The rise of the 1%: an organizational explanation

In the latter months of 2011, slogans proclaiming that ‘we are the 99%’ were used in demonstrations and occupations held in numerous countries in response to the global economic crisis. While the crisis first began in 2007, by 2011 there was still no sign of sustained recovery, and the impacts of the crisis were being felt by ever-wider segments of the population across the world. The 99% were defined, of course, primarily in contrast with “the 1%”; members of an elite variously claimed to be responsible for causing the crisis, of benefiting excessively from the troubled economic system, of fostering severe austerity measures on governments, and forcing “the 99%” to shoulder the burden of this austerity while the 1% continues to enjoy a gilded existence.

The counterposition of the 99% versus the 1% is the most striking example of a more general re-emergence of class-based discourse that has accompanied the economic crisis. This article argues that the perception of class division and the renewed saliency of class-based critique reflect a fundamental transformation in the organization of economic activity, with organizations dismantled into chains of market-governed contracts; a process that has occurred in a variety of avatars but which can broadly be described as financialization. This process has permitted an elite to extract itself from relationships of mutuality inherent in earlier organizational forms. At the same time, the ‘end of organizations’ has undercut the capacity of other organizational actors to assert themselves within the economic system. The result of this shift in power relationships within the economy has been the enrichment of a small elite – the 1% - and the impoverishment of the great majority – the 99%. This development has not only fostered antagonism between the privileged few and the rest of the population, but has also destabilized the economy and caused economic crisis by reducing consumption and depressing overall economic activity. In the context of the hegemony of the 1% within the economy and politics, the ‘price’ for economic crisis falls on the 99%, thus causing a further decline in the economy and leading to further demands for austerity. The only escape from this vicious downward spiral is the restoration of organizations as fundamental units of economic activity to the relationships of mutual dependence and accountability that are not possible within a purely market-based, financialized economic system.

This article begins by briefly exploring the outcome of the post-organizational economy in terms of growing inequality and particularly the rise of a small, enriched elite. It then goes on to examine the change in the character of economic activity and particularly the dismantling of the ‘traditional’ capitalist corporation and its replacement by the ‘nexus of contracts’ approach. Finally the article traces back the logic for the restructuring of economic relationships to the rise of neoliberalism, a creed that developed and eventually became dominant through its assiduous propagation by a cohesive political movement built from an alliance forged between anti-socialist intellectuals and key representatives of business interests.

The position of the “we are the 99%” movement is based fundamentally on a claim that the gap between the rich and rest of the population has risen substantially in recent years. The movement bases its claims on widely published and analysed statistics relating mainly to various OECD countries. There is a plethora of statistics and we will focus on the US and the UK.

The 2008 Nobel Prize winning economist Paul Krugman has argued that the largest increase in inequality has actually been between the top one-thousandth of the population and the rest: “Between 1979 and 2005 the inflation-adjusted, after-tax income of Americans in the middle of the

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income distribution rose 21 percent. The equivalent number for the richest 0.1 percent rose 400 percent” (Krugman, 2011). The Congressional Budget Office, examining income trends for the top 1%, found that in 1980 they earned 9.1% of all income, while by 2006 this had risen to 18.8% of total earned income (CBO, 2009). Similar trends exist in terms of accrued wealth; in 2010 the US top one percent owned 40% of all wealth, up from 33% in 1985 (Wolff, 2010). Frank (2010) demonstrates that elite capture of societal resources extends beyond finance and includes key factors in generationally transmittable social capital (Bourdieu, 1987) so that, for example, access to elite education

Similar patterns are found in the UK, where the Gini coefficient of inequality – a measure comparing incomes at the top of the income distribution with those at the bottom – increased from 26 to 40 in the decade to 2009 (Monbiot, 2011). A similar pattern in the rise of the income share taken by the top 1% is noted; doubling to 14.3% between 1970 and 2005 (OECD, 2011). The OECD also noted that during the past generation the UK has enjoyed progressively less social mobility, and that the social benefits and tax systems have both been less effective in redistributing income.

