The free-market paradox of company structure

(charles.hope)

As a bit of an old fashioned lefty, I've never been a big fan of unfettered capitalism and the uncontrolled free market, particularly where global trade is concerned (or any point, in fact, where the 'strong' meet the 'weak').

My problem is that, for all the theoretical purity of the arguments in favour of economic freedoms, what works in a textbook rarely works in practise.

Because the sad fact is that, ultimately, we all have a worrying tendency to be be selfish and self-serving. And in the free market, this tends to mean the survival of the fittest (for which read richest, most powerful etc.) in all the worst ways, rather than a case of 'floating all boats' (to quote an oft-used free market platitude). Basically, it's a system which favours those with the ability/power/resources to 'play' the system, breaking the 'natural' rules of markets in the process and bending (sometimes ignoring) those imposed by governments. All of which means that those at the bottom of the pile suffer as a consequence.

The problem is that, for me at least, this is all gut feeling (even if I know I'm right!) - I'm not a professional economist with all the arguments to hand. But because the free market meta-narrative is now so all pervading, and intertwined with that of 'democracy' and 'individual rights' (but not, obviously, 'personal responsibility'), everyone 'knows' it is good and right. And that to argue otherwise means you're a communist or some old school 70s trade unionist (and look what happened back then).

Which is why a small point in one of John Grant's recent posts on economics and the environment leapt out at me. In it, 'green' Economist Herman Daly draws a parallel between the freedoms nation states are expected to offer businesses to aid the workings of the market, and the controls those same companies impose on their own work force.

The argument was so simple and so obvious - a Homer 'doh' moment. Because if we are so convinced of the power of the market, why don't we run our businesses along similar lines - insisting on freedom of all information and all resources (rather than just that which we view as essentially disposable/easily replicable), and letting people within the business decide for themselves what they want to 'make', 'buy' and 'sell' (it's the 'freedom' we want to impose on developing nations after all…albeit heavily influenced by our view of what they should be 'free' to do). Because if markets work, clearly they must work everywhere. Otherwise there is an exception that proves the rule - that markets don't work perfectly.

But obviously businesses aren't run in this way. Many of the most successful are, in fact, as totalitarian and centrally planned as during the worst excesses of Stalinist Russia. And even the most modern and flattest in structure will have rules a plenty for people to abide by. It's just that when it comes to how these companies operate at a macro level, all the importance placed on control (strangely!) goes out the window. And the expectation becomes one of freedom (to do what I want and damn the consequences to others) all the way. Funny that.

So next time you're confronted by this attitude, ask the person in question when they're going to start running their own business along similar lines, if the free market is such an efficient and effective model.

If nothing else, it should make for an entertaining conversation.

P.s. just in case anyone wants to fire back the hypocrisy argument, I see no contradiction with holding this view and working in advertising ;-)

Comments

[Rob @ Cynic]

That's more like it ... let it out and for what it's worth, I wholeheartedly agree with you.

I have no problems with making clients rich - it's how you do it and what they do with the cash once they've got it that is the major issue for me.

Given my parents background [Ethics Barrister, Humanitarian Activist] it was inevitable this philosophy would guide me which is why I've always subscribed to "socialistic commercial strategies" - making clients wealthy by developing ideas that fundamentally address/benefit the community/segment at large.

I love this post, LOVE IT ... more please.

[Jon Howard]

Most kind. And I like your idea of "socialistic commercial strategies". May inspire me to write something else!

[James Parr]

Jon, great post and I couldn't agree more!
I'm a deplorable lefty myself (and like you see no contradictions with that viewpoint and the fact that I work in marketing!) and am constantly dismayed by the free market theory of everything.

A good read on the idea of democracy in the workplace is Ricardo Semler's book 'The Seven Day Weekend'. Semler has created a fully democratic company (much like the one you moot) that is now one of the most successful organisations in Brazil. One point that stood out to me from the book: western society is happy to send it's young men off to foreign lands to fight for democracy, but baulks at even the idea of democracy in the workplace.

Well worth a look if you've not seen it as it's both inspiring and practical.

Keep fighting the power! (in a horrendously bleeding-heart, liberal kind of way if you're anything like me!)

[Rob @ Cynic]

I'm not kind, I'm being honest - and please write, I'd love to see it, the whole premise of cynic was built on this philosophy and while we'll never be a WPP or something, we have great clients and can sleep at night and that's worth quite abit in my book.

[Jon Howard]

James, a really interesting flip.

I was thinking in terms of the macro world not functioning without controls, and using the example of internal controls companies impose as proof that they don't practice what they preach.

It was a case of the exception that proves the rule. And I guess I was coming from a POV that assumed such internal freedom would never work - that chaos would ensue.

But as you point out with your Brazilian example, maybe it does work...but I would still suggest not along pure free market lines.

Because I'm guessing we are talking egalitarian democratic collectivism in the business you mention (which is a good thing), rather than pure capitalist free marketing (which isn't).

And I'm also guessing that anyone who sets up/wants to work for that kind of organisation, would look for similarly socially positive ways of working at the macro level.

Again something I would wholeheartedly support!!

[Jon Howard]

Rob, it is a great philosophy to have the freedom to work to. Wish it was more widely do-able. I am very envious!

[Rob @ Cynic]

That's the thing Jon, it is very doable - sure it's down to having the right clients [but you attend to attract the right clients if you have this sort of attitude] but it's also down to doing it rather than as most companies do, just talk about it.

Go for it mate ... it's not about making clients poor, it's about making them rich and more valuable than they ever could of expected.

[Jon Howard]

But much as you can chip away at an individual level, the big impact comes when this kind of belief is embedded in the values of a business - it's why everyone gets out of bed in the morning, and drives everything you do (which seems to be the case at Cynic).

Whilst QS isn't 'The Man' (anything but in fact), beliefs of this kind aren't part of the DNA - collectively, we can do old-school consumerist with the best of them (sadly!).

I just need to not lose sight of my own beliefs...and fight the good fight from within!!

[Rob @ Cynic]

I guess where I'm lucky is that I am the one who gets to make the calls as I was the one who started the place.

We'll never be a WPP [thank God] but at 70 people in 3 countries, I still feel we are proving not all advertising people/agencies are inherently evil - but that could be just me trying to make myself feel better about what I do, my Father still hated I was in advertising, ha!

[Charles Frith]

Great post. The idea that so called free market economics are the salvation for everything is nonsense. We're choking on growth.

I too don't have a problem working in advertising and holding these views. I've never had a client or colleague yet that didn't acknowledge its right and at the same time tacitly accept theirs is a greed model.

There are other ways of course but its an uphill life.