Tag Archives: networkeconomy

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.

  1. Basic instincts: Neuroscience catches us in flagrante

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?

  1. “It’s the Economy, stupid”: Paying the price for continued loss in real wages

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[1] (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.

Reallohnentwicklung USA seit 1979_eAccording 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.

real wages in cdn and uk

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.

An alternative headline could be: Policies that weaken real wages turn election day into payback day for the political center.[2][3]

 

  1. “It’s the Communication, stupid”: Many problems in politics originate from failed communication

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.[4]

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.

Conclusion

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

Note:
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.

[1] See compilation by A. Hirschal [in German]: https://www.facebook.com/adi.hirschal/posts/1053528918011079

[2] One of many examples is Minnesota http://www.huffingtonpost.com/entry/mark-dayton-minnesota-economy_b_6737786

[3] Interview with Mariana Mazzucato “Dangers of austerity craziness”; Financial Times on.ft.com/1Pc7Zlj

[4] http://www.imf.org/external/pubs/ft/fandd/2016/06/pdf/ostry.pdf

Sharing Economy, self-organizing networks, democratization of information, ‘sharing is the new owning’, cheap and quick money through Crowdfunding, more innovation through Crowdsourcing … all this is current. Cut.

In fact we find ourselves in the midst of a transition from one era to another: from modern society to network society. The tribal society started with the development of language. When writing was invented tribal society developed into ancient society. Modern (or industrialized) society developed with Gutenberg’s printing press. The change to the era of networking began with the invention and global spread of  the internet. With each transition, communication behaviour, complexity and hierarchies changed considerably. All the changes of eras were in fact driven by a major change in the availability of information and knowledge.

Usually such transitions take decades to complete. An era change always involves a shift of powers and a split in society divided by the new cultural (social and economic) techniques.

books

At the turn of eras to modern/industrial society the printing press was invented. Suddenly, everyone could own a book. Grand! Yet it was at this time also quite an advantage to be able to read in order to benefit from the blessings of this innovation. Eventually (at a much later date), compulsory school education was introduced.

At the turn of eras, at which we stand now, the new and society-changing cultural technique is the internet along with its accompanying technologies. Illusively the internet appears as if everyone could take part on an equal basis. This is somewhat deceptive as media literacy does not mean only that one is able to operate a facebook profile without difficulty for a year. Conditions could actually not be more unfair. The small bookseller against Amazon? A million users win against facebook? Oh sure. Where? When did we see this really happen?

While disruption will be necessary in order for mankind to move on there are several questions that we need to ask ourselves in this transition phase between the Industria Age and Network Society. Outdated, outdated practices may be on the verge of entering through the back door under a new name. Let’s watch out that we don’t fall back into feudal practices that may in fact backfire on the attempt to creating increasing prosperity.

The Sharing Economy: A Trojan?

The basic values of the network society are solidarity and sharing. The Sharing Economy serves a virtually social (democratic) ideal. Basically it is okay of course, that if one buys the cars which others use, then everyone contributes a fair share so the company can make a profit. But what used to be neighbourly help is now called Airbnb and is a business that confronts hotels, which sit with numerous and costly legal and technical obligations for facilities, fire protection, etc., while Airbnb hosts in most cases have no or slim regulations to adhere to. Hence the issue is creating unfair market conditions, while both are basically doing the same thing.

Crowdfunding
Does the word Crowdfunding still sound so romantic when the cost of financing that way ranges from 9 to 15 per cent? Crowdfunding at this horrendous cost is typically used by startup businesses, while large corporations acquire millions of credit funding for close to nothing. The Sharing Economy is good business for auditing and law firms. The high cost of financing hits precisely the startup businesses, which we hope will bring positive impulses to the economy. This, while the burden is distributed to their great disadvantage. The hope for positive and sustainable economic impulses from startups cannot be fulfilled well under such circumstances.