The growth in inequality has had ramifications beyond differential access to goods and services. Both Frank (2010) and Stiglitz (2011) note that large disparities in market power caused by inequality generate wider social changes that are often deleterious. For example, the wealthy have less need for collective service provision because they can buy services like education and health care privately, and this leaches resources out of public systems. Overall productivity declines as education quality declines, and minor or preventable health conditions go untreated. Frank has focused particularly on the dynamic of ‘stardom’ which has become prevalent. Originating in entertainment fields such as sports and music, mass communications have opened a wide gulf between the income of those at the very top in comparison with those even marginally below them in ‘marketability’. Whereas the football fan of days past would don his cloth cap and head down to the local ground to watch local stars, he will now sit on the sofa and watch Sky Sports’ coverage of the Premier League. The star system in music has resulted in the decline of local live music in favour of reproduction through various channels of the performances of a small star elite. Frank has also explored the interconnection between income disparity growth and growth in excessive and conspicuous consumption (Frank, 2010a), associated with growing dissatisfaction of those unable to enjoy elite consumption lifestyles.

This phenomenon of a growing gap between elite and average salaries has also occurred in mainstream business, where CEO salaries have risen ten times as fast as those of the workforce as a whole (Hayes and Schaefer, 2009), with in-company ratios of between 250 and 500 times average employee salary not uncommon (Faleye et al., 2010). A survey of USA CEO salaries found that average CEO compensation rose by 27% in 2009 (the latest period for which data are available) outstripping share price increases by 10% (thus bringing into doubt the argument that elite salaries should be tied to share performance) (Rushe, 2011).

There is apparently considerable evidence, therefore, confirming the assertions of the We are the 99% movement about increasing inequality. We have also begun to explore the wider ramifications on the nature of society of growing inequality, and noted the tendency of growing inequality to become self-reinforcing. Finally, growing inequality seems to be associated with economic inefficiency and reduced productivity through reducing investment in collective goods. In the next

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section we focus on changes in the nature of economic organization which facilitate and foster growing inequality.

The post-war economy had been built around the ideal type of the American corporation which internalized much if not all of a production process from product or service conceptualization through production, to marketing. Mainstream organization studies treated this entity as taken-for-granted and focused on its design, management, and internal life; critical organization studies adopted a more sceptical standpoint but rarely challenged the organization as the fundamental unit of analysis. Mainstream organization theory and design continues to characterize the classic organization in much the same terms as the golden age of the great American corporation in the 1950s.

Organizations are perceived as relatively stable entities structured into classic functions. Organizational development is typically presented as a largely linear, staged process of growing internal complexity. The model for the corporation is strongly influenced by Berle and Means’s (1935) classic model of the separation of ownership from control, in which company managers are seen as largely usurping the leadership of shareholders. Because corporate managers’ power is derived from the organization, there is a strong incentive to place organizational growth ahead of profitability. Similarly, classic theories of the multinational corporation emphasize a staged development in which the process of internationalization is driven by organizational heft that is built upon an entrenched managerial hierarchy. Again, the archetypal (multinational) corporation is perceived as replacing aspects of the free market (Hymer, 1970).

Davis (2007) has noted that this model is increasingly outdated. Since the 1970s, economic production has been transformed through the emergence of global business processes. Increasingly, production was conceptualized using a value chain approach (Gereffi, 1989, Kaplinsky, 1985), in which production was broken down into numerous steps that might be carried out under in widely dispersed locales. Although an early advocate of this approach was the management theorist Michael Porter (1985), he situated his analysis in the firm, thus underestimating the true revolutionary potential of value chain reorganization which was that even complex economic processes could be carried out under multiple organizational structures. In value chain capitalism, strategic attention is placed not on the organization but on the process chain.

In a loosened regulatory environment, there are multiple opportunities for value chain reconfiguration, a process that is described evocatively as ‘lego capitalism’ (Berger, 2005). By 1993, Fortune magazine increased profits to corporate modularization (Tully and Welsh, 1993). This disarticulation process permits the valuation and marketization (outsourcing) of ever smaller chunks of the value chain. This phenomenon of disarticulation is associated with the break-up of large corporate entities into smaller units, that are themselves regularly combined and restructured and traded between holding conglomerates that may have hundreds of small subsidiaries, what Ackroyd (2011) calls ‘capital extensive firms’ (CEFs). The management of their subsidiaries by the holding company is typically hands-off and primarily concerned with meeting financial targets.

