Self-Governance and World Governance: Necessary Partners

By Shann Turnbull

(Publisher's note: Readers may be confused seeing a title "Self-Governance" in the newsletter of the World Government of World Citizens. We print Turnbull's forward-thinking economic views while reserving our political rights and duties as declared World Citizens. As continually stated in these pages, world government is a necessary fiction to which we give our prime allegiance in the global village. That problems in our century have gone global is not news. War and the environment are the main ones. While Turnbull treats the environmental problem mainly locally and nationally, it is also and predominantly global, as Chernobyl and ocean pollution dramatically reveal. For war to disappear from the human scene, its chief allies, nations, must likewise disappear as exclusive entities. As Turnbull points out, municipal economo/politics is one valid path particularly in terms of decentralization of economic power through democratic corporate shareholding. But if the human race is to survive in the Nuclear Age, it first must achieve its overall political unity.)

A socially and ecologically sustainable system of world governance cannot be achieved until nations develop the theory and practice of building self-governing social institutions. Nor will it be possible to sustain cultural and environmental diversity without the creation of social institutions governed by locally-determined needs. Of course, national leaders may have little incentive to promote self-governance. Why would any dictator, or elected representatives in national governments, for that matter, want to devolve power to local institutions? This would pose a serious threat to their rule, reducing their power, status and influence.

However, the community's need and desire for cultural identity can provide a strong opposing influence to dictatorial control and the centralization of government institutions. Indeed, much of the political turmoil around the world today is created by pressures from various cultural/religious interests seeking self-governance.

While the movement towards cultural identity may affect only some regions of the world, the imperative to sustain local environments is fast becoming universal. Environmental concerns will eventually force nations, whether ruled by dictators or by elected representatives, to promote self-governance. Even now, nation-states throughout the world are enacting laws and initiating programs to protect their environment. Yet many of these initiatives would become unnecessary or redundant if the social organizations in each nation were designed to be directly responsible for preserving their local ecology. If this were to happen, centralized, "top down" environmental protection would be replaced, for the most part, with custom-designed, decentralized and dynamic "bottom up" responses.

Society would then be governed by the people for the people, and the environment by and for the environment. In other words, "Environmental Republics" would be established (Refer to WCN 7:5, June 1993) as were sustained by Australian Aboriginals for more millenniums than any other society.

Decentralization

Decentralization and self-governance would ultimately lead to the "withering away of the State" as envisaged by old time communists. Of course modern right wing and market ideologues also want to minimize the role of the state. However, nations must first learn how to replace centralized government regulation with decentralized self-regulation, not with right wing or market-dominated control. The development of self-governing institutions will provide ways to meet the ideological objectives of both the political far-left and -right.

Within social institutions, the decentralization of power allows checks and balances to be introduced to attenuate the power of markets and hierarchies. Checks and balances are an essential feature for any self-governing body, be it a living thing, machine, or social organization.

The decentralization of power within a social institution also increases the number of people who can become directly involved in its governance. In this way the responsibility for managing a business, local government body, or non-profit service establishment can be shared among all stakeholders. If an organization is to both serve its stakeholders and become self-governing, it needs to be controlled by all those who are, or could be, affected by its operations.

Feedback and Democracy

The scale and structure of modern democracies encourages social alienation rather than inclusive participation and self-governance. Citizens become frustrated by insensitive bureaucracies, feel exploited by business, depressed by environmental degradation, and become cynical regarding the ability-or desire-of their elected representatives to make things better.

We need to reinvent democracy. As part of this process, we also need to re-invent firms, bureaucracies and all other types of social institutions to allow all their stakeholders to participate in their control. The participation of all stakeholders is a pre-condition for creating self-governing social institutions. The reinvention of democracy based on the governance of stakeholders would lead to a new type of political economy quite different from either socialism or capitalism as identified in the Table on page 7 of WCN February/March 1995.

Stakeholder Governance

While the Mondragon stakeholder cooperatives are locally owned and controlled, it would also be possible to introduce stakeholder governance in both the public and private sectors as explained in my article "Stakeholder Democracy: Redesigning the Governance of Firms and Bureaucracies" (The Journal of Socio-Economics, JAI Press, 23:3, pp. 321-360, July, Connecticut, 1994). This article discusses the operating advantages of stakeholder governance.

Harvard Business School Professor Michael Porter recommended in 1992 that stakeholders be included in the governance of U.S. firms to allow America to become more internationally competitive. However, the Porter recommendations would be counter-productive unless the existing centralized system of U.S. corporate control was decentralized. How this might be achieved for publicly traded firms is illustrated in the diagram "Stakeholder Governance."

The information and control architecture shown in the diagram is based on features found in Mondragon firms. A World Bank study found that Mondragon firms were more profitable than investor- owned firms with their traditional centralized system of control. The diagram illustrates: (a) how power can be divided into various boards and councils, (b) checks and balances between centers of "distributed intelligence," (c) specialization of control roles, (d) simplification of individual control duties, (e) built-in feedback information and controls, (f) inclusive participation of all strategic stakeholders, and (g) requisite variety to manage complexity as discussed on page 15, WCN April/May 1996.

The sloping lines at the top of the diagram indicate the possibility of also decentralizing ownership as well as control to stakeholders. This can be achieved through tax incentives as described in my 1975 book, Democratizing The Wealth of Nations. This book also details strategies and models to introduce stakeholder control of land, buildings, and social infrastructure to create sustainable, self-governing communities.

Stakeholder Accountability

The Stakeholders Council supports the directors by establishing qualitative and quantitative performance standards for management and provides directors with information independent of management to evaluate management's performance. The Council also provides a way to integrate modern management practices such as Total Quality Control (TQM), Just In Time (JIT) supply of goods, and participative employee practices into the information and control systems of firms, government departments or nonprofit organizations. Stakeholder councils can also protect consumers, employees and the local community and reduce the need for government laws and regulations to protect stakeholders.

A Social Council provides meaningful employee participation and supports management by determining the value of relative jobs. It acts as a loyal opposition to protect employee interests and also manages the social, welfare and industrial interests of employees, reducing the need for external regulation or ombudsmen.

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.