Our society is now a “society of organizations”. Social sector organizations have developed to serve a purpose beyond their chief activities: they create citizenship. The modern polity has become so big and complex that citizenship—that is, responsible participation—is no longer possible outside these organizations. It has been reduced to voting once every few years and paying taxes all the time.

Volunteer Tradition Returns

Social sector organizations offer an alternative, where the individual can make a difference by volunteering. The United States has a long volunteer tradition because of the separation of the church from government. The only other country with something like this tradition is Britain, although volunteerism exists there to a much lesser extent because the British welfare state is far more embracing and there is an established church paid for by the state and run as a civil service. In Hong Kong the volunteer tradition was strong before the growth of the welfare state in the 1970s, but it is again resurging.

In fact, there is a shift globally towards a “society of organizations” because the knowledge society needs the social sector, and the social sector needs the volunteer. The social sector offers knowledge workers a sphere in which they can act as citizens and create a community. It also offers an outlet for what Adam Smith, in his Theory of Moral Sentiments, described as the moral need in humans to express sympathy for their less fortunate brethren (this is in addition to the pursuit of self-interest—the subject of his Wealth of Nations). Such sentiments can be harnessed voluntarily outside the state and they are the foundation for a cohesive and vibrant civil society.

The pluralist nature of the knowledge society has also supported the rise of a “society of organizations”.  Social tasks are increasingly performed by individual organizations, each created for one, and only one, social task, whether education, health care, or street cleaning. The first new institution to claim an autonomous existence beyond the state was the modern business enterprise around 1870. Since then the labor union, the modern hospital, the mega church, and others have emerged.

Yet our political theories still assume that there are no power centers except government. Nation state building was the main thrust of politics in the West for 500 years from the 14th to the 19th centuries. In the process it destroyed or at least rendered impotent all other power centers and eliminated many social sector institutions. Those that survived, for example the universities and the churches, became organs of the state, with their functionaries becoming civil servants. The demise of continental European universities as major centers of learning is one of the consequences of curtailed autonomy during the state building process.

The new social sector institutions have no interest in public power. They do not want to be government, but they seek autonomy for their functions.

An old problem therefore has re-emerged. Each of the new institutions is concerned only with its own purpose and mission. It does not claim power over anything else. But it also does not assume responsibility for anything else. Who, then, is concerned with the common good in the “society of organizations”? This has always been a central problem of pluralism. No earlier pluralist society solved it. The problem remains, but in a new guise.

Until this day, the response of government has been to impose limits on socially undesirable behavior represented through the social sector institutions—forbidding them to do things in the pursuit of their mission, function, and interest which encroach upon the public domain or violate public policy. The laws against discrimination, gay marriages, rape, abortion, and so on all forbid socially undesirable behavior. The list is endless.

Schools Suffer After Assuming Political Role

Nonetheless social sector institutions have persisted and, although few realize it, their aims are couched in what could be described as a demand to return to a feudal type of pluralism. It is a demand that private hands assume public power. The old pluralism was rooted in territorial fiefdoms for an immobile peasantry; the new pluralism is grounded in organizations for mobile knowledge workers. A churchgoer, a Red Cross volunteer, a social worker for the handicapped can join the work of these organizations in different cities and across continents as they move for work or family reasons. The citizenship they are attached to can be either national or international; and they are not averse to serving local clients in different locations.

But what are the corporate social responsibilities of these social-sector organizations? This question has been largely ignored until recently, but it is starting to appear alongside the demand for greater transparency and accountability. Do donations for disaster relief reach the victims? Is counseling work helping the targeted group or does it simply provide jobs for social welfare agencies? Will the organizations be corrupted by the weight of corporate donations and the power of government subventions? Do these organizations have hidden political agendas?

A separate issue that could seriously threaten the functioning of the new social sector organizations is the example of schools in the United States. One of the major reasons for the steady decline in the capacity of schools to do their job—that is, to teach children elementary knowledge skills—is surely that since the 1950s the United States has increasingly made schools the conduits of all kinds of social policies, such as the elimination of racial discrimination and others. Whether we have actually made any progress in assuaging social ills is highly debatable; so far the schools have not proved particularly effective as tools for social reform. But making schools the organ of social policies has, without any doubt, severely impaired their capacity to do their job.