Conversely, management of the holding companies is strategically focussed and elevated apart from management of the process subsidiaries; the holding company executives often have considerable shareholdings and are part of an international executive elite. The holding companies can be structured in a number of different ways; they may be stock-market traded or private firms

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attracting pension fund, hedge fund, and/or private equity investment, or they may be owned directly by private investors (Metrick and Yasuda, 2010). However the management strategies pursued by companies with different ownership models tend to converge with two key characteristics; substantial and growing rewards to the holding company managers and financial intermediaries, and permanent restructuring of business processes (Folkman et al, 2007).

Even large organizations that remain theoretically intact such as BT have effectively been disembowelled through the wholesale outsourcing of previously internalized functions (Colwill and Grey, 2007), while other former traditional giants such as IBM have reinvented themselves as providers of shared services and even as experts in business process reengineering (Miozzo and Grimshaw, 2011).

The eclipse of the integrated, Fordist-model corporation and its replacement by reconfigurable value chain processes has resulted in a cascade of impacts both on the organization of the economy and on relationships between different economic actors. The overall effect is to substantially reduce the embedded mutuality that existed within the institutionalised corporation and to replace this with short-term relationships between ‘free’ contractual actors. The question of where power (‘governance’) lies in the value chain becomes decisive (Humphrey and Schmitz, 2001), defining opportunities for value realisation. In the neoliberal mythology of free market capitalism, contractual relationships are between equals. However by breaking down value processes into ever smaller chunks that can be performed by production units located anywhere in the world, and in the context of the free international movement of capital, goods and services, those controlling the strategic configuration of value chains are able to maximize their share of overall income. In particular, they are readily able to incur costs in low wage economies and realise revenues in high priced markets.

This elite advantage not only leads to growing income and wealth disparity, but also results in irresolvable imbalances in the economy. In the context of wholesale outsourcing of production, income declines in the high wage economies where goods and services are sold and value realised. For several years, declining income was offset by exponential growth in credit, a bubble whose inevitable bursting triggered the current global crisis.

It is often argued by mainstream business scholars that outsourcing merely reflects the creative destruction inherent within capitalism, whereby economic functions are carried out in the location of maximum economic efficiency. In this perspective, manufacturing jobs in the West will be replaced by higher value employment, for example in design and innovation. Thus, the world can profitably be divided between, “Those who grow; those who make; those who create; those who coordinate”(Czinkota and Ronkainen, 2005: 117). If some areas of the West lose jobs, such as the Rust Belt of the American Midwest or Britain’s West Midlands, other areas will gain, like Silicon Valley or London’s City. However, this win-win account obscures the potential for elite extraction of additional value through the dynamics of global value chains. Stephen Roach, Morgan Stanley chief economist, noted as early as 2004 that, “Wage rates in China and India range from 10% to 25% of those for comparable-quality workers in the United States and the rest of the developed world. Consequently, offshore outsourcing that extracts product and/or services from relatively low-wage workers in the developing world has become an increasingly urgent survival tactic for companies in the developed economies” (Roach, 2004). Smith (2008, 2011) critically extends this argument, noting

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that although an increasingly large proportion of consumer goods are produced in developing countries, only a small proportion of the overall value of the goods is realised in those countries. There are, of course, numerous accounts of different finished goods that are largely produced by developing country labour but the bulk of whose value is realised in developed countries, of which the iconic Apple Corp. products are probably the best known example (Xing and Detert, 2011). Kraemer et al. (2011) calculate that only around 2% of the cost of the iPad and iPhone actually contributes to China’s GDP: “Much of the value in high-end products is captured at the beginning and end of the process, by the brand and the distributors and retailers” (Barboza, 2010). Similar calculations for products such as shoes manufactured in Central America reveal a similar picture of a miniscule proportion of product value remaining in countries such as the Dominican Republic (Smith, 2011). Despite rises in wages in China and other developing countries, these remain many multiples below Western levels – the purchasing power of Chinese workers’ salaries in 2010 was only 6% of that of US workers (de Regil, 2010). Chinese workers provide their labour in conditions of repressed free speech, restrictions on physical movement, and absence of free trade unions (Pun and Smith, 2007) – undermining the credibility of the neoliberal argument that their incorporation in the global economy reflects ‘efficiency’ rather than simple exploitation. Similarly, in India, the major service outsourcing location, global economic integration occurs in a society still structured according to feudal social relationships, so that the labour released to function in global enclaves is underpinned by a caste-oppressed underclass of support workers (Murphy, 2010). Again, the neoliberal argument of a global ‘free’ labour market is not well grounded.

