Does public distrust of the media threaten democracy or does the media's failure to report and analyze the news in a balanced way fail the public and democracy? Larwyn just forwarded a post from Jammiewearingfool who comments on a New York Times editorial:
"Get a load of this pap:
"'It might seem a bit self-flagellating for the editorial board of the New York Times to bemoan the collapse of Americans’ trust in the press over the last 30 years. But it seems that the media’s fall from grace is undermining democracy.'
"Oh my. Now because people aren't getting their marching orders from this socialist rag, the bumpkins in flyover country may not vote the way the elitist snobs in Manhattan want them to."
As I mentioned in class the other day, it would be instructive to compare the New York Times's, Fortune's and Business Week's coverage of both Enron and Wal*mart during the years 1997 to 2000. Were the Times and the business press suspicious of the payment of an $80 million bonus to Rebecca Marks for building a $1 billion power plant in Dabhol, India that never opened? Or was Paul Krugman busily collecting $50,000 in fees each year from Enron and so managed to overlook this story? While virtually none of the media questioned the Dabhol plant or any of the other long litany of incompetent investments that Enron had made, and were telling the public that breaches of fiduciary duty meant that Enron was the most creative firm in America, how did the Times and Fortune describe Wal*Mart, which has consistently helped the poor by creating consumer surplus?
Rather than bemoan the public's mistrust, perhaps the New York Times should explain.
Showing posts with label Enron. Show all posts
Showing posts with label Enron. Show all posts
Sunday, April 20, 2008
Monday, March 24, 2008
Organizational Learning and the Progressive Model
The natural evolution of organizational learning should over time shift the relationship between business and government from more to less. Early in their history, capitalist firms lacked the ability to think and plan strategically; to research markets; to assess competition. Over time, the professionalization of management, the development of tools and learning processes, new methods of management and new planning processes and models not only provide businesses with tools that were not available to them in the 19th century, but also are less accessible to government because the personnel are not available. In David Ames Wells's time, Wells did not believe that firms could strategically plan investment; could perform market research; could persuade workers to purchase consumer goods; or could assess the long run profitability of a plant or business unit. By the 1960s, John Kenneth Galbraith overstating the case argued that firms plan and manage demand. Clearly the role of the state must change in response to the evolution of managerial knowledge. But the state's role can change only if it develops sophistication about the same processes that the firms learn about. But of course such learning is beyond the budget, the ability and the organizational flexibility of government agencies. Hence, the role of government will quickly become outdated.
The problem facing government is not just a matter of organizational learning. It is a matter of being able to anticipate the insights, deviations and failures of ever-evolving organizations. Such learning is so far beyond the ability of government, that government will inevitably prove to be disruptive to firms' learning processes.
An example is the case of Enron. Enron's failure was in large part due to its accounting emphasis on mark to market accounting. But mark to market accounting was the very policy that the SEC approved in response to Jeff Skilling's application. Another example is the California degregulation of the power market. The state adopted a regulatory system that facilitated Enron's and other power firms' manipulation of the power grid that caused massive power outages.
The results of the relationship between a state which aims to guide organizations that learn at a faster rate than the state does is one of four things. One, the state becomes irrelevant and adopts a de facto laissez faire approach. Two, the state enforces its prerogatives to control or influence industry and limits organizational learning and economic progress. Three the state attempts to ritually mimic firms' organizational learning and its supposed role of providing support to industry, squandering resources while in fact adopting a laissez faire approach. Four, the state becomes captive or subject to the influence of the industry and competing interest groups, resulting in policies that reflect political power and economic resources rather than rationality.
Government has adopted all three approaches. In human resource regulation such as OSHA and ERISA, the federal government has adopted costly regulation that has done little to improve safety or security, reducing economic opportunity. With respect to education, education schools continue to advocate progressive education approaches that reduce educational outcomes. In finance, the state has gradually backed off various regulations but continues to maintain regulation that makes it difficult for entrepreneurial financial firms to compete. In most fields the fourth likelihood has occurred. The brokerage of special interests has become a key characteristic of the American economy.
The problem facing government is not just a matter of organizational learning. It is a matter of being able to anticipate the insights, deviations and failures of ever-evolving organizations. Such learning is so far beyond the ability of government, that government will inevitably prove to be disruptive to firms' learning processes.
An example is the case of Enron. Enron's failure was in large part due to its accounting emphasis on mark to market accounting. But mark to market accounting was the very policy that the SEC approved in response to Jeff Skilling's application. Another example is the California degregulation of the power market. The state adopted a regulatory system that facilitated Enron's and other power firms' manipulation of the power grid that caused massive power outages.
The results of the relationship between a state which aims to guide organizations that learn at a faster rate than the state does is one of four things. One, the state becomes irrelevant and adopts a de facto laissez faire approach. Two, the state enforces its prerogatives to control or influence industry and limits organizational learning and economic progress. Three the state attempts to ritually mimic firms' organizational learning and its supposed role of providing support to industry, squandering resources while in fact adopting a laissez faire approach. Four, the state becomes captive or subject to the influence of the industry and competing interest groups, resulting in policies that reflect political power and economic resources rather than rationality.
