Capitalism needs a reboot so that no industry is too big to fail

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No industry should be considered too big to fail, including the auto industry.
(Shutterstock)

Deborah de Lange, Ryerson University

The financial crisis of 2008 has not led us to take sufficient steps to avoid the next economic disaster. The dips in stock markets last February and just recently, together with dire predictions for early 2019, are setting off alarm bells.

If you have a defined contribution type of pension plan or your RRSP funds are tied up in stocks or mutual funds, you may also be concerned about reforming our stock market system.

But stock market fluctuations reflect a more fundamental problem than most realize.

Trader James Lamb watches his screens on the floor of the New York Stock Exchange on Oct. 10, 2018. The next big stock market correction could be coming.
(AP Photo/Richard Drew)

Large firms need to be able to focus on the substance of their operations, not be distracted by stock markets.

The next big stock market correction could be coming. Although many foresee macro-economic changes driven by a technological transformation as the world switches to clean energy and transportation and away from fossil fuels, not all are equally prepared. In Canada, we had strong banks to mitigate against the last crisis, but we still bailed out the auto companies because they were “too big to fail” — meaning their failure would have resulted in an economic catastrophe for Canada.

Canada’s reliance on the fossil fuel industry and reluctance to diversify quickly enough may make the nation more economically vulnerable than the last time — especially when Canadian banks and the domestic auto industry are still linked to the fate of oil and gas. The oil-and-gas industry is resisting change.

No pressure from Canadian lawmakers

The global auto industry, however, is trying to save itself by offering electric cars now with autonomous features and car-as-a-service coming soon. Car-as-a-service means that rather than purchase a car, we will use an app to call a car to pick us up, drive us autonomously to a desired destination, and drop us off.

This simpler car-sharing approach saves time and resources. But automotive plants in Canada have not retooled for these new technologies. And Canadian political leaders have not pressured automakers building cars in Canada to adapt.

Prime Minister Justin Trudeau meets with auto workers at an assembly plant in Windsor, Ont., on Oct. 5, 2018.
THE CANADIAN PRESS/Troy Shantz

But how can the government engage this way when Big Auto can threaten to move jobs out of the country? The government only has leverage when the auto industry is on the brink of extinction because these firms are not just too big to fail, they’re also too big to budge.

At the same time, Forbes’ 2018 list of largest publicly traded companies reports many oil-and-gas companies as some of the biggest firms in the world, with Shell at No. 11 and ExxonMobil at No. 13, to name just a couple of companies populating the list.

Canada’s the home of some big oil-and-gas players like Suncor, Enbridge, Imperial Oil, Canadian Natural Resources and TransCanada Corp. Overall, everywhere, the oil-and-gas sector, like the auto industry, is both too big to budge and too big to fail, a very tenuous situation.

Independent oversight long overdue

Book outlines how to ensure no company or sector is too big to fail.
Palgrave MacMillan

In my book Cliques and Capitalism: A Modern Networked Theory of the Firm, I make suggestions on how we can avoid the too-big-to-fail problem. New corporate structures and matching incentive systems with independent oversight are crucial. Structural changes can make capitalism work better for us.

This can happen by changing the way firms are run. My book makes a holistic set of interlinked recommendations that need to be interpreted as a whole, but a few characteristics are outlined below.

The aim is to develop a sustainable model for corporations so that they do not become too big to fail, and their failures don’t spell disaster for a country or several nations.

1) By eliminating hierarchy, firms are less top-heavy while more democratic and egalitarian. By placing an emphasis on core work rather than administration, companies become more adaptable.

The firm is more directly and regularly subject to market forces because it is treated like a “bundle of projects” that can be added or removed as consumer market forces dictate. For example, in strategy consulting, we would staff client projects as needed and consultants would switch to a new project after finishing the last one, and there would be multi-tasking across several projects.

Continuous learning is an imperative. The firm adapts on an ongoing basis through its changing set of projects so it doesn’t experience sudden shocks that are impossible to recover from.

2) Through team governance, the tension between labour unions and management — a result of hierarchy and concentrated power — is eliminated.

Employees become a more integral part of decision-making. Monitoring is achieved by a combination of employee social networks and market forces together with an independent audit function. Employees will not tolerate other low performers if their own survival is at stake.

