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Above and Beyond the Sovereign State
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History of the Global Economic Crisis
Economy and Society
"What caused the Global Financial Crisis of 2008? What does it mean for the Australian economy, and the rest of the world? And what can we do about it? It will last into 2012 and beyond.
Governments around the world are trying to spend and regulate their way out of the economic crisis. The Institute of Public Affairs has argued loudly and forcefully that the crisis may be bad, but responding to the crisis with bad policy will only make it far worse. This section collates the best IPA commentary on the crisis, its causes, and its consequences for politics and the economy. (Source:
The Institute of Public Affairs
Post Graduate Conference
University of Melbourne, Australia
24 July 1999
Compare 1999 to today
Australia is undergoing a period of high economic growth, a boom time, and yet this nation also has unacceptable levels of unemployment coupled with disillusionment, insecurity, apathy and alienation. Researchers are seeking to understand why.
Human capital is undervalued and much is wasted. Industry undergoes continued re-engineering and downsizing whilst slavishly following questionable management methods and practices. Political policy lacks a depth of research and debate.
Age and experience is too often disregarded in favour of youth. Deeper learning is being devalued by an over emphasis on competency based learning. Society is influenced by the moment, by what is immediately at hand, by the craft of images, perception and pervasive consumerism. Dissent is frowned upon, and practitioners are too often victimised or ridiculed while the lesser morality of business and politics is accepted as an every day part of life. The forces of global capitalism intrude, some would say, with a decaying effect.
This paper, among other sources takes, as its underlying theme, the research work of Richard Sennet, specifically his book titled "The Corrosion of Character". Sennett teaches sociology at the London School of Economics and New York University. He is the co-author of "The Hidden Injuries of Class" (1972) with Jonathan Cobb. In his latest work "The Corrosion of Character" (1998) he "explores the disorienting effects of new capitalism".
For him there are two worlds, the almost vanished rigid, hierarchical organisation, where what mattered was a sense of personal character and the new world of corporate re-engineering, risk, flexibility, networking and short term teamwork, where we must reinvent ourselves constantly. The presentation examines this work in the context of an Australian experience, extracting elements of Sennett’s story and asking you, the reader, to examine them in the light of your own beliefs, perceptions and experiences.
THE CORROSION OF CHARACTER©
Sennett defines character as "the ethical value we place on our own desires and on our relations to others. They are the personal traits that we value in ourselves and for which we seek to be valued by others."
Post war Australia, similarly to Sennett’s America, was a reasonably predictable environment where one took a single profession, career or job and expected to work for a given period to buy a house, raise children and retire. People had an idea when they would retire and how much money they would have. Regardless of station, the narrative of experience and place in the community provided a sense of self respect. Those who worked under these conditions could say "this is what I do and this is what I am responsible for." Today however there are many people that cannot offer the substance of work life as an example to others, or their children, of how they should conduct themselves ethically. The qualities of good work, according to Sennett, are not the qualities of good character.
The whole of the workforce is contingent, with jobs being replaced by projects and fields of work.1
And yet careers rather than jobs develop our characters. The short term, flexibility of new capialism precludes substantial narrative.
The economist Bennett Harrison believes the source of the hunger for constant change is impatient capital and the desire for rapid returns. Organisations are no longer pyramids, they are being conceived as networks which are lighter on their feet, more readily decomposable or re-definable than fixed assets (Powell). There is no long term and this, according to Sennett, is the principle that corrodes trust, loyalty and mutual commitment. The short time frame of modern institutions limits the ripening of informal trust. Fleeting forms of association are more useful to people than long term connections and strong social ties like loyalty have ceased to be compelling. The time dimension of the new capitalism, rather than high technology, the stock markets or free trade, most directly affects people’s emotional lives outside the workplace. This short term capitalism, according to Sennett, threatens to corrode the character of Rico, a central individual in the research, particularly those qualities of character which bind human beings to one another and furnishes each with a sense of sustainable self.