Government has adopted all three approaches. In human resource regulation such as OSHA and ERISA, the federal government has adopted costly regulation that has done little to improve safety or security, reducing economic opportunity. With respect to education, education schools continue to advocate progressive education approaches that reduce educational outcomes. In finance, the state has gradually backed off various regulations but continues to maintain regulation that makes it difficult for entrepreneurial financial firms to compete. In most fields the fourth likelihood has occurred. The brokerage of special interests has become a key characteristic of the American economy.
Wednesday, May 23, 2007
Enron and the End of Post Modernism
The notion that reality is socially constructed; that ethics are local or conventional; that power rather than truth has authenticity; and that the will to power is the ultimate arbiter of factuality has never been a very convincing point of view. Indeed, that this perspective has gained legitimacy in academia suggests a decline of standards and of competence. Happily, the notion that reality is socially constructed was debunked once and for all in 2001, in the form of Enron's bankruptcy.
The management of Enron attempted to socially construct the firm's legitimacy. It ignored the social context of ethics, pretending that its own, localized definition of ethics was enough and that the public image rather than the substance was sufficient to achieve ethical virtue.
Enron did not really earn money and was not a profit-maximizing firm. It pretended to earn money. Its profits were socially constructed, and Wall Street concurred with this social construction of profit maximization. Enron's approach to rejecting reality in favor of social construction is consistent with English departments' arguments for conventionalism and the will to power. It worked well with business school academics, who touted Enron's creativity, and it also worked well with stock analysts, in part becuse they were graduates of the same business schools and in part because they were told that if they didn't play along they'd be removed. Much as the post-modern left is suppressive and totalitarian, so the employees of Enron were subjected to tight, authoritarian social control that ensured that "politically incorrect" views were inhibited.
Enron had all of the pathologies of the post-modern left. It was narcissistic. It was paranoid. And it was sociopathic. It claimed to be ethical but it was manipulative. It claimed to democratically care about its employees, but its goal was to harm and steal from them. Indeed, Enron claimed to create a revolutionary form of organization based on "asking why?", an assent to the post-modern left's claim to egalitarianism and skepticism. But of course, like the post-modern left, Enron was a fraud.
The post-modern left claims that power is more important than reason, and alas, Enron was a power company. Its chairman, Ken Lay, sought political power in Washington rather than focusing on management of his firm. Post modernism claims that social construction defines our perception, and indeed, social perception defined Enron's success which was not real for at least several years before its public demise. Enron rejected reason, much as post-modernism rejects reason, and its managers believed that they could construct a perpetual pyramid scheme based on social belief rather than truth. They were wrong. Enron failed, just as any social scheme that the post-modern left advocates will fail.
Like the New Left, Enron fell because it had no empirical support. The belief in power is not the same as empirically-derived rules of law. Substantive truth will win out over popular delusion, and if popular delusion, the ideas of the left, prevail, then our society will die. Liberalism and the new left avoid rather than address reality.
The management of Enron attempted to socially construct the firm's legitimacy. It ignored the social context of ethics, pretending that its own, localized definition of ethics was enough and that the public image rather than the substance was sufficient to achieve ethical virtue.
Enron did not really earn money and was not a profit-maximizing firm. It pretended to earn money. Its profits were socially constructed, and Wall Street concurred with this social construction of profit maximization. Enron's approach to rejecting reality in favor of social construction is consistent with English departments' arguments for conventionalism and the will to power. It worked well with business school academics, who touted Enron's creativity, and it also worked well with stock analysts, in part becuse they were graduates of the same business schools and in part because they were told that if they didn't play along they'd be removed. Much as the post-modern left is suppressive and totalitarian, so the employees of Enron were subjected to tight, authoritarian social control that ensured that "politically incorrect" views were inhibited.
Enron had all of the pathologies of the post-modern left. It was narcissistic. It was paranoid. And it was sociopathic. It claimed to be ethical but it was manipulative. It claimed to democratically care about its employees, but its goal was to harm and steal from them. Indeed, Enron claimed to create a revolutionary form of organization based on "asking why?", an assent to the post-modern left's claim to egalitarianism and skepticism. But of course, like the post-modern left, Enron was a fraud.
The post-modern left claims that power is more important than reason, and alas, Enron was a power company. Its chairman, Ken Lay, sought political power in Washington rather than focusing on management of his firm. Post modernism claims that social construction defines our perception, and indeed, social perception defined Enron's success which was not real for at least several years before its public demise. Enron rejected reason, much as post-modernism rejects reason, and its managers believed that they could construct a perpetual pyramid scheme based on social belief rather than truth. They were wrong. Enron failed, just as any social scheme that the post-modern left advocates will fail.
Like the New Left, Enron fell because it had no empirical support. The belief in power is not the same as empirically-derived rules of law. Substantive truth will win out over popular delusion, and if popular delusion, the ideas of the left, prevail, then our society will die. Liberalism and the new left avoid rather than address reality.
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