3) Oversight has to become more integrated, independent and transparent, but it can also be more cost-effective for firms.

Boards of directors are not needed, and no controlling shareholders are allowed in the new paradigm. Without hierarchy, ineffective “top-down” influences are removed. Instead, each large firm has an internal Independent Audit Council (IAC) that is truly independent and motivated through a carefully designed incentive system, explained in the book.

The IAC coordinates with a single external stakeholder-run Government Business Regulator (GBR). The GBR sets out common triple-bottom line reporting standards for all large firms, and works with the IACs of each firm to make objective decisions regarding breaking up companies due to anti-competitive monopolistic or oligopolistic industry developments. Companies use a triple-bottom line approach when they report transparently on their activities as related to environmental quality, social justice, and profitability.

Picking up the slack

Maintaining transparency and market competition ensures that if one firm fails, several others in the same industry can pick up the slack. Governments never have to bail out firms this way.

At the same time, the suggested systems and structures help firms prevent failures. They are more adaptive, and internal structural problems related to hierarchy are removed.

Ultimately, the effectiveness of operations becomes the focus, while the short-term whims of shareholders and stock markets have decreased influence.

Deborah de Lange, Associate Professor, Ryerson University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

In the end, it was Khashoggi’s ‘friends’ who silenced him

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People, including the activist group Code Pink, hold signs at the Embassy of Saudi Arabia during a protest about the disappearance of Saudi journalist Jamal Khashoggi, Oct. 10, 2018, in Washington, D.C.
(AP Photo/Jacquelyn Martin)

Shenaz Kermalli, Ryerson University

I was first in touch with Jamal Khashoggi — the Saudi journalist who disappeared on Oct. 2 — while setting up an interview with Osama bin Laden’s former close friend and brother-in-law, Mohammad Jamal Khalifa, for the CBC back in 2003.

It was two years after Sept. 11, 2001, when 2,977 victims were killed by four co-ordinated attacks against the United States by the al-Qaida terrorist group, and the world was still searching for reasons behind the tide of anti-Americanism across the Arab world.

Khalifa was a murky character at the time (he has since died in a mysterious killing in Madagascar in 2007). After Sept. 11, 2001, he always maintained publicly that he had fallen out with bin Laden’s decision to form al-Qaida in 1988. He was accused of being a major financier for the al-Qaida-aligned Abu Sayyaf terrorist group and reportedly also played a controversial role in the arrest of the group that attempted to blow up the World Trade Centre in 1993.

Khashoggi, then the deputy editor-in-chief of Arab News, a Gulf English language daily, was one of dozens of Saudi-based journalists and political observers I reached out to in an effort to track down Khalifa. For several months, all my calls and emails went unanswered. And then Khashoggi responded.

Yes, I know Khalifa, he told me via email. And yes, he could help facilitate an in-person interview with him.

From a news perspective, it was a great scoop: a rare opportunity to speak to someone who had once been close to bin Laden. Khashoggi not only followed through with the interview, but he also sought out several other English-speaking political analysts to take part in another separate television segment — a panel discussing Saudi affairs.

A wide source-list: Saudi royals and terrorists

I know I am not alone among foreign journalists who have had similarly positive experiences working with Khashoggi. Any reporter or policy researcher who has covered the Gulf countries can attest to how difficult it is to find helpful, credible and thoughtful voices who are willing to share their insight on life inside the elusive kingdom.

In this respect, Khashoggi was a breath of fresh air. He always seemed to be fine with appearing on camera and being identified in news reports.

But Khashoggi was also noticeably cautious. This caution likely prompted any reporter who used him as a source to assess him with a healthy degree of scrutiny. How many journalists after all — no matter how high they are — can honestly say they have sources to both international terrorists and elusive members of the Saudi royal family?

It’s no secret Khashoggi had parallel careers as both a reporter and a government adviser. From 2003 to 2006 he was the right-hand man of the powerful Saudi prince, Faisal bin Turki, a former spy chief and ambassador to the U.S. and the United Kingdom. Clearly, he was no ordinary journalist.

