economic sociology

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This CollegeHumor parody eTrade ad has been making the rounds. In light of the recent stock market “correction”, what is underscored is there is a two-tiered market, as Jon Stewart claimed when he had Jim Cramer on The Daily Show in 2009—one for the powers that be and one for the rest of us. Economic sociology blasts apart the naïve assumption that markets have “atomized” agents guided by rational choice. There are embedded social networks and institutional factors that create information asymmetries, with the deck stacked in favour of those “in the know”. The individual investor and those relying on the market through defined contribution plans, IRAs, etc. for their retirements might relate to this parody ad far too well. Oh, how we should long for the days of the defined benefit pension.

As an aside, as one who has ditched the ivory tower for navigating the entrepreneurial waters, I can say one thing that I knew all along, but is abundantly clear in so many ways—the system is geared towards business and doors open that are closed to individuals, save for those with great means.

In light of the threat of the “r” word—recession, it’s easy to second-guess the “jobless recovery” and US economic policy aimed at bailouts {Obama style} and propping up the capital markets. While corporations are better off than they were three years ago, they have grown accustomed to sitting on cash and extracting more out of the labour force because it’s a buyers’ market. The unanimous consensus is that the economic indicators aren’t rosy and the prospects for US GDP growth are dim. The political focus on deficits is the last thing that the economy needed.

Was the stock market yet another bubble that’s about to burst? Canada’s housing bubble should cause worries, as well, as Canadian unemployment is still relatively high. Of course, Canada’s Finance Minister, Jim Flaherty, refuses to acknowledge there’s a housing bubble, hoping the Canadian economy grows out of any and all predicaments, which is exactly what Obama, Geithner, et al were hoping from day one.

Jack Welch, ex-CEO of GE, online MBA namesake {this Economist article is funny}, and policy critic is no stranger to controversy.  Here’s “Neutron” Jack warning of Obama running up deficits::

I have no problem with criticizing policy, but when it drifts from rhetoric towards potshots, my patience wears thin remarkably fast, regardless of the ideology.  Welch offered the curious advice of a “fake plan” after revisions of the deficit came out and Obama already responded to the news.  In my book, Welch isn’t offering analysis, but just stirring the pot and trying to seem relevant in the eye of the public.

Fast forward to June 28, when Welch offered up more controversy at a human resource management conference and was quoted in a Wall Street Journal article.   Now, after his comments have gotten into the press, Welch is getting into a bit of hot water for statements he made on there not being such a thing as a work-life balance.  Welch said those taking time off for family won’t be there “in the clutch” and could be passed over for promotions.

“We’d love to have more women moving up faster…But they’ve got to make the tough choices and know the consequences of each one.”

According to Welch, there is a consolation.  While you might not get to the top for trying the career-family balancing act, you can still have a nice career, nevertheless.  Some praised Welch for his bluntness, while others lambasted him for being “out of touch.”

One comment on the article accused the WSJ of attempting to increase pageviews with inflammatory articles and another accused Welch of trying to peddle his book.   The Twittersphere was abuzz with Welch’s statements, as of 7:12 EDT, with plenty of retweets of the article and quite a few naysayers.  Welch himself, who has a Twitter account, is in the hospital with a serious spinal infection, so don’t expect anything from him on the matter any time soon.  One Tweet called him a grumpy old man, as did a blog at The Conglomerate {via Salon}.  Grumpy or not, is he right?

While his words might seem to apply to both men an women equally, the fact of the matter is that there are key perceptual gendered differences in organizations when it comes to family, bringing up a double-standard.  Scott Coltrane’s paper, “Elite Careers and Family Commitment: It’s (Still) about Gender,” makes this point clear::

  • “Family men” are viewed as having mature leadership qualities
  • Women getting married or having children can derail their previous “fast track” status, as that choice renders her as less-qualified

Welch is advocating what some in sociology call a “separate spheres” ideology, regarding gender, allowing the double-standard on the meaning of “family” to persist.  The fact of the matter is that even if you talk about “family” with respect to both men and women, the meanings aren’t the same.  Research on CEO succession are consistent with the tenets of economic sociology, i.e., if one desires to be heir to the CEO throne, social relations within the organization and with the corporate board matter {e.g., See Cannella & Shen}.  So, if you’re up for a CEO spot, it matters how others perceive you, whether you like the double standard or not.  Welch is promoting a mythology of the CEO as an individual totally committed to the organization.  Along with his other statements, CEOs and managers all should have a draconian stance and total obeisance to the almighty shareholder value, or perceptions thereof {including cooking the books?}.