Global labour arbitrage substantially increases the surplus value that accrues to elites controlling transnational values chains. A key feature of value chain capitalism is the increasing proportion of value which is assigned to intangibles such as branding and other ‘intellectual property’. Lego capitalism’s value chain disarticulation has resulted in a relative decline in the status of the physical production process – which as we have noted, can be reconfigured at will - and a substantially increased share of value captured in the branding process (Willmott, 2010). This phenomenon is significant not only because it provides a vehicle for further strategic elite value capture, but also because of the intangible nature of intellectual property whose value can therefore be realised anywhere. Whereas under Fordist capitalism the corporation had little choice but to realize its profits in the production and/or sales locations, brand property can be vested in offshore corporations in tax havens and pseudo-havens such as the Irish Republic, with very low corporation tax rates. Just as outsourcing under Lego capitalism undercuts workers’ bargaining power, so states’ bargaining power is undermined by the ability of holding corporations to relocate at will and realise profits in the most advantageous location, leading to state financial crisis and the transfer of tax burden from corporate to individual tax (Avi-Yonah, 2000).

Tax havens are used by major corporations and the global elite in order to shield their wealth from taxation and from state and public scrutiny. While tax havens have been used for the past 100 years their importance in the global economy has grown exponentially since the 1970s. They have been associated with rapid movements of capital and with global financial instability (Larudee, 2009). 98 of the ‘blue chip’ FTSE 100 companies have tax haven subsidiaries, with many having several hundred (Action Aid, 2011).

Corporations involved in major fraud scandals have tended to make extensive use of tax havens – such as Enron (Larudee, 2009), WorldCom (Sikka, 2010), Stanford Financial Corporation (Dhesi,

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2010), and Madoff Investment Securities (Palan et al, 2010). However, use of tax havens has become a normalized practice of most major corporations. For example, GlaxoSmithKline made extensive use of tax havens to reduce tax exposure on drugs going off-patent during the 2000s, the three major banana suppliers Dole, Chiquita and Fresh Del Monte minimized global taxation through distribution via a Bermuda-registered subsidary, and Honda made use of tax holidays offered by the Chinese government to attempt to reduce its tax exposure in higher-rate jurisdictions (Sikka and Willmott, 2010). The extent to which use of offshore havens has been legitimized is demonstrated by the ability of corporate elites to make extensive use of tax havens while continuing to collect honours from states which they overtly deprive of tax revenues.

One prominent example concerns WPP, a holding company that controls hundreds of subsidiaries which employ 150,000 people worldwide and together dominate the global advertising industry, has its corporate headquarters in a small townhouse in Dublin, although the company is actually managed from London. In 2010 the company paid only 1.6% of revenue in tax (Edwards, 2011). WPP is reported to have 611 subsidiaries in tax havens. Despite his company’s aggressive tax avoidance, WPP’s CEO Martin Sorrell is feted by the British state; Sorrell was appointed Ambassador for British Business by the New Labour government in 1997, then appointed to the Council for Excellence in Management and Leadership in 1999 and knighted in 2000. Sorrell was a guest at President Obama’s inauguration in 2008, his second wife is a senior executive at the elite Davos World Economic Forum, where Sorrell is a regular participant (Teather, 2010), and despite his awards from New Labour, he is described in the Financial Times as “a longstanding Conservative party supporter” (Parker and Giles, 2011). WPP’s UK tax avoidance did not preclude a WPP subsidiary from winning the contract to handle all media buying for the UK government’s Central Information Office (Robinson, 2010), nor did it deter CEO Sorrell from repeatedly demanding cuts in UK government expenditures (Parker and Giles, 2011), nor from being invited in December 2011 to appear on BBC’s prestigious Desert Island Discs whose guests are “people who’ve played a significant role in their field or in society”. Interviewer Kirsty Young omitted to ask Sorrell about his corporate tax affairs, despite them having been the subject of numerous critical media commentaries (BBC, 2011). Involvement of elites in corporate tax avoidance does not bring social opprobrium, whereas those claimed to have taken unfair advantage of the social benefits system are subject to a torrent of government and media abuse (Daily Mail, 2011).

