The action professor: “The market has worked well, but it may have gone too far”

Published: 2019-06-13

From Swedish pupil Greta Thunberg’s call for action regarding climate change, to students and educators raising questions about the sustainability in our food choices and travels – the voices are many concerning the future for our planet. Ester Barinaga is a new professor in social entrepreneurship at Lund University and raises questions in a critique of the current capitalistic system. What truths do teachers teach, and is it possible to change perspective in order to equip the students with a wider, more reflective mindset?

Shorter version available here (in Swedish)

You argue that the “rules of the game” concerning the market system should change. What are these rules?

“When applied to our current economic system, economist William Baumol’s “rules of the game” refer to the system of rewards characteristic of the market system that channel entrepreneurial behaviour toward profit-seeking initiatives. Today’s market-based system of rewards consists of three main rules: the free market, private property and the profit motive. These rules correspond and build on each other.

These market rules developed with the industrial revolution and have become dominant in today’s economic system. Capitalism has brought us progress and raised the overall standards of living. Yet, in its current form, it has also led to increased inequality, environmental degradation and political polarization.

Because of this, the rules of the game are today very much under question. Are these rules leading to a sustainable future? I think not.”

Through what process do the rules of the game lead to such economic, social and natural distress?

“Economic historian Karl Polanyi and his analysis of market society are very relevant today. In his 1944 book The Great Transformation he analyses the change from small, relatively independent, village markets to what he calls a “market society” that ushered with the Industrial Revolution. In a market society, the market is not only used to organize the production and distribution of goods and services, but also the distribution of land and labour. Nature was enclosed so it could be bought and sold as land; humans were commodified and their time bought and sold in the labour market. The scale of human suffering the commodification of nature and life brought is well known from Dickens’ descriptions. The market system put society at the service of the economy.

Parallel to the establishment of a self-regulating market to organize the economy, and as a response to the suffering it brought, Polanyi identifies the emergence of what he calls the counter-movement, an effort to organize social protection from the dislocations brought by the market. In the thirties these movements to organise social protection took the forms of fascism, socialism and Bolshevism.”

What would that social dislocation lead to?

“With the development of a global market system, since the eighties we have seen the growth of precarity in employment, deregulation of businesses, the commodification of the firm, dismantling of institutions for social solidarity, increased economic inequality, and acceleration of natural degradation. If Karl Polanyi is correct in his analysis, it leads to the paralysing conclusion that we are bound to repeat the tragedies of the 20th century.

Geoffrey Jones in Multinationals and Global Capitalism depicts the parallel between the thirties and today in a clear graph that shows globalisation waves in history, with global economy peaks at 1929 and 2008, and de-globalisation periods in-between. Bearing in memory what happened in the thirties, it is to me almost paralysing that it could happen again.”

Why do you believe that these capitalist market rules have to or need to change?

“The continued liberalisation of markets and the ever stronger dominance of the market as a system to organise ourselves has led to continued precarisation of work. Guided by the ideal of the free, self-regulating market, we have deregulated labour markets. We have a level of precarity that is leading to the radicalising of politics, such as extreme nationalism.

The working classes see that their kids have it worse than their parents. The educated class has no hope, in some countries more than others, for any permanence of work or lasting contracts. This is the first time in history, that the new generation doesn’t improve their living conditions compared to their parents.

Economists like Paul Krugman, Joseph Stiglitz or Thomas Piketty, are telling us how increased inequalities actually lead to a collapse of the system itself. We’ve seen a decline in upward mobility, growth in the shadow economy, an acceleration of natural degradation. All these changes have been driven by a market ideology. It served us well in certain areas, but it has gone beyond what was created for. We praise equality, but this system is not leading us there. The social and caring part of society is left out. That is why I think it has to change.”

Can you see that in some ways the shift you are talking about is already happening, for instance in the way you and others teach?

“I do think there is a lot of work to do. Polanyi talked about the need of a new way of thinking for organising ourselves. But we seem to lack the political and social imagination to organise ourselves differently. So, we as teachers cannot teach differently, because we don’t know how to think outside this system that we are all used to. We think of the economy and we think of the market. I think we may have to organise society on a variety of principles, the market being one among others.

This fall I’ll be teaching a course, Re-imagining capitalism. We’ll look at experiments with new ways of organising the economy. It’s everything from basic income and community currencies to cooperative systems that have 50 years on their back so that they can show that they work, and what kind of society that has led to. There are thoughts in that course that I don’t myself believe in, but where the proponents present them as a different way to solve the social challenges we face, like social impact bonds and microfinance.”

Do you think that the system has to break before we can imagine another one?

“I hope not. The thought of that is what paralyses me. Because if you look at Jones graph, we know what changed it, two world wars… The first one was the end of the imperialistic dream, and the second one was the break of a wave of market globalisation. My fear is that if it breaks down, the fourth world war will be with stones and spears.

Instead, I hope that it might start with small changes. Consumption of meat in Sweden is, for instance, going down for the first time, and more and more people are consuming ecological products. Hopefully gradual individual and collective changes will slowly transform the economy into a sustainable, fair and humane one.”

How to rethink the rules of the game? Can we contribute to re-thinking them? Even though some people criticise parts of the capitalistic system, very few seem to criticise the bigger picture, as everything in society is built upon it?

“I think that we as educators, explicitly and implicitly, contribute to reproducing the current rules of the game, but that we, by asking ourselves “what can we do” can try to find our role and be part of catalysing the counter-movement. We do have an entrepreneurial capacity in our society, but how do we channel it into endeavours that build on other economic principles? We need to see ourselves as active participants reproducing (or contributing to change) the system.

