I have been thinking of some of the entrenched narratives of today's economy. See this for the misleading narratives of our times. What is the basis of their hold on our collective imagination? What prevents them being upended by a counter-narrative?
Consider some of the central tenets of modern capitalism and the free-market economic system. And also consider some of the alternative scenarios or questions.
1. Managerial capitalism and the idea of separating ownership and operations by entrusting it to professional managers.
What if managerial capitalism was only relevant for certain economic times, and its costs exceed benefits today? What if the incentives associated with managerial capitalism have been upended irreversibly (at least for now) and for the bad? What if family owned businesses or owner operated companies are better suited to the changed times?
2. The idea that businesses have to be managed to maximise shareholder value, to the exclusion or marginalisation of all else, including value to workers and society at large.
What if a new narrative emerges that places, for whatever reasons, labour or society at the centre of the value created by a business?
3. Free market capitalism is the most efficient ordering of the economic system.
What if free-market capitalism was suitable for a bygone era and is not well-suited to addressing the challenges of this different time? What if a world of deep uncertainty and geo-political tensions demands a different form of economic ordering?
4. The idea that a system of exclusion like patenting is required to incentivise R&D investments among businesses.
What if there are few more examples of price gouging like Martin Shkreli and Valeant, say, for a new Covid 19 drug, which turns the tide on patent exclusivism? What if there are few examples of high-profile drug discovery efforts ?
5. The idea that lower taxes are required to incentivise effort and investments by entrepreneurs and investors.
What if the governments in a new era decide that the public under-writing of the plumbing of a limited liability company or contract law in general demands a much higher return to the government in the form of taxes? What if the social cognition on a new layer of high net worth individuals, say top 1-2% of the tax payers, becomes salient, with demand for a much higher marginal tax rate?
6. The idea that minimum wages can discourage labour hiring by businesses.
What if a few cities or regions that break-out and raise minimum wage do far better compared to their counterparts in the coming uncertain times ahead, and their stories take hold of public imagination?
7. The idea that the exorbitant executive compensation is just desserts for attracting and retaining talent. This has perpetuated the system of widening salary gap between top executives and the median workers in any business.
What if there are few high-profile examples of exorbitantly paid chief executives who bring down their companies? What if a corporate raider or activist investor takes aim at some totemic company and mobilises enough shareholder support to tip the balance on executive compensation? Also, why should shareholders find a chief executive so much more valuable than employees?
8. The idea of leveraged investments in businesses and financial instruments.
What if a generation of businesses who loaded up on leverage lose their shirts and are irreparably scarred during the next down-turn? What if that ends up stigmatising debt accumulation? What if a few stories pop-up from among them which lead the charge on a counter-narrative?
9. The idea that venture capital (VC) financing optimally aligns incentives and promotes start-up entrepreneurship.
Like good things happening to ordinary ideas, what if the emergence of VC financing just coincided with the eruption of technology start-ups due to the ripening of a host of digital technologies? What if there is a crop of a clutch of high-profile bootstrapped and profit-financed start-ups who grow on to become market segment leaders? What if there are a few high-profile VC failures?
10. The idea that an independent central bank is essential to ensure macroeconomic stability.
What if the world economy lands up in a prolonged period of stagflation, exposing all the excesses accumulated by various actors over the decade of extraordinary monetary accommodation? What if the seeds of debt accumulation sown by central bank policies reach payback in a most calamitous manner for large parts of the economy?
Much the same logic could be applied to various management theories on personnel management, organisational discipline and incentivisation, organisational structure, and so on which are prevailing dogmas of our times.
If you pause and think deeply enough about each of these, you'll realise that they are all just ideas. They are not grounded on any non-falsifiable evidence. Even in their heydays, at best, they were contentious propositions.
None of these prevailing beliefs are based on any unambiguous or completely objective truisms. They are all narratives that have emerged over time, for whatever reasons. Having emerged, they have become entrenched and are being perpetuated by the vested interests who benefit from them, irrespective of whether the conditions that led to their emergence in the first place have changed or not.
Neither are any of these enduring or perennial truths or realities. They all have emerged into their current position of dominance no earlier than a few decades back. They are all ephemeral, like all other social trends. There were other dominant narratives on each before their arrival.
At an epistemological level, all research that explores these issues and comes up with some definitive verdict is deeply flawed. They are blinded by the trappings of rigour in their research to make definitive conclusions about what are essentially subjective issues of ethics and politics.
Note also that in all these cases, the entrenched narrative will not give way based on logic and reasoned arguments, much less evidence. Instead, they are likely to only give way to another narrative which emerges from a story or some high-profile examples that illustrate a counter-narrative. A narrative is a faith. And faith can be displaced only by another faith.
As a mechanism of change, in each of these cases, the narrative gets upended either when it is discredited or when a new narrative suddenly erupts into the scene and takes hold of public imagination. The former can happen either through the gradual erosion of the prevailing narrative or its sudden disruption. Into the vacated space a new narrative invariably takes centerstage.
The history of ideas is littered with the trajectory of ideas taking hold, deepening their roots on public imagination, and the decaying and being replaced by a counter-idea.
The world with these counter-narratives could look very different. And there is nothing that prevents these counter-narratives from taking hold anytime. We should not be surprised when that happens.
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