The use of tax havens has been driven by the activities of major consulting / audit / accounting companies that design tax avoidance vehicles, frequently making use of offshore financial centres and in particular transfer pricing, described euphemistically by KPMG as “Tax Efficient Supply Chain Management” (Sikka and Hampton, 2005).

Tax havens are also associated with innovative corporate structuring such as ‘cell companies’ that isolate liability in a plethora of ‘cells’ within an overall ownership umbrella (Sharman, 2006). However, the tax and liability avoidance mechanisms developed in tax havens are increasingly also available within developed country jurisdictions (Sharman, 2011). It can be seen that this ‘cell’ approach to tax minimisation dovetails with the structure of value chain capitalism in which holding companies control hundreds of units or cells.

Notwithstanding the substantial leakage of potential tax revenues – estimated by the UK-based Tax Justice Network at $255 billion on the $11.5 trillion-plus of assets held in OFC’s (TJN, 2005) – and the

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parlous state of state finances globally, the UK government in its 2011 budget introduced a special tax rate of 5.75% instead of the normal (reduced) tax rate of 23%, for companies running their internal banking through a tax haven subsidiary. This move, apparently driven particularly by a desire to lure Sorrel’s WPP headquarters back from Dublin to London, is indicative both of the impact of tax havens in encouraging legitimate states to bid down their tax rates for corporations and the wealthy, and the complicity of governments with elites using globalisation to evade taxation.

Despite the significance of the organizational transformations and power rebalancing entailed in value chain capitalism, these have until recently only received limited attention within organization studies. This weakness in tracing and understanding broad transformations is an inevitable outcome of the virtual absence of political economy analysis within the field of organization studies (Morgan et al. 2011). Although most theories of organizational change acknowledge the existence of an external environment that has some impact on organizations (Kezaar, 2011), the role of politics and power in structuring that environment is generally seen as outside the scope of organization studies. However, as we have already explored, the environmental dynamics that have impacted on organizations in the neoliberal era have been widespread and consistent, and have led to thoroughgoing transformations in organizational forms and processes. As we will discuss in the next section, these environmentally-driven changes in organizations have resulted from a highly political process. It is not possible to understand the nature and dynamics of organizational change without understanding the broader political economy underpinning systemic change. In the final section of this article we will explain the emergence of value chain capitalism through an exploration of the historical emergence of neoliberalism as a political movement.

Within any sphere or field of thought, certain ways of viewing the world tend to predominate over a period of time, only to be replaced by other predominant perspectives. This phenomenon in which relatively lengthy periods of stable and widely accepted frameworks are then replaced through a ‘revolution’ in thinking and approaches has been described by Kuhn (1962) in relation to natural sciences, and similar processes are if anything more predominant in the social sciences where there is limited opportunity to test and prove hypotheses. In both the natural and social sciences there is a hierarchy of frameworks, so that certain core perspectives have a cascading impact on subordinate orientations and practices. Within the social sciences, perspectives on the role of the individual and the collective, the public and the private, act as keystone orientations that establish a world view that can be applied in a more or less consistent manner to existing and emergent problems.