Entrepreneurship is often linked to “business”, but we have forgotten that the word in its original French (entreprendre) means “getting things done”, “set things in motion”. I myself like the Danish word for it, iværksætteri. There are other ways of organising a business than those based on the profit-motive and private property. Think for instance of co-operatives. But most often we don’t teach about that.”

Has the business education changed since you yourself were a student?

“The biggest dream when I was a student in the nineties, was to become a big manager at Ericsson; in the early 2000s it was to become a consultant for McKinsey; now many students dream of becoming entrepreneurs. Some of them want to create a better world, as social entrepreneurs. Social entrepreneurship wasn’t even a topic when I studied business.”

Can you see among your students that they need – or crave – a changed set of rules?

“I hear many people talking about sustainability and how important it is. But many seem to lack the tools to know what to do. Is this because of something missing in their and our educations? Have we been given the wrong tools? What rules are we reproducing in our teaching? Which ones do we need to revise?”

You describe your own research as “interventionist” and that you actively take part in entrepreneurial processes you write about. What do you mean by that?

“I’m a qualitative scholar, and traditionally you go and interview or observe and then you go back to University and write. Such a way of working may come with a critique of how things are done, but it seldom offers suggestions on how to do differently. So I decided to change my methods to become more interventionist in the realities that I studied.

In 2010 I started the social venture Förorten i centrum, where we used the collective production of murals as a method to work with communities in the stigmatised suburbs of Sweden’s cities. Then I wrote about the process of mobilising the community and organising for social change. It is interventionist in the sense that together with the communities and others, I start up something, you can call it action research if you like. The idea is that we have to bring the University closer to the world that we study. If we want the world to change, we need to learn from and teach together with people outside the university.

Right now, I’m involved in a research project in Kenya, where we’ll be studying some of the community currencies that they already have in Mombasa and Nairobi. We’ll study what worked and what didn’t, what governance structures strengthen the community and their democratic processes. We will then introduce three new community currencies in Kisumu. As we do this, we will be facilitating the meeting across communities so that they learn from each other. By doing this, we hope to create local networks of knowledge, to empower them and make them independent of us.”

Kvinna pratar med sex män.

Why do they have those local currencies? Don’t they have “normal” money?

“They don’t. These are slums, informal settlements with the most vulnerable populations. The Kenyan shillings don’t get there, as most people don’t have jobs. Those that have a job and manage to earn Kenyan shillings, they quickly spend the money on things that may be difficult to find in the slum. With local currencies, communities come together instead and create their own money, and because it is money that is not useful anywhere else, it stays in the community. We’ve seen that recent community currencies in Kenya generate economic activity, raising the standard of living.

Local currencies are a phenomenon that arises when there are financial recessions or crisis. They thrived across Europe in the thirties and also after the 2008 crisis. Yet not many have heard about them. Economists like Irving Fisher in the thirties studied this and proposed local currencies to the government as a solution out of the financial crisis. One of the currencies created in Switzerland in 1934, the WIR, still exists today. Some economists argue that one of the reasons to the stability of the Swiss economy is that they have another currency to use when their main currency is scarce.”

You talk about the system on a global scale, and the need to change that, at the same time as many people here in Sweden make pledges to eat less meat, buy less new things, and above all else, fly less. Do you believe in those small ways of changing things? Or do we need to do things together, bring forth policy changes and so on?

“Those small changes, from eating less meat to flying less often or recycling and buying second hand, do contribute to change everyday practices. As such they help not only at the level of practices, but also of imbuing a more conscious way of relating to our social and natural environment. But I think individual changes won’t be enough. The challenges we face are global in nature and, as we discussed, have their root in the rules of the game of the current economic system. I believe we need a variety of tools as well, from policies and regulations to a variety of civil society initiatives that organize the economy and society along with different principles.”

What can you do and what can I do?

“Be reflexive in your everyday activities, be aware of the choices you make. As a University, we reach out to many students every year, and they will hopefully be key actors, who not only have power over their everyday lives, but will be influencing groups of other people. We can help shape these students into prioritising the environment and social sustainability. Everyone can do something. The challenges are so big though. I don’t know really.

I try to do my research in a way that is aligned with those kinds of values. Instead of researching something we know doesn’t work, and then say why it doesn’t work, which is rather common in my field; we should try to research something that we believe may really work, something that challenges our imagination and the way we organise things, so that we can see if this can be the seed of something new.”

You say that you don’t know, but I think you know. Everyone can do something, even if it’s small and seemingly insignificant.

“Yes, that’s true. Nobody can change the world alone.”

Text: Louise Larsson

The topic: Entrepreneurship and sustainability

Professor Ester Barinaga held the keynote Entrepreneurship and sustainability – do we do the right things as educators? at the European Entrepreneurship Education Workshop 2019 in Lund 28–29 March 2019.

The interview with Ester is based on the thoughts she expressed during the said keynote lecture.

The keynote as a PDF

Theme: Speaking of our age

What thought patterns can be found in Sweden today? What invisible ideas govern our thoughts? Meet some of the University's researchers who give their perspectives on the present. Next up is Ester Barinaga, new professor in Social Entrepreneurship at Lund University.

This article was first published in the Lund University Magazine, LUM.

Find more articles here

Ester Barinaga

Professor in social entrepreneurship
Sten K. Johnson Centre for Entrepreneurship at
Lund University School of Economics and Management, LUSEM

E-mail: ester.barinaga@fek.lu.se

Ester was appointed professor at LUSEM in 2019. In 2013, she became Professor at the Copenhagen Business School (CBS).

From 1998 to 2002, Barinaga conducted her Ph.D. studies in Business Administration at the Stockholm School of Economics (HHS), Sweden. 

She received a Master in Business Administration (MBA) in 1995 and a Master’s Degree in International Management from ESADE Business School in Barcelona, Spain, in 1996.

Read more about Ester's research in the Lund University Research Portal