European tradition of 'Voice'


Term Paper (Advanced seminar), 2007

21 Pages, Grade: 1,7


Excerpt


Table of contents

1. Introduction

2. Hirschman’s concept of Exit and Voice

3. American vs. European Ideology and Practice

4. Exit and Voice in Liberal and Coordinated Market Economies

5. Innovation and the Value of diversity

6. Conclusions with regard to the German case

7. References

1. Introduction

Since the Rhine-model of capitalism seems to have worldwide launched into a gradual disintegration there emerged an unending discussion in social sciences offering different predictions with regard to the future direction coordinated national economies (CME) may take. In this debate the German case attracted an outstanding amount of attention due to two facts. Firstly, because the German economy has repeatedly served as a prime example of CMEs, not least due to its high-performance not only compared with other CMEs but also with liberal market economies (LME).[1] Secondly, because the structure of Germany’s market economy has encountered radical change since the early 1990s at the latest.[2] The expected outcomes of the German economy’s distinct move towards a much more market-orientated coordination of its activities vary widely. At first glance analyses presuming complete convergence to liberal market capitalism seem to be just as well founded as investigations amounting to partial adjustment of the old system – including ‘functional conversion’ or the evolution of a ‘new complementarity’ – or examinations suggesting the emergence of a hybrid model merging CME and LME elements.[3] While carefully analysing the impacts of globalisation, new financial markets, changed ownership structures, transformed labour relations, the altered role of industry associations or novel management styles etc. most of those studies base their predictions on contemporary economical and political features influencing the German capitalism and disregard deep-rooted historical traditions. However, traditional German ideology and practice may have an affect on national economical behaviour. What is even more, it may have had determined the type of capitalism that prevailed at the apogee of German economy.

The first purpose of the present paper is to complement existing studies with the general idea that new findings may emerge by tracing back diverse models of capitalist organisation to nations’ varying traditional patterns of behaviour. The assumption is that distinct traditional attitudinal preferences in societies have promoted market minded behaviour differently across nations and have inspired, thus, different types of market economies. The second goal is to reject significant convergence of the German economy to the Anglo-American sort of liberal market capitalism based. The rejection is founded on the one hand, on the general results of the first part of the paper, on the other hand, on throwing light on additional particular phenomena that motivate the continuing existence of diverse capitalist structures. This second step is necessary because, we not only claim that traditional ideology played a crucial role in the evolution of capitalist models but we also argue that traditions only persist to have influence on the society if their necessity is repetitively confirmed. In other words, traditions will simply be cast aside if they lose their useful functions in a society. Therefore, we will finally identify at least one key situation where traditional CMEs sustain to have a vital function for global purpose.

In order to define fundamental differences in national ideology and practice we will refer to Hirschman’s concept of exit and voice. The core distinction between liberal and coordinated market economies will constitute an appropriate opposition with regard to capitalist organisation; here Hall and Soskice’s contribution serves as theoretical background. Finally, we will briefly refer to Tushman and Anderson’s innovation-theory when pointing out the role of traditional CME values in the global economy.

2. Hirschman’s concept of Exit and Voice

Hirschman’s theory is based on the observation that “human societies are marked by the existence of a surplus above subsistence”.[4] However, the surplus is not only the origin of increasing economic progress and welfare but is also the source of the “society’s ability to take considerable deterioration in its stride”.[5] In other words, social or economical progress is by no means a one-way development. Slack with regard to the performance of firms or organisations is, according to Hirschman, a natural phenomenon in surplus-producing societies. He “assumes not only that slack has somehow come into the world and exists in given amounts, but that it is continuously being generated as a result of some sort of entropy characteristic of human (…) societies”.[6] At a first glance, such reasoning considerably challenges classical economics, in which slack is defined as a failure of a system caused by deflection from the model of perfect competition, rather than as a natural phenomenon that is inherent to the system. However, precisely stated, Hirschman’s theory rather complements classical theories. For Hirschman does not doubt that the incentives of perfect competition lead to a taut economy; where every individual is motivated to perform at the top of his form. Instead, he tries to investigate the wide ranges of economy and society where the model of perfect competition does not apply. This is very much justified, considering that perfect competition is “a purely theoretical construct with little reality-content”.[7]