There have been various attempts to explain the process whereby different structuring world views arise and are then replaced. One of the more flexible approaches is the ‘thought style’ typology conceived by Ludwik Fleck, a Polish biologist active in the mid twentieth century. Fleck, who was involved in the development of tests for syphilis, noted that there were a number of competing broad understandings of the nature of syphilis which structured the way groups of scientists adhering to these competing viewpoints went about creating tests for the disease. Fleck noted that the predominance of one perspective over another was not necessarily reflective of the merits of the perspective but was dependent instead on the power, prestige, resources, and effective organization of the nuclei of scientists adhering to the different ‘thought styles’. He called these nuclei ‘thought collectives’, while a wider group of adherents who accepted and applied the approach but were not involved in developing it were described as its “thought community”. From Fleck’s perspective it can be seen that the development of scientific approaches is linked both to

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power (pre-existing resources) and the assiduousness with which certain thought collectives advocate their approach. Mary Douglas (1986) developed and refined Fleck’s original approach through specifying the ways in which the thought style structures thinking about its sphere of interest. Specifically, Douglas underlined that the thought style not only frames the way issues are addressed but also closes off alternative and incompatible perspectives.

Employing Fleck’s approach, the emergence of value chain capitalism and the consequent rebalancing of power and resources towards the elite can be viewed as the outcome of the establishment of a neoliberal hegemony or thought style (Fleck, 1935, Douglas, 1986). The next part of the article will explore the process whereby this has taken place.

From the 1940s a small group of economists, including prospective luminaries such as Hayek, von Mises, and Milton Friedman, gathered in the Mont Pelerin Society (MPS) (Mirowski and Plehwe, eds., 2009) and a small number of other thinktanks and associations (such as Ayn Rand’s Objectivists and in the UK, the Institute for Economic Affairs) (Cockett, 1995; Branden, 1999). Their common objective was to turn back what they saw as the tide of socialism and to promote an alternative of ‘free markets’; the movement now known as neoliberalism.

The emergence of what is now known as neoliberalism was remarkable for the breadth of its preoccupations. Quite deliberately, the MPS from its earliest days organized groups and sessions on issues as wide-ranging as macroeconomics, the power of unions, international development, the structure of global governance institutions, etc. Initially concentrated in the US at the Economics Department of the University of Chicago, MPS supporters organized the capture of university economics departments from erstwhile Keynesian domination in America and beyond (van Horn and Mirowski, 2009). By the late 1970s the International Monetary Fund and the World Bank had come under neoliberal domination, which resulted in an about-turn in economic development orthodoxy. Henceforth, developing countries would no longer be encouraged to pursue national industrialization policies but would rather be expected to seek export markets for their (mainly primary) goods. They would also be expected to shrink the size of their state administration and reduce investment in higher education (Plehwe, 2009, Murphy, 2008).

The rise of neoliberalism is often presented, particularly by its advocates, as the victory of a disinterested intellectual movement over its philosophical adversaries. However, from an early stage, the neoliberal movement was deeply intertwined with business interests. Financial support was provided directly by politically active businesspeople and indirectly through right-wing foundations established to promote business interests; this occurred on both sides of the Atlantic (Phillips-Fein, 2009; Cockett, 1995).

Although the neoliberals employed ‘free markets’ as a propaganda slogan, their dominant objective was a rebalancing of power and wealth in favour of elites; this can be seen in the MPS debate on monopoly (van Horn, 2009, 2011). Although the neoliberals claimed to be inheriting the mantle of classical liberalism, in line with their business patrons, they opposed regulation of monopolies, marginalizing old school Chicago liberals like Jacob Viner who supported breaking up monopolies in order to permit the operation of competitive markets.

Review of the records of MPS meetings underlines that from the early days of their movement or thought collective, the neoliberals were conscious advocates of a general right wing political agenda