Crowdsourcing
Regarding so called CrowdSOURCING, i.e. the drawing of innovative ideas from the public, there is just one provocative question to be asked: ‘Is this new wage dumping?’ Provocatively: ‘Just fire the people in R&D – the guys out there do it for free – or one of maybe 500 wins a subscription for something or other.’

Freedom of Information / Open Data
Concerning the “Freedom of Information” movement, currently propagandized as the democratization of information, we might ask who really benefits greatly from published Open Government Data. Software and databases, which are unaffordable for individuals or SMEs, enable large corporations in the information business to track back to individual persons even from carefully anonymized data. There can be no question of democratization of information (and privacy) under such circumstances. The freedom of information act largely plays into the hands of data collecting information concerns and puts governments at risk of accidentally disclosing private details of individuals or business information of companies to their competitors.

To summarize, it looks very romantic yet isn’t. Care and a set of standards still needs to be applied in this field in order to arrive at a mature and responsible understanding of the issue.

Instability and Loss of Trust

Almost everything changes in society at the time of a change in era: work, business models, values. Typically, at the beginning of a new era a series of professions disappear or greatly shrink in relevance – significantly more than during “normal” times. Transition times between eras also typically see the emergence of more new professions than ‘normal’ times. At first, a feeling of discomfort or fear spreads in society, because the reasons for the development are not visible. So we panic – at least since the mid 1960s when an illustration of a robot representing the “Job Killer Automation” was emblazoned on the covers of mainstream media. The visible effects of such unbalanced reporting are a feeling of instability and loss of trust in management or politicians, who seem to be responsible for keeping the economy and society in a functioning and stable mode. While some jobs erode others are desperately needed: Europe reports missing 400.000 IT professionals by the end of 2014.

In transition times between eras the successful concepts that have been used so far do not produce satisfying results anymore: conditions have changed, thus concepts will have to be amended. If we haven’t communicated that change is happening and what this means, trust will erode. How to get through transition without clashes of societal groups? What would concepts compatible with network society look like?

  1. ‘Together’ is the New ‘Competition’

Until now the economy was ruled by the principle: ‘Competition is good for business.’ Network society now functions with the opposing principle: ‘Together is good for business.’ Numerous studies, in particular those by Alexander Pentland (M.I.T.) with the currently most substantial and valid data, have shown that the professions, companies and towns or regions, which are considerably more successful economically are those in which more communication and interdisciplinary knowledge sharing take place. This was found true for call centre agents as well as for stockbrokers and entire cities. The more interaction, mixing and mingling, and intercultural and interdisciplinary exchange there is, the more innovation, added value and prosperity. Cooperation is therefore the imperative of network society. Bad news for the ‘seal-the-border’ and proprietory systems fraction.

  1. Participation Culture is Not Yet a Tradition

Our current culture is deeply engrained with the conviction that ‘those up there do what they like anyway.’ Participation today still means for many to go to a gathering, to deliver a rant and to throw a paper with accusations onto the table and then to leave. At best, leaving happens without slamming the door off the hinges. An approach like this won’t enable us to make a difference though. Participation culture still isn’t a tradition. This is something society has to learn. Participation with fruitful results will not come about in response to a mailshot, but rather as described below:

  1. Legitimation Today: Participation is Mutual

Power is increasingly less often being won in elections or by being placed in a high level position in management. Legitimation is generated through participation – not only in allowing population or staff to participate in processes and problem solving but also by management or politics participating in the life of people – and addressing problems together. Why? Two reasons. Firstly, people will endorse and support what has been developed together with them, and secondly, the solutions of a larger number of people will be smarter than a solution thought out by one person alone. In today’s complex world more brains and eyes will see more eventualities and issues than one person alone. Management or government thus have to promise less and should instead offer more (mutual) participation. In this way, insecurity can be reduced, planning stability and trust can be generated – and change does not have to be imposed but can be designed together. To wrap up: we will have to conduct conversations. The projects in the public or corporate world that really generate engagement and collaboration are not the ones where we set up a database and inform participants by mailshot. It is those, in which we talk to each other with mutual interest.

Isabella Mader