Read more on Medium here …
Read more on Medium here …
Networks are the new, successful structure of organizations, be it in trade and commerce (Amazon, Alibaba, Uber, Airbnb, …) or in organizing work. Employed work is being increasingly replaced by freelance: platforms offer virtually everything from secretarial to project management. The concept of employment is dying while it still serves as the main basis of a social contract that is the result of an epoch of negotiations shaping something like a symbiotic connection of mutual dependencies between employers and employees. The further development of society suggests that this is no longer viable. The current social contract is basically dissolving before our eyes: the relation of the players involved in economic life needs to be redefined to reflect the changes that are currently materializing in society.
During the transition from the Industrial Society to Network Society, light-weight network structures are replacing the slower, heavily process-laden silo structures of the Industrial Age. Networks in this sense orchestrate assets instead of owning them. By rigidly adhering to old structures or trying to preserve them by tightening up regulation, we could miss the opportunity to design a new framework that is going to be inevitable some time soon anyway. Employment is being continuously replaced by freelance and short-term contracts. In the US more than 40 percent of workers held so-called “insecure contingent jobs” in 2015 . The tendency of this is strongly increasing.
The transition to a new epoch hasn’t only manifested itself in a radical transformation of society and organizational structures as well as the disruption of business models. We also see phenomena resurface that were typical around the advent of the last epoch when craftsmen and farmers were driven out of their work and had to queue for underpaid labour in the new factories that disrupted basically all types of business. Those recurring patterns are
i.e. a loss of trust between citizens and the elites;
3. increased insecurity in personal life planning – considerably more than during other times.
Previously as well as currently the reason for an emerging imbalance between societal groups lies in the ability to use or own the new culture techniques. This enables the (new) elites to gain a substantial economic advantage or power over those who do not own or cannot yet use the technologies of the new age. The other reason for a tilt of economic scales in society lies in the fact that the social contract of the ending epoch doesn’t work with the social and economic structure of the new age.
It seems that a new epoch demands a new social contract. The current social contract in its broader sense dates back to the 18th century when, among others, Jean-Jacques Rousseau published a draft in 1762. This foundation has seen negotiations and an evolution of adaptations across the entire Industrial Age, but the necessary amendment for the Network Society hasn’t surfaced so far. Some of the following may be useful to discuss in this context.
Part 1: From representative to participative democracy
As a cornerstone, every social contract lays out the form of government that respectively determines with whom the will shall be vested in a society. With the current provision of democracy increasing difficulty has surfaced recently.
Currently, the appreciation for democracy is in a free fall: The World Values Surveys  show a scary decrease in the appreciation for living in a democratically governed country. In the US the appreciation for democracy falls from approx. 75 percent by those with the birth years in the 1930s to just over 30 percent with those born in the 1980s. Besides, democracy can be abused by authoritarian leaders and be degraded to a sheer legitimation tool while citizens are deprived of real participation. The recent tendency that authoritarian leaders and groups see massive gains in the electorate in a series of western democracies is nothing short of an alarming development. Donald Trump, Marine Le Pen, Nigel Farage and the Leave campaigners in Great Britain or the AfD in Germany exemplify this trend with their sharp rise in success in stark contrast to the average share that such groups in society typically occupy.
What can such a necessary advancement of democracy look like? The social contract of 1762 placed a strong emphasis on the rights and duties of the individual. From today’s viewpoint, a new version would need to add duties and responsibilities for the community and for the collective. In short, participation would need to be established as a right and a duty. The proposal: Advance democracy from the current representative democracy to a participative democracy.
How could this be organized? Participation can neither come as a sheer plebiscite inflation nor as pure online voting. Referenda as such are extremely open to abuse when misused as a legitimation tool where badly informed citizens vote on issues that have been populistically manipulated. Pure online participation without offering a follow-up live discussion (in whatever format) basically conveys the underlying message that “We actually don’t want to talk to you anyway.” Participation is also not to be imagined as 7,000 people gathering in a conference hall and speaking simultaneously.