In other words, the politicization of social sector organizations is bad for their performance. The new pluralism has a new challenge: how to maintain the performance capacity of the new institutions and yet maintain the cohesion of society. This makes the emergence of a strong and effective social sector to discharge both functions doubly important.

When the first business enterprises emerged 140 years ago, it was only natural that the problem of the emerging “society of organizations” was first seen as the relationship of government and business. The first attempt to come to grips with this was aimed at making economic interests serve the political process. Modern politics, whether democratic or autocratic, was framed essentially as an economic proposition of how wealth and income should be distributed. Harold D. Lasswell summarizes it best in the title of his book Politics: Who Gets What, When, How.

Divisive Politics and Government Paralysis

Politics in all developed countries are structured so that economic interests are exchanged for other concerns and interests through the political process. It works well when the key economic resources being exchanged are lifeless commodities. But that balance shifts in a knowledge-based economy. Knowledge is embedded in each individual and once it becomes the key economic resource, the preferences of each individual knowledge worker will matter crucially. The ability to exchange economic interests for other concerns and interests becomes severely limited in politics.

Economic interests therefore can no longer integrate all other concerns and interests. As soon as knowledge becomes the key economic resource, the integration of interests begins to crumble. Increasingly, non-economic interests are becoming the foundation of a new pluralism—the special interest groups, the single-cause organizations, and so on. Increasingly, politics is not about “who gets what, when, how” but about values, each of them considered to be absolute.

Politics is about the right to life of the embryo in the womb as against the right of a woman to control her own body and to abort an embryo. It is about environment rights and gay rights. It is about gaining equality for groups alleged to be oppressed and discriminated against. None of these issues is economic. All are fundamentally moral.

Economic interests, on the other hand, can be compromised, which is the great strength of politics based on economic interests. “Half a loaf is still bread” is a meaningful saying. But half a baby, in the biblical story of the judgment of Solomon, is not half a child. No compromise is possible. To an environmentalist, half an endangered species is an extinct species. This greatly aggravates the crisis of modern government. It is a challenge that the Hong Kong government has to face.

More and more pressure groups no longer lobby for economic interests. They lobby for and against measures that they—and their paymasters—see as moral, spiritual, and cultural. And each of these new moral concerns, each represented by a new organization, claims to stand for an absolute. Dividing their loaf is not compromise; it is treason.

There is thus in the “society of organizations” no single integrating force that pulls individual organizations in society and community into coalition. The political parties—perhaps the most successful political creations of the 19th century—can no longer integrate divergent groups and divergent points of view into a common pursuit of power. Rather, they have become battlefields between groups, each of them fighting for absolute victory and not content with anything but total surrender of the enemy. Political activism has become predominantly advocatory in nature, media driven and appealing only to a narrow minority of the population. The public perception is that this is not responsible participation.

The fragmentation of politics is a symptom of all developed societies. In Hong Kong, where political parties and representative politics are still new, that fragmentation is already in full manifestation. Government becomes naturally weak and paralyzed. Some commentators argue that the symptoms are a result of the failure of Hong Kong to have full democracy and mature political parties. Without the right to capture power through the ballot box, political parties in Hong Kong cannot aggregate divided interests.  But what we observe in all countries where the ballot box is present is that politics everywhere is hopelessly divided.

I conjecture that the fragmentation of politics in Hong Kong, as elsewhere, is more the symptom of a knowledge society where economic and social sector organizations are well developed and increasingly entrenched. They have not found a common discourse through which diverse and divided views can be adequately aggregated.

But we will not even have a chance to resolve these new political problems – and achieve social cohesion, economic strength and governmental capacity – unless we first address the economic and social challenges of today’s knowledge society. The first order of business is for people in all walks of life, as parents, as employees, as citizens, to work on these priority tasks, bearing in mind that there are few precedents, let alone tested solutions.