Once it has been accepted that there is some latitude for deterioration, it is also evident that some sort of recuperation mechanism ought to exist in order to bar decline as well as to initiate recovery. According to Hirschman: “[The] radical pessimism, which views decay as an ever-present force constantly on the attack, generates its own cure: for as long as decay (…) is hardly in undisputed command everywhere and at all times, it is likely that the very process of decline activates certain counterforces”.[8] Hirschman separates those counterforces into two contrasting categories of recuperation mechanisms; exit and voice, which represent two opposite extremes. Exit means that customers choose the option to stop buying a product or using a service as a result of quality decline. The corresponding act of a member of an organisation is to resign from membership and leave the organisation if he feels disgruntled with the management’s performance. Hence, the exiting consumer or member pursuits the goal to reduce his discontent by ‘leaving the scene’ and to look for a substitute product or service. He consequently does not care about the performance of the firm or organisation after his exit and shows neither interest nor motivation to help with its retrieval. The person or body responsible, i.e. the management finds out about its failings indirectly by dropping revenue or declining membership. However, the result of exit is undeniable because it can be directly measured in terms of quantity. In order to stop exit, the management is expected to be severely impelled to search for means of recuperation. Voice means to express, in case of decline, dissatisfaction directly to the management of the firm or the organisation while remaining a client of the company or a member of the organisation at least for the time being. The goal of the voice option is to achieve recuperation from within by uttering informative criticism directly to the persons in charge. Thus, customers and members resorting to voice provide the management with reasons for decline unlike in the case of exit. Contrary to exit, the voice option is a much less neat reaction, for it includes vastly different degrees of activity. However, voice should normally become more intensive if quality suffers a further decline. Because the customer or member is not leaving, in the short run, the voice option seems to be less fatal to the company or organisation than exit. On the other hand, management is under voice -circumstances exposed to explicit – occasionally even publicly stated – disapproval and customers and members will continue to articulate discontent and probably threaten the management with exit unless the original quality is fully restored.

By examining in modern society the frequency of occurrence of exit and voice with regard to different social systems, it seems to be obvious that theses recuperation mechanisms reflect the fundamental schism between economics and politics. While “exit is the sort of mechanism economics thrives on,” “voice is political action par excellence”.[9] Nevertheless, voice plays also an important role in the economy especially if exit is a significantly limited option. Therefore, in the case of monopolies or oligopolies as well as in the case of expensive consumer durables resort to voice occurs more frequently. Apart from those general considerations – applicable to all sort of capitalist economics, the conditions under which an individual gives up raising his voice and resorts to exit varies also among nations and, thus, seem to be socially determined. This is at least Hirschman’s conclusion when he applies the theory to his fellow citizens. After a short recapitulation of different traditional preferences in America[10] and in Europe with regard to recuperation mechanisms we will look for the influences of that divergence on economic organisation.

[...]


[1] cf. Streeck (1995:6)

[2] For encompassing reviews of the history of German economics in the 1990s see Beyer et al.(2003), Streeck (1995).

[3] Those predictions are exhaustively described by Lane. cf. Lane (2004)

[4] Hirschman (1970:6)

[5] ibid.

[6] Hirschman (1970:15) Italics according to the original wording.

[7] Hirschman (1970:9)

[8] Hirschman (1970:15)

[9] Hirschman (1970:15 et sqq.) The italics are mine.

[10] In this paper the terms America and American refer throughout to the United States of America.

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Details

Title
European tradition of 'Voice'
College
http://www.uni-jena.de/  (Institut für Soziologie)
Course
HS Management and Labour in Europe
Grade
1,7
Author
Year
2007
Pages
21
Catalog Number
V75421
ISBN (eBook)
9783638812177
ISBN (Book)
9783638812009
File size
435 KB
Language
English
Keywords
European, Voice, Management, Labour, Europe
Quote paper
Dipl.-Volkswirt (BA) Oliver Heiden (Author), 2007, European tradition of 'Voice', Munich, GRIN Verlag, https://www.grin.com/document/75421

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