Participation that works comes in two useful forms: The one is personal engagement in civil society projects like in disaster relief and in all kinds of social services. On the other hand, participation may materialize in contributing to public projects, where persons who are interested or competent in a topic will join the discussion and development of public policy and programs. One example could be the Digital Agenda of the City of Vienna, where citizens co-created the digital strategy of the municipality and collaborated even in follow-up projects.
This type of co-creation leads to better endorsement and legitimation of programs that have been developed together. Besides, the complexity of today’s society and factors of influence can be considered and integrated much better by the wisdom of the many than by any small team.
The new paradigm would need to be rooted in a personal obligation and readiness to take responsibility for ourselves as well as for others and the community as a whole. In a participative democracy it’s less about being important but more about making a contribution.
Part 2: Commitment to balanced economic policies
Small incomes and securing the subsistence of people earning them will be one major touchstone and key challenge of a freelance Network Society. Countries in which medium and lower incomes slide into poverty or considerably lowered life standards see a massive erosion of voters turning to radical or populist leaders or parties. Two examples: In 2015, the real wages in Great Britain were 7 percent below the level of 2007 (while they were 5 percent above 2007 values in Canada). The real wages of the lowest 10th percentile of incomes in the US today are below the values of the year 1979 (!) – the medium real wages are more or less unchanged since 1979 (!) – only the highest 10 percent of incomes saw a decent increase. Trump and the Brexit vote seem explained (the same applies to a series of other countries). A further delay of tax relief for small incomes avenges itself on the parties of the political center. Fortunately, some countries have quite recently improved on their corresponding policies.
The social contract in the narrower sense governs – among other things – the responsibilities of employers and employees and will have to address the aforementioned, specifically with regard to small incomes. Social achievements of successful democracies like health insurance and retirement funds as well as continuing professional education will solely burden the freelancers in a network economy without a revision of the current social contract. In addition, freelancers will have to administer themselves and usually need to pay for their own assets with which they do their work: the car of the Uber driver is paid/repaired/insured by the driver himself. Failure to achieve a suitable solution regarding payment and social security will inevitably build up a social time bomb simply by the enormous size of the affected cohort alone. Portable benefits, a share in social insurance as well as new regulations of minimum wages are being considered, but seem to fight a fruitless battle against the fact that companies aren’t bound to contracting services locally (besides services that can only be rendered on site). Nothing can stand in the way of choosing a web designer in Bangladesh via one of the numerous freelancer platforms. Possibly, the deliverables will be similar, but the fee may cost a tenth of what a US or European professional may need to charge to support himself. The competition in the labour market doesn’t need to immigrate anymore. At the same time, the western corporate world cannibalizes the buying power of its own client base: precarious pay and a middle class slowly sliding toward lower living standards, instability and even poverty certainly do not make a decent and solvent consumer base. Demand and growth vanish. The way to a solution needs to consider the negotiation power of the parties involved: The negotiation power of the platform enterprises is evident, while the workers are currently on their own without much weight in the negotiation scale besides their skills. In a labour market that continues to be highly competitive, this may not suffice to wrest decent conditions, especially because workers do not sign individual contracts anymore but sit with standard terms of service on a platform instead. A new way to organize labour will be needed: On the one hand, the negotiation power of workers needs to be re-established and, on the other hand, the uneconomic self-administration issue needs a workable solution. This is where platform cooperatives come in as one possible solution: workers can hold a membership or share and receive services like the administration of their taxes, accounting etc. (that can be delivered much more easily and cost efficiently than if each freelancer did it individually) – while the platform offers the products and services of its members. Such initiatives may be organized as a cooperative or as a not-for-profit organization, with varying membership fees or commissions depending on the numbers of services each member wishes to use. Such cooperative or non-profit platforms would need to reside on community values regarding payment and social standards. Such quality platforms could create a counterweight, as a Cooperative Economy, to the common wage and social dumping in the so-called Sharing Economy – and establish negotiation power and increased efficiency through joint administration. Conclusion: The balance of power stabilizes systems.
