, remarkable development, political and social as well as economic. The communist states of Eastern Europe collapsed because they were utterly out of balance, with so much power concentrated in their public sectors.

It turns out that the Berlin Wall fell on us: predatory capitalism has been triumphing since 1989, throwing much of the world out of balance, on the side of private sectors. They are dominating government and much of society, with the consequences described above.

What were they thinking at Volkswagen? Very likely that governments are impotent, or coopted, or lack the staff to regulate and prosecute. OK, so this particular company was particularly dumb. But how many others are close behind, just a bit smarter, to keep out of the spotlight?

Remember “The End of History”,  the widely accepted claim in 1989 that human society had reached perfection, thanks to our relentless greed? Well, watch out: unless we get our act together, here it comes.

© Henry Mintzberg 2015. See Rebalancing Society for more on this. See also critique of the Fukuyama claim in "The end of thinking?"

UPDATED: Sept. 24, 2015 2:25pm