This modern world of work and politics is culturally conservative, there is a tendency to stereotype and to loathe social parasites embodied in the figure of the welfare recipient. Such philosophies appear to have permeated conservative governments that frame policies in political speak – the "mutual contribution" requirement. The recent comments by Minister Tony Abbott, demonstrate and reinforce this attitude, whilst Mr. Abbott forgets that he is a servant of the people including those he condemns.
To explain such attitudes of government Sennett refers to Michael Albert’s theory of the Anglo-American model that stresses the state bureaucracy’s subordination to the economy, and thus a willingness to loosen the safety net provided by government.2
These regimes, with the exception of Australia, may have low levels of unemployment but they also have increasing wage inequality. Former Secretary of Labour in the United States, Reich says that America is on the way to becoming a two tiered society composed of a few winners and a larger group left behind.
The Chairman of the US Federal Reserve Bank, Alan Greenspan (1995) declared that unequal income would become a major threat to our society.3
Corporations are imbued with human characteristics, treating their ongoing existence as paramount to the interests of real human beings.
In this modern world there is nothing unfair about a corporation making itself tighter, leaner and even meaner or even reappearing in another form after they have failed. The representatives of business interests oppose legislators altering the corporations law to place workers rights and entitlements ahead of other creditors. Governments procrastinate while moral imperative would have them act immediately. A coal mine goes broke, the owner’s assets and directors, are protected from loss, the workers lose their jobs, their superannuation, their leave and their redundancy.
Downsizing, right sizing, or whatever desensitising language may be used to make it palatable, is something readily accepted by society, governments and the business community as a fact of life and a right of the owners of capital.
When IBM downsized, or as Schumpeter says, engaged in creative destruction, the characters in Sennett’s story took it upon themselves as their own burden having first overcome the shock of recrimination. They believed they should have foreseen the circumstances and should have planned for the contingency.
Paul Gollan, a lecturer in management at the Graduate School of Management, Macquarie University, says that companies that downsize destroy the experience network and the knowledge of what made the organisation tick, informal networks, cultures and trust relationships. Henry Mintzberg (1985) said "there is no re-engineering in the idea of re-engineering, just reification, just the same old notion that the new system will do their job".
Uncertainty today exists without any looming disaster, instead it is woven into the everyday practices of vigorous capitalism. Instability is meant to be normal. In modern capitalism those employed "experience a distinction between their own time and the employer’s time." 4
The modern manager, or owner of business, too often sees commitment to the firm as something beyond the separation of the two demanding that work take precedence as if the firm owns the employee’s time, at its will and command. The working week is now regularly over fifty hours often extending into periods of seven days, consistently. This causes conflict in the individual and a feeling that they are not in charge of their own lives. People are "surrendering life to capitalism" (Long, 1999). Sennett says the power that directs this world of work and time is now more subtle. He defines "the modern system of power" in three forms, the discontinuous reinvention of institutions, flexible specialisation of production and concentration of, without centralisation of, power. Reinvention is decisive and irrevocable. Technology is the primary tool.
Discontinuous re-invention, or if one prefers other terms, delayering, vertical disaggregation or re-engineering, gives employees many multiple tasks to perform. Sennett says that only in the fantasy life of consultants can large organisations define a new business plan, trim and re-engineer itself to suit, then stream forward to realise the new design.
Erik Clemens says many, if not most, re-engineering efforts fail. The American Management Association and the Wyatt Companies found that repeated down sizing produces lower profits and declining worker productivity. Craig Littler researching Australian firms holds a similar view, and has documented at least two thirds of firms that down sized did not achieve the targets or increased profitability.
Flexible specialisation tries to get more varied products ever more quickly to the market. The market may be consumer driven as never before in history.5 A strategy of permanent innovation: accommodation to ceaseless change, rather than an effort to control it.6 The concept of flexible specialisation suits high technology and it is favoured by the speed of modern communications.
