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Rebalancing Society: Pipe dream or prophecy?

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Book Cover: Rebalancing Society

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How can we improve the world?

It's a question that has been asked -- and answered -- repeatedly over time by philosophers, statesmen, economists, sociologists, politicians, historians, writers, and thinkers. In 1863 Nikolai Chernishevsky famously wrote Что делать? (What is to be done?). There have been many prescriptions. Henry Mintzberg has another.

Mintzberg is a fascinating fellow whose interests and imagination range widely. Educated as a mechanical engineer at McGill, he has for years (since 1968) been teaching management studies there. Over that time he's written some 170 papers and 17 books on a wide variety of management related issues. Rebalancing Society: Radical renewal beyond left, right, and center (the preceding above allows one to download a free PDF version of the book) is Mintzberg's provocative and suggestive pamphlet/book, at once an socio-economic analysis of the world, a manifesto and call to action, and a prescription of what needs to be done.

Henry MintzbergThe Plural Sector

"You can have data without information, but you cannot have information without data." -- Daniel Keys Moran

At its heart is a simple observation. In contrast to the public versus private dichotomy that so often figures in political discourse, Mintzberg sees society as consisting of three primary sectors:

a) The public, meaning all those mechanisms and organizations that are administered by governments (at all levels) on behalf of the public;

b) The private, meaning all those mechanisms and organizations, from single entrepreneurs to multinational corporations, that create for-profit economic activity; and

c) The plural, meaning all those mechanisms and organizations, from community groups and associations, volunteer networks, unions, cooperatives, charities, religious groups, all manner of non-governmental organizations, and entities such as (for example) universities and hospitals that (however they derive their funding, and often it is with a mixture of public and private funds) nonetheless are neither public organizations (meaning belonging to or controlled by governments) nor private ones. They are often run by boards of directors. They 'belong'  (according to one's perspective) to no one or to everyone. And they are not-for-profit.

public-Private-Plural GraphicMintzberg's thesis is that each of these sectors -- public, private, and plural -- does certain things effectively, and that a healthy society requires a healthy balance between them. An over-emphasis on one (and consequent under-emphasis on others) is problematic and frequently dysfunctional. 

For example, there are compelling public policy reasons why infrastructure (road, railways, bridges, sewage disposal, water provision, etc.), primary and secondary education, monetary policy, policing, defense, the justice system, and many other services should be provided by the public sector and not by private, for-profit enterprises. Similarly, in terms of entrepreneurship and the development of innovative commercial products and services within a healthy competitive environment, the private sector excels. There's no need for government to intrude in this activity, simply to regulate it in ways that satisfy the greater public good. 

Meanwhile, the plural sector, by not being driven by the profit motive, being accessible to everyone, and being owned by no one, is able to take action and represent the interests and desires of not only people, but entities like the climate and environment in ways that neither the public or private sector are necessarily well positioned to do. "Communityship" is the term that Mintzberg coins to call it, in contrast to "citizenship" in the public sector (and perhaps "entrepreneurship" in the private sector?).

It's an attractive notion and there are many intuitive reasons why such a "balance" between public, private, and plural sectors in society would seem to make sense. 

This isn't, of course, a completely novel suggestion. The recognition of a "third sector" is something that political scientists, sociologists, economists, and others have been writing about for years, sometimes under the names of the social economy, the non-governmental sector, the not-for-profit sector, the voluntary sector, civil society, and the third sector appellation itself. There are varying definitions of what these encompass, and Mintzberg's notion of the plural sector may subtend a wider ambit than most. With a simple name that, moreover, begins with the letter "p" (like public and private) it has an attractive and engaging ring to it that helps solidify the concept. In my view, Mintzberg's proposal is engaging, intuitively attractive, and worth exploring and Rebalancing Society begins that process. 

Tall on ideas, short on details

"Data! Data! Data! I can't make bricks without clay!" -- Sherlock Holmes

 The Communist ManifestoThat said, Rebalancing Society is less a book (in places Mintzberg refers to it as a pamphlet) then it is a Coles Notes treatment of a book that has yet to be written. The central text of the book is 75 pages long (in 12 point font) with an appendix, references, index, and notes that bring the whole up to 151 pages. It's an easy, breezy read with a couple of simple illustrations, and no graphs, tables, or statistics. And, in the context of what Mintzberg is trying to do, namely introduce and popularize the concept of the plural sector, this may well be a good approach. If you want an idea to catch fire and be read by the maximal number of people, keep it simple, clear, direct, and accessible. I don't know how many words it runs, but it's probably not much longer than The Communist Manifesto and the Quotations of Chairman Mao Tse-tung. It reminds me of Robert Reich's brilliant video, The Truth About the Economy, a lightning-fast analysis of the economy and the reasons for inequality, all in less than two minutes and fifteen seconds.