Public finance will need rethinking as well: Both in a project at Harvard University and in a much acknowledged paper by IMF economists, underfinanced or badly credit funded systems tend to show higher volatility, instability and overall low growth. Among other things, the authors of the IMF paper point to the austerity regime of their own institution as a cause for the era of low growth that we are obviously in. Mariana Mazzucato explained in a recent Bloomberg interview that if countries manage to achieve a higher growth in GDP with debt financed investment than what the debt service will cost them, they will be better able to rehabilitate their state finances. Underfinanced systems won’t manage to do the same: they remain instable and show too little medium and long-term growth. In September 2016 the OECD issued a similar recommendation. Conclusion: No return without investment.
Tax policies need to be similarly reconsidered for the Network Society. Currently, many countries tax capital gains on a rather low level while labour often sees a two or three times higher tax rate. This leads to efficiency innovation in companies with the effect of a release of labour and capital, the latter flowing into financial markets. In the US this effect materializes e.g. in the infamous share buy-back programs. No wonder: Due to the massive imbalance in the taxation of capital gains on the one hand and labour on the other, investment in labour doesn’t pay off well enough. Market generating innovation, as explained by Clayton Christensen, that creates long-term return and invests in labour as well remains, at large, outside of current investment considerations. Harmonization of the taxation between work and added value or capital gains seems advisable. Conclusion: We shape decisions by shaping taxation.
Part 3: Reduction of rules and regulations
The Sharing Economy demonstrates that a lot less regulation would do. This realization is rather trivial. Every system needs a certain set of rules in order to work well. The point of stable balance between increased efficiency and preventing misuse or damage on the one hand and an uneconomical burden on the other isn’t that trivial a question anymore. Nevertheless, this point of balance should be sought.
Part 4: Education in new culture techniques
The invention of the printing press stands at the beginning of the last era as a symbol: Everyone could suddenly own a book. Great! It was also an advantage to be able to read in order to benefit from the blessings of this innovation. We see the same today. The internet connection would be the same as having a book, however, being able to use it wouldn’t mean operating a Facebook account without major problems for a year. Programming and web technologies as well as information and media literacy are today’s culture techniques that need to become as natural as reading and writing in order to close the digital divide.
Educating children and youth is not going to suffice though: Adults have to be included in these strategies quickly. According to the European Commission, the EU alone lacks well over 400,000 IT professionals in jobs that cannot be filled currently (IT is just one example of the new sought-after professions). At the same time, the economy lays off hundreds of thousands of workers who lack the currently needed competencies. At the end of an epoch and the beginning of a new one, series of professions disappear and lots of new ones emerge – considerably more than during the times in between. The list of historic professions on Wikipedia is certainly worth a look. We are no longer lifting heavy stuff by hand – we are using cranes today instead. Mankind continuously rids himself of drudgery.
Another new culture technique that will be needed while we venture into an emerging Entrepreneurial Age: business and economics education needs to become a common standard for everyone. There are numbers of promising activities in this field, but a standard integration in curricula still awaits implementation. Experimental programs like school children founding a company and running it across the entire school year serve as lighthouse examples for what will be needed.
A further competence in the Network Age and in times of participative democracy will be a sense of community and helpfulness … something that we consequently train ‘down’ in our children: In experiments, toddlers demonstrate that they help each other manage a set of given tasks. At age seven children in the same experiment watch each other fail. This isn’t natural behaviour but a consistently trained one. During the Industrial Age “Competition is good for business” was the agreed road to success. In the Network Age, we may need to shift to the more successful precept “Cooperation is good for business” as we enter the age of collaborative culture, where cooperation outperforms the principle of the lone warrior every time. Should we not manage to develop and cultivate a sense of community and helpfulness in society, we may see the highly complex Network Society characterized by the escalation of self-serving, particular interests and confrontation with a strongly damaging effect on growth and prosperity.