It’s a bottom-line world, right?  Companies face a reality and Jack is simply reflecting it.  Maybe not.  BusinessWeek taped a Q&A session with the CEOs of Sony {Howard Stringer} and Best Buy {Brad Anderson}, two companies with very different attitudes towards the “balance” issue::

“What became apparent in subsequent discussions from both CEOs was that personal time was pretty hard to come by. Stringer talked about the differences in the Japanese and U.S. career cultures. The Japanese work much longer hours including one weekend day, and the idea of a great deal of leisure time, or time spent in their homes with their families, is still not part of their culture. He also noted that many employees, manager level really, were still mostly male (something he hoped to help change).

This was in stark contrast to the recent changes at Best Buy and their new flexible hours program being implemented at all levels of the company. Mr. Anderson gave the example of two women (working mothers) promoted to manager who were now able to job share, since neither due to child care commitments could work the hours required.”

Organizations are social systems and are often in states of flux.  Welch is advocating a received-view way of thinking, but on the basis of what logic?  I would argue that we need to rethink the role of the CEO, away from organizational financial performance and towards meaning and leadership.  A strong leader creates meaning, which guides actions throughout.  It would be interesting to compare the meaning systems of Sony and Best Buy and how it affects corporate culture and decision-making.  Maybe students in Welch’s online MBA programme can take that on.

Twitterversion:: Jack Welch stirring pot w/comments on work-life balance. Oldschool ideas reinforce faulty logic. #Fail #ThickCulture @Prof_K

Song:: Work Is A Four-Letter Word – The Smiths

Logan Pass-Glacier National Park US, 17 July 2006
Logan Pass-Glacier National Park US, 17 July 2006

In the classroom and with conversations with researchers, I’ve discussed the idea that the environment is a luxury, in light of more pressing matters, such as food, jobs, etc. So, if we have a negative by-product of an activity {an externality such as pollution}, it creates a social cost that may be unfairly borne by others.  A key question is how to allocate such social costs, in light of competing interests?  What if these social costs in the form of taxes harm employers to the point where jobs are threatened?  Which should prevail?

The problem is that the value of the environment is not straightforward, as they often relate to a quality of life that is embedded in particulars, not universals.  When I lived in southern California, life without a car outside of Los Angeles would have been challenging.  My housing choices would be limited, possibly affecting my quality of life.  As it turned out, my decisions were independent of my environmental impact.  I had a 20 mile commute, albeit in a hybrid, but my choices affected everyone’s quality of life in terms of pollution, as well as the amounts of global greenhouse gasses.  Should policy affect choices like this?

In our everyday lives, we all have a set of practices that we take for granted.  In Pierre Bourdieu’s parlance, this would be habitus.  These practices are tied to environmental outcomes, whether we’re aware of them or not.  We only seem to be aware of them through consciousness or cost.

I don’t think the environment is a luxury that should take a back seat in an economic downturn, as it holds sacred the current mode of production and the current practices tied to it.  Of course, this could be disruptive, but should something that’s disruptive be avoided because of the uncertainty it generates?

Let’s assume the environment is a luxury when it comes to sustainable foods.  Organics should be toast in a recession, considered to be an overpriced luxury for most consumers.  In the UK, a Guardian article notes that consumers are less willing to spend on ethically-produced products {e.g., fairtrade} and organics, but are still want quality and are willing to pay a price-premium for locally-grown produce.  This shows how complicated markets can be, how consumers’ preferences shift, and creates implications for local production and land-use in Britain, creating challenges and opportunities for sustainable agriculture.  Habitus.

Policy can “incentivize” innovation, by enforcing standards such as those mandating increased fuel efficiency {CAFE standards in the US; CAFC guidelines in Canada}, state emissions testing, and the sale of lower-emissions vehicles.  Such approaches often are mired within institutional battlegrounds, places where economic sociology offer great insights.  While environmental policies enforcing change are disruptive and force auto manufacturers to move towards a different mode of production, the end societal results can be positive.  I agree with Alexandra Shimo of Macleans that the recession is bad for the environment, as oil prices fall, the incentives for the development of alternatives to fossil fuels wane.

So, is the environment a luxury?  Well, it may well be akin to the diamond-water paradox.  Why are diamonds so expensive relative to water, where the latter we need to live.  Scarcity.  If we just allow the market to dictate decision-making, we unfortunately will only value the environment when we perceive it as growing scarce.  Will that be too late?