Polite requests for new freedoms

But he was also no ordinary political adviser. Under his editorial direction at Arab News, for instance, he bravely published editorials that called for more personal freedoms and greater employment for Saudi youth, and allowed coverage of public demands by migrant workers and Shia minority communities in Bahrain. These are virtual no-go areas in Gulf news outlets.

It would be misleading, however, to portray him in the way some leading journalists have since his disappearance last week in Turkey. Khashoggi wasn’t “a fierce critic” of the Saudi regime.

Before he decided to start using The Washington Post last year as a platform to effect change (after being constantly suspended from writing in various Saudi media), his criticism of the leadership could probably best be described as subtle with polite reservations of the kingdom’s policies.

“Khashoggi was a smooth, articulate and polite defender of the realm,” says Madawi al-Rasheed, a visiting professor at the London School of Economics in a column for U.K. publication Middle East Eye. “His reservations on Saudi policies have always been subtle and tolerated.”

They were especially tolerated — and no doubt appreciated by the ruling elite — when he publicly supported the Saudi position on the disastrous war in Yemen (although his recent editorials in the Washington Post take on a decidedly different tone), the execution of leading Shia cleric Sheikh Nimr al-Nimr in 2016 and the 2011 Saudi-led military crackdown on Arab Spring-inspired activists in Bahrain.

Khashoggi’s disappearance

In the days after Khashoggi’s disappearance, it’s worth noticing that many of the experts, journalists and political officials he regularly debated with on air also expressed sorrow — and respect for what he stood for. “Jamal Khashoggi and I disagreed on many issues, but unlike many of his Saudi and UAE colleagues he was always civil and polite to me and other Iranians,” tweeted Mohammad Marandi, a professor of English literature and orientalism at the University of Tehran.

Another journalist in Bahrain who has been imprisoned numerous times for covering the violent Saudi crackdown on unarmed activists, vehemently disagreed with Khashoggi’s perception of Iranian encroachment in the region, but told me he still credits Khashoggi for trying to bring reform. “You don’t survive in Saudi if you don’t have friends. I can tell you from experience he was focused on getting the real story with all views out.”

In the end, it was Khashoggi’s own “friends” that silenced him. And if the latest accounts of his death by Turkish media and authorities are true — that there was an assault and a struggle inside the Saudi consulate in Istanbul where he was last seen walking into — then he follows a long line of other critics who have paid tragically to speak truth to power.

It’s a vital reminder not only of Riyadh’s crazed obsession with stifling dissent, but of the need to genuinely respect and value intellectuals with diverse perspectives.

Shenaz Kermalli, Journalism Instructor, Ryerson University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

The end of scientific, rational thinking: Donald Trump, Doug Ford and Jordan Peterson

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Participants in the March for Science, marching on Constitution Ave. in Washington, D.C. in April 2017 after listening to speakers at Washington Monument on a rainy Saturday Earth Day.
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David Chandross, Ryerson University

This has been a terrible year for science and evidence-based decision making, which are the newest casualties of the growing wave of populism in North America where “postmodern thought … is being used to undermine scientific truths.”

In the United States, President Donald Trump has repeatedly made false claims such as those that led to the repeal of environmental protections.

In Ontario, Premier Doug Ford, whose election win symbolized an overthrow of a left-leaning government, has already cancelled the “cap and trade” program for emissions control, moving Canada further away from Kyoto emissions targets accepted by the federal government.

Adding to this is bestselling author and University of Toronto professor Jordan Peterson who accuses the liberal left in universities as well as liberal politicians of postmodern thinking. This unrelenting attack on postmodern thinking is the core argument that propelled Peterson to fame.

Postmodernism
emerged with views that Western morality and universal truths — as outlined in the modern period of Enlightenment — should be deconstructed. This created a form of skepticism in which Western morality and later science came into question.

One of the erroneous impacts of this new skepticism is the erosion of public confidence in the conclusions of scientific studies.

The science wars

Peterson’s well established critique of postmodernism misses how this arena of postmodernism has become dangerous through the deconstruction of science and outright denial of scientific facts.

Marcel Kuntz argues that this version of postmodernism has led us toward an increasing dissolution of the notion of objective reality. Social critic Noam Chomsky argues that a “turn away from postmodernism” is necessary. He says although “there are institutional factors determining how science proceeds that reflect power structures,” that does not mean we should “abuse scientific concepts”.