Could mankind agree to managing the current turning point in history more smartly than the last one (reference: the French Revolution)? To accomplish this, we do not need additional rules according to Peter Drucker, but as he puts it: “No country suffers from a shortage of laws. We need a new model.”
 Pofelt, Elaine; Shocker: 40% of Workers Now Have ‘Contingent’ Jobs, Says U.S. Government. Forbes, 25 May 2015. [Online]: http://www.forbes.com/sites/elainepofeldt/2015/05/25/shocker-40-of-workers-now-have-contingent-jobs-says-u-s-government/
 World Values Surveys, Waves 5 and 6 (2005 – 14). Consolidated data from EU member states. Valid answers: USA 3.398; EU 25.789. and:
Foa, Roberto S.; Mounk, Yasha: The Danger of Deconsolidation – The Democratic Disconnect. Journal of Democracy, Vol. 27, No. 3, July 2014.
 Mader, Isabella: Hatred On The Web, Brexit: How The Reptile Brain Blows Democracy. [Online]: http://www.excellence-institute.at/en/hatred-on-the-web-brexit-how-the-reptile-brain-blows-democracy/
 Ip, Greg: Fiscal Policy Makes A Quiet Turn Toward Stimulus. Wall Street Journal, 14 September 2016. [Online]: http://www.wsj.com/articles/fiscal-policy-makes-a-quiet-turn-toward-stimulus-1473870699
 Aghion, Philippe et al.: Volatility and growth: Credit constraints and productivity-enhancing investment. Working paper, Department of Economics, Harvard University, 2005. [Online auf Harvard DASH]: https://dash.harvard.edu/handle/1/27769097
 Ostry, Jonathan ; Loungani , Prakash, Furceri, Davide: Neoliberalism: Oversold? IMF Finance & Development, Vol. 53, Nr. 2, June 2016. [Online]: http://www.imf.org/external/pubs/ft/fandd/2016/06/pdf/ostry.pdf
Direct democracy and participation projects are topical issues while simultaneously an established Western democracy staggers ostentatiously into a self-inflicted crisis and split: The Brexit referendum reveals – virtually in textbook fashion – that our society and its institutions are not yet ready for a participation culture. Interdisciplinary science now helps us understand reasons and necessary development.
With the advent of the Network Society, citizens and staff increasingly expect more inclusion in the decision making processes. Recently, public discourse in many countries highlighted issues that may need to be addressed: public discussion processes and election campaigns have led to a division into (mostly) two camps of diametrically opposed groups that confront each other in a seemingly irreconcilable manner. Stigmatizing voters – like in the current Brexit example – as dumb, uneducated, even as too old (!) or, in the kindest case, as “globalisation losers” is as little useful as generally correct. Resentment will only increase and questioning democracy this way instead of solving the underlying problems may not prove to be helpful.
Even if partly achieved by illicit means as it seems, such protest vote results may briefly deliver satisfaction, but in the case of the UK, a country stands before its own virtual ruins and eventually achieved the opposite of what was intended.
Lately, many have sought the path to confront hatred, to report incidents to the police, or to patiently enter into discussions and point out disinformation … only to find that in populist, reactionist or extremist groupings the stubborn denial of facts fruitlessly wears down every discussion. Nothing can be achieved, nothing.
What is wrong?
In order to understand the mechanisms that stand in our way in this regard, results from an interdisciplinary project offer explanation and help.