Twitterversion:: Some argue that environmentalism and sustainability is a luxury, as when push comes to shove, pragmatics dictate pressing concerns prevail. @Prof_K

Song:: Honey Honey (BBC Sessions) – Feist on the Green Owl compilationlyrics

Video:: Talking Heads- “Nothing But Flowers” w/ Johnny Marr & Kirsty MacColl

"A different kind of compan. A different kind of car?" ~Saturn tagline 1990s
"A different kind of company. A different kind of car"? ~Apologies to Saturn tagline of the 1990s

Notes from North of 49ºN

It’s not often I agree with Tom Friedman, but last fall when I was preoccupied with the US general election, teaching, and associate directing a center, he was advocating not just a bailout, but a green buildup.  He quoted Van Jones, author of The Green Collar Economy::

“It’s time to stop borrowing and start building. America’s No. 1 resource is not oil or mortgages. Our No. 1 resource is our people. Let’s put people back to work — retrofitting and repowering America. … You can’t base a national economy on credit cards. But you can base it on solar panels, wind turbines, smart biofuels and a massive program to weatherize every building and home in America.”

Friedman was in favour of attaching green strings to bailouts, an idea I think warranted further study, at the very least.  Fast forward 9 months and focus on the province of Ontario, where at the federal level, the Conservatives {Stephen Harper}, and at the provincial level, the Liberals {Dalton McGuinty}, jumped on the US bailout bandwagon to a tune of $9.5B or $10.9B Canadian.  This is in addition to the Obama administration’s $49.8B.  The combined US and Canadian bailouts are worth 130 times the present value of GM.  Here’s what both Harper and McGuinty had to say about this::

“We had to save it all or have zero forever,”

–Stephen Harper, Prime Minister of Canada

“The alternative would have been a devastating blow to Ontario families and communities.”

–Dalton McGuinty, Ontario Premiere

The troubles in the industry are not new news and CBC has a chronology of layoffs.  I’ve alluded to this bailout before and the scant jobs it will save, but here are the specifics in terms of the Canadian GM assembly line::

“At present GM Canada has 12,000 hourly and salaried employees, but that number is expected to shrink to about 5,500 over the next couple of years. About 1,100 of the new total is expected to be salaried jobs, which are unrelated to assembly operations. That means Ottawa and the Ontario government are together spending an unprecedented $2.1 million for each assembly job at GM Canada they hope to save.”–Time, 1 June 2009

It’s likely that GM suppliers will also be affected, a $7.2B industry employing 45,000 workers, but it is unlikely that all these jobs are at risk.  While Canada accounts for about 19.4% of North American production, Canadian cost advantages have been eroded by a stronger Canadian dollar, a weakened US union in the UAW, and strong and strategic bargaining by the Canadian Auto Workers union.

While the situation looks gloomy for manufacturing in Ontario, quite a few are banking on green jobs.  So much so that St. Clair College has a 2-year green jobs programme and the province has a commitment to clean energy.  Currently, the province gets 25% of its electricity from coal, but wants to shut down all of its coal plants by 2014.  The province is hoping to convert some of the plants to carbon-neutral biomass, although the yields will be lower.  The slack will need to be picked up by alternatives, with greener options being wind and solar.  Ontario’s Climate Change Action Plan calls for greenhouse gas emission reduction to 6% under 1990 levels and the new Green Energy Act is meant to protect the environment, regulate, and spur investment in green technologies.

Policy & Innovation:: The California Example

The PPIC has a report on the effects of California’s Zero-Emissions Vehicle {ZEV} mandate, particularly in the 1990s and early 2000s.  During this time, the California government, through the Air Resources Board {CARB} initially set in 1990 requirements that by 1998 that 2% and by 2003 that 10% vehicles sold in California would be ZEV.  Suffice it to say, concessions were made over time, but the original mandate set the wheels in motion for innovation.  The effects of the program were::

  • The policy spurred patents in near-term technologies
  • CARB arguably responded to technological changes when revising the program
  • Technological spillovers resulted in a greater number of indirect  innovations
  • Increased market development for emerging technologies
  • Broadened design parameters
  • Lower emissions in California

The program, albeit complex and not without politics and controversy, shows how policy can help to shape market-based activity in ways that would not occur otherwise.