‘Make America Think Again’ among many placards in the March for Science in Washington, D.C. on Earth Day 2017.
Shutterstock

What we see with Peterson, Trump and Ford is a new set of values in which science is just another factor in determining reality. Science has lost its primacy.

Scientific relativism

The political right has embraced scientific relativism. Scientific relativism is based on the idea that scientific observation and analysis are framed within unique cultural biases.

Former Canadian Prime Minister Stephen Harper adopted a cautionary stance against science and muzzled his own federal researchers on climate change. But even this was not the catastrophic rejection of science that has currently evolved.

Peterson refers to all forms of relativism as a form of cancer. But Peterson fails to criticize Trump’s litany of relativistic transgressions when it comes to science.

Even Peterson’s mentor, Bernard Schiff, has now said that Peterson might be more dangerous than those he attacks.

It is paradoxical that both Trump and Ford are embracing postmodernism much more than the left, which they accuse of the same sin. But the left demand factual evidence for decisions. Cap and trade was selected because the only other alternative is a regulation that denies corporations financial incentives to participate.

Peterson should challenge science relativism

One leaves a Peterson lecture with the sense that there is no coherency between ideas; the ground itself has been taken away. He mercilessly opposes unscientific thinking in his discussion of sexual and gender identity. But he then jumps to unscientific ideas like Carl Jung’s transpersonal psychology and his mystical collective unconscious in the next breath.

Is he a Jungian mystic or the embryology guy who asserts that science confirms there are only two sexes? Peterson has many followers and they participate in this sustained polemic attack on the left, claiming that moral relativism has left the world in disarray.

Peterson places all blame squarely in the hands of those who fight for social justice and who embrace progressive ideology. Resistance to change is associated with the political right and he says this is where postmodernism truly dwells.

By focusing on the moral relativism of postmodern thinking and ignoring scientific relativism, Peterson further erodes our ability to think critically. Peterson says that his aim is to build critical thinking in his readers, but his method of analysis is combative and takes no note of the virtues of depolarizing facts.

Protesters hold signs during Earth Day’s March for Science, April 22, 2017 in Santa Rosa, Calif.
Shutterstock

Which Ford will we get today, the one who accepts climate change or the one who denies that regulating emissions is an antidote worthy of analysis? And which Trump will we get today, the one who sees Canada as a partner, or the one who demonizes our trade pacts?

Depolarizing facts are not what make Ford, Trump or Peterson fans tick. They argue for political effect, not to test their own hypothesis of the world.

One leaves both Peterson’s lectures or a Trump rally with a frightening sense of unreality, there is no place that is safe. Your own rationality is called into question. These voices remove safety and then quickly replace it with a new set of basic truths that now stabilize a weakened framework of the world.

Science rejection

There is new evidence that science can neutralize polarizations. This depolarization through independent science may be the antidote for a political sphere that seems about to shatter any form of debate. Yuval Noah Harari, the Israeli historian says that although false narratives are nothing new, citing the dogmatic acceptance of religion as an example, he cautions us to use science as a final arbiter.

Stripped of basic rational coordinates we have no shelter, no starting point for making sense of the world. Similarly, leaving a Ford press conference or a Trump rally (they are interchangeable), one has the same disquieting sense that there is nothing left, all maps have been burned. There is only Ford’s truth, Trump’s declaration or Peterson’s harsh admonitions. They deny us any factual compass.

Instead we have a series of memes and parables, not the pressure gauges and coordinates by which to navigate the challenges that life provides. What has happened to belief in inquiry, and to refutation of that which has no evidence? It has, like a photograph long exposed to light, lost its hues.

Rationality is on the executioner’s block, and the results are predictable if Maoist China is any example. This is the ferment of totalitarianism and by vilifying the left, and ignoring the emotional ramblings of the right, there is little one can do in this intellectual vacuum that remains, but to suffocate. And like a kill on the savannas, suffocation is the pretext to being consumed by a predator.

David Chandross, Program coordinator; researcher, Ryerson University

This article is republished from The Conversation under a Creative Commons license. Read the original article.