Humans achieve the highest satisfaction with decisions and avoid unintended side-effects if they act in a considerate and cooperative manner instead of an impulsive and purely reactive way. In order to understand those different approaches, it is useful to know that we have several areas in the brain that we use for decision making and that these areas bring totally different results. In situations of perceived danger or fear, our so-called reptile brain (in terms of evolution, the oldest part of our brain) takes over and decides impulsively for fight or flight, while the modern, rational thinking brain gets blocked. Therein lies the explanation for hatred on the web and phenomena as witnessed in recent electoral showdowns as seen in the Brexit Leave campaign or with the stunning rally of Donald Trump. The reptile brain knows only two things in fighting: victory or submission. Therefore, it fights or discusses until the other one gives in by all means – and this is acted out unfortunately on the level of the reptile brain. This area of our brain is also responsible for complete denial in situations of perceived (not necessarily really existing!) danger – ignorance toward facts that stands unshaken in the midst of the best proof: The reptile brain cannot calculate and memorize. Therefore, it also repeats behaviour that failed previously. It only knows fight, flight, freeze – and otherwise food, security and sex. That’s all. For animals in the wild or for reptiles (from whom we inherit this part of our brain), such behaviour is certainly suitable and sufficient. But: The rise of human civilization is owed to overcoming those primitive instincts as they are fatal and result in loss of control, chaos, violence and destruction. For the development of human civilization, a different set of abilities has proven to be successful i.e. cooperative, strategic decision making and conscientious, considerate planning and practices. Those are seated in the so-called neocortex, the modern human brain that differentiates us from reptiles and lizards. Now how can we avoid being trapped by our reptile brain in fear-driven behavior and reacting like a wild animal – thereby cutting us off from better decisions? This is a matter of being aware of the mechanism and then of training. And how can politics prevent large groups of the population getting stuck in fear even if that kind of fear is almost never appropriate in western civilization? How can it be prevented while other political forces heavily engage in creating that type of fear?
Perceived or real loss of financial security or in social standing makes one vulnerable to fear – and as a consequence, allowing the reptile brain to take over and create all the phenomena described above, from hatred to fight and back. A first series of tests and long-term comparisons showed that workers seem to feel a loss in real wages only with a delay of several years – only then private consumption adjusted. With the same delay populist forces (mostly from the far right) see dramatic gains in the electorate, while the center of the political spectrum suffers significant losses (examples are Germany, Great Britain, Austria and currently also the US with Trump). However, real wages are certainly not the only indicator. In France, the same effect seems to emanate from unemployment instead. Those countries in the comparison with a display of constant, albeit moderate, growth of real wages do not show the same polarization and no diminishing effect on the election results of the political center (example: Canada). It may be somehow obvious, but it seems that secured buying power and income makes people immune to a number of irrational fears. Maybe this is the reason why right wing parties like the Austrian FPÖ or candidates like Trump vote against policies that are supposed to help strengthen lower income groups (unless this happens unintentionally). Departing from the logic that a financially stable population cannot easily be radicalized, such a strategy seems quite understandable.
In the UK, real wages in 2015 amounted to the same they were in 2004 – after a continuous tumble since 2009. Following the logic, these first results seem to confirm the Brexit vote and would be less a surprise but rather consequent.
According to the US Bureau of Labour Statistics in the US, real weekly wages of the lower and middle income groups have remained completely unchanged since 1979 (!) – which is the observation period currently considered in this project – (1979: $ 383/week; 2014: $ 379/week), while the highest (10th) percentile rose from $ 1.422/week in 1979 to $1.898/week in 2014. Regardless of the respectable performance of the Obama administration with e.g. Dow Jones at around 6.600 points in 2009 and today over 17.000 points, with unemployment cut in half from 10% to under 5%, with a considerably increased GDP and further demonstrable results compared with predecessor G.W. Bush – all administrations share one key weakness: the stagnation of the lower and middle real wages. The “prettiest” indicators seem not to resonate with the citizens unless they arrive in the wallets of the middle class and lower income groups. Seeing that the middle and lower income groups form the vast majority of the population of every country, the current successes of Trump are explained – as he clearly addresses fear with his ideal-typical reptile brain campaign style.
According to the International Labour Organization (ILO), Canada increased the real wages between 2007 and 2013 by a full 5 percentage points. Among the currently available data in this project, Canada is the only positive example.
Public communication unintentionally becomes brainwashing if, for example, it is suggested over longer periods that austerity programs and cuts in social benefits are because “we don’t have money”. Eventually, people will believe it even if their salary checks don’t show it (yet).