This strength is also, in part, a weakness, since the analysis developed by Mintzberg is at times very sketchy. I'm onside with Mintzberg in all the essential sentiments of his thesis, although the details to support this are sometimes very thin. In particular, in trying to marshal historical evidence to support his ideas, Mintzberg's analysis of history is so slender that it is prone to the criticism of being superficial. For example, the capitalist versus communist dialectic of 20th century history, the collapse of communism with the Berlin Wall, and therefore purported triumph of capitalism narrative is too much of a quick gloss. What it leaves out is almost as important as what it includes, and there are a number of such instances.

Mintzberg also draws simple contrasts between the United States (too much emphasis on the private sector and an increasingly dysfunctional public sector) and the former East Bloc (all public sector and no private sector). It's a highly simplified sketch that does have some truth (although the USSR and East Block could well be considered as representing state capitalism in which private interests were simply devoured by the state) but also cries out for a wider basis of comparison, for example, the social-democratic models of governance and economy that have been developed in the Nordic states. However, a sketch is a sketch and not a rendering on the ceiling of the Sistine Chapel – one does have to simplify and omit many details. 

Where's the evidence?

"Errors using inadequate data are much less than those using no data at all." -- Charles Babbage

 Quotations of Chairmen MaoThere is one important weakness in Rebalancing Society, namely the lack of data to support the thesis. The idea of a balance between public, private, and plural sectors leading to an overall better society is intuitively engaging and Mintzberg supports his case with various theoretical arguments and some anecdotal accounts. But there's no empirical evidence adduced that could actually show that this is the case. Moreover, if we take Mintzberg's advice, and try collectively to work towards a society in which these sectors are in better "balance," how can we evaluate our efforts? How might certain policies, programs, or strategies improve or worsen that balance? How might we evaluate whether the consequences of an enhanced and strengthened plural sector lead to a better -- or worse -- society. There's not a statistic, number, table, or graph in the entire book to provide such evidence, or an analytic technique by which we could conduct such an appraisal.

Now, for a manifesto this may be fine.  There's no data, empirical evidence, algorithms, or an analytical method of this kind supplied in The Communist Manifesto or the Quotations of Chairman Mao Tse-tung either. A frequent first step is to explain the idea and engage people in consideration of it, although Thomas Piketty's Capital in the Twenty-First Century provides a brilliant illustration of a socio-political and economic analysis that is underpinned by so much convincing empirical evidence as to provide a QED proof of the thesis at the same time it is presented (see: Thomas Piketty: Economics Transfigured).

Testing Mintzberg's Thesis

 The Third SectorBearing the above in mind, let's make a very preliminary foray to see if there is some evidence that could bear out Mintzberg's thesis. 

A 2008 study by the International Centre of Research and Information on the Public, Social and Cooperative Economy (CIRIEC) called The Social Economy in the European Union provides some excellent data on employment in the social economy of 29 countries of the European Union (Table 6.2) and also on the on the scale of volunteer activity (Table 6.5). The social economy doesn't cover exactly the same ground as the wider plural sector as defined by Mintzberg, and the number of people employed by this sector isn't a full representation of the sector's activity, but for the purposes of a first order inquiry it's reasonable to allow employment in the social economy (or the number of participants) to serve as a proxy for the "vibrancy" of the plural sector.

Another similar data set is provided by a 2004 book entitled The Third Sector in Europe by Adalbert Evers and Jean-Louis Laville that provides similar data on the employment in the non-profit sector (i.e., neither public nor private) in a smaller number of European states and several non-European ones (Australia, Japan, Israel, and the United States) as a basis of comparison. Again, the definition of what is included is not as broad as that of Mintzberg's plural sector, and employment in it is not a full representation of its total activity, but for a first-order inquiry, it can serve as a not-unreasonable proxy for the health and vibrancy of the plural sector.

What then to compare this to?

Does a robust plural sector lead to greater economic equality?

"In God we trust; all others must bring data." -- W. Edwards Deming

Inspired by Piketty, we ask, is there evidence that a more robust plural sector improves economic outcomes in such a way as a to make a more egalitarian and less unequal society?

The United Nations Development Program, the World Bank, and the CIA's World Factbook all calculate and provide various measures of the economic inequality of nations. These have been usefully compiled in a Wikipedia entry entitled List of countries by income equality. These measures of inequality include: 

1) R/P 10%: The ratio of the average income of the richest 10% to the poorest 10%;

2) R/P 20%: The ratio of average income of the richest 20% to the poorest 20%; and

3) The Gini Index, a quantified representation of a nation's Lorenz curve.