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designed to rebalance power into the hands of business elites (van Horne, 2011). This orientation reached its apex with the active involvement of a number of prominent Chicago School economists and MPS members as policy advisors to General Augusto Pinochet’s military dictatorship in Chile. Pinochet overthrew the democratically elected socialist government of Salvador Allende in 1973 with CIA support, and set about dismantling Allende’s economic policies, employing a number of Chicago-trained economists, who in turn invited leading US neoliberals to assist them including Milton Friedman and fellow MPS personality Arnold Harberger (Valdes, 1995). The Pinochet government was responsible for extensive and continuing human rights abuses, throughout its rule but particularly in the early years when the influence of the Chicago neoliberals was at its peak (Frank, 1976). After Chile’s return to democracy in 1990 the new government appointed a Truth and Reconciliation Commission which concluded that over 2,000 people were murdered by the Pinochet government (Zalaquett, 1991). A later more extensive state investigation into human rights abuses found that 38,254 people had been imprisoned between 1973 and 1990 for political reasons, and that most of them had been tortured (Valech Report, 2011). The neoliberals were aware of what was going on in wider society while they were providing advice, but concluded that this was a necessary ‘rectification’ (Fischer, 2009)

The concluding paragraphs recapitulate the discussion and draw conclusions on the role of neoliberal political ideology in setting in motion a chain of economic restructuring, This restructuring has led to the dismantling of the corporate model of the era of managed capitalism, the enrichment of a small transnational elite at the expense of the mass of the population, and the unleashing of a serious, long-term, economic crisis.

The article has proceeded through three main stages of reasoning. In the first part of the article it was shown that the complaints of the ‘we are the 99%’ movement were largely justified in that there has been a substantial shift in income and wealth towards the 1%; shorthand for a small elite who have benefited disproportionately from the global economy, at the same time as the economic system appears to be suffering from existential crisis. The article then went on to demonstrate that a central feature of the changed dynamic in contemporary financialized capitalism is the dismantling of the traditional corporation in favour of international value chain networks. The new form of economic production removes many of the chains of mutuality that bound actors together under Fordist production systems. The stretching of value networks across national boundaries in a loosened regulatory environment provided opportunities both for global labour arbitrage – driving labour costs down by incorporating new and vulnerable sectors into a globalized workforce – and for the use of offshore havens where the elite could realise value without scrutiny, regulation, or taxation. These phenomena account for the shifting balance in wealth and power in favour of the 1% noted in the first part of the article. The article then goes on to situate the shifts in the global economy in terms of the emergence and eventual domination of the neoliberal ‘thought style’, originating in the assiduous advocacy of the adherents of the Mont Pelerin Society, who represented a coalition of anti-socialist ideologues and business interests.

Although the ambitions of the MPS were always grand, the hegemonic neoliberal thought style has caused a cascading series of outcomes, a perfect storm that imposes ever more draconian restructuring on the global economy and on economic relationships. Beginning in the 1970s, the power of trade unions was restricted, permitting the restructuring of organizations and the dismantling of the Fordist corporate model. The neoliberal takeover of global governance and

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development institutions, combined with the collapse of the Communist bloc, forced developing countries to abandon autarkic development strategies and orient their economies towards emergent global production systems. These two phenomena dovetailed, with business enabled to outsource production to the new working class in developing countries. This essential dynamic continued to deepen, with the traditional structure of corporations dismantled into multiple units that could be traded and restructured internationally at will. The erasure of national economic boundaries precluded effective labour resistance and also permitted corporations to foster Dutch auction bidding between states vying to provide the most amenable regulatory regimes. Free capital movement and inter-state competition permitted corporations and wealthy individuals to realize their profits in tax havens, although the predominance of the neoliberal thought style and the shift in balance of power between labour and capital has meant that most developed country states pursue ‘elite-friendly’ policies in any event, and the ‘solution’ to economic problems is sought only through the further deepening of the neoliberal agenda.

The article’s approach provides some insight into key issues surrounding both organizational dynamics and broader political economy developments. The motivation and the possibility for the emergence of value chain capitalism and the end of the Fordist organization has been traced to the emergence of neoliberalism as a dominant thought style. The power of neoliberalism and the absence of coherent alternatives, despite deepening economic crisis, can also be attributed to a feature of dominant thought styles; their colonization of thinking and the closing of alternatives. These features suggest that system reform is unlikely and that neoliberal era will end only when it is transcended by an emergent but as yet unspoken alternative thought style, based on a thorough and cascading reimagining of the possible.

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Graphics

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Simple value chainKaplinsky, R. and M. Morris (2001), A Handbook for Value Chain Research, Ottawa, IDRC, p.4

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