Today everyone can post content to the web and make it look like information or news. When, if not now, should we consider upgrading the information and media literacy of the population?
While everyone can post to others directly, media are still called to duty: election results are heavily influenced by the reporting style and content of online and legacy media and, in some cases, it isn’t clear whether some media are still reporting news or are already engaging more in hardcore politics instead. Garish, lurid lead stories of the tabloid media therefore fall under the communication for the reptile brain as described above. While the latter tries hard to sound intelligent and convincing, poor quality facts and even disinformation are to be found too often. Interestingly enough, any electorate that has successfully been fooled into reptile brain reflexes will excuse even proven falsehoods up to open corruption as long as it serves the goal of the annihilation of a perceived enemy. This explains why Leave voters in the Brexit referendum weren’t bothered that politicians like Nigel Farage withdrew their promises hours after the vote and stepped down shortly thereafter due to the lack of a concept – perhaps because the actions were driven by reptile brain anxieties and, therefore, consequences were not the focus.
For individual politicians on the one hand and for economies and economic regions like the EU on the other, there is no reason to publicly reprimand the British. It is too unfortunate that EU policies, institutions and governments are jointly responsible for many of the current developments and shortcomings that have driven citizens to such grounds for refusal. Furthermore, all this may have been jointly caused by austerity policies that led to a loss in real wages in many countries without tackling the necessary structural reforms in a consistent manner, which leaves us with the current worrisome tendencies in voting results and split countries. In a notable recent article “Neoliberalism: Oversold?” IMF economists criticize and relativize IMF’s long-term austerity line.
Neither governments nor the European Union can be relieved of their responsibility regarding their processes and communication. In times of high transparency governments are a danger to themselves once they engage in blocking each other in a coalition and therefore fail to implement policies. Or, in case of the EU, that sets out to pass treaties like TTIP with far-reaching consequences for the entire region in secretive “reading rooms” as classified information for delegates or discusses to continue CETA without the national parliaments. Co-creation, a culture of involvement, transparency and a well-informed, economically stable public seem to be minimum requirements in our new networked society.
The last era change didn’t just bring the disruption of craftsmen and farmers by early industries. It also brought the disruption of monarchies through democracies. The current era change replaces the silo systems of the industrial society in the economy and government with flat network structures, where legitimation for management or in politics is not awarded with the office but generated by citizens’ endorsement of co-created policies. Hence, all players involved (politics, media, citizens) may be well-advised to start working together in developing ways for how to deal with information and collective decision making.
As long as entire societies (literally!) unconsciously operate in reptile mode, the current crisis of division, separatism and nationalism will deepen. Once we come to terms with the fact that this is about fairness, safety, collaboration and communication we will need to get down to doing exactly that every day. Solutions lie closer than they may seem – they require one basic decision to start with: to stay out of the reptile brain. The distance between the reptile brain and the neocortex is actually rather short.
States or communities of states will require a set of new values suited for times of great transparency and complexity where bonding and economic fairness are not just for some but for just about everyone. Until real wages live up to the overall performance and productivity of a country we will likely see more of division and hate. The Age of the Sharing Economy will have to deliver sharing on all levels: from sharing cars and flats to sharing prosperity and sharing government. In the cases of the US, the UK or the EU, their names contain “United” or “Union” after all.
Isabella Mader MSc
1 August 2016
This article contains first findings from an ongoing research project called “Democracy 4.0”. Further results will be published as they become available.
For any questions you may have please direct them to info [@] excellence-institute.at.
Explanation re graph US real wages:
90th, 75th, etc. denominate so-called percentiles that are used to differentiate income groups in the US.
 See compilation by A. Hirschal [in German]: https://www.facebook.com/adi.hirschal/posts/1053528918011079
 One of many examples is Minnesota http://www.huffingtonpost.com/entry/mark-dayton-minnesota-economy_b_6737786