All of these have different strengths and weaknesses, but particularly in a comparative context they can shed light on the relative economic equality/inequality of a nation's citizenry. Thus, comparing the numerical strength of the social economy in various countries with the level of economic equality/inequality found there might help us to answer our question. In countries where there is a much stronger social economy, do we see less inequality?

What do the results show? In comparing all three of the above measures (R/P 10%, R/P 20%, and Gini), as calculated by the UN, World Bank, and CIA, in both European Union states, and in others (as above) there is no meaningful correlation (as examples see Figures 1-3 below; I conducted 15 separate analyses with similarly uncorrelated results). The trend lines of all these metrics of economic inequality are flat or decline slightly over the increasing trend lines of social economy engagement, and the correlation coefficients (a measure of how closely these datasets match one another) show very weak negative correlations (in the case of the social economy data set) and very weak positive correlations (in the case of the third sector data set). Translation: this first order comparison shows no relationship of the size of the social economy or third sector leading to greater economic equality or inequality. 

 Rebalancing Society

 Rebalancing Society

 Rebalancing Society

Now, it may be that either there is no such relationship i.e., that having a vibrant social economy or third sector, doesn't by itself result in an economic redistribution that would decrease (or increase) economic equality. Or it could be that the metric I have chosen (i.e., the scale of employment or involvement in these sectors) doesn't properly reflect their impact. 

In evaluating Mintzberg's ideas, it could also be the case that his definition of the plural sector is wider and isn't properly represented (even as a proxy) by the social economy or third sector. It would be useful for a much more detailed analysis of economic data to be done to address our question, since if a robust plural sector does not have an impact on economic inequality it would greatly limit the value of trying to build and balance this sector as per Mintzberg's proposals. 

Does a robust plural sector improve people's quality of life? 

"What gets measured, gets managed." -- Peter Drucker

Rather than focusing simply on economic metrics, how might a robust and vibrant plural sector improve the overall quality of the lives of people in ways that might include (but not be limited to) their economic well-being; i.e., that would extend beyond economics to other areas of their lives? 

This is the approach of the 2015 World Happiness Report edited by John Helliwell, Richard Layard, and Jeffrey Sachs (with chapters written by several other authors). Originally prepared for the United Nations Development Program (UNDP) it is a project that evaluates human well being on the basis of a number of metrics including i) GDP per capita; ii) social support; iii) healthy life expectancy at birth; iv) freedom to make life choices; v) generosity in society; and vi) perceptions of corruption in the country. Individual metrics to reflect these six parameters were developed and then they were combined in a single, weighted, synthetic "Happiness" ranking.

The results here are much more promising. In evaluating 25 states in the European Union (for which there was data), there is a moderate (correlation coefficient, 0.6084) positive correlation between the scale of employment in the social economy and the Happiness Index (Figure 4). 

 Rebalancing Society

There is also a moderately strong (correlation coefficient, 0.6789) positive correlation between the scale of volunteer activity in the social economy and the Happiness Index (Figure 5).

 TRebalancing Society

In the case of the third sector dataset, the correlation is significantly weaker (correlation coefficient, 0.4251), but the trend line is also positive (Figure 6).

 Rebalancing Society

[A statistical Nota Bene: A correlation coefficient of 1.0 indicates an absolute positive correlation between two data sets; a correlation coefficient of -1.0 indicates an absolute negative correlation between two data sets; a value of 0 indicates absolutely no correlation. How high a value can be considered significant depends of the data set one is working with, but in the social sciences (where there are many extraneous complicating factors) a value of 0.8 can be considered a strong correlation.] 

Thus, even employing this preliminary first-order comparison of the social economy with the happiness and well being of a society appears to give some weight to the contention that there is a positive correlation between the two. In other words, the more robust and vibrant the social economy of a country is, the greater the happiness and well being of its citizens (and recall, that the Happiness Index includes a weighted component of per capita GDP so it does include an economic parameter in addition to others). 

Sherlock HolmesTherefore, if the social economy can be taken to be a reasonable proxy for Mintzberg's plural sector, this would appear to add empirical evidence to the case that a robust and vibrant plural sector improves the happiness and well being of citizens. 

As noted previously, these are very much first-order inquires that should be extended with more detailed studies on much larger and more comprehensive sets of data. What is important is finding an empirical basis on which to evaluate Mintzberg's idea of a plural sector, and also to evaluate the impact of policy initiatives that might strengthen or weaken this sector. If we can't find a way of measuring such proposals we can’t ascertain their validity, nor can we determine how best to build and encourage them. 

"I never guess. It is a capital mistake to theorize before one has data. Insensibly one begins to twist facts to suit theories, instead of theories to suit facts." -- Sherlock Holmes

Christopher Majka is an ecologist, environmentalist, policy analyst, and writer. He is the director of Natural History Resources and Democracy: Vox Populi.

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