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Markets and Hierarchies: A Curse of Modernity

By Shann Turnbull

Markets and hierarchies can be counter-productive in creating an equitable, efficient and ecological system of world governance.

Hierarchies organize social transactions, with information being transmitted through a chain of command. But as set out in the accompanying table, three other ways of communicating information can serve as alternative means for governing social transactions.

The four modes developed through evolutionary stages from left to right across the table.

Creation of a command system for organizing widely dispersed individuals depended upon the development of political structures.

Traditional Australian Aboriginal societies depended solely upon sensory and semiotic modes of information for governing their society, as illustrated in the diagram on page 11 of World Citizen News for Dec. 1995/Jan. 1996. Australian Aboriginals had no political structure to organize complex cooperative activities among tribes speaking quite different languages and dispersed over hundreds of miles. However, they were able to decide, months in advance, when and where to have a ceremony. The invitation to the ceremony indicating its time and place is communicated through a pattern of notches placed on a message stick handed on by nomadic Aboriginals from one language group to another.

Some ceremonies involved over a thousand people arriving at the same place at the right time to engage in elaborate, shared rituals for up to seven days without a common language and without commands or markets.

A week-long performance of such a large group could not be organized in a modern society without a script and many rehearsals, even with the latest communication technology and a common language. Aboriginals utilized a "silent" or "hidden" method of communication based on signs and symbols.

The study of signs and symbols is called semiotics. This method of communication is ingrained so deeply in modern society that many of us do not recognize how much we depend on semiotics in organizing collective action.

One example which we take for granted involves road travel. We have culturally agreed conventions to facilitate vehicular transport by keeping either to the right or left.

To take another instance: in some cultures arriving one hour late for a meeting may be taken as a major insult, while in another culture it may only represent a minor degree display of indifference.

International incidents have arisen and potential deals have been lost due to such cultural differences.

I first became aware of the power of semiotics to organize society and to determine my own future career when I was required to read The Silent Language by E. T. Hall (Doubleday, 1959) at Harvard Business School in 1961. Hall also wrote The Hidden Dimension (1963), which provided an analytical perspective on Vance Packards' 1957 book The Hidden Persuaders. Packards' book shocked many people by revealing how they can be unconsciously manipulated by media semiotics. And Hall pointed out that people communicate their relationships, interests, roles and authority by the way they use space and time and by other cues such as dress, manner, signs and symbols.

The position, size and furnishing of an office communicates the authority of its occupant in the same way as body paint and decorations indicate the totemic relationship of an Australian Aboriginal. Totemic relationships in turn determine who should dance, sing or cater at a ceremony. The nature of the ceremony determines the role of each totemic group.

Today, money is a ubiquitous "message stick" communicating what people wish to use, consume or produce. Prices are used to communicate to a large number of widely dispersed people speaking different languages. However, prices communicate very limited information and may have little meaning unless accompanied by collateral information and/or understanding of the nature and quality of the relevant good or service.

While prices can provide necessary information for organizing transactions, they are far from sufficient for the reasons discussed in my article on "Banking's (And Money's) Digital Future" (World Citizen News, Oct./Nov. 1995). The need to use message sticks in the form of prices diminishes as the number of people and their geographic dispersion decreases. This is the case within a family, for instance, And even in a modern society, transactions may be governed at a neighborhood level not by money but through social reciprocity of gift and counter-gift and/or barter.

The degree to which we rely on markets, hierarchies, semiotics or our five senses to establish collaborative relationships depends upon the institutional structure of society. If we wish to improve the quality and sustainability of life on our planet, then we will need to develop institutional arrangements that will permit us to minimize the use of market mechanisms.

A substantial move toward this objective would be taken by distributing welfare, or even a universal minimum income, through each local community, instead of via a central government's welfare hierarchy. The disbursement of aid would also be in-kind rather than in-cash.

Local communities are best suited to provide life-support resources such as food, clothing, housing and energy. Local communities are also in the best position to utilize the services of people who require life support. This provides a basis for establishing an efficient, equitable and sustainable civil society based on community networks rather than external markets and hierarchy.

Markets and hierarchy would still be used as integrative mechanisms but to a lesser degree and in more appropriate ways. Exposure to market forces would occur not at the individual level but through community organizations, which would include both profit-making enterprises and not-for-profit institutions.

Hierarchy and its associated social alienation can also be minimized within firms. Excellent role models are provided by the nested networks of locally owned and controlled firms established around the town of Mondragon in the Basque region of Spain.

Hierarchy in government can be minimized by organizing the activities of the public sector on the principle that no higher level undertakes any function that can be better performed at a lower level. This rubric of subsidiary function means that the most personal activities of government, such as underwriting the provision of food, shelter, clothing, energy, health and education, should be provided at the family, neighborhood and community level. Such arrangements would substantially reduce societies' reliance on markets and commands as integrative social mechanisms.

Hierarchical command systems are not democratic and are socially undesirable because they facilitate alienation and exploitation. However, since the beginning of civilization the degree to which society has been governed by commands within the private or public sector has continuously increased, as indicated in the diagram. It estimates the proportion of information utilized by each governance mode in various social systems.

As command and market systems have developed, modern society has come to rely less on transactions governed by human senses and on semiotics-based social relationships.

The introduction of a command economy in countries that experimented with socialism resulted in a reduction in the transactions mediated by senses and markets. However, this forced the development of an informal barter sector based on relationships.

The column on the far right of the diagram refers to a "Stakeholder Democracy," which was described and illustrated in World Citizen News for August/September 1994. The introduction of a Stakeholder Democracy would reverse the ever-growing historical reliance on markets and commands for governing society, as shown in the diagram. Design criteria for building social institutions to achieve this objective are described in my paper "Stakeholder Democracy: Redesigning the Governance of Firms and Bureaucracies." It was published in The Journal of Socio-Economics, pp. 321-360, 23:3, 1994.

Shann Turnbull is economic consultant to the World Government of World Citizens. He can be reached at P.O. Box 266, Woollahra, Sydney, NSW 2025, Australia.


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