Education in the knowledge economy is central to the performance capacity and survival of organizations and individuals, and we should be re-examining its purpose, values, and content. What combination of knowledge inputs and approaches will be most useful? Should we emphasize increasingly specialized, applied knowledge, or the general ability to acquire knowledge continuously? And what responsibility comes with the use of knowledge? What are the responsibilities of the knowledge worker, and especially of a person with highly specialized knowledge? The education reforms in Hong Kong, culminating in the curriculum changeover in 2012, are a good starting point for examining our educational aims. These reforms must continue and be sustained. The cost will not be cheap.

Dual Role of Social Organizations

There is a real danger that specialist knowledge workers could successfully organize themselves to protect their human capital investments, to form cartels that damage larger public interests. The functional constituencies that represent the professions in Hong Kong’s legislature are evolving in this direction. By contrast, business interests by virtue of their broader representation have too many inherent conflicts of interest so they cannot speak on behalf of narrow special interests.

Increasingly, the policies of any country, and especially of any developed country, will have to give primacy to the country’s competitive position in a competitive world economy. Any proposed domestic policy needs to be shaped so as to improve that position, or at least to minimize adverse impacts on it. The same holds true for the policies and strategies of institutions within a nation, whether a local government, a business, a university, or a hospital.

In developed countries most policies are adopted only after they have undergone safety, health, environmental, and various other social impact assessments. This is the consequence of political lobbying. What is obviously missing in these exercises is an assessment of the impact of any public policy on the competitive position of the economy in a globalized world, where knowledge is the key economic resource and the dominant source of comparative advantage. For example, what is the economic impact of having a rigid planning and land zoning regime on economic transformation and development? 

As a “society of organizations” the knowledge society will have to think through how to balance two apparently contradictory requirements. Organizations must competently perform the social function for which they exist: schools must teach, hospitals cure the sick, businesses make profits or the capital needed to provide for the risks of the future. They need single-minded concentration to carry out their specialized mission. But they also face demands from society to show social responsibility, to work on the problems and challenges of the community. True, these social purpose organizations are the community, but by themselves they cannot achieve society’s goals. Both the public and the private sectors have to share the work. Working together is the central challenge for the “society of organizations”.

We do not have even the beginnings of a political theory or the political institutions needed for effective government in the knowledge-based “society of organizations”. Yet the function of government and its functioning must be central to all political thought and life. The 20th century indulgence in the all powerful state has not performed, either in its totalitarian or in its democratic version. It has not delivered on its promises. Contrary to the claims of John Kenneth Galbraith, government by countervailing lobbyists is neither particularly effective nor attractive. In fact, it is paralysis.

Politics as the Design of Fair Game Rules

Effective government has never been needed more than in this highly competitive and fast-changing world of ours, in which the dangers created by pollution, terrorism, poverty, disease and other challenges loom large.

The 21st century will surely be one of continuing political turmoil, at least in its early decades. And the coming challenges may be more serious and more daunting than those posed by the social and economic transformations that took place in the 20th century. If the nature of the political innovations needed to cope with these changes is not clear to us, their necessity certainly is. I was heartened to read in the Financial Secretary’s Budget Speech this year an important reference to the role of the Third Sector. Unfortunately that message has not been taken up in subsequent policy and media discussions.

I conjecture that the increasingly divided interests in the knowledge society will not be resolved by enlarging the burdens of the state to satisfy divided interests, but more likely through facilitated and voluntary cooperation between business and social organizations.

In economic and social affairs, the state is best at setting rules to provide a level playing field, policing behavior for compliance, and being a partial paymaster to facilitate voluntary participation. The necessary compromises in the presence of divided interests cannot be divined by government. Just as in the example of King Solomon in the Bible, the wise sovereign can only set up conditions for achieving a fair and efficient solution in which the parties involved would have proper incentives to decide for themselves. Politics then is the design of ever smarter rules of the game to help reveal the true preferences of society and upon which public policy can be decided.

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