The shifting demands of the outside world determine the inside structure of institutions. Sennett talks of his annual visits to Davos where the ‘kingdom of achievers’ owe their success to flexible specialisation. A place filled with ex communists extolling the virtues of free trade and conspicuous consumption. These people have the capacity to let go of their past and the confidence to accept fragmentation which are the "traits of people truly at home in the new capitalism". These same traits begetting spontaneity are more self destructive for those who work lower down in the flexible regime.
The three elements, discontinuos reinvention, flexible specialisation of production and concentration of without centralisation of power, according to Sennett, corrode the characters of more ordinary workers who try to play by the rules. Risk is a daily necessity being shouldered by the masses. To quote Sennet, "it is the driven man bent on proving his moral worth through his work". In the postmodern theories the notion of fragmentation of identity, not simply enstrangement but dislocation, according to Giddens (1990), comes about through ruptures in the discourse of modern knowledge and information.
Sennett further says that the driven man is intensely competitive but cannot enjoy what he gains. He refers to Max Weber’s (1947) observation that man is weighed down by the importance he has come to attach to work as being extremely relative to today.
According to Sennett, detachment and superficial co-operativeness are better armour for dealing with current realities than behaviour based on values of service and loyalty.
The older models of a learning organisation are now typified, in new concepts of organisational structure. Typified by subcontracting of work, reduction in salaries against the national average, individual worker commitment, the disappearance of union practices and unionised workplaces (Cardoso, 1998) and organisational entities are now heterogeneous networks of human and non human materials (Easton, 1985).
Modern production equipment enables less skilled workers to follow "iconised’ instructions and when the equipment (computer) stops they stop. These are not learning organisations.
This is "program dependent labour" with a shallow competency and increasing loss of knowledge in their work. The work is not legible.
Sennett uses the modern computerised manufacturing bakery as an example. When difficulty and resistance, an important source of mental stimulation, is diminished through the use of `fool proof’ technology uncritical and indifferent activity arises on the part of the worker. The engagement with work becomes superficial.
If this is the case, then re-engineering style, scientific process models, proposed by Champy and Hammer (1993,4,5), as tools of management, cannot capture the human elements of the absence of loyalty and values of service and will be doomed to failure in their objectives.
Certainty, in the past, available to one generation, is disappearing for the next. The most telling example is the loss of the security of a job for life and the shortening of the timeframe of work (Guillemard, 1993) "Over fifty and burned out"
Postmodernity has no single inherent meaning or value and it is a new social arena with a universe of events that is difficult to understand (Giddens, 1990). Those who can afford it educate themselves privately which undermines the public system of education (Probert, 1993). Governments, and employers, are making decisions that have long term ramifications. The population, struggling to exist and absorb this mosaic of change is left behind in the debate.
Education is being framed with the single dimensional objective of fitness for employment. Argyris and Schon (1978) termed this `single loop learning’. The need to understand learning better in all of its dimensions is now imperative says Argyris (1991). The purpose and the context of change have been lost to the practitioner.
The continued rhetoric and focus on words such as clever and intelligent signals we are in the process of creating a technological elite (Rohatyn, 1995) with growing inequality in terms of the value of technical skills. Raising the wages of people who produce planes and lower the wages of the unskilled with an attendant huge transfer of wealth from these lower skilled, middle class workers to the technological aristocracy. The jobs that are growing in Australia, according to the Australian Financial Review writer Stephen Long, Wednesday 16, December 1999, are casual and part time at the lower end of skills. Such climates promote extreme risk taking in our youth and despondency in the older members who may not want to embrace lifeless and unintelligent machines. In an unfettered world those in a position to grab everything do and will.
What value are corporations to community and how do they serve the civic interest rather than its own ledger of profit and loss?
Australia, its government and people mutually must define the common good. Are we in pursuit of unbridled free market ideologies, a few political restraints on wealth inequality but full employment or a balance between capital (corporate) interests, welfare, knowledge and job creation.
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