Ontario:: Good Money After Bad

While not surprising, Canada and Ontario should have considered asserting themselves more, rather than caving to bailout pressure.  Why not move forward to develop policies that help transition away from declining industries and in-line with over provincial objectives?, e.g., environmental and energy.  How I see it is that the US and Canada are bailing out a company the capital markets have little faith in and now face the daunting task of rebuilding with a new CEO, “Big Ed,” who has a reputation for being an empire-builder.  I question having an empire-builder in charge of a company needing to be leaner, a company needing to reinvent itself overnight.  Let’s hope he indeed  “learns something about cars,” and doesn’t make mistakes like this one, the old CEO Rick Wagoner copped to:: “axing the EV1 electric-car program and not putting the right resources into hybrids. It didn’t affect profitability, but it did affect image.”

While there have been debates on whether or not the US needs an auto industry {NY Times} and criticisms abound, such as this one on how GM betrayed our trust, Canada is nevertheless a 12% equity shareholder.  This creation of a capitalist-state joint venture opens up a huge can of worms, as which interests will prevail and how to balance autonomous management and control versus paternalism?  I think the answers are in economic sociology, a topic for a future post.

Song::Canada” – Low


Twitterversion:: #Canada #bailout of #GMfail =more #fail ? Can #Ontario still dvel #greeneconomy & innov.w/enviro&energy policy objctves?  @Prof_K


Notes from north of 49ºN

While the Vancouver Canucks advance in their bid for the Stanley Cup, the British Columbia provincial election is heating up, as the NDP has pulled within 2 points (39/41 +/- 3.4) of the not-so-liberal BC Liberal Party.  The Green Party is running a distant third at 13%.

One of the big election issues is the Carbon Tax, which is a tax on pollution.  It puts a price on the social costs of environmental degradation {negative externalities}.  The carbon tax was initiated last year in BC, which should give Obama insights into his plans to address carbon reduction.  {Obama’s already talking of a nationwide “cap and trade” policy.}

BC Carbon Tax & The Economic Sociology of the Environment

The BC carbon tax claims to be revenue neutral, meaning it returns the tax in the form of lower personal and corporate income tax.  The tax shuffles funds around in the following manner where one-third of the carbon tax revenues are paid by individuals and two-thirds by industry, while two-thirds of the tax reductions benefit individuals and one-third benefit business.  A fairness issue arises, as some businesses can pass the tax along to consumers, depending on the elasticity of demand.  The carbon tax is initially (effective 7/1/08) $10 per tonne of carbon dioxide equivalent (CO2e) emissions (2.41¢ per litre on gasoline), but will increase each year after until 2012 to a final price of $30 per tonne (7.2¢ per litre).  For US readers, this is currently 7.68¢ US per gallon of gasoline and will go up to 22.9¢ in 2012 (4/30/2009 exchange rate).

One of the issues brought up is that while the BC Liberal Party is imposing a tax on pollution, it’s allowing the export of carbon-producing fuels to leave the province untaxed.  In addition, the government is allowing offshore drilling for oil as part of their energy policy.  This is opening up the BC Liberals to charges of hypocrisy.

So, in the past 10 months, what has been the effect?  I think it’s impossible to gauge the results, given that gasoline prices have gone down and the BC economy is in a recession, although with lower unemployment than Washington, Oregon, and California.  I have to admit I am skeptical that the BC Liberal’s  carbon tax policy will actually reduce carbon emissions.  Why?  This Canadian Dimension editorial introduces a paradox::

“By way of comparison, the average retail price of gas in Canada, adjusted for inflation, has risen forty percent in the past five years. The increase is the equivalent of $120 per tonne of emissions — four times as much as the maximum tax proposed in B.C.

But consumption did not decline. In fact, during the same period both gasoline sales and greenhouse-gas emissions rose to record levels…

In short, the B.C. carbon tax is regressive, shifting ever more of the province’s tax burden onto working people, while reducing taxes on corporations. It will do nothing to cut emissions or slow global warming.”–“B.C.’s Carbon Tax: A Regressive Hoax” from Canadian Dimension (4/30/2008)

How can this be?  Are the economists that off-base?

As an economic sociologist, with a BA in the dismal science, I know at least some of the answers.  Increasing prices through a Pigouvian tax without consumption/production alternatives offers no incentives to alter behaviour away from carbon emitting activities.

A Northwestern sociologist, Monica Prasad, offered this interesting observation::

“The one country in which carbon taxes have led to a large decrease in emissions is Denmark, whose per capita carbon dioxide emissions were nearly 15 percent lower in 2005 than in 1990. And Denmark accomplished this while posting a remarkably strong economic record and without relying on nuclear power.”

“On Carbon, Tax and Don’t Spend,” NYT (3/25/08)

How did Denmark do it?  According to Prasad, Danish policymakers subsidized environmental innovation by businesses and investing heavily in alternatives.  The idea here is to give incentives to move consumers and businesses away from carbon emission generating technologies towards renewable ones.  As a sociologist, I’m wary of talk of “pricing” carbon, as it attempts to reduce natural capital (i.e., the environment) with financial capital and the assignment of property rights, politicizing economic activity along the lines of power and wealth.  I’d much rather see policy aimed at moving towards a different technological curve, away from carbon, along with an increase in investments in public infrastructure (e.g., mass transit in cities/suburbs) that offers alternatives to carbon-heavy practices.

The Politics of Carbon: “Axe the Tax”

Carole James, leader of the NDP, has been advocating dumping the carbon tax in favour of a “cap and trade” approach, the direction Obama is leaning towards.  The NDP “axe the tax” stance was costing them politically, despite the tax being unpopular, as environmental groups criticized the move.  In this election, there are 85 seats up for grabs.  While the Green Party may siphon off votes from the NDP, it is very unlikely that a single seat will go to the Greens.  Given the overall BC Liberal Party stance on the environment, environmentalists may have a tough choice on May 12.  The carbon tax may fade away as a key issue, as the economy and issues of ethics and integrity might come front and center, but perhaps the economy and the environment will become an intertwined issue.

I’d like to see policies in BC and elsewhere move towards weaning citizens away from carbon.  A recent Wired Magazine article  goes over many of the issues involved in green technologies, including who will pay for the costs of innovation.  I think the BC Liberal carbon tax isn’t the best policy, as I don’t see it reducing carbon emissions and is mute on carbon-emitting fuels being exported and untaxed.  Whichever party wins, I see the BC government as playing a key role in spurring behavior changes through investments and incentives, but who will foot the bill, particularly given a tight budget?

  • What are your thoughts on a carbon tax?  (In BC or even in the US)
  • What are your thoughts on policies that create incentives for businesses & residences to adopt new greener technologies or retrofit carbon-based ones?
  • Should policy focus on investing in new green technologies?  How much should government foot the bill? Should green be linked to economic recovery plans?
  • What would the candidates & the “Fake Tweeple” candidates say?

differencebetweentheprotestantandcatholicchurchservice-1024x768-5334I’ve been thinking about José’s blog on Luther’s Freedom (2/19), which reminded of Max Weber’s The Protestant Ethic and the Spirit of Capitalism (PESC).

I find many of these ideas to be interesting.  The idea of Luther’s Reformation as a catalyst for change in terms of social relations in markets is pretty heady stuff.  I see the Reformation as the obvious move away from the [ideas/ideals] of the Catholic church (and its take on absolution and salvation, which was often criticized from within), which also marked a shift (in my opinion) a new era of spirituality, going from a more commutarian approach to an individualistic one, particularly under Calvinism.

After the Reformation, salvation was divorced (no pun intended) from leading a Christian life.  Pascal’s wager was irrelevant, as man could not influence God.  Nevertheless, through work could man serve God.  One’s profession was one’s calling.  It was later developments in Protestantism, i.e., John Calvin, where one couldn’t know for sure if they were saved, BUT success might be an indicator of it.  Hence, the Protestant work ethic was born.  It gave people meaning, as opposed to wallowing in nihilism due to not knowing one’s eternal fate.  Actions became centralized around the individual.  Community wasn’t dead, but status and legitimacy were now focused more than ever towards personal success.

Slouching towards late capitalism (or postmodernity), spiritual life was usurped by the profane.  The final fall of mediaeval asceticism?  The ascendance of bourgeois ideology?  Materialism filled in the gaps of meaning.  (S)he who dies with the most toys, wins?  Brands become the symbols/totems that hold meanings.  Nike = transcendence.  Coca-Cola = global community.  Apple = cool rebellion.

While I find Weber’s PESC to be interesting, I think that the main idea is that the cultural context matters when it comes to determining the roots of the various flavors of capitalism, which is being fleshed out with recent research.  One could write a paper on the Shintoist ethic and the divine spirit of capitalism to explain the rise and fall of Japan, layering how feudal structures were thrust into capitalism under Meiji and how, decades later, overembedded networks of people and organizations were both a boon (70s-80s) and an albatross (90s-00s) to economic growth.  Cultural context.

  • Is the trajectory of Protestantism responsible, at least in part, for our current era of materialism?
  • Was the trajectory inevitable?
  • If so, what does this say about Luther’s freedom?
image:  “Difference between the Protestant and Catholic church